ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") dated September 22, 1997,
is made and entered into by and among Michigan Educators Insurance Agency, Inc.,
a Michigan corporation ("MEIA I"), Michigan Educators Life Insurance Agency,
Inc., a Michigan corporation ("MELA," and together with MEIA I, the "Agency"),
MEEMIC Insurance Services Corporation, a Michigan corporation ("XXXX XX"), and
Professionals Insurance Company Management Group, a Michigan corporation
("Professionals").
R E C I T A L S
The Agency desires to sell and transfer to XXXX XX, and XXXX XX desires to
purchase and acquire from the Agency, the Assets (as defined below), pursuant to
the terms and conditions set forth in this Agreement.
Pursuant to the terms and conditions set forth in this Agreement, Mutual
(as defined below) and Professionals will guarantee certain payments to be made
by XXXX XX to the Agency.
Therefore, in consideration of the representations, warranties, covenants
and agreements contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Agency, XXXX
XX and Professionals, intending to be legally bound, hereby agree as follows.
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINITIONS.
(a) When used in this Agreement, the following terms shall have the
following meanings:
"Acquired Receivables" means those items described in clause (h) of
the definition of "Assets."
"Affiliate" of any Person means any Person directly or indirectly
controlling, controlled by or under common control with any such Person and any
officer, director or controlling person of such Person. A Person shall be
deemed to control another Person if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such other Person by
ownership of voting securities, contract or otherwise.
"Agency" means Michigan Educators Insurance Agency, Inc. and Michigan
Educators Life Insurance Agency, Inc.
"Aggregate Payment" means, as of any applicable September 1, the sum
of: (i) $22,500,000, plus (ii) all of the Installment Payments made pursuant to
Section 2.2(b) and Section 2.12 as of such September 1 (or made subsequent to
such September 1 by reason of resolution of any Dispute Notice given pursuant to
Section 2.11), includes all Guaranteed Payments made by Mutual and Professionals
pursuant to the Mutual Guaranty and the Professionals Guaranty, respectively,
and includes all sums paid into an interest-bearing escrow pursuant to Section
13.3(b), and all amounts withheld by Professionals or XXXX XX pursuant to their
right of offset under Section 12.2(d).
"Applicable Policies" means all policies of life insurance and all
policies of property and casualty insurance issued by Mutual and other insurers
in Michigan with respect to which XXXX XX is or, by reason of Section 8.6,
should properly be the agent.
"Assets" means all of the assets, properties and rights of the Agency
(other than Excluded Assets), including:
(a) all contracts as described on the attached SCHEDULE 1.1(a), which
shall include all contracts from which the Agency derived
premiums in excess of $100,000 (including all contingency
commissions) in 1996, and the Insurance Agency Agreements (the
"Assumed Contracts");
(b) all of the Agency's tangible personal property (the "Tangible
Assets"), including all warranties and indemnities with respect
to the Tangible Assets;
(c) all of the Intellectual Property of the Agency;
(d) all sales literature, promotional literature and other selling
and advertising material used by the Agency and a list of all
customers and suppliers of the Agency;
(e) all books, records, ledgers and other documents pertaining to the
Assets, Assumed Liabilities and/or the operation of the Business;
(f) all assignable third party warranties and guarantees with respect
to any and all of the Assets;
(g) all franchises, approvals, permits, licenses, orders,
registrations,
certificates, variances, tax abatements and other similar permits
or rights (including regulatory approvals obtained from any
Governmental Authority and all pending applications therefor)
relating to the Business (collectively, the "Permits");
(h) all accounts and notes receivable relating to the Business,
including those due from commissions and other payments due to
the Agency from Mutual with respect to policies originated on or
after the Closing Date (the "Acquired Receivables");
(i) all goodwill of the Business as a going concern; and
(j) all telephone numbers used in connection with the Business.
"Assumed Contracts" means those items described in clause (a) of the
definition of "Assets."
"Business" means the lines of business and operations as presently
conducted by the Agency, including the property and casualty insurance lines of
MEIA I and the life insurance line of MELA.
"Change of Control" means, with respect to any Person, the sale,
transfer or other disposition of substantially all of the assets of such Person
to another Person not an Affiliate of such first Person, or the merger,
consolidation, recapitalization, reorganization, or other business combination
of such Person whereby 30% or more of the combined voting power entitled to vote
generally in the election of directors (or their equivalent) of such Person are
sold or otherwise transferred to another "person" or "group" as those terms are
defined in Section 13(d) or Section 14(d) of the Securities Exchange Act of
1934, as amended, and where such person or group is not an Affiliate of such
first Person. Change of Control shall also mean the liquidation or dissolution
of such Person but shall not include the proposed merger between Professionals,
PICOM and Physicians Protective Trust Fund of Coral Gables, Florida. Change of
control shall also not include a Demutualization.
"Code" means the Internal Revenue Code of 1986, as amended.
"Cumulative Written Premiums" means, with respect to any applicable
date, the direct premiums in respect of Applicable Policies written through (or
which, by reason of Section 8.6, should properly be written through) XXXX XX
plus any additional premiums arising from endorsements to Applicable Policies,
and minus any return premiums arising from any cancellations or endorsements of
Applicable Policies, all for the period commencing October 1, 1997, or the
Closing Date, whichever occurs earlier, and ending on July 13 immediately
preceding such applicable date. Cumulative Written Premiums shall also include,
with respect to each such period, an amount equal to 6.67 multiplied by actual
commissions earned by XXXX XX in respect of annuity contracts
written through (or which, by reason of Section 8.6, should properly be written
through) XXXX XX for the same period.
"Demutualization" means a demutualization of Mutual pursuant to which
Mutual's eligible members receive subscription rights to purchase capital stock
under any of the conversion mechanisms permitted by M.C.L. 500.5905 (c)(i)
according to the provisions of the plan of conversion which is required to be
filed with the Michigan Insurance Bureau pursuant to M.C.L. 500.5905.
"Xxxxxxx Money Deposit" means the $3,000,000 deposited into the Escrow
Account by Professionals on January 10, 1997.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" means: (i) the Agency's cash, cash equivalents,
refundable Taxes and accounts and notes receivable (other than the Acquired
Receivables); (ii) the Agency's interest in The Bellwether Group, L.L.C.;
(iii) the Agency's insurance policies; (iv) the Agency's corporate seal(s),
minute book(s), stock book(s) and stock ledger(s); and (v) the other assets,
properties and rights described on the attached SCHEDULE 1.1(b).
"Governmental Authority" means any foreign, federal, state, regional
or local authority, agency, body, court or instrumentality.
"Installment Payments" means the payments to be made by XXXX XX
(certain of which are guaranteed by Mutual and Professionals) to the Agency
pursuant to Section 2.2(b)(i)-(iv) and to the Agency's shareholders pursuant to
Section 2.12.
"Insurance Agency Agreements" means any agreement pursuant to which
either MEIA I or MELA serves as an agent or sub-agent for an insurance company,
including any such agreement with Mutual.
"Intellectual Property" means any patent, trademark, service xxxx,
design, logo, trade name (including the trade names "Michigan Educators
Insurance Agency" and "Michigan Educators Life Insurance Agency"), copyright,
license, process, design, formula, computer program, trade secret, invention,
label, slogan, drawing, design, technology, research and development,
proprietary know-how and information and other intellectual property rights used
in connection with the Business by either MEIA I or MELA and all registrations
and applications for registration of the foregoing.
"IRS" means the Internal Revenue Service.
"Leased Property" means the real property located at 000 X. Xxxxxxxx
Xxxx, Xxxxxx Xxxxx, Xxxxxxxx (including all buildings, improvements and
structures
located thereon and all appurtenances belonging thereto) of which the Agency is
the lessee.
"Letter of Intent" means the letter of intent dated December 31, 1996,
made and entered into by and between Professionals and the Agency.
"Liabilities" means any and all claims, debts, liabilities,
commitments and obligations, whether as primary obligor or guarantor or
otherwise, and whether accrued or fixed, absolute or contingent, known or
unknown, matured or unmatured, including those arising under any law, action or
governmental order or those arising under any contract, agreement, arrangement,
commitment, undertaking or otherwise.
"Lien" means any lien, easement, adverse claim, charge, encumbrance,
security interest, mortgage, lease, restriction, right of way, license,
condition, covenant or other title defect, restriction or matter of any kind
affecting title.
"Material Adverse Effect" means, with respect to any Person, a
material adverse effect on (i) the condition (financial or otherwise), business,
reserves, net worth, assets, properties or operations of such Person or
(ii) such Person's ability to consummate the transactions contemplated hereby.
"MEIA I" means Michigan Educators Insurance Agency, Inc.
"XXXX XX" means MEEMIC Insurance Services Corporation, a wholly-owned
subsidiary of Mutual.
"MELA" means Michigan Educators Life Insurance Agency, Inc.
"Minimum Cumulative Payment" means, with respect to September 1 of
each of 1998 through 2004, inclusive, the amount set forth next to such date in
the table below:
September 1, 1998 $23,500,000
September 1, 1999 24,500,000
September 1, 2000 25,500,000
September 1, 2001 28,500,000
September 1, 2002 32,500,000
September 1, 2003 37,500,000
September 1, 2004 43,000,000
"Multiemployer Plan" means any multiemployer plan within the meaning
of Section 3(37) of ERISA.
"Mutual" means Michigan Educational Employees Mutual Insurance
Company, a Michigan mutual insurance company.
"Net Income" means the net income of the Agency, before income taxes.
"Noncompetition Agreements" means the Noncompetition Agreements
between Professionals and the shareholders of the Agency and between
Professionals and the Agency in substantially the form attached hereto as
EXHIBIT 1.1(c).
"Permits" means those items described in clause (g) of the definition
of "Assets."
"Person" means an individual, corporation, partnership, limited
liability company, trust, organization, association, governmental agency or body
or other entity.
"PICOM" means PICOM Insurance Company, a subsidiary of Professionals.
"Present Value of the Unpaid Purchase Price" means, as of any date on
which any remittance is made pursuant to Section 2.6 (or Section 2.12(c)(v), the
present value of the Purchase Price not theretofore paid to the Agency, if any,
which for purposes of Section 2.6 and Section 2.12(c)(v) shall be established as
$45,000,000 ($43,000,000 payable pursuant to the schedule included in the
definition of Minimum Cumulative Payment and a $2,000,000 Bonus payable on
September 1, 2004) less the Aggregate Payment made to date (which shall be
subtracted from the foregoing schedule in chronological order), using a discount
rate of 7% per annum, compounded on an actual/365 day basis. For example, if a
cash-out option is exercised on October 3, 2001, and as of September 1, 2001, an
Aggregate Payment of $35,000,000 had been paid, the following schedule would be
used for purposes of a present value calculation:
September 1, 2002 0 ($32,500,000 - $35,000,000)
September 1, 2003 $2,500,000 ($37,500,000 - $35,000,000)
September 1, 2004 $5,500,000 ($43,000,000 - $37,500,000)
September 1, 2004 $2,000,000 (Bonus)
"Professionals" means Professionals Insurance Company Management
Group.
"Related Agreements" means the Escrow Agreement, the Subscription
Agreement, the Noncompetition Agreements, the Mutual Guaranty, the Professionals
Guaranty, the Releases, the Liquidating Trust Agreement, the Assignment and
Assumption Agreements and all other agreements referred to herein which are
necessary for the consummation of the transactions contemplated hereby.
"Releases" means the releases executed by the Agency, its
Affiliates and each of its directors, officers and shareholders in favor of
XXXX XX, Mutual, Professionals and PICOM, and their respective Affiliates,
representatives, advisors, attorneys and accountants in substantially the
form attached hereto as EXHIBIT 1.1(d).
"Scale-Up Amount" means, as of any date written notice is given to the
Agency of an early payment of the Purchase Price by XXXX XX pursuant to Section
2.5, the amount set forth with respect to such date in the table below:
Closing Date through August 31, 2000, inclusive $1,000,000
September 1, 2000 through August 31, 2001, inclusive 1,500,000
September 1, 2001 through September 1, 2002, inclusive 2,000,000
provided that, from and after a Demutualization, the Scale-Up Amount shall be
$2,000,000.
"Subscription Agreement" means the Subscription Agreement among Mutual
and XXXX XX in substantially the form attached hereto as EXHIBIT 1.1(e).
"Tangible Assets" means those items described in clause (b) of the
definition of "Assets."
"Tax" and "Taxes" means all federal, state, local, foreign and other
taxes and excess profits charges or assessments caused to be paid by a
Governmental Authority which are reasonably attributable to a period prior to
the Closing Date, including, income, estimated income, business, occupation,
franchise, property, sales, use, employment, excise, premium or withholding
taxes and privilege fees, including interest, penalties, assessments, additions
and deficiencies in connection therewith which are imposed by any law or
regulation in effect on or before the Closing Date.
"To the best of the Agency's knowledge" means the actual knowledge of
Xxxx X. Xxxx, Xxx X. Xxxxx, Xxxxxxx Xxxxxxxxx, Xxxxx Xxxxxx, Xxxx Xxxxx and all
of the Agency's directors, after reasonable inquiry.
"To the best of Professionals' knowledge" means the actual knowledge
of Xxxxxx X. Xxxxx, R. Xxxxx Xxxxxxx, Xxx Xxxxx and all of Professionals'
directors, after reasonable inquiry.
(b) When used in this Agreement, the following terms shall have the
meanings set forth in the applicable Section reference below:
"AAA" -- Section 12.2(h).
"Agency Agreements" -- Section 3.6.
"Annual Calculation Date" -- Section 2.11(a).
"Annual Installment Payment Date" -- Section 2.2(b).
"Assignment and Assumption Agreement" -- Section 2.12(b).
"Assumed Liabilities" -- Section 2.8.
"Balance Sheet" -- Section 3.5(a).
"Balance Sheet Date" -- Section 3.5(a).
"Bonus" -- Section 2.4.
"Claim" -- Section 12.2(d).
"Claimant" -- Section 12.2(d).
"Closing" -- Section 6.1.
"Closing Date" -- Section 6.1.
"Dispute Notice" -- Section 2.11(a).
"Earn-out Period" -- Section 8.6.
"Employee of the Business" -- Section 3.14.
"Escrow Account" -- Section 2.9.
"Escrow Agent" -- Section 2.9.
"Escrow Agreement" -- Section 2.9.
"Guaranteed Payments" -- Section 2.3.
"Indemnitor" -- Section 12.2(d).
"Inter-Creditor Agreement" -- Section 2.3.
"Interim Financial Statements" -- Section 3.5(b).
"Interim Period" -- Section 7.1.
"Liquidating Trust Agreement" -- Section 2.12(a).
"Mutual Guaranty" -- Section 2.3.
"Notices" -- Section 13.1.
"Plans" -- Section 3.16(a).
"Professionals Guarantee" -- Section 2.3.
"Professionals' Reports" -- Section 4.4(a).
"Pro-Rata" -- Section 2.12(b).
"Purchase Price" -- Section 2.2(a).
"Releasors" -- Section 7.9(c).
"Required Licenses" -- Section 3.10.
"SEC" -- Section 4.4(a).
"Start Date" -- Section 8.4(a).
"Transitioned Employee" -- Section 8.4(a).
1.2 CERTAIN RULES OF CONSTRUCTION. For purposes of this Agreement:
(a) The words "herein," "hereof" and "hereunder," and words of
similar import, refer to this Agreement as a whole and not any particular
provision of this Agreement, and references to Articles, Sections, Exhibits
and/or Schedules, and similar references, are to Articles or Sections of, or
Exhibits or Schedules to, this Agreement unless otherwise specified.
(b) Unless the context otherwise requires: (i) the singular includes
the plural, and VICE VERSA; (ii) all definitions and references to an agreement,
instrument or document shall mean such agreement, instrument or document
together with all exhibits and schedules thereto and any and all amendments,
supplements or modifications thereto as the same may be in effect at the time
such definition or reference is applicable for any purpose; (iii) all references
to any Person shall include
such Person's successors and permitted assigns; and (iv) the term "including"
means including, without limitation.
(c) Accounting terms used herein and not otherwise defined herein
shall have the meanings attributed to them under generally accepted accounting
principles.
ARTICLE II
PURCHASE, SALE AND ASSUMPTION
2.1 PURCHASE AND SALE. Subject to the terms and conditions set forth in
this Agreement, the Agency shall sell, convey and assign to XXXX XX (or cause to
be sold, conveyed and assigned to XXXX XX), and XXXX XX shall purchase,
effective on the Closing Date, the Assets, free and clear of all Liens, for the
consideration set forth in Section 2.2.
2.2 PURCHASE PRICE; PAYMENT OF THE PURCHASE PRICE.
The consideration to be paid to the Agency for the Assets (the "Purchase Price")
shall be paid as follows, subject to adjustments as provided for in this
Article II:
(a) On the Closing Date, XXXX XX shall remit the sum of $22,500,000,
less any adjustments pursuant to Section 2.13, to the Agency by wire transfer in
immediately available funds according to wire transfer instructions provided to
XXXX XX by the Agency in writing prior to the Closing:
(b) On September 1 of the years 1998 through 2004, inclusive (or the
first business day thereafter which is not a bank holiday if September 1 is
either not a business day or is a bank holiday) (each such September 1, an
"Annual Installment Payment Date"), XXXX XX shall remit the Installment Payment
to be made on such Annual Installment Payment Date to the Agency, the amount of
which Installment Payment shall be determined and paid as follows:
(i) on each Annual Calculation Date, XXXX XX shall compare
3.75% of the Cumulative Written Premiums to the Minimum Cumulative
Payment with respect to the September 1 next succeeding such Annual
Calculation Date;
(ii) if 3.75% of Cumulative Written Premiums is less than the
applicable Minimum Cumulative Payment, XXXX XX shall remit to the
Agency an amount, which amount (including any Guaranteed Payments)
shall equal (A) the Minimum Cumulative Payment applicable for that
year less (B) the Aggregate Payment to date (each such remittance to
be an "Installment Payment");
(iii) if 3.75% of Cumulative Written Premiums is more than the
applicable Minimum Cumulative Payment, XXXX XX shall remit to the
Agency an amount, which amount shall equal (A) 3.75% of Cumulative
Written Premiums less (B) the Aggregate Payment to date (each such
remittance to be an "Installment Payment"); and
(iv) remittance of Installment Payments shall be made by wire
transfer of immediately available funds according to wire transfer
instructions provided to XXXX XX by the Agency in writing at least
five business days before such remittances are to be made.
