-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Cvpr1cuGOFlTKKkJwN1JV4ZBkpywvDZkZoZ0MHTJHf39dMsBSheEqjdFjrtrCM9I xC9udKduuNXkuRFTgtxKmw== 0000893220-96-000433.txt : 19960312 0000893220-96-000433.hdr.sgml : 19960312 ACCESSION NUMBER: 0000893220-96-000433 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19960311 SROS: NONE GROUP MEMBERS: ATLANTIC EMPLOYERS INSURANCE CO. GROUP MEMBERS: CIGNA CORP SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: WARNER INSURANCE SERVICES INC CENTRAL INDEX KEY: 0000737300 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 132698053 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-42937 FILM NUMBER: 96533681 BUSINESS ADDRESS: STREET 1: 17 01 POLLITT DR CITY: FAIR LAWN STATE: NJ ZIP: 07410 BUSINESS PHONE: 201-794-4817 MAIL ADDRESS: STREET 1: 17 01 POLLIT DRIVE CITY: FAIR LAWN STATE: NJ ZIP: 07410 FORMER COMPANY: FORMER CONFORMED NAME: WARNER COMPUTER SYSTEMS INC DATE OF NAME CHANGE: 19920407 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CIGNA CORP CENTRAL INDEX KEY: 0000701221 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 061059331 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: ONE LIBERTY PL 1650 MARKET ST STREET 2: P O BOX 7716 CITY: PHILADELPHIA STATE: PA ZIP: 19192-1550 BUSINESS PHONE: 2157611000 SC 13D 1 SCHEDULE 13D FOR WARNER INSURANCE SERVICES, INC. 1 OMB APPROVAL ------------------------- OMB Number. 3235-0145 Expires: August 31, 1991 Estimated average burden hours per response..14 gn UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )* Warner Insurance Services, Inc. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, par value $.01 per share - -------------------------------------------------------------------------------- (Title of Class of Securities) 934467 10 1 - -------------------------------------------------------------------------------- (CUSIP Number) Kathryn Pietrowiak, Esquire, CIGNA Corporation, S-215, 900 Cottage Grove Road, Hartford, CT, 06152-2215, Tel: 203-726-8908, with a copy to Steven N. Haas, Esquire, Cozen and O'Connor, 1900 Market Street, Philadelphia, PA 19103, Tel: 215-665-4171 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) March 1, 1996 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box / /. Check the following box if a fee is being paid with the statement /X/. (A fee is not required only if the reporting person: (1) has a previous statement on file reporting beneficial ownership of more than five percent of the class of securities described in Item 1; and (2) has filed no amendment subsequent thereto reporting beneficial ownership of five percent or less of such class.) (See Rule 13d-7.) Note: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). 2 SCHEDULE 13D CUSIP NO. 934467 10 1 PAGE 2 OF 15 PAGES - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON CIGNA Corporation Tax I.D. #: 06-1059331 - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / / (b) /X/ - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* Other - 00 - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) / / - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES -0- BENEFICIALLY ----------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH REPORTING 3,657,797 PERSON ----------------------------------------------------------------- WITH 9 SOLE DISPOSITIVE POWER -0- ----------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 3,657,797 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,657,797 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / / - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 28.14% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* HC - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! 3 SCHEDULE 13D CUSIP NO. 934467 10 1 PAGE 3 OF 15 PAGES - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Atlantic Employers Insurance Company Tax I.D. #23-2173820 - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / / (b) /X/ - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* Other - 00 - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) / / - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION NEW JERSEY - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES -0- BENEFICIALLY ----------------------------------------------------------------- OWNED BY 8 SHARED VOTING POWER EACH REPORTING 3,657,797 PERSON ----------------------------------------------------------------- WITH 9 SOLE DISPOSITIVE POWER -0- ----------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 3,657,797 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,657,797 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / / - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 28.14% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IC - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! 4 CUSIP NO. 934467 10 1 Schedule 13D Page 4 of 15 Pages Item 1 Security and Issuer This statement relates to shares of Common Stock, par value $.01 per share (the "Shares"), of Warner Insurance Services, Inc. (the "Issuer"). The principal executive offices of the Issuer are located at 17-01 Pollitt Drive, Fair Lawn, NJ 07410. Item 2 Identity and Background (a)-(c) This statement is being filed by Atlantic Employers Insurance Company, a New Jersey corporation ("Atlantic"), and CIGNA Corporation, a Delaware corporation ("CIGNA"). CIGNA is deemed to beneficially own the Shares which are the subject of this statement because it is the ultimate parent corporation of Atlantic. The principal business address of Atlantic is Two Liberty Place, 1601 Chestnut Street, Philadelphia, PA 19192. The principal business address of CIGNA is One Liberty Place, 1650 Market Street, Philadelphia, PA 19192. The present principal business of Atlantic is to transact property and casualty insurance. The present principal business of CIGNA is to act as a holding company for various subsidiaries which provide insurance, healthcare and financial services. The directors and executive officers of Atlantic are as follows:
Name Position ---- -------- Barry L. Adams Vice President, Assistant Treasurer Harold W. Albert Director Paul Bergsteinsson Vice President, Assistant Treasurer Marcy F. Blender Vice President, Treasurer Robert W. Burgess Director Michael J. Daly Vice President Darrell L. DeMoss Vice President Robert H. Dowe Vice President
5 CUSIP NO. 934467 10 1 Schedule 13D Page 5 of 15 Pages
Name Position ---- -------- Richard C. Franklin President, Chief Underwriting Officer, Director Michael E. Grady Vice President Sharon I. Helldorfer Vice President Richard A. Hinckely, Jr. Vice President Robert P. Irvan Director, Vice President, Chief Financial Officer, Chief Actuary Gerald A. Isom Chairman of the Board, Director Dennis P. Kane Director, Vice President Mac D. Livingston Vice President John A. Murphy, Jr. Director, Vice President, Chief Counsel William Palgutt Director Jane E. Pell Vice President Geraldine F. Prusko Director, Vice President Arthur C. Reeds, III Director James A. Sears Vice President, Controller Joseph Stagliano Vice President, Assistant Controller Richard W. Wratten Director
The principal business address of Messrs. Albert, Burgess and Reeds is c/o CIGNA Corporation, 900 Cottage Grove Road, Hartford, CT 06152. The principal business address of each of the other above-listed persons is c/o Atlantic, Two Liberty Place, 1601 Chestnut Street, Philadelphia, PA 19192. The present principal occupation of each of the above-named individuals is fulfilling his or her duties in a 6 CUSIP NO. 934467 10 1 Schedule 13D Page 6 of 15 Pages management position on behalf of CIGNA or one or more of its wholly-owned affiliates. The directors and executive officers of CIGNA are as follows:
Name Position ---- -------- Robert P. Bauman Director Robert H. Campbell Director Alfred C. DeCrane Director James F. English, Jr. Director Bernard M. Fox Director H. Edward Hanway President, CIGNA Healthcare Gerald A. Isom President, CIGNA Property & Casualty Frank S. Jones Director Thomas C. Jones President, CIGNA Individual Insurance Gerald D. Laubach, Ph.D. Director John K. Leonard President, CIGNA Group Insurance-Life Accident Disability Donald M. Levinson Executive Vice President, Human Resources Marilyn W. Lewis Director Francine M. Newman President, CIGNA Reinsurance-Life Accident Health Byron D. Oliver President, CIGNA Retirement & Investment Services Paul F. Oreffice Director
7 CUSIP NO. 934467 10 1 Schedule 13D Page 7 of 15 Pages
Name Position ---- -------- Arthur C. Reeds President, CIGNA Investment Management Kingsley Schubert President, CIGNA International Charles R. Shoemate Director James G. Stewart Executive Vice President, Chief Financial Officer Louis W. Sullivan, M.D. Director Wilson H. Taylor Chairman of the Board, Chief Executive Officer, Director Thomas J. Wagner Executive Vice President, General Counsel Carol Cox Wait Director Ezra K. Zilkha Director
The principal business address of Mr. Oliver is CIGNA Corporation, Metro Center, 350 Church Street, P.O. Box 2975, Hartford, CT 06104-3120. The principal business address of Messrs. Hanway, T. Jones, and Reeds and Ms. Newman is CIGNA Corporation, 900 Cottage Grove Road, Hartford, CT 06152. The principal business address of Messrs. Isom, Leonard and Schubert is c/o CIGNA Corporation, Two Liberty Place, 1601 Chestnut Street, Philadelphia, PA 19192. The principal business address of each of the other above-listed persons is c/o CIGNA Corporation, One Liberty Place, 1650 Market Street, Philadelphia, PA 19192. The present principal occupation of each of Messrs. Hanway, Isom, T. Jones, Leonard, Levinson, Oliver, Reeds, Schubert, Stewart, Taylor, Wagner and Ms. Newman is fulfilling his or her respective duties as an officer and/or director of CIGNA. Mr. Bauman presently is the Non-Executive Chairman of British Aerospace plc. Mr. Campbell presently is the Chairman, President and Chief Executive Officer of Sun Company, Inc. 8 CUSIP NO. 934467 10 1 Schedule 13D Page 8 of 15 Pages Mr. DeCrane presently is the Chairman of the Board and Chief Executive Officer of Texaco, Inc. Mr. English presently is President Emeritus, Trinity College. Mr. Fox presently is the President and Chief Executive Officer of Northeast Utilities. Mr. F. Jones presently is Ford Professor Emeritus of Urban Affairs at the Massachusetts Institute of Technology. Dr. Laubach is a retired President of Pfizer, Inc. Ms. Lewis presently is the Chairman of American Water Works Company. Mr. Oreffice is a retired Chairman of the Board of The Dow Chemical Company. Mr. Shoemate presently is the Chairman, President and Chief Executive Officer of CPC International, Inc. Dr. Sullivan presently is the President of Morehouse School of Medicine. Ms. Cox Wait presently is the President of the Committee for a Responsible Federal Budget. Mr. Zilkha presently is President of Zilkha & Sons, Inc. (d) During the last five years, none of Atlantic, CIGNA or any of their respective directors or executive officers referred to above (collectively the "Management") has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) During the last five years, none of Atlantic, CIGNA or any of the Management has been a party to any civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which it or he/she was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violations with respect to such laws. 9 CUSIP NO. 934467 10 1 Schedule 13D Page 9 of 15 Pages (f) All of the natural persons listed above are citizens of the United States. Item 3 Source and Amount of Funds or Other Consideration Atlantic acquired beneficial ownership of 3,657,797 Shares, including 1,181,250 Shares issuable upon the exercise of a Common Stock Purchase Warrant exercisable within 60 days (the "Warrant), as a result of the restructuring of the Issuer (the "Transaction") pursuant to the terms of a Restructuring Agreement dated March 1, 1996 among the Issuer, Atlantic, Pacific Employers Insurance Company ("Pacific"), Electric Insurance Company ("Electric"), The Robert Plan Corporation ("RPC"), Material Damage Adjustment Corporation ("MDAC"), Lion National Insurance Company ("Lion"), and National Consumer Insurance Company ("NCIC") (the "Restructuring Agreement"). A copy of the Restructuring Agreement and Warrant are attached hereto as Exhibits 1 and 2, respectively. Pacific also is an indirect wholly-owned subsidiary of CIGNA, but is not deemed a beneficial owner of Shares pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Act"). The Transaction was effectuated to improve the Issuer's financial position and to permit the Issuer to focus on the business of its wholly-owned subsidiary, COVER-ALL Systems, Inc. ("COVER-ALL"), which develops software products for the property and casualty insurance industry. As reported in the Issuer's Forms 10-Q for the Quarters June 30 and September 30, 1995, the Issuer encountered financial difficulties resulting from, among other things: (i) litigation between the Issuer and MDAC; (ii) litigation between the Issuer and NCIC, Lion and RPC; (iii) litigation between the Issuer and a former officer of the Issuer, who also was an officer and director of COVER-ALL; (iv) operational losses suffered by its insurance services group ("ISG"); and (v) operational losses suffered by COVER-ALL. Prior to the Transaction, the Issuer, through its ISG, provided services to the automobile insurance industry including, among other services, underwriting, data processing and claims and policy administration. The Issuer provided those services to Atlantic and Pacific in support of their respective automobile insurance businesses in New Jersey in accordance with 10 CUSIP NO. 934467 10 1 Schedule 13D Page 10 of 15 Pages the terms of a Service Agreement dated April 25, 1991 (the "Service Agreement"). Pursuant to the Service Agreement, the Issuer was obligated to provide to Atlantic and Pacific, among other services, claims and policy administration, and was subject to certain loss ratio incentives and penalties. As of the closing of the Transaction, the Issuer was, or was estimated to become, indebted to Atlantic and Pacific for amounts in excess of $15,000,000 for the value of pre-paid services and contingent loss ratio fees over the remainder of the term of the Service Agreement. Through the Transaction, the Issuer was restructured principally as follows: (i) the Issuer sold the assets related to the ISG to MDA Services, Inc.; (ii) Atlantic and the other ISG customers, including Pacific, terminated their respective service agreements with the Issuer and released the Issuer from liability thereunder; and (iii) the Issuer settled its litigation with MDAC, RPC, Lion and NCIC. Specifically, under the Restructuring Agreement, Atlantic and Pacific terminated the Service Agreement and released the Issuer from future liability thereunder, in consideration for which the Issuer issued to Atlantic 2,476,547 Shares (the "Settlement Shares"), the Warrant to purchase an additional 1,181,250 Shares (the "Warrant Shares"), and $675,000 in cash. In addition, Atlantic was granted the right (together with the other parties to the Restructuring Agreement to whom Shares also were issued) to designate one member to the Issuer's Board of Directors. The Settlement Shares and the Warrant Shares carry certain registration rights as more specifically set forth in the Restructuring Agreement. Subject to the terms of the Warrant, Atlantic is entitled to purchase the Warrant Shares at any time on or before February 28, 2001 for an exercise price of $2.00 per Warrant Share, subject to adjustment upon the occurrence of certain events to prevent dilution. Other than the Settlement Shares and the Warrant, none of Atlantic, CIGNA or any of the Management is the beneficial owner of any Shares. Item 4 Purpose of Transaction The information set forth under Item 3 is incorporated herein by reference. 