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AGREEMENT AND PLAN OF MERGER
BETWEEN
TRENWICK GROUP INC.
AND
CHARTWELL RE CORPORATION
Dated as of June 21, 1999
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Table of Contents
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ARTICLE I
THE MERGER
SECTION 1.1. The Merger....................................................................... 2
SECTION 1.2. Closing 2
SECTION 1.3. Effective Time................................................................... 2
SECTION 1.4. Effects of the Merger............................................................ 2
SECTION 1.5. Certificate of Incorporation; By-laws............................................ 2
SECTION 1.6. Directors and Officers........................................................... 3
ARTICLE II
EFFECT OF THE MERGER ON SECURITIES
SECTION 2.1. Effect on Capital Stock.......................................................... 3
(a) Cancellation of Treasury Stock and Trenwick-Owned Stock................. 3
(b) Conversion of Chartwell Common Stock.................................... 3
(c) Conversion Number....................................................... 4
(d) Cancellation and Retirement of Chartwell Common Stock................... 4
SECTION 2.2. Exchange of Certificates......................................................... 4
(a) Exchange Agent.......................................................... 4
(b) Letter of Transmittal................................................... 4
(c) Exchange Procedures..................................................... 4
(d) Distributions with Respect to Unexchanged Shares........................ 5
(e) No Further Ownership Rights in Chartwell Common Stock................... 5
(f) No Fractional Shares.................................................... 5
(g) Termination of Exchange Fund and Common Shares Trust.................... 6
(h) No Liability............................................................ 6
(i) Lost Certificates....................................................... 7
SECTION 2.3. Tax Consequences of Merger....................................................... 7
SECTION 2.4. Stock Options, Warrants and Stock Purchase Plans................................. 7
SECTION 2.5. Adjustments...................................................................... 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of Chartwell...................................... 8
(a) Organization, Standing and Corporate Power.............................. 8
(b) Subsidiaries............................................................ 9
(c) Capital Structure....................................................... 9
(d) Authority; Noncontravention............................................. 10
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(e) SEC Documents; Financial Statements..................................... 11
(f) Information Supplied.................................................... 13
(g) Absence of Certain Changes or Events.................................... 13
(h) Benefit Plans........................................................... 14
(i) Taxes................................................................... 19
(j) No Excess Parachute Payments; Section 162(m) of the Code................ 21
(k) Compliance with Applicable Laws......................................... 21
(l) Litigation.............................................................. 21
(m) No Undisclosed Liabilities.............................................. 22
(n) Reserves................................................................ 22
(o) Insurance Issued........................................................ 23
(p) Opinion of Financial Advisor............................................ 23
(q) Voting Requirements..................................................... 23
(r) Rights Agreement; Section 203........................................... 23
(s) Brokers................................................................. 24
(t) No Default.............................................................. 24
(u) Related Party Transactions.............................................. 24
(v) Title to Property....................................................... 24
(w) Environmental........................................................... 25
(x) Chartwell Investees..................................................... 25
(y) Reinsurance Contracts, Coverholders and MGAs............................ 26
(z) Reinsurance Agreement................................................... 27
SECTION 3.2. Representations and Warranties of Trenwick....................................... 27
(a) Organization, Standing and Corporate Power.............................. 27
(b) Subsidiaries............................................................ 27
(c) Capital Structure....................................................... 27
(d) Authority; Noncontravention............................................. 28
(e) SEC Documents; Financial Statements..................................... 29
(f) Information Supplied.................................................... 31
(g) Absence of Certain Changes or Events.................................... 31
(h) Benefit Plans........................................................... 32
(i) Taxes................................................................... 36
(j) Compliance with Applicable Laws......................................... 37
(k) Litigation.............................................................. 38
(l) No Undisclosed Liabilities.............................................. 37
(m) Reserves................................................................ 37
(n) Opinion of Financial Advisor............................................ 37
(o) Voting Requirements..................................................... 37
(p) Brokers................................................................. 37
(q) No Default.............................................................. 37
(r) Related Party Transactions.............................................. 40
(s) Title to Property....................................................... 37
(t) Environmental........................................................... 37
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(u) Reinsurance Contracts, Coverholders and MGAs............................ 37
(v) Trenwick Investees...................................................... 42
(w) Insurance Issued........................................................ 37
(x) Approvals and Permits................................................... 37
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1. Conduct of Business.............................................................. 37
(a) Conduct of Business by Chartwell........................................ 37
(b) Conduct of Business by Trenwick......................................... 45
(c) Other Actions........................................................... 37
(d) Advice of Changes....................................................... 37
SECTION 4.2. No Solicitation by Chartwell..................................................... 37
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1. Preparation of the Form S-4 and the Joint Proxy Statement........................ 37
SECTION 5.2. Stockholder Approval............................................................. 37
SECTION 5.3. Access to Information; Confidentiality........................................... 37
SECTION 5.4. Commercially Reasonable Efforts.................................................. 37
SECTION 5.5. Benefit Plans.................................................................... 37
SECTION 5.6. Indemnification and Insurance.................................................... 52
SECTION 5.7. Public Announcements............................................................. 53
SECTION 5.8. Consents, Approvals and Filings.................................................. 37
SECTION 5.9. NASDAQ Approval.................................................................. 54
SECTION 5.10. Affiliates and Certain Stockholders............................................. 37
SECTION 5.11. Tax Matters..................................................................... 55
SECTION 5.12. Letters of Accountants.......................................................... 55
SECTION 5.13. Stockholder Litigation.......................................................... 55
SECTION 5.14. Fees and Expenses............................................................... 55
SECTION 5.15. Reinsurance Agreement........................................................... 57
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1. Conditions to Each Party's Obligation To Effect the Merger....................... 57
(a) Stockholder Approval.................................................... 57
(b) Governmental, Regulatory and Lloyd's Consents........................... 57
(c) HSR Act................................................................. 57
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(d) No Injunctions or Restraints............................................ 57
(e) Form S-4................................................................ 58
(f) NASDAQ.................................................................. 58
(g) Third-Party Consents.................................................... 58
SECTION 6.2. Conditions to Obligation of Trenwick............................................. 58
(a) Representations and Warranties.......................................... 58
(b) Performance of Obligations of Chartwell................................. 58
(c) Tax Opinion............................................................. 58
(d) No Material Adverse Change.............................................. 58
(e) Ratings................................................................. 59
(f) Reinsurance Agreement................................................... 59
(g) Opinion................................................................. 59
SECTION 6.3. Conditions to Obligation of Chartwell............................................ 59
(a) Representations and Warranties.......................................... 59
(b) Performance of Obligations of Trenwick.................................. 59
(c) Tax Opinion............................................................. 59
(d) Material Adverse Change................................................. 59
(e) Ratings................................................................. 59
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1. Termination...................................................................... 60
SECTION 7.2. Effect of Termination............................................................ 61
SECTION 7.3. Amendment........................................................................ 62
SECTION 7.4. Extension; Waiver................................................................ 62
SECTION 7.5. Procedure for Termination, Amendment, Extension or Waiver........................ 62
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1. Nonsurvival of Representations and Warranties.................................... 62
SECTION 8.2. Definitions...................................................................... 62
SECTION 8.3. Notices 64
SECTION 8.4. Interpretation................................................................... 65
SECTION 8.5. Counterparts..................................................................... 65
SECTION 8.6. Entire Agreement; No Other Representations; No Third-Party Beneficiaries......... 65
SECTION 8.7. Governing Law.................................................................... 66
SECTION 8.8. Assignment....................................................................... 66
SECTION 8.9. Enforcement and Consent to Jurisdiction.......................................... 66
SECTION 8.10. Severability.................................................................... 66
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 21, 1999 (the
"Agreement"), between Trenwick Group Inc., a Delaware corporation ("Trenwick")
and Chartwell Re Corporation, a Delaware corporation ("Chartwell").
WHEREAS, the respective Boards of Directors of Trenwick and
Chartwell deem it advisable and in the best interest of their respective
companies and stockholders to enter into this Agreement, pursuant to which
Chartwell shall be merged with and into Trenwick (the "Merger"), and the
transactions contemplated hereby and have adopted resolutions approving this
Agreement and the transactions contemplated hereby;
WHEREAS, as a condition to Trenwick's willingness to execute
and deliver this Agreement, to pay the Merger Consideration to the Chartwell
stockholders and to consummate the Merger and the other transactions
contemplated hereby, Trenwick has required, and Chartwell has agreed, that
Trenwick be indemnified and guaranteed, effective as of the Effective Time (as
defined herein), against certain adverse development in the reserves for losses,
loss adjustment expenses and certain other balance sheet items of Chartwell, and
that such indemnity and guaranty be accomplished through the reinsurance
agreement described in Section 3.1(z) of the Chartwell Disclosure Schedule (as
defined herein) (the "Reinsurance Agreement") and whereas, such indemnification
and guarantee will be effected through the securing of the Reinsurance
Agreement, which will be effective at the Effective Time and an express
condition to the closing of the Merger and whereas, consummation of the Merger
is predicated upon the Reinsurance Agreement being obtained by Chartwell;
WHEREAS, for federal income tax purposes, it is intended that
the Merger will qualify as a reorganization under the provisions of Section 368
(a) of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, subject to and immediately following the execution
and delivery of this Agreement, Chartwell and Trenwick will enter into an
agreement (the "Stock Option Agreement"), pursuant to which Chartwell will grant
Trenwick the option to purchase a number of shares equal to 19.9% of the
outstanding common stock, par value $.01 per share, of Chartwell ("Chartwell
Common Stock"), upon the terms and subject to the conditions set forth therein;
and
WHEREAS, Trenwick and Chartwell desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, the parties
agree as follows:
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ARTICLE I
THE MERGER
SECTION 1.1. The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the Delaware General
Corporation Law (the "DGCL"), Chartwell shall be merged with and into Trenwick
at the Effective Time (as hereinafter defined). At the Effective Time, the
separate existence of Chartwell shall cease, and Trenwick shall continue as the
surviving corporation (the "Surviving Corporation").
SECTION 1.2. Closing. Unless this Agreement shall have been terminated
pursuant to Section 7.1, and subject to the satisfaction or waiver of each of
the conditions set forth in Article VI, the closing of the Merger (the
"Closing") shall take place at 10:00 a.m. on the date that is the second
business day following the date on which the last to be fulfilled or waived of
the conditions set forth in Section 6.1 shall be fulfilled or waived in
accordance with this Agreement (other than those conditions that by their nature
are to be fulfilled on the Closing Date, but subject to the fulfillment or
waiver of those conditions), at the offices of Xxxxx & XxXxxxxx, 805 Third
Avenue, New York, New York, unless another date, time or place is agreed to in
writing by the parties hereto. The actual date and time of the Closing are
herein referred to as the "Closing Date."
SECTION 1.3. Effective Time. The parties hereto will file with the
Secretary of State of the State of Delaware (the "Delaware Secretary of State")
on the date of the Closing (or on such other later date as Trenwick and
Chartwell may agree in writing) a certificate of merger or other appropriate
documents, executed in accordance with the relevant provisions of the DGCL, and
make all other filings or recordings required under the DGCL in connection with
the Merger. The Merger shall become effective upon the filing of the certificate
of merger with the Delaware Secretary of State, or at such later time as is
specified in the certificate of merger (the "Effective Time").
SECTION 1.4. Effects of the Merger. The Merger shall have the effects
set forth in Section 259 of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the properties,
rights, privileges, powers and franchises of Chartwell and Trenwick shall vest
in the Surviving Corporation, and all debts, liabilities and duties of Chartwell
and Trenwick shall become the debts, liabilities and duties of the Surviving
Corporation, all as provided under the DGCL.
SECTION 1.5. Certificate of Incorporation; By-laws. (a) At the
Effective Time and without any further action on the part of Chartwell or
Trenwick, the Restated Certificate of Incorporation of Trenwick as in effect
immediately prior to the Effective Time shall be the certificate of
incorporation of the Surviving Corporation until thereafter amended as provided
therein and under the DGCL.
(b) At the Effective Time and without any further action on the part of
Chartwell or Trenwick, the By-laws of Trenwick shall be the By-laws of the
Surviving
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Corporation until thereafter amended or repealed in accordance with their terms
or the Certificate of Incorporation of the Surviving Corporation and as provided
by law.
SECTION 1.6. Directors and Officers. (a) The directors of Trenwick at
the Effective Time shall be the directors of the Surviving Corporation;
provided, that at the Effective Time, Trenwick shall increase the size of its
Board of Directors in order to enable the four (4) individuals set forth in
Section 1.6 of the Chartwell Disclosure Schedule, or any mutually agreed
substitute for any of such individuals who is unwilling or unable to so serve
(the "Designees"), which Designees shall include any director whose election is
provided for pursuant to the Stockholders Agreement, dated as of December 13,
1995, among Chartwell and the security holders named or referenced therein, to
be members of the Trenwick Board of Directors. The Trenwick Board of Directors
shall appoint each of the Designees to the Trenwick Board of Directors as of the
Effective Time, with such Designees to be divided as evenly as possible among
the classes of directors of Trenwick.
(b) The officers of Trenwick at the Effective Time shall, from and
after the Effective Time, be the officers of the Surviving Corporation, until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
ARTICLE II
EFFECT OF THE MERGER ON SECURITIES
SECTION 2.1. Effect on Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders of any
shares of Chartwell Common Stock or any other shares of capital stock of
Chartwell or any shares of capital stock of Trenwick:
(a) Cancellation of Treasury Stock and Trenwick-Owned Stock. Each share
of Chartwell Common Stock issued and outstanding immediately prior to the
Effective Time that is owned by Trenwick or any subsidiary of Trenwick or by
Chartwell or any subsidiary of Chartwell (together, in each case, with the
associated Right (as defined in Section 3.1(c)) shall automatically be canceled
and retired and shall cease to exist, and no cash or other consideration shall
be delivered or deliverable in exchange therefor.
(b) Conversion of Chartwell Common Stock. Each share of Chartwell
Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares to be canceled in accordance with Section 2.1(a)) together
with the associated Right shall be converted into the right to receive that
number (the "Stock Consideration") of validly issued, fully paid and
nonassessable shares of common stock, par value $.10 per share, of Trenwick
("Trenwick Common Stock") which is equal to the Conversion Number (as defined in
Section 2.1(c)). The Stock Consideration and any cash to be paid in accordance
with Section 2.2 in lieu of fractional shares of Chartwell Common Stock are
referred to collectively as the "Merger Consideration."
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(c) Conversion Number. As used herein, "Conversion Number" shall mean
0.825.
(d) Cancellation and Retirement of Chartwell Common Stock. As of the
Effective Time, all shares of Chartwell Common Stock, other than shares to be
canceled in accordance with Section 2.1(a), issued and outstanding immediately
prior to the Effective Time, shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such shares of Chartwell Common Stock shall
cease to have any rights with respect thereto, except the right to receive the
Merger Consideration upon surrender of such certificate in accordance with
Section 2.2, without interest.
SECTION 2.2. Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Trenwick shall deposit
with a bank or trust company designated by Trenwick and reasonably satisfactory
to Chartwell (the "Exchange Agent"), certificates representing the shares of
Trenwick Common Stock representing the aggregate Stock Consideration (such
certificates, together with any dividends or distributions with respect to such
certificates, being hereinafter referred to as the "Exchange Fund").
(b) Letter of Transmittal. Promptly after the Effective Time (but in no
event more than 5 days thereafter), the Surviving Corporation shall cause the
Exchange Agent to mail to each record holder of certificates that immediately
prior to the Effective Time represented shares of Chartwell Common Stock which
have been converted pursuant to Section 2.1, a form of letter of transmittal and
instructions for use in surrendering such certificates and receiving the
consideration to which such holder shall be entitled pursuant to Section 2.1.
(c) Exchange Procedures. As soon as practicable after the Effective
Time, each holder of an outstanding certificate or certificates which prior
thereto represented shares of Chartwell Common Stock shall, upon surrender to
the Exchange Agent of such certificate or certificates and acceptance thereof by
the Exchange Agent, be entitled to a certificate representing that number of
whole shares of Trenwick Common Stock (and cash in lieu of fractional shares of
Trenwick Common Stock as contemplated by this Section 2.2) which the aggregate
number of shares of Chartwell Common Stock previously represented by such
certificate or certificates surrendered shall have been converted into the right
to receive pursuant to Section 2.1(b) of this Agreement. The Exchange Agent
shall accept such certificates upon compliance with such reasonable terms and
conditions as the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with normal exchange practices. If the consideration to be
paid in the Merger (or any portion thereof) is to be delivered to any person
other than the person in whose name the certificate representing shares of
Chartwell Common Stock surrendered in exchange therefore is registered, it shall
be a condition to such exchange that the certificate so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
person requesting such exchange shall pay to the Exchange Agent any transfer or
other taxes required by reason of the payment of such consideration to a person
other than the registered holder of the certificate surrendered, or shall
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not applicable. After the Effective Time,
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there shall be no further transfer on the records of Chartwell or its transfer
agent of certificates representing shares of Chartwell Common Stock and if such
certificates are presented to Chartwell for transfer, they shall be canceled
against delivery of the Merger Consideration as hereinabove provided. Until
surrendered as contemplated by this Section 2.2(c), each certificate
representing shares of Chartwell Common Stock (other than certificates
representing shares to be cancelled in accordance with Section 2.1(a)) shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration, without any interest
thereon, as contemplated by Section 2.1. No interest will be paid or will accrue
on any cash payable as Merger Consideration.
(d) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to Trenwick Common Stock with a record date
after the Effective Time shall be paid to the holder of any certificate that
immediately prior to the Effective Time represented shares of Chartwell Common
Stock which have been converted pursuant to Section 2.1, until the surrender for
exchange of such certificate in accordance with this Article II. Following
surrender for exchange of any such certificate, there shall be paid to the
holder of such certificate, without interest, (i) at the time of such surrender,
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to the number of whole shares of
Trenwick Common Stock into which the shares of Chartwell Common Stock
represented by such certificate immediately prior to the Effective Time were
converted pursuant to Section 2.1, and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time, but prior to such surrender, and with a payment date subsequent
to such surrender, payable with respect to such whole shares of Trenwick Common
Stock.
(e) No Further Ownership Rights in Chartwell Common Stock. The Merger
Consideration paid upon the surrender for exchange of certificates representing
shares of Chartwell Common Stock in accordance with the terms of this Article II
shall be deemed to have been issued and paid in full satisfaction of all rights
pertaining to the shares of Chartwell Common Stock theretofore represented by
such certificates, subject, however, to the Surviving Corporation's obligation
(if any) to pay any dividends or make any other distributions with a record date
prior to the Effective Time which may have been declared by Chartwell on such
shares of Chartwell Common Stock in accordance with the terms of this Agreement
and which remain unpaid at the Effective Time.
(f) No Fractional Shares. (i) No certificates or scrip representing
fractional shares of Trenwick Common Stock shall be issued upon the surrender
for exchange of certificates that immediately prior to the Effective Time
represented shares of Chartwell Common Stock which have been converted pursuant
to Section 2.1, and such fractional share interests will not entitle the owner
thereof to vote or to any rights as a stockholder of Trenwick. No Chartwell
stockholder shall be entitled to receive cash in lieu of fractional shares in an
amount greater than the value of one full share of Trenwick Common Stock.
(ii) As promptly as practicable following the Effective Time, the
Exchange Agent shall determine the excess of (x) the number of shares of
Trenwick Common Stock delivered to the Exchange Agent by Trenwick pursuant to
Section 2.2(a) over (y) the
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aggregate number of whole shares of Trenwick Common Stock to be distributed to
holders of the certificates formerly representing shares of Chartwell Common
Stock pursuant to Section 2.2(c) (such excess being herein called the "Excess
Shares."). As soon after the Effective Time as practicable, the Exchange Agent,
as agent for the holders of the certificates formerly representing shares of
Chartwell Common Stock, shall sell the Excess Shares at then prevailing prices
on the Nasdaq Stock Market National Market ("NASDAQ") all in the manner provided
in paragraph (iii) of this Section 2.2(f).
(iii) The sale of the Excess Shares by the Exchange Agent shall be
executed on NASDAQ through one or more authorized market makers and shall be
executed in round lots to the extent practicable. Until the net proceeds of such
sale or sales have been distributed to the holders of the certificates, the
Exchange Agent will hold such proceeds in trust for the holders of the
certificates (the "Common Shares Trust"). Trenwick shall pay all commissions,
transfer taxes and other out-of-pocket transaction costs, including the expenses
and compensation of the Exchange Agent, incurred in connection with such sale of
the Excess Shares. The Exchange Agent shall determine the portion of the Common
Shares Trust to which each holder of a certificate shall be entitled, if any, by
multiplying the amount of the aggregate net proceeds comprising the Common
Shares Trust by a fraction, the numerator of which is the amount of the
fractional share interest to which such holder is entitled and the denominator
of which is the aggregate amount of fractional share interests to which all
holders of the certificates are entitled.
(iv) As soon as practicable after the determination of the amount
of cash, if any, to be paid to holders of the certificates in lieu of any
fractional share interests, the Exchange Agent shall make available such
amounts, without interest, to such holders of the certificates.
(g) Termination of Exchange Fund and Common Shares Trust. Any portion
of the Exchange Fund or Common Shares Trust which remains undistributed to the
holders of the certificates representing shares of Chartwell Common Stock for
180 days after the Effective Time shall be delivered to Trenwick, upon demand,
and any holders of shares of Chartwell Common Stock who have not theretofore
complied with this Article II shall thereafter look only to Trenwick for payment
of their claim for any Merger Consideration and any dividends or distributions
with respect to Trenwick Common Stock.
(h) No Liability. None of Chartwell, Trenwick or the Exchange Agent
shall be liable to any person in respect of any shares, cash, dividends or
distributions payable from the Exchange Fund or Common Shares Trust delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law. If any certificates representing shares of Chartwell Common Stock
shall not have been surrendered prior to five years after the Effective Time (or
immediately prior to such earlier date on which any Merger Consideration in
respect of such certificate would otherwise escheat to or become the property of
any Governmental Entity (as defined in Section 3.1(d))), any such shares, cash,
dividends or distributions payable in respect of such certificate shall, to the
extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
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(i) Lost Certificates. If any certificate representing Chartwell Common
Stock shall have been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the person claiming such certificate to be lost, stolen or
destroyed and, if required by the Surviving Corporation, the posting by such
person of a bond in such reasonable amount as the Surviving Corporation may
direct as indemnity against any claim that may be made against it with respect
to such certificate, the Exchange Agent will deliver in exchange for such lost,
stolen or destroyed certificate the Merger Consideration set forth in Section
2.1(b) with respect to the shares of Chartwell Common Stock formerly represented
thereby, without any interest thereon.
SECTION 2.3. Tax Consequences of Merger. It is the intent of Chartwell
and Trenwick and the holders of the Chartwell Common Stock and the holders of
the Trenwick Common Stock that the Merger qualify as a reorganization described
in Section 368(a)(1) of the Code, pursuant to which none of the holders of the
Chartwell Common Stock or the holders of the Trenwick Common Stock will
recognize any gain or loss for Federal income tax purposes, except to the extent
of any cash received in lieu of fractional shares.
SECTION 2.4. Stock Options, Warrants and Stock Purchase Plans.