2.3 GUARANTIES. Mutual shall guarantee payment of the Installment
Payments payable under Section 2.2(b)(ii) to be made on the Annual Installment
Payment Date in each of the years 1998 through 2000, inclusive, as provided in
the Agreement of Guaranty attached hereto as Exhibit 2.3(a) (the "Mutual
Guaranty"). Professionals shall guarantee payment of the Installment Payments
payable under Section 2.2(b)(ii) on the Annual Installment Payment Date in years
2001 through 2004, inclusive, and the other consideration payable to the Agency
in the years 1998 through 2004, inclusive, pursuant to Sections 2.4, 2.5, 2.6
and 2.7 as provided in the Agreement of Guaranty attached hereto as EXHIBIT
2.3(b) (the "Professionals Guaranty"). Payments made to the Agency pursuant to
the Mutual Guaranty and/or the Professionals Guaranty (regardless of whether
such remittances are made to the Agency by Mutual, Professionals or XXXX XX)
shall be referred to as "Guaranteed Payments." Neither Mutual nor Professionals
shall have any obligation to make MEIA II's Installment Payments except as set
forth in the Mutual Guaranty and the Professionals Guaranty, respectively. As
among one another, XXXX XX, Mutual and Professionals shall remit and reimburse
Guaranty Payments as provided in the Inter-Creditor Agreement attached hereto as
EXHIBIT 2.3(c) (the "Inter-Creditor Agreement").
2.4 BONUS. On September 1, 2004 (or the first business day thereafter
which is not a bank holiday if September 1 is either not a business day or is a
bank holiday), Professionals shall pay to the Agency a bonus (the "Bonus") equal
to $2,000,000 less, on a dollar for dollar basis, the amount by which 3.75% of
Cumulative Written Premiums, as of such September 1, is less than or greater
than $43,000,000; PROVIDED that the Bonus cannot be less than zero. Such Bonus
shall be remitted to the Agency by wire transfer of immediately available funds
according to wire transfer instructions provided by the Agency in writing to
Professionals at least five business days before such remittance is to be made.
2.5 EARLY PAYMENT OF PURCHASE PRICE. At any time on or prior to September
1, 2002, upon 30 days prior written notice to the Agency, XXXX XX may pay to the
Agency, or Professionals may cause XXXX XX to pay to the Agency, an amount
equal to the excess, if any, of $43,000,000, plus the Scale-Up Amount, over the
Aggregate Payment as of the September 1 immediately preceding such date. Any
such amount shall be payable as provided in Section 2.12 of this Agreement.
Such early payment of Purchase Price shall be remitted to the Agency by wire
transfer of immediately available funds according to wire transfer instructions
provided in writing by the Agency to XXXX XX at least five business days before
such remittance is to be made. Receipt of the consideration contemplated by
this section shall extinguish the right to receive any further payments pursuant
to this Article II.
2.6 CASH-OUT OPTION. Within two years of the closing of a Demutualization
and upon 30 days' prior written notice to XXXX XX, the Agency may cause XXXX XX
to remit to the Agency an amount equal to the Present Value of the Unpaid
Purchase Price. Any such remittance shall be made by wire transfer of
immediately available funds according to wire transfer instructions provided in
writing to XXXX XX by the Agency, at least five business days before such
payment is to be made. Receipt of the consideration contemplated by this
section shall extinguish the right to receive any further payments pursuant to
this Article II.
2.7 CASH-OUT REQUIREMENT. Upon the occurrence of a Change of Control with
respect to (a) Professionals, (b) Mutual (other than a Demutualization and other
than any Change of Control immediately following which Mutual is an Affiliate of
Professionals), (c) any Affiliate of Professionals which "controls," as such
term is defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended, Mutual (other than any Change of Control immediately following which
Mutual is an Affiliate of Professionals) or (d) XXXX XX (other than any Change
of Control immediately following which XXXX XX is an Affiliate of
Professionals), XXXX XX shall remit to the Agency an amount equal to the excess,
if any, of $45,000,000 over the Aggregate Payment made to date. Any such
remittance shall be made by XXXX XX to the Agency by wire transfer of
immediately available funds according to wire transfer instructions provided to
XXXX XX by the Agency in writing at least five business days before such
remittance is to be made. Receipt of the consideration contemplated by this
Section shall extinguish the right to receive any further payments pursuant to
this Article II.
2.8 LIABILITIES. Except for obligations under the Assumed Contracts, the
Agency's obligations to its solicitors as described on the attached
Schedule 2.8(a) and all of the Agency's accrued charges for employee benefits,
but only to the extent described and for the amounts set forth on the attached
Schedule 2.8(b) (which Schedule shall be updated as of the Closing Date at
Closing) (collectively, the "Assumed Liabilities"), XXXX XX is not assuming, and
shall not be liable for, any of the Agency's Liabilities or Taxes of any nature
or kind whatsoever, whether existing now or as of the Closing Date or
thereafter. All of such Liabilities or Taxes, including any obligations to
former officers, directors or shareholders and any employee salaries and benefit
costs incurred or accrued prior to the Closing, shall be solely those of the
Agency. At or prior to the Closing, the Agency shall repay any sums it owes to
Mutual.
2.9 ESTABLISHMENT OF ESCROW ACCOUNT. On January 10, 1997, Professionals
deposited the Xxxxxxx Money Deposit into an account (the "Escrow Account") with
Capital National Bank (the "Escrow Agent") pursuant to an agreement in the form
attached hereto as EXHIBIT 2.9 (the "Escrow Agreement"). At the Closing, the
Agency and PICOM shall deliver to the Escrow Agent executed instructions
authorizing the Escrow Agent to disburse the Xxxxxxx Money Deposit (including
all interest accrued thereon) to PICOM. In the event the Closing does not occur
prior to December 31, 1997, the Escrow Agent shall make disbursements from the
Escrow Account in accordance with the Escrow Agreement.
2.10 ALLOCATION OF PURCHASE PRICE. The consideration contemplated by
Section 2.2 shall be allocated for all purposes (including for financial
accounting and tax reporting) as set forth on the attached Schedule 2.10.
XXXX XX and the Agency will file their respective tax returns and forms in a
manner that is consistent with such allocation. MEIA I, MELA, XXXX XX and
Professionals acknowledge that, notwithstanding the manner in which such
consideration is allocated as set forth on Schedule 2.10 or otherwise, no
additional consideration will be paid for the Assets.
2.11 CALCULATION OF CUMULATIVE WRITTEN PREMIUMS.
(a) On or before August 15 of each year in which Installment Payments
are to be made (or the first business day thereafter if August 15 is not a
business day) (the "Annual Calculation Date"), XXXX XX shall calculate the
Cumulative Written Premiums, in accordance with generally accepted accounting
principles (though "GAAP" financial statements need not be prepared)
consistently applied. With respect to any applicable year, XXXX XX shall
assume, for purposes of such calculation, that 50% of the premiums in respect of
Applicable Policies for July relate to the first 13 calendar days of such July
and 50% relate to in the last 18 days of such July. XXXX XX shall provide to
the Agency a copy of its calculation of Cumulative Written Premiums, together
with its calculation of the Installment Payment, if any, to be made to the
Agency on the Annual Installment Payment Date next succeeding such Annual
Calculation Date, certified by an executive officer of XXXX XX as being true and
correct. The Agency shall have until the October 14 next succeeding such Annual
Calculation Date to notify XXXX XX in writing of any objections thereto,
reasonably and sufficiently describing the basis for any such objections (a
"Dispute Notice").
(b) In the event a Dispute Notice is received by XXXX XX on or prior
to the date an Installment Payment is to be made, XXXX XX shall only be
obligated to pay that portion of such Installment Payment that is not the
subject of such Dispute Notice. Likewise, Mutual and Professionals shall only
be obligated to pay that portion of such Installment Payment that is not the
subject of such Dispute Notice under the terms of the Mutual Guaranty and the
Professionals Guaranty, respectively, until resolution of such Dispute Notice.
In the event a Dispute Notice is received by XXXX XX, XXXX XX shall ensure that
Mutual (in the years 1998 to 2000, inclusive) and Professionals (in the
years 2001 to 2004, inclusive) each promptly receive a copy of the Dispute
Notice.
(c) XXXX XX and the Agency shall each use reasonable efforts to
resolve any objections set forth in the Dispute Notice. If XXXX XX and the
Agency shall be unable to resolve any objections set forth in the Dispute
Notice within 15 days following receipt thereof by XXXX XX, the Agency and XXXX
XX shall promptly select a "Big 6" independent auditing firm, which shall not be
the general auditor of any of the Agency or XXXX XX, Mutual and Professionals,
to resolve any objections set forth in the Dispute Notice. If the Agency and
XXXX XX are unable to promptly agree on the selection of any such firm, such
firm shall be selected by lot. The resolution of the Dispute Notice by such
firm shall be conclusive and binding on XXXX XX and the Agency.
(d) If, in its resolution, the auditing firm concludes that the
Cumulative Written Premiums exceed the amount calculated and certified by XXXX
XX, XXXX XX shall pay all fees and expenses of such firm. If, in its
resolution, the auditing firm concludes that the Cumulative Written Premiums are
less than or equal to the amount calculated and certified by XXXX XX, the Agency
shall pay all fees and expenses of such firm.
(e) If the Installment Payment to be made on any such Annual
Installment Payment Date, as finally determined (whether by mutual agreement or
by an independent auditing firm) shall be greater than the Installment Payment
made on such Annual Installment Payment Date, XXXX XX shall promptly pay to the
Agency such excess, plus interest thereon at a rate of 7% per annum from such
Annual Installment Payment Date until the date payment thereof shall be made.
If the Installment Payment to be made on any Annual Installment Payment Date, as
finally determined (whether by mutual agreement or by an independent auditing
firm), shall be less than the Installment Payment made on such Annual
Installment Payment Date, the Agency shall promptly pay to XXXX XX such
deficiency plus interest thereon at a rate of 7% per annum from such Annual
Installment Payment Date until the date payment thereof shall be made.
(f) XXXX XX shall make available to the Agency and its agents and
representatives and any independent auditing firm selected to resolve any
objections set forth in the Dispute Notice, at reasonable times and upon
reasonable notice, the workpapers and other supporting documentation used by
XXXX XX in preparation of the foregoing calculations.
2.12 ASSIGNMENT OF RIGHTS TO INSTALLMENT PAYMENTS.
(a) Not later than the first anniversary of the Closing Date, MEIA I
and MELA shall concurrently (and not other than concurrently) assign to a
liquidating trust created pursuant to a Liquidating Trust Agreement in
substantially the form attached hereto as EXHIBIT 2.12(a) (the "Liquidating
Trust Agreement"), among other things, all of: (i) the consideration delivered
pursuant to Section 2.2(a) (or any portion thereof remaining after payment of
any of the expenses and/or liabilities of the Agency); (ii)
their respective rights in and to the Installment Payments to be made pursuant
to Section 2.2(b);(iii) the other consideration contemplated by Sections 2.4,
2.5, 2.6 and 2.7, and (iv) the rights of the Agency with respect to the
guarantee given by Professionals in favor of the Agency under the Professionals
Guaranty and the guarantee given by Mutual in favor of the Agency under the
Mutual Guaranty; PROVIDED that such consideration and rights shall be assigned
subject to (and not other than subject to), among other things, the obligations
of MEIA I, MELA and their respective successors and assigns set forth in this
Agreement, including but not limited to Sections 7.4, 7.9, 7.10 and 12.2.
Except as contemplated by this Section 2.12(a), the Agency shall not distribute
any of such consideration or rights, or any earnings thereon, any accretions
therein, any proceeds thereof or any substitutions therefor, to any of the
Agency's shareholders or any other Person prior to the eighth anniversary of the
Closing Date other than in such amounts and at such times as the Agency shall in
good faith determine to be necessary to satisfy any federal, state or local tax
liability of any of the Agency's shareholders directly related to any election
by the Agency to be treated as an S corporation (as defined in Section 1361(a)
of the Code).
Pursuant to the terms of the Liquidating Trust Agreement, the Trust (as
defined by the Liquidating Trust Agreement) may thereafter assign its assets,
and rights to the shareholders of the Agency on a pro-rata basis as described
therein in accordance with the terms of an Assignment and Assumption Agreement
in substantially the form attached hereto as EXHIBIT 2.12(b). The Trust may
only exercise such assignment and assumption option with the same effective date
for at least 22 shareholders unless otherwise approved in writing by XXXX XX
and Professionals. Such assignment and assumptions shall only become effective
with respect to XXXX XX upon thirty days prior written notice thereof,
accompanied by fully completed and executed copies of the applicable Assignment
and Assumption Agreements for each shareholder.
(b) "Pro-Rata" means, with respect to each shareholder of MEIA I and
MELA as of the date of the assignment and assumption, such shareholder's
percentage ownership of the common stock of MEIA I and MELA held or owned of
record by all shareholders of MEIA I and MELA as of such date, which figure
shall be included in the Assignment and Assumption Agreement provided to XXXX
XX. MEIA I and MELA each agree that such percentage ownership shall be
determined as the undivided percentage interest of such shareholder as set forth
in SCHEDULE 2.03 of the Liquidating Trust Agreement.
(c) In the event of an assignment and assumption by the Trust to the
shareholders pursuant to Section 2.12(a), the provisions of Section 2.2(b), 2.3,
2.4, 2.5, 2.6, 2.7 and 2.11 shall be modified as follows; provided, however,
that if following any such assignment and assumption any shareholder(s) have not
fully completed and executed the Assignment and Assumption Agreement, such
shareholder's Pro-Rata share, as determined below, shall continue to be paid to
the Trust until such time as the fully completed and executed Assignment and
Assumption Agreement(s) are received by XXXX XX.
(i) Section 2.2(b) shall read in its entirety as follows:
(i) Until such time as any of the shareholders of the Agency
exercises his or her individual cash out option as provided in Section
2.6 (as restated by Section 2.12(c)(v)), on September 1 of the years
1998 through 2004, inclusive (or the first business day thereafter
which is not a bank holiday if September 1 is either not a business
day or is a bank holiday) (each such September 1, an "Annual
Installment Payment Date"), XXXX XX shall remit the Installment
Payments to be made to the Agency's shareholders, the amount of which
Installment Payments shall be determined and paid as follows:
(A) On each Annual Calculation Date, XXXX XX shall compare
3.75% of the Cumulative Written Premiums to the Minimum
Cumulative Payment with respect to the September 1 next
succeeding such Annual Calculation Date.
(B) If 3.75% of Cumulative Written Premiums is less than the
applicable Minimum Cumulative Payment, XXXX XX shall
remit to the shareholders on a Pro-Rata basis an amount,
which amount (including Guaranteed Payments) shall equal
(i) the Minimum Cumulative Payment applicable for that
year less (ii) the Aggregate Payment to date (each such
remittance to be an "Installment Payment").
(C) If 3.75% of Cumulative Written Premiums is more than the
applicable Minimum Cumulative Payment, XXXX XX shall
remit to the shareholders on a Pro-Rata basis an amount,
which amount (including Guaranteed Payments) shall equal
(i) 3.75% of Cumulative Written Premiums less (ii) the
Aggregate Payment to date (each such remittance to be an
"Installment Payment").
(D) Remittances of Installment Payments shall be made on a
Pro-Rata basis by wire transfer of immediately available
funds according to wire transfer instructions provided to
XXXX XX by the shareholders in writing at least ten (10)
business days before such remittances are to be made.
(ii) Upon the exercise by a shareholder or shareholders of his
or her individual cash out option as provided in Section 2.6 (as
restated by Section 2.12(c)(v)), on September 1 of the years 1998
through 2004, inclusive (or the first business day thereafter which is
not a bank holiday if September 1 is either not a business day or is a
bank holiday) (each such September 1, an "Annual Installment Payment
Date"), XXXX XX shall remit the Installment Payments to be
made to the Agency's shareholders, the amount of which Installment
Payments shall be determined and paid as follows:
(A) On each Annual Calculation Date, XXXX XX shall compare
the Pro-Rata portion of 3.75% of the Cumulative Written
Premiums for each shareholder who has not exercised his
or her individual cash-out option under Section 2.6 (as
restated by Section 2.12(c)(v)) to the Pro-Rata portion
of the Minimum Cumulative Payment for each such
shareholder with respect to the September 1 next
succeeding such Annual Calculation Date.
(B) If the Pro-Rata portion of 3.75% of Cumulative Written
Premiums for each shareholder who has not exercised his
or her individual cash-out option under Section 2.6 (as
restated by Section 2.12(c)(v)) is less than such
shareholder's Pro Rata portion of the applicable Minimum
Cumulative Payment, XXXX XX shall remit to each such
shareholder an amount, which amount (including Guaranteed
Payments) shall equal (i) the Pro-Rata portion Minimum
Cumulative Payment applicable for that year for such
shareholder less (ii) the Pro-Rata portion of the
Aggregate Payment (excluding any bonus paid to
shareholders exercising their individual cash out option
under Section 2.6 (as restated by Section 2.12(c)(v)) to
date (each such remittance to be an "Installment
Payment").