11 CUSIP NO. 934467 10 1 Schedule 13D Page 11 of 15 Pages Pursuant to the Restructuring Agreement, Atlantic has agreed that, for the period ending February 28, 1998, it will not, without the Issuer's consent, initiate or otherwise participate in any activity in a manner the intent of which would require it to file with the Securities and Exchange Commission (the "Commission") a Schedule 13D, either individually or as a member of a group, to report the occurrence of any of the events described in Item 4 of Schedule 13D; provided, that Atlantic is not prevented from (i) acquiring, or selling, securities of the Issuer in each case in the ordinary course, which would require Atlantic to amend this statement solely due to an increase or decrease in Atlantic's beneficial ownership of the Issuer's securities; (ii) voting its Shares on any matter as it determines in its sole discretion; or (iii) tendering its Shares in connection with any tender, exchange or similar offer made by a third party. (a) The Warrant evidences Atlantic's right to purchase an additional 1,181,250 Shares. Pursuant to the Restructuring Agreement, the Issuer has the option to purchase 50% of the Settlement Shares at the price specified in the Restructuring Agreement and to purchase 50% of the Warrant at a cash price of $1.00 per Warrant Share represented thereby, for a period of six months, which expires on August 31, 1996. Except as described herein, none of Atlantic, CIGNA or any of the Management presently has plans or proposals to either acquire additional Shares or other securities of the Issuer or to dispose of any Shares. Atlantic will evaluate its investment in the Shares on a continuing basis, and depending upon certain factors, including general economic and financial conditions, may in the future decide to dispose of all or a portion of its holdings of the Shares. For internal management and asset control purposes of CIGNA, the Shares held by Atlantic may be transferred from Atlantic to another subsidiary or indirect subsidiary of CIGNA. In addition, Atlantic or other affiliates of CIGNA may purchase additional Shares. (b) None of Atlantic, CIGNA or any of the Management presently has any plans or proposals which would result in an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Issuer. 12 CUSIP NO. 934467 10 1 Schedule 13D Page 12 of 15 Pages (c) None of Atlantic, CIGNA or any of the Management presently has any plans which would result in a sale or transfer of a material amount of assets of the Issuer. (d) Other than having the right to designate one member to the Issuer's Board of Directors pursuant to Section 7.1 of the Restructuring Agreement and as described in Item 3, none of Atlantic, CIGNA or any of the Management presently intends to effectuate a change in the composition of the Board of Directors or management of the Issuer. (e) None of Atlantic, CIGNA or any of the Management presently has any plans or proposals which would result in any material change in the present capitalization or dividend policy of the Issuer. (f) None of Atlantic, CIGNA or any of the Management presently intends to effectuate changes in the Issuer's business or corporate structure. (g) None of Atlantic, CIGNA or any of the Management presently has any plans or proposals which would result in any changes in the Issuer's Certificate of Incorporation or By-laws or other actions which may impede the acquisition of control of the Issuer by any person. (h) On or about March 4, 1996, the Issuer was de-listed from the New York Stock Exchange (the "NYSE") for failing to meet the NYSE's criteria for net tangible assets and three year average net income. None of Atlantic, CIGNA or any of the Management participated in, planned or proposed the de-listing of the Shares from the NYSE. None of Atlantic, CIGNA or any of the Management presently has any plans or proposals which would result in causing a class of securities of the Issuer to be de-listed from any other national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association. (i) None of Atlantic, CIGNA or any of the Management presently has any plans or proposals which would result in a class of equity securities of the Issuer becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Act. 13 CUSIP NO. 934467 10 1 Schedule 13D Page 13 of 15 Pages (j) Except as set forth above, none of Atlantic, CIGNA or any of the Management presently has any other plans or proposals which would result in any action similar to those enumerated in (a) - (i) above. Item 5 Interest in Securities of the Issuer (a) As a result of the Transaction and as of the date hereof, Atlantic is deemed to beneficially own 3,657,797 Shares (including the 1,181,250 Warrant Shares). Pursuant to the Transaction, as of March 1, 1996, there were 12,998,355 Shares outstanding. Thus, Atlantic is deemed to beneficially own 28.14% of the outstanding Shares (including the Warrant Shares). As a result of the Transaction and as of the date hereof, CIGNA, solely by reason of its capacity as the ultimate corporate parent of Atlantic, is deemed to beneficially own 3,657,797 Shares (including the 1,181,250 Warrant Shares). Pursuant to the Transaction, as of March 1, 1996, there are 12,998,355 Shares outstanding. Thus, CIGNA, solely by reason of its capacity as the ultimate corporate parent of Atlantic, is deemed to beneficially own 28.14% of the outstanding Shares (including the 1,181,250 Warrant Shares). This ownership interest is the same as, and not in addition to, the ownership interest of Atlantic described above. (b) Atlantic, has the power to vote or to direct the vote of, dispose or direct the disposition of, all of the Shares it beneficially owns (including the 1,181,250 Warrant Shares). CIGNA, through its indirect ownership of Atlantic, may be deemed to have shared power to vote or to direct the vote of, and dispose or direct the disposition of, all of the Shares beneficially owned by Atlantic (including the 1,181,250 Warrant Shares). (c)-(e) Not Applicable. Item 6 Contracts, Arrangements, Understandings or Relationships With Respect to Securities of Issuer The information set forth under Item 3 is incorporated herein by reference. Pursuant to the Restructuring Agreement, Atlantic has granted the Issuer a right of first refusal in the 14 CUSIP NO. 934467 10 1 Schedule 13D Page 14 of 15 Pages event that Atlantic receives a bona fide offer to purchase 35% or more of the Settlement Shares. The right of first refusal will require the Issuer to meet the same terms and conditions, including purchase price, as contained in the bona fide offer. In addition, the Issuer has the option to purchase 50% of the Settlement Shares issued to Atlantic at the price specified in the Restructuring Agreement and to purchase 50% of the Warrant at a cash price of $1.00 per Warrant Share represented thereby, for a period of six months, which expires on August 31, 1996. Item 7 Materials to be Filed as Exhibits Exhibit 1 - The Restructuring Agreement dated March 1, 1996 among Warner Insurance Services, Inc., Atlantic Employers Insurance Company, Pacific Employers Insurance Company, Electric Insurance Company, The Robert Plan Corporation, Material Damage Adjustment Corporation, Lion National Insurance Company, and National Consumer Insurance Company Exhibit 2 - The Warrant to Purchase Common Stock of Warner Insurance Services, Inc. Exhibit 3 - The Joint Filing Agreement between CIGNA Corporation and Atlantic Employers Insurance Company dated March 11, 1996. 15 CUSIP NO. 934467 10 1 Schedule 13D Page 15 of 15 Pages SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information with respect to me set forth in this statement is true, complete and correct. CIGNA CORPORATION By: /s/ Carol J. Ward -------------------------------------- Name: Carol J. Ward Title Corporate Secretary ATLANTIC EMPLOYERS INSURANCE COMPANY By: /s/ Richard A. Hinckley, Jr. -------------------------------------- Name: Richard A. Hinckley, Jr. Title Vice President Dated: March 11, 1996 EX-1 2 RESTRUCTURING AGREEMENT DATED MARCH 1, 1996 1 RESTRUCTURING AGREEMENT RESTRUCTURING AGREEMENT dated as of the ____ day of March, 1996 by and among WARNER INSURANCE SERVICES, INC., a Delaware corporation ("Warner"), ATLANTIC EMPLOYERS INSURANCE COMPANY ("AEIC"), a New Jersey corporation, PACIFIC EMPLOYERS INSURANCE COMPANY ("PEIC"), a California corporation, ELECTRIC INSURANCE COMPANY ("Electric"), a Massachusetts corporation, (each of AEIC, PEIC and Electric are sometimes individually herein referred to as a "Customer" or collectively as the "Customers"), THE ROBERT PLAN CORPORATION ("RPC"), a Delaware corporation, MATERIAL DAMAGE ADJUSTMENT CORPORATION ("MDA"), a New York corporation, LION INSURANCE COMPANY ("LIC"), a New Jersey corporation and NATIONAL CONSUMER INSURANCE COMPANY ("NCIC"), a New Jersey corporation (all parties hereto, other than Warner, are sometimes herein individually called a "Releasee" or collectively the "Releasees") W I T N E S S E T H: WHEREAS, Warner is a party to certain insurance services contracts with certain of the Customers as listed on SCHEDULE 1 hereto (collectively, the "Services Contracts") and Warner and the Customers wish to restructure their arrangements under the Services Contracts on the terms herein set forth; and WHEREAS, Warner, RPC, MDA, LIC and NCIC are parties to the lawsuits described on SCHEDULE 2 annexed hereto (the "RPC Lawsuits") and wish to settle the RPC Lawsuits on the terms herein set forth; and WHEREAS, Warner has performed insurance services pursuant to the Services Contracts, and as part of the transactions contemplated hereby and to induce the Customers to release Warner from its obligations under the Services Contracts, Warner is entering into an Asset Purchase Agreement (the "Asset Purchase Agreement") of even date herewith with MDA Services, Inc., a New Jersey corporation ("Newco") pursuant to which Warner will transfer to Newco the assets of Warner relating to the insurance services business and Newco will enter into new insurance services contracts with the Customers on revised terms and the Customers will release Warner from its obligations under the Services Contracts as herein set forth; and WHEREAS, to further induce the Customers to release Warner from its obligations under the Services Contracts, to induce the Customers to enter into new contracts with Newco and to settle the RPC Lawsuits, Warner will (i) issue an aggregate of 3,256,201 shares of common stock, par value $.01 per share, of Warner ("Common Stock") (the "Settlement Shares") to the 2 Releasees which shall represent 27.55% of the outstanding shares of Common Stock of Warner after the issuance thereof, (ii) issue to the Releasees five-year warrants (the "Warrants") to acquire an aggregate of 1,553,125 shares of Common Stock at $2.00 per share (the Warrants being in the form annexed hereto as Exhibit A), and (iii) assign to the Releasees the cash collateral (the "Cash Collateral") described on SCHEDULE 3 annexed hereto securing the Letter of Credit also described on SCHEDULE 3 annexed hereto. NOW, THEREFORE, in consideration of the mutual premises and the representations, warranties and covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: 1. Description of Transaction. 1.1 Issuance of Settlement Shares and Warrants. On the Closing Date, Warner shall issue and deliver certificates representing all of the Settlement Shares and the Warrants to the Releasees in the amounts indicated next to the name of each Releasee as set forth on SCHEDULE 4 annexed hereto. 1.2 Cash Collateral. Upon the expiration of the Letter of Credit described in SCHEDULE 3 annexed hereto and the termination by Chase Manhattan Bank, N.A. of all of its right, title and interest in the Cash Collateral also described in said SCHEDULE 3, Warner shall deposit $887,500 of the Cash Collateral into an escrow account with Reid & Priest LLP, as escrow agent. On the Closing Date, the Cash Collateral shall be released from escrow to the Releasees listed on SCHEDULE 5 annexed hereto, in the percentage amounts indicated next to the name of each Releasee on said SCHEDULE 5. 2. Services Contract Releases. On the Closing Date, in consideration of the issuance by Warner of the Settlement Shares, the Warrants and the payment of the Cash Collateral pursuant to Section 1 hereof, each Customer shall separately release Warner from its obligations under the Services Contract with such Customer (collectively, the "Services Contract Releases"), such release to be substantially in the form annexed hereto as Exhibit B, and each such Customer shall enter into a new services contract (the "Revised Newco Service Agreements") with Newco. 3. Robert Plan Corporation Lawsuits. On the Closing Date, the RPC Lawsuits shall be settled and dismissed with prejudice, such settlement and dismissal to be pursuant to the Stipulation in the form annexed hereto as Exhibit C (the "Stipulation"), the Mutual General Release (the "Mutual General -2- 3 Release") in the form annexed hereto as Exhibit D and the CWP Assignment Agreement (the "CWP Assignment") in the form annexed hereto as Exhibit E. 4. Closing Date. The closing of the transactions herein contemplated (the "Closing") will take place on March ___, 1996 at 10:00 A.M. at the offices of Reid & Priest LLP, 40 West 57th Street, New York, New York 10019 or such other date and time as the parties may mutually agree upon (the "Closing Date"). 5. Representations and Warranties of Warner. In order to induce each Releasee to enter into this Agreement and to consummate the transactions contemplated hereunder, Warner hereby represents and warrants to each Releasee as follows: 5.1 Corporate Existence and Qualification. Warner is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as now being conducted and to own, lease and operate its properties as and in the places where such business is now conducted and such properties are now owned, leased or operated. Warner has all requisite corporate power to execute and deliver this Agreement, the Asset Purchase Agreement, the Services Contract Releases, the Warrants, the Stipulation, the Mutual General Release and the CWP Assignment (the Asset Purchase Agreement, the Services Contract Releases, the Warrants, the Stipulation, the Mutual General Release and the CWP Assignment are sometimes collectively called the "Related Agreements"), and to perform its obligations under each such agreement. 5.2 Capitalization. The authorized capital stock of Warner consists of 20,000,000 shares of Common Stock, $.01 par value. As of the date hereof, 8,560,904 shares of Common Stock are issued and outstanding, and such shares have been duly authorized, and are validly issued, fully paid and non-assessable. On the date hereof and with the contemporaneous public announcement of the transactions contemplated by this Agreement and the Related Agreements, the shares of Common Stock of Warner shall be suspended from trading on the New York Stock Exchange ("NYSE") and Warner has been advised by the NYSE that its shares will subsequently be delisted by and from the NYSE. Except as set forth on SCHEDULE 6 hereto, there are no other shares of capital stock or other equity securities of Warner issued or issuable. All Settlement Shares to be issued by Warner hereunder shall, upon issuance thereof, be duly authorized, validly issued, fully paid and non-assessable shares of Common Stock of Warner. The Warrants have been duly authorized for issuance and the shares of Common Stock to be issued upon the exercise thereof in accordance with the terms thereof will be -3- 4 duly authorized, validly issued, fully paid and non-assessable shares of Common Stock of Warner. 