(a) At the Effective Time, each employee and director stock option to
purchase Chartwell Common Stock granted under any of the Stock Option Plans (as
hereinafter defined in Section 3.1(c)) outstanding as of the Effective Time
(each, a "Stock Option"), whether or not then vested or exercisable, shall be
assumed by Trenwick and converted into an option to acquire, on the same terms
and conditions as were applicable under such Stock Option prior to the Effective
Time, the number (rounded down to the nearest whole number) of shares of
Trenwick Common Stock determined by multiplying (x) the number of shares of
Chartwell Common Stock subject to such Stock Option immediately prior to the
Effective Time by (y) the Conversion Number, at a price per share of Trenwick
Common Stock (rounded up to the nearest whole cent) equal to (A) the exercise
price per share otherwise purchasable pursuant to such Stock Option divided by
(B) the Conversion Number. At the Effective Time, each then outstanding warrant
to purchase Chartwell Common Stock (each, a "Warrant") shall be assumed by
Trenwick in accordance with its terms.
(b) At the Effective Time, each option to purchase Chartwell Common
Stock under Chartwell's Sharesave Scheme 1997 (each, a "Sharesave Stock Option")
with respect to the 1997, 1998 and 1999 calendar years, but only to the extent
accrued to the Effective Time, whether or not then vested or exercisable, shall
be converted as of the Effective Time into the right to receive from the
Surviving Corporation the number (rounded down to the next whole number, with
cash to be paid in lieu of any fractional share eliminated through such
rounding) of shares of Trenwick Common Stock equal to the product of (i) the
number of shares of Chartwell Common Stock that were subject to such Sharesave
Stock Option immediately prior to its conversion pursuant to this Section 2.4
and (ii) the Conversion Number, less the number of shares of Trenwick Common
Stock equal to any U.K. tax required to be withheld by the Surviving
Corporation. The amount of cash to be paid in lieu of fractional shares pursuant
to this Section 2.4(b) shall be determined as provided in Section 2.2(f) (iii).
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(c) Notwithstanding any other provision of this Agreement to the
contrary, prior to the Effective Time Chartwell shall make any amendments to the
Stock Option Plans and Stock Purchase Plans (as hereinafter defined in Section
3.1(c)) and take such other actions, if any, as are necessary to give effect to
the transactions contemplated by this Section.
(d) Trenwick shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Trenwick Common Stock for delivery
pursuant to the terms set forth in this Section 2.4. At the Effective Time,
Trenwick shall file with the Securities and Exchange Commission (the "SEC") a
registration statement or statements on Form S-8, or such other appropriate form
as Trenwick may select, with respect to the Trenwick Common Stock subject to the
Stock Options pursuant to this Section 2.4, and shall use its reasonable best
efforts to maintain the effectiveness of the registration statement and current
status of the prospectus relating thereto, as well as comply with any applicable
state securities or "blue sky" laws, for so long as such Stock Options remain
outstanding. The shares of Trenwick Common Stock to be issued pursuant to
Section 2.4(b) shall be registered under the Form S-4 (as hereinafter defined).
(e) Chartwell and Trenwick shall take all such steps as may be required
to provide that, with respect to each Section 16 Affiliate (as defined below),
(i) the transactions contemplated by this Article II and (ii) any other
dispositions of Chartwell equity securities (including derivative securities) or
other acquisitions of Trenwick equity securities (including derivative
securities) in connection with this Agreement, shall be exempt under Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). For purposes of this Agreement, "Section 16 Affiliate" shall mean each
individual who (x) immediately prior to the Effective Time is a director or
executive officer of Chartwell or (y) at the Effective Time will become a
director or executive officer of Trenwick.
SECTION 2.5. Adjustments. If at any time during the period between the
date of this Agreement and the Effective Time, any change in the outstanding
shares of capital stock of Trenwick or Chartwell shall occur by reason of any
reclassification, recapitalization, stock split combination, exchange or
readjustment of shares, any stock dividend thereon with a record date during
such period, or any similar transaction, the Merger Consideration and the
adjustments to options and warrants and the payments required to be made under
Section 2.4 shall be appropriately adjusted.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of Chartwell. Except as
disclosed in the Disclosure Schedule delivered by Chartwell to Trenwick at or
prior to the execution of this Agreement (the "Chartwell Disclosure Schedule")
and making reference to the particular subsection of this Agreement to which
exception is being taken, Chartwell represents and warrants to Trenwick as
follows:
(a) Organization, Standing and Corporate Power. Each of Chartwell and
its subsidiaries (as defined in Section 8.2(d)) is a corporation or other legal
entity duly organized,
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validly existing and in good standing (with respect to jurisdictions that
recognize such concept) under the laws of the jurisdiction in which it is
organized and has the requisite corporate or other power, as the case may be,
and authority to carry on its business as now being conducted, except where the
failure to be so organized, existing or in good standing or to have such power
individually or in the aggregate would not have a Material Adverse Effect (as
defined in Section 8.2(h)) on Chartwell. Each of Chartwell and its subsidiaries
is duly qualified or licensed to do business and is in good standing (with
respect to jurisdictions that recognize such concept) in each jurisdiction in
which the nature of its business or the ownership, leasing or operation of its
properties makes such qualification, licensing or good standing necessary,
except for those jurisdictions where the failure to be so qualified or licensed
or to be in good standing or to have such power individually or in the aggregate
would not have a Material Adverse Effect on Chartwell. Chartwell has delivered
to Trenwick complete and correct copies of its Certificate of Incorporation and
By-laws and the Certificates of Incorporation and By-laws, or other
organizational documents, of its subsidiaries, in each case as amended to the
date of this Agreement.
(b) Subsidiaries. Section 3.1(b) of the Chartwell Disclosure Schedule
includes all the subsidiaries of Chartwell which as of the date of this
Agreement are Significant Subsidiaries (as defined in Rule 1-02 of Regulation
S-X of the SEC). All the outstanding shares of capital stock of, or other equity
interests in, each such Significant Subsidiary have been validly issued and are
fully paid and nonassessable and are owned directly or indirectly by Chartwell,
free and clear of all pledges, claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever (collectively, "Liens").
(c) Capital Structure. The authorized capital stock of Chartwell
consists of 20,000,000 shares of Chartwell Common Stock and 5,000,000 shares of
preferred stock, par value $1.00 per share. At the close of business on June 18,
1999, (i) 9,641,854 shares of Chartwell Common Stock were issued and
outstanding, (ii) zero shares of Chartwell Common Stock were held by Chartwell
in its treasury; (iii) 1,471,300 shares of Chartwell Common Stock were reserved
for issuance pursuant to outstanding Stock Options issued under Chartwell's
Amended and Restated 1993 Stock Option Plan, 1997 Omnibus Stock Incentive Plan
and 1996 Non-Employee Director Stock Option Plan (collectively, the "Stock
Option Plans"), (iv) 25,045 shares of Chartwell Common Stock were reserved for
issuance pursuant to the 1995 Employee Stock Purchase Plan and Sharesave Scheme
1997 (collectively, the "Stock Purchase Plans") (including shares of Chartwell
Common Stock that were reserved for issuance pursuant to options granted
pursuant to the 1995 Employee Stock Purchase Plan ("ESPP Stock Options") and
Sharesave Stock Options then outstanding), (v) 334,532 shares of Chartwell
Common Stock were reserved for issuance upon the exercise of the Warrants listed
in Section 3.1(c) of the Chartwell Disclosure Schedule and (vi) 125,000 shares
of Junior Participating Cumulative Preferred Stock, par value $1.00 per share,
were reserved for issuance in connection with the rights (the "Rights") issued
pursuant to the Rights Agreement dated as of May 22, 1997 (the "Rights
Agreement"), between Chartwell and State Street Bank and Trust Company. Except
as set forth above, at the close of business on June 18, 1999, no shares of
capital stock or other equity securities of Chartwell were issued, reserved for
issuance or outstanding. All outstanding shares of capital stock of Chartwell
are, and all shares which may be issued pursuant to the Stock Option Plans, the
Stock Purchase Plans or the Warrants will be, when issued, duly authorized,
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validly issued, fully paid and nonassessable and not subject to preemptive
rights. Except as set forth in Section 3.1(c) of the Chartwell Disclosure
Schedule, since January 1, 1999, no shares of the capital stock of Chartwell
have been issued other than pursuant to Stock Options, Warrants, ESPP Stock
Options or Sharesave Stock Options already in existence on such date, and, since
such date, no Stock Options, Warrants, ESPP Stock Options or Sharesave Stock
Options have been granted. Except as set forth in Section 3.1(c) of the
Chartwell Disclosure Schedule, no bonds, debentures, notes or other indebtedness
of Chartwell or any subsidiary of Chartwell having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which the stockholders of Chartwell or any subsidiary of
Chartwell may vote are issued or outstanding. Section 3.1(c) of the Chartwell
Disclosure Schedule lists each subsidiary of Chartwell and, except for the
capital stock of such subsidiaries and the other ownership interests listed in
Section 3.1(c) of the Chartwell Disclosure Schedule, Chartwell does not own,
directly or indirectly, any capital stock or other ownership interest in any
corporation, partnership, joint venture or other entity other than any
publicly-traded corporation in which Chartwell owns 100 or fewer shares of
common stock. Except as disclosed in Section 3.1(c) of the Chartwell Disclosure
Schedule, all the outstanding shares of capital stock of each subsidiary of
Chartwell have been validly issued and are fully paid and nonassessable and are
owned by Chartwell, by one or more wholly owned subsidiaries of Chartwell or by
Chartwell and one or more such wholly owned subsidiaries, free and clear of all
Liens. Except as set forth above or in Section 3.1(c) of the Chartwell
Disclosure Schedule, there are not any securities, options, warrants, rights,
commitments or agreements of any kind to which Chartwell or any subsidiary is a
party or by which any of them is bound obligating Chartwell or any subsidiary to
issue, sell or deliver, or repurchase, redeem or otherwise acquire, shares of
capital stock or other equity or voting securities of any of them or securities
convertible into or exchangeable for capital stock or voting securities of
Chartwell, or obligating any of them to issue, sell, deliver, grant, extend or
enter into any such security, option, warrant, right, commitment or agreement.
Except as set forth in Section 3.1(c) of the Chartwell Disclosure Schedule,
there are no stockholder agreements, voting trusts or other agreements or
understandings to which Chartwell or any of its subsidiaries is a party, or to
which any of them is bound, relating to the voting or disposition of any shares
of capital stock of Chartwell or any subsidiary thereof.
(d) Authority; Noncontravention. Chartwell has all requisite corporate
power and authority to enter into this Agreement and, subject to obtaining the
Chartwell Stockholder Approval (as defined in Section 3.1(q)), to consummate the
transactions contemplated by this Agreement. Chartwell has all requisite
corporate power and authority to enter into the Stock Option Agreement and to
consummate the transactions contemplated thereby. The execution and delivery of
this Agreement and the Stock Option Agreement by Chartwell and the consummation
by Chartwell of the transactions contemplated by this Agreement and the Stock
Option Agreement have been duly authorized by all necessary corporate action on
the part of Chartwell, subject to the Chartwell Stockholder Approval. This
Agreement and the Stock Option Agreement have been duly executed and delivered
by Chartwell and, assuming the due authorization, execution and delivery of this
Agreement and the Stock Option Agreement by Trenwick, constitute legal, valid
and binding obligations of Chartwell, enforceable against Chartwell in
accordance with their respective terms. The execution and delivery of this
Agreement and the Stock Option Agreement do not, and, subject to the Chartwell
Stockholder Approval with respect to this Agreement, the consummation of the
transactions contemplated by
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this Agreement and the Stock Option Agreement and compliance with the provisions
of this Agreement and the Stock Option Agreement will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a benefit under, or result in the
creation of any Lien upon any of the properties or assets of Chartwell or any of
its subsidiaries under, (i) the Certificate of Incorporation or By-laws of
Chartwell or the comparable organizational documents of any of its subsidiaries,
(ii) subject to the matters referred to in Section 3.1(d) of the Chartwell
Disclosure Schedule and the matters referred to in the sentence following the
next sentence, any indenture or other material agreement, permit, franchise,
license or instrument to which Chartwell or any of its subsidiaries is a party
or by which Chartwell or any of its subsidiaries or any of their assets is bound
or affected, or (iii) subject to the matters referred to in the sentence
following the next sentence, any statute, law, ordinance, rule, regulation,
order, judgment, injunction, decree, determination or award applicable to
Chartwell or any of its subsidiaries or any of their respective properties or
assets, other than, in the case of clause (ii) above, any such conflicts,
violations, defaults, rights, losses or Liens that individually or in the
aggregate would not (x) have a Material Adverse Effect on Chartwell or (y)
reasonably be expected to impair materially the ability of Chartwell to perform
its obligations under this Agreement and the Stock Option Agreement. Assuming
the conditions set forth in Section 3.1(d) of the Chartwell Disclosure Schedule
are met, the Merger and the other transactions contemplated hereby will not
constitute a "change of control" under the Contingent Interest Notes due June
30, 2006 or the Indenture dated as of December 1, 1995 (the "Contingent Interest
Notes Indenture") between Chartwell, as the successor to Piedmont Management
Company Inc. and State Street Bank and Trust Company, as successor to Fleet
National Bank of Connecticut, as Trustee. No consent, approval, order, or
authorization of, action by or in respect of, or registration, declaration or
filing with any federal, state, local or foreign government, any court, tribunal
or administrative, governmental or regulatory authority or agency or commission
or any non-governmental self-regulatory agency, commission or authority (each, a
"Governmental Entity"), or of the Society and Corporation of Lloyd's of London
("Lloyd's"), is required by or with respect to Chartwell or any of its
subsidiaries in connection with the execution and delivery of this Agreement and
the Stock Option Agreement by Chartwell or the consummation by Chartwell of the
transactions contemplated hereby, except for (A) in connection with or in
compliance with the provisions of (1) the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (2) the Securities Act of
1933, as amended (the "Securities Act"), (3) the Exchange Act, (4) the DGCL, (5)
the New York Stock Exchange, Inc. (the "NYSE"), (6) any non-United States
competition, antitrust and investment laws, and the securities or "blue sky"
laws of the various states, (7) the approvals, filings and notices required
under the insurance laws of the jurisdictions in which Chartwell transacts the
business of insurance or reinsurance; (8) the filing of the certificate of
merger with the Delaware Secretary of State and appropriate documents with the
relevant authorities of other states in which Chartwell is qualified to do
business, (9) any required consents and waivers of Lloyd's and (B) such other
consents, approvals, orders, authorizations, actions, registrations,
declarations, filings or notices (as may be required) the failure of which to be
made or obtained individually or in the aggregate would not have a Material
Adverse Effect on Chartwell.
(e) SEC Documents; Financial Statements. (i) Chartwell has timely filed
all required forms, reports, schedules, statements and other documents
(including exhibits and all
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other information incorporated therein) with the SEC since January 1, 1996.
Chartwell has delivered or made available to Trenwick all registration
statements, proxy statements, annual reports, quarterly reports and reports on
Form 8-K and other forms, reports and documents, if any, filed by Chartwell with
the SEC since January 1, 1996 (as such documents have been amended since the
time of their filing, collectively, the "Chartwell SEC Documents"). As of their
respective dates or, if amended, as of the date of the last such amendment, the
Chartwell SEC Documents (i) were timely filed and complied as to form in all
material respects with the applicable requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Chartwell SEC Documents, and (ii) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of Chartwell included in the
Chartwell SEC Documents complied as to form, as of their respective dates of
filing with the SEC, in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited consolidated quarterly statements,
as permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial position of
Chartwell and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited quarterly statements, to normal
year-end adjustments).
(ii) Chartwell has previously furnished to Trenwick true and
complete copies of the annual statements for each of the years ended December
31, 1996, December 31, 1997, and December 31, 1998, together with all exhibits
and schedules thereto (collectively, the "Annual Statements"), with respect to
each of Chartwell Reinsurance Company, The Insurance Corporation of New York,
Dakota Specialty Insurance Company and ReCor Insurance Company Inc. (each, an
"Insurer"), in each case as filed with the Governmental Entity charged with
supervision of insurance companies of such Insurer's jurisdiction of domicile
(the "Insurance Regulator"). The Annual Statements were prepared in conformity
with statutory accounting practices prescribed or permitted by such Insurance
Regulator applied on a consistent basis ("SAP") and present fairly, to the
extent required by and in conformity with SAP in all material respects the
statutory financial condition of such Insurer at their respective dates and the
results of operations, changes in capital and surplus and cash flow of such
Insurer for each of the periods then ended. Except as set forth in Section
3.1(e) of the Chartwell Disclosure Schedule, no deficiencies or violations
material to the financial condition of any of the Insurers, individually,
whether or not material in the aggregate, have been asserted in writing by any
Insurance Regulator which have not been cured or otherwise resolved to the
satisfaction of such Insurance Regulator (unless not currently pending).
Chartwell has made available to Trenwick true and complete copies of all
financial examination reports of state insurance departments since January 1,
1996 relating to each Insurer. The quarterly statements of each Insurer for the
quarter ending March 31, 1999 as filed and the quarterly statements of each
Insurer thereafter filed prior to the Closing, when filed with the insurance
regulatory authorities of the applicable states, presented and will present
fairly, to the extent required by and in conformity with SAP in all material
respects the statutory financial condition of such Insurer at their respective
dates
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indicated and the results of operations, changes in capital and surplus and cash
flow of such Insurer for each of the periods therein specified (subject to
normal year-end adjustments).
(iii) The Annual Report and Accounts and the Syndicate Quarterly
Reports together with all exhibits and schedules thereto, of each of Lloyd's
Syndicates 44, 270, 544, 741/2741, 839, 947 and 994 (collectively, "Chartwell
Syndicates") as of and for each of the years ended December 31, 1996, 1997 and
1998 and for the quarter ended March 31, 1999 (x) have been prepared in all
material respects in accordance with the applicable requirements of the
Syndicate Accounting Rules of Lloyd's and (y) other than as to Chartwell
Syndicate 947 show a true and fair view in accordance with the foregoing
requirements and standards, in all material respects of the 1996 closed year of
account profit with respect to the Chartwell Syndicates.
(f) Information Supplied. None of the information supplied or to be
supplied by Chartwell for inclusion or incorporation by reference in (i) the
registration statement on Form S-4 to be filed with the SEC by Trenwick in
connection with the issuance of Trenwick Common Stock in the Merger (the "Form
S-4") will, at the time the Form S-4 is filed with the SEC, at any time it is
amended or supplemented or at the time it becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not misleading
or (ii) the filing with the SEC of a proxy statement relating to the Chartwell
Stockholder Approval and the proxy statement relating to the Trenwick
Stockholder Approval, in each case as amended or supplemented from time to time,
(the "Joint Proxy Statement") will, at the date it is first mailed to
Chartwell's stockholders or at the time of the Chartwell Stockholders Meeting
(as defined in Section 5.2), contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Joint Proxy Statement will comply as to form
in all material respects with the requirements of the Exchange Act and the rules
and regulations promulgated thereunder. Notwithstanding the foregoing, no
representation or warranty is made by Chartwell in this Section 3.1(f) with
respect to information supplied by Trenwick for inclusion or incorporation by
reference in the Joint Proxy Statement.
(g) Absence of Certain Changes or Events. Except in connection with
this Agreement, the Stock Option Agreement and the transactions contemplated
hereby, as disclosed in the Chartwell SEC Documents filed and publicly available
prior to the date of this Agreement (the "Filed Chartwell SEC Documents") or in
Section 3.1(g) of the Chartwell Disclosure Schedule, since the date of the most
recent audited financial statements included in the Filed Chartwell SEC
Documents, Chartwell and its subsidiaries have conducted their business in the
ordinary course consistent with past practice, and there has not occurred (i)
any event or change having individually or in the aggregate a Material Adverse
Effect on Chartwell, (ii) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to any of Chartwell's outstanding capital stock, other than regular quarterly
cash dividends of $.04 per share on the Chartwell Common Stock and dividends
paid by wholly owned subsidiaries, (iii) (A) any granting by Chartwell or any of
its subsidiaries to any current or former director or officer of Chartwell or
its subsidiaries of any increase in compensation, bonus or other benefits,
except for normal increases in the ordinary course of
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business or as was required under any employment agreements or benefit plan
listed in Section 3.1(h) of the Chartwell Disclosure Schedule, (B) any granting
by Chartwell or any of its subsidiaries to any such current or former director
or officer of any increase in severance or termination pay except as was
required under any agreement listed in Section 3.1(h) of the Chartwell
Disclosure Schedule or (C) any entry by Chartwell or any of its subsidiaries
into, or any amendments of, any employment, deferred compensation, consulting,
severance, termination or indemnification agreement with any such current or
former director or officer, (iv) any tax election that individually or in the
aggregate would have a Material Adverse Effect on Chartwell or any of its tax
attributes or any settlement or compromise of any material income tax liability,
or (v) any change in accounting principles or practices by Chartwell or any of
its subsidiaries materially affecting their assets, liabilities or business,
except insofar as may have been required or permitted by a change in applicable
accounting principles (including SAP).
(h) Benefit Plans. (A) (i) Each "employee benefit plan" (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and each other plan, arrangement or policy, whether written or oral,
relating to stock options, stock purchases, stock appreciation rights, profit
sharing, group insurance, vacation pay, leave of absence, dependent care,
cafeteria benefits, workers compensation, consulting, pension, retirement,
compensation, deferred compensation, severance, fringe benefits or other
employee benefits, in each case maintained or contributed to, or required to be
maintained or contributed to, by Chartwell or any of its subsidiaries for the
benefit of any present or former U.S. officer, employee or director of Chartwell
or any of its subsidiaries (all the foregoing collectively referred to
hereinafter as "Chartwell Benefit Plans") has been administered substantially in
accordance with its terms and any related trust agreement or insurance contract
has been administered substantially in accordance with its terms. Chartwell, its
subsidiaries and all the Chartwell Benefit Plans, and any related trust
agreements or insurance contracts, are in substantial compliance with the
applicable provisions of ERISA, the Code, all other applicable laws and all
applicable collective bargaining agreements.
(ii) None of Chartwell or any other person or entity that together
with Chartwell is treated as a single employer under Section 414 of the Code
(each a "Chartwell Commonly Controlled Entity") has incurred any material
liability under Title IV of ERISA (other than for the payment of benefits or the
timely payment of Pension Benefit Guaranty Corporation insurance premiums, in
either case in the ordinary course) or under Section 412(f) or 412(n) of the
Code, and no condition exists which could reasonably be expected to present a
risk of Chartwell or any Commonly Controlled Entity incurring such a material
liability.
(iii) Neither Chartwell nor any Chartwell Commonly Controlled
Entity is obligated to contribute to any "multiemployer plan" (as defined in
Section 3(37) or Section 4001(a)(3) of ERISA) or has any material liability,
including current or potential withdrawal liability (within the meaning of
Section 4201 of ERISA) with respect to any multiemployer plan.
(iv) Except as contemplated by Section 2.4 or as disclosed in the
Filed Chartwell SEC Documents or in Section 3.1(h) of the Chartwell Disclosure
Schedule, since the date of the most recent audited financial statements
included in the Filed Chartwell SEC Documents, there has not been any adoption
or amendment by Chartwell or any of its
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subsidiaries of any collective bargaining agreement or any Chartwell Benefit
Plan. Except as disclosed in the Filed Chartwell SEC Documents or in Section
3.1(h) of the Chartwell Disclosure Schedule, there exist no employment,
consulting, change in control, severance, termination or indemnification
agreements, arrangements or understandings between Chartwell or any subsidiary
and any current or former employee, officer or director of Chartwell or any
subsidiary or any Chartwell Benefit Plan.