(C) If the Pro-Rata portion of 3.75% of Cumulative Written
Premiums for each shareholder who has not exercised his
or her individual cash-out option under Section 2.6 (as
restated by Section 2.12(c)(v)) is more than the
applicable Minimum Cumulative Payment, XXXX XX shall
remit to each such shareholder an amount, which amount
(including Guaranteed Payments) shall equal (i) the
Pro-Rata portion of 3.75% of Cumulative Written Premiums
less (ii) the Pro-Rata portion of the Aggregate Payment
(excluding any bonus paid to shareholders exercising
their individual cash out option under Section 2.6 (as
restated by Section 2.12(c)(v)) to date; provided,
however, that XXXX XX shall only be obligated to make
such payment from funds available after satisfaction of
its obligations to Mutual and/or Professionals under the
terms of the Inter-Creditor Agreement, as executed on the
Closing Date and without regard to any subsequent
modification or amendment thereto (each such remittance
to be an "Installment Payment").
(D) Remittances of Installment Payments shall be made by wire
transfer of immediately available funds according to wire
transfer
instructions provided to XXXX XX by the shareholders in
writing at least ten (10) business days before such
remittances are to be made.
(ii) Section 2.3 shall read in its entirety as follows:
GUARANTIES. Mutual shall guarantee payment of the Installment
Payments payable under Section 2.2(b)(i)(B) and Section 2.2(b)(ii)(B)
(as such provisions are restated by Section 2.12(c)(i)) to be made on
the Annual Installment Payment Date in each of the years 1998 through
2000, inclusive as provided in the Agreement of Guaranty attached
hereto as EXHIBIT 2.3(a) (the "Mutual Guaranty"). Professionals shall
guarantee payment of the Installment Payments payable under Section
2.2(b)(i)(B) and Section 2.2(b)(ii)(B) (as such provisions are
restated by Section 2.12(c)(i)) to be made on the Annual Installment
Payment Date in each of the years 2001 through 2004, inclusive, and
the other consideration to be paid to the Agency's shareholders in the
years 1998 through 2004, inclusive, pursuant to Sections 2.4, 2.5, 2.6
and 2.7 (as such provisions are restated by Sections 2.12(c)(iii),
(iv), (v) and (vi)), as provided in the Agreement of Guaranty attached
hereto as EXHIBIT 2.3(b) (the "Professionals Guaranty"). Payments
made to the shareholders pursuant to the Mutual Guaranty and/or the
Professionals Guaranty (regardless of whether such remittances are
made to the shareholders by Mutual, Professionals or XXXX XX) shall be
referred to as "Guaranteed Payments." Neither Mutual nor
Professionals shall have any obligation to make MEIA II's Installment
Payments except as set forth in the Mutual Guaranty and the
Professionals Guaranty, respectively. As among one another, XXXX XX,
Mutual and Professionals shall remit and reimburse Guaranteed Payments
as provided in the Inter-Creditor Agreement attached hereto as EXHIBIT
2.3(c) (the "Inter-Creditor Agreement").
(iii) Section 2.4 shall read in its entirety as follows:
BONUS. On September 1, 2004 (or the first business day thereafter
which is not a bank holiday if September 1 is either not a business
day or is a bank holiday), Professionals shall pay to each shareholder
of the Agency who has not exercised his or her cash out option
pursuant to Section 2.6 (as restated by Section 2.12(c)(v)) a bonus
(the "Bonus") equal to the shareholder's Pro-Rata share of $2,000,000
less, on a dollar for dollar basis, the amount by which 3.75% of
Cumulative Written Premiums, as of such September 1 is less than or
greater than $43,000,000,
PROVIDED that the Bonus cannot be less than zero. Remittance of each
shareholder's Bonus shall be made by wire transfer of immediately
available funds according to wire transfer instructions provided to
XXXX XX by the shareholders in writing at least ten (10) business days
before such remittances are to be made.
(iv) Section 2.5 shall read in its entirety as follows:
EARLY PAYMENT OF PURCHASE PRICE. At any time on or prior to September
1, 2002, upon 30 days' prior written notice to each of the Agency's
shareholders (at the address provided by the shareholder in his or her
Assignment and Assumption Agreement, which address may be amended by
prior written notice to the Agency pursuant to the Section 13.1) who
has not exercised his or her cash-out option pursuant to Section 2.6
(as restated by Section 2.12(c)(v)) XXXX XX may pay to each such
shareholder, or Professionals may cause XXXX XX to pay to each such
shareholder, an amount equal to such shareholder's Pro-Rata portion of
$43,000,000 plus such shareholder's Pro-Rata portion of the Scale-Up
Amount, if any, over such shareholder's Pro-Rata portion of the
Aggregate Payment (excluding any bonus paid to shareholders
exercising their individual cash-out option under Section 2.6 (as
restated by Section 2.12(c)(v)) as of the September 1 immediately
preceding such date. Remittance of such amounts shall be made by wire
transfer of immediately available funds according to wire transfer
instructions provided to XXXX XX by the shareholders in writing at
least ten (10) business days before such remittances are to be made.
Receipt of the consideration contemplated by this Section shall
extinguish the right to receive any further payments pursuant to this
Article II.
(v) Section 2.6 shall read in its entirety as follows:
CASH-OUT OPTION. Within two years of the closing of a
Demutualization, and upon 30 days' prior written notice to XXXX XX,
each shareholder of the Agency who has not exercised his or her
cash out option pursuant to Section 2.6 (as restated by Section
2.12(c)(v)) may cause XXXX XX to remit to such shareholder an
amount equal to such shareholder's Pro-Rata share of the Present
Value of the Unpaid Purchase Price. Remittance of such amounts
shall be made by wire transfer of immediately available funds
according to wire transfer instructions provided to XXXX XX by the
shareholders in writing at least ten (10) business days before such
remittances are to be made. Receipt of the consideration
contemplated by this Section shall extinguish the right to receive
any further payments pursuant to this Article II.
(vi) Section 2.7 shall read in its entirety as follows:
CASH-OUT REQUIREMENT. Upon the occurrence of a Change of Control with
respect to (a) Professionals, (b) Mutual (other than a Demutualization
and other than any Change of Control immediately following which
Mutual is an Affiliate of Professionals), (c) any Affiliate of
Professionals which "controls," as such term is defined in Section
13(d) of the Securities Exchange Act of 1934, as amended, Mutual
(other than any Change of Control immediately following which Mutual
is an Affiliate of Professionals), or (d) XXXX XX (other than any
Change of Control immediately following which XXXX XX is an Affiliate
of Professionals), XXXX XX shall remit to each shareholder of the
Agency who has not exercised his or her cash-out option pursuant to
Section 2.6 (as restated by Section 2.12(c)(v)), an amount equal to
the excess, if any, of such shareholder's Pro-Rata portion of
$45,000,000 over such shareholder's Pro-Rata portion of the Aggregate
Payment (excluding any bonus paid to shareholders exercising their
individual cash-out options under Section 2.6 (as restated by Section
2.12(c)(v)) as of the September 1 immediately preceding the date of
such occurrence. Remittance of such amounts shall be made by wire
transfer of immediately available funds according to wire transfer
instructions provided to XXXX XX by the shareholders in writing at
least ten (10) business days before such remittances are to be made.
Receipt of the consideration contemplated by this Section shall
extinguish the right to receive any further payments pursuant to this
Article II.
(vii) Section 2.11 shall read in its entirety as follows:
CALCULATION OF CUMULATIVE WRITTEN PREMIUMS.
(a) On or before August 15 of each year in which Installment
Payments are to be made (or the first business day
thereafter if August 15 is not a business day (the
"Annual Calculation Date"), XXXX XX shall calculate the
Cumulative Written Premiums in accordance with generally
accepted accounting principles consistently applied
(though "GAAP" financial statements need not be prepared
for this purpose). With respect to any applicable year,
XXXX XX shall assume, for purposes of such calculation,
that 50% of the premiums in respect of Applicable
Policies for July relate to
the first 13 calendar days of such July and 50% relate to
the last 18 days of such July. XXXX XX shall provide
each of the Agency's shareholders (at the address
provided by the shareholder in his or her Assignment and
Assumption Agreement, which address may be amended by
prior written notice to the Agency pursuant to the
Section 13.1) who has not exercised his or her cash-out
option pursuant to Section 2.6 (as restated by Section
2.12(c)(v)) a copy of its calculation of Cumulative
Written Premiums and each such shareholder's Pro-Rata
share of the Installment Payment, if any, to be made to
such shareholder on the Annual Installment Payment Date
next succeeding such Annual Calculation Date, certified
by an executive officer of XXXX XX as being true and
correct.
Until the October 14 next succeeding such Annual
Calculation Date, the shareholders who have not exercised
their cash-out options pursuant to Section 2.6 (as
restated by Section 2.12(c)(v)) may collectively and by
majority decision (according to their respective Pro-Rata
shares) notify XXXX XX in writing of any objections to
the Cumulative Written Premiums calculation, reasonably
and sufficiently describing the basis for any such
objections (a "Dispute Notice"). In addition, until the
October 14 next succeeding such Annual Calculation Date,
each such shareholder may notify XXXX XX in writing of
any objections to the calculation of his or her
individual Installment Payment (also a "Dispute Notice");
provided, however, that such shareholder is not entitled
to dispute on an individual basis either (i) the
Cumulative Written Premiums calculation, (ii) the
Aggregate Payment calculation, or (iii) the Pro-Rata
figure used in determining the individual Installment
Payment.
(b) In the event a Dispute Notice is received by XXXX XX on
or prior to the date an Installment Payment is to be
made, XXXX XX shall only be obligated to pay that portion
of such Installment Payment that is not the subject of
such Dispute Notice. Likewise, Mutual and Professionals
shall only be obligated to pay that portion of such
Installment Payment that is not the subject of such
Dispute Notice under the terms of the Mutual Guaranty and
the Professionals Guaranty, respectively, until
resolution of such Dispute Notices. In the event a
Dispute Notice is received by XXXX XX, XXXX XX shall
ensure that Mutual (in the years 1998 through 2000,
inclusive) and Professionals (in the years 2001 through
2004, inclusive) each promptly receive a copy of the
Dispute Notice.
(c) XXXX XX and the disputing shareholder(s) shall each use
reasonable
efforts to resolve any objections set forth in the
Dispute Notice. If XXXX XX and the disputing
shareholder(s) shall be unable to resolve any objections
set forth in the Dispute Notice within 15 days following
receipt thereof by XXXX XX, the Agency and XXXX XX shall
promptly select a "Big 6" independent auditing firm,
which shall not be the general auditor of XXXX XX,
Mutual, Professionals or such shareholder to resolve any
objections set forth in the Dispute Notice. If the
disputing shareholder(s) and XXXX XX are unable to
promptly agree on the selection of any such firm, such
firm shall be selected by lot. The resolution of the
Dispute Notice by such firm shall be conclusive and
binding on XXXX XX and the shareholders.
(d) If, in its resolution, the auditing firm concludes that
the Cumulative Written Premiums exceed the amount
calculated and certified by XXXX XX, XXXX XX shall pay
all fees and expenses of such firm. If, in its
resolution, the auditing firm concludes that the
Cumulative Written Premiums are less than or equal to the
amount calculated and certified by XXXX XX, the disputing
shareholders shall pay all fees and expenses of such
firm.
(e) If the Installment Payment to be made on any such Annual
Installment Payment Date, as finally determined (whether
by mutual agreement or by an independent auditing firm)
shall be greater than the Installment Payment made on
such Annual Installment Payment Date, XXXX XX shall
promptly pay to such shareholder(s) the applicable
excess, plus interest thereon at a rate of 7% per annum
from such Annual Installment Payment Date until the date
payment thereof shall be made. If the Installment
Payment to be made on any Annual Installment Payment Date
as finally determined (whether by mutual agreement or by
an independent auditing firm) shall be less than the
Installment Payment made on such Annual Installment
Payment Date, the shareholders shall promptly pay to XXXX
XX the deficiency, plus interest thereon at a rate of 7%
per annum from such Annual Installment Payment Date until
the date payment thereof shall be made.
(f) XXXX XX shall make available to the disputing
shareholder(s) and his or her agents and representatives
and any independent auditing firm selected to resolve any
objections set forth in the Dispute Notice, at reasonable
times and upon reasonable notice, the workpapers and
other supporting documentation used by XXXX XX in
preparation of the foregoing calculations.
(vii) The terms of this Section 2.12 shall not provide any shareholder
with the right to bring any independent claims against XXXX XX, Professionals
and/or Mutual arising out of or in any way related to its or their failure to
deliver any of the Installment Payments or other consideration contemplated by
Sections 2.4, 2.5, 2.6 and 2.7 (in each case as modified by this Section 2.12),
whether such claims shall be made under this Asset Purchase Agreement, the
Professionals Guaranty or the Mutual Guaranty, it being understood that such
claims are retained by the Trustee pursuant to the terms of the Liquidating
Trust Agreement.
2.13 PREPAIDS AND OTHER ADJUSTMENTS. All accrued or prepaid charges for
utilities, property taxes, special assessments and other obligations under
Assumed Contracts shall be prorated, as of the Closing Date, at Closing. In
addition, at Closing, the Agency shall provide to XXXX XX and Professionals a
schedule of prorations, certified as being true and correct, disclosing all
current employee salaries, benefits, sick-pay and vacation costs, payroll taxes,
rents and operating expenses, commissions due to solicitors and all other
expenses related to current operations, which as of the Closing Date shall have
been accrued by the Agency but not paid. All of such items shall be prorated,
as of the Closing Date, at Closing. At Closing, the Agency will also provide
to XXXX XX and Professionals an updated Schedule 2.8(b), certified as being true
and correct, disclosing all amounts accrued by the Agency through the Closing
Date for employee benefits. The Purchase Price shall be reduced by (i) the
aggregate amount of such accruals, and (ii) the amount of any outstanding loans
or other evidences of indebtedness owed by the Agency to Mutual, repayment of
which is required by Section 2.8, and (iii) if the Closing shall occur on or
after October 2, 1997, an amount equal to 3.75% of Cumulative Written Premiums,
if any, for the period of October 1, 1997 to and including the Closing Date.
Any item not disclosed on such certified schedules shall remain a Liability
solely of the Agency.
2.14 INTEREST ON INSTALLMENT PAYMENTS. The Agency and XXXX XX acknowledge
that this Agreement does not provide for the payment of any interest on any of
the Installment Payments, but that the provisions of Code Section 1274 may
require interest to be imputed with respect to the Installment Payments.
Accordingly, if and to the extent that Code Section 1274 requires interest to be
so imputed, such interest shall be imputed at the lowest applicable Federal rate
allowed under Code Section 1274. The Agency and XXXX XX acknowledge and agree
that even if interest is imputed under Code Section 1274, no additional
consideration will be paid by XXXX XX for the Assets pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF THE AGENCY
Each of MEIA I and MELA represents and warrants to XXXX XX and
Professionals that, as of the date hereof and as of the Closing Date:
3.1 ORGANIZATION. Each of MEIA I and MELA is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Michigan and each has all requisite corporate power to enter into this
Agreement, to perform each of the other agreements contained herein and to own,
lease and operate its properties and assets and carry on its business as
currently operated. Each of MEIA I and MELA is in good standing in every
jurisdiction where the nature of the business conducted by it or the properties
owned, leased or operated by it requires qualification or licensure.
3.2 AUTHORITY. The execution and delivery of this Agreement and each of
the Related Agreements to which either MEIA I or MELA is a party, and the
consummation of the transactions contemplated hereby or thereby, have been duly
and validly authorized by the Board of Directors of each of MEIA I and MELA and
all other necessary corporate action on the part of either MEIA I or MELA or
their respective Affiliates, and the agreements of each of MEIA I and MELA
contained herein constitute valid and legally binding obligations enforceable in
accordance with their terms.
3.3 THE AGENCY'S REQUISITE CONSENTS; NONVIOLATION. The execution and
delivery of this Agreement and each of the Related Agreements to which either
MEIA I or MELA is a party, and the consummation of the transactions contemplated
hereby and thereby in compliance with the terms hereof and thereof, by the
Agency, do and will not, (a) except for the consent of the Michigan Commissioner
of Insurance and as otherwise described on the attached SCHEDULE 3.3, require
the consent, license, permit, waiver, approval, authorization or other action
of, by or with respect to, any Person or Governmental Authority, the absence of
which would have a Material Adverse Effect on the Business or MEIA I's or MELA's
ability to perform its obligations hereunder, (b) violate or conflict with the
provisions of the Articles of Incorporation or Bylaws of either MEIA I or MELA,
(c) constitute a default under, violate, conflict with or result in the
termination of any Assumed Contract, judgment, order, injunction or decree to
which either MEIA I or MELA is a party, or by which either is bound or to which
either MEIA I or MELA, or any of their respective properties, is subject (except
where such default, violation, conflict or termination would not have a Material
Adverse Effect on either MEIA I or MELA or on the ability of MEIA I, MELA, XXXX
XX or Professionals to consummate the transactions contemplated hereby or on the
ability of XXXX XX to own and operate the Business and Assets from and after the
Closing), other than as described on the attached SCHEDULE 3.3(d) result in
the creation or imposition of any Lien on the Assets or in any Person (other
than XXXX XX) obtaining the right to acquire any of the properties, rights or
assets used in the Business or (e) upon the obtaining of any required
governmental approvals, conflict with or violate any applicable law, rule,
regulation, judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over either MEIA I or MELA or any
of their respective assets or properties (except where such conflict or
violation would not have a Material Adverse Effect on MEIA I or MELA or on the
ability of MEIA I, MELA, XXXX XX and Professionals to consummate the
transactions contemplated hereby or on the ability of XXXX XX to own and operate
the Business and Assets from and after Closing).
