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EXHIBIT 2.2
STANDSTILL AGREEMENT
THIS STANDSTILL AGREEMENT ("Standstill Agreement") is made as of this
30th day of June, 1999, by and between Zenith National Insurance Corp., a
Delaware corporation (the "Company") and Fairfax Financial Holdings Limited, a
Canada corporation (the "Purchaser").
RECITALS
WHEREAS, Reliance Group Holdings, Inc. (the "Seller") beneficially owns
as of the date of this agreement an aggregate of 6,574,445 shares (the
"Shares") of the common stock of the Company ("Zenith Common Stock");
WHEREAS, the Seller and the Purchaser, have entered into a Stock Purchase
Agreement, dated June 25, 1999 (the "Stock Purchase Agreement"), which
provides, among other things, that the Purchaser shall purchase the Shares from
the Seller (the "Transaction");
WHEREAS, in order to induce the Purchaser to enter into this Standstill
Agreement, the Company is willing to facilitate the Transaction on the terms
described herein by cooperating in seeking all necessary approval of the
Transaction as shall be required (i) under applicable insurance laws and with
the appropriate insurance commission(s), and (ii) under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976 (the "H-S-R Act");
NOW THEREFORE, in consideration of the aforesaid and mutual promises
hereinafter made, the parties hereto agree as follows:
1. Standstill
1.1 Subject to the provisions of Section 1.2 below, and except in
connection with the consummation of the Transaction, the Purchaser and any
corporation or other entity controlled by or affiliated with the Purchaser
(collectively, the "Purchaser Group") hereby covenants and agrees that,
without the prior written consent of the Board of Directors of the Company
specifically expressed in a resolution adopted by a majority of the directors of
the Company who are not affiliates of, and are neither officers, directors nor
employees of, any member of the Purchaser Group, the Purchaser Group will not in
any manner, directly or indirectly, or in connection with any other person or
entity, (a) effect or seek, offer, encourage or
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propose (whether publicly or otherwise) to effect or participate in, (i) any
acquisition of any securities (or beneficial ownership thereof) or assets of the
Company, except by way of stock dividends or other distributions or offerings
made available to holders of Company securities generally, (ii) any tender or
exchange offer, merger or other business combination involving the Company,
except to the extent that the Purchaser is selling Zenith Common Stock owned on
the date hereof or acquired pursuant to the Transaction or by way of stock
dividends or other distributions or offerings made available to holders of
Company securities generally, (iii) any recapitalization, restructuring,
liquidation, dissolution or other extraordinary transaction with respect to the
Company, or (iv) any "solicitation" of "proxies" (as such terms are defined in
Rule 14a-1 under the Exchange Act) or consents to vote any securities of the
Company, (b) form, join or in any way participate in a "group" (as such term is
used in Section 13(d)(3) of the Exchange Act) (except insofar as the Purchaser
Group sets to consummate the Transaction), or otherwise act, alone or with
others, to seek to acquire or affect control or influence the management, Board
of Directors or policies of the Company, (c) enter into any arrangements with
any third party regarding any of the foregoing or (d) take any action which
would force the Company to make a public announcement regarding the types of
matters set forth in (a) of this Section 1.1. The Purchaser Group also agrees
not to ask, subject to the provisions of Section 1.2 hereof, the Company (or its
directors, officers, employees or agents) directly or indirectly, to amend,
waive or terminate any of the provisions of this Section 1.1, including this
sentence. The covenants and agreements contained in this Section 1.1 shall
survive until the earlier of (i) the fifth anniversary of the consummation of
the Transaction and (ii) the date on which Xxxxxxx X. Xxx is no longer the
full-time Chairman of the Board and President of the Company. Nothing herein
shall affect the Purchaser Group's ability to dispose of its Zenith Common Stock
and, except as set forth above, nothing herein shall limit the Purchaser Group's
ability to exercise the rights attaching to the Shares.
1.2 Notwithstanding Section 1.1 above, the Purchaser Group shall not
be prohibited from proposing a transaction to the Company or its Board of
Directors or from having discussions with officers, directors, employees or
agents of the Company in the ordinary course with respect to the Company or the
conduct of the Company's business.
2. Company Covenants
2.1 The Company covenants that it will use its commercially
reasonable efforts to cooperate in seeking all necessary approvals of the
Transaction
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as shall be required (i) under applicable insurance law and with the appropriate
insurance commission(s) and (ii) under the H-S-R Act.
2.2 The Company hereby consents to the assignment by the Seller to
the Purchaser of the registration rights embodied in Article IX of the Purchase
Agreement, made as of February 4, 1981 among Reliance Insurance Company, the
Company, and certain other parties.
3. CONDITIONS TO PURCHASER'S OBLIGATIONS. The Purchaser's covenants and
agreements set forth herein are subject to the receipt by the Purchaser of
waivers, with respect to the Transaction, from Xxxxxxx X. Xxx, Xxxxxxxxx
Xxxxxxx, Xxxx X. Xxxxxxx, Xxxx X. Xxxxxx, Xxxxxx X. Xxxxx, Xxxxxxx X. Xxxxxxxx
and Xxxxx X. Xxxxxx substantially in the form of Exhibit A hereto.