(v) Except as set forth in Section 3.1(h) of the Chartwell
Disclosure Schedule, all material contributions and other payments required to
be made by Chartwell and its subsidiaries to any Chartwell Benefit Plan prior to
the date hereof have been made and all accruals required to be made under any
Chartwell Benefit Plan have been made. There is no claim, dispute, grievance,
charge, complaint, restraining or injunctive order, litigation or proceeding
pending, or, to the knowledge of Chartwell, threatened or anticipated (other
than routine claims for benefits) against or relating to any Chartwell Benefit
Plan or against the assets of any Chartwell Benefit Plan which could reasonably
be expected to result in the imposition of any material liability of Chartwell.
Neither Chartwell nor any of its subsidiaries has communicated generally to
employees or specifically to any employee regarding any future increase of
benefit levels (or future creations of new benefits) with respect to any
Chartwell Benefit Plans.
(vi) Each Chartwell Benefit Plan can be terminated or otherwise
discontinued without any liability to Chartwell or any subsidiary that would
reasonably be expected to have a Material Adverse Effect. With respect to each
Chartwell Benefit Plan subject to Title IV of ERISA and with respect to each
plan of a Chartwell Commonly Controlled Entity subject to Title IV of ERISA
(each a "Defined Benefit Plan") (i) no termination of any Defined Benefit Plan
has occurred pursuant to which all liabilities have not been satisfied in full,
and no event has occurred and no condition exists that could reasonably be
expected to result in Chartwell or any Chartwell Commonly Controlled Entity
incurring liability under Title IV of ERISA or could constitute grounds for
terminating any Defined Benefit Plan; (ii) each Defined Benefit Plan which is
subject to Part 3 of Subtitle B of Title I of ERISA or Section 412 of the Code,
has been maintained in compliance with the minimum funding standards of ERISA
and the Code and no such Defined Benefit Plan has incurred any "accumulated
funding deficiency," as defined in Section 412 of the Code and Section 302 of
ERISA, whether or not waived; (iii) neither Chartwell nor any Chartwell Commonly
Controlled Entity has sought or received a waiver of its funding requirements
with respect to any Defined Benefit Plan and all material contributions payable
with respect to each Defined Benefit Plan have been timely made; (iv) no
reportable event, within the meaning of Section 4043 of ERISA, and no event
described in Section 4062 or 4063 of ERISA, has occurred with respect to any
Defined Benefit Plan; (v) the aggregate accumulated benefit obligations of each
Defined Benefit Plan subject to Title IV of ERISA (as of the date of the most
recent actuarial valuation prepared for such Defined Benefit Plan) do not exceed
the fair market value of the assets of such Defined Benefit Plan (as of the date
of such valuation); and (vi) no amendment has been made to any Defined Benefit
Plan that has required or would require the provision of security under ERISA
Section 307 or Code Section 401(a)(29).
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(vii) The execution, delivery and performance of this Agreement and
the transactions contemplated hereby will not in and of themselves result in the
imposition of any federal excise tax with respect to any Chartwell Benefit Plan.
(viii) Neither Chartwell nor any subsidiary maintains or
contributes (or has maintained or contributed to) any Chartwell Benefit Plan
which provides, or has a liability to provide, life insurance, medical,
severance, or other employee welfare benefits to any employee upon his
retirement or termination of employment, except as may be required by Section
4980B of the Code.
(ix) Neither Chartwell nor any of its subsidiaries maintains or
contributes to a trust, organization or association described in any of the
Sections 501(c)(9), 501(c)(17) or 501(c)(2) of the Code.
(x) Favorable determination letters have been received from the
Internal Revenue Service with respect to each Chartwell Benefit Plan which is
intended to comply with the provisions of Section 401(a) of the Code, and each
such Chartwell Benefit Plan complies in form and in operation in all material
respects with the requirements of a "qualified plan" under Section 401(a) of the
Code.
(xi) Neither Chartwell nor any of its subsidiaries, nor any of
their respective directors, officers, employees or, to the knowledge of
Chartwell, any other "fiduciary," as such term is defined in Section 3(21) of
ERISA, has any liability for failure to comply with ERISA or the Code for any
action or failure to act in connection with the administration or investment of
the Chartwell Benefit Plans.
(xii) There has been no act or acts which would result in a
disallowance of a deduction or the imposition of a tax pursuant to Section
4980B, or with regard to plan years beginning before December 31, 1988, Section
162(i) of the Code as in effect immediately prior to the enactment of the
Technical and Miscellaneous Revenue Act of 1988, or any regulations promulgated
thereunder, whether final, temporary or proposed. No event has occurred with
respect to which Chartwell or any of its subsidiaries could be liable for a tax
imposed by Chapter 43 of Subtitle A of the Code, or for a civil penalty or other
liability under Section 502(c) or Section 501(l) of ERISA. Each Chartwell
Benefit Plan that is a "group health plan" as defined in Section 607 of ERISA
complies in all material respects and has been operated in substantial
compliance in all respects with Part 7 of Title I, Subtitle B of ERISA and
Subtitle K of the Code.
(xiii) With respect to each of the Chartwell Benefit Plans,
Chartwell has delivered to Trenwick true and complete copies of: (a) the plan
documents, including any related trust agreements, insurance contracts or other
funding arrangements, or a written summary of the terms and conditions of the
plan if there is no written plan document; (b) the most recent determination
letter received from the Internal Revenue Service; (c) the most recent IRS Form
5500; (d) the most recent actuarial valuation; (e) the most recent financial
statement; (f) all material correspondence with the Internal Revenue Service,
the Department of Labor and the Pension Benefit Guaranty Corporation with
respect to the past three plan years other than IRS
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Form 5500 filings and PBGC premium payments; and (g) the most recent summary
plan description.
(B) Except as would not have a Material Adverse Effect on Chartwell
and save as disclosed in Section 3.1(h) of the Chartwell Disclosure Schedule or
as previously disclosed in writing to Trenwick and so far as the senior
management of Chartwell UK Holding as hereinafter defined (and for this purpose
the senior management means the following individuals: Xxxxxx Xxxxxxxxx, Xxxxxxx
Xxxxx, Xxxxxx Xxxxx, Xxxxx Xxxxxxx, Xxxxxx Xxxxx and Xxxxx Xxxxxxxx) are aware:
(i) There is no existing or threatened or pending industrial or
trade dispute involving Chartwell Holding Limited ("Chartwell UK Holding") or
any of its subsidiaries and any of the employees of Chartwell UK Holding or any
of its subsidiaries and there are no facts known or which would on reasonable
inquiry be known to Chartwell UK Holding or any of its subsidiaries which might
indicate that there may be any such dispute (excluding the Merger and the
transactions contemplated by this Agreement). There are no agreements or
arrangements (whether oral or in writing or existing by reason of custom and
practice and whether or not legally binding) between Chartwell UK Holding or any
of its subsidiaries and any trade union or other employees' representatives or
organization concerning or affecting the employees of Chartwell UK Holding or
any of its subsidiaries and there are no trade unions or other employees'
representatives whom Chartwell UK Holding or any of its subsidiaries recognizes
to any extent for collective bargaining purposes nor, so far as each of
Chartwell UK Holding and its subsidiaries is aware, has Chartwell UK Holding or
any of its subsidiaries done any act which might be construed as recognition.
(ii) Neither Chartwell UK Holding nor its subsidiaries has given
notice of any redundancies to the U.K. Secretary of State nor started
consultations with any independent trade union or employees' representatives
within the preceding period of one year in relation to any of employees of
Chartwell UK Holding or any of its subsidiaries. No circumstances have arisen
under which Chartwell UK Holding or any of its subsidiaries is likely to be
required to pay damages for wrongful dismissal or breach of contract, to make
any contractual or statutory redundancy payment or make or pay any compensation
in respect of unfair dismissal, to make any other payment under any employment
protection legislation or to reinstate or re-engage any former employee. No
circumstances have arisen under which Chartwell UK Holding or any of its
subsidiaries is likely to be required to pay damages or compensation, or suffer
any penalty or be required to take corrective action or be subject to any form
of discipline under the Employment Rights Xxx 0000, the Trade Union and Labour
Relations (Consolidation) Xxx 0000, the Transfer of Undertakings (Protection of
Employment) Regulations 1981, the Sex Discrimination Xxx 0000, the Equal Pay Xxx
0000, the Treaty of Rome or any Directive or recommendation made pursuant to it,
the Race Relations Xxx 0000 or the Disability Discrimination Xxx 0000. So far as
each of Chartwell UK Holding and its subsidiaries is aware, there are no
current, pending or threatened claims of any type against Chartwell UK Holding
or any of its subsidiaries by any existing or former employees or directors of
Chartwell UK Holding or any of its subsidiaries or by any existing or former
consultants to Chartwell UK Holding or any of its subsidiaries.
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(iii) There are no existing service or other agreements or
contracts between Chartwell UK Holding or any of its subsidiaries and any of its
directors or executives or employees which cannot be lawfully terminated by six
calendar months' notice or less without giving rise to any claim for damages or
compensation other than a statutory redundancy payment or a claim for unfair
dismissal depending on the circumstances of the termination. Each of Chartwell
UK Holding and its subsidiaries has complied with all its material obligations
under all legislation, regulations and other requirements having the force of
law (including, without limitation, orders and awards) in connection with its
employees, directors and consultants.
(iv) Neither Chartwell UK Holding nor any of its subsidiaries is
involved in negotiations (whether with employees or any trade union or other
employees' representatives) to vary the terms and conditions of employment or
engagement of any of its employees, directors or consultants and has not made
any representations, promises, offers or proposals to any of its employees,
directors or consultants or to any trade union or other employees'
representatives concerning or affecting the terms and conditions of employment
or engagement of any of its employees, directors or consultants.
(v) Each of Chartwell UK Holding and its subsidiaries has
discharged its obligations in full in relation to salary, wages, fees,
commission, bonuses, overtime pay, holiday pay, sick pay and all other benefits
and emoluments relating to its employees, consultants and directors in respect
of all prior periods.
(vi) There are no pension, share option, share incentive, life
assurance, disability or similar schemes, arrangements or obligations for any
employees or directors of Chartwell UK Holding or any of its subsidiaries, and
neither Chartwell UK Holding nor any of its subsidiaries has obligations
(whether legally binding or established by custom) to pay any pension or make
any other payment after retirement or death or otherwise to provide "relevant
benefits" within the meaning of section 612 of the U.K. Income and Corporation
Taxes Act 1988 or to make any payment for the purpose of providing such
"relevant benefits" to or in respect of any person who is now or has been an
officer or employee of Chartwell UK Holding or any of its subsidiaries and is
not a party to any scheme or arrangement having as its purpose or one of its
purposes the making of such payments or the provision of such benefits.
(vii) All Retirement Benefits Schemes comply with and have at all
times complied with the provisions of the relevant legislation and the
requirements of the Pension Schemes Office and the Contributions Agency
affecting schemes approved under Chapter I of Part XIV of the U.K. Income and
Corporation Taxes Xxx 0000. Each of Chartwell UK Holding and its subsidiaries
and the trustees of such schemes have duly complied with their respective
obligations under the trust deeds and the rules thereof and under the
aforementioned legislation and requirements, except that the accounts prepared
to 31 December 1997 may not conform to the requirements of the Pensions Xxx
0000. All amounts due to the trustees thereof or to any insurance company in
connection therewith have been paid.
(viii) Neither Chartwell UK Holding nor any of its subsidiaries nor
the trustees of any pension scheme is engaged in any litigation or arbitration
proceedings in respect of any Retirement Benefits Scheme or any benefit provided
thereunder in relation to the
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employees or former employees of Chartwell UK Holding or any of its subsidiaries
and there are no current submissions or referrals to the Pensions Ombudsman or
to the Occupational Pensions Advisory Service in respect of Chartwell UK Holding
or any of its subsidiaries or any pension scheme.
(ix) No Retirement Benefits Scheme in which employees or former
employees of Chartwell UK Holding or any of its subsidiaries participate or have
participated has been or is in the process of being (or is proposed to be) wound
up (in whole or in part) or closed to new entrants (in whole or in part).
(i) Taxes. (i) Chartwell is the common parent of an affiliated group of
corporations (within the meaning of Section 1504(a) of the Code) eligible to
file consolidated federal income tax returns, of which each of the subsidiaries
that is an includible corporation under Section 1504(b) of the Code is a member;
(ii) except as set forth in Section 3.1(i)(ii) of the Chartwell
Disclosure Schedule, Chartwell and each of its subsidiaries have filed (or
joined in the filing of) when due all material tax returns required by
applicable law to be filed with respect to Chartwell or any of the subsidiaries
and all taxes shown to be due on such tax returns have been paid;
(iii) all such tax returns were true, correct and complete as of
the time of such filing;
(iv) all material taxes relating to periods ending on or before the
Effective Time owed by Chartwell or any of its subsidiaries (whether or not
shown on any tax return) or to which Chartwell or any of its subsidiaries may be
liable under Treasury Regulations Section 1.1502-6 (or analogous state or
foreign provisions) by virtue of having been a member of any "affiliated group"
(or other group filing on a combined or unitary basis) at any time on or prior
to the Effective Time, if required to have been paid, have been paid (except for
taxes which are being contested in good faith);
(v) any liability of Chartwell or any of its subsidiaries for
material taxes not yet due and payable, or which are being contested in good
faith, has been provided for on the financial statements of Chartwell in
accordance with generally accepted accounting principles;
(vi) except as set forth in Section 3.1 (i)(vi) of the Chartwell
Disclosure Schedule, there is no action, suit, proceeding, investigation, audit
or claim now pending against, or with respect to, Chartwell or any of its
subsidiaries in respect of any material tax or assessment, nor is any claim for
additional tax or assessment asserted by any tax authority;
(vii) since January 1, 1991, no claim has been made by any tax
authority in a jurisdiction where Chartwell or any of its subsidiaries does not
currently file a tax return that it is or may be subject to any material tax by
such jurisdiction, nor to Chartwell's knowledge is any such assertion
threatened;
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(viii) except as set forth in Section 3.1(i)(viii) of the Chartwell
Disclosure Schedule, there is no outstanding request by Chartwell or any of its
subsidiaries for any extension of time within which to pay any taxes or file any
tax returns;
(ix) except as set forth in Section 3.1(i)(ix) of the Chartwell
Disclosure Schedule, there has been no waiver or extension of any applicable
statute of limitations for the assessment or collection of any taxes of
Chartwell or any of its subsidiaries;
(x) no property of Chartwell or any of its subsidiaries is
"tax-exempt use property" within the meaning of Section 168(h) of the Code;
(xi) neither Chartwell nor any of its subsidiaries is a party to
any lease made pursuant to former Section 168(f)(8) of the Internal Revenue Code
of 1954;
(xii) no excess loss account (within the meaning of Treasury
Regulations Section 1.1502-19) exists with respect to any of Chartwell's
subsidiaries;
(xiii) neither Chartwell nor any of its subsidiaries has any
deferred gain or loss arising from any intercompany transactions, within the
meaning of Treasury Regulations Section 1.1502-13;
(xiv) neither Chartwell nor any of its subsidiaries has filed any
agreement or consent under Section 341(f) of the Code;
(xv) except as set forth in Section 3.1(i)(xv) of the Chartwell
Disclosure Schedule, neither Chartwell nor any of its subsidiaries is a party to
any agreement, whether written or unwritten, providing for the payment of taxes,
payment for tax losses, entitlements to refunds or similar tax matters;
(xvi) no ruling with respect to taxes (other than a request for
determination of the status of a qualified pension plan) has been requested by
or on behalf of Chartwell or any of its subsidiaries;
(xvii) neither Chartwell nor any of its subsidiaries has been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code;
(xviii) Chartwell and each of its subsidiaries have withheld and
paid all material taxes required to be withheld in connection with any amounts
paid or owing to any employee, creditor, independent contractor or other third
party;
(xix) neither Chartwell nor any of its subsidiaries has taken any
action or knows of any fact, agreement, plan or other circumstance that is
reasonably likely to prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code; and
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(xx) As used in this Agreement, "taxes" shall include all (x)
federal, state, local or foreign income, premium, property, sales, excise and
other taxes or similar governmental charges, including any interest, penalties
or additions with respect thereto, (y) liability for the payment of any amounts
of the type described in (x) as a result of being a member of an affiliated,
consolidated, combined or unitary group, and (z) liability for the payment of
any amounts as a result of being party to any tax sharing agreement or as a
result of any express or implied obligation to indemnify any other person with
respect to the payment of any amounts of the type described in clause (x) or
(y).
(j) No Excess Parachute Payments; Section 162(m) of the Code. (i)
Except as disclosed in Section 3.1(j) of the Chartwell Disclosure Schedule, none
of the transactions contemplated by this Agreement shall constitute a triggering
event under any employment, severance or termination agreement or other
compensation arrangement or Benefit Plan currently in effect which (either alone
or upon the occurrence of any additional or subsequent event) could reasonably
be expected to result in any payment, acceleration, vesting or increase in
benefits to any current or former officer, employee or director of Chartwell or
any of its subsidiaries and which would constitute an "excess parachute payment"
(as such term is defined in Section 280G(b)(1) of the Code); and
(ii) Except as disclosed in Section 3.1(j) of the Chartwell
Disclosure Schedule, the disallowance of a deduction under Section 162(m) of the
Code for employee remuneration will not apply to any amount paid or payable by
Chartwell or any subsidiary of Chartwell under any contract, Chartwell Benefit
Plan, program, arrangement or understanding currently in effect.
(k) Compliance with Applicable Laws. Chartwell and its subsidiaries
have in full force and effect all approvals, authorizations, certificates,
consents, filings, franchises, licenses, notices, permits and rights of all
Governmental Entities (including Insurance Regulators) (collectively, "Permits")
necessary for them to own, lease or operate their respective properties and
assets and to carry on their respective business as now conducted, and there has
occurred no default under any such Permit, except for failures of Permits to be
in full force and effect and for defaults under Permits which individually or in
the aggregate would not have a Material Adverse Effect on Chartwell. Except as
disclosed in the Filed Chartwell SEC Documents, Chartwell and its subsidiaries
are in compliance with all applicable statutes, laws, ordinances, rules,
regulations and orders of any Governmental Entity, except for such noncompliance
which individually or in the aggregate would not have a Material Adverse Effect
on Chartwell. Chartwell and its subsidiaries are in compliance with all
applicable recommendations and requirements of the Underwriting Agency
Department of Lloyd's, except for such noncompliance which individually or in
the aggregate would not have a Material Adverse Effect on Chartwell.
(l) Litigation. Except as disclosed in the Chartwell SEC Documents or
in Section 3.1(l) of the Chartwell Disclosure Schedule, there is no suit,
action, proceeding or arbitration (excluding those arising in the ordinary
course of business relating to policies of insurance or reinsurance written by
Chartwell and its subsidiaries) pending or, to the knowledge of Chartwell,
threatened against or affecting Chartwell or any of its subsidiaries or any of
their
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respective properties or assets that individually or in the aggregate could
reasonably be expected to (i) have a Material Adverse Effect on Chartwell, (ii)
impair the ability of Chartwell to perform its obligations under this Agreement
or (iii) prevent the consummation of any of the transactions contemplated by
this Agreement, nor is there any judgment, writ, decree, injunction or order of
any Governmental Entity or arbitrator outstanding against Chartwell or any of
its subsidiaries having, or which could be reasonably expected to have any such
effect.
(m) No Undisclosed Liabilities. Except (i) as disclosed in Section
3.1(m) of the Chartwell Disclosure Schedule, (ii) as disclosed in the Filed
Chartwell SEC Documents, (iii) obligations for losses, loss adjustment expenses,
unearned premiums and reinsurance premiums under reinsurance and insurance
contracts entered into by Chartwell and its subsidiaries and (iv) as a result of
any transaction set forth in Section 4.1 of the Chartwell Disclosure Schedule or
which has been approved in writing by Trenwick, none of Chartwell or its
subsidiaries has any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, and whether due or to become due or asserted
or unasserted which, individually or in the aggregate, would have a Material
Adverse Effect on Chartwell.
(n) Reserves. (i) All reserves for claims, losses (including, without
limitation, incurred but not reported losses) and loss adjustment expenses
(whether allocated or unallocated) as reflected in the Annual Statement of each
Insurer for each of the years ended December 31, 1996, December 31, 1997 and
December 31, 1998, together with all exhibits and schedules thereto (a) were
determined in accordance with SAP and commonly accepted actuarial standards and
principles consistently applied and were fairly stated in accordance with sound
actuarial principles specified by the Actuarial Standards Board, (b) meet the
requirements of all applicable insurance laws, rules, and regulations of each
applicable jurisdiction in all material respects, and (c) were based on
actuarial assumptions which were in accordance with those called for in relevant
policy and contract provisions, and such reserves made reasonable provision in
the aggregate to cover the total amount of liabilities under all outstanding
policies and contracts of insurance, reinsurance and retrocession as of the
dates of such statutory statements (it being understood that no representation
or warranty is made in this Agreement to the effect that such reserves were in
fact adequate to cover the actual amount of such liabilities that are eventually
paid after the date thereof). Each Insurer owns assets that qualify as admitted
assets under applicable insurance laws and regulations in an amount at least
equal to all such required reserves plus its minimum statutory capital and
surplus as required under applicable insurance laws, rules and regulations. No
Insurer's reserves have been discounted on either a tabular or non-tabular
basis.
(ii) All net reserves for claims, losses (including, without
limitation, incurred but not reported losses) and loss adjustment expenses
(whether allocated or unallocated) held with respect to Chartwell Syndicates as
reflected in the audited financial statements of Chartwell for each of the years
ended December 31, 1997 and December 31, 1998 (a) were determined in accordance
with GAAP and commonly accepted actuarial standards and principles consistently
applied and were fairly stated in accordance with sound actuarial principles
specified by the Actuarial Standards Board and (b) were based on actuarial
assumptions which were in accordance with those called for in relevant policy
and contract provisions, and such reserves made reasonable provision in the
aggregate to cover the total amount of liabilities under
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all outstanding policies and contracts of insurance, reinsurance and
retrocession as of the dates of such audited financial statements (it being
understood that no representation or warranty is made in this Agreement to the
effect that such reserves were in fact adequate to cover the actual amount of
such liabilities that are eventually paid after the date thereof).
(o) Insurance Issued. Except as disclosed in Section 3.1(o) of the
Chartwell Disclosure Schedule:
(i) All in-force primary insurance policies issued by any Insurer
are, to the extent required under applicable insurance laws, rules or
regulations, on forms and at rates approved by the insurance regulatory
authority of the jurisdiction where issued or have been filed with and not
objected to by such authority within the period provided for objection, except
as would not individually or in the aggregate have a Material Adverse Effect on
Chartwell.
(ii) To the knowledge of Chartwell, except as would not
individually or in the aggregate have a Material Adverse Effect on Chartwell,
each insurance agent or solicitor, including, without limitation, salaried
employees of Chartwell or any Insurer appointed by any Insurer as an insurance
agent or solicitor, at the time such agent or solicitor wrote, sold, solicited
or produced business for such Insurer since January 1, 1996, was duly licensed
as an insurance agent (for the type of business written, sold, solicited or
produced by such insurance agent or solicitor in the particular jurisdiction in
which such agent or solicitor wrote, sold, solicited or produced such business).
