1
August 22, 1999
PRIVATE AND CONFIDENTIAL
------------------------
Xxxxxxx X. Way
Chairman & Chief Executive Officer
HCC Insurance Holdings, Inc.
00000 Xxxxxxxxx Xxxxxxx
Xxxxxxx, XX 00000-0000
RE: CONFIDENTIALITY AGREEMENT
Dear Xxxxxxx:
In connection with your consideration of a possible transaction with The Centris
Group, Inc. ("Centris"), we will provide you, upon your request, certain
financial and other information (the "Evaluation Material") concerning the
business and affairs of Centris. The terms "you" or "your" in this Agreement
include HCC Insurance Holdings, Inc. and all of its affiliates as that term is
defined in the Federal Securities laws. The term "Evaluation Material" includes
all information furnished to you in connection with a possible transaction,
regardless of the source or manner in which it is furnished, whether written or
oral or electronically stored or transmitted, furnished before or after the date
hereof to you or your Representatives (as defined below) by Centris (which shall
be deemed to include its directors, officers, employees, agents and
representatives), or by other sources together with any analyses, compilations,
studies, or other documents or records prepared by you or your Representatives,
containing, reflecting, or resulting from such information; provided, however,
Evaluation Material does not include information which (i) is or becomes
generally available to the public other than as a result of a disclosure by you
or your directors, officers, employees, affiliates, agents, accountants,
attorneys, financial advisors or any of their affiliates, representatives,
agents or advisors, (all of the foregoing collectively referred to as "your
Representatives"); or (ii) was or becomes available to you on a non-confidential
basis from a source other than Centris, provided that such source is not known
to you to be bound by a confidentiality agreement or other contractual, legal or
fiduciary obligations of non-disclosure with Centris; or (iii) was lawfully
within your possession prior to its being furnished to you by or on behalf of
Centris, as evidenced by your written records, provided that the source of such
information was not known to you to be bound by a confidentiality agreement or
prohibited from furnishing the information to you due to a contractual, legal or
fiduciary obligation with Centris in respect thereof; or (iv) is independently
developed by you without any reliance on or use of the Evaluation Material.
2
Xxxxxxx X. Way
August 22, 1999
Page 2
As a condition to you and your Representatives being furnished with any
Evaluation Material, you agree as follows:
(1) You recognize and acknowledge the competitive value and
confidential nature of the Evaluation Material and the damage
that could result to Centris if information contained therein
is disclosed to any third party. The Evaluation Material will
not be used by you or your affiliates or Representatives in
any way detrimental to Centris, including, without limitation,
in competition with Centris.
(2) You agree that the Evaluation Material will be used solely for
the purpose of evaluating a possible transaction between
Centris and you. You also agree that you and your
Representatives will keep the Evaluation Material confidential
and will not disclose any of the Evaluation Material now or
hereafter received or obtained from Centris, or any of their
representatives to any third party, without the prior written
consent of Centris; provided, however, that any of the
Evaluation Material may be disclosed to your Representatives
who need to know the information contained in the Evaluation
Material for the purpose of evaluating a possible transaction
with Centris and who agree to keep such information
confidential and to be bound by this Agreement to the same
extent as if they were parties hereto (it being understood and
agreed that your Representatives shall be informed by you of
the confidential nature of the Evaluation Material and shall
be directed by you to treat the Evaluation Material
confidentially). In any event, you shall be fully legally
responsible for any improper use of the Evaluation Material by
your Representatives.
(3) In addition, Centris will not and, without the prior written
consent of Centris, or unless required by valid court order or
other valid order of an adjudicatory body, neither you nor
your Representatives will disclose to any person (which shall
include, without limitation, any corporation, company, group,
partnership or individual) (a) that the Evaluation Material
has been made available to you, (b) that you have inspected
any portion thereof, (c) that discussions or negotiations are
taking place concerning a possible transaction with Centris or
(d) any of the terms, conditions or other facts with respect
to any such possible transaction, including the status
thereof.
(4) In the event that the transaction contemplated by this
agreement is not consummated, or upon Centris' request, all
Evaluation Materials (and all copies, extracts or other
reproductions in whole or in part thereof) provided to you by
Centris or its representatives shall be returned to Centris
(or, with Centris' written
3
Xxxxxxx X. Way
August 22, 1999
Page 3
permission, destroyed, and, if requested by Centris, such
destruction shall be certified in writing to Centris by an
authorized officer supervising such destruction) and not
retained by you or your Representatives in any form
(electronically or otherwise) or for any reason. All
documents, copies, summaries and analyses, memoranda, notes
and other writings, including information in electronic form
whatsoever which was prepared by you or your Representatives
and which contain Evaluation Material shall be destroyed or
purged, and, if requested by Centris, such destruction shall
be certified in writing to Centris by an authorized officer
supervising such destruction.