5.3 Authorization of Agreements; Validity. The execution and delivery by Warner of this Agreement, and the Related Agreements and the consummation by Warner of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on behalf of Warner. Except as set forth on SCHEDULE 7 hereto, this Agreement has been duly executed and delivered by Warner, and this Agreement constitutes, and, when executed, the Related Agreements will constitute, the legal, valid and binding obligations of Warner, enforceable against Warner in accordance with their respective terms, except to the extent that such validity, binding effect and enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium and other laws affecting creditors' rights generally from time to time in effect and by general equitable principles. 5.4 Effect of Agreements. Except as set forth on SCHEDULE 8 hereto, neither the execution and delivery of this Agreement, or any of the Related Agreements by Warner, nor the consummation of the transactions contemplated hereby and thereby nor compliance by Warner with the provisions of this Agreement or any of the Related Agreements by Warner (i) violates or will violate, conflicts or will conflict with, or results or will result in a breach of any provision, term or condition of, or constitutes or will constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of a Lien upon any of the properties or assets of Warner or any subsidiary of Warner under the terms, conditions or provisions of (x) the Certificate of Incorporation, as amended, the By-Laws, as amended, of Warner, or of any of its subsidiaries, or (y) any other agreement or instrument to which Warner or any subsidiary of Warner is a party, or by which any of them is bound, or any of their respective properties or assets, may be subject, or (ii) violates any judgment, ruling, order, writ, injunction, decree, law, statute, ordinance, rule or regulation, domestic or foreign (collectively, "Law"), applicable to Warner or any other subsidiary of Warner or any of their respective properties or assets, except in the case of each of clauses (i) and (ii) above, for such violations, conflicts, breaches, defaults, terminations, accelerations or creations of Liens, which, in the aggregate, would not have any material adverse effect on the condition (financial or otherwise) or the operations of Warner and its subsidiaries taken as a whole, the business or on the ability of the parties to consummate the transactions contemplated hereby. -4- 5 5.5 Private Sale. Warner has not, either directly or through any agent, offered the Settlement Shares or the Warrants to or solicited any offer to acquire the Settlement Shares or the Warrants from, or otherwise approached, negotiated or communicated in respect of the Settlement Shares or the Warrants with, any person so as to require that the Settlement Shares or the Warrants be registered pursuant to the provisions of Section 5 of the Securities Act of 1933, as amended (the "Securities Act") or any applicable state securities law. 5.6 Filings, Notices, Consents and Approvals. Except as set forth on SCHEDULE 9 annexed hereto, no notice to, filing with, or authorization, consent or approval of, any domestic or foreign governmental or public body, agency or authority or any person not a party to this Agreement, is necessary in connection with the execution, delivery and performance of this Agreement or any of the Related Agreements by Warner or the consummation by Warner of the transactions contemplated, except where failure to give such notice, make such filings, or obtain such authorizations, consents or approvals would, in the aggregate, not have a material adverse effect on the condition (financial or otherwise) or operations of Warner and its subsidiaries taken as a whole, or on the ability of the parties to consummate the transactions contemplated hereby. 5.7 Performance Representation. Except as set forth on SCHEDULE 10 annexed hereto, Warner represents and warrants that as of the date hereof and through the Closing Date, it has performed and will perform its obligations incurred in the ordinary course of business in all material respects, including all obligations under the Services Contracts in all material respects. 5.8 Solvency Representation. Warner represents and warrants that it is receiving fair and adequate consideration, as a result of arms length negotiations, for the transfer of the assets pursuant to the Asset Purchase Agreement and other assets being transferred and issued pursuant to this Agreement in that the RPC Lawsuits are being settled and the Services Contract Releases are being executed. Warner further represents and warrants that its current net worth deficit should be decreased as a result of the consummation of the transactions contemplated by this Agreement and the Asset Purchase Agreement and that Warner currently intends to pay its retained liabilities in accordance with their terms as they mature. 6. Representations and Warranties of the Releasees. In order to induce Warner to enter into this Agreement and to consummate the transactions contemplated hereunder, each Releasee hereby represents and warrants to Warner severally as to itself as follows: -5- 6 6.1 Corporate Existence and Qualification. Such Releasee is a corporation duly incorporated, validly existing and in good standing under the laws of its respective state of incorporation and has all requisite corporate power and authority to carry on its business as now being conducted and to own, lease and operate its properties as and in the places where such business is now conducted and such properties are now owned, leased or operated. Such Releasee has all requisite power to execute and deliver this Agreement and to perform its obligations hereunder. 6.2 Authorization of Agreements. The execution and delivery by such Releasee of this Agreement, any Related Agreement, and the Revised Newco Service Agreement and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on behalf of such Releasee. This Agreement has been duly executed and delivered by such Releasee, and this Agreement constitutes, and when executed, each of the Related Agreements and the Revised Newco Service Agreements will constitute the legal, valid and binding obligation of such Releasee, enforceable against such Releasee in accordance with their respective terms, except to the extent that such validity, binding effect and enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium and other laws affecting creditors' rights generally from time to time in effect and by general equitable principles. 6.3 Securities Laws. (a) Each Releasee acknowledges and understands that the Settlement Shares and the Warrants have not been registered under the Securities Act, or the securities laws of any state, and that such Settlement Shares and the Warrants may not be offered or sold unless first registered under the Securities Act and any applicable state securities laws, or unless such offer or sale is exempt from registration. (b) Except to the extent contemplated by the Customers pursuant to Section 7.2, each Releasee is purchasing the Settlement Shares and the Warrants for investment purposes, has no current intention to sell the Settlement Shares or the Warrants and will not sell or dispose of the Settlement Shares and the Warrants in violation of applicable United States federal and state securities laws. (c) Each Releasee has received a copy of the most recent annual report on Form 10-K and the three most recent quarterly reports on Form 10-Q, and is aware that Warner has suffered significant losses, will report additional losses in the fourth quarter and has serious cash flow problems. -6- 7 (d) Each Releasee agrees that the following legend may be placed on any certificates evidencing the Settlement Shares and on any other securities issued in respect of the Settlement Shares: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL TO THE COMPANY OR OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED." Each Releasee understands that, so long as the above legend remains on the certificates representing the Settlement Shares, Warner may maintain appropriate "stop transfer" orders with respect to the Settlement Shares on its books and records and with its registrar and transfer agent. Each Releasee agrees that prior to any proposed transfer of the Settlement Shares and as a condition thereto, if such transfer is not made pursuant to an effective Registration Statement under the Securities Act or an opinion of counsel to Warner (or other counsel reasonably acceptable to Warner and its counsel) that the Settlement Shares may be sold publicly without registration under the Securities Act, the respective Releasee will, if requested by Warner, deliver to Warner (i) an agreement by such transferee to the impression of the restrictive legends set forth above on the Settlement Shares and (ii) an agreement by such transferee that Warner may place a "stop transfer" order with Warner's transfer agent and registrar. 7. Covenants of Warner. 7.1 Election of Director to Board of Directors. For a period of three years after the Closing Date, Warner shall elect to its Board of Directors one designee selected by the holders of a majority in amount of the Settlement Shares issued pursuant to this Agreement. Such designee shall be elected as a director in the Class of 1998 (due to the staggered director provisions contained in Warner's By-Laws, as amended), such designee will be subject to reelection at the 1998 Annual Meeting of Stockholders of Warner called for the election of directors (the "1998 Annual Meeting") on the Closing Date, or as soon thereafter as Warner is notified in writing of such designation. Beginning with the 1998 Annual Meeting, Warner shall include such -7- 8 designee, or any successor designee selected as described in the preceding sentence, as a nominee in management's slate of directors for election at such annual meeting, and Warner shall recommend to its stockholders the election of such designee or successor, as a director at the 1998 Annual Meeting. In the event that said designee shall not be elected as a director at the 1998 Annual Meeting, Warner shall, following said meeting, elect said designee to its Board of Directors and amend its By-Laws to create any vacancy, if required, to serve for a period equal to the remainder of the three-year term contained herein. Warner agrees that if such designee dies or resigns, his successor shall be designated as herein provided. 7.2 Registration Rights. 7.2.1 Demand Registration. (a) At any time following the filing with the United States Securities and Exchange Commission (the "Commission") by Warner of its Annual Report on Form 10-K for the fiscal year ended December 31, 1995, upon receipt by Warner of a written request executed by one or more of the Releasees receiving Settlement Shares (the "Initiating Holder") requesting registration of a number of shares of Common Stock at least equal to (i) thirty percent (30%) or more of the Settlement Shares and the shares of Common Stock underlying the Warrants (the "Warrant Shares") then held by the Holders or (ii) the entire remaining number of Settlement Shares and the Warrant Shares owned by the Initiating Holder, Warner will give notice of such request to each other Holder (the "Other Holders") and give them the right to participate therein in accordance with this Section 7.2.1. (b) Upon receipt of the request given pursuant to Subsection (a) above, Warner shall promptly prepare and file with the Commission a registration statement (the "Registration Statement") under the Securities Act covering the Settlement Shares and/or the Warrant Shares requested to be sold under a Registration Statement by the Initiating Holder and by the Other Holders who elect to have their Settlement Shares and/or Warrant Shares included in a Registration Statement by providing written notice of its election to Warner within 30 days from receipt by such Other Holders of notice from Warner pursuant to Section 7.2.1(a) (the "Registered Shares") and shall otherwise comply with its obligations under Section 7.2.1. (c) Warner's obligations under Section 7.2.1 shall be limited to two (2) effective Registration Statements under the Securities Act; provided, however, that if the Settlement Shares and/or Warrant Shares may be registered by means of a Registration Statement on Form S-3 or a successor form thereto, the Holders of Settlement Shares and/or Warrant Shares shall be entitled to exercise their rights under Section 7.2 on an -8- 9 unlimited number of occasions, but not more than once every fiscal quarter, until all of the Settlement Shares and/or Warrant Shares are either subject to an effective Registration Statement under the Securities Act or have been sold. 7.2.2 Piggy Back Registration Rights. (a) At any time after the receipt by the Holders of any Settlement Shares, Warner will send written notice to the Holders then owning Settlement Shares and/or Warrant Shares, at least twenty (20) days prior to the filing of each and every Registration Statement filed by Warner, whether or not pursuant to this Agreement (other than a Registration Statement covering exclusively securities under an employee option or stock purchase plan, a merger, acquisition or similar transaction) and give to such Holders the right to have included therein any Settlement Shares and/or Warrant Shares then held by the Holders. Such notice must specify the proposed offering price and the plan of distribution. Warner must receive written notice from such Holders within fifteen days after the date of Warner's written notice, indicating the full name and address of each Holder desiring to have Settlement Shares and/or Warrant Shares included for sale in such Registration Statement and the number of Settlement Shares or Warrant Shares requested to be covered. (b) If the registration of which Warner gives notice is for a registered public offering involving an underwriting, Warner shall so advise the Holders as a part of the written notice given pursuant to Section 7.2.2(a). To the extent Holders propose to distribute their Settlement Shares or Warrant Shares through such underwriting, such Holders shall, together with Warner, enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by Warner which underwriting agreement shall also be reasonably acceptable to the Holders. Warner shall use its reasonable best efforts to cause the managing underwriter of such proposed underwritten offering to permit the Settlement Shares or Warrant Shares proposed to be included in such registration to be included in the registration statement for such offering on no less than the most favorable terms and conditions as any similar securities of Warner included therein. Notwithstanding any other provision of this Section 7.2.2, the Holders shall be entitled to include in the registration all of the shares which they desire to sell for their own account, and if the managing underwriter determines that general marketing conditions are such that the inclusion of all of the shares to be sold by the Holders for their own accounts would jeopardize the sale of shares for the account of Warner, the managing underwriter may reduce the similar securities to be included in such registration for the accounts of the Holders, pro rata among the Holders whose shares are -9- 10 included in the registration, but only after the shares of Warner to be included in the registration for the account of persons other than Warner and the Holders are first reduced, to zero if necessary. If any Holder disapproves of the terms of any such underwriting, such person may elect to withdraw therefrom by written notice to Warner and the managing underwriter. Any Settlement Shares or Warrant Shares excluded or withdrawn from such underwriting shall not be transferred prior to sixty (60) days after the effective date of the registration statement relating thereto, or such other shorter period of time as the underwriters may require. 