(p) Opinion of Financial Advisor. Chartwell has received the opinion of
Xxxxxxx, Xxxxx & Co. dated as of the date of this Agreement to the effect that
the Conversion Number is fair to the stockholders of Chartwell from a financial
point of view.
(q) Voting Requirements. The affirmative vote of holders of a majority
of the shares of Chartwell Common Stock (with each share of Chartwell Common
Stock having one vote per share) to approve and adopt this Agreement and the
Merger (the "Chartwell Stockholder Approval") is the only vote of the holders of
any class or series of the capital stock of Chartwell necessary to approve and
adopt this Agreement and the Merger and the transactions contemplated hereby.
(r) Rights Agreement; Section 203. Chartwell and its Board of Directors
have amended the Rights Agreement (without redeeming the Rights) so that the
execution and delivery of this Agreement, the Stock Option Agreement or the
consummation of the Merger will not (i) cause any of the Rights to become
exercisable, (ii) cause Trenwick to be an Acquiring Person (as defined in the
Rights Agreement) or (iii) trigger other provisions of the Rights Agreement,
including giving rise to a Distribution Date (as defined in the Rights
Agreement), and the Expiration Date (as defined in the Rights Agreement) of the
Rights shall occur immediately prior to the Effective Time. Such amendment shall
be in full force and effect from and after the date hereof. Chartwell has taken
all corporate action necessary to render inapplicable to the Merger, this
Agreement, the Stock Option Agreement and the other transactions contemplated
hereby, the provisions of Section 203 of the XXXX.
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(s) Brokers. No broker, investment banker, financial advisor or other
person, other than Xxxxxxx, Sachs & Co., the fees and expenses of which will be
paid by Chartwell, is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of Chartwell.
Except as set forth in Section 3.1(s) of the Chartwell Disclosure Schedule,
Chartwell has furnished to Trenwick true and complete copies of all agreements
under which any such fees or expenses are payable and all indemnification and
other agreements related to the engagement of the persons to whom such fees are
payable.
(t) No Default. Except as disclosed in the Chartwell SEC Documents, the
business of Chartwell and each of its subsidiaries is not being conducted in
default or violation of any term, condition or provision of (i) its respective
certificate of incorporation or by-laws or similar organizational documents, or
(ii) any company agreement, excluding from the foregoing clause (ii), defaults
or violations that would not have a Material Adverse Effect on Chartwell or
would not materially impair the ability of Chartwell to consummate the Merger or
the other transactions contemplated hereby.
(u) Related Party Transactions. Except as set forth in Section 3.1(u)
of the Chartwell Disclosure Schedule, all transactions, agreements, arrangements
or understandings between Chartwell or any of Chartwell's subsidiaries, on the
one hand, and Chartwell's affiliates (other than wholly-owned subsidiaries of
Chartwell) or other Persons, on the other hand, that are required to be
disclosed in the Chartwell SEC Documents in accordance with Item 404 of Schedule
S-K under the Securities Act have been so disclosed. Since March 31, 1999, there
have been no transactions, agreements, arrangements or understandings between
Chartwell or any of its subsidiaries, on the one hand, and Chartwell's
affiliates (other than wholly-owned subsidiaries of Chartwell) or other Persons,
on the other hand, that would be required to be disclosed in future public
filings under the Exchange Act pursuant to such Item which have not already been
disclosed in the Chartwell SEC Documents filed prior to the date hereof.
(v) Title to Property. (i) Except as set forth in Section 3.1(v) of the
Chartwell Disclosure Schedule, Chartwell and its subsidiaries have good and
valid title to, have valid leasehold interests in or valid contractual rights to
use, all of the assets, tangible and intangible, used by or necessary for the
conduct of, their business, except where the failure to have such good and valid
title, valid leasehold interests or such valid contractual rights do not,
individually or in the aggregate, have a Material Adverse Effect on Chartwell.
(ii) Except as set forth in Section 3.1(v) of the Chartwell
Disclosure Schedule, Chartwell and its subsidiaries:
(a) own and have good and marketable title in fee simple to
the real property owned by such party, free and clear of all mortgages,
pledges, liens, charges, encumbrances, defects, security interests,
claims, options and restrictions of all kind except for (y) minor
imperfections of title, easements and rights of way, none of which
individually or in the aggregate, materially detracts from the value of
or impairs the use of the affected property or impairs the operations
of
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Chartwell or any of its subsidiaries and (z) liens for current taxes
not yet due and payable;
(b) is in peaceful and undisturbed possession of the space
and/or estate under each lease under which it is a tenant, and there
are no material defaults by it as tenant thereunder; and
(c) has good and valid rights of ingress and egress to and
from all the real property owned or leased by such party from and to
the public street systems for all usual street, road and utility
purposes.
(w) Environmental. (i) Chartwell and its subsidiaries are in material
compliance with all applicable Environmental Laws.
(ii) To the knowledge of Chartwell, no facts, events or conditions
with respect to the operation of its business or the business of its
subsidiaries, or the locations of those businesses exist which could reasonably
be expected to interfere with or prevent continued compliance with, or could
give rise to any liability (including, without limitation, liability for clean
up costs, personal injury or property damage) or form the basis for any claim,
action, suit, proceeding, hearing or investigation against or involving
Chartwell or any of its subsidiaries or their respective businesses, under any
applicable Environmental Law.
(iii) Chartwell and its subsidiaries have not received any written
notice, report or other information regarding any actual or alleged violation
of, or liability under, Environmental Laws relating to Chartwell or its
subsidiaries, or the locations of the operation of their businesses, which
violation or liability could have a Material Adverse Effect on Chartwell.
(iv) There is no action, suit, claim, proceeding or investigation
pending, or to the knowledge of Chartwell, threatened against Chartwell or its
subsidiaries that alleges or would allege any violation of any applicable
Environmental Laws.
(v) To the knowledge of Chartwell, neither Chartwell nor its
subsidiaries has ever generated, transported, treated, stored or disposed of any
Hazardous Material at any site, location or facility, and no such Hazardous
Material is present on, in or under any location occupied by Chartwell or its
subsidiaries, including without limitation, containment of such Hazardous
Material by means of any underground storage tank.
Notwithstanding the foregoing, this Section 3.1(w) does not include
any representation or warranty with respect to Chartwell or any of its
subsidiaries arising in their respective capacities as reinsurer or issuer of
any insurance product.
(x) Chartwell Investees. Section 3.1(x) of the Chartwell Disclosure
Schedule sets forth a list of certain corporations and other entities other than
publicly traded companies (collectively, the "Chartwell Investees") in which
Chartwell or a subsidiary has made an equity investment, and indicates the
percentage of the voting equity interests and total ownership interests in such
Chartwell Investees held by Chartwell and its subsidiaries as of the date hereof
(collectively, the "Chartwell Investee Interests"). Except as disclosed in
Section 3.1(x) of the
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Chartwell Disclosure Schedule, to the knowledge of Chartwell, all Chartwell
Investee Interests are fully paid and nonassessable and are owned by Chartwell,
by one or more subsidiaries of Chartwell or by Chartwell and one or more
subsidiaries, free and clear of all Liens. Except as disclosed in Section 3.1(x)
of the Chartwell Disclosure Schedule, to the knowledge of Chartwell, neither
Chartwell nor any of its subsidiaries is a party to or bound by any agreement,
proxy or other arrangement restricting the transfer or affecting the voting of
any Chartwell Investee Interest. Except as disclosed in Section 3.1(x) of the
Chartwell Disclosure Schedule, the executive officers of Chartwell do not know,
without inquiry, of any representation and warranty made with respect to a
subsidiary of Chartwell in Sections 3.1(d), (k) and (l) of this Agreement which
would not be true and correct in all material respects (or, with respect to
those representations and warranties that are qualified as to materiality, true
and correct) if the Chartwell Investees were each considered a subsidiary of
Chartwell for purposes of such representation and warranty, except for such
failures to be true and correct in all material respects (or true and correct,
as applicable) which would not reasonably be expected to have a Material Adverse
Effect on Chartwell.
(y) Reinsurance Contracts, Coverholders and MGAs. (i) Section 3.1(y) of
the Chartwell Disclosure Schedule contains a true and complete list of all
managing general agents of the Insurers (collectively, "MGAs"), coverholders
with respect to the Chartwell Syndicates ("Coverholders") with whom any Insurer
or Chartwell does business and all in force contracts, treaties or arrangements,
regarding ceding of reinsurance, coinsurance, excess insurance, or retrocession,
(collectively, "Reinsurance Contracts") to which any Insurer or Chartwell
Syndicate is a party as the cedent thereunder or by or to which any of them are
bound or subject as the cedent thereunder, as each such Reinsurance Contract may
have been amended, modified or supplemented. Except as would not, individually
or in the aggregate, have a Material Adverse Effect on Chartwell: (i) each of
the foregoing Reinsurance Contracts is valid and binding in accordance with its
terms, and is in full force and effect and (ii) none of the Insurers or Plaza Co
Syndicates nor, to the knowledge of Chartwell any other party thereto, is in
default in any material respect with respect to any such Reinsurance Contract,
nor to the knowledge of Chartwell does any condition exist that with notice or
lapse of time or both would constitute such a material default thereunder.
Except as set forth in Section 3.1(y) of the Chartwell Disclosure Schedule, none
of the contracts, treaties or arrangements involving the MGAs or Coverholders
contain "change of control" provisions and no such Reinsurance Contract contains
any provision providing that any such other party thereto may terminate, cancel
or commute the same by reason of the transactions contemplated by this Agreement
or any other provision which would be altered or otherwise become applicable by
reason of such transactions, and no party has given notice of termination,
cancellation or commutation of any such Reinsurance Contract or that it intends
to terminate, cancel or commute any such Reinsurance Contract as a result of the
transactions contemplated hereby; and
(ii) Except as set forth in Section 3.1(y) of the Chartwell
Disclosure Schedule, each of the Insurers is entitled under applicable insurance
laws, rules and regulations to take credit in its statutory financial statements
in accordance with Chapter 22 of the NAIC Accounting Practices and Procedures
Manual for Property and Casualty Insurance Companies as in effect on the date
hereof with respect to the Reinsurance Contracts listed in Section 3.1(y) of the
Chartwell Disclosure Schedule and all such amounts are properly reflected in the
statutory
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financial statements of each Insurer. Each of Chartwell and the Insurers has no
knowledge of any disputes as to reinsurance or retrocessional coverage under, or
any terms or provisions of, any such Reinsurance Contract. To the knowledge of
Chartwell and each Insurer, the financial condition of any other party to any
such Reinsurance Contract is not impaired to the extent that a default
thereunder could reasonably be expected to occur.
(z) Reinsurance Agreement. Chartwell has obtained on or prior to the
date of this Agreement an underwriting commitment in the form set forth in
Section 3.1(z) of the Chartwell Disclosure Schedule with respect to the
Reinsurance Agreement.
SECTION 3.2. Representations and Warranties of Trenwick. Except as
disclosed in the Disclosure Schedule delivered by Trenwick to Chartwell at or
prior to the execution of this Agreement (the "Trenwick Disclosure Schedule")
and making reference to the particular subsection of this Agreement to which
exception is being taken, Trenwick represents and warrants to Chartwell as
follows:
(a) Organization, Standing and Corporate Power. Each of Trenwick and
its subsidiaries (as defined in Section 8.2(d)) is a corporation or other legal
entity duly organized, validly existing and in good standing (with respect to
jurisdictions that recognize such concept) under the laws of the jurisdiction in
which it is organized and has the requisite corporate or other power, as the
case may be, and authority to carry on its business as now being conducted,
except where the failure to be so organized, existing or in good standing or to
have such power individually or in the aggregate would not have a Material
Adverse Effect (as defined in Section 8.2(h)) on Trenwick. Each of Trenwick and
its subsidiaries is duly qualified or licensed to do business and is in good
standing (with respect to jurisdictions that recognize such concept) in each
jurisdiction in which the nature of its business or the ownership, leasing or
operation of its properties makes such qualification, licensing or good standing
necessary, except for those jurisdictions where the failure to be so qualified
or licensed or to be in good standing or to have such power individually or in
the aggregate would not have a Material Adverse Effect on Trenwick. Trenwick has
delivered to Chartwell complete and correct copies of its Certificate of
Incorporation and By-laws and the Certificates of Incorporation and By-laws, or
other organizational documents, of its subsidiaries, in each case as amended to
the date of this Agreement.
(b) Subsidiaries. Section 3.2(b) of the Trenwick Disclosure Schedule
includes all the subsidiaries of Trenwick which as of the date of this Agreement
are Significant Subsidiaries. All the outstanding shares of capital stock of, or
other equity interests in, each such Significant Subsidiary have been validly
issued and are fully paid and nonassessable and are owned directly or indirectly
by Trenwick, free and clear of Liens.
(c) Capital Structure. The authorized capital stock of Trenwick
consists of 30,000,000 shares of Trenwick Common Stock and 2,000,000 shares of
preferred stock, par value $.10 per share. At the close of business on June 18,
1999, (i) 10,630,510 shares of Trenwick Common Stock were issued and
outstanding, (i) 1,071,170 shares of Trenwick Common Stock were reserved for
issuance pursuant to outstanding stock options ("Trenwick Stock Options") issued
under Trenwick's 1989 Stock Plan, 1993 Stock Option Plan and 1993
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Stock Option Plan for Non-Employee Directors all currently in effect
(collectively, the "Trenwick Stock Option Plans"), (ii) zero shares of Trenwick
Common Stock were held in Trenwick's treasury and (iii) 200,000 shares of Series
B Junior Participating Preferred Stock, were reserved for issuance in connection
with the rights issued pursuant to the Rights Agreement dated as of September
24, 1997 (the "Rights Agreement"), between Trenwick and First Chicago Trust
Company of New York. Except as set forth above, at the close of business on June
18, 1999, no shares of capital stock or other equity securities of Trenwick were
issued, reserved for issuance or outstanding. All outstanding shares of capital
stock of Trenwick are, and all shares which may be issued pursuant to this
Agreement or the Trenwick Stock Option Plans will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. Except as set forth in Section 3.2(c) of the Trenwick
Disclosure Schedule, since January 1, 1999, no shares of the capital stock of
Trenwick have been issued other than pursuant to Trenwick Stock Options already
in existence on such date, and, since such date, no Trenwick Stock Options have
been granted. No bonds, debentures, notes or other indebtedness of Trenwick or
any subsidiary of Trenwick having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
the stockholders of Trenwick or any subsidiary of Trenwick may vote are issued
or outstanding. Section 3.2(b) of the Trenwick Disclosure Schedule lists the
Significant Subsidiaries of Trenwick and, except for the capital stock of such
subsidiaries, Trenwick does not own, directly or indirectly, any capital stock
or other ownership interest in any corporation, partnership, joint venture or
other entity other than any publicly-traded corporation in which Trenwick owns
100 or fewer shares of common stock and other than any registered investment
company. All the outstanding shares of capital stock of each subsidiary of
Trenwick have been validly issued and are fully paid and nonassessable and are
owned by Trenwick, by one or more wholly owned subsidiaries of Trenwick or by
Trenwick and one or more such wholly owned subsidiaries, free and clear of all
Liens. Except as set forth above, there are not any securities, options,
warrants, rights, commitments or agreements of any kind to which Trenwick or any
subsidiary is a party or by which any of them is bound obligating Trenwick or
any subsidiary to issue, sell or deliver, or repurchase, redeem or otherwise
acquire, shares of capital stock or other equity or voting securities of any of
them or securities convertible into or exchangeable for capital stock or voting
securities of Trenwick, or obligating any of them to issue, sell, deliver,
grant, extend or enter into any such security, option, warrant, right,
commitment or agreement. There are no stockholder agreements, voting trusts or
other agreements or understandings to which Trenwick or any of its subsidiaries
is a party, or to which any of them is bound, relating to the voting or
disposition of any shares of capital stock of Trenwick or any subsidiary
thereof.
(d) Authority; Noncontravention. Trenwick has all requisite corporate
power and authority to enter into this Agreement and, subject to obtaining the
Trenwick Stockholder Approval (as defined in Section 3.2(o)), to consummate the
transactions contemplated by this Agreement. Trenwick has all requisite
corporate power and authority to enter into the Stock Option Agreement and to
consummate the transactions contemplated thereby. The execution and delivery of
this Agreement and the Stock Option Agreement by Trenwick and the consummation
by Trenwick of the transactions contemplated by this Agreement and the Stock
Option Agreement have been duly authorized by all necessary corporate action on
the part of Trenwick, subject to the Trenwick Stockholder Approval. This
Agreement and the Stock Option Agreement have been duly executed and delivered
by Trenwick and, assuming the due
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34
authorization, execution and delivery of this Agreement and the Stock Option
Agreement by Chartwell constitute legal, valid and binding obligations of
Trenwick, enforceable against Trenwick in accordance with their respective
terms. The execution and delivery of this Agreement and the Stock Option
Agreement do not, and, subject to the Trenwick Stockholder Approval with respect
to this Agreement, the consummation of the transactions contemplated by this
Agreement and the Stock Option Agreement and compliance with the provisions of
this Agreement and the Stock Option Agreement will not, conflict with, or result
in any violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a benefit under, or result in the
creation of any Lien upon any of the properties or assets of Trenwick or any of
its subsidiaries under, (i) the Certificate of Incorporation or By-laws of
Trenwick or the comparable organizational documents of any of its subsidiaries,
(ii) subject to the matters referred to in the next sentence, any indenture or
other material agreement, permit, franchise, license or instrument to which
Trenwick or any of its subsidiaries is a party or by which Trenwick or any of
its subsidiaries or any of their assets is bound or affected, or (iii) subject
to the matters referred to in the next sentence, any statute, law, ordinance,
rule, regulation, order, judgment, injunction, decree, determination or award
applicable to Trenwick or any of its subsidiaries or any of their respective
properties or assets, other than, in the case of clause (ii) above, any such
conflicts, violations, defaults, rights, losses or Liens that individually or in
the aggregate would not (x) have a Material Adverse Effect on Trenwick or (y)
reasonably be expected to impair materially the ability of Trenwick to perform
its obligations under this Agreement and the Stock Option Agreement. No consent,
approval, order, or authorization of, action by or in respect of, or
registration, declaration or filing with any Governmental Entity, or of Lloyd's,
is required by or with respect to Trenwick or any of its subsidiaries in
connection with the execution and delivery of this Agreement and the Stock
Option Agreement by Trenwick or the consummation by Trenwick of the transactions
contemplated hereby, except for (A) in connection with or in compliance with the
provisions of (1) the HSR Act, (2) the Securities Act, (3) the Exchange Act, (4)
the DGCL, (5) NASDAQ, (6) any non-United States competition, antitrust and
investment laws, and the securities or "blue sky" laws of the various states,
(7) the approvals, filings and notices required under the insurance laws of the
jurisdictions in which Trenwick transacts the business of reinsurance; (8) the
filing of the certificate of merger with the Delaware Secretary of State and
appropriate documents with the relevant authorities of other states in which
Trenwick is qualified to do business, (9) any required consents and waivers of
Lloyd's and (B) such other consents, approvals, orders, authorizations, actions,
registrations, declarations, filings or notices (as may be required) the failure
of which to be made or obtained individually or in the aggregate would not have
a Material Adverse Effect on Trenwick.
(e) SEC Documents; Financial Statements. (i) Trenwick has timely filed
all required forms, reports, schedules, statements and other documents
(including exhibits and all other information incorporated therein) with the SEC
since January 1, 1996. Trenwick has delivered or made available to Chartwell all
registration statements, proxy statements, annual reports, quarterly reports and
reports on Form 8-K and other forms, reports and documents, if any, filed by
Trenwick with the SEC since January 1, 1996 (as such documents have been amended
since the time of their filing, collectively, the "Trenwick SEC Documents"). As
of their respective dates or, if amended, as of the date of the last such
amendment, the Trenwick SEC Documents (i) were timely filed and complied as to
form in all material respects with the
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35
applicable requirements of the Securities Act or the Exchange Act, as the case
may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such Trenwick SEC Documents, and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The consolidated
financial statements of Trenwick included in the Trenwick SEC Documents complied
as to form, as of their respective dates of filing with the SEC, in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles (except, in the case of unaudited
consolidated quarterly statements, as permitted by Form 10-Q of the SEC) applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present in all material respects the consolidated
financial position of Trenwick and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited quarterly statements, to
normal year-end adjustments).
(ii) Trenwick has previously furnished to Chartwell true and
complete copies of the annual statements for each of the years ended December
31, 1996, December 31, 1997, and December 31, 1998, together with all exhibits
and schedules thereto (collectively, the "Annual Statements"), with respect to
Trenwick America Reinsurance Company ("TARCO") as filed with the appropriate
Insurance Regulator. The Annual Statements were prepared in conformity with SAP
and present fairly, to the extent required by and in conformity with SAP in all
material respects the statutory financial condition of TARCO at their respective
dates and the results of operations, changes in capital and surplus and cash
flow of TARCO for each of the periods then ended. No deficiencies or violations
material to the financial condition of TARCO, individually, whether or not
material in the aggregate, have been asserted in writing by any Insurance
Regulator which have not been cured or otherwise resolved to the satisfaction of
such Insurance Regulator (unless not currently pending). Trenwick has made
available to Chartwell true and complete copies of all financial examination
reports of state insurance departments since January 1, 1996 relating to TARCO.
The quarterly statements of TARCO for the quarter ending March 31, 1999 as filed
and the quarterly statements of TARCO thereafter filed prior to the Closing,
when filed with the insurance regulatory authorities of the applicable states,
presented and will present fairly, to the extent required by and in conformity
with SAP in all material respects the statutory financial condition of TARCO at
its respective dates indicated and the results of operations, changes in capital
and surplus and cash flow of TARCO for each of the periods therein specified
(subject to normal year-end adjustments).
(iii) Trenwick has previously furnished to Chartwell true and
complete copies of the financial statements of Trenwick International Limited
("Trenwick International") for each of the years ended December 31,1996,
December 31, 1997, and December 31, 1998, together with all exhibits and
schedules thereto (collectively, the "Trenwick International Financial
Statements"), as filed with the appropriate Insurance Regulator. The Trenwick
International Financial Statements have been prepared in accordance with the
requirements of all relevant statutes and with generally accepted accounting
principles (including to the extent applicable, the Guidance on Accounting for
Insurance Business as published by the Association of British Insurers) ("U.K.
GAAP") and are complete and accurate in all material respects and
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36
show a true and fair view of the state of affairs of Trenwick International and
its subsidiaries and the profit of Trenwick International and its subsidiaries
for the financial period ending on their respective dates. No deficiencies or
violations material to the financial condition of Trenwick International,
individually, whether or not material in the aggregate, have been asserted in
writing by any Insurance Regulator which have not been cured or otherwise
resolved to the satisfaction of such Insurance Regulator (unless not currently
pending). Trenwick has made available to Chartwell true and complete copies of
all financial examination reports of applicable insurance regulatory authorities
since January 1, 1996 relating to Trenwick International and its subsidiaries.