(5) You agree that (except as permitted in the following
paragraph) for a period of six (6) months from the date of
this Agreement, neither you nor any of your affiliates or
associates will, in any manner, alone or in concert with third
parties (whether or not pursuant to any legally binding
agreement or commitment), without the prior written approval
of the Board of Directors or Executive Committee of Centris
(i) acquire, or offer to acquire, directly or indirectly,
record or beneficial ownership of any equity securities of
Centris or of any subsidiary of Centris; (ii) acquire or offer
to acquire, directly or indirectly, any options or other
rights to acquire any equity securities of Centris or of any
subsidiary of Centris (whether or not exercisable only after
the passage of time or the occurrence of any event); (iii)
acquire or offer to acquire, directly or indirectly, any
assets of Centris; (iv) offer to enter into any acquisition or
other business combination transaction relating to Centris or
to any subsidiary of Centris; (v) make, or in any way
participate, directly or indirectly, in any "solicitation" of
"proxies" or "written authorization or consent" (as such terms
are used in the proxy rules of the Securities and Exchange
Commission) to vote, or seek to advise or influence any person
with respect to the voting of any voting securities of
Centris; (vi) otherwise act alone or in concert with third
parties, to seek to control or influence the management, the
Board of Directors or the policies of Centris; (vii) directly
or indirectly participate in or encourage the formation of any
"group" (within the meaning of Section 13 (d) (3) of the
Securities Exchange Act of 1934) which owns or seeks or offers
to acquire record or beneficial ownership of equity securities
of Centris (including rights to acquire such equity
securities) or which seeks or offers to affect control of
Centris or otherwise seeks or proposes to do any of the acts
specified in (i) through (vi) above; (viii) propose, or
publicly announce or otherwise disclose any request for
permission or consent in respect of, any of the foregoing; or
(ix) advise, assist or encourage any third parties in
connection with any of the foregoing. You also agree during
such period not to (a) request Centris (or its directors,
officers, employees or agents), directly or indirectly, to
amend or waive any provision of this paragraph (including this
4
Xxxxxxx X. Way
August 22, 1999
Page 4
sentence) or (b) take any action which would require Centris
to make a public announcement regarding the possibility of a
business combination or merger without the prior written
approval as noted above.
Notwithstanding the generality of the foregoing, this
Agreement shall not prohibit: (i) the purchase by you, or of
any investment fund managed by you or any of your affiliates,
of equity securities of Centris; provided that no such
purchase shall result in the beneficial ownership by you,
taken in the aggregate with any such investment funds, of five
percent (5%) or more of the outstanding shares of any class of
equity securities of Centris; (ii) an offer by you to acquire
all of the outstanding shares of Centris common stock at a
purchase price of $14.00 per share or greater; or (iii) in the
event the Board of Directors of Centris shall approve an
"Acquisition Transaction" with another party, an offer by you
to acquire all of the outstanding stock of Centris, or the
purchase of shares of common stock pursuant to your offer. As
used herein, an "Acquisition Transaction" means any
transaction in which all or substantially all of the assets of
Centris, or a majority of the common stock of Centris will be
acquired by any person, or a merger in which the shares of
common stock of Centris outstanding immediately prior to such
transaction, or of any other person issued in exchange for
such Centris shares, will represent either (a) less than a
majority of the outstanding shares of the surviving
corporation in such merger; or (b) (if the surviving
corporation is a wholly owned subsidiary of another
corporation) less than a majority of the outstanding shares of
such parent corporation, immediately upon completion of such
merger. In the event that, while this Section 5 remains in
effect, Centris determines not to oppose any publicly
disclosed offer by a third party for an Acquisition
Transaction, Centris will afford you an opportunity, not less
than five (5) business days, to submit a competing offer and
to make public disclosure concerning the same. This Section 5
shall terminate and be of no further effect in the event
Centris' stockholders' equity shall be reduced by 5% or more
from the amount thereof as of June 30, 1999, without giving
effect to: (i) any reduction of up to $3.8 million resulting
from the repurchase of common stock of Centris, and (ii) any
unrealized loss on investments resulting from a general change
in interest rates or other general changes in market
conditions.
(6) Neither you nor your Representatives will initiate any
communications with any employee of Centris concerning the
Evaluation Material without the prior consent of the Chairman
of Centris or his appointed representative.