7.2.3 Miscellaneous Registration Provisions. (a) In connection with any Registration Statement filed pursuant to Sections 7.2.1 or 7.2.2 hereof: (i) Warner's obligation under this Agreement to include Settlement Shares or Warrant Shares in a Registration Statement shall mean shares of Common Stock or any security received by a Holder in exchange or upon reclassification of the present Common Stock or the securities then owned by a Holder by reason of a prior exchange or reclassification of or on account of present Common Stock; (ii) the Holders of Settlement Shares or Warrant Shares (herein "Registering Holders") shall furnish to Warner in writing such information as shall be required by the Securities Act or the rules and regulations promulgated thereunder in respect of the Holder or the Settlement Shares or Warrant Shares to be included in the Registration Statement; (iii) the Registering Holders and Warner shall enter into the usual and customary form of underwriting agreement agreed to by Warner and any underwriter with respect to any such offering, if required, and such underwriting agreement shall contain the customary reciprocal rights of indemnity and contribution between Warner, the underwriters, and the selling shareholder, including the Registering Holders, to the extent the obligations of the Registering Holders do not exceed those set forth in Subsections (f) and (g) herein; provided, however, that no Registering Holder shall be obligated to refrain from selling or otherwise disposing of such Registering Holder's shares for a period of in excess of sixty (60) days from the effective date of the Registration Statement; (iv) the Registering Holders shall agree that they shall execute, deliver and/or file with or supply to Warner, any underwriters, the Commission and/or any state or other regulatory authority such information, documents, representations, -10- 11 undertakings and/or agreements necessary to carry out the provisions of the registration covenants contained in this Agreement and/or to effect the registration or qualification of their Settlement Shares or Warrant Shares under the Securities Act and/or any of the laws and regulations of any state or governmental instrumentality; and (v) the Registering Holders shall furnish Warner with such questionnaires and other documents regarding their identity and background as may be necessary to permit the offer and sale of the Settlement Shares and/or Warrant Shares in those jurisdictions requested by the Registering Holders. (b) if and whenever Warner is required to effect the registration of any Settlement Shares or Warrant Shares pursuant to Section 7.2.1 or 7.2.2, Warner will use its best efforts to effect such registration to permit the sale of such Settlement Shares or Warrant Shares in accordance with the intended method or methods of disposition thereof, and pursuant thereto it will, as promptly as is practicable: (i) prepare and file with the Commission such amendments (including post-effective amendments) and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all Settlement Shares or Warrant Shares covered by such Registration Statement until such time as all of such Settlement Shares or Warrant Shares have been disposed of in accordance with the intended methods of disposition set forth in such Registration Statement; (ii) furnish to the Holders and to any underwriter of Settlement Shares or Warrant Shares such number of conformed copies of such Registration Statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus included in such Registration Statement (including each preliminary prospectus and any summary prospectus) and any amendment or supplement thereto, in conformity with the requirements of the Securities Act, such documents incorporated by reference in such Registration Statement or prospectus, and such other documents, as the Holders or such underwriter may reasonably request, and, if requested, a copy of any and all transmittal letters or other correspondence to, or received from, the Commission or any other governmental agency or self-regulatory body or other body having jurisdiction (including any domestic or foreign securities exchange) relating to such offering; -11- 12 (iii) use its best efforts to obtain the withdrawal of any order suspending the effectiveness of such Registration Statement at the earliest possible moment; (iv) use its best efforts to list all such Settlement Shares or Warrant Shares covered by such Registration Statement on the principal securities exchange and inter-dealer quotation system on which a class of common equity securities of Warner is then listed, and to pay all fees and expenses in connection therewith; (v) cooperate and assist in any filings required to be made and with any performance of any due diligence investigation by any underwriter; and (c) Warner shall pay all out-of-pocket expenses and disbursements incurred by Warner and the Holders in connection with the Registration Statements filed by it pursuant to Sections 7.2.1 and 7.2.2 or, including, without limitation, all legal and accounting fees, Commission filing fees, exchange filing fees, printing costs, registration or qualification fees and expenses to comply with state Blue Sky or other state securities laws, the fees of other experts, and any expenses or other compensation paid to the underwriters; provided, however, that such registration expenses shall not include underwriting commissions and discounts and transfer taxes, if any. (d) Warner shall be obligated to keep any Registration Statement filed by it under Sections 7.2.1 and 7.2.2 effective under the Securities Act until such time as all of the Settlement Shares or Warrant Shares covered by such Registration Statement have been disposed of in accordance with the intended methods of disposition set forth in such Registration Statement and to prepare and file such supplements and amendments necessary to maintain an effective Registration Statement for such period. As a condition to Warner's obligation under this Subsection (d), the Registering Holders will take all actions as shall be necessary to comply with the relevant provisions of the Securities Act. (e) Warner shall use its best efforts to register or qualify the Registered Shares under such securities or Blue Sky laws in such jurisdictions within the United States as the Registering Holders may reasonably request; provided, however, that Warner reserves the right, in its sole discretion, not to register or qualify such Registered Shares in any jurisdiction where such Registered Shares do not meet with the requirements of such jurisdiction after having taken reasonable steps to meet such requirements or where Warner is required to qualify as a foreign corporation to do business in such jurisdiction and is not so qualified therein. -12- 13 (f) The Registering Holders agree that upon notification by Warner that, in the opinion of its counsel, the prospectus contains an untrue statement of a material fact or omits to state a fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, they shall immediately upon receipt of such notification (i) cease to offer or sell any securities of Warner which must be accompanied by such prospectus; (ii) return all such prospectuses in their hands to Warner; and (iii) shall not offer or sell any securities of Warner until they have been provided with a current prospectus and Warner has given them notification permitting them to resume offers and sales. Warner covenants to promptly correct such prospectus and file with the Commission such amended prospectus or supplement and shall use its best efforts to cause such amended prospectus or supplement to be declared effective by the Commission. (g) As a condition to the filing of a Registration Statement pursuant to this Agreement, Warner shall indemnify and hold harmless each Registering Holder and each underwriter and each of such Registering Holder's and underwriter's officers, directors, employees, agents and counsel and each other person, if any, who controls such Registering Holder or underwriter within the meaning of the Securities Act or the Securities Exchange Act of 1934, as amended from and against any and all losses, claims, damages, expenses or liabilities whatsoever caused by any failure of Warner to comply with the Securities Act or any rule or regulation promulgated thereunder in connection with the registration in which the Settlement Shares or Warrant Shares have been included or any untrue statement of a material fact contained in the Registration Statement, any post-effective amendment to such registration statements, or any prospectus included therein required to be filed or furnished by reason of this Agreement or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statements or alleged untrue statements or omissions based upon information furnished or required to be furnished in writing to Warner by the party seeking indemnification expressly for use therein; provided, however, that Warner shall not be obligated to so indemnify the Registering Holders or any such underwriter or other person referred to above unless the Registering Holders or underwriter or other person, as the case may be, shall at the same time indemnify Warner, its directors, each officer signing the Registration Statement and each person, if any, who controls Warner within the meaning of the Securities Act, from and against any and all losses, claims, damages and liabilities caused by any untrue statement or alleged untrue statement of a material fact -13- 14 contained in the Registration Statement, any registration statement or any prospectus required to be filed or furnished by reason of this Agreement or caused by any omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, insofar as such losses, claims, damages or liabilities are caused by any untrue statement or alleged untrue statement or omission based upon information furnished in writing to Warner by the Holder or underwriter expressly for inclusion therein; provided, however, that the extent of any Registering Holder's indemnification obligation hereunder shall be limited to the aggregate net proceeds received by such Registering Holder upon the sale of the Settlement Shares and/or the Warrant Shares included in such Registration Statement. (h) Each party entitled to indemnification under paragraph (g) above (the "Indemnified Party") shall, promptly after receipt of notice of any claim or the commencement of any action against such Indemnified Party in respect of which indemnity may be sought, notify the party required to provide indemnification (the "Indemnifying Party") in writing of the claim or the commencement thereof; provided that the failure of the Indemnified Party to notify the Indemnifying Party shall not relieve the Indemnifying Party from any liability which it may have to an Indemnified Party pursuant to the provisions of paragraph (g), unless the Indemnifying Party was materially prejudiced by such failure, and in no event shall such failure relieve the Indemnifying Party from any other liability which it may have to such Indemnified Party. If any such claim or action shall be brought against an Indemnified Party, it shall notify the Indemnifying Party thereof and the Indemnifying Party shall be entitled to participate therein, and, to the extent that it wishes, jointly with any other similarly notified Indemnifying Party, to assume the defense thereof with counsel reasonably satisfactory to the Indemnified Party. After notice from the Indemnifying Party to the Indemnified Party of its election to assume the defense of such claim or action, the Indemnifying Party shall not be liable (except to the extent the proviso to this sentence is applicable, in which event it will be so liable) to the Indemnified Party under paragraph (g) for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof other than reasonable costs of investigation: provided that each Indemnified Party shall have the right to employ separate counsel to represent it and assume its defense (in which case, counsel to the Indemnifying Party shall not represent it) if (i) upon the advice of counsel, the representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the -14- 15 Indemnifying Party will not have the right to assume the defense of such claim or action on behalf of such Indemnified Party), or (ii) in the event the Indemnifying Party has not assumed the defense thereof within ten (10) days of receipt of notice of such claim or commencement of action, in which case the fees and expenses of one such separate counsel shall be paid by the Indemnifying Party. If any Indemnified Party employs such separate counsel it will not enter into any settlement agreement which is not approved by the Indemnifying Party, such approval not to be unreasonably withheld. If the Indemnifying Party so assumes the defense thereof (and by so assuming shall be solely responsible for liabilities relating to such claim or action, and shall release the Indemnified Party from such liabilities to the extent permitted by law, except to the extent the Indemnified Party is not entitled to be indemnified pursuant to paragraph (g), it may not agree to any settlement of any such claim or action as the result of which any remedy or relief, other than monetary damages for which the Indemnifying Party shall be responsible hereunder, shall be applied to or against the Indemnified Party, without the prior written consent of the Indemnified Party. No Indemnified Party will consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect of such claim or action. In any action hereunder as to which the Indemnifying Party has assumed the defense thereof with counsel satisfactory to the Indemnified Party, the Indemnified Party shall continue to be entitled to participate in the defense thereof, with counsel of its own choice, but, except as set forth above, the Indemnifying Party shall not be obligated hereunder to reimburse the Indemnified Party for the costs thereof. (i) If for any reason the indemnification provided for above is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, claim, damage, liability or expense referred to therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party thereunder, shall contribute to the amount paid or payable by the Indemnified Party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by the Indemnified Party and the Indemnifying Party, but also the relative fault of the Indemnified Party and the Indemnifying Party, as well as any other relevant equitable considerations, subject in all events, to the limitations described in the last proviso set forth in Subsection 7.2(g). 7.3 Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission which may permit the sale of the Settlement Shares and -15- 16 the Warrant Shares to the public without registration, Warner agrees to: (a) Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times from and after the issuance of the Settlement Shares and the Warrant Shares; (b) Not take any action which would cause Warner to no longer be registered under Section 12(g) of the Exchange Act; (c) File with the Commission in a timely manner all reports and other documents required of Warner under the Securities Act and the Exchange Act at any time after it has become subject to such reporting requirements; and (d) Furnish to the Holders forthwith upon request: a written statement by Warner as to its compliance with the reporting requirements of Rule 144 and of the Securities Act and the Exchange Act; a copy of the most recent annual or quarterly report of Warner filed under the Exchange Act; and such other reports and documents so filed as the Holder shall be required to have in order to avail itself of any rule or regulation of the Commission allowing the Holder to sell any of the Settlement Shares and the Warrant Shares without registration. 