3.4 ASSETS.
(a) TITLE TO ASSETS. Either MEIA I or MELA, as the case may be, has
good and marketable title to the Assets free and clear of any imperfection of
title or Lien of any kind or nature, except (i) for Liens for current taxes not
yet due and payable, (ii) such imperfections of title as do not materially
detract from or interfere with the present use of the Assets subject to or
affected thereby, or otherwise materially impair the use of the Assets, and
(iii) as described on the attached SCHEDULE 3.4(a).
(b) SUFFICIENCY OF ASSETS. The Assets, taken as a whole, constitute
all the material properties, assets and rights used primarily in the operation
of the Business. The Assets, together with the licenses, services and
arrangements provided pursuant to this Agreement comprise all tangible and
intangible rights, assets and services the use of which is necessary for the
continued conduct of the Business by XXXX XX as now being conducted by MEIA I or
MELA.
(c) CONDITION OF ASSETS. The Tangible Assets are in good operating
condition and repair (reasonable wear and tear excepted) and are free from any
material defect.
(d) LEASED PROPERTY. The attached SCHEDULE 3.4(d) identifies the
Leased Property, all other real property leased or under option to be leased by
the Agency and specifies the name of the lessor thereof, the lease term and the
basic annual rent. No other real property is used in the conduct of the
Business and neither MEIA I nor MELA leases any real property as lessor or owns
any real property. Either MEIA I or MELA has a valid, enforceable leasehold
estate in the Leased Property, free and clear of any Lien. Each of MEIA I and
MELA enjoys peaceful and undisturbed possession of all of the property described
on the attached SCHEDULE 3.4(d). There are no subleases in effect with respect
to the Leased Property nor condemnation proceedings pending or, to the best of
the Agency's knowledge, threatened with respect to the Leased Property. Neither
the operations of MEIA I and MELA on any of such real property, nor such real
property, including improvements thereon, violates any applicable building code,
zoning requirement or classification, or pollution control ordinance or statute
relating to the particular property or to such operations, and such
non-violation is not dependent, in any instance, on so-called non-conforming use
exceptions.
3.5 FINANCIAL STATEMENTS.
(a) Each of MEIA I and MELA has delivered to XXXX XX and
Professionals true and correct copies of: (i) the audited and unaudited
combined financial statements of each of MEIA I and MELA (including balance
sheets, statements of operations, stockholders' equity and cash flows and all
notes and schedules thereto, if any) as of and for the years ended December 31,
1995, prepared on the basis of
generally accepted accounting principles, including a report thereon by KMPG
Peat Marwick, LLP, and (ii) combined unaudited financial statements of each of
MEIA I and MELA, prepared on the basis of generally accepted accounting
principles, including a balance sheet (the "Balance Sheet") and statements of
operations and stockholders' equity, all as of December 31, 1996 (the "Balance
Sheet Date") and December 31, 1994, as reviewed by KMPG Peat Marwick, LLP.
(b) Promptly following the end of January 1997 and each subsequent
monthly accounting period completed prior to the Closing Date, each of MEIA I
and MELA will cause to be delivered to Professionals and XXXX XX updated
financial statements prepared in a manner consistent with the unaudited
financial statements delivered pursuant to Section 3.5(a)(ii) (collectively, the
"Interim Financial Statements"), with respect to such accounting period prepared
in the ordinary course of business consistent with past practices.
(c) As of their respective dates, the statements delivered under
Section 3.5(a) and all Interim Financial Statements to be delivered under
Section 3.5(b), (1) do (and, with respect to Interim Financial Statements to be
delivered between this date and the Closing Date, will) not contain any untrue
statement of a material fact or omit a material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading, (2) fairly present
(or, if applicable, will fairly present) the financial position of each of
MEIA I and MELA as of the dates indicated therein and the results of its
operations for the periods covered thereby, in each case in accordance with
generally accepted accounting principles consistently applied during the periods
involved (subject, with respect to Interim Financial Statements, to normal
recurring year-end adjustments), and (3) are in accordance with the books and
records of each of MEIA I and MELA.
(d) The Balance Sheet reflects all of the assets and properties, real
and personal, used by MEIA I and MELA in their respective businesses, or
otherwise held by either MEIA I or MELA, except for (a) property acquired or
disposed of in the ordinary and usual course of business since the Balance Sheet
Date and (b) property not required under generally accepted accounting
principles to be reflected thereon.
(e) Except as described on the attached SCHEDULE 3.5(e), at the
Balance Sheet Date and on the date of any balance sheet delivered with Interim
Financial Statements between this date and the Closing Date, neither MEIA I nor
MELA had or will have any material liabilities or obligations of any nature,
absolute, contingent or otherwise, not fully or properly reflected or reserved
against in such balance sheet, required to be disclosed on a balance sheet
prepared in conformity with generally accepted accounting principles, and not
otherwise paid in full by MEIA I or MELA.
3.6 CONTRACTS.
(a) The attached SCHEDULE 3.6 lists all outstanding contracts, leases
and commitments (except for insurance policies issued outside of the ordinary
course of business, which are listed on SCHEDULE 3.13), whether written or oral,
to which either MEIA I or MELA is a party or any of their respective properties
are subject (the "Agency Agreements"), including, for illustrative purposes
only, the following:
(i) any contract, lease or commitment or series of related
contracts, leases or commitments, obligated to make
aggregate payments in excess of $20,000;
(ii) management or employment contracts (other than oral
agreements for employment at will), consulting contracts,
collective bargaining contracts or other agreements with
any labor union or termination and severance agreements;
(iii) notes, mortgages, deeds of trust, loan agreements,
security agreements, guaranties, debentures, indentures,
credit agreements, warehousing agreements, repurchase
agreements and other evidence of indebtedness, other than
endorsements for collection or deposit in the ordinary
course of business;
(iv) pension, retirement, profit-sharing, deferred
compensation, bonus, incentive, life insurance,
hospitalization or other employee benefit plans or
arrangements (including any contracts or agreements with
trustees, insurance companies or others relating to any
such employee benefit plan or arrangement);
(v) stock option, stock purchase, warrant, repurchase or
other contracts or agreements with any employee or
officer of the Agency relating to the shares of capital
stock of either MEIA I or MELA;
(vi) contracts or agreements with reinsurers, managing general
agents, managing general underwriters, general agents,
underwriters, agents, investment bankers, investment
advisers, custodians, brokers or sales representatives;
(vii) contracts or agreements with any director or officer of
either MEIA I or MELA or with any Person affiliated or
associated with such director or officer;
(viii) powers of attorney or similar authorizations granted to
any third party by either MEIA I or MELA;
(ix) contracts or agreements containing covenants limiting the
freedom of either MEIA I or MELA to compete in any line
of business or with respect to any particular product or
service or with any Person;
(x) requirements contracts or similar agreements in which
either of MEIA I or MELA is the purchaser or the seller;
(xi) license or sublicense agreements relating to any
Intellectual Property; and
(xii) contracts with associations with which either of MEIA I
or MELA maintains an affinity group or similar customer
relationship, including contracts with any Person that
services the accounts of, or otherwise relates to, any
such associates or group.
(b) Each of MEIA I and MELA has made available to representatives of
XXXX XX and Professionals, for its review and examination, all of the Agency
Agreements and has provided true and correct copies thereof upon request.
3.7 NO DEFAULT. Each Assumed Contract is valid, in full force and effect
and enforceable in accordance with its terms, except to the extent that its
enforceability may be limited by applicable insolvency, bankruptcy or similar
laws affecting the enforcement of creditors' rights generally or by general
equitable principles. There has not occurred any default or any event which,
with notice or lapse of time or both, would become a default under any of the
Assumed Contracts resulting from any act or omission by either MEIA I or MELA or
any other party thereto prior to the Closing Date, nor (ii) has there been any
claim of any breach or default under any of the Assumed Contracts by MEIA I,
MELA or any other party thereto, nor (iii) has any party made a request, claim
or demand for funds in excess of the contract price described in any Assumed
Contract. There are no investigations or audits pending or, to the best of the
Agency's knowledge, threatened, involving any of the Assumed Contracts, which
would reasonably be expect to have a Material Adverse Effect on the operations
of the Business. Except as described on the attached SCHEDULE 3.7, within the
last twelve (12) months, neither MEIA I nor MELA has received any written notice
that any Person is cancelling, modifying or terminating or intends to cancel,
modify or terminate any of the Assumed Contracts.
3.8 LITIGATION. Except as described on the attached SCHEDULE 3.8, there
is no pending or, to the best of the Agency's knowledge, threatened litigation
or judicial, administrative or arbitration claim, action or proceeding which
would, individually or in the aggregate, reasonably be expected (a) to preclude
MEIA I or MELA from consummating the transactions contemplated by this Agreement
or from performing any
of its obligations under this Agreement or any of the Related Agreements, or
(b) to result in a Material Adverse Effect on any Asset or the financial
condition or operations of the Business, nor are there any judgments, orders,
injunctions or decrees currently in effect and involving or affecting any Asset
or the Business, or which would, individually or in the aggregate, reasonably be
expected to result in any such preclusion or effect described in clauses (a) and
(b).
3.9 INTELLECTUAL PROPERTY. The attached SCHEDULE 3.9 is a true and
complete list of all Intellectual Property owned or used by the Agency in the
Business. The Agency owns or possesses adequate licenses or other rights to
transfer such Intellectual Property to XXXX XX, and the Intellectual Property is
sufficient to conduct the Business as the Business has been and is now being
conducted. The operations of the Agency do not conflict with or infringe, and
no one has asserted to the Agency that such operations conflict with or
infringe, any Intellectual Property owned, possessed or used by any third party.
To the best of the Agency's knowledge, there are no third parties whose
operations conflict with or infringe, nor has anyone asserted that such
operations conflict with or infringe, any Intellectual Property owned, possessed
or used by the Agency. There are no facts or alleged facts which would
reasonably serve as a basis of any claim that the Agency does not have the
unrestricted right to use, free of any rights or claims of others, all
Intellectual Property in the development, provision, use, sale or other
disposition of any or all products or services presently being, or contemplated
to be, used, furnished or sold in the Business.
3.10 LICENSES AND PERMITS.
(a) Each of MEIA I and MELA has obtained, and is in compliance in all
material respects with, all necessary licenses, permits, consents, approvals,
orders, certificates, authorizations, declarations and filings required by all
federal, state, local and other Governmental Authorities and all courts and
other tribunals for the conduct of the Business and operations of the Agency as
now conducted (collectively, the "Required Licenses"), and there are no
proceedings pending or, to the best of the Agency's knowledge, threatened which
may result in the revocation, cancellation or suspension, or any adverse
modification, of any such Required License nor are there any facts known to the
Agency which may give rise to such proceedings. The attached SCHEDULE 3.10
contains a correct and complete list of all Required Licenses and the
jurisdictions for which they are issued and a correct and complete list of all
states in which either MEIA I or MELA currently has pending an application to
transact any line of business. Except as described on the attached
SCHEDULE 3.10, all of the Required Licenses shall remain in full force and
effect notwithstanding the consummation of the transactions contemplated
hereunder.
(b) All material reports and applications required to be filed with
any Governmental Authority have been filed and are true and complete in all
material respects and accurately present the information contained therein.
Neither the sale of the Assets hereunder nor any change which occurs as a result
thereof will, when
reflected in appropriate amendments to such reports or applications, have a
Material Adverse Effect upon any matters (including rate approvals) which are
the subject of such reports or applications.
3.11 COMPLIANCE WITH LAWS. There is no past or present violation by either
MEIA I or MELA of any federal, state, local or foreign law, ordinance, rule or
regulation applicable to the Business or any of the Assets (including any law,
regulation, order or requirement relating to securities, properties, business,
products, advertising, or sales practices, civil rights or antitrust), nor, to
the best of the Agency's knowledge, is there any allegation of any such
violation, where such violation would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Business.
3.12 EVENTS SINCE THE BALANCE SHEET DATE. Since the Balance Sheet Date,
except as described in the attached SCHEDULE 3.12 or as consented to in writing
by XXXX XX, each of MEIA I and MELA has conducted business only in the ordinary
and usual course and, without limiting the generality of the foregoing:
(a) Neither MEIA I nor MELA has sustained any damage, destruction or
loss (including by reason of revocation of license, certificate of authority or
right to do business, total or partial termination, suspension, default or
modification of contracts, governmental restriction, regulation, investigation
or inquiry), regardless of whether covered by insurance, which, individually or
in the aggregate, have had or would reasonably be expected to have a Material
Adverse Effect on either MEIA I or MELA.
(b) There have been no changes, events or conditions which,
individually or in the aggregate, have had or would reasonably be expected to
have a Material Adverse Effect on either MEIA or MELA.
(c) Neither MEIA I nor MELA has incurred additional debt for borrowed
money or incurred any other obligations or liability (fixed, contingent or
otherwise), regardless of whether required to be reflected on a balance sheet
prepared in accordance with generally accepted accounting principles, except in
the ordinary course of its business and consistent with past practices.
(d) Neither MEIA I nor MELA has paid or prepaid any obligation or
liability (fixed, contingent or otherwise), or discharged or satisfied any Lien
or encumbrance, or settled any liability, claim, dispute, proceeding, suit or
appeal, pending or, to the best of the Agency's knowledge, threatened against it
or any of its assets or properties, except for current liabilities included in
the Balance Sheet and current liabilities incurred since the Balance Sheet Date
in the ordinary course of business of either MEIA I or MELA.
(e) Neither MEIA I nor MELA has authorized, declared, paid or
effected any dividend, payment or other distributions on or with respect to any
share of its capital stock.
(f) Neither MEIA I nor MELA has purchased, redeemed or otherwise
acquired or committed itself to acquire, directly or indirectly, any of its
shares.
(g) Neither MEIA I nor MELA has mortgaged, pledged, otherwise
encumbered or subjected to Lien any of its assets or properties, tangible or
intangible.
(h) Neither MEIA I nor MELA has sold, leased or otherwise disposed of
any asset or property, tangible or intangible, except in the ordinary course of
its business, and in each case for a consideration at least equal to the fair
value of such asset or property, nor has MEIA I or MELA leased or licensed to
others (including officers and directors) any asset or property or discontinued
any product or service line or the sale or other disposition of any of its
products or services.
(i) Neither MEIA I nor MELA has purchased or otherwise acquired any
debt or equity securities of any corporation, partnership, joint venture, firm
or other entity.
(j) Neither MEIA I nor MELA has made any expenditure for the
purchase, acquisition, construction or improvement of a capital asset other than
expenditures made in the ordinary course of business consistent with past
practice and which expenditures have not, in the aggregate, exceeded $20,000.
(k) Except as described on the attached SCHEDULE 3.12, neither MEIA I
nor MELA has entered into any transactions or contract, except in the ordinary
course of its business consistent with past practice, nor has either MEIA I or
MELA waived any right of substantial value or cancelled any debts or claims or
voluntarily suffered any extraordinary losses.
(l) Neither MEIA I nor MELA has sold, assigned, transferred, licensed
or otherwise conveyed any Intellectual Property.
(m) Neither MEIA I nor MELA has effected any amendment or supplement
to, or extension of, any employee profit-sharing, stock option, stock purchase,
pension, bonus, incentive, retirement, medical reimbursement, life insurance,
deferred compensation or other employee benefit plan or arrangement.
(n) Neither MEIA I nor MELA has paid to or for the benefit of its
directors, officers, employees or shareholders any compensation of any kind
other than wages, salaries, bonuses and benefits at times and rates in effect
prior to the Balance Sheet Date, other than scheduled increases and increases in
the ordinary course of business consistent with past practice, and any and all
accrued compensation payable under any profit-sharing plan in respect to any
period prior to the Balance Sheet Date (which has not been reflected as a
liability of the company on the balance sheet included in the Interim Financial
Statements) will be paid by either MEIA I or MELA.
(o) Neither MEIA I nor MELA has effected any amendment or
modification to its charter documents, bylaws or other governing documents.
(p) Neither MEIA I nor MELA has made any change in accounting methods
or principles used for financial, tax or regulatory reporting purposes.
(q) Neither MEIA I nor MELA has entered into any agreement or
commitment, whether in writing or otherwise, to take any action described in
this Section 3.12.
(r) There have been no claims incurred or reported to either MEIA I
or MELA which, individually or in the aggregate, have or would be reasonably
expected to have a Material Adverse Effect on either MEIA I or MELA.
3.13 INSURANCE.
(a) The attached SCHEDULE 3.13 is (i) a full and complete list of all
policies of insurance to which either MEIA I or MELA is a party or is a
beneficiary or named insured and both MEIA I and MELA have in full force and
effect, with all premiums due thereon paid, the policies of insurance set forth
therein and (ii) a true and complete list of all insurance policies to which
other parties are a party or a beneficiary which relate to the properties,
assets or operations of either MEIA I or MELA and the names of such other
parties. No notice of cancellation or termination has been received with
respect to any insurance policy described in this Section 3.13. Both MEIA I and
MELA carry insurance, with solvent insurers, in amounts and types of coverage
which are customary in the industry and against risks and losses which are
usually insured against by persons holding or operating similar properties and
similar businesses, including errors and omissions insurance. No material
claims have been asserted under any of such insurance policies or relating to
the properties, assets or operations of either MEIA I or MELA since January 1,
1996. MEIA I and MELA agree to tail-out their respective errors and omissions
insurance for a period of one year from Closing and furnish XXXX XX with
satisfactory evidence of such action on or before the Closing Date.