The quarterly statements of Trenwick International for the quarter ending March
31, 1999 and thereafter prior to the Closing, when filed with the appropriate
Insurance Regulators, will have been prepared in accordance with the
requirements of all relevant statutes and with U.K. GAAP and are complete and
accurate in all material respects and show a true and fair view of the state of
affairs of Trenwick International and its subsidiaries and the profit of
Trenwick International and its subsidiaries for the financial period ending on
their respective dates (subject to normal year-end adjustments).
(f) Information Supplied. None of the information supplied or to be
supplied by Trenwick for inclusion or incorporation by reference in (i) the Form
S-4 will, at the time the Form S-4 is filed with the SEC, at any time it is
amended or supplemented or at the time it becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of circumstances under which they are made, not misleading or
(ii) the Joint Proxy Statement will, at the date it is first mailed to
Trenwick's stockholders or at the time of the Trenwick Stockholders Meeting (as
defined in Section 5.2), contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading. The Form S-4 will comply as to form in all material
respects with the requirements of the Securities Act and the rules and
regulations promulgated thereunder. The Joint Proxy Statement will comply as to
form in all material respects with the requirements of the Exchange Act and the
rules and regulations promulgated thereunder. Notwithstanding the foregoing, no
representation or warranty is made by Trenwick in this Section 3.2(f) with
respect to information supplied by Chartwell for inclusion or incorporation by
reference in the Joint Proxy Statement.
(g) Absence of Certain Changes or Events. Except in connection with
this Agreement, the Stock Option Agreement and the transactions contemplated
hereby, as disclosed in the Trenwick SEC Documents filed and publicly available
prior to the date of this Agreement (the "Filed Trenwick SEC Documents") since
the date of the most recent audited financial statements included in the Filed
Trenwick SEC Documents, Trenwick and its subsidiaries have conducted their
business in the ordinary course consistent with past practice, and there has not
occurred (i) any event or change having individually or in the aggregate a
Material Adverse Effect on Trenwick, (ii) any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to any of Trenwick's outstanding capital stock, other
than regular quarterly cash dividends of $.26 per share on the Trenwick Common
Stock and dividends paid by wholly owned subsidiaries, (iii) (A) any granting by
Trenwick or any of its subsidiaries to any current or former director or officer
of Trenwick or its subsidiaries of any increase in compensation, bonus or other
benefits, except for normal
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increases in the ordinary course of business, (B) any granting by Trenwick or
any of its subsidiaries to any such current or former director or officer of any
increase in severance or termination pay or (C) any entry by Trenwick or any of
its subsidiaries into, or any amendments of, any employment, deferred
compensation, consulting, severance, termination or indemnification agreement
with any such current or former director or officer, (iv) any tax election that
individually or in the aggregate would have a Material Adverse Effect on
Trenwick or any of its tax attributes or any settlement or compromise of any
material income tax liability, or (v) any change in accounting methods,
principles or practices by Trenwick or any of its subsidiaries materially
affecting their assets, liabilities or business, except insofar as may have been
required or permitted by a change in applicable accounting principles (including
SAP).
(h) Benefit Plans. (A) (i) Each "employee benefit plan" (as defined in
Section 3(3) of ERISA), and each other plan, arrangement or policy, whether
written or oral, relating to stock options, stock purchases, stock appreciation
rights, profit sharing, group insurance, vacation pay, leave of absence,
dependent care, cafeteria benefits, workers compensation, consulting, pension,
retirement, compensation, deferred compensation, severance, fringe benefits or
other employee benefits, in each case maintained or contributed to, or required
to be maintained or contributed to, by Trenwick or any of its subsidiaries for
the benefit of any present or former U.S. officer, employee or director of
Trenwick or any of its subsidiaries (all the foregoing collectively referred to
hereinafter as "Trenwick Benefit Plans") has been administered substantially in
accordance with its terms and any related trust agreement or insurance contract
has been administered substantially in accordance with its terms. Trenwick, its
subsidiaries and all the Trenwick Benefit Plans, and any related trust
agreements or insurance contracts, are in substantial compliance with the
applicable provisions of ERISA, the Code, all other applicable laws and all
applicable collective bargaining agreements.
(ii) None of Trenwick or any other person or entity that
together with Trenwick is treated as a single employer under Section 414 of the
Code (each a "Trenwick Commonly Controlled Entity") has incurred any material
liability under Title IV of ERISA (other than for the payment of benefits or the
timely payment of Pension Benefit Guaranty Corporation insurance premiums, in
either case in the ordinary course) or under Section 412(f) or 412(n) of the
Code, and no condition exists which could reasonably be expected to present a
risk of Trenwick or any Commonly Controlled Entity incurring such a material
liability.
(iii) Neither Trenwick nor any Trenwick Commonly Controlled
Entity is obligated to contribute to any "multiemployer plan" (as defined in
Section 3(37) or Section 4001(a)(3) of ERISA) or has any material liability,
including current or potential withdrawal liability (within the meaning of
Section 4201 of ERISA) with respect to any multiemployer plan.
(iv) Except as contemplated by Section 2.4 or as disclosed in
the Filed Trenwick SEC Documents or in Section 3.2(h) of the Trenwick Disclosure
Schedule, since the date of the most recent audited financial statements
included in the Filed Trenwick SEC Documents, there has not been any adoption or
amendment by Trenwick or any of its subsidiaries of any collective bargaining
agreement or any Trenwick Benefit Plan. Except as disclosed in the Filed
Trenwick SEC Documents or in Section 3.2(h) of the Trenwick Disclosure Schedule,
there exist no employment, consulting, change in control, severance, termination
or
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38
indemnification agreements, arrangements or understandings between Trenwick or
any subsidiary and any current or former employee, officer or director of
Trenwick or any subsidiary or any Trenwick Benefit Plan.
(v) All material contributions and other payments required to
be made by Trenwick and its subsidiaries to any Trenwick Benefit Plan prior to
the date hereof have been made and all accruals required to be made under any
Trenwick Benefit Plan have been made. There is no claim, dispute, grievance,
charge, complaint, restraining or injunctive order, litigation or proceeding
pending, or, to the knowledge of Trenwick, threatened or anticipated (other than
routine claims for benefits) against or relating to any Trenwick Benefit Plan or
against the assets of any Trenwick Benefit Plan which could reasonably be
expected to result in the imposition of any material liability of Trenwick.
Neither Trenwick nor any of its subsidiaries has communicated generally to
employees or specifically to any employee regarding any future increase of
benefit levels (or future creations of new benefits) with respect to any
Trenwick Benefit Plans.
(vi) Each Trenwick Benefit Plan can be terminated or otherwise
discontinued without any liability to Trenwick or any subsidiary that would
reasonably be expected to have a Material Adverse Effect. With respect to each
Trenwick Benefit Plan subject to Title IV of ERISA and with respect to each plan
of a Trenwick Commonly Controlled Entity subject to Title IV of ERISA (each a
"Trenwick Defined Benefit Plan") Trenwick Defined Benefit Plan (i) no
termination of any Trenwick Defined Benefit Plan has occurred pursuant to which
all liabilities have not been satisfied in full, and no event has occurred and
no condition exists that could reasonably be expected to result in Trenwick or
any Trenwick Commonly Controlled Entity incurring liability under Title IV of
ERISA or could constitute grounds for terminating any Trenwick Defined Benefit
Plan; (ii) each Trenwick Defined Benefit Plan which is subject to Part 3 of
Subtitle B of Title I of ERISA or Section 412 of the Code, has been maintained
in compliance with the minimum funding standards of ERISA and the Code and no
such Trenwick Defined Benefit Plan has incurred any "accumulated funding
deficiency," as defined in Section 412 of the Code and Section 302 of ERISA,
whether or not waived; (iii) neither Trenwick nor any Trenwick Commonly
Controlled Entity has sought or received a waiver of its funding requirements
with respect to any Trenwick Defined Benefit Plan and all material contributions
payable with respect to each Defined Benefit Plan have been timely made; (iv) no
reportable event, within the meaning of Section 4043 of ERISA, and no event
described in Section 4062 or 4063 of ERISA, has occurred with respect to any
Trenwick Defined Benefit Plan; (v) the aggregate accumulated benefit obligations
of each Trenwick Defined Benefit Plan subject to Title IV of ERISA (as of the
date of the most recent actuarial valuation prepared for such Trenwick Defined
Benefit Plan) do not exceed the fair market value of the assets of such Trenwick
Defined Benefit Plan (as of the date of such valuation); and (vi) no amendment
has been made to any Trenwick Defined Benefit Plan that has required or would
require the provision of security under ERISA Section 307 or Code Section
401(a)(29).
(vii) The execution, delivery and performance of this
Agreement and the transactions contemplated hereby will not in and of themselves
result in the imposition of any federal excise tax with respect to any Trenwick
Benefit Plan.
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39
(viii) Neither Trenwick nor any subsidiary maintains or
contributes (or has maintained or contributed to) any Trenwick Benefit Plan
which provides, or has a liability to provide, life insurance, medical,
severance, or other employee welfare benefits to any employee upon his
retirement or termination of employment, except as may be required by Section
4980B of the Code.
(ix) Neither Trenwick nor any of its subsidiaries maintains or
contributes to a trust, organization or association described in any of the
Sections 501(c)(9), 501(c)(17) or 501(c)(2) of the Code.
(x) Favorable determination letters have been received from
the Internal Revenue Service with respect to each Trenwick Benefit Plan which is
intended to comply with the provisions of Section 401(a) of the Code, and each
such Trenwick Benefit Plan complies in form and in operation in all material
respects with the requirements of a "qualified plan" under Section 401(a) of the
Code.
(xi) Neither Trenwick nor any of its subsidiaries, nor any of
their respective directors, officers, employees or, to the knowledge of Trenwick
any other "fiduciary," as such term is defined in Section 3(21) of ERISA, has
any liability for failure to comply with ERISA or the Code for any action or
failure to act in connection with the administration or investment of the
Trenwick Benefit Plans.
(xii) There has been no act or acts which would result in a
disallowance of a deduction or the imposition of a tax pursuant to Section
4980B, or with regard to plan years beginning before December 31, 1988, Section
162(i) of the Code as in effect immediately prior to the enactment of the
Technical and Miscellaneous Revenue Act of 1988, or any regulations promulgated
thereunder, whether final, temporary or proposed. No event has occurred with
respect to which Trenwick or any of its subsidiaries could be liable for a tax
imposed by Chapter 43 of Subtitle A of the Code, or for a civil penalty or other
liability under Section 502(c) or Section 501(l) of ERISA. Each Trenwick Benefit
Plan that is a "group health plan" as defined in Section 607 of ERISA complies
in all material respects and has been operated in substantial compliance in all
respects with Part 7 of Title I, Subtitle B of ERISA and Subtitle K of the Code.
(xiii) With respect to each of the Trenwick Benefit Plans,
Trenwick has delivered to Chartwell true and complete copies of: (a) the plan
documents, including any related trust agreements, insurance contracts or other
funding arrangements, or a written summary of the terms and conditions of the
plan if there is no written plan document; (b) the most recent determination
letter received from the Internal Revenue Service; (c) the most recent IRS Form
5500; (d) the most recent actuarial valuation; (e) the most recent financial
statement; (f) all material correspondence with the Internal Revenue Service,
the Department of Labor and the Pension Benefit Guaranty Corporation with
respect to the past three plan years other than IRS Form 5500 filings and PBGC
premium payments; and (g) the most recent summary plan description.
(B) Except as would not have a Material Adverse
Effect on Trenwick and so far as the senior management of Trenwick International
as hereinafter defined (and for
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this purpose the senior management means the following individuals: Xxxxxx X.
Xxxxxxx and Xxxxxxx X. English) are aware:
(i) There is no existing or threatened or pending industrial
or trade dispute involving Trenwick International and any of the employees of
Trenwick International and there are no facts known or which would on reasonable
inquiry be known to Trenwick International which might indicate that there may
be any such dispute (excluding the Merger and the transactions contemplated by
this Agreement). There are no agreements or arrangements (whether oral or in
writing or existing by reason of custom and practice and whether or not legally
binding) between Trenwick International and any trade union or other employees'
representatives or organization concerning or affecting the employees of
Trenwick International and there are no trade unions or other employees'
representatives whom Trenwick International recognizes to any extent for
collective bargaining purposes nor, so far as Trenwick International is aware,
has Trenwick International done any act which might be construed as recognition.
(ii) Trenwick International has given no notice of any
redundancies to the U.K. Secretary of State nor started consultations with any
independent trade union or employees' representatives within the preceding
period of one year in relation to any of employees of Trenwick International. No
circumstances have arisen under which Trenwick International is likely to be
required to pay damages for wrongful dismissal or breach of contract, to make
any contractual or statutory redundancy payment or make or pay any compensation
in respect of unfair dismissal, to make any other payment under any employment
protection legislation or to reinstate or re-engage any former employee. No
circumstances have arisen under which Trenwick International is likely to be
required to pay damages or compensation, or suffer any penalty or be required to
take corrective action or be subject to any form of discipline under the
Employment Rights Xxx 0000, the Trade Union and Labour Relations (Consolidation)
Xxx 0000, the Transfer of Undertakings (Protection of Employment) Regulations
1981, the Sex Discrimination Xxx 0000, the Equal Pay Xxx 0000, the Treaty of
Rome or any Directive or recommendation made pursuant to it, the Race Relations
Xxx 0000 or the Disability Discrimination Xxx 0000. So far as Trenwick
International is aware, there are no current, pending or threatened claims of
any type against Trenwick International by any existing or former employees or
directors of Trenwick International or by any existing or former consultants to
Trenwick International.
(iii) There are no existing service or other agreements or
contracts between Trenwick International and any of its directors or executives
or employees which cannot be lawfully terminated by six calendar months' notice
or less without giving rise to any claim for damages or compensation other than
a statutory redundancy payment or a claim for unfair dismissal depending on the
circumstances of the termination. Trenwick International has complied with all
its material obligations under all legislation, regulations and other
requirements having the force of law (including, without limitation, orders and
awards) in connection with its employees, directors and consultants.
(iv) Trenwick International is not involved in negotiations
(whether with employees or any trade union or other employees' representatives)
to vary the terms and conditions of employment or engagement of any of its
employees, directors or consultants and
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41
has not made any representations, promises, offers or proposals to any of its
employees, directors or consultants or to any trade union or other employees'
representatives concerning or affecting the terms and conditions of employment
or engagement of any of its employees, directors or consultants.
(v) Trenwick International has discharged its obligations in
full in relation to salary, wages, fees, commission, bonuses, overtime pay,
holiday pay, sick pay and all other benefits and emoluments relating to its
employees, consultants and directors in respect of all prior periods.
(vi) There are no pension, share option, share incentive, life
assurance, disability or similar schemes, arrangements or obligations for any
employees or directors of Trenwick International, and Trenwick International has
no obligations (whether legally binding or established by custom) to pay any
pension or make any other payment after retirement or death or otherwise to
provide "relevant benefits" within the meaning of section 612 of the U.K. Income
and Corporation Taxes Act 1988 or to make any payment for the purpose of
providing such "relevant benefits" to or in respect of any person who is now or
has been an officer or employee of Trenwick International and is not a party to
any scheme or arrangement having as its purpose or one of its purposes the
making of such payments or the provision of such benefits.
(vii) All Retirement Benefits Schemes comply with and have at
all times complied with the provisions of the relevant legislation and the
requirements of the Pension Schemes Office and the Contributions Agency
affecting schemes approved under Chapter I of Part XIV of the U.K. Income and
Corporation Taxes Xxx 0000. Trenwick International and the trustees of such
schemes have duly complied with their respective obligations under the trust
deeds and the rules thereof and under the aforementioned legislation and
requirements. All amounts due to the trustees thereof or to any insurance
company in connection therewith have been paid.
(viii) Neither Trenwick International nor the trustees of any
pension scheme is engaged in any litigation or arbitration proceedings in
respect of any Retirement Benefits Scheme or any benefit provided thereunder in
relation to the employees or former employees of Trenwick International and
there are no current submissions or referrals to the Pensions Ombudsman or to
the Occupational Pensions Advisory Service in respect of Trenwick International
or any pension scheme.
(ix) No Retirement Benefits Scheme in which employees or
former employees of Trenwick International participate or have participated has
been or is in the process of being (or is proposed to be) wound up (in whole or
in part) or closed to new entrants (in whole or in part).
(i) Taxes. (i) Trenwick is the common parent of an affiliated
group of corporations (within the meaning of Section 1504(a) of the Code)
eligible to file consolidated federal income tax returns, of which each of the
subsidiaries that is an includible corporation under Section 1504(b) of the Code
is a member;
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(ii) Trenwick and each of its subsidiaries have filed (or
joined in the filing of) when due all material tax returns required by
applicable law to be filed with respect to Trenwick or any of the subsidiaries
and all taxes shown to be due on such tax returns have been paid;
(iii) all such tax returns were true, correct and complete as
of the time of such filing;
(iv) all material taxes relating to periods ending on or
before the Effective Time owed by Trenwick or any of its subsidiaries (whether
or not shown on any tax return) or to which Trenwick or any of its subsidiaries
may be liable under Treasury Regulations Section 1.1502-6 (or analogous state or
foreign provisions) by virtue of having been a member of any "affiliated group"
(or other group filing on a combined or unitary basis) at any time on or prior
to the Effective Time, if required to have been paid, have been paid (except for
taxes which are being contested in good faith);
(v) any liability of Trenwick or any of its subsidiaries for
material taxes not yet due and payable, or which are being contested in good
faith, has been provided for on the financial statements of Trenwick in
accordance with generally accepted accounting principles;
(vi) there is no action, suit, proceeding, investigation,
audit or claim now pending against, or with respect to, Trenwick or any of its
subsidiaries in respect of any material tax or assessment, nor is any claim for
additional tax or assessment asserted by any tax authority;
(vii) since January 1, 1991, no claim has been made by any tax
authority in a jurisdiction where Trenwick or any of its subsidiaries does not
currently file a tax return that it is or may be subject to material tax by such
jurisdiction, nor to Trenwick's knowledge is any such assertion threatened;
(viii) there is no outstanding request by Trenwick or any of
its subsidiaries for any extension of time within which to pay any taxes or file
any tax returns;
(ix) there has been no waiver or extension of any applicable
statute of limitations for the assessment or collection of any taxes of Trenwick
or any of its subsidiaries;
(x) no property of Trenwick or any of its subsidiaries is
"tax-exempt use property" within the meaning of Section 168(h) of the Code;
(xi) neither Trenwick nor any of its subsidiaries is a party
to any lease made pursuant to former Section 168(f)(8) of the Internal Revenue
Code of 1954;
(xii) no excess loss account (within the meaning of Treasury
Regulations Section 1.1502-19) exists with respect to any of Trenwick's
subsidiaries;
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(xiii) neither Trenwick nor any of its subsidiaries has any
deferred gain or loss arising from any intercompany transactions, within the
meaning of Treasury Regulations Section 1.1502-13;
(xiv) neither Trenwick nor any of its subsidiaries has filed
any agreement or consent under Section 341(f) of the Code;
(xv) except as set forth in Section 3.2(i)(xv) of the Trenwick
Disclosure Schedule, neither Trenwick nor any of its subsidiaries is a party to
any agreement, whether written or unwritten, providing for the payment of taxes,
payment for tax losses, entitlements to refunds or similar tax matters;
(xvi) no ruling with respect to taxes (other than a request
for determination of the status of a qualified pension plan) has been requested
by or on behalf of Trenwick or any of its subsidiaries;
(xvii) neither Trenwick nor any of its subsidiaries has been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code;
(xviii) Trenwick and each of its subsidiaries have withheld
and paid all material taxes required to be withheld in connection with any
amounts paid or owing to any employee, creditor, independent contractor or other
third party; and
(xix) neither Trenwick nor any of its subsidiaries has taken
any action or knows of any fact, agreement, plan or other circumstance that is
reasonably likely to prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.
(j) Compliance with Applicable Laws. Trenwick and its subsidiaries have
in full force and effect all Permits necessary for them to own, lease or operate
their respective properties and assets and to carry on their respective business
as now conducted, and there has occurred no default under any such Permit,
except for failures of Permits to be in full force and effect and for defaults
under Permits which individually or in the aggregate would not have a Material
Adverse Effect on Trenwick. Except as disclosed in the Filed Trenwick SEC
Documents, Trenwick and its subsidiaries are in compliance with all applicable
statutes, laws, ordinances, rules, regulations and orders of any Governmental
Entity, except for such noncompliance which individually or in the aggregate
would not have a Material Adverse Effect on Trenwick. Trenwick and its
subsidiaries are in compliance with all applicable recommendations and
requirements of the Underwriting Agency Department of Lloyd's, except for such
noncompliance which individually or in the aggregate would not have a Material
Adverse Effect on Trenwick.
(k) Litigation. There is no suit, action, proceeding or arbitration
(excluding those arising in the ordinary course of business relating to policies
of insurance or reinsurance written by Trenwick and its subsidiaries) pending
or, to the knowledge of Trenwick, threatened against or affecting Trenwick or
any of its subsidiaries or any of their respective properties or assets that
individually or in the aggregate could reasonably be expected to (i) have a
Material
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Adverse Effect on Trenwick, (ii) impair the ability of Trenwick to perform its
obligations under this Agreement or (iii) prevent the consummation of any of the
transactions contemplated by this Agreement, nor is there any judgment, writ,
decree, injunction or order of any Governmental Entity or arbitrator outstanding
against Trenwick or any of its subsidiaries having, or which could be reasonably
expected to have any such effect.
(l) No Undisclosed Liabilities. Except (i) as disclosed in the Filed
Trenwick SEC Documents, (ii) obligations for losses, loss adjustment expenses,
unearned premiums and reinsurance premiums under reinsurance and insurance
contracts entered into by Trenwick and its subsidiaries and (iii) as a result of
any transaction which has been approved in writing by Chartwell, none of
Trenwick or its subsidiaries has any liabilities or obligations of any nature,
whether or not accrued, contingent or otherwise, and whether due or to become
due or asserted or unasserted which, individually or in the aggregate, would
have a Material Adverse Effect on Trenwick.
(m) Reserves. (i) All reserves for claims, losses (including, without
limitation, incurred but not reported losses) and loss adjustment expenses
(whether allocated or unallocated) as reflected in the Annual Statement of TARCO
for each of the years ended December 31, 1996, December 31, 1997, and December
31, 1998, together with all exhibits and schedules thereto (a) were determined
in accordance with SAP and commonly accepted actuarial standards and principles
consistently applied and were fairly stated in accordance with sound actuarial
principles specified by the Actuarial Standards Board, (b) meet the requirements
of all applicable insurance laws, rules, and regulations of each applicable
jurisdiction in all material respects, and (c) were based on actuarial
assumptions which were in accordance with those called for in relevant policy
and contract provisions, and such reserves made reasonable provision in the
aggregate to cover the total amount of liabilities under all outstanding
policies and contracts of insurance, reinsurance and retrocession as of the
dates of such statutory statements (it being understood that no representation
or warranty is made in this Agreement to the effect that such reserves were in
fact adequate to cover the actual amount of such liabilities that are eventually
paid after the date thereof). Each Insurer owns assets that qualify as admitted
assets under applicable insurance laws and regulations in an amount at least
equal to all such required reserves plus its minimum statutory capital and
surplus as required under applicable insurance laws, rules and regulations.
Except as set forth in Section 3.2(m) of the Trenwick Disclosure Schedule,
TARCO's reserves have not been discounted on either a tabular or non-tabular
basis.