7.4 Access to Records and Operations Of Warner. (a) Pending the Closing of the transactions contemplated by this Agreement, each Customer shall have the right to designate a representative who shall have access to the premises of Warner for the purpose of reviewing records and operations of Warner with respect to such Customer. Further, in the event that Warner shall, pending the Closing, cease operations, commence a bankruptcy or insolvency proceeding or commit a performance default under an existing service contract, such designated representative shall have the right to communicate, independently of Warner, with Micro Graphics Corporation, regarding graphic imaging record retrieval. (b) From and after the Closing Date the Customers shall have reasonable access to the books and records of Warner relating to the details of Warner's performance under the Services Contracts from and before the Closing Date. 7.5 Escrow of Portion of Proceeds from Sale or Liquidation of Alerion Insurance Company. On the date hereof, Warner agrees to deposit into an escrow account with Reid & Priest LLP, as escrow agent, pursuant to the terms and conditions of an escrow agreement in the form annexed hereto as Exhibit F, a portion of the proceeds to be received by Warner upon the liquidation of its wholly-owned insurance company, Alerion -16- 17 Insurance Company ("Alerion"), in the amount of $920,000 for the purpose of paying certain due and unpaid legal and administrative expenses ("ALE") of Warner, as well as accrued but unbilled ALE obligations of Warner, in connection with insurance services performed by Warner under existing Services Contracts with the Customers. SCHEDULE 11 annexed hereto contains an updated list prepared by Warner of ALE accrued expenses through February 19, 1996. After the Closing Date, such escrowed funds will be released in payment of such ALE in accordance with the procedures set forth in Exhibit F. The balance of the funds received from the liquidation of Alerion have been used to pay the expenses outlined in SCHEDULE 11. 7.6 Covenant to Maintain Certain Insurance. Warner covenants and agrees to maintain its current third party administrators professional liability insurance coverage of up to $5 million in the aggregate, as contained in Policy Number 243-30-95 issued by Lexington Insurance Company, through the expiration date of such policy on December 31, 1996. 7.7 Employee Compensation. Warner covenants for a period of two years from the Closing Date that it will not renew the employment contracts currently in effect with Harvey Krieger, Theodore I. Botter or Bradley J. Hughes and that beginning August 1, 1996, the aggregate annual compensation payable to such persons shall not exceed $250,000. 7.8 Covenant to Execute the Related Agreements. Warner covenants and agrees to execute the Related Agreements on the Closing Date. 8. Covenants of Each Releasee. 8.1 Control of Warner. Each Releasee covenants and agrees that, for a period of two (2) years from the Closing Date, such Releasee, or any of its affiliates as such term is defined under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), will not, without the prior approval of Warner's Board of Directors, initiate or otherwise participate in any activity in a manner the intent of which would require such Releasee or affiliate to file with the Commission a Schedule 13D, either individually or as a member of a group, to report the occurrence of any of the events described in Item 4 of Schedule 13D; provided, however, that nothing herein shall prevent Releasee or its affiliates from: (i) acquiring additional securities of Warner, or from selling securities of Warner, in each case in the ordinary course which would require such Releasee or affiliate to file or amend a previously filed Schedule 13D solely due to an increase or decrease in such Releasee's or affiliates' beneficial ownership of securities of Warner; (ii) voting its shares of Warner on any matter as it -17- 18 determines in its sole discretion, or (iii) tendering its shares of Warner in connection with any tender, exchange or similar offer made by a third party. 8.2 Right of First Refusal. (a) Bona Fide Offer. Except as provided in Section 8.2(b) below, until July 31, 1996 each Releasee covenants and agrees that it shall not sell, assign, transfer, pledge, encumber or in any other manner dispose of thirty-five percent (35%) or more of the Settlement Shares of Warner acquired by each such Releasee pursuant to the terms and conditions of this Agreement, except upon receipt by such Releasee of a bona fide offer in writing from an unrelated third party (hereinafter referred to as a "Bona Fide Offer") to purchase such Settlement Shares. The Bona Fide Offer shall specify the name and background of the third party, the number of Settlement Shares subject to the Bona Fide Offer, the amount to be paid for the Settlement Shares and the terms of payment, and all other material conditions of such offer. Upon receipt of a Bona Fide Offer, such Releasee shall promptly offer in writing (hereinafter referred to as the "Reoffer") to sell such Settlement Shares to Warner or to a third party acceptable to Warner (the "Selected Purchaser"), upon the same terms and conditions contained in the Bona Fide Offer. The Reoffer may be accepted by Warner or the Selected Purchaser at any time within fifteen (15) business days next following its receipt and shall expire on the close of business on such 15th business day. Acceptance of a Reoffer must be made unconditionally by notice to such Releasee prior to its expiration, which notice shall set forth a time and place for closing no earlier than the day after the expiration date of the Reoffer and no later than thirty (30) days thereafter. Upon the expiration of the Reoffer, such Releasee shall be free to accept the Bona Fide Offer provided that the third party offeror agrees to hold such Settlement Shares subject to all terms, conditions and restrictions of this Agreement. Any Bona Fide Offer shall be deemed to have expired ninety (90) days after it was made unless accepted in accordance with its original terms and may not thereafter be accepted. If the amount of a Bona Fide Offer should be reduced, or if any of its terms or provisions should be changed, then it shall be treated as a new Bona Fide Offer and may not be accepted unless the provisions of this subsection shall have been complied with and a Reoffer made with respect to it. (b) Unrestricted Transfers. The restrictions specified in this Section 8.2 shall not apply to the sale or transfer of the Settlement Shares held by a Releasee to a wholly-owned subsidiary, partnership or affiliate of such Releasee; provided, however, that such sale or transfer shall not relieve -18- 19 such Releasee of its obligations hereunder. Prior to such transfer, such wholly-owned subsidiary, partnership or affiliate, shall agree in writing to be bound by the terms and conditions of this Agreement. 8.3 Payment of All Amounts Under Services Contracts. Pending the Closing of the transactions contemplated by this Agreement, each Customer covenants and agrees to continue to make all regularly required payments under existing Services Contracts with Warner consistent with past billing practices in order to enable Warner to continue to perform its obligations in accordance with the terms of such contracts. The amount of such payments which are or will be due and payable on or prior to the Closing Date are set forth on SCHEDULE 12 hereto. At the Closing, Warner shall deliver to the Customers a Certificate of the President and Chief Executive Officer of Warner certifying that the amounts set forth on SCHEDULE 12 are true and correct and have been calculated in accordance with Warner's past, ordinary billing practices and procedures. The parties agree that, upon payment of such amounts as reflected in said Schedule, no other amounts will be required to be paid by each Customer and/or Warner in accordance with the terms of their respective Services Contracts. 8.4 Option of Warner to Purchase Settlement Shares and Warrants. (a) For a period of six months after the Closing Date, Warner shall have the option to acquire from the Releasees 50% of the Settlement Shares at a cash price equal to the greater of $3.00 or 50% of the then market price of a share of Warner Common Stock. For purposes of this subsection, market price shall mean the average closing price for a share of Warner Common Stock on such market which is or may become the major trading market for Warner Common Stock for the five (5) business days immediately prior to the notice of exercise of such option, as provided for in subsection (c) below. (b) For a period of six months after the Closing Date Warner shall have the option to acquire from the Releasees 50% of the Warrants at a cash price equal to $1.00 per Warrant. (c) The options granted hereunder shall be exercisable by written notice by Warner to the Releasees, which notice shall set a date and time and place of closing, which closing date shall be no earlier than five (5) business days after the date of such notice and no later than ten (10) business days after the date of such notice, at which closing Warner shall deliver the consideration by certified check payable to the order of each Releasee, and each Releasee shall deliver the securities being acquired by Warner duly endorsed for transfer. The options granted hereunder shall be exercised pro rata as to each Releasee based upon the original number of Settlement Shares and/or -19- 20 Warrants issued to such Releasee. The certificates for such securities will be appropriately legended to reflect the options granted hereunder. (d) Warner shall have the right to assign the options granted herein in its sole discretion subject to such assignee agreeing in writing to be bound by the provisions of this Section 8.4. 8.5 Covenant As To Related Agreements. Each Releasee agrees to execute and deliver any Related Agreement which is required to be executed by it on the Closing Date. 9. Covenant and Indemnification Among Warner, RPC and MDA. The agreements among Warner, RPC, NCIC and MDA relating to the RPC lawsuits and the settlements thereof are contained in the Stipulation, the Mutual General Release and the CWP Assignment annexed hereto as Exhibits C, D and E, respectively. 10. Conditions to Obligations of Warner. This Agreement and the obligations of Warner to perform hereunder are subject to the satisfaction by each Releasee, or a waiver in writing by Warner, of the following conditions, each of which is individually hereby deemed material, at or prior to the Closing: 10.1 Concurrent Agreements. Each Releasee will execute and deliver its respective Services Contract Release and its respective Revised Newco Service Agreement and any Related Agreements referred to in this Agreement. 10.2 Wausau Services Contract Release. Employers Insurance of Wausau, a Mutual Company, a Wisconsin corporation, Wausau Underwriters Insurance Company, a Wisconsin corporation, and Providian Auto and Home Insurance Company (formerly Worldwide Underwriters Insurance Company), a Missouri corporation (collectively "Wausau") shall each execute a Services Contract Release, such release to be substantially in the form annexed hereto as Exhibit B. 10.3 Representations, Warranties and Obligations. All representations and warranties of each Releasee contained in this Agreement and in the Exhibits hereto shall be true and correct commencing as of the date hereof and ending with and on the Closing Date as though made on and as of such Closing Date. Each Releasee shall have performed and complied with all of their respective covenants and obligations under this Agreement in all material respects. -20- 21 11. Conditions to Obligations of Releasees. This Agreement and the obligations of each Releasee to perform hereunder are subject to the satisfaction by Warner, or a waiver in writing by the all of the Releasees, of the following conditions, each of which is individually hereby deemed material, at or prior to the Closing: 11.1 Concurrent Agreements. Warner will have entered into the Asset Purchase Agreement on the date hereof, and on the Closing Date, will execute and deliver all the Related Agreements and each Releasee will have executed and delivered its Revised Newco Service Agreement and any Related Agreement related to it. 11.2 Corporate Authorization. On the Closing Date, Warner shall have delivered to each Releasee certified copies of the resolution(s) of the Board of Directors of Warner authorizing the execution, delivery and performance by Warner of this Agreement and the Related Agreements and the consummation of the transactions contemplated hereby and thereby. 11.3 Representations, Warranties and Obligations. All representations and warranties of Warner contained in this Agreement and in the Exhibits hereto shall be true and correct in all material respects commencing as of the date hereof and ending with and on the Closing Date as though made on and as of such Closing Date. Warner shall have performed and complied with all of their respective covenants and obligations under this Agreement in all material respects. 11.4 Issuance and Delivery of Settlement Shares and Warrants to the Releasees. Warner shall issue and deliver certificates to the Releasees representing all of the Settlement Shares and Warrants. 11.5 Payment of a Portion of the Cash Collateral. Warner shall direct the Escrow Agent to release from escrow to the Releasees $887,500 of the Cash Collateral in accordance with the terms of Section 1.2 hereof. 11.6 Legal Opinion. On the Closing Date, Reid & Priest LLP, counsel to Warner, shall deliver an opinion of counsel dated as of the Closing Date and addressed to the Releasees, in the form set forth in Exhibit G annexed hereto. 12. Survival; Indemnification. The representations, warranties, covenants and agreements of Warner on the one hand, and each Releasee on the other hand, contained in this Agreement, and the Exhibits hereto, shall survive and remain operative and in full force following the execution and delivery of this Agreement and the Related Agreements. The following provisions are applicable to claims made under these Agreement(s): -21- 22 12.1 Obligation of Warner to Indemnify. Warner hereby agrees to indemnify, defend and hold harmless each Releasee (and its directors, officers, employees, affiliates and assigns) from and against all claims, losses, suits, proceedings, demands, judgments, damages, expenses and costs (including reasonable attorneys' fees and disbursements) (collectively, "Losses") which any Releasee may incur relating to (i) any material inaccuracy in, or any material breach of, any representation, warranty, covenant or agreement of Warner contained in this Agreement or the Exhibits hereto or (ii) any claim by a third party who is a creditor or shareholder of Warner or any of its subsidiaries relating to damages caused to such third party by the transfer of assets by Warner pursuant to the provisions of the Asset Purchase Agreement. 12.2 Obligation of Each Releasee to Indemnify. Each Releasee hereby agrees to indemnify, defend and hold harmless Warner (and its directors, officers, employees, affiliates and assigns) from and against any Losses which it may incur arising from any material inaccuracy in, or any material breach of, any representation, warranty, covenant or agreement of such Releasee contained in this Agreement. 12.3 Notice to Indemnitor. Promptly after any party hereto (i) receives notice of any claim or the commencement of any action or proceeding against it, (ii) has knowledge of any claim, action or proceeding against it, or (iii) has knowledge of any matter for which it intends to seek indemnification hereunder, the party seeking indemnification (the "Indemnitee") shall, if a claim for indemnity with respect thereto is to be made against any party hereto obligated to provide indemnification under Sections 12.1 or 12.2 hereof (the "Indemnitor"), give the Indemnitor written notice of such claim or the commencement of such action or proceeding, in all cases within sufficient time to respond to such claim or to answer or otherwise plead in any such action. Such notice shall be a condition precedent to the Indemnitor's obligation to provide indemnification under this Section 12. 