(b) MEIA I and MELA have furnished to XXXX XX and Professionals true
and correct copies of all policies of reinsurance to which each of MEIA I and
MELA is a party or a beneficiary or a named insured, all of which are listed on
the attached SCHEDULE 3.13. Such reinsurance contracts (i) were purchased for
the benefit of either MEIA I or MELA, and (ii) will be retained through the
Closing Date.
3.14 EMPLOYEES. The attached SCHEDULE 3.14 is a true and complete list of
all employees of MEIA I and MELA employed primarily, either as full time or part
time employees, in connection with the Business (collectively, the "Employees of
the Business"; each an "Employee of the Business") and the compensation paid to
each such Employee of the Business during the last calendar year. Except as
described on
the attached SCHEDULE 3.14, none of such Employees of the Business has any
written employment agreement. Except as described on SCHEDULE 3.14 and pursuant
to this Agreement, none of the Employees of the Business is subject to any
covenant not to compete, confidentiality agreement or other contract or
commitment with or owing to either MEIA I or MELA that limits or restrains any
Employee of the Business from engaging in or competing in any products or lines
of business with any Person.
3.15 COLLECTIVE BARGAINING AGREEMENTS. Neither MEIA I nor MELA is a party
to or subject to any collective bargaining agreement with any labor union.
There are no labor controversies pending or, to the best of the Agency's
knowledge, threatened against either MEIA I or MELA which would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
either MEIA I or MELA. Neither MEIA I nor MELA has experienced any strikes,
shutdowns, slowdowns or work stoppages since January 1, 1996.
3.16 EMPLOYEE BENEFIT PLANS.
(a) PLANS. The attached SCHEDULE 3.16 lists all employee benefit
plans or arrangements currently in effect and which are applicable to the
current or former employees of the Business, including pension or thrift plans,
individual or supplemental pension or accrued compensation arrangements,
contributions to hospitalization or other health or life insurance programs,
incentive plans, bonus arrangements and vacation, sick leave, disability and
severance and termination arrangements or policies and workers' compensation
policies (collectively, the "Plans").
(b) COMPLIANCE WITH ERISA. MEIA I, MELA and the Plans are in
compliance in all material respects with those provisions of ERISA and the Code
which are applicable to the Plans. No transaction proscribed by Section 406 of
ERISA or Section 4975 of the Code, and no reportable event as described in
Section 4043(b) of ERISA, has occurred with respect to any Plan. Neither MEIA I
nor MELA is an employer with respect to any multiemployer plan as defined in
Section 4001(a)(3) of ERISA or Section 414(f) of the Code.
(c) COMPLIANCE WITH LAWS. Each of MEIA I and MELA is, with respect
to the operation of its portion of the Business, in compliance in all material
respects with all applicable laws, rules and regulations relating to the
employment of labor, including those related to wages, hours, collective
bargaining and discrimination.
3.17 ENVIRONMENTAL CONDITION. To the best of the Agency's knowledge:
(a) the operations of the Business as presently conducted comply in
all material respects with applicable environmental laws, rules or regulations;
(b) MEIA I or MELA, as appropriate, has obtained with respect to the
Business all Required Licenses required under applicable environmental laws,
rules or
regulations;
(c) the Business is not subject to any judicial or administrative
proceeding alleging violation of any applicable environmental law, rule or
regulation, and no such proceeding has been threatened, which if determined
adversely to either MEIA I or MELA would reasonably be expected to have a
Material Adverse Effect on the Business;
(d) neither MEIA I nor MELA has received any written notice that it
is a potentially responsible party or any request for information from any
governmental authority with respect to any site that is the subject of an
investigation, removal or remedial activity under any environmental law, rule or
regulation; and
(e) since January 1, 1995, there has been no release of any hazardous
material, and there has been no contamination by any hazardous material which
has occurred on or about the Leased Property which is required to be remediated
by either MEIA I or MELA or any Affiliate of either under any applicable
environmental law, rule or regulation.
3.18 COMMISSIONS AND/OR PREMIUMS RECEIVABLE. All of the commissions and/or
premiums receivable shown on the Balance Sheet or the Interim Financial
Statements, as applicable, or thereafter acquired arose under validly issued
policies of insurance in the ordinary course of the business consistent with
past practice of MEIA I and MELA. The values at which commissions and/or
premiums receivable are carried on the Balance Sheet and Interim Financial
Statements are consistent with their respective past practices and in accordance
with generally accepted accounting principles applied on a consistent basis.
3.19 GUARANTEES. Except as described on the attached SCHEDULE 3.19, none
of the obligations or liabilities of MEIA I and MELA is guaranteed by any
Person. Neither MEIA I nor MELA has guaranteed, nor is otherwise contingently
obligated for, any indebtedness of any third party.
3.20 CERTAIN ADVANCES. Except as described on the attached SCHEDULE 3.20,
there are no receivables of either MEIA I or MELA owing by directors, officers,
employees, consultants or shareholders of either MEIA I or MELA, or owing by any
Affiliate of any director or officer of either MEIA I or MELA, other than
advances in the ordinary course of business consistent with past practice to
officers and employees for reimbursable business expenses.
3.21 TAX STATUS OF MEIA I AND MELA.
(a) Except as described on the attached SCHEDULE 3.21, all Tax
returns and reports relating to either MEIA I or MELA required to be filed prior
to the Closing Date have been or will be duly and timely filed with the
appropriate taxing authorities, all
such Tax returns are or will be true and correct in all material respects and
all Taxes relating to either MEIA I or MELA which are due to, or claimed to be
due from them by, any taxing authority, any Affiliate or former Affiliate of
either MEIA I or MELA, have been paid. The financial statements of each of
MEIA I and MELA delivered under, and to be delivered under, Section 3.5 includes
or will include adequate provision through and including the period covered by
such financial statements for all Taxes, if any, which relate to the business,
operations, properties and assets of either MEIA I or MELA conducted and held
through the Closing Date which are not yet due and owing, or which are due and
owing but have not yet been paid, to the appropriate taxing authority or to any
Affiliate or former Affiliate of either MEIA I or MELA. Except as described on
the attached SCHEDULE 3.21, there is currently no audit or examination of, or
action or proceeding relating to, any Tax return of either MEIA I or MELA or
which includes either MEIA I or MELA presently in progress or of which either
MEIA I or MELA has received notice. Except as described on the attached
SCHEDULE 3.21, there are no outstanding agreements or waivers extending the
statutory period of limitations applicable to any Tax return which include
either MEIA I or MELA.
(b) Except as described on the attached SCHEDULE 3.21, no claim for
assessment or collection of Taxes has been asserted against either MEIA I or
MELA, nor, to the best of the Agency's knowledge, is there any reasonable basis
for any such claim. The federal income Tax returns of, or including, MEIA I
have never been audited or examined by the IRS. The federal income Tax returns
of, or including, MELA have never been audited or examined by the IRS. Except
as described on the attached SCHEDULE 3.21, no material issue has been raised by
any state, local or foreign taxing authority in connection with an audit or
examination of the Tax returns, business or properties of either MEIA I or MELA
which has not been settled or resolved. Both MEIA I and MELA have paid all
taxes owed by them in respect of, or of which either is required to withhold
from, amounts owing to employees, creditors or other third parties. Neither
MEIA I or MELA, nor any of their respective assets or properties, is subject to
any pending property tax reassessments. Neither MEIA I nor MELA is a party to
any tax sharing or similar arrangement, written or otherwise.
3.22 RELATED PARTIES. Except as described on SCHEDULE 3.22, no officer or
director of either MEIA I or MELA, or any Affiliate of any such Person, has,
either directly or indirectly, (a) an interest in any corporation, partnership,
firm or other Person which furnishes or sells services or products which are
similar to those furnished or sold by either MEIA I or MELA, or (b) a beneficial
interest, or alleges a claim of beneficial interest, in any contract or
agreement to which either MEIA I or MELA may be bound, other than the lease
relating to the Leased Property. No Assumed Contract provides for any payment
by either MEIA I or MELA to any Affiliate of either MEIA I or MELA, other than
the lease relating to the Leased Property.
3.23 UNDERLYING DOCUMENTS. Any underlying documents listed or described in
the Schedules referred to in this Agreement have heretofore been furnished to
Professionals and XXXX XX or their respective advisors or representatives. All
such
documents furnished to Professionals and XXXX XX are true and complete copies,
and there are no amendments or modifications thereto, except as expressly noted
in the Schedules in which such documents are incorporated. The minute books of
each of MEIA I and MELA contain full, complete and accurate records of all
meetings and other corporate action taken by the directors and shareholders of
MEIA I and MELA, respectively.
3.24 ABSENCE OF REGULATORY ACTIONS. Neither the Agency nor any of its
Affiliates is a party to any cease and desist order, written agreement or
memorandum of understanding with, or a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient of
any extraordinary supervisory letter from, or has adopted any board resolutions
at the request of any Governmental Authority, nor has it been advised by any
Governmental Authority that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
directive, written agreement, memorandum of undertaking, extraordinary
supervisory letter, commitment letter, board resolutions or similar undertaking.
3.25 DISCLOSURE OF MATERIAL FACTS. Each of MEIA I and MELA has disclosed
to Professionals and XXXX XX all material facts relating to the condition
(financial or otherwise), business, net worth, assets, properties, operations or
future prospects of MEIA I and MELA, respectively. The representations and
warranties contained in this Article III and in the Schedules hereto, and any
other documents or information furnished to Professionals or XXXX XX by or on
behalf of either MEIA I or MELA, do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements contained herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF PROFESSIONALS
Professionals represents and warrants to the Agency that:
4.1 ORGANIZATION. Professionals is a corporation duly organized, validly
existing and in good standing under the laws of the State of Michigan and has
all requisite corporate power to enter into this Agreement, to perform each of
the other agreements contained herein and to own, lease and operate its
properties and assets and carry on its business as currently operated.
Professionals is in good standing in every jurisdiction where the nature of the
business conducted by it or the properties owned, leased or operated by it
requires qualification or licensure.
4.2 AUTHORITY. The execution and delivery of this Agreement and each of
the Related Agreements to which it is a party, and the consummation of the
transactions
contemplated hereby and thereby, have been duly and validly authorized by the
Board of Directors of Professionals and all other necessary corporate action on
the part of Professionals or its Affiliates, and the agreements of Professionals
contained herein constitute valid and legally binding obligations enforceable in
accordance with their terms.
4.3 REQUISITE CONSENTS OF PROFESSIONALS; NONVIOLATION. The execution and
delivery of this Agreement and each of the Related Agreements to which it is a
party, and the consummation of the transactions contemplated hereby and thereby
in compliance with the terms hereof and thereof, by Professionals, do and will
not, (a) except for the consent of the Michigan Commissioner of Insurance,
require the consent, license, permit, waiver, approval, authorization or other
action of, by or with respect to, any person or Governmental Authority, the
absence of which would have a Material Adverse Effect on Professionals or
Professionals' ability to perform its obligations hereunder, (b) violate or
conflict with the provisions of the Articles of Incorporation or Bylaws of
Professionals, or (c) constitute a default under, violate, conflict with or
result in the termination of any judgment, order, injunction or decree to which
Professionals is a party, or by which Professionals is bound or to which
Professionals, or any of its properties, is subject (except where such default,
violation, conflict or termination would not have a Material Adverse Effect on
Professionals or on the ability of Professionals to consummate the transactions
contemplated hereby).
4.4 REPORTS.
(a) As of their respective dates, neither Professionals' Annual
Report on Form 10-K for the fiscal year ended December 31, 1996, nor any other
document filed by Professionals subsequent to December 31, 1996, under Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act, each in the form
(including exhibits) filed with the Securities Exchange Commission (the "SEC")
(collectively, the "Professionals' Reports"), contained or will contain any
untrue statement of a material fact or omitted or will omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading and the Professionals' Reports complied in all material respects with
the requirements of the Securities Exchange Act of 1934, as amended. Each of
the consolidated balance sheets contained or incorporated by reference in the
Professionals' Reports (including in each case any related notes and schedules)
fairly presented in all material respects the financial position of the entity
or entities to which it relates as of its date and each of the consolidated
statements of income, consolidated statements of stockholders' equity and
consolidated statements of cash flows contained or incorporated by reference in
the Professionals' Reports (including in each case any related notes and
schedules) fairly presented in all material respects the results of operations,
stockholders' equity and cash flows, as the case may be, of the entity or
entities to which it relates for the periods set forth therein (subject, in the
case of unaudited interim statements, to normal year-end audit adjustments that
are not material in amount or effect), in each case in accordance with generally
accepted
accounting principles consistently applied during the periods involved, except
as may be noted therein.
(b) Professionals and each of its subsidiaries have each timely filed
all reports, registrations and statements, together with any amendments required
to be made with respect thereto, that they were required to file since December
31, 1993 with the SEC and have paid all fees and assessments due and payable in
connection therewith.
4.5 LITIGATION. There is no pending or, to the best of Professionals'
knowledge, threatened litigation or judicial, administrative or arbitration
claim, action or proceeding which would, individually or in the aggregate,
reasonably be expected (a) to preclude Professionals from consummating the
transactions contemplated by this Agreement or from performing any of its
obligations under this Agreement or any of the Related Agreements, or (b) to
result in a Material Adverse Effect on the business, properties, assets,
financial condition or operations of Professionals or any of its Affiliates, nor
are there any judgments, orders, injunctions or decrees currently in effect and
involving Professionals or any of its Affiliates, which would, individually or
in the aggregate, reasonably be expected to result in any such preclusion or
effect described clauses (a) and (b).
4.6 KNOWLEDGE AS TO CONDITIONS. As of the date hereof, Professionals
knows of no reason why the approvals and consents of Governmental Authorities
referred to in Section 11.1(e) should not be obtained.
4.7 ABSENCE OF REGULATORY ACTIONS. Neither Professionals nor any of
its Affiliates is a party to any cease and desist order, written agreement or
memorandum of understanding with, or a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient of
any extraordinary supervisory letter from, or has adopted any board resolutions
at the request of any Governmental Authority, nor has it been advised by any
Governmental Authority that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
directive, written agreement, memorandum of undertaking, extraordinary
supervisory letter, commitment letter, board resolutions or similar undertaking.
4.8 MATERIAL ADVERSE CHANGE. Since the latest filing by Professionals
with the SEC and as of the Closing Date, there has been no material adverse
change in the business, liabilities, assets, operations or financial condition
of Professionals.
ARTICLE V
REPRESENTATIONS AND
WARRANTIES OF XXXX XX
XXXX XX represents and warrants to the Agency that:
5.1 ORGANIZATION. XXXX XX is a corporation duly organized, validly
existing and in good standing under the laws of the State of Michigan and has
all requisite corporate power to enter into this Agreement, to perform each of
the other agreements contained herein and to own, lease and operate its
properties and assets and carry on its business as currently operated. XXXX XX
is in good standing in every jurisdiction where the nature of the business
conducted by it or the properties owned, leased or operated by it requires
qualification or licensure.
5.2 AUTHORITY. The execution and delivery of this Agreement and each of
the Related Agreements to which it is a party, and the consummation of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by the Board of Directors of XXXX XX and all other necessary
corporate action on the part of XXXX XX or its Affiliates, and the agreements of
XXXX XX contained herein constitute valid and legally binding obligations
enforceable in accordance with their terms.
5.3 REQUISITE CONSENTS OF XXXX XX; NONVIOLATION. The execution and
delivery of this Agreement and each of the Related Agreements to which it is a
party, and the consummation of the transactions contemplated hereby and thereby
in compliance with the terms hereof and thereof, by XXXX XX, do and will not,
(a) except for the consent of the Michigan Commissioner of Insurance, require
the consent, license, permit, waiver, approval, authorization or other action
of, by or with respect to, any person or Governmental Authority, the absence of
which would have a Material Adverse Effect on XXXX XX or MEIA II's ability to
perform its obligations hereunder, (b) violate or conflict with the provisions
of the Articles of Incorporation or Bylaws of XXXX XX, or (c) constitute a
default under, violate, conflict with or result in the termination of any
judgment, order, injunction or decree to which XXXX XX is a party, or by which
XXXX XX is bound or to which XXXX XX, or any of its properties, is subject
(except where such default, violation, conflict or termination would not have a
Material Adverse Effect on XXXX XX or on the ability of XXXX XX to consummate
the transactions contemplated hereby).
5.4 LITIGATION. There is no pending or, to the best of MEIA II's
knowledge, threatened litigation or judicial, administrative or arbitration
claim, action or proceeding which would, individually or in the aggregate,
reasonably be expected (a) to preclude XXXX XX from consummating the
transactions contemplated by this Agreement or from performing any of its
obligations under this Agreement or any of the Related Agreements, or (b) to
result in a Material Adverse Effect on the business, properties, assets,
financial condition or operations of XXXX XX or any of its Affiliates, nor
are there any judgments, orders, injunctions or decrees currently in effect
and involving XXXX XX or any of its Affiliates, which would, individually or
in the aggregate, reasonably be expected to result in any such preclusion or
effect described clauses (a) and (b).
5.5 KNOWLEDGE AS TO CONDITIONS. As of the date hereof, XXXX XX knows of
no reason why the approvals and consents of Governmental Authorities referred to
in Section 11.1(e) should not be obtained.