(ii) All net reserves for claims, losses (including, without
limitation, incurred but not reported losses) and loss adjustment expenses
(whether allocated or unallocated) of Trenwick International as reflected in the
audited financial statements of Trenwick for each of the years ended December
31, 1997 and December 31, 1998 (a) were determined in accordance with GAAP and
commonly accepted actuarial standards and principles consistently applied and
were fairly stated in accordance with sound actuarial principles specified by
the Actuarial Standards Board and (b) were based on actuarial assumptions which
were in accordance with those called for in relevant policy and contract
provisions, and such reserves made reasonable provision in the aggregate to
cover the total amount of liabilities under all outstanding policies and
contracts of insurance, reinsurance and retrocession as of the dates of such
audited financial
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statements (it being understood that no representation or warranty is made in
this Agreement to the effect that such reserves were in fact adequate to cover
the actual amount of such liabilities that are eventually paid after the date
thereof).
(n) Opinion of Financial Advisor. Trenwick has received the opinion of
Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation dated as of the date of this
Agreement to the effect that the Conversion Number is fair to the stockholders
of Trenwick from a financial point of view. (o) Voting Requirements. The
affirmative vote of holders of a majority of the shares of Trenwick Common Stock
(with each share of Trenwick Common Stock having one vote per share) to approve
and adopt this Agreement and the Merger and to authorize the issuance of the
Stock Consideration (the "MetroCo Stockholder Approval") is the only vote of the
holders of any class or series of capital stock of MetroCo necessary to approve
and adopt this Agreement and the Merger and the transactions contemplated
hereby.
(p) Brokers. No broker, investment banker, financial advisor or other
person, other than Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation, the fees
and expenses of which will be paid by Trenwick, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Trenwick. Trenwick has furnished to Chartwell true and
complete copies of all agreements under which any such fees or expenses are
payable and all indemnification and other agreements related to the engagement
of the persons to whom such fees are payable.
(q) No Default. Except as disclosed in the Trenwick SEC Documents, the
business of Trenwick and each of its subsidiaries is not being conducted in
default or violation of any term, condition or provision of (i) its respective
certificate of incorporation or by-laws or similar organizational documents, or
(ii) any company agreement, excluding from the foregoing clause (ii), defaults
or violations that would not have a Material Adverse Effect on Trenwick or would
not materially impair the ability of Trenwick to consummate the Merger or the
other transactions contemplated hereby.
(r) Related Party Transactions. All transactions, agreements,
arrangements or understandings between Trenwick or any of Trenwick's
subsidiaries, on the one hand, and Trenwick's affiliates (other than
wholly-owned subsidiaries of Trenwick) or other Persons, on the other hand, that
are required to be disclosed in the Trenwick SEC Documents in accordance with
Item 404 of Schedule S-K under the Securities Act have been so disclosed. Since
March 31, 1999, there have been no transactions, agreements, arrangements or
understandings between Trenwick or any of its subsidiaries, on the one hand, and
Trenwick's affiliates (other than wholly-owned subsidiaries of Trenwick) or
other Persons, on the other hand, that would be required to be disclosed in
future public filings under the Exchange Act pursuant to such Item which have
not already been disclosed in the Trenwick SEC Documents filed prior to the date
hereof.
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(s) Title to Property. (i) Trenwick and its subsidiaries have good and
valid title to, have valid leasehold interests in or valid contractual rights to
use, all of the assets, tangible and intangible, used by or necessary for the
conduct of, their business, except where the failure to have such good and valid
title, valid leasehold interests or such valid contractual rights do not,
individually or in the aggregate, have a Material Adverse Effect on Trenwick.
(ii) Trenwick and its subsidiaries:
(a) own and have good and marketable title
in fee simple to the real property owned by such party, free
and clear of all mortgages, pledges, liens, charges,
encumbrances, defects, security interests, claims, options and
restrictions of all kind except for (y) minor imperfections of
title, easements and rights of way, none of which individually
or in the aggregate, materially detracts from the value of or
impairs the use of the affected property or impairs the
operations of Trenwick or any of its subsidiaries and (z)
liens for current taxes not yet due and payable;
(b) is in peaceful and undisturbed
possession of the space and/or estate under each lease under
which it is a tenant, and there are no material defaults by it
as tenant thereunder; and
(c) has good and valid rights of ingress and
egress to and from all the real property owned or leased by
such party from and to the public street systems for all usual
street, road and utility purposes.
(t) Environmental. (i) Trenwick and its subsidiaries are in material
compliance with all applicable Environmental Laws.
(ii) To the knowledge of Trenwick, no facts, events or
conditions with respect to the operation of its business or the business of its
subsidiaries, or the locations of those businesses exist which could reasonably
be expected to interfere with or prevent continued compliance with, or could
give rise to any liability (including, without limitation, liability for clean
up costs, personal injury or property damage) or form the basis for any claim,
action, suit, proceeding, hearing or investigation against or involving Trenwick
or any of its subsidiaries or their respective businesses, under any applicable
Environmental Law.
(iii) Trenwick and its subsidiaries have not received any
written notice, report or other information regarding any actual or alleged
violation of, or liability under, Environmental Laws relating to Trenwick or its
subsidiaries, or the locations of the operation of their businesses, which
violation or liability could have a Material Adverse Effect on Trenwick.
(iv) There is no action, suit, claim, proceeding or
investigation pending, or to the knowledge of Trenwick, threatened against
Trenwick or its subsidiaries that alleges or would allege any violation of any
applicable Environmental Laws.
(v) To the knowledge of Trenwick, neither Trenwick nor its
subsidiaries has ever generated, transported, treated, stored or disposed of any
Hazardous
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Material at any site, location or facility, and no such Hazardous Material is
present on, in or under any location occupied by Trenwick or its subsidiaries,
including without limitation, containment of such Hazardous Material by means of
any underground storage tank.
Notwithstanding the foregoing, this Section 3.2(t) does not
include any representation or warranty with respect to Trenwick or any of its
subsidiaries arising in their respective capacities as reinsurer or issuer of
any insurance product.
(u) Reinsurance Contracts, Coverholders and MGAs. (i) Section 3.2(u) of
the Trenwick Disclosure Schedule contains a true and complete list of all MGAs
and Coverholders with whom each subsidiary of Trenwick does business and all
Reinsurance Contracts to which each subsidiary of Trenwick is a party as the
cedent thereunder or by or to which each subsidiary of Trenwick is bound or
subject as the cedent thereunder, as each such Reinsurance Contract may have
been amended, modified or supplemented. Except as would not, individually or in
the aggregate, have a Material Adverse Effect on Trenwick: (i) each of the
foregoing Reinsurance Contracts is valid and binding in accordance with its
terms, and is in full force and effect and (ii) neither the Subsidiaries of
Trenwick nor, to the knowledge of Trenwick, any other party thereto, is in
default in any material respect with respect to any such Reinsurance Contract,
nor to the knowledge of Trenwick does any condition exist that with notice or
lapse of time or both would constitute such a material default thereunder. None
of the contracts, treaties or arrangements involving the MGAs or Coverholders
contain "change of control" provisions and no such Reinsurance Contract contains
any provision providing that any such other party thereto may terminate, cancel
or commute the same by reason of the transactions contemplated by this Agreement
or any other provision which would be altered or otherwise become applicable by
reason of such transactions, and no party has given notice of termination,
cancellation or commutation of any such Reinsurance Contract or that it intends
to terminate, cancel or commute any such Reinsurance Contract as a result of the
transactions contemplated hereby.
(ii) Except as set forth in Section 3.2(u) of the Trenwick
Disclosure Schedule, TARCO is entitled under applicable insurance laws, rules
and regulations to take credit in its statutory financial statements in
accordance with Chapter 22 of the NAIC Accounting Practices and Procedures
Manual for Property and Casualty Insurance Companies as in effect on the date
hereof, with respect to the Reinsurance Contracts listed in Section 3.2(u) of
the Trenwick Disclosure Schedule and all such amounts are properly reflected in
the statutory financial statements of TARCO. Each of Trenwick and TARCO has no
knowledge of any disputes as to reinsurance or retrocessional coverage under, or
any terms or provisions of, any such Reinsurance Contract. To the knowledge of
Trenwick and TARCO, the financial condition of any other party to any such
Reinsurance Contract is not impaired to the extent that a default thereunder
could reasonably be expected to occur.
(v) Trenwick Investees. Other than its Subsidiaries, any
publicly-traded corporation in which Trenwick owns 100 or fewer shares of common
stock, or investments in registered investment companies, Trenwick does not have
any equity investments or other ownership interest in any corporation or other
entity.
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(w) Insurance Issued. TARCO does not currently issue and has not issued
since January 1, 1991 any primary insurance policies in the United States.
(x) Approvals and Permits. To the knowledge of Trenwick and without
inquiry, Trenwick has no reason to believe that it and its affiliates will not
be able to promptly obtain all necessary approvals, authorizations, and consents
of Governmental Entities and Lloyd's required to be obtained to consummate the
transactions contemplated by this Agreement.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1. Conduct of Business.
(a) Conduct of Business by Chartwell. Except as specifically
contemplated by this Agreement or the Stock Option Agreement (including as set
forth on Section 4.1 of the Chartwell Disclosure Schedule), or as may be
required by law, during the period from the date of this Agreement to the
Effective Time, Chartwell shall, and shall cause its subsidiaries to, carry on
their respective businesses in the ordinary course substantially consistent with
past practice and, to the extent consistent therewith, use all commercially
reasonable efforts to preserve intact their current business organizations and
their relationships with agents, brokers, insureds, reinsureds and other persons
having business dealings with them. Without limiting the generality of the
foregoing (but subject to the above exceptions), during the period from the date
of this Agreement to the Effective Time, or as may be required by law, Chartwell
shall not, and shall not permit any of its subsidiaries to, without the prior
written consent of Trenwick:
(i) (x) declare, set aside or pay any dividends on, or make
any other distributions (whether in cash, stock or property) in respect of, any
of its capital stock other than the regular quarterly cash dividends of $.04 per
share with respect to the Chartwell Common Stock, (y) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock or (z) purchase, redeem or otherwise acquire any shares of
outstanding capital stock of Chartwell or any of its subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any such
shares;
(ii) issue, deliver, sell, grant, pledge or otherwise encumber
or subject to any Lien, any shares of its capital stock, any other voting
securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible securities
(other than (x) the issuance of Chartwell Common Stock upon the exercise of
Stock Options, ESPP Stock Options, Sharesave Stock Options or Warrants, in each
case, outstanding as of the date hereof in accordance with their present terms,
(y) in accordance with the Chartwell Rights Agreement and (z) the issuance of
Chartwell Common Stock pursuant to the Stock Option Agreement);
(iii) amend its certificate of incorporation, bylaws or other
comparable organizational documents;
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(iv) (x) acquire (by merger, amalgamation, consolidation or
acquisition of stock or assets or otherwise) any corporation, partnership, joint
venture, association or other business organization or division thereof or (y)
make any material investment either by purchase of stock or securities,
contributions or capital property, transfer or acquisition including by lease of
any material amount of assets or properties of any other individual entity,
except acquisitions of investment assets in the ordinary course of business in
accordance with Chartwell's investment guidelines and consistent with past
practice;
(v) sell, lease, mortgage or otherwise encumber or subject to
any Lien or otherwise dispose of any of its properties or assets (including
securitizations) (collectively, "Dispositions") except (a) Dispositions of
investment assets in the ordinary course of business in accordance with
Chartwell's investment guidelines and consistent with past practice and (b)
Dispositions of assets other than investment assets in the ordinary course of
business consistent with past practice and in no case exceeding 1.0 million U.S.
dollars;
(vi) (x) incur any indebtedness for borrowed money or
guarantee or otherwise become responsible for any such indebtedness of another
person other than pursuant to existing line of credit arrangements of Chartwell
or its subsidiaries and letters of credit and related agreements of Chartwell
and its subsidiaries, in each case in the ordinary course of business consistent
with past practice or (y) make any loans, advances or capital contributions to,
or investments in, any other person, other than to Chartwell or to any direct or
indirect subsidiary of Chartwell and customary loans and advances to employees
and as permitted under clause (iv);
(vii) make any tax election or settle or compromise any income
tax liability that would have a Material Adverse Effect on Chartwell and its
subsidiaries taken as a whole;
(viii) make any change in accounting principles or practices
used by Chartwell or any of its subsidiaries materially affecting its assets,
liabilities or business, including any such change with respect to establishment
of reserves for unearned premiums, losses and loss adjustment expenses, except
for any such change required by reason of a concurrent change in GAAP or SAP or
applicable U.K. accounting rules or principles;
(ix) make any material capital expenditure other than in the
ordinary course of business substantially consistent with past practice and in
each case not exceeding 1.0 million U.S. dollars;
(x) (A) enter into, adopt, amend (except as may be required by
law) or terminate any bonus, profit-sharing, compensation, severance,
termination, change in control, consulting, fringe benefit, stock option, stock
appreciation right, restricted stock, performance unit, stock equivalent, stock
purchase agreement, pension, retirement, deferred compensation, employment,
severance or other employee benefit agreement, trust, plan, fund, award or other
arrangement for the benefit or welfare of any director, officer or employee in
any manner, or (B) except for (x) merit increases in salaries of non-officer
employees at regularly scheduled times substantially consistent with past
practice and in each case not exceeding a 5% increase in each individual
non-officer employee's current salary and (y) as required under existing
agreements or
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benefit plans set forth on Section 3.1(h) of the Chartwell Disclosure Schedule,
increase in any manner the compensation, employee benefits or fringe benefits of
any director, officer or employee;
(xi) enter into any agreement or arrangement that limits or
otherwise restricts Chartwell or any of its subsidiaries or any successor
thereto or that could, after the Effective Time, limit or restrict the Surviving
Corporation and its affiliates (including Trenwick) or any successor thereto,
from engaging or competing in any line of business or in any geographic area;
(xii) settle or compromise any derivative suit or other
litigation or claim arising out of the transactions contemplated hereby, or any
other litigation or claim involving Chartwell if the settlement thereof involves
payment of in excess of $100,000 (other than claims for contractual benefits
under any insurance or reinsurance contract under which Chartwell or any
subsidiary of Chartwell is the insurer or reinsurer) which, for purposes of this
clause (xii), prior written consent of Trenwick shall not be unreasonably
withheld;
(xiii) take or allow to be taken or fail to take any action
which act or omission would jeopardize qualification of the Merger as a
"reorganization" with the meaning of Section 368(a)(1)(A) of the Code;
(xiv) commute any corporate aggregate excess loss reinsurance
contracts or arrangements of Chartwell or any of its Subsidiaries; or
(xv) authorize any of, or commit or agree to take any of, the
foregoing actions.
In addition to, and notwithstanding, the foregoing, Chartwell shall
cause the business of the Chartwell Syndicates which are the subject of a
proposal for the merger of Chartwell Syndicates 270, 741, 2741 and 544 into
Chartwell Syndicate 839 for the 2000 Year of Account (set forth in Section
4.1(a) of the Chartwell Disclosure Schedule, the "Lloyd's Business Plan")
previously submitted to Lloyd's by or on behalf of Chartwell to be conducted
substantially as set forth in the Lloyd's Business Plan, and shall not sell or
otherwise transfer or dispose of all or any material portion of its interest in
any Chartwell Syndicate without the prior written consent of Trenwick.
(b) Conduct of Business by Trenwick. Except as specifically
contemplated by this Agreement or the Stock Option Agreement (including as set
forth on Section 4.1 of the Trenwick Disclosure Schedule), or as may be required
by law, during the period from the date of this Agreement to the Effective Time,
Trenwick shall, and shall cause its subsidiaries to, carry on their respective
businesses in the ordinary course substantially consistent with past practice
and, to the extent consistent therewith, use all commercially reasonable efforts
to preserve intact their current business organizations and their relationships
with agents, brokers, insureds, reinsureds and other persons having business
dealings with them. Without limiting the generality of the foregoing (but
subject to the above exceptions), during the period from the date of this
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Agreement to the Effective Time, or as may be required by law, Trenwick shall
not, and shall not permit any of its subsidiaries to, without the prior written
consent of Chartwell:
(i) (x) declare, set aside or pay any dividends on, or make
any other distributions (whether in cash, stock or property) in respect of, any
of its capital stock other than the regular quarterly cash dividends of $.26 per
share with respect to the Trenwick Common Stock, (y) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock or (z) purchase, redeem or otherwise acquire any shares of
outstanding capital stock of Trenwick or any of its subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any such
shares;
(ii) issue, deliver, sell, grant, pledge or otherwise encumber
or subject to any Lien, any shares of its capital stock, any other voting
securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible
securities, (other than (x) the issuance of Trenwick Common Stock upon the
exercise of Trenwick Employee Stock Options outstanding as of the date hereof in
accordance with their present terms and (y) in accordance with the Trenwick
Rights Agreement);
(iii) amend its certificate of incorporation, bylaws or other
comparable organizational documents;
(iv) (x) acquire (by merger, amalgamation, consolidation or
acquisition of stock or assets or otherwise) any corporation, partnership, joint
venture, association or other business organization or division thereof or (y)
make any material investment either by purchase of stock or securities,
contributions or capital property, transfer or acquisition including by lease of
any material amount of assets or properties of any other individual entity,
except acquisitions of investment assets in the ordinary course of business in
accordance with Trenwick's investment guidelines and consistent with past
practice.
(v) sell, lease, mortgage or otherwise encumber or subject to
any Lien or otherwise dispose of any of its properties or assets (including
securitizations ) (collectively, "Dispositions") except (a) Dispositions of
investment assets in the ordinary course of business in accordance with
Trenwick's investment guidelines and consistent with past practice and (b)
Dispositions of assets other than investment assets in the ordinary course of
business consistent with past practice and in no case exceeding $1.0 million
U.S. dollars;
(vi) (x) incur any indebtedness for borrowed money or
guarantee or otherwise become responsible for any such indebtedness of another
person other than pursuant to existing line of credit arrangements of Trenwick
or its subsidiaries and letters of credit and related agreements of Trenwick and
its subsidiaries, in each case in the ordinary course of business consistent
with past practice or (y) make any loans, advances or capital contributions to,
or investments in, any other person, other than to Trenwick or to any direct or
indirect subsidiary of Trenwick and customary loans and advances to employees
and as permitted under clause (iv);
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(vii) make any tax election or settle or compromise any income
tax liability that would have a Material Adverse Effect on Trenwick and its
subsidiaries taken as a whole;
(viii) make any change in accounting principles or practices
used by Trenwick or any of its subsidiaries materially affecting its assets,
liabilities or business, including any such change with respect to establishment
of reserves for unearned premiums, losses and loss adjustment expenses, except
for any such change required by reason of a concurrent change in GAAP or SAP or
applicable U.K. accounting rules or principles;
(ix) make any material capital expenditure other than in the
ordinary course of business substantially consistent with past practice and in
no case exceeding 1.0 million U.S. dollars;
(x) (A) enter into, adopt, amend (except as may be required by
law) or terminate any bonus, profit-sharing, compensation, severance,
termination, change in control, consulting, fringe benefit, stock option, stock
appreciation right, restricted stock, performance unit, stock equivalent, stock
purchase agreement, pension, retirement, deferred compensation, employment,
severance or other employee benefit agreement, trust, plan, fund, award or other
arrangement for the benefit or welfare of any director, officer or employee in
any manner, or (B) except (x) merit increases in salaries of non-officer
employees at regularly scheduled times substantially consistent with past
practice and (y) as required under existing agreements or Trenwick Benefit
Plans, increase in any manner the compensation, employee benefits or fringe
benefits of any director, officer or employee;
(xi) enter into any agreement or arrangement that limits or
otherwise restricts Trenwick or any of its subsidiaries or any successor thereto
or that could, after the Effective Time, limit or restrict the Surviving
Corporation and its affiliates (including Chartwell) or any successor thereto,
from engaging or competing in any line of business or in any geographic area;
(xii) settle or compromise any derivative suit or other
litigation or claim arising out of the transactions contemplated hereby, or any
other litigation or claim involving Trenwick if the settlement thereof involves
payment of in excess of $100,000 (other than claims for contractual benefits
under any insurance or reinsurance contract under which Trenwick or any
subsidiary of Trenwick is the insurer or reinsurer) which, for purposes of this
clause (xii), prior written consent of Chartwell shall not be unreasonably
withheld;
(xiii) take or allow to be taken or fail to take any action
which act or omission would jeopardize qualification of the Merger as a
"reorganization" with the meaning of Section 368(a)(1)(A) of the Code;
(xiv) commute any corporate aggregate excess of loss
reinsurance contracts or arrangements of Trenwick or any of its Subsidiaries; or
(xv) authorize any of, or commit or agree to take any of, the
foregoing actions.
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(c) Other Actions. Except as required by law, and subject to Section
4.2(a), Chartwell and Trenwick shall not, and shall not permit any of their
respective subsidiaries to, voluntarily take any action that would, or that
could reasonably be expected to, result in (i) any of the representations and
warranties of such party set forth in this Agreement or the Stock Option
Agreement that are qualified as to materiality being untrue at the Effective
Time, (ii) any of such representations and warranties that are not so qualified
being untrue in any material respect at the Effective Time, or (iii) any of the
conditions to the Merger set forth in Article VI not being satisfied.
(d) Advice of Changes. Chartwell and Trenwick shall promptly advise the
other party orally and in writing to the extent it has knowledge of (i) any
representation or warranty made by it contained in this Agreement or the Stock
Option Agreement that is qualified as to materiality becoming untrue or
inaccurate in any respect or any such representation or warranty that is not so
qualified becoming untrue or inaccurate in any material respect, (ii) the
failure by it to comply in any material respect with or to satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement or the Stock Option Agreement and (iii) any
change or event having, or which, insofar as can reasonably be foreseen at the
time, would reasonably be expected to have a Material Adverse Effect on such
party or on the truth of their respective representations and warranties or the
ability to satisfy the conditions set forth in Article VI; provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties (or remedies with respect thereto) or the
conditions to the obligations of the parties under this Agreement or the Stock
Option Agreement.
SECTION 4.2. No Solicitation by Chartwell.
(a) Chartwell shall not, nor shall it permit any of its subsidiaries
to, nor shall it authorize or permit any of its directors, officers or employees
or any investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries to, and it shall use
commercially reasonable efforts to ensure that such persons do not directly or
indirectly, (i) solicit, initiate or encourage (including by way of furnishing
non-public information), or take any other action designed to facilitate, any
inquiries or the making of any proposal which constitutes any Chartwell Takeover
Proposal (as defined below) or (ii) participate in any discussions or
negotiations regarding any Chartwell Takeover Proposal; provided, however, that
if at any time prior to Chartwell Stockholder Approval the Board of Directors of
Chartwell determines in good faith, after consultation with outside counsel,
that it is necessary to do so in order to comply with its fiduciary duties to
Chartwell's stockholders under applicable law, Chartwell may, in response to a
Chartwell Superior Proposal (as defined in Section 4.2(b)) which was not
solicited by it or which did not otherwise result from a breach of this Section
4.2(a), and subject to providing prior written notice of its decision to take
such action to Trenwick and compliance with Section 4.2(c), (x) furnish
information with respect to Chartwell and its subsidiaries to any person making
a Chartwell Superior Proposal pursuant to a customary confidentiality agreement
(as determined by Chartwell after consultation with its outside counsel) and (y)
participate in discussions or negotiations regarding such Chartwell Superior
Proposal. For purposes of this Agreement, "Chartwell Takeover Proposal" means
any inquiry, proposal or offer from any person relating to any direct or
indirect acquisition or
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purchase of a business that constitutes 15% or more of the net revenues, net
income or assets of Chartwell and its subsidiaries, taken as a whole, or 15% or
more of any class of equity securities of Chartwell or any of its subsidiaries,
any tender offer or exchange offer that if consummated would result in any
person beneficially owning 15% or more of any class of equity securities of
Chartwell or any of its subsidiaries, or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving Chartwell or any of its Significant Subsidiaries, other than the
transactions contemplated by this Agreement or the Stock Option Agreement.