12.4 Right to Defend; Compromise of Claims. The Indemnitor shall have the duty to defend and right to compromise, at its own expense and by its own counsel, any matter involving the asserted liability of any Indemnitee; provided, however, that no compromise of any claim shall be made without the consent of the Indemnitee unless such compromise results in the full and unconditional release of all claims against the Indemnitee by the party asserting such claim. The opportunity to compromise or defend as herein provided shall be a condition precedent to any liability of an Indemnitor under the provisions of this Section 12.4. If any Indemnitor shall undertake to compromise or defend any such asserted liability, it shall promptly notify the -22- 23 Indemnitee of its intention to do so and provide the Indemnitee with reasonable assurance as to the ability of the Indemnitor to defend and/or compromise such matter, which, in the case of Warner, as Indemnitor, shall include documentation evidencing the ability of Warner to pay any judgment with regard to any such asserted liability. The Indemnitee at Indemnitor's expense shall cooperate with the Indemnitor and its counsel in the defense against any such asserted liability and in any compromise thereof. Such cooperation shall include, but not be limited to, furnishing the Indemnitor with any books, records or information reasonably requested by the Indemnitor and taking such action as the Indemnitor may reasonably request to mitigate or reduce any claim. After an Indemnitor has notified an Indemnitee of its intention to defend any asserted liability, the Indemnitor shall not be liable for any additional legal expenses incurred by the Indemnitee unless the Indemnitor fails to prosecute the defense of such claim. If the Indemnitor shall desire to compromise any such asserted liability by the payment of a liquidated amount which the party asserting such liability is willing to accept in exchange for fully and unconditionally releasing all claims against the Indemnitee, and the Indemnitee shall refuse to consent to such compromise, then the Indemnitor's liability under this Section 12 with respect to such asserted liability shall be limited to the amount so offered in compromise. Under no circumstances shall the Indemnitee compromise any asserted liability without the written consent of the Indemnitor. 13. Miscellaneous. 13.1 Entire Agreement. This Agreement and the Related Agreements and the Exhibits and Schedules annexed hereto and made a part hereof, contain the entire agreement between Warner and each Releasee with respect to the matters set forth herein and supersede all prior agreements and understandings among them as to the subject matter thereof. No party shall be bound by nor shall be deemed to have made any representations, warranties or covenants except those contained herein. 13.2 Benefits. All of the terms and provisions of this Agreement and the Related Agreements shall bind and inure to the benefit of Warner and each Releasee and their respective successors and assigns. 13.3 Notices, Etc. All notices, requests, consents and other communications hereunder shall be in writing and shall be deemed to be duly given (i) upon receipt, if personally delivered with receipt acknowledged, (ii) not less than three (3) business days after mailing, if mailed by registered or certified mail, first class, postage prepaid, and (iii) on the next business day, if delivered by a nationally recognized overnight -23- 24 courier service or if transmitted by facsimile machine addressed as follows: (i) if to Warner: Warner Insurance Services, Inc. 17-01 Pollitt Drive Fair Lawn, New Jersey 07410 Tel: (201) 794-4800 Fax: (201) 791-9113 Attention: President with a copy to: Reid & Priest LLP 40 West 57th Street New York, New York 10019 Attention: Leonard Gubar, Esq. Tel: (212) 603-2000 Fax: (212) 603-2001 or to such other address or such other person(s) as Warner may designate by written notice to the other parties hereto. (ii) if to the Releasees, at the addresses set forth on SCHEDULE 13 annexed hereto. or to such other address or such other person(s) as each Customer may designate by written notice to the other parties hereto. 13.4 Governing Law; Submission to Jurisdiction. (i) This Agreement shall be construed in accordance with and governed by the internal laws of the State of New York. (ii) The parties hereto (A) submit for themselves in any legal action or proceeding relating to the enforcement of the rights of and the obligations under this Agreement to the jurisdiction of the New York State Supreme Court, New York County, Commercial Part and the appellate courts therefrom, (B) consent that any such action or proceeding shall be brought in such courts, and waive any objection each may have now or hereafter have to the venue of any such action or proceeding in any such court, (C) agree that service of process of any such action or proceeding may be effected by certified mail (or substantially similar form of mail), postage prepaid, to the appropriate party at its address as set forth herein and service made shall be deemed to be completed upon the earlier of actual receipt or five (5) days after the same shall have been posted as aforesaid, and (D) agree that nothing herein shall affect the right to effect service of process in any other manner permitted by law. -24- 25 13.5 Severability. If any provision of this Agreement shall be held invalid or unenforceable, such invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render invalid or unenforceable any other severable provision of this Agreement, and this Agreement shall be carried out as if any such invalid or unenforceable provision were not contained herein. 13.6 Modification, Waivers, Etc. Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally but only by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought. 13.7 Captions. The captions of sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. 13.8 Further Assurances. At any time and from time to time, upon the reasonable request of any party hereto, the requested party shall execute, deliver and acknowledge, or cause to be executed, delivered and acknowledged, such further documents and instruments and do such other acts and things as the requesting party may reasonably request in order to fully effect this Agreement. -25- 26 13.9 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which, when taken together, shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto either individually or by their duly authorized representatives have caused this Agreement to be executed and delivered in their respective names as of the date and year first above written. WARNER INSURANCE SERVICES, INC. ELECTRIC INSURANCE COMPANY By: /s/ By: /s/ -------------------------- -------------------------- Name: Alfred J. Moccia Name: Laurence J. Cohen Title: President and Chief Executive Officer Title: Vice President and Treasurer ATLANTIC EMPLOYERS INSURANCE COMPANY THE ROBERT PLAN CORPORATION By: /s/ By: /s/ -------------------------- -------------------------- Name: John A. Murphy, Jr. Name: Carl Hollander Title: Vice President Title: Secretary PACIFIC EMPLOYERS INSURANCE COMPANY MATERIAL DAMAGE ADJUSTMENT CORPORATION By: /s/ By: /s/ -------------------------- -------------------------- Name: John A. Murphy, Jr. Name: Philbert A. Nezamoodeen Title: Vice President Title: Secretary NATIONAL CONSUMER INSURANCE LION INSURANCE COMPANY COMPANY By: /s/ By: /s/ -------------------------- -------------------------- Name: Philbert A. Nezamoodeen Name: Philbert A. Nezamoodeen Title: Secretary Title: Secretary
-26- 27 LIST OF SCHEDULES AND EXHIBITS TO THE RESTRUCTURING AGREEMENT Schedules: 1 - List of Services Contracts 2 - Description of RPC Lawsuits 3 - Description of Cash Collateral and Letter of Credit 4 - Number of Settlement Shares to be Issued to each Releasee 5 - Percentage Amounts of Cash Collateral to be received by each Releasee 6 - Shares of Capital Stock of Warner Issued or Issuable 7 - Exceptions to Due Execution and Delivery 8 - List of Conflicts, etc. 9 - Notices, Consents, Approvals Required 10 - Exceptions to Performance of Obligations 11 - List of ALE Accrued Expenses through February 19, 1996 and Expenses Paid with Balance of Funds 12 - Amounts Payable through the Closing Date under the Services Contracts 13 - Notice Address for each Customer Exhibits: A - Form of Warrant B - Form of Services Contract Release C - Form of Stipulation in respect of the RPC Lawsuits D - Form of Mutual General Release in respect of the RPC Lawsuits E - Form of CWP Assignment F - Form of Escrow Agreement G - Form of Legal Opinion from Reid & Priest LLP EX-2 3 WARRANT TO PURCHASE COMMON STOCK OF WARNER INS. 1 THIS WARRANT AND THE UNDERLYING COMMON STOCK HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF. VOID AFTER 5:00 P.M., NEW YORK TIME, ON FEBRUARY 28, 2001, OR IF NOT A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M., NEW YORK TIME, ON THE NEXT FOLLOWING BUSINESS DAY. No. W-1 WARRANT TO PURCHASE 1,181,250 Shares of Common Stock WARRANT TO PURCHASE COMMON STOCK OF WARNER INSURANCE SERVICES, INC. TRANSFER RESTRICTED -- SEE SECTION 6.02 This certifies that, for good and valuable consideration, pursuant to that certain Restructuring Agreement dated as of March 1, 1996 among WARNER INSURANCE SERVICES, INC., a Delaware corporation (the "Company") and the Releasees listed therein (the "Restructuring Agreement"), Atlantic Employers Insurance Company, a New Jersey corporation, and its registered, permitted assigns (collectively, the "Warrantholder" or "Holder"), is entitled to purchase from the Company, subject to the terms and conditions hereof, at any time before 5:00 P.M., New York time, on February 28, 2001 (or, if such day is not a business day, at or before 5:00 P.M., New York time on the next following business day), the number of fully paid and non-assessable shares of Common Stock, par value $.01 per share, of the Company (the "Common Stock") stated above at the exercise price of $2.00 per share (the "Exercise Price"). The Exercise Price and the number of shares purchasable hereunder are subject to adjustment as provided in Article II hereof. Pursuant to Section 8.4(b) of the Restructuring Agreement, for a period of six months after the issuance of this Warrant, the Company has the right to acquire up to one half of the Warrants at a cash price equal to $1.00 per Warrant. This Warrant is being issued to the Holder in accordance with Section 1.1 of the Restructuring Agreement and is one in a series of Warrants being similarly issued with the Restructuring Agreement. Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Restructuring Agreement. THIS WARRANT IS ONE OF A SERIES OF WARRANTS WITH LIKE PROVISIONS TO PURCHASE, IN THE AGGREGATE, 1,553,125 SHARES OF COMMON STOCK. THE COMPANY HAS THE RIGHT, PURSUANT TO SECTION 8.4(b) OF THE RESTRUCTURING AGREEMENT TO ACQUIRE ONE HALF OF THE WARRANTS ON A PRO RATA BASIS AT A CASH PRICE EQUAL TO $1.00 PER WARRANT FOR A PERIOD ENDING ON AUGUST 31, 1996. 2 ARTICLE I Duration and Exercise of Warrant Section 1.01: Duration of Warrant. Subject to the terms contained herein, this Warrant may be exercised at any time before 5:00 P.M., New York time, on February 28, 2001 (the "Expiration Date"), (or, if such day is not a business day, at or before 5:00 P.M., New York time, on the next following business day). If this Warrant is not exercised at or before 5:00 P.M., New York time, on the Expiration Date, it shall become void, and all rights hereunder shall thereupon cease. Section 1.02: Exercise of Warrant. (a) The Warrantholder may exercise this Warrant, in whole or in part, upon surrender of this Warrant with the Subscription Form hereon duly executed, to the Company at its corporate office at 17-01 Pollitt Drive, Fair Lawn, New Jersey 07410, or to such office as duly designated by the Company to the Warrantholder, together with the full Exercise Price for each Warrant Share to be purchased by tendering in lawful money of the United States, or by certified check or bank draft payable in United States Dollars to the order of the Company. (b) Upon receipt of this Warrant with the Subscription Form duly executed and accompanied by payment of the aggregate Exercise Price for the Warrant Shares for which this Warrant is then being exercised, the Company will promptly cause to be issued certificates for the total number of whole shares of Common Stock for which this Warrant is being exercised (adjusted to reflect the effect of the provisions contained in Article II hereof, if any, and as provided in Section 4.04 hereof) in such denominations as are required for delivery to the Warrantholder, and the Company shall thereupon deliver such certificates to the Warrantholder. If at the time this Warrant is exercised a registration statement is not in effect to register under the Securities Act, the Warrant Shares issuable upon exercise of this Warrant, the Company may place such legends on certificates representing the Warrant Shares to indicate that the Warrant Shares have not been registered and may not be transferred except upon compliance with the registration requirements of the Securities Act of 1933, as amended, and applicable state securities laws or an opinion of counsel to the Company or of counsel reasonably satisfactory to the Company that such registration is not required, or such other legends as may be reasonably required in the opinion of counsel to the Company to permit the Warrant Shares to be issued without such registration. From and after receipt by the Company of the duly executed Subscription Form and the aggregate exercise prices and notwithstanding that certificates in respect of the Warrant Shares may not have been delivered, the Warrantholder shall be considered a shareholder of the Company in respect of the Warrant Shares for all intents and purpose. -2- 3 (c) In case the Warrantholder shall exercise this Warrant with respect to less than all of the Warrant Shares that may be purchased under this Warrant, the Company will execute a new warrant in the form of this Warrant for the balance of such Warrant Shares and deliver such new warrant to the Warrantholder. (d) The Company covenants and agrees that it will pay when due and payable any and all costs, expenses, charges and stock transfer and similar taxes which may be payable in respect of the issue of this Warrant or in respect of the issue of any Warrant Shares. The Company shall not, however, be required to pay any tax imposed on income or gross receipts or any tax which may be payable in respect of any transfer involved in the issuance or delivery of this Warrant or at the time of surrender. ARTICLE II Adjustment of Warrant Shares Purchasable and of Exercise Price The Exercise Price and the number and kind of Warrant Shares shall be subject to adjustment from time to time upon the happening of certain events as provided in this Article II. Section 2.01: Mechanical Adjustments. (a) Anti-Dilution Provisions; Adjustment of Exercise Price. The Exercise Price shall be subject to adjustment from time to time as hereinafter provided. Upon each adjustment of the Exercise Price, the Warrantholder shall thereafter be entitled to purchase, at the Exercise Price resulting from such adjustment, the number of Warrant Shares obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. (b) Exercise Price Adjustment Formulas. If and whenever after the date of this Warrant, the Company