5.6 ABSENCE OF REGULATORY ACTIONS. Neither XXXX XX nor any of its
Affiliates is a party to any cease and desist order, written agreement or
memorandum of understanding with, or a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient of
any extraordinary supervisory letter from, or has adopted any board resolutions
at the request of any Governmental Authority, nor has it been advised by any
Governmental Authority that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
directive, written agreement, memorandum of undertaking, extraordinary
supervisory letter, commitment letter, board resolutions or similar undertaking.
ARTICLE VI
CLOSING
6.1 CLOSING. If the conditions to the obligations of MEIA I, MELA, XXXX
XX and Professionals enumerated in Article XI are satisfied, consummation of the
transactions contemplated hereby (the "Closing") shall take place on a mutually
agreeable date within two business days after all necessary regulatory approvals
and Agency shareholder approvals have been obtained, at the offices of Xxxxxx
Xxxxxxx PLLC, 1577 North Xxxxxxxx Avenue, Suite 300, Bloomfield, Michigan, or on
such other date as the conditions precedent are satisfied (the "Closing Date").
MEIA I, MELA, XXXX XX and Professionals shall use reasonable efforts to cause
the Closing Date to be September 22, 1997. The transfers and deliveries
described in Article XI shall be mutually interdependent and regarded as
occurring simultaneously; and no such transfer or delivery shall become
effective until all the other transfers and deliveries provided for in
Article XI have also been consummated. The transfers and deliveries herein
contemplated shall be deemed to have occurred and the Closing shall be effective
as of the close of business on the Closing Date.
6.2 DELIVERIES AT CLOSING. The following documents shall be delivered at
Closing:
(a) a Warranty Xxxx of Sale and Assignment executed by MEIA I, MELA
and XXXX XX in substantially the form attached hereto as EXHIBIT 6.2(a);
(b) an Assignment of Lease by MEIA I and MELA in favor of XXXX XX in
substantially the form attached hereto as EXHIBIT 6.2(b);
(c) a Consent and Estoppel executed by the landlord of the Leased
Property in substantially the form attached hereto as EXHIBIT 6.2(c);
(d) a legal opinion of Xxxxxx & Xxxxxx Attorneys, P.C., counsel to
the Agency, in substantially the form attached hereto as EXHIBIT 6.2(d);
(e) an Officers' Certificate executed by the Chief Executive Officer
and Secretary of each of MEIA I and MELA in substantially the form attached
hereto as EXHIBIT 6.2(e);
(f) a legal opinion of Xxxxxxxx Xxxxxx Xxxxxxxx and Xxxx, counsel to
Professionals, in substantially the form attached hereto as EXHIBIT 6.2(f);
(g) a legal opinion of Xxxxxx Xxxxxxx PLLC, counsel to XXXX XX, in
substantially the form attached hereto as EXHIBIT 6.2(g);
(h) an Officers' Certificate executed by the Chief Executive Officer
and Secretary of Professionals in substantially the form attached hereto as
EXHIBIT 6.2(h);
(i) an Officers' Certificate executed by the Chief Executive Officer
and Secretary of XXXX XX in substantially the form attached hereto as EXHIBIT
6.2(i);
(j) the Subscription Agreement executed by Mutual and XXXX XX in
substantially the form attached hereto as EXHIBIT 1.1(e);
(k) the Noncompetition Agreements executed by Professionals, each of
the shareholders of the Agency and the Agency in substantially the form attached
hereto as EXHIBIT 1.1(c);
(l) the Releases executed by the Agency, its Affiliates and each of
its directors, officers and shareholders in favor of XXXX XX, Mutual,
Professionals, PICOM and their respective Affiliates, representatives, advisors,
attorneys and accountants in substantially the form attached hereto as EXHIBIT
1.1(d);
(m) the Mutual Guaranty executed by Mutual in substantially the form
attached hereto as EXHIBIT 2.3(a);
(n) the Professionals Guaranty executed by Professionals in
substantially the form attached hereto as EXHIBIT 2.3(b);
(o) the Inter-Creditor Agreement executed by Mutual, XXXX XX and
Professionals in substantially the form attached hereto as EXHIBIT 2.3(c);
(p) the books and records of the Agency (other than those included in
the Excluded Assets), including executed originals of all Assumed Contracts; and
(q) the Liquidating Trust Agreement executed by MEIA I, MELA and
the Initial Trustee defined therein, in substantially the form attached hereto
as EXHIBIT 2.12(a);
ARTICLE VII
THE AGENCY'S COVENANTS
The Agency covenants that:
7.1 CONDUCT OF BUSINESS. With respect to the Business, from the date of
this Agreement until the earlier of the Closing or any termination of this
Agreement pursuant to the provisions hereof (the "Interim Period"), the Agency
shall (except to the extent Professionals and XXXX XX shall have given its prior
written consent to do otherwise);
(a) conduct, carry on and use its reasonable efforts to maintain and
preserve the Business intact; use its reasonable efforts to maintain and
preserve its relationship with and the goodwill of agents, solicitors,
suppliers, customers and others having business relations with the Business; and
maintain the Assets, as well as the books of account, records and files related
to the conduct of the Business and the Employees of the Business, all in the
ordinary course of business and consistent with past practice;
(b) promptly inform Professionals and XXXX XX in writing of any
specific event or circumstance of which it becomes aware that has or is likely
to have a Material Adverse Effect on the Assets or the current or future
earnings of the Business or which constitutes a breach of any representations or
warranties set forth in Article III;
(c) not, without the prior written consent of Professionals and
XXXX XX:
(i) change or modify in any manner its existing credit,
collection and payment policies, procedures and practices
with respect to accounts receivable and accounts payable,
respectively, including accelerating collections of
receivables, failing to make or delaying making
collections of receivables (whether or not past due),
accelerating payment of payables or failing to pay or
delaying payment of payables;
(ii) (A) enter into any contract or commitment which would
become an Assumed Contract, (B) enter into any contract
or commitment with respect to the licensing or
disposition of any Intellectual Property or (C) incur
any liability, absolute or contingent, waive any right
or enter into any other transaction (except in the
ordinary course of business consistent with past
practice) which would reasonably be expected to have a
Material Adverse Effect on the Business or the Assets;
(iii) make any material changes in compensation or benefits or
grant any material new compensation or benefits payable
to or in respect of any Employee of the Business; or
(iv) take or omit to take any action which if taken or omitted
prior to the date hereof would constitute or result in a
breach of any representations or warranties set forth in
Article III.
7.2 INVESTIGATION AND ACCESS TO INFORMATION BEFORE AND AFTER CLOSING.
During the Interim Period and after the Closing, the Agency shall, and shall use
its reasonable efforts to cause its counsel and independent public accountants
to, afford to Professionals and XXXX XX and their employees, agents and
representatives, including their respective counsel and independent public
accountants, reasonable access, during normal business hours, to the premises of
the Business and to all the Assumed Contracts, and to all books, records, files,
documents or other assets related to the Business in either MEIA I's or MELA's
possession or under either MEIA I's or MELA's control as may be reasonably
requested by Professionals or XXXX XX. After the Closing, Professionals and
XXXX XX shall have the right, at its cost and expense, to copy such books,
records, files and documents related to the Business which remain in the
MEIA I's or MELA's possession or under MEIA I's or MELA's control after the
Closing as may be reasonably useful to Professionals or XXXX XX in connection
with preparing tax returns or the investigation or defense of claims.
7.3 CLOSING. The Agency will, to the extent within its control, use its
reasonable efforts to cause the conditions specified in Article XI to be
satisfied by the Closing Date.
7.4 COOPERATION BY THE AGENCY. The Agency shall not interfere in any
attempts by Professionals to cause a Demutualization and shall use reasonable
efforts to assist Professionals in obtaining any agreements necessary from
Mutual's directors and policyholders to achieve such Demutualization. The
Agency shall not attempt to cause a Change of Control of Professionals, Mutual,
any Affiliate of Professionals which "controls," as such term is defined by
Section 13(d) of the Securities Exchange Act of 1934, as amended, Mutual, or
XXXX XX.
7.5 AMENDMENT OF SCHEDULES. From time to time prior to the Closing Date,
the Agency shall supplement or amend in writing (referring specifically to this
Section) the Schedules delivered in connection herewith with respect to any fact
or circumstance arising from and after the execution of this Agreement to the
Closing Date (but not with respect to any fact or circumstance existing, whether
known or unknown by the Agency, on or prior to the date of this Agreement) of
which the Agency becomes aware, which, if existing, occurring or known at the
date of this Agreement, would have been required to
be set forth or described in any such Schedule or which is necessary to correct
any information in any such Schedule which has been rendered inaccurate thereby.
Acceptance of any such amendment or supplement by Professionals or XXXX XX shall
not constitute a waiver of rights by either Professionals or XXXX XX with
respect to any right or claim Professionals or XXXX XX might have or have had on
account of any matter so disclosed on such amendment or supplement.
7.6 CORPORATE NAME CHANGE. Immediately following the Closing, each of
MEIA I and MELA shall file a Certificate of Amendment to Articles of
Incorporation with the Michigan Department of Consumer and Industry Services
changing its corporate name to a name that is substantially dissimilar to
"Michigan Educators Insurance Agency," "MEIA," "Michigan Educators Life
Insurance Agency" or "MELA."
7.7 MERGER OF 401(k) PLAN. On or before the Closing Date, the Agency (i)
shall, in cooperation with Mutual, take all action necessary to merge the
Agency's Michigan Educators Insurance Agency, Inc. Retirement and Savings Plan
with Mutual's Michigan Educational Employees Mutual Insurance Company Retirement
and Savings Plan, carrying over for each plan participant vested and unvested
contributions and qualifying years of service, (ii) will ensure that all
contributions to such plans which would have been made in the ordinary course
are made, (iii) will make a contribution to such plans on a pro-rata basis for
the Agency's current fiscal year, and (iv) will cooperate with Mutual with
respect to the foregoing.
7.8 TAIL COVERAGE. On or before the Closing Date, the Agency shall take
all actions necessary to maintain errors and omissions insurance coverage for
the Agency from and after the Closing Date until the first anniversary thereof.
7.9 RELEASE.
(a) To the extent permitted by law, the Agency, on behalf of itself
and its directors, shareholders, officers, employees, Affiliates,
representatives, advisors, attorneys, accountants, successors and assigns, and
each of the Agency's shareholders (pursuant to this Section 7.9 and by
acceptance, directly or indirectly of the consideration to be paid under Article
II), ("Releasors") hereby fully and forever release, absolve, remise, acquit
and discharge Mutual, Professionals, XXXX XX, PICOM and their respective
directors, officers, employees, Affiliates, representatives, advisors,
attorneys, accountants, fairness opinion providers including but not limited to
Xxxxxxx Xxxxxx, Inc., and successors and assigns, from any and all matter of
action, claims, demands, actions, causes of actions, obligations, suits, debts,
choses in action, damages and liabilities of any nature whatsoever, at law or in
equity, whether known or not now known, suspected or claimed, which Releasors
ever had, or now have, with respect to and arising out of or from, or in
connection with, the Letter of Intent, or otherwise, provided that the parties
remain obligated to perform their respective obligations under this Agreement.
(b) Releasors will not commence any action, suit or other proceeding,
at law or in equity, on account of any right, claim, action or cause of action
which now exists or which may hereinafter accrue in its favor upon the basis of
facts, whether known or unknown, existing as of the date of this Agreement and
which have been released and discharged pursuant to Section 7.9(a), and if
Releasors or its shareholders, officers, directors, representatives, employees,
attorneys, successors or assigns, files such an action, suit or proceeding, or
asserts any related claim, against any person released in Section 7.9(a),
Releasor will indemnify and hold harmless such person from any liability,
damages, costs or expenses arising out of any such action, suit, proceeding or
claim, including but not limited to fees and costs incurred by any person
released in Section 7.9(a) in the defense of such action, suit, proceeding or
claim.
7.10 NONCOMPETITION. Except as otherwise provided in the Noncompetition
Agreement executed and delivered pursuant to Section 6.2 with respect to such
Person, the Agency and each of its shareholders (pursuant to this Section 7.10
and by acceptance, directly or indirectly of the consideration to be paid under
Article II), agree not to compete with Mutual or XXXX XX or otherwise sell
insurance to educators as a target market through the fifth anniversary of the
Closing; PROVIDED, HOWEVER, that this covenant shall not preclude any Agency
shareholder from selling insurance through XXXX XX or any policy offered by
Mutual.
ARTICLE VIII
PROFESSIONALS' AND MEIA II'S COVENANTS
Professionals and XXXX XX covenant that:
8.1 CLOSING. Each of Professionals and XXXX XX will, to the extent within
its control, use its best reasonable efforts to cause the conditions specified
in Article XI to be satisfied by the Closing Date.
8.2 CERTAIN FILINGS, CONSENTS AND ARRANGEMENTS. Professionals and XXXX XX
shall, as soon as practicable, make any filings and applications required to be
filed in order to obtain all approvals, consents and waivers contained in
Section 11.1(e).
8.3 THE AGENCY'S ACCESS TO INFORMATION AFTER THE CLOSING. Until the fifth
anniversary of the Closing Date, XXXX XX will retain the books and records
pertaining to the Business prior to the Closing Date. If XXXX XX wishes to
dispose of such books and records after such date, then it shall first give 90
days' notice to the Agency and the Agency shall have the right, upon notice to
XXXX XX within such 90-day period, to require XXXX XX to retain such books and
records (at the Agency's cost) for such additional period as the Agency
reasonably requests or, at MEIA II's option, XXXX XX may deliver possession of
such books and records to the Agency, at the Agency's cost.
8.4 LABOR MATTERS.
(a) TRANSITIONED EMPLOYEES. Prior to the Closing Date, Mutual or
XXXX XX shall extend an offer of employment, effective as of the Closing Date,
to all Employees of the Business, with an employment start date (the "Start
Date") which is 12:01 a.m. on the day immediately following the Closing Date,
unless the Employee of the Business is a salaried employee then on an approved
leave pursuant to any of MEIA I's or MELA's leaves policies, in which event the
Start Date for such Employee of the Business shall be the date the Employee of
the Business returns to work but in any event not later than 180 days after the
Closing Date. Mutual or XXXX XX shall be responsible for managing and
implementing the transfer to Mutual or XXXX XX of those Employees of the
Business who accept Mutual's or MEIA II's offer of employment (collectively, the
"Transitioned Employees"; each, a "Transitioned Employee").
(b) HIRING REQUIREMENTS. Mutual or XXXX XX shall hire each Employee
of the Business who (i) is employed by either MEIA I or MELA in connection with
the operations of the Business as of the Closing Date; and (ii) does not decline
the offer of employment from Mutual or XXXX XX.
(c) TERMS OF EMPLOYMENT. Mutual's or MEIA II's offer of employment
to the Employees of the Business shall include the following:
(i) POSITIONS. Mutual or XXXX XX shall offer employment to
each Employee of the Business. Such offer shall be subject to the employee's
agreement that his or her employment is "at-will," and thereby terminable at any
time, with or without cause, at the sole and exclusive discretion of Mutual or
XXXX XX, and, further, subject to such other policies, rules, regulations, terms
and conditions as Mutual or XXXX XX may adopt from time to time.
(ii) SALARY AND BENEFITS. Each offer of employment from
Mutual or XXXX XX shall include a salary that is equal to that which the
employee earned as an employee of either MEIA I or MELA, as of the date of this
Agreement, and benefits comparable to those provided similarly compensated (or
classified) employees of Mutual or XXXX XX. Mutual and XXXX XX reserve the
right to change an employee's salary or benefits at any time and for any reason
subsequent to the employee's initial hire.
(d) WORKER'S COMPENSATION CLAIMS. MEIA I and MELA shall each be
responsible for any unpaid workers' compensation claims of the Transitioned
Employees to the extent such claims arise out of events occurring on or prior to
the Start Date, whether or not reported prior to the Start Date. Mutual or XXXX
XX shall be responsible for any workers' compensation claims of the Transitioned
Employees to the extent such claims arise out of events occurring on and after
the Start Date. With regard to workers' compensation claims of Transitioned
Employees which arise out of events occurring both prior to the Start Date and
on and after the Start Date, MEIA I,
MELA, XXXX XX and Professionals shall use their best efforts to allocate the
portion of any such claim arising prior to the Start Date, which portion shall
be the responsibility of MEIA I and MELA, and the portion of any such claim
arising on and after the Start Date, which portion shall be the responsibility
of Mutual or XXXX XX.
(e) NO ASSUMPTION OF OBLIGATIONS. Except to the extent there is an
adjustment of the Purchase Price pursuant to Section 2.13, neither Mutual nor
XXXX XX shall assume any obligations of either MEIA I or MELA for employee
salaries, benefits, or other costs, debts and liabilities of any nature
whatsoever accrued through the Closing Date.
8.5 CHANGE OF CONTROL. Except as otherwise precluded by applicable
securities laws, at least five business days before the occurrence of any Change
of Control with respect to Professionals, Mutual, or XXXX XX or an Affiliate
that "controls" Mutual (as that term is defined in Section 13(d) of the
Securities Exchange Act of 1934, as amended) (other than as permitted under
Section 2.7), Professionals shall notify the Agency in writing of such
occurrence. At least five business days before the occurrence of a
Demutualization of Mutual, Mutual shall notify the Agency in writing of such
occurrence.