(b) Except as expressly permitted by this Section 4.2, neither the
Board of Directors of Chartwell nor any committee thereof shall (i) withdraw or
modify, or propose publicly to withdraw or modify, in a manner adverse to
Trenwick, the approval or recommendation by such Board of Directors or such
committee of this Agreement and the transactions contemplated hereby, (ii)
approve or recommend, or propose publicly to approve or recommend, any Chartwell
Takeover Proposal, or (iii) cause Chartwell to enter into any letter of intent,
agreement in principle, acquisition agreement or other similar agreement (each a
"Chartwell Acquisition Agreement") related to any Chartwell Takeover Proposal.
Notwithstanding the foregoing, the Board of Directors of Chartwell may terminate
this Agreement (upon payment to Trenwick of the Termination Fee required by
Section 5.14(b)) and concurrently with or after such termination, if it so
chooses, cause Chartwell to enter into any Chartwell Acquisition Agreement with
respect to any Chartwell Superior Proposal, and withdraw its approval and
recommendation to stockholders of the transactions contemplated hereby, but only
at a time that is after the fifth business day following Trenwick's receipt of
written notice advising Trenwick that the Board of Directors of Chartwell is
prepared to accept a Chartwell Superior Proposal, specifying the material terms
and conditions of such Chartwell Superior Proposal and identifying the person
making such Chartwell Superior Proposal, all of which information will be kept
confidential by Trenwick pursuant to the terms of the confidentiality agreement,
dated May 20, 1998 between Trenwick and Chartwell. For purposes of this
Agreement, a "Chartwell Superior Proposal" means any proposal made by a third
party to acquire, directly or indirectly, including pursuant to a tender offer,
exchange offer, merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction, for consideration consisting of
cash and/or securities, more than 50% of the combined voting power of the shares
of Chartwell Common Stock then outstanding or all or substantially all the
assets of Chartwell and otherwise on terms which the Board of Directors of
Chartwell determines in its good faith judgment (based on the advice of a
financial advisor of nationally recognized reputation) to be more favorable to
Chartwell's stockholders than this Agreement and the transactions contemplated
hereby and for which financing, to the extent required, is then committed or
which, in the good faith judgment of the Board of Directors of Chartwell, is
reasonably capable of being obtained by such third party.
(c) In addition to the obligations of Chartwell set forth in paragraphs
(a) and (b) of this Section 4.2, Chartwell shall immediately advise Trenwick
orally and in writing of any request for non-public information or of any
Chartwell Takeover Proposal, the material terms and conditions of such request
or Chartwell Takeover Proposal and the identity of the person making such
request or Chartwell Takeover Proposal. Chartwell will keep Trenwick reasonably
informed of the status and material details (including amendments or proposed
amendments) of
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any such request or Chartwell Takeover Proposal. Any such information provided
to Trenwick will be kept confidential by Trenwick pursuant to the terms of the
confidentiality agreement dated May 20, 1998 between Trenwick and Chartwell.
Nothing contained in this Section 4.2 shall prohibit Chartwell from taking and
disclosing to its stockholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from making any disclosure to Chartwell's
stockholders if, in the good faith judgment of the Board of Directors of
Chartwell, after consultation with outside counsel, failure so to disclose would
be inconsistent with its obligations under applicable law.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1. Preparation of the Form S-4 and the Joint Proxy Statement.
As soon as is reasonably practicable following the date of this Agreement,
Chartwell and Trenwick shall prepare and file with the SEC the Joint Proxy
Statement and a registration statement of Trenwick on Form S-4 with respect to
the transactions contemplated by this Agreement. Each of Chartwell and Trenwick
shall use its commercially reasonable efforts to have the Joint Proxy Statement
cleared by the SEC under the Exchange Act and the Form S-4 declared effective
under the Securities Act as promptly as practicable after such filing. Chartwell
will use its commercially reasonable efforts to cause the Joint Proxy Statement
to be mailed to Chartwell's stockholders, and Trenwick will use its commercially
reasonable efforts to cause the Joint Proxy Statement to be mailed to Trenwick's
stockholders, in each case as promptly as practicable after the Form S-4 is
declared effective under the Securities Act. Trenwick shall also take any action
(other than qualifying to do business in any jurisdiction in which it is not now
so qualified or to file a general consent to service of process) required to be
taken under any applicable state securities laws in connection with the issuance
of Trenwick Common Stock in the Merger and Chartwell shall furnish all
information concerning Chartwell and its stockholders as may be reasonably
requested in connection with any such action. No filing of, or amendment or
supplement to, the Form S-4 or the Joint Proxy Statement will be made by
Trenwick or Chartwell without providing the other parties the opportunity to
review and comment thereon. Trenwick will advise Chartwell, promptly after it
receives notice thereof, of the time when the Form S-4 has become effective or
any supplement or amendment has been filed, the issuance of any stop order, the
suspension of the qualification of Trenwick Common Stock issuable in connection
with the Merger for offering or sale in any jurisdiction, or any request by the
SEC for amendment of the Joint Proxy Statement or the Form S-4 or comments
thereon or responses thereto or requests by the SEC for additional information.
If at any time prior to the Effective Time any information relating to Trenwick
or Chartwell, or any of their respective affiliates, officers or directors,
should be discovered by Trenwick or Chartwell which should be set forth in an
amendment or supplement to any of the Form S-4 or Joint Proxy Statement, so that
any such documents would not include any misstatement of a material fact or omit
to state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, the party which
discovered such information shall promptly notify the other party hereto and an
appropriate amendment or supplement describing such information
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shall be promptly filed with the SEC and, to the extent required by law,
disseminated to the stockholders of Trenwick and Chartwell.
SECTION 5.2. Stockholder Approval.
(a) Chartwell, acting through its Board of Directors, shall, in
accordance with applicable law and Chartwell's Certificate of Incorporation and
By-laws, (i) convene a meeting of its stockholders as soon as practicable after
the date of this Agreement to consider and vote on the approval of this
Agreement and the Merger (the "Chartwell Stockholders Meeting") and (ii) subject
to the fiduciary duties of its Board of Directors to stockholders under
applicable law, (A) solicit proxies from its stockholders to obtain the approval
of its stockholders with respect to this Agreement and (B) include in the Joint
Proxy Statement the recommendation of the Board of Directors of Chartwell that
the stockholders of Chartwell vote in favor of the approval of this Agreement
and the Merger.
(b) Trenwick, acting through its Board of Directors, shall, in
accordance with applicable law and Trenwick's Restated Certificate of
Incorporation and By-laws, (i) convene a meeting of its stockholders as soon as
practicable after the date of this Agreement to consider and vote on the
approval of the issuance of Trenwick Common Stock in the Merger (the "Trenwick
Stockholders Meeting"), (ii) solicit proxies from its stockholders to obtain the
approval of its stockholders with respect thereto and (iii) include in the Joint
Proxy Statement the recommendation of the Board of Directors of Trenwick that
the stockholders of Trenwick vote in favor of such issuance.
(c) Chartwell and Trenwick shall coordinate and cooperate with respect
to the timing of such meetings and shall endeavor to hold such meetings on the
same day and as soon as practicable after the date hereof.
SECTION 5.3. Access to Information; Confidentiality. Each of Chartwell
and Trenwick shall, and shall cause each of its respective subsidiaries to,
afford to the other party and to the officers, employees, counsel, financial
advisors and other representatives of such other party, reasonable access during
normal business hours during the period prior to the Effective Time to all its
respective properties, books, contracts, commitments, personnel and records and,
during such period, each of Chartwell and Trenwick shall, and shall cause each
of its respective subsidiaries to, furnish as promptly as practicable to the
other party (a) a copy of each report, schedule, registration statement and
other document filed by it during such period pursuant to the requirements of
domestic or foreign federal or state securities or insurance laws and (b) all
other information concerning its business, properties and personnel as such
other party may from time to time reasonably request. Trenwick will hold, and
will cause its subsidiaries and each of their respective directors, officers,
employees, counsel, financial advisors and other representatives and affiliates
to hold, any non-public information in confidence to the extent required by, and
in accordance with, the provisions of the existing confidentiality agreement,
dated May 20, 1998, between Trenwick and Chartwell, and Chartwell will hold, and
will cause its subsidiaries and each of their respective directors, officers,
employees, counsel, financial advisors and other representatives and affiliates
to hold, any non-public information in confidence to the extent required by, and
in accordance with, the provisions of the confidentiality agreement dated May
26, 1998, between Chartwell and Trenwick (collectively, the "Confidentiality
Agreements").
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SECTION 5.4. Commercially Reasonable Efforts. Upon the terms and
subject to the conditions and other agreements set forth in this Agreement, each
of the parties agrees to use its commercially reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement and the Stock Option Agreement. Nothing set forth in this Section 5.4
will limit or affect actions permitted to be taken pursuant to Section 4.2.
SECTION 5.5. Benefit Plans.
(a) Trenwick will cause those employees of Chartwell or its
subsidiaries who are employed at the Effective Time by the Surviving Corporation
or its subsidiaries (the "Continuing Employees") to be provided with employee
benefits other than severance benefits which are covered in clause (b) below
which are no less favorable in the aggregate than those benefits provided to
other similar situated employees of Trenwick and its subsidiaries.
For purposes of the employee benefits to be provided to the Continuing
Employees, solely to the extent permissible pursuant to applicable law, Trenwick
will cause the Continuing Employees to receive full credit for purposes of
eligibility and vesting (but not benefit accrual) for such Continuing Employees'
service with Chartwell or its subsidiaries prior to the Effective Time. Such
service also shall apply for purposes of satisfying any waiting periods,
evidence of insurability requirements, or the application of any preexisting
condition limitation.
(b) Trenwick shall provide, or cause the Surviving Corporation to
provide, severance benefits to Continuing Employees whose employment is
terminated without cause by Trenwick or its subsidiaries during the one year
period following the Effective Time, which severance benefits are no less
favorable in the aggregate than those severance benefits provided to other
similarly situated employees of Trenwick or its subsidiaries, giving full credit
to the Continuing Employees for time of service with Chartwell or its
subsidiaries.
SECTION 5.6. Indemnification and Insurance.
(a) From and after the Effective Time, Trenwick agrees that it will
indemnify and hold harmless each person who is, or has been at any time prior to
the date hereof or who becomes prior to the Effective Time, an officer or
director of Chartwell or any of its subsidiaries (the "Indemnified Parties"), in
respect of acts or omissions occurring on or prior to the Effective Time
(including but not limited to the transactions contemplated by this Agreement),
to the same extent provided under the Certificate of Incorporation and By-laws
of Chartwell or the certificate of incorporation or bylaws of any such
subsidiary as in effect on the date hereof; provided, that such indemnification
shall be subject to any limitation imposed from time to time under applicable
law. The Indemnified Parties shall be entitled to advancement of expenses
provided such Indemnified Party provides Trenwick with an undertaking to
reimburse Trenwick in a form comparable to the undertaking provided for by the
DGCL. Any determination to be made as to whether any Indemnified Party has met
any standard of conduct imposed by law shall be made
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by legal counsel reasonably acceptable to such Indemnified Party and the
Surviving Corporation, retained at the Surviving Corporation's expense.
(b) Trenwick will cause to be maintained in effect for a period of not
less than six years from the Effective Time the current directors' and officers'
liability insurance, fiduciary liability insurance and indemnification policies
maintained by Chartwell and its subsidiaries to the extent that such policies
provide coverage for any matter existing or act or omission occurring on or
prior to the Effective Time (the "D&O Insurance") for all current or former
directors, officers or employees of Chartwell or any subsidiary on the date of
this Agreement, so long as the annual premium therefor would not be in excess of
two hundred percent (200%) of the last annual premium paid prior to the date of
this Agreement (200% of such premium, the "Maximum Premium"); provided, however,
that Trenwick may, in lieu of maintaining such existing D&O Insurance as
provided above, cause no less favorable coverage to be provided under any policy
maintained for the benefit of the directors and officers of Trenwick or any of
its subsidiaries, so long as (i) the insurance company providing such coverage
has an A.M. Best Company rating of A or better and (ii) the material terms
thereof are no less advantageous than the existing D&O Insurance. If the
existing D&O Insurance expires, is terminated or cancelled or if the annual
premium would exceed the Maximum Premium during such six-year period, Trenwick
will use reasonable efforts to cause to be obtained as much D&O Insurance as can
be obtained for the remainder of such period for an annualized premium not in
excess of the Maximum Premium, on terms and conditions no less advantageous than
the existing D&O Insurance to the extent commercially available. Section 5.6 (b)
of the Chartwell Disclosure Schedule sets forth the amount of Maximum Premium.
(c) The provisions of this Section 5.6 are in addition to, and not in
substitution for any other rights that an Indemnified Party may have under the
applicable certificate of incorporation or by-laws of or agreements with
Chartwell or any of its subsidiaries or under applicable law. Trenwick agrees to
pay all costs and expenses (including fees and expenses of counsel) that may be
incurred by any Indemnified Party in successfully enforcing the indemnity or
other obligations under this Section. The provisions of this Section shall
survive the Merger and are intended to be for the benefit of, and shall be
enforceable by, each of the Indemnified Parties, their heirs and their
representatives.
(d) In the event that Trenwick or any of its successors or assigns (i)
consolidates with or merges into any other person and is not the continuing or
surviving corporation or entity of such consolidation or merger or (ii)
transfers or conveys all or substantially all of its properties and assets to
any person, then, and in each such case, proper provision will be made so that
the successors and assigns of Trenwick assume the obligations set forth in this
Section 5.6.
SECTION 5.7. Public Announcements. Trenwick and Chartwell will consult
with each other before issuing, and provide each other the opportunity to
review, comment upon, and concur with any press release or other public
statements with respect to the transactions contemplated by this Agreement,
including the Merger and the Stock Option Agreement, and shall not issue any
such press release or make any such public statement prior to such consultation,
except as either party may determine is required by applicable law, court
process or
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by obligations pursuant to any listing agreement with any national securities
exchange or authorized interdealer quotation system. The parties agree that the
initial press release to be issued with respect to the transactions contemplated
by this Agreement and the Stock Option Agreement shall be in the form hereto
agreed by the parties.
SECTION 5.8. Consents, Approvals and Filings. (a) Chartwell and
Trenwick will make and cause their respective subsidiaries to make all necessary
registrations and filings, as promptly as practicable, including those required
under the HSR Act, the Securities Act, the Exchange Act, state securities laws
and state insurance laws, in order to facilitate prompt consummation of the
Merger, the Stock Option Agreement and the other transactions contemplated by
this Agreement. In addition, Chartwell and Trenwick will each use their
commercially reasonable efforts, and will cooperate fully with each other (i) to
comply as promptly as practicable with all governmental requirements applicable
to the Merger, the Stock Option Agreement and the other transactions
contemplated by this Agreement, and (ii) to obtain as promptly as practicable
all necessary permits, orders or other consents, approvals or authorizations
from, or to avoid an action or proceeding by, any Governmental Entity and
consents, approvals or waivers from all third parties (including Lloyd's)
necessary in connection with the consummation of the Merger, the Stock Option
Agreement and the other transactions contemplated by this Agreement. Each of
Chartwell and Trenwick shall use its commercially reasonable efforts to provide
such information and communications to Governmental Entities and Lloyd's as they
may reasonably request.
(b) Each of the parties shall provide to the other party copies of all
applications or other communications in advance of filing or submission of such
applications or communications to Governmental Entities or Lloyd's in connection
with this Agreement. Trenwick shall give to Chartwell prompt written notice if
it receives any notice or other communication from any Insurance Regulator or
Lloyd's in connection with the transactions contemplated by this Agreement, and,
in the case of any such notice or communication which is in writing, shall
promptly furnish Chartwell with a copy thereof. Each of the parties shall give
to the other party reasonable prior written notice of the time and place when
any meetings may be held by it with Insurance Regulators or Lloyd's in
connection with the transactions contemplated by this Agreement, and the party
to whom such notice shall be given shall have the right to have a representative
or representatives present at any such meeting.
(c) Chartwell shall give prompt notice to Trenwick, and Trenwick shall
give prompt notice to Chartwell, of (i) any representation or warranty made by
it contained in this Agreement that is qualified as to materiality becoming
untrue or inaccurate in any respect or any such representation or warranty that
is not so qualified becoming untrue or inaccurate in any material respect or
(ii) the failure by it to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
SECTION 5.9. NASDAQ Approval. Trenwick shall use its reasonable best
efforts to cause the shares of Trenwick Common Stock to be issued in the Merger
and the other
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transactions contemplated by this Agreement to be approved for listing on the
NASDAQ National Market, subject to official notice of issuance, as promptly as
practicable after the date hereof and in any event prior to the Effective Time.
SECTION 5.10. Affiliates and Certain Stockholders. Prior to the Closing
Date, Chartwell shall deliver to Trenwick a list identifying all persons who
are, at the time of the Chartwell Stockholders Meeting, "affiliates" of
Chartwell for purposes of Rule 145 under the Securities Act. Chartwell shall
furnish such information and documents as Trenwick may reasonably request for
the purpose of reviewing such list. Chartwell shall use its commercially
reasonable efforts to cause each such person to execute and deliver to Trenwick
on or prior to the Closing Date a written agreement in a form satisfactory to
Trenwick (an "Affiliate Agreement"), that such person will not offer or sell or
otherwise dispose of any of the shares of Trenwick Common Stock issued to such
person pursuant to the Merger in violation of the Securities Act or the rules or
regulations promulgated by the SEC thereunder. The certificates representing
Trenwick Common Stock received by such affiliates in the Merger shall bear a
customary legend regarding applicable Securities Act transfer restrictions and
the provisions of this Section 5.10.
SECTION 5.11. Tax Matters. Trenwick and Chartwell shall each use all
reasonable efforts to cause the Merger to qualify as a reorganization under the
provisions of Section 368(a)(1) of the Code, and neither shall knowingly take,
nor shall it permit any subsidiary knowingly to take, any action that would
jeopardize such treatment.
SECTION 5.12. Letters of Accountants. (a) Chartwell shall use its
reasonable efforts to cause to be delivered to Trenwick two letters from
Chartwell's independent accountants, one dated a date within two business days
before the date on which the Form S-4 shall become effective and one dated a
date within two business days before the Effective Time, each addressed to
Trenwick, in form and substance reasonably satisfactory to Trenwick and
customary in scope and substance for comfort letters delivered by independent
public accountants in connection with registration statements similar to the
Form S-4.
(b) Trenwick shall use its reasonable efforts to cause to be delivered
to Chartwell two letters from Trenwick's independent accountants, one dated a
date within two business days before the date on which the Form S-4 shall become
effective and one dated a date within two business days before the Effective
Time, each addressed to Chartwell, in form and substance reasonably satisfactory
to Chartwell and customary in scope and substance for comfort letters delivered
by independent public accountants in connection with registration statements
similar to the Form S-4.
SECTION 5.13. Stockholder Litigation. Each of Chartwell and Trenwick
shall (to the extent their interests do not diverge) cooperate in the defense of
any litigation against Chartwell or Trenwick, as applicable, and its directors
and officers relating to the transactions contemplated by this Agreement and the
Stock Option Agreement.
SECTION 5.14. Fees and Expenses. (a) Except as provided in this Section
5.14, all fees and expenses incurred in connection with this Agreement, the
Stock Option Agreement and the transactions contemplated by this Agreement and
the Stock Option Agreement shall be
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paid by the party incurring such fees or expenses, whether or not the Merger is
consummated, except that each of Chartwell and Trenwick shall bear and pay
one-half of the costs and expenses incurred in connection with (1) the filing,
printing and mailing of the Form S-4 and the Joint Proxy Statement (including
SEC filing fees) and (2) the filings of the premerger notification and report
forms under the HSR Act (including filing fees). Each of Chartwell and Trenwick
shall file any return with respect to, and shall pay, any state or local taxes
(including any penalties or interest with respect thereto), if any, which are
attributable to the transfer of the beneficial ownership of real property of
Chartwell and Trenwick (collectively, the "Real Estate Transfer Taxes") as a
result of the transactions contemplated by this Agreement. Trenwick and
Chartwell shall cooperate with each other in the filing of such returns,
including supplying in a timely manner a complete list of all real property
interests held by it and any information with respect to such property that is
reasonably necessary to complete such returns. The fair market value of any real
property of Trenwick or Chartwell subject to the Real Estate Transfer Taxes
shall be as agreed to between Chartwell and Trenwick.
(b) In the event that (w) the Board of Directors of Chartwell shall
terminate this Agreement pursuant to Section 7.1(c)(ii) hereof, (x) the Board of
Directors of Trenwick shall terminate this Agreement pursuant to Section
7.1(d)(ii), (y) the Board of Directors of Trenwick shall terminate this
Agreement pursuant to Section 7.1(d)(iii) hereof or the Board of Directors of
Chartwell shall terminate this Agreement pursuant to Section 7.1(c)(iii) and in
either case there shall have been made or commenced a Chartwell Takeover
Proposal (other than the Merger) with respect to Chartwell, or (z) the Board of
Directors of Trenwick shall terminate this Agreement pursuant to Section
7.1(d)(i) and within one year of such termination, Chartwell shall have entered
into a definitive agreement with respect to a Chartwell Superior Proposal, then
Chartwell shall, as a condition precedent to such termination of this Agreement
in the cases of clauses (w), (x), (y) above, and, in the case of (z) above,
within 24 hours of such event, pay to Trenwick $6.5 million U.S. dollars (the
"Termination Fee") in cash by wire transfer of same day funds.
(c) If the Board of Directors of Trenwick shall terminate this
Agreement pursuant to Section 7.1(d)(i) then Chartwell shall pay or cause to be
paid to Trenwick on the date of such termination $2.0 million U.S. dollars in
respect of liquidated damages; provided, however, that such liquidated damages
shall be credited towards any Termination Fee that becomes payable as
contemplated by Section 5.14(b)(z) hereof. If within 1 year of such termination
Chartwell shall have entered into a definitive agreement with respect to a
Chartwell Superior Proposal, such that the Termination Fee contemplated by
Section 5.14(b)(z) shall become payable, the aforementioned $2.0 million U.S.
dollars in liquidated damages shall be allowed as a credit against such
Termination Fee.
(d) Chartwell acknowledges that the agreements contained in this
Section 5.14(b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Trenwick would not enter into
this Agreement; accordingly, if Chartwell fails promptly to pay the amount due
pursuant to this Section 5.14, and, in order to obtain such payment, Trenwick
commences a suit which results in a judgment against Chartwell for the fee set
forth in this Section 5.14, Chartwell shall pay to Trenwick its costs and
expenses (including attorneys' fees and expenses) in connection with such suit,
together with interest on the amount
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of the fee at the prime rate as reported in the Wall Street Journal on the date
such payment was required to be made.