5
Xxxxxxx X. Way
August 22, 1999
Page 5
(7) Neither you nor your Representatives will initiate discussions
with respect to the prospective employment of Centris'
employees with you or any of your Representatives for a period
of twelve (12) months after the date of signing this Agreement
without the prior written consent of Centris.
(8) Neither Centris nor its agents make any representations or
warranties as to the accuracy or completeness of the
Evaluation Material. Centris and its agents expect that you
will conduct your own independent investigation and analysis.
You agree that neither Centris nor any of its officers,
directors, employees, agents or representatives shall have any
liability to you or your Representatives resulting from the
use of the Evaluation Material supplied by Centris or any of
its representatives under this Agreement.
(9) No delay or failure in exercising any right, power or
privilege hereunder shall be construed to be a waiver thereof,
nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any
right, power or privilege hereunder.
(10) Notwithstanding anything to the contrary set forth herein, in
the event that you or any of your Representatives are
requested or become legally compelled (by oral questions,
interrogatories, request for information or documents,
subpoena, civil investigative demand or similar process) to
disclose any of the Evaluation Material or take any other
action prohibited hereby, you will provide Centris with prompt
written notice so that Centris may seek a protective order or
other appropriate remedy and/or waive compliance with the
provisions of this Agreement. In the event that such
protective order or other remedy is not obtained, or that
Centris waives compliance with the provisions of this
Agreement, you will use commercially reasonable efforts to
furnish only that portion of the Evaluation Material or take
only such action which is legally required and to obtain
reliable assurances that confidential treatment will be
accorded any Evaluation Material so furnished.
(11) It is understood that Centris may institute appropriate
proceedings against you to enforce its rights hereunder.
Because the harm which may be done to Centris by the
disclosure of the Evaluation Material, you acknowledge and
agree that money damages would not be a sufficient remedy for
any violation of the terms of this Agreement. Accordingly, you
agree that Centris shall be entitled to specific performance
and injunctive relief as remedies for any violation by you of
your obligations hereunder. These remedies shall not be deemed
to be the exclusive
6
Xxxxxxx X. Way
August 22, 1999
Page 6
remedies for a violation of the terms of this Agreement but
shall be in addition to all other remedies available to
Centris at law or equity.
(12) You understand and agree that no contract or Agreement
providing for a transaction between you and Centris shall be
deemed to exist unless and until a definitive transaction
agreement (a "Transaction Agreement") has been executed and
delivered by the parties to this Agreement, and you hereby
waive, in advance, any claim (including, without limitation,
breach of contract) in connection with a possible transaction
unless and until both parties hereto shall have entered into a
Transaction Agreement. You also agree that unless and until a
Transaction Agreement between us has been executed and
delivered, Centris has no legal obligation of any kind
whatsoever with respect to any such transaction by virtue of
this Agreement or any other written or oral expression with
respect to such transaction except, in the case of this
Agreement or any other written agreement, for the matters
specifically agreed to herein or therein.
(13) This Agreement is made pursuant to and to be construed under
and conclusively deemed for all purposes to be governed by the
laws of the State of California (without giving effect to the
principles of conflict of laws) and any judicial proceeding
arising out of this Agreement or any matter related thereto
shall be brought in the Superior Court of the County of Orange
of the State of California, or in the United States District
Court for the Central District of California. By execution and
delivery of this Agreement, each party accepts the
jurisdiction of such courts as noted above, and agrees to be
bound by any judgment rendered therein in connection with this
Agreement. The prevailing party of any litigation arising out
of this Agreement shall be entitled to receive from the losing
party all costs and expenses, including the reasonable counsel
fees incurred by the prevailing party.
(14) This Agreement shall be binding on and inure to the benefit of
the parties hereto and their respective successors and
assigns.
(15) Your confidentiality obligations with respect to the
Evaluation Material shall survive the date of this Agreement
for a period of two (2) years.
7
Xxxxxxx X. Way
August 22, 1999
Page 7
If the terms hereof are acceptable, please sign and return to Centris one copy
of this Agreement to evidence your acceptance of and agreement to the foregoing,
whereupon this Agreement will become a binding agreement.
Very truly yours,
THE CENTRIS GROUP, INC.
By: /s/ XXXXX X. XXXXXXX
-----------------------------------------------
Xxxxx X. Xxxxxxx
Chairman, President and Chief Executive Officer
Agreed and consented to this 22nd day of August, 1999:
HCC INSURANCE HOLDINGS, INC.
By: /s/ XXXXXXX X. WAY
-----------------------------------------------
Xxxxxxx X. Way
Chairman and Chief Executive Officer
DLC/mks