4. MISCELLANEOUS
4.1 MERGER CLAUSE. This Agreement constitutes the complete agreement
between the parties hereto with respect to the subject matter hereof and shall
continue in full force and affect until terminated by mutual agreement of the
parties hereto or pursuant to the terms hereof. The section headings used herein
are for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
4.2 CHOICE OF LAW. This Agreement shall be construed, performed and
enforced in accordance with, and governed by the internal laws of the State of
Delaware, without giving effect to the principles of conflicts of law thereof,
and each party consents to personal jurisdiction in such state and voluntarily
submits to the jurisdiction of the courts of such state in any action or
proceeding relating to this Agreement. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision hereof is held to be invalid, illegal
or unenforceable under any applicable law or rule in any jurisdiction, such
provision will be ineffective only to the extent of such invalidity, illegality,
or unenforceability, without invalidating the remainder of this Agreement. This
Agreement may not be modified or amended and no provision hereof may be waived,
in whole or in part, except by a written agreement signed by the parties hereto.
No waiver of any breach or default hereunder shall be considered valid unless in
writing, and no such waiver shall be deemed a waiver of any subsequent breach or
default.
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4.3 Remedy. The Purchaser acknowledges that the Company would not
have an adequate remedy at law for money damages in the event that this
agreement is not performed in accordance with its terms and therefore the
Purchaser agrees that the Company shall be entitled to specific enforcement of
the terms hereof in addition to any other remedy to which it may be entitled, at
law or in equity.
4.4 Notices. Every notice or other communication required or
contemplated by this Agreement by either party shall be delivered by (i)
personal delivery, (ii) postage prepaid, return receipt requested, registered or
certified mail (airmail if available), or the equivalent of registered or
certified mail under the laws of the country where mailed, (iii) internationally
recognized express courier, such as Federal Express, UPS or DHL, or (iv)
facsimile with a confirmation copy sent simultaneously in the manner
contemplated by clauses (i), (ii) or (iii) of this Section 4.4, in each case
addressed to the party for whom intended at the following address or at such
other address of which notice has been given in accordance with this
Section 4.4:
(i) If to the Company:
Zenith National Insurance Corp.
00000 Xxxxxx Xxxxxx
Xxxxxxxx Xxxxx, XX 00000
Facsimile No.: 000-000-0000
Attn: Xxxxxxx X. Xxx, Chairman of the Board and President
With a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxx Xxxxxx, Xxx. 0000
Xxx Xxxxxxx, XX 00000
Facsimile No.: 213-687-5600
Attn: Xxxxxx X. Xxxxx
(2) If to the Purchaser:
Fairfax Financial Holdings Limited
00 Xxxxxxxxxx Xxxxxx Xxxx, Xxx. 000
Xxxxxxx, Xxxxxxx Xxxxxx X0X 0X0
Facsimile No.: 000-000-0000
Attn: Xxxx Xxxxxxxx, Vice President, Corporate Affairs
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4.5 Counterparts. This Agreement may be executed in counterparts,
all of which shall be taken together as one and the same instrument.
Please acknowledge your agreement with the terms of this Agreement where
indicated below and return an executed copy of this Agreement to the
undersigned, whereupon this will be a binding agreement between us.
Zenith National Insurance Corp.
By: /s/ XXXXXXX X. XXX
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Name: Xxxxxxx X. Xxx
Title: Chairman of the Board and
President
ACCEPTED AND AGREED to by:
Fairfax Financial Holdings Limited
By: /s/ XXXX XXXXXXXX
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Name: Xxxx Xxxxxxxx
Title: Vice President, Corporate Affairs
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EXHIBIT A
, 1999
[Zenith National Insurance Corp.] [Zenith Insurance Company]
00000 Xxxxxx Xxxxxx
Xxxxxxxx Xxxxx, XX 00000
Fairfax Financial Holdings Limited
00 Xxxxxxxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxx X0X 0X0
Dear Sirs:
Reference is made to the Employment Agreement, effective as of ________
(the "Employment Agreement") between [Zenith National Insurance Corp., a
Delaware corporation ("Zenith")] [Zenith Insurance Company, a California
corporation and wholly-owned subsidiary of Zenith National Insurance Corp., a
Delaware corporation ("Zenith") and the undersigned.
Pursuant to Section _____ of the Employment Agreement, the undersigned was
granted certain rights in the event of a Change in Control (as defined in the
Employment Agreement).
The undersigned has been informed that Fairfax Financial Holdings Limited,
a Canada corporation ("Fairfax"), has entered into a Stock Purchase Agreement,
dated June 25, 1999 with Reliance Insurance Company ("Reliance"), pursuant to
which Fairfax will purchase all of the shares of the common stock of Zenith held
by Reliance and its affiliates (the "Transaction"). In connection with the
Transaction, Fairfax has entered into a Standstill Agreement, dated June 30,
1999 (the "Standstill Agreement"), with Zenith. Under the terms of the
Employment Agreement, as a result of the Transaction, a Change in Control will
have occurred and, accordingly, the undersigned would be entitled to exercise
the rights specified in Section _____ of the Employment Agreement. Section 3 of
the Standstill Agreement provides that the covenants and agreements of Fairfax
thereunder are conditioned on the waiver of such rights by the undersigned.
The undersigned hereby waives [his] [her] rights to terminate under Section
_____ of the Employment Agreement with respect to the Transaction. In so doing,
however, the undersigned is not waiving any other rights under the Employment
Agreement, including any rights that may arise in the event of any future or
different transaction that would constitute a Change in Control.
Very truly yours,
[Employee]