SECTION 5.15. Reinsurance Agreement. Chartwell shall use its
commercially reasonable efforts to obtain not later than the Effective Time the
Reinsurance Agreement on the terms set forth in Section 3.1(z) of the Chartwell
Disclosure Schedule.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1. Conditions to Each Party's Obligation To Effect the
Merger. The respective obligation of each party to effect the Merger is subject
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. Each of the Chartwell Stockholder Approval
and the Trenwick Stockholder Approval shall have been obtained.
(b) Governmental, Regulatory and Lloyd's Consents. All filings required
to be made prior to the Effective Time with, and all consents, approvals,
permits and authorizations required to be obtained prior to the Effective Time
from, Governmental Entities or Lloyd's, including, without limitation, those set
forth in Sections 3.1(d) and 3.2(d) of the Disclosure Schedule, in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by Chartwell and Trenwick shall have been made
or obtained (as the case may be); provided, however, that such consents,
approvals, permits and authorizations may be subject to conditions customarily
imposed by insurance regulatory authorities or Lloyd's and other conditions that
are consistent with the parties' obligations to use commercially reasonable
efforts to complete the transactions contemplated hereby.
(c) HSR Act. The waiting period (and any extension thereof) applicable
to the Merger under the HSR Act shall have been terminated or shall have
expired.
(d) No Injunctions or Restraints. No preliminary or permanent
injunction, judgment, order, decree, statute, law, ordinance, rule or
regulation, entered, enacted, promulgated, enforced or issued by any court,
arbitrator, Insurance Regulator or any other Government Entity of competent
jurisdiction or other legal restraint or prohibition (collectively,
"Restraints") shall be in effect (i) preventing the consummation of the Merger
or any of the transactions contemplated by this Agreement (ii) prohibiting or
limiting the ownership or operation by Trenwick or Chartwell and their
respective subsidiaries of any material portion of the business or assets of
Trenwick or Chartwell and their respective subsidiaries taken as a whole, in the
event that the Merger or any of the transactions contemplated by this Agreement
is consummated as contemplated hereby, or (iii) compelling Trenwick or Chartwell
and their respective subsidiaries to dispose of or hold separate any material
portion of the business or assets of Trenwick or Chartwell and their respective
subsidiaries taken as a whole, in the event that the Merger or any of the other
transactions contemplated by this Agreement is consummated
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as contemplated hereby; provided, however, that the party invoking the condition
shall have used reasonable efforts to prevent the entry of any such Restraints
and to appeal as promptly as possible any such Restraints that may be entered.
(e) Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order.
(f) NASDAQ. The shares of Trenwick Common Stock to be issued in the
Merger and the other transactions contemplated by this Agreement shall have been
approved for trading on NASDAQ, subject to official notice of issuance.
(g) Third-Party Consents. All consents and waivers of third parties
(other than Governmental Entities) to the consummation of the Merger and the
transactions contemplated by this Agreement that are set forth in Section 3.1(d)
of the Chartwell Disclosure Schedule and 3.2(d) of the Trenwick Disclosure
Schedule shall have been obtained, other than those which, if not obtained do
not have, and are not likely to have, individually or in the aggregate, a
Material Adverse Effect on Trenwick or Chartwell.
SECTION 6.2. Conditions to Obligation of Trenwick. The obligation of
Trenwick to effect the Merger is further subject to the satisfaction or waiver
by Trenwick at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Chartwell set forth herein, shall be true and correct as of the date of this
Agreement and as of the Effective Time as though made on and as of the Effective
Time (except to the extent expressly made as of an earlier date, in which case
as of such date), except where the failure of such representations and
warranties to be so true and correct (without giving effect to any limitation as
to "materiality" or "material adverse effect" set forth therein) does not have,
and is not likely to have, individually or in the aggregate, a Material Adverse
Effect on Chartwell, and Trenwick shall have received a certificate signed on
behalf of Chartwell by an executive officer of Chartwell to the effect set forth
in this paragraph.
(b) Performance of Obligations of Chartwell. Chartwell shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Trenwick shall have
received a certificate signed on behalf of Chartwell by an executive officer of
Chartwell to such effect.
(c) Tax Opinion. Trenwick shall have received an opinion of its special
tax counsel, Xxxxx & XxXxxxxx, in form and substance satisfactory to Trenwick,
dated the Effective Time, to the effect that the Merger will be treated as a
reorganization under Section 368(a)(1) of the Code. In rendering its opinion
pursuant to this Section 6.2(c), Xxxxx & XxXxxxxx shall be entitled to rely upon
representations of officers of Chartwell and Trenwick.
(d) No Material Adverse Change. At any time after the date of this
Agreement there shall not have occurred any Material Adverse Change relating to
Chartwell; provided, that this condition shall no longer be applicable following
the Chartwell Stockholder Approval.
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(e) Ratings. None of the claims-paying or financial strength ratings
assigned by A.M. Best & Co. or Standard & Poor's Corporation to Chartwell or its
Subsidiaries, as in effect on the date of this Agreement, shall have been
lowered on or prior to the Effective Time (other than as a result of the
announcement or consummation of the transactions contemplated hereby), and no
such ratings shall have been placed on credit watch with negative implications
(other than as a result of the announcement or consummation of the transactions
contemplated hereby) without being reversed on or prior to the Effective Time.
(f) Reinsurance Agreement. Chartwell shall have obtained the
Reinsurance Agreement which shall be effective at the Effective Time.
(g) Opinion. Trenwick shall have received the opinion of LeBoeuf, Lamb,
Xxxxxx & XxxXxx, L.L.P., in the form set forth as Exhibit 6.2(g) hereto, to the
effect that the Merger will not constitute a "change of control" as defined in
the Contingent Interest Notes Indenture.
SECTION 6.3. Conditions to Obligation of Chartwell. The obligation of
Chartwell to effect the Merger is further subject to the satisfaction or waiver
by Chartwell at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Trenwick set forth herein, shall be true and correct as of the date of this
Agreement and as of the Effective Time as though made on and as of the Effective
Time (except to the extent expressly made as of an earlier date, in which case
as of such date) except where the failure of such representations and warranties
to be so true and correct (without giving effect to any limitation as to
"materiality" or "material adverse effect" set forth therein) does not have, and
is not likely to have, individually or in the aggregate, a Material Adverse
Effect on Trenwick, and Chartwell shall have received a certificate signed on
behalf of Trenwick by an executive officer of Trenwick to the effect set forth
in this paragraph.
(b) Performance of Obligations of Trenwick. Trenwick shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Chartwell shall
have received a certificate signed on behalf of Trenwick by an executive officer
of Trenwick to such effect.
(c) Tax Opinion. Chartwell shall have received an opinion of its
counsel, LeBoeuf, Lamb, Xxxxxx & XxxXxx, L.L.P., in form and substance
satisfactory to Chartwell, dated the Effective Time, to the effect that the
Merger will be treated as a reorganization under Section 368(a)(1) of the Code.
In giving such opinion, LeBoeuf, Lamb, Xxxxxx & XxxXxx, L.L.P. shall be entitled
to rely upon representations of officers of Trenwick and Chartwell.
(d) Material Adverse Change. At any time after the date of this
Agreement, there shall not have occurred any Material Adverse Change relating to
Trenwick.
(e) Ratings. None of the claims-paying or financial strength ratings
assigned by A.M. Best & Co. or Standard & Poor's Corporation to Trenwick or its
Subsidiaries, as in effect on the date of this Agreement, shall have been
lowered on or prior to the Effective Time
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(other than as a result of the announcement or consummation of the transactions
contemplated hereby), and no such ratings shall have been placed on credit watch
with negative implications (other than as a result of the announcement or
consummation of the transactions contemplated hereby) without being reversed on
or prior to the Effective Time.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1. Termination. Anything herein contained or elsewhere to the
contrary notwithstanding, this Agreement may be terminated and the Merger
contemplated herein may be abandoned at any time prior to the Effective Time,
whether before or after the Chartwell Stockholder Approval or the Trenwick
Stockholder Approval:
(a) By the mutual written consent of the Board of Directors of Trenwick
and the Board of Directors of Chartwell;
(b) By the written notice by either of the Board of Directors of
Trenwick or of the Board of Directors of Chartwell:
(i) if the Merger shall not have become effective on or before
December 31, 1999; provided, however, that the right to terminate this Agreement
under this Section 7.1(b)(i) shall not be available to any party whose failure
to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Merger to occur on or prior to such date;
(ii) if Trenwick fails to obtain the required approval of its
stockholders at the Trenwick Stockholders Meeting; or
(iii) if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action (which order, decree, ruling or other
action the parties hereto shall use their commercially reasonable efforts to
lift) in each case permanently restraining, enjoining or otherwise prohibiting
the transactions contemplated by this Agreement and such order, decree, ruling
or other action shall have become final and nonappealable;
(c) By the Board of Directors of Chartwell:
(i) if Trenwick (x) breaches or fails in any material respect
to perform or comply with any of its material covenants and agreements contained
herein or (y) breaches its representations and warranties in any material
respect and such breach would have or would be reasonably likely to have a
Material Adverse Effect on Trenwick and its subsidiaries, in each case such that
the conditions set forth in Section 6.1 and Section 6.3 would not be satisfied;
provided, however, that if any breach is curable by the breaching party through
the exercise of the breaching party's best efforts and for so long as the
breaching party shall be so using its best efforts to cure such breach,
Chartwell may not terminate this Agreement pursuant to this Section 7.1(c)(i);
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(ii) as provided in Section 4.2(b); provided, that Chartwell
shall have given Trenwick forty-eight (48) hours advance notice of any
termination pursuant to this Section 7.1(c)(ii) and that Chartwell shall have
paid Trenwick the Termination Fee required to be paid by Chartwell pursuant to
Section 5.14(b) hereof. Chartwell agrees to notify Trenwick promptly if it is no
longer prepared to accept the Chartwell Superior Proposal referred to in its
notification under Section 4.2(b); or
(iii) if Chartwell fails to obtain the required approval of
its stockholders at the Chartwell Stockholders Meeting and Chartwell shall have
paid Trenwick any Termination Fee required to be paid by Chartwell pursuant to
Section 5.14(b) hereof;
(d) By the Board of Directors of Trenwick:
(i) if Chartwell (x) breaches or fails in any material respect to
perform or comply with any of its material covenants and agreements contained
herein or (y) breaches its representations or warranties in any material respect
and such breach would have or would be reasonably likely to have a Material
Adverse Effect on Chartwell and its subsidiaries, in each case, such that the
condition set forth in Section 6.2(a) or 6.2(b) would not be satisfied;
provided, however, that if such breach is curable by Chartwell through the
exercise of Chartwell's best efforts and for so long as Chartwell shall be so
using its best efforts to cure such breach, Trenwick may not terminate this
agreement pursuant to this Section 7.1(d)(i); or
(ii) if the Board of Directors of Chartwell shall have withdrawn or
modified or changed its approval or recommendation of this Agreement or the
Merger in a manner adverse to Trenwick or shall have approved or recommended a
Chartwell Takeover Proposal, (including, without limitation, a Chartwell
Superior Proposal) or Chartwell shall have entered into an agreement in
principle (or similar agreement) or definitive agreement providing for a
Chartwell Takeover Proposal with a person or entity other than Trenwick or any
of its subsidiaries (or the Board of Directors of Chartwell resolves to do any
of the foregoing); or
(iii) if the stockholders of Chartwell do not approve the Merger at the
Chartwell Stockholders Meeting.
SECTION 7.2. Effect of Termination.
(a) In the event of termination of this Agreement by either Chartwell
or Trenwick as provided in Section 7.1, written notice thereof shall promptly be
given to the other party, and this Agreement shall forthwith become void and
there shall be no liability or obligation on the part of any party hereto (or of
any of its directors, officers, employees, agents, legal and financial advisors
or other representatives) other than the liabilities and obligations provided
for in Sections 3.1(s) and 3.2(p), the last sentence of Section 5.3, Section
5.14, this Section 7.2 and Article VIII. Nothing contained in this section shall
relieve any party from any liability resulting from any willful and material
breach of any of its representations, warranties, covenants or agreements set
forth in this Agreement.
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SECTION 7.3. Amendment. Subject to the applicable provisions of the
DGCL, this Agreement may be amended, modified and supplemented in any and all
respects whether before or after the Trenwick Stockholder Approval or the
Chartwell Stockholder Approval only by written agreement signed by the parties
hereto, pursuant to action taken by respective Boards of Directors with respect
to any of the terms contained herein; provided, however, that after any such
stockholder approval, there shall not be any amendment that by law requires
further approval by the stockholders of Trenwick or Chartwell without the
further approval of such stockholders.
SECTION 7.4. Extension; Waiver. At any time prior to the Effective
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to Section 7.3, waive compliance by the other party with any of the agreements
or conditions of the other party contained in this Agreement. Any agreement on
the part of a party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. The failure of
any party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
SECTION 7.5. Procedure for Termination, Amendment, Extension or Waiver.
A termination of this Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.3 or an extension or waiver pursuant to Section
7.4 shall, in order to be effective, require in the case of Trenwick or
Chartwell, action by its Board of Directors or, with respect to any amendment to
this Agreement, the duly authorized designee of its Board of Directors.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any schedule, instrument
or other document delivered pursuant to this Agreement shall survive the
Effective Time. This Section 8.1 shall not limit any covenant or agreement of
the parties which by its terms contemplates performance after the Effective Time
including but not limited to Sections 5.5 and 5.6.
SECTION 8.2. Definitions. For purposes of this Agreement:
(a) an "affiliate" of or a person "affiliated" with, a specified
person, means a person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with, the
person specified;
(b) "control" (including "controlling," "controlled by" and "under
common control with") means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a person,
whether through the ownership of voting securities, by contract or otherwise.
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(c) "person" means any individual, corporation, estate, partnership,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization or government or an agency or political
subdivision thereof or other entity;
(d) a "subsidiary" means with respect to any person, (i) any
corporation at least a majority of the outstanding voting stock (or equity
interest if no voting interest exists) of which is owned, directly or
indirectly, by such person or by one or more of its subsidiaries, or by such
person and one or more of its subsidiaries, (ii) any general partnership, joint
venture or similar entity, at least a majority of whose outstanding partnership
or similar interests shall at the time be owned by such person, or by one or
more of its subsidiaries, or by such person and one or more of its subsidiaries,
(iii) any limited partnership of which such person or any of its subsidiaries is
a general partner and (iv) any statutory business trust formed under the laws of
the State of Delaware all of the beneficial interests (represented by common
securities) of which shall be owned by such person. For the purposes of this
definition, "voting stock" means shares, interests, participations or other
equivalents in the equity interest (however designated) in such person having
ordinary voting power for the election of a majority of the directors (or the
equivalent) of such person, other than shares, interests, participations or
other equivalents having such power only by reason of the occurrence of a
contingency; and
(e) "knowledge" of any person which is not an individual means the
knowledge of such person's executive officers after reasonable inquiry.
(f) "Environmental Law" means the Comprehensive Environmental Response,
Compensation, and Liability Act, the Water Pollution Control Act, the Safe
Drinking Water Act, the Clean Water Act, the Clean Air Act, the Resource
Conservation and Recovery Act, the Hazardous Materials Transportation Act, the
Solid Waste Disposal Act, the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and analogous state acts, and all
other statutes, rules and regulations relating to pollution or protection of the
environment, each as amended and implemented as of the date of this Agreement.
(g) "Hazardous Material" means (i) hazardous materials, hazardous
substances, extremely hazardous substances or hazardous wastes, as those terms
are defined in applicable Environmental Laws; (ii) petroleum, including, without
limitation, crude oil or any fraction thereof which is liquid at standard
conditions of temperature and pressure (60 degrees Fahrenheit and 14.7 pounds
per square inch absolute); (iii) asbestos in any form or condition; and (iv) any
other material, substance or waste to which liability or standards of conduct
may be imposed under any applicable Environmental Law.
(h) "Material Adverse Change" or "Material Adverse Effect" means, when
used in connection with Trenwick or Chartwell, any change, effect, event,
occurrence or state of facts that is or will be materially adverse to the
business, results of operations or financial condition of such party and its
subsidiaries taken as a whole other than any change, effect, event, occurrence
or state of facts relating to (i) the United States or global economy or
securities markets in general, (ii) this Agreement or the transactions
contemplated hereby (including with respect to Chartwell, the items set forth in
Section 8.2(h) of the Chartwell Disclosure Schedule
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and, with respect to Trenwick, the items set forth in Section 8.2(h) of the
Trenwick Disclosure Schedule), or the announcement thereof, (iii) any segment of
the property and casualty insurance or reinsurance industry in which such person
or any of its subsidiaries participates in general, and not specifically
relating to Trenwick or Chartwell or their respective subsidiaries, (iv) any
decrease in the value of portfolio investments resulting from an increase in
prevailing market interest rates or (v) any losses under insurance, reinsurance
or retrocessional agreements (other than where a subsidiary of Chartwell or
Trenwick is the cedent) in respect of any event that is designated to be a
"catastrophe" by the Property Claims Services Division of the American Insurance
Services Group, Inc. after the date hereof.
SECTION 8.3. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, sent by facsimile (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Trenwick, to
Xxxx X. Xxxxx
Vice President and Chief Financial Officer
Trenwick Group Inc.
Xxx Xxxxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
with a copy to:
Xxxxx & XxXxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Fax: (000) 000-0000
(b) if to Chartwell, to
President
Chartwell Re Corporation
Four Stamford Plaza
000 Xxx Xxxxxx
Xxxxxxxx XX 00000
Fax: (000) 000-0000
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with a copy to:
LeBoeuf, Lamb, Xxxxxx & XxxXxx, L.L.P.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxx
Fax: (000) 000-0000
SECTION 8.4. Interpretation. When a reference is made in this Agreement
to an Article, Section, Exhibit or Schedule, such reference shall be to an
Article or Section of, or an Exhibit or Schedule to, this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available. The
words "hereof", "herein" and "hereunder" and words or similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. All terms defined in this Agreement
shall have the defined meanings when used in any certificate or other document
made or delivered pursuant hereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by wavier or consent and (in the case of statutes) by succession of
comparable successor statutes. References to a person are also to its permitted
successors and assigns.
SECTION 8.5. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be an original and all of which shall be
considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other party.
SECTION 8.6. Entire Agreement; No Other Representations; No Third-Party
Beneficiaries. This Agreement (including any exhibits and schedules hereto), the
Stock Option Agreement, and the Confidentiality Agreements constitute the entire
agreement, and supersede all prior agreements, understandings, representations
and warranties, both written and oral, among the parties with respect to the
subject matter of this Agreement. Trenwick acknowledges that neither Chartwell
nor any affiliate or officer, director, employee, representative or advisor of
any of them makes or has made any representation or warranty, express or
implied, to Trenwick except as specifically made in this Agreement or in any
certificate or other document delivered pursuant hereto. This Agreement is not
intended to confer upon any person other than the parties hereto, any rights or
remedies except as set forth in Section 5.6(c).
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SECTION 8.7. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to conflicts of laws principles thereof.
SECTION 8.8. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by either of the parties hereto without
the prior written consent of the other party. Any assignment in violation of the
preceding sentence shall be void. Subject to the preceding two sentences, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
SECTION 8.9. Enforcement and Consent to Jurisdiction. The parties agree
that irreparable damage would occur and that the parties would not have any
adequate remedy at law in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement in any court of
the United States located in the State of Delaware or in Delaware state court
(any such federal or state court, a "Delaware Court"), in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of the
parties hereto (a) consents to submit itself to the personal jurisdiction of any
Delaware Court in the event any dispute arises out of this Agreement or any of
the transactions contemplated by this Agreement and (b) agrees that it will not
attempt to deny or defeat such personal jurisdiction or venue by motion or other
request for leave from any such Delaware Court, and (c) agrees that it will not
bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than any Delaware Court.
SECTION 8.10. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory or
public policy, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. Upon any determination that any
term, provision, covenant or restriction is invalid, void, unenforceable or
against its regulatory or public policy, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in an acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of the
date first written above.
TRENWICK GROUP INC.
By: /s/ Xxxxx X. Xxxxxxx, Xx.
Name: Xxxxx X. Xxxxxxx, Xx.
Title: Chairman, President and
Chief Executive Officer
CHARTWELL RE CORPORATION
By: /s/ Xxxxxxx X. Xxxx
Name: Xxxxxxx X. Xxxx
Title: Chairman and Chief
Executive Officer
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EXHIBIT 6.2(g)
_____________, 1999
Trenwick Group Inc.
Xxx Xxxxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Re: Chartwell
Dear Sirs:
We have acted as special counsel to Chartwell Re Corporation
("Chartwell") in connection with the execution and delivery by Chartwell of the
Agreement and Plan of Merger, dated as of June 21, 1999 (the "Merger
Agreement"), between Chartwell and Trenwick Group Inc. ("Trenwick"), pursuant to
which Chartwell shall be merged with and into Trenwick on the terms and subject
to the conditions set forth in the Merger Agreement (the "Merger"). This opinion
is being rendered to you pursuant to Section 6.2(g) of the Merger Agreement.
For purpose of rendering this opinion we have examined and relied
upon the following: (i) the Merger Agreement; and (ii) the Indenture, dated as
of December 1, 1995, between Chartwell, as the successor to Piedmont Management
Company Inc. and Fleet National Bank of Connecticut, as Trustee, for the
Contingent Interest Notes due June 30, 2006, and the First Supplemental
Indenture thereto, dated as of December 13, 1995, among Piedmont Management
Company Inc., Chartwell and Fleet National Bank of Connecticut, as Trustee (as
so supplemented, the "Indenture"). In addition, as special counsel for
Chartwell, we have examined originals (or copies certified or otherwise
identified to our satisfaction) of such instruments, certificates and documents
and have reviewed such questions of law as we have deemed necessary or
appropriate for the purposes of this opinion. In such examination we have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals and the conformity to authentic original documents
of all documents submitted to us as copies. As to any facts material to our
opinion, we have, when relevant facts were not independently established by us,
relied upon the aforesaid instruments, certificates and documents.
In addition, in rendering this opinion, we have assumed that:
(i) as a result of the Merger, no "person" or "group" (within the
meaning of Rule 13d-5 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and Sections 13(d) and 14(d) of the Exchange Act) will become
the direct or indirect "beneficial
74
Trenwick Group Inc.
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Page 2
owner" (as defined in Rule 13d-3 under the Exchange Act), of greater than 50% of
the total voting power (as defined in the definition of "Change of Control" set
forth in Section 1.1. of the Indenture) entitled to vote in the election of
directors of Trenwick; and
(ii) prior to the time that the Common Stock, par value $.01 per
share, of Chartwell ceases to be listed on the New York Stock Exchange, Trenwick
will have executed and delivered to the Trustee a supplemental indenture and
succeeded to the rights, powers and obligations of Chartwell under the Indenture
pursuant to and in accordance with Article 5 thereof.
Based on the foregoing, and subject to the qualifications stated
herein, we are of the opinion that the consummation of the Merger will not
constitute a "Change of Control" as defined in Section 1.1 of the Indenture.
We express no opinion with respect to any laws other than the laws
of the State of New York. This opinion is delivered solely to you pursuant to
the Merger Agreement, and it may not be delivered to or relied upon in any
manner by any other person or entity, or in connection with any other
transaction or matter, without our express prior written consent.
Very truly yours,