8.6 CONDUCT OF BUSINESS. From and after the Closing Date until September
1, 2004 (such period being referred to in this Section 8.6 as the "Earn-out
Period"), Professionals and XXXX XX will each in good faith use its best efforts
to cause XXXX XX to:
(a) Conduct the Business in a manner that, subject to sound business
practices, is reasonably likely to preserve and increase the premiums in respect
of policies of insurance written through XXXX XX during the Earn-out Period;
(b) Ensure that XXXX XX maintains its role as exclusive agent of
Mutual with respect to the sale and marketing of insurance products that target
educators, including teachers, administrators or other employees of public and
private school systems (including colleges and universities), in Michigan during
the Earn-out Period; and
(c) Ensure that no Affiliate of either Professionals or XXXX XX
engages, directly or indirectly, in selling or marketing any insurance product
that targets educators, including teachers, administrators or other employees of
public and private school systems (including colleges and universities), in
Michigan during the Earn-out Period; provided, however, that nothing in this
Section 8.6 shall prohibit Professionals from continuing to sell or market
professional liability insurance to lawyers or health care professionals.
ARTICLE IX
ADDITIONAL COVENANTS
9.1 COOPERATION. MEIA I, MELA, XXXX XX and Professionals will cooperate
with each other in obtaining any necessary consents to the consummation of the
transactions contemplated hereby.
9.2 TAX COVENANTS.
(a) MEIA I and MELA will be responsible for the preparation and
filing of all federal and state income and franchise Tax returns, and all other
Tax returns required to be filed by either MEIA I or MELA, relating to the
Business or the Assets for all periods ending on or before the Closing Date.
MEIA I and/or MELA shall make all payments required with respect to any such Tax
return as shown thereon.
(b) XXXX XX will be responsible for the preparation and filing of all
other Tax returns relating to the Business or the Assets.
(c) Federal and state income and franchise Taxes imposed on or in
respect of the Business for any taxable period that includes the Closing Date
shall be allocated to and paid by (i) MEIA I and MELA for the period up to and
including the Closing Date, and (ii) XXXX XX for the period subsequent to the
Closing Date. For purposes of this Agreement, Taxes for the period up to and
including the Closing Date and for the period subsequent to the Closing Date
shall be apportioned on a per diem basis in the case of any such Taxes not
measured or measurable in whole or in part with reference to net or gross
income, sales or receipts, capital expenses or compensation expenses, and all
other such Taxes shall be determined on the basis of any interim closing of the
books of the Business as of the Closing Date.
(d) MEIA I, MELA, XXXX XX and Professionals shall provide reasonable
cooperation to each other in connection with (i) the preparation or filing of
any Tax return, Tax election, Tax consent or certification or any claim for a
Tax refund, (ii) any determination of liability for Taxes and (iii) any audit,
examination or other proceeding in respect of Taxes related to the Assets or the
Business.
ARTICLE X
TERMINATION
10.1 TERMINATION. Subject to Section 10.2, this Agreement and the
transactions contemplated hereby may be terminated at any time prior to the
Closing Date:
(a) MUTUAL CONSENT. By mutual written consent of MEIA I, MELA,
Professionals and XXXX XX;
(b) MISREPRESENTATION OR BREACH. By MEIA I and MELA on one hand or
Professionals and XXXX XX on the other hand, if there has been a material
misrepresentation or breach of warranty or covenant herein or in any signed
writing delivered pursuant hereto on the part of the other party(ies);
(c) COURT ORDER. By MEIA I and MELA on one hand or Professionals and
XXXX XX on the other hand, if any non-appealable final order, decree or judgment
of any court or governmental body having competent jurisdiction has been entered
against MEIA I, MELA, Professionals or XXXX XX or their respective Affiliates
restraining, prohibiting, declaring illegal or awarding substantial damages in
connection with the transactions contemplated hereby; and
(d) FAILURE TO SATISFY CONDITIONS. By MEIA I and MELA, if all of the
conditions set forth in Article XI shall not have been satisfied or waived on or
before December 31, 1997, other than through failure of MEIA I and MELA to fully
comply with their respective obligations hereunder; or by Professionals and
XXXX XX, if all of the conditions set forth in Article XI shall not have been
satisfied or waived on or before December 31, 1997, other than through failure
of Professionals and XXXX XX to fully comply with their respective obligations
hereunder.
10.2 LIMITATION ON RIGHT TO TERMINATE; RIGHT TO PROCEED.
(a) LIMITATION. No person shall be allowed to exercise any right of
termination pursuant to Section 10.1 if the event giving rise to the termination
right shall be due to the willful failure of such Person seeking to terminate
this Agreement to perform or observe in any material respect any of the
covenants or agreements set forth herein to be performed or observed by such
Person.
(b) WAIVER. Notwithstanding anything in this Agreement to the
contrary, if any condition specified in Article XI has not been satisfied,
MEIA I and MELA, in the case of the conditions specified in Section 11.2, and
Professionals and XXXX XX, in the case of the conditions specified in Section
11.1, in addition to any other rights which may be available thereto, shall have
the right to waive such condition and to require the other Person(s) to proceed
with the Closing. Any such waiver shall be incorporated in a written instrument
executed by the Person(s) so granting such waiver.
ARTICLE XI
CONDITIONS
11.1 CONDITIONS TO OBLIGATIONS OF XXXX XX AND PROFESSIONALS. The
obligation of XXXX XX and Professionals to consummate the transactions
contemplated by this Agreement and the other Related Agreements is subject to
the satisfaction on or prior to the Closing Date of the following conditions:
(a) PERFORMANCE. Each agreement and obligation of MEIA I and MELA to
be performed or complied with on or before the Closing Date pursuant hereto
shall have been duly performed and complied with in all material respects.
(b) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of MEIA I, MELA and any Affiliate of either MEIA I or MELA
contained in this Agreement, including all Exhibits or Schedules hereto or in
the Related Agreements and in any other writing signed by either MEIA I or MELA
delivered pursuant hereto or thereto or in connection herewith or therewith
shall be true and complete in all material respects on and as of the Closing
Date with the same effect as though made on and as of such date.
(c) NO VIOLATION OF STATUTES, ORDERS, ETC. There shall be no legal
requirements which make it illegal for XXXX XX and Professionals to consummate
the transactions contemplated hereby or which enjoin Professionals or XXXX XX
from consummating the transactions contemplated hereby.
(d) LEGAL ACTIONS. No legal action or proceeding shall have been
instituted or threatened in writing by any Person (i) naming XXXX XX,
Professionals, Mutual or PICOM, or any of their respective Affiliates,
representatives, advisors, attorneys or accountants, which action or proceeding
relates to this Agreement, the Letter of Intent or the consummation of
transactions contemplated by the Letter of Intent or this Agreement, or
(ii) seeking to restrain or prohibit, or questioning the validity or legality
of, the consummation of the transactions contemplated by this Agreement or
seeking material damages or other remedies which would have a Material Adverse
Effect on the Assets or the Business or on XXXX XX or Professionals or any of
their respective Affiliates.
(e) CONSENTS AND APPROVALS. All consents and approvals with regard
to the Assumed Contracts shall have been obtained, except for any consents or
approvals not obtained by the Closing Date that have been expressly waived in
writing by Professionals and XXXX XX and any such consents and approvals with
regard to the Assumed Contracts with insurance companies other than Mutual, the
receipt of which is hereby waived by Professionals and XXXX XX. In addition,
all necessary consents and approvals from Governmental Authorities, including
approval by the Michigan Commissioner of Insurance, shall have been obtained by
the Closing Date.
(f) CERTIFICATE. Each of MEIA I and MELA shall have delivered to
Professionals and XXXX XX an Officers' Certificate, dated as of the Closing
Date, in substantially the form attached hereto as EXHIBIT 6.2(e), executed on
their behalf by the Chief Executive Officer and Secretary of each of MEIA I and
MELA, certifying (i) that the representations and warranties of MEIA I and MELA
contained in this Agreement are true and complete in all material respects as of
the Closing Date with the same effect as though made on and as of the Closing
Date, and (ii) that each of MEIA I and
MELA has in all material respects performed and complied with all of the
covenants in this Agreement to be performed and complied with by it on or prior
to the Closing Date.
(g) RELATED AGREEMENTS. Each of MEIA I and MELA shall have executed
and delivered to Professionals and XXXX XX the Related Agreements to which it is
a party.
(h) NONCOMPETITION AGREEMENTS. Professionals and XXXX XX shall have
received executed copies of the Noncompetition Agreements from each of the
Agency's shareholders.
(i) RELEASES. XXXX XX, Mutual, Professionals and PICOM shall have
received executed copies of the Releases from the Agency and each of the
Agency's Affiliates, directors, officers and shareholders.
11.2 CONDITIONS TO OBLIGATIONS OF THE AGENCY. The obligation of the Agency
to consummate the transactions contemplated by this Agreement and the other
Related Agreements is subject to the satisfaction on or prior to the Closing
Date of the following conditions:
(a) PERFORMANCE. Each agreement and obligation of Professionals or
XXXX XX to be performed or complied with on or before the Closing Date pursuant
hereto shall have been duly performed and complied with in all material
respects.
(b) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of XXXX XX and Professionals contained in this Agreement,
including the Exhibits and Schedules hereto, or in the Related Agreements and in
any other writing signed by either XXXX XX and Professionals delivered pursuant
hereto or thereto or in connection herewith or therewith shall be true and
complete in all material respects on and as of the Closing Date with the same
effect as though made on and as of such date.
(c) NO VIOLATION OF STATUTES, ORDERS, ETC. There shall be no legal
requirements which make it illegal for MEIA I or MELA to consummate the
transactions contemplated hereby or which enjoin either MEIA or MELA from
consummating the transactions contemplated hereby.
(d) LEGAL ACTIONS. No legal action or proceeding shall have been
instituted or threatened in writing by any Person (excluding any action or
proceeding instituted or threatened by any party to this Agreement) seeking to
restrain or prohibit, or questioning the validity or legality of, the
consummation of the transactions contemplated by this Agreement or seeking
material damages, or other remedies which would have a Material Adverse Effect
on XXXX XX or Professionals or on MEIA I or MELA or any of their respective
Affiliates.
(e) PROFESSIONALS' CERTIFICATE. Professionals shall have delivered
to the Agency an Officers' Certificate, dated as of the Closing Date, executed
on behalf of Professionals by the Chief Executive Officer and Secretary of
Professionals, certifying (i) that the representations and warranties of
Professionals contained in this Agreement are true and complete in all material
respects as of the Closing Date with the same effect as though made on and as of
the Closing Date, and (ii) that Professionals has in all material respects
performed and complied with all of the covenants in this Agreement to be
performed and complied with by it on or prior to the Closing Date.
(f) MEIA II'S CERTIFICATE. XXXX XX shall have delivered to the
Agency an Officers' Certificate, dated as of the Closing Date, executed on
behalf of XXXX XX by the Chief Executive Officer and Secretary of XXXX XX,
certifying (i) that the representations and warranties of XXXX XX contained in
this Agreement are true and complete in all material respects as of the Closing
Date with the same effect as though made on and as of the Closing Date, and
(ii) that XXXX XX has in all material respects performed and complied with all
of the covenants in this Agreement to be performed and complied with by it on or
prior to the Closing Date.
(g) RELATED AGREEMENTS. Each of XXXX XX and Professionals shall have
executed and delivered to the Agency the Related Agreements to which it is a
party.
ARTICLE XII
SURVIVAL; INDEMNIFICATION
12.1 SURVIVAL; EXCLUSION OF OTHER REPRESENTATIONS.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Subject to the time
limitations set forth in Section 12.2(e), all representations and warranties
made by MEIA I, MELA, XXXX XX or Professionals in this Agreement, including the
Exhibits and Schedules, or in any Related Agreement shall survive the Closing.
(b) EXCLUSION OF OTHER REPRESENTATIONS. Each of MEIA I, MELA,
XXXX XX and Professionals acknowledges that it has sufficient knowledge and
expertise in business and financial matters to evaluate the merits and risks
associated with the transactions contemplated by this Agreement. Each of MEIA
I, MELA, XXXX XX and Professionals has made its decision to enter into this
Agreement and to consummate the transactions provided for herein without relying
upon any express or implied representations, warranties, commitments or
undertakings of any other Person, or such other Person's directors, officers,
employees, agents, representatives or affiliates, except as expressly set forth
in this Agreement, including the Exhibits and Schedules, and in the Related
Agreements.
12.2 INDEMNIFICATION.
(a) INDEMNIFICATION BY THE AGENCY. If the Closing is consummated,
the Agency and its successors and assigns shall indemnify and defend and hold
Professionals and XXXX XX and their respective directors, officers and other
Affiliates harmless against and with respect to, and shall reimburse
Professionals and XXXX XX and their respective directors, officers and other
Affiliates for, any and all damages reasonably and proximately incurred by any
of the foregoing as a result of any of the following:
(i) any inaccuracy or misrepresentation in or breach of any
representation or warranty of MEIA I or MELA in this
Agreement or any of the Related Agreements;
(ii) the breach or failure by either MEIA I or MELA to perform
any of its covenants or agreements under this Agreement
or any of the Related Agreements;
(iii) the operation or ownership of the Business or the Assets
prior to the Closing Date; and
(iv) any Excluded Asset or any Liability (except for Assumed
Liabilities); provided, however, that such Liabilities
shall include any breaches of an Assumed Liability that
occurred prior to Closing.
(b) INDEMNIFICATION BY PROFESSIONALS. If the Closing is consummated,
Professionals shall indemnify and defend and hold MEIA I and MELA and their
respective directors, officers, shareholders and other Affiliates harmless
against and with respect to, and shall reimburse MEIA I and MELA and their
respective directors, officers, shareholders and other Affiliates for, any and
all damages reasonably and proximately incurred by any of the foregoing as a
result of the following:
(i) any inaccuracy or misrepresentation in or breach of any
representation or warranty of Professionals in this
Agreement or any of the Related Agreements; and
(ii) the breach or failure by Professionals to perform any of
its covenants or agreements under this Agreement or any
of the Related Agreements.
(c) INDEMNIFICATION BY XXXX XX. If the Closing is consummated,
XXXX XX shall indemnify and defend and hold MEIA I and MELA and their respective
directors, officers, shareholders and other Affiliates harmless against and with
respect to, and shall reimburse MEIA I and MELA and their respective directors,
officers, shareholders and other Affiliates for, any and all damages reasonably
and proximately incurred by any of the foregoing as a result of the following:
(i) any inaccuracy or misrepresentation in or breach of any
representation or warranty of XXXX XX in this Agreement
or any of the Related Agreements;
(ii) the breach or failure by XXXX XX to perform any of its
covenants or agreements under this Agreement or any of
the Related Agreements;
(iii) the operation or ownership of the Business or the Assets
from and after the Closing Date, excluding any liability
arising from any act or omission, fact or circumstance in
existence or having occurred prior to the Closing Date;
and
(iv) any Assumed Contract or other Assumed Liability.
(d) PROCEDURE FOR INDEMNIFICATION. The procedure for indemnification
shall be as follows:
(i) The Person claiming indemnification ("Claimant") shall,
within thirty (30) days after its discovery of any claim
for which indemnification will be sought as provided in
this Agreement (the "Claim"), give notice to the Person
from whom indemnification is sought ("Indemnitor") of its
Claim, specifying in reasonable detail the factual basis
for the Claim and, to the extent known, the amount of the
Claim. Notwithstanding the foregoing, the failure by
Claimant to provide notice of any Claim within the period
specified, or any delay in providing such notice, shall
not affect or impair the obligations of Indemnitor
hereunder, except and only to the extent that Indemnitor
has been adversely affected by such failure or delay.
(ii) With respect to Claims between MEIA I, MELA, XXXX XX and
Professionals, following receipt of notice from Claimant
of a Claim, Indemnitor shall have thirty (30) days to
make any investigation of the Claim that Indemnitor deems
necessary or desirable. For purposes of this
investigation, Claimant shall make available to
Indemnitor and its authorized representatives the
information relied upon by Claimant to substantiate the
Claim. If Claimant and Indemnitor cannot agree as to the
validity and amount of the Claim within the
thirty (30)-day period (or any mutually agreed upon
extension thereof), Claimant shall submit the claim to
arbitration as provided in Section 12.2(h).
(iii) With respect to any Claim by a third party as to which
Claimant is entitled to indemnification hereunder,
Indemnitor shall have the right, exercisable by written
notice to Claimant within thirty (30) days after receipt
of written notice from Claimant of the commencement or
assertion of any such Claim, at its own expense to
participate in or assume control of the defense of the
Claim, and Claimant shall cooperate fully with
Indemnitor, subject to reimbursement for actual
out-of-pocket expenses incurred by Claimant as the result
of a request by Indemnitor. If Indemnitor does not elect
to assume control or otherwise participate in the defense
of any third-party Claim within thirty (30) days of its
receipt of notice of the Claim (or any extended period
mutually agreed upon by the parties), Claimant shall
(upon further written notice to Indemnitor) have the
right to undertake the defense, compromise or settlement
of the Claim for the account of Indemnitor subject to the
right of Indemnitor, at its expense, to assume the
defense of the Claim at any time prior to final
settlement, compromise or determination thereof. In no
event shall Indemnitor be liable or otherwise have any
obligation with respect to any settlement, compromise or
determination of any Claim agreed to by Claimant without
the prior written consent of Indemnitor (which consent
shall not be unreasonably withheld). Notwithstanding the
foregoing, Indemnitor shall not settle or compromise any
Claim without the prior written consent of Claimant
(which consent shall not be unreasonably withheld).