shall issue or sell any shares of Common Stock (except as provided in subsection 2.01(h)) for a consideration per share less than 95% of the Market Price on the date of such issuance or sale, then forthwith the Exercise Price shall be reduced to the prices (calculated to the nearest tenth of a cent) determined by multiplying the Exercise Price in effect immediately prior to the time of such issuance or sale by a fraction, the numerator of which shall be (i) the sum of (A) the number of shares of Common Stock outstanding immediately prior to such issuance or sale (assuming the conversion of all securities convertible into shares of Common Stock) multiplied by the Market Price immediately prior to such issuance or sale, and (B) the consideration, if any, received and deemed received by the Company upon such issuance or sale, divided by (ii) the total number of shares of Common Stock outstanding and deemed outstanding immediately after -3- 4 such issuance or sale, and the denominator of which shall be the Market Price immediately prior to such issuance or sale. No adjustment of the Exercise Price, however, shall be made in an amount less than $.01 per share, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which together with any adjustments so carried forward shall amount to $.01 per share or more. (c) Constructive Issuances of Stock; Convertible Securities; Rights and Options; Stock Dividends. For the purposes of subsection 2.01(b) above, the following provisions (i) to (viii), inclusive, shall also be applicable: (i) In case at any time subsequent to the date hereof, the Company shall in any manner grant any rights to subscribe for or to purchase, or any options for the purchase of, shares of Common Stock or any stock or securities convertible into or exchangeable for shares of Common Stock (such convertible or exchangeable stock or securities being hereinafter called "Convertible Securities"), whether or not such rights or options or the right to convert or exchange any such Convertible Securities are immediately exercisable, and the consideration per share for which shares of Common Stock are issued or sold upon the exercise of such Convertible Securities (determined by dividing (A) the total amount, if any, received or receivable by the Company as consideration for the granting of such rights or options, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of such rights or options, plus, in the case of any such rights or options which relate to such Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable upon the issuance or sale of such Convertible Securities (and, if such convertible securities constitute obligations of the Company, the principal amount of such obligations so converted) and upon the conversion or exchange thereof, by (B) the total maximum number of shares of Common Stock issuable upon the exercise of such rights or options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such rights or options) shall be less than 95% of the Market Price determined as of the date of granting such price or options, as the case may be, then the total maximum number of shares of Common Stock issuable upon the exercise of such rights or options (or upon conversion or exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of such rights or options) shall be deemed to be outstanding and to have been issued for such price per share. Except as provided in subsection 2.01(c)(iii) below, no further adjustments of the Exercise Price shall be made upon the actual issuance of such shares of Common Stock or of such Convertible Securities upon exercise of such rights or options or upon the -4- 5 actual issuance of such shares of Common Stock upon conversion or exchange of such Convertible Securities. (ii) In case at any time the Company shall in any manner issue or sell any Convertible Securities, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which shares of Common Stock are issuable upon such conversion or exchange (determined by dividing (A) the total amount received or receivable by the Company as consideration for the issuance or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (B) the total maximum number of shares which would be issuable upon the conversion or exchange of all such Convertible Securities) shall be less than 95% of the Market Price determined as of the date of such issuance or sale, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall (as of the date of the issuance or sale of such Convertible Securities) be deemed to be outstanding and to have been issued for such price per share; except as otherwise specified in subsection 2.01(c)(iii) below, no further adjustments of the Exercise Price shall be made upon the actual issuance of such shares of Common Stock upon conversion or exchange of such Convertible Securities. (iii) If the purchase price provided for in any right or option referred to in subsection 2.01(c)(i), or the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in subsection 2.01(c)(ii), or the rate at which any Convertible Securities referred to in subsections 2.01(c)(i) or (ii) are convertible into or exchangeable for shares of Common Stock, shall change or a different purchase price or rate shall become effective at any time or from time to time (other than under or by reason of provisions designed to protect against dilution) then, upon such change becoming effective, the Exercise Price then in effect at the time of such event shall forthwith be increased or decreased to such Exercise Price as would have been obtained had the rights, options or Convertible Securities still outstanding provided for such changed purchase price, additional compensation or rate of commission or exchange, as the case may be, at the time initially granted, issued or sold. On the expiration of any such option or right or the termination of any such right to convert or exchange such Convertible Securities, the Exercise Price then in effect hereunder shall forthwith be increased to such Exercise Price as would have been obtained at the time of such expiration or termination had such option, right or convertible securities never been issued. If the purchase price provided for in any right or option referred to in subsection 2.01(c)(i), or the additional consideration payable upon the exchange or conversion of any Convertible Securities referred to in subsections 2.01(c)(i) or (ii), or the rate -5- 6 at which any Convertible Securities referred to in subsections 2.01(c)(i) or (ii) are convertible into or exchangeable for shares of Common Stock, shall decrease at any time under or by reason of provisions with respect thereto designed to protect against dilution, then, in the case of the delivery of shares of Common Stock upon the exercise of any such right or option or upon conversion or exchange of any such right or option or upon conversion or exchange of any such Convertible Securities, the Exercise Price then in effect hereunder shall forthwith be decreased to such Exercise Price as would have been obtained had the adjustments made upon issuance of such right or option or Convertible Securities been made upon the basis of the issuance of (and the total consideration computed in accordance with subsections 2.01(c)(i) or (ii), as the case may be, received for) the shares of Common Stock delivered as aforesaid. (iv) In case of the issuance of shares of Common Stock or Convertible Securities of the Company as a dividend or distribution upon any shares of Common Stock of the Company, such shares of Common Stock or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration. (v) In case at any time any shares of Common Stock or Convertible Securities or any rights or options to purchase any such shares of Common Stock or Convertible Securities shall be issued or sold for cash, the consideration received therefor shall be deemed to be the amount payable to the Company therefor, without deduction therefrom of any expenses incurred or any underwriting or selling commissions or concessions paid by the Company in connection therewith or any underwriting or selling discounts allowed by the Company in connection therewith. In case any shares of Common Stock or Convertible Securities or any rights or options to purchase any such shares of Common Stock or Convertible Securities shall be issued or sold for a consideration other than cash, the amount of the consideration other than cash payable to the Company shall be deemed to be the fair value of such consideration as determined by the Board of Directors of the Company, without deduction therefrom of any expenses incurred or any underwriting or selling commissions or concessions paid by the Company in connection therewith or any underwriting or selling discounts allowed by the Company in connection therewith. In case any shares of Common Stock or Convertible Securities shall be issued in connection with any merger of another corporation into the Company, the amount of consideration therefor shall be deemed to be the fair value, as determined by the Board of Directors of the Company, of such portion of the assets of such merged corporation as such Board shall determine to be attributable to such shares of Common Stock, Convertible Securities, rights or options, as the case may be. -6- 7 (vi) In case at any time the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in shares of Common Stock or in Convertible Securities, or (B) to subscribe for or purchase shares of Common Stock or Convertible Securities, then such record date shall be deemed to be the date of the issuance or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right or subscription or purchase, as the case may be. (vii) "Market Price" shall mean, as of any day, the closing sale price of the shares of Common Stock on such day on the New York Stock Exchange or the American Stock Exchange (or if the Common Stock shall not then be listed on either such exchange, the closing sale price on the principal (determined by the highest volume averaged for a period of twenty consecutive business days prior to the day as to which "Market Price" is being determined) national securities exchange (as defined in the Securities Exchange Act of 1934, as amended) on which the Common Stock may then be listed) or, if there shall have been no sales on such exchange or exchanges on such day, the averages of the high and low sales prices of the Common Stock on such day on the NASDAQ National Market System or, if the Common Stock is not included in the NASDAQ National Market System, the average of the bid and asked prices at the end of such day or, if the Common Stock shall not be so listed, the average of the bid and asked prices at the end of the day in the over-the-counter market as reported by NASDAQ or, if the Common Stock is not included on NASDAQ, as reported by the National Quotation Bureau, Inc. or any successor organization, in each such case, averaged for a period of twenty consecutive business days prior to the day as to which "Market Price" is being determined. (viii) The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issuance or sale of shares of Common Stock for the purposes of subsection 2.01(b). (d) Effect of Certain Dividends. In case at any time the Company shall declare a dividend upon the shares of Common Stock payable otherwise than out of earnings or earned surplus (other than in a partial or total liquidation or dissolution of the Company) and otherwise than in shares of Common Stock or Convertible Securities, the Exercise Price in effect immediately prior to the declaration of such dividend shall be reduced by an amount equal, in the case of a dividend in cash, to the amount thereof payable per share of Common Stock or, in the case of any other dividend, to the fair value thereof per share of Common Stock as determined by the Board of Directors of the -7- 8 Company. For the purposes of the foregoing, a dividend other than in cash shall be considered payable out of earnings or earned surplus only to the extent that such earnings or earned surplus are charged an amount equal to the fair value of such dividend as determined by the Board of Directors of the Company. Such reductions shall take effect as of the date on which a record is taken for the purpose of such dividend, or if a record is not taken, the date as of which the holders of record of shares of Common Stock entitled to such dividends are to be determined. As used in this subsection 2.01(d), the term "dividend" shall mean any distribution to the holders of shares of Common Stock. Except as provided in this subsection 2.01(d), no adjustment in the Exercise Price and no change in the number of Warrant Shares so purchasable shall be made pursuant to this Section 2.01 as a result of or by reason of any such dividend. (e) Stock Splits and Reverse Splits. In case at any time the Company shall subdivide its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision shall be proportionately reduced and the number of shares purchasable pursuant to this Warrant immediately prior to such subdivision shall be proportionately increased, and conversely, in case at any time the Company shall combine its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of shares of Common Stock purchasable upon the exercise of this Warrant immediately prior to such combination shall be proportionately reduced. Except as provided in this subsection 2.01(e), no adjustment in the Exercise Price and no exchange in the number of Warrant Shares so purchasable shall be made pursuant to this Section 2.01 as a result of or by reason of any such subdivision or combination. (f) Effect of Reorganization and Assets Sales. If any capital reorganization or reclassification of the capital stock of the Company, or consolidation of the Company with or merger of the Company into another corporation, or the sale of all or substantially all of its assets to another corporation, shall be effected in such a way that holders of shares of Common Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for shares of Common Stock, then, as a condition of such reorganization, reclassification, consolidation, merger or sale, lawful and adequate provision shall be made whereby each holder of Warrants shall thereafter have the right to receive upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock of the Company immediately theretofore receivable upon the exercise of such Warrants, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for a number of outstanding stock of Common Stock equal to the number of shares of such stock immediately theretofore so receivable upon exercise had such reorganization, reclassification, consolidation, merger or sale not taken place, and in any such case appropriate provision shall be made with respect to the rights and interests of such holder to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Exercise Price and of the number of shares issuable upon exercise) shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise of such Warrants. The Company shall not -8- 9 effect any such consolidation, merger or sale unless prior to or simultaneously with the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger, or of the corporation purchasing such assets shall assume by written instrument executed and mailed or delivered to each Warrantholder, the obligation to deliver to such Warrantholder such shares of stock, securities or assets as, in accordance with the foregoing provisions such Warrantholder may be entitled to receive, and containing the express assumption of such successor corporation of the performance and observance of the provisions of this Warrant to be performed and observed by the Company and of all liabilities and obligation of the Company hereunder. (g) Accountants' Certificate. Upon each adjustment of the Exercise Price and upon each change in the number of Warrant Shares, then and in each such case, the Company will promptly obtain a certificate of a firm of independent certified public accountants of recognized standing selected by the Company's Board of Directors, who may be the regular auditors of the Company, stating the adjusted Exercise Price and the new number of Warrant Shares so issuable, or specifying the other shares of stock, securities or assets and the amount thereof receivable as a result of such change in rights, and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. The Company will promptly mail a copy of such accountant's certificate to the Warrantholders, which certificate shall be conclusive evidence of the correctness of the computation with respect to any such adjustment of the Exercise Price and any such change in the number of such Warrant Shares so issuable. (h) No Adjustments Required. Notwithstanding anything herein to the contrary, there shall be no adjustment in the Exercise Price in connection with (i) the grant of any option, or the exercise of any option granted under any employee benefit plan or stock option plan or (ii) upon the exercise of any Convertible Security outstanding on the date of this Warrant including this Warrant. Section 2.02: Notice of Adjustment. Whenever the number of Warrant Shares or the Exercise Price is adjusted as herein provided, the Company shall prepare and deliver to the Warrantholder a certificate signed by its Chairman of the Board, President, any Vice President, Treasurer or Secretary, setting forth the adjusted number of Warrant Shares purchasable upon the exercise of this Warrant and the Exercise Price of such Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which adjustment was made. Section 2.03: No Adjustment for Dividends. Except as provided in Section 2.01 of this Agreement, no adjustment in respect of any cash dividends payable out of earnings or earned surplus shall be made during the term of this Warrant or upon the exercise of this Warrant. -9- 10 Section 2.04: Form of Warrant After Adjustments. The form of this Warrant need not be changed because of any adjustments in the Exercise Price or the number or kind of the Warrant Shares, and any Warrant theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in this Warrant, as initially issued. ARTICLE III Compliance with the Securities Act The Holder acknowledges that the Warrant Shares, in its hands, will be restricted securities which may not be sold or offered for sale in the absence of an effective registration statement under the Securities Act or an opinion of counsel satisfactory to the Company that such registration is not required. With respect to any offer, sale or other disposition of any Warrant Shares, the Holder will give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such Holder's counsel, to the effect that such offer, sale or other distribution may be effected without registration or qualification (under federal law and applicable state law then in effect). Promptly upon receiving such written notice and reasonably satisfactory opinion, if so requested, the Company, as promptly as practicable, shall notify such Holder that such Holder may sell or otherwise dispose of the Warrant Shares, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this Article III that the opinion of counsel for the Holder is not reasonably satisfactory to the Company, the Company shall so notify the Holder promptly after such determination has been made. Each certificate representing the Warrant Shares thus transferred shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with the Securities Act, unless in the opinion of counsel for the Company such legend is not required, in order to ensure compliance with the Securities Act. The Company may issue stop transfer instructions to its transfer agent and registrar in connection with such restrictions. The Warrant Shares are entitled to certain rights of registration as provided in Section 7.2 of the Restructuring Agreement. ARTICLE IV Other Provisions Relating to Rights of Warrantholder Section 4.01: No Rights as Shareholder; Notice to Warrantholder. Nothing contained in this Warrant shall be construed as conferring upon the Warrantholder or his transferees the right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of shareholders for the election of directors of the Company or of any other matter or any rights whatsoever as shareholders of the Company, except to the extent specifically provided for herein; provided, however that the Warrantholder shall be delivered all notices and other communications sent by the Company -10- 11 to its shareholders. Without limiting the foregoing, in case at any time: (1) the Company shall declare any dividend payable in Common Stock or any distribution (other than cash dividends) to the holders of the Common Stock; (2) the Company shall make an offer for subscription pro rata to the holders of its Common Stock of any additional shares of stock of any class or other rights; (3) there shall be any capital reorganization, or reclassification of the capital stock of the Company, or consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another corporation; or (4) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company; then, in any one or more of such cases, the Company shall give notice to the Warrantholder of the date on which (a) the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights, or (b) such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up shall take place, as the case may be. Such notice shall also specify the date as of which the holders of Common Stock of records shall participate in such dividend, distribution or subscription rights, or shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding up as the case may be. Such written notice shall be given not less than 10 days and not more than 90 days prior to the record date on which the Company's transfer books are closed in respect thereto and such notice may state that the record date is subject to the effectiveness of a registration statement under the Securities Act, or to a favorable vote of stockholders, if either is required. Section 4.02: Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms as to indemnity or otherwise as it may in its reasonable discretion impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as, and in substitution for, this Warrant. Section 4.03: Reservation of Shares. (a) The Company covenants and agrees that at all times it shall reserve and keep available for the exercise of this Warrant such number of authorized shares of Common Stock or other securities as are sufficient to permit the exercise in full of this Warrant. (b) The Company shall use its best efforts to maintain or secure the listing of the Warrant Shares upon the securities exchange or automated quotation system, if any, upon which shares of its Common Stock are then listed. (c) The Company covenants that all shares of Common Stock issued on exercise of this Warrant will be validly issued, fully paid, non-assessable and free of preemptive rights. -11- 12 Section 4.04: No Fractional Shares. Anything contained herein to the contrary notwithstanding, the Company shall not be required to issue any fraction of a share in connection with the exercise of this Warrant. In any case where the Warrantholder would, except for the provisions of this Section 4.04, be entitled under the terms of this Warrant to receive a fraction of a share upon exercise of this Warrant and receipt of the Exercise Price, the Company shall not be required to issue any fraction of a share, but rather, will adjust the aggregate Exercise Price for such fraction of a share to which the Warrantholder would otherwise be entitled. ARTICLE V Treatment of Warrantholder Prior to due presentment for registration or transfer of this Warrant, the Company may deem and treat the Warrantholder as the absolute owner of this Warrant (notwithstanding any notation of ownership or other writing hereon) for the purpose of any exercise hereof and for all other purposes of the Company shall not be affected by any notice to the contrary. ARTICLE VI Split-Up, Combination, Exchange and Transfer of Warrant Section 6.01: Split-Up, Combination, Exchange and Transfer of Warrant. Subject to and limited by the provisions of Section 6.02 hereof, this Warrant may be split up, combined or exchanged for another Warrant or Warrants containing the same terms to purchase a like aggregate number of Warrant Shares. If the Warrantholder desires to split up, combine or exchange this Warrant, he shall make such request in writing delivered to the Company and shall surrender to the Company this Warrant and any other Warrants to be so split up, combined or exchanged. Upon any such surrender for a split-up, combination or exchange, the Company shall execute and deliver to the person entitled thereto a Warrant or Warrants, as the case may be, as so requested. The Company shall not be required to effect any split-up, combination or exchange which will result in the issuance of a Warrant entitling the Warrantholder to purchase upon exercise a fraction of a share of Common Stock or a fractional Warrant. The Company may require such Warrantholder to pay a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any split-up, combination or exchange of Warrants. Section 6.02: Restrictions on Transfer. This Warrant may be exercised and this Warrant and the Warrant Shares may not be sold, hypothecated, assigned or transferred (a "Transfer"), except only in accordance with and subject to the provisions of the Securities Act and the rules and regulations promulgated thereunder. The Warrantholder shall have -12- 13 the benefit of the certain registration rights for the Warrant Shares as provided in the Restructuring Agreement. ARTICLE VII Other Matters Section 7.01: Successors and Assigns. All the covenants and provisions of this Warrant shall be binding upon and inure to the benefit of the Company and the Holder and their respective successors and assigns. Section 7.02: Amendments and Waivers. The provisions of this Warrant, including the provisions of this sentence, may not be amended, modified or supplemented, and waiver or consents to departures from the provisions hereof may not be given unless the Company has obtained the written consent of the Holder. The Warrantholder shall be bound by any consent authorized by this Section whether or not certificates representing his Warrant have been marked to indicate such consent. Section 7.03: Counterparts. This Warrant may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Section 7.04: Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware. Section 7.05: Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provisions in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. Section 7.06: Integration/Entire Agreement. This Warrant is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein other than as to registration rights set forth in the Restructuring Agreement as to which the Warrant Shares shall be entitled. This Warrant supersedes all prior agreements and understandings between the parties with respect to such subject matter. Section 7.07: Notices. Any notice, request or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given if personally delivered or mailed by registered or certified mail or overnight courier, postage prepaid, at the respective addresses of the parties as set forth herein. Any party hereto may -13- 14 by notice so given change its address for future notice hereunder. Notice shall conclusively be deemed to have been given when delivered in the manner set forth above and shall be deemed to have been received when delivered. Copies of all notices to the Company shall be given to: Reid & Priest LLP 40 West 57th Street New York, New York 10019 Attention: Leonard Gubar and all notices to the Warrantholder shall be given to: Atlantic Employers Insurance Company 1601 Chestnut Street TLP 44 Two Liberty Place Philadelphia, PA 19192 Attention: James R. Stallard, Esq. Notice or demand pursuant to this Warrant to be given or made by the Warrantholder to or on the Company shall be sufficiently given or made if sent by first class mail or overnight courier, postage prepaid, to the Warrantholder at his last known address as it shall appear on the books of the Company. Section 7.08: Headings. The Article and Section headings herein are for convenience only and are not part of this Warrant and shall not affect the interpretation thereof. IN WITNESS WHEREOF, this Warrant has been duly executed by the Company under its corporate seal as of the 1st day of March, 1996_. WARNER INSURANCE SERVICES, INC. By: ------------------------------------------ Name: Alfred J. Moccia Title: President and Chief Executive Officer (Corporate Seal) ATTEST: - -------------------------------- Secretary -14- 15 ASSIGNMENT (To be executed only upon assignment of Warrant Certificate) For value received, ____________________________ hereby sells, assigns and transfers unto ________________________ the within Warrant Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint _____ ____________________ attorney, to transfer said Warrant Certificate on the books of the within-named Company with respect to the number of Warrants set forth below, with full power of substitution in the premises:
Name(s) of Assignee(s) Address No. of Warrants ----------- ------- ---------------
And if said number of Warrants shall not be all the Warrants represented by the Warrant Certificate, a new Warrant Certificate is to be issued in the name of said undersigned for the balance remaining of the Warrants represented by said Warrant Certificate. Dated: ________________, _____. ----------------------------------------------------- Note: The above signature should correspond exactly with the name on the face of this Warrant Certificate. 16 SUBSCRIPTION FORM (To be executed upon exercise of Warrant) WARNER INSURANCE SERVICES, INC. The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant Certificate for, and to purchase thereunder, shares of Common Stock, as provided for therein, and tenders herewith payment of the purchase price in full in the form of cash or a certified or official bank check in the amount of $ . Please issue a certificate or certificates for such Common Stock in the name of, and pay any cash for any fractional share to: Name -------------------------------- (Please Print Name, Address and Social Security No.) Signature --------------------------- Note: The above signature should correspond exactly with the name on the first page of this Warrant Certificate or with the name of the assignee appearing in the assignment form below. And if said number of shares shall not be all the shares purchasable under the within Warrant Certificate, a new Warrant Certificate is to be issued in the name of said undersigned for the balance remaining of the shares purchasable thereunder less any fraction of a share paid in cash. EX-3 4 JOINT FILING AGREEMENT BETWEEN CIGNA & ATLANTIC 1 JOINT FILING AGREEMENT In accordance with Rule 13d-1(f) under the Securities Exchange Act of 1934, as amended, the persons named below agree to the joint filing on behalf of each of them a Statement on Schedule 13D (including amendments thereto) with respect to the Common Stock, $0.01 par value, of Warner Insurance Services, Inc., a Delaware corporation, and further agree that this Joint Filing Agreement be included as an exhibit to such joint filings. In evidence thereof, the undersigned, being duly authorized, hereby execute this Agreement this 11th day of March, 1996. CIGNA CORPORATION By: /s/ Carol J. Ward -------------------------------------- Name: Carol J. Ward Title Corporate Secretary ATLANTIC EMPLOYERS INSURANCE COMPANY By: /s/ Richard A. Hinckley, Jr. -------------------------------------- Name: Richard A. Hinckley, Jr. Title Vice President -----END PRIVACY-ENHANCED MESSAGE-----