(iv) MEIA I, MELA, XXXX XX and Professionals shall cooperate
in defending any third-party Claim, and the defending
Person(s) shall have reasonable access to the books,
records and personnel which are pertinent to the defense
and which are in control of the other Person(s). MEIA I,
MELA, XXXX XX and Professionals shall furnish such
records, information and testimony, and attend such
conferences, discovery proceedings, hearings, trials and
appeals, as may be reasonably requested by the other
Person(s) in connection with defending any third-party
Claim.
(v) Notwithstanding anything contained in this Agreement to
the contrary, if the Agency shall owe Professionals or
XXXX XX any amount during the period XXXX XX (or
Professionals or Mutual, as guarantors) shall owe a
portion of the Purchase Price payable to the Agency
pursuant to Section 2.2(b)
hereof, Professionals, Mutual or XXXX XX shall be
entitled to set-off against its payment obligation the
amount then owed by the Agency to Professionals, Mutual
or XXXX XX; PROVIDED that no such set-off shall be taken
unless Professionals, Mutual or XXXX XX shall have given
to the Agency 30 days' prior written notice of its intent
to exercise its right of set-off under this Section 12.2
and the basis thereof. If Professionals or XXXX XX shall
have asserted a claim for indemnification pursuant to
this Article XII, then either Professionals or XXXX XX
will direct that the amount subject to such claim will be
held in an interest-bearing escrow pending the resolution
of such claim. Any such escrowed amount will be counted
against any payment obligation then owed by
Professionals, Mutual and/or XXXX XX to the Agency.
(e) TIME LIMITATIONS. Indemnitor will have no liability to Claimant
under or in connection with a breach of any of the representations and
warranties made or to be performed by Indemnitor contained in this Agreement
unless written notice asserting a Claim based thereon is given to Indemnitor not
later than eight (8) years following the date of this Agreement; provided that,
notwithstanding the foregoing, Indemnitor will have no liability to Claimant
under or in connection with (a) a breach of any representation, warranty,
covenant or agreement made or to be performed by Indemnitor contained in this
Agreement related to any Taxes or Employee Benefit Plans, including those
representations and warranties set forth in Section 3.16, Section 3.21 and
Section 4.5 (as it relates to Taxes or Employee Benefit Plans) unless written
notice asserting a Claim based thereon is given to Indemnitor prior to the later
of (i) 90 days after the date upon which the liability to which any such Claim
may relate is barred by all applicable statutes of limitation and (ii) 90 days
after the date upon which any claim for refund or credit related to such Claim
is barred by all applicable statutes of limitation; (b) a breach of any
representation, warranty, covenant or agreement made or to be performed by
Indemnitor contained in this Agreement related to any environmental matters,
including those representations and warranties set forth in Section 3.17 and
Section 4.5 (as it relates to environmental matters) unless written notice
asserting a Claim is given to Indemnitor prior to the tenth anniversary of the
Closing Date, and (c) those representations and warranties set forth in Section
3.1, Section 3.2, Section 3.3, Section 3.4, Section 4.1, Section 4.2, Section
4.3, Section 5.1, Section 5.2 or Section 5.3 which may be asserted at any time.
(f) TAX EFFECT AND INSURANCE. The liability of Indemnitor with
respect to any Claim shall be reduced by the tax benefit actually realized and
any insurance proceeds received by Claimant as a result of any losses upon which
such Claim is based and shall include any tax detriment actually suffered by
Claimant as a result of such losses.
(g) SUBROGATION. Upon payment in full of any Claim, whether
such payment is effected by set-off or otherwise, or payment of any judgment or
settlement with respect to a third-party Claim, Indemnitor shall be subrogated
to the extent of such payment and to the extent permitted by applicable law to
the rights of Claimant against any Person with respect to the subject matter of
such Claim or third party Claim.
(h) ARBITRATION. All disputes arising under this Article XII (other
than claims in equity) shall be resolved by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association ("AAA").
Arbitration shall be by three arbitrators. Each of the Agency, on the one
hand, and Professionals and XXXX XX together, on the other hand, shall select a
single arbitrator and file with the AAA a notice of appointment. The two
arbitrators so chosen shall select a third arbitrator who shall act as chairman
of the arbitrations. If either the Agency, on the one hand, or Professionals
and XXXX XX together, on the other hand, should abstain from selecting an
arbitrator within ten (10) business days, or should the two arbitrators selected
above fail to select a third arbitrator within ten (10) business days, then at
the request of either the Agency, on the one hand, or Professionals and XXXX XX
together, on the other hand, the President of the AAA shall select an
arbitrator, to fill the vacant position within ten (10) business days of such
request. Arbitration shall be held in such place in Xxxxxx County, Michigan, as
may be specified by the arbitrator (or any place agreed to by Indemnitor,
Claimant and the arbitrator). The decision of the arbitrator shall be final and
binding as to any matters submitted under this Article XII; PROVIDED, HOWEVER,
that, if necessary, such decision and satisfaction procedure may be enforced by
either Indemnitor or Claimant in any court of record having jurisdiction over
the subject matter or over any of MEIA I, MELA, XXXX XX or Professionals. All
costs and expenses incurred in connection with any such arbitration proceeding
(including reasonable attorneys' fees) shall be borne by the Person(s) against
which the decision is rendered, or, if no decision is rendered, such costs and
expenses shall be borne equally by Indemnitor and Claimant. If the arbitrator's
decision is a compromise, the determination of which Person(s) shall bear the
costs and expenses incurred in connection with any such arbitration proceeding
shall be made by the arbitrator on the basis of the arbitrator's assessment of
the relative merits of the positions of Indemnitor and Claimant.
(i) If the Closing is consummated, the indemnification provided in
this Section 12.2 shall be the sole and exclusive legal remedy for any
inaccuracy or misrepresentation in or breach of any representation or warranty
made by MEIA I, MELA, Professionals or XXXX XX or in any of the Related
Agreements and no such Person shall seek any other legal remedy (whether under
federal or state securities laws or otherwise) which might otherwise be
available to such Person; PROVIDED, HOWEVER, that nothing in this Section 12.2
shall preclude any Person from seeking any legal remedy available to such Person
for any inaccuracy or breach which constitutes fraud on the part of any other
Person; and PROVIDED FURTHER, HOWEVER, that nothing in this Section 12.2 shall
preclude any Person from seeking any equitable remedy available to such Person
for any such inaccuracy or breach or for any failure by any
other Person to comply with any of the covenants or agreements of such other
Person contained herein or in any of the Related Agreements to be performed or
complied with after the Closing.
ARTICLE XIII
MISCELLANEOUS
13.1 NOTICES. All notices, demands, requests, consents, approvals or other
communications (collectively, "Notices") required or permitted to be given
hereunder or which are given with respect to this Agreement shall be in writing
and shall be personally served or deposited in the United States mail, first
class, registered or certified, return receipt requested, postage prepaid,
addressed as set forth below, or such other address or to such other Person as
any of MEIA I, MELA, XXXX XX or Professionals shall have specified most recently
by written notice in accordance with this Section 13.1. Notice shall be deemed
given on the date of service if personally served. Notice mailed as provided
herein shall be deemed given on the third business day following the date so
mailed. Notice given by telex, telecopy or other means of telecommunications
shall be deemed to have been given at the time of receipt thereof by the Person
to whom such notice is addressed; PROVIDED, HOWEVER, that any Notice given by
telex, telecopy or other means of telecommunications and received after the
receiving Person's normal business hours shall be deemed received by such Person
on the immediately succeeding business day.
To the Agency:
Michigan Educators Insurance Agency, Inc.
000 X. Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxx Xxxxx, Xxxxxxxx 00000
Attn.: Xxxx X. Xxxx, Chairman
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
With a copy to:
Xxxxxx & Xxxxxx Attorneys, P.C.
0000 X. Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx Xxxxx, Xxxxxxxx 00000
Attn.: Xxxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
To XXXX XX:
MEEMIC Insurance Services Corporation
000 X. Xxxxxxxx Xx., Xxxxx 000
Xxxxxx Xxxxx, Xxxxxxxx 00000
Attn.: R. Xxxxx Xxxxxxx, President
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxxx PLLC
000 Xxxxxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attn.: Xxxx X. Xxxxxxxx
Telecopy No.: 000-000-0000
Telephone No.: 000-000-0000
To Professionals:
Professionals Insurance Company Management Group
0000 Xxxxxx Xxxx
Xxx 0000
Attn.: Xxxxxx X. Xxxxx
Telecopy No.: 000-000-0000
Telephone No.: 000-000-0000
With a copy to:
Xxxxxxxx Xxxxxx Xxxxxxxx and Xxxx
000 Xxxxx Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000-0000
Attn.: Xxxxxxx Xxxxxx Xxxxxxxx
Telecopy No.: 000-000-0000
Telephone No.: 000-000-0000
13.2 EXPENSES. Whether or not the transactions contemplated herein shall
be consummated, all legal and other costs and expenses incurred in connection
herewith and the transactions contemplated hereby shall be paid by the party
incurring such expenses. The provisions of this Section 13.2 shall survive any
termination of this Agreement.
13.3 SUCCESSORS AND ASSIGNS.
(a) GENERAL. This Agreement and all of the provisions hereof shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided that, except as provided
in Section 2.12(a), neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned, by operation of law or otherwise, by any
party hereto without the prior written consent of the other party(ies) hereto.
If any party is so permitted to assign any of its rights or obligations under
this Agreement or any other Related Agreement, such
assignment (unless otherwise agreed to by the other party(ies)) shall not in any
manner affect or impair such assigning party's obligations under this Agreement
and the other Related Agreements to which it is a party.
(b) RIGHT OF SUSPENSION. (i) From and after the date of any
assignment and assumption contemplated by Section 3.03(a) of the Liquidating
Trust Agreement, in the event that any shareholder of MEIA I or MELA shall
breach any of the obligations of MEIA I, MELA or their respective successors or
assigns set forth in this Agreement, including but not limited to, Sections 7.4,
7.9, 7.10 and 12.2 or any of the terms of the Noncompetition Agreement or
Release to which such shareholder is a party, XXXX XX, Mutual and Professionals
shall be entitled to suspend their respective obligations to such shareholder
with respect to the Installment Payments to be made pursuant to Section 2.2(b)
and the other consideration contemplated by Sections 2.3, 2.4, 2.5, 2.6, 2.7 and
2.12(c) pending resolution of such breach; (ii) from and after the date of any
assignment and assumption contemplated by Section 3.03(a) of the Liquidating
Trust Agreement, for any shareholder which has not executed its assignment and
assumption, in the event that any shareholder of MEIA I or MELA shall breach any
of the obligations of MEIA I, MELA or their respective successors or assigns set
forth in this Agreement, including but not limited to, Sections 7.4, 7.9, 7.10
and 12.2 or any of the terms of the Noncompetition Agreement or Release to which
such shareholder is a party, XXXX XX, Mutual and Professionals shall be entitled
to suspend their respective obligations to the Agency (or the Trust as defined
under the Liquidating Trust Agreement as its successor or assign) with respect
to the Installment Payments to be made pursuant to Section 2.2(b) and the other
consideration contemplated by Sections 2.3, 2.4, 2.5, 2.6, 2.7 and 2.12(c)
pending resolution of such breach; PROVIDED, that no such suspension shall occur
unless XXXX XX or Professionals, as the case may be, shall have given to such
shareholder 30 days' prior written notice of its intent to exercise its right of
suspension under this Section 13.3(b) and the basis thereof, and, PROVIDED,
FURTHER, that any such Installment Payment to be made or other consideration to
be delivered shall be held in an interest-bearing escrow pending resolution of
such breach. Notwithstanding anything in this Agreement to the contrary, from
and after the date on which any of XXXX XX, Mutual and Professionals has
exercised its right of suspension with respect to any shareholder under this
Section 13.3(b), such shareholder shall be entitled to exercise his or her
cash-out option pursuant to Section 2.6 (as restated by Section 2.12(c)(v)), but
the proceeds of any such cash-out option shall be held in an interest-bearing
escrow pending resolution of such breach.
(c) DISPUTES REGARDING SUSPENSION. In the event of any dispute with
respect to the exercise of any right of suspension under Section 13.3(b), the
same shall be resolved consistent with the provisions of Section 12.2(h).
13.4 PUBLIC ANNOUNCEMENTS. Neither MEIA I, MELA, XXXX XX, Professionals,
their respective Affiliates nor the agents and representatives of MEIA I, MELA,
XXXX XX, Professionals or their respective Affiliates will make any press
release or public announcement concerning the existence of this Agreement or the
transactions
contemplated hereby, except to the extent legally required to do so after
consultation with such other Person(s) or with the prior consent of such other
Person(s); PROVIDED, HOWEVER, that nothing in this Agreement shall require any
Person to consult with or obtain the consent of any other Person(s) if such
disclosure is required by applicable securities laws.
13.5 ENTIRE AGREEMENT; AMENDMENT. This Agreement, including the Schedules
and Exhibits and the Related Agreements, and the Memorandum of Understanding
dated the date hereof, embody the entire agreement and understanding of MEIA I,
MELA, Professionals and XXXX XX with respect to the subject matter hereof and
supersede all prior agreements between MEIA I, MELA, Professionals and XXXX XX
or any of their Affiliates with respect to the subject matter of this Agreement,
including the Letter of Intent (it being understood and acknowledged by each of
MEIA I, MELA and Professionals that, upon execution of this Agreement, the
Letter of Intent shall be terminated and the respective rights and obligations
of MEIA I, MELA and Professionals under the Letter of Intent shall be
extinguished). This Agreement may be amended, modified or supplemented in any
manner and at any time only by a written instrument executed by MEIA I and MELA,
Professionals and XXXX XX. No waiver by any of MEIA I, MELA, Professionals or
XXXX XX of any term or condition hereof, or the breach of any covenant,
agreement, warranty, representation or provision contained herein, in any one or
more instances, shall be made to be or construed as a further continuing waiver
of any such term, condition or breach or a waiver of any other term, condition
or breach.
13.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts all of which shall together constitute one and the same instrument
and shall become effective when one or more counterparts have been signed by
XXXX XX and Professionals and delivered to MEIA I and MELA and one or more
counterparts have been signed by MEIA I and MELA and delivered to XXXX XX and
Professionals.
13.7 HEADINGS; REFERENCES; INTERPRETATION. The Article and Section
headings in this Agreement are for convenience of reference only and shall not
be deemed to alter or affect the meaning or interpretation of any provisions
hereof. Any reference to a Schedule or an Exhibit shall be deemed to refer to
the applicable Schedule or Exhibit attached hereto, all of such Schedules and
Exhibits being incorporated herein by this reference.
13.8 GOVERNING LAW. This Agreement shall be governed by, interpreted
under, and construed and enforced in accordance with the internal laws, and not
the laws pertaining to conflicts or choice of laws, of the State of Michigan,
and applicable controlling United States federal law.
13.9 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated
hereby is not affected in any adverse manner to any of MEIA I, MELA,
Professionals and XXXX XX. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, MEIA I, MELA,
Professionals and XXXX XX shall negotiate in good faith to modify this Agreement
to effect their original intent as closely as possible in an acceptable manner
so that the transactions contemplated hereby are fulfilled to the extent
possible.
13.10 FURTHER ASSURANCES. MEIA I, MELA, Professionals and XXXX XX will
each promptly prepare, execute and deliver to such other Person(s) such lists,
instruments and documents and cooperate with such other Person(s) in such other
respects as the requesting Person(s) may, from time to time, before or after the
Closing, reasonably request to carry out the transactions contemplated by this
Agreement.
13.11 BROKERAGE. All negotiations relative to this Agreement and the
transactions contemplated by this Agreement have been carried on by MEIA I,
MELA, Professionals and XXXX XX directly without the intervention of any Person.
Such negotiations, and the consummation of the transactions under this
Agreement, will not result in any liability by any of MEIA I, MELA,
Professionals and XXXX XX for any finder's fee, brokerage commission or other
similar fee. Each of MEIA I, MELA, Professionals and XXXX XX shall indemnify
such other Person(s) and hold it (or them) harmless from and against any claim
for brokerage or finders' fees or other commissions resulting from actions of
the indemnifying party which are not in accordance with the preceding sentence.
13.12 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement, express
or implied, is intended to or shall (i) confer on any Person other than MEIA I,
MELA, Professionals and XXXX XX and their respective successors or permitted
assigns any rights (including third party beneficiary rights), remedies,
obligations or liabilities of any nature whatsoever under or by reason of this
Agreement, or (ii) constitute MEIA I, MELA, Professionals and XXXX XX as
partners or as participants in a joint venture. This Agreement shall not
provide third parties with any remedy, claim, liability, reimbursement, cause of
action or other right in excess of those existing without reference to the terms
of this Agreement.
13.13 ACKNOWLEDGMENT. MEIA I, MELA, Professionals and XXXX XX each
acknowledge that all the terms and conditions in this Agreement and the Related
Agreements have been the subject of active and complete negotiation between them
and represent their agreement based upon all relevant considerations. The terms
and conditions of this Agreement and the Related Agreements shall not be
construed in favor of or against any of MEIA I, MELA, Professionals and XXXX XX
by reason of the extent to which any such Person or its professional advisors
participated in the preparation hereof or thereof.
IN WITNESS WHEREOF, the undersigned execute and deliver this Agreement as
of the date first written above.
MICHIGAN EDUCATORS INSURANCE
AGENCY, INC.
By: /s/ Xxxx X. Xxxx
--------------------------------
Xxxx X. Xxxx
Chairman of the Board
MICHIGAN EDUCATORS LIFE
INSURANCE AGENCY, INC.
By: /s/ Xxxx X. Xxxx
--------------------------------
Xxxx X. Xxxx
Chairman of the Board
MEEMIC INSURANCE SERVICES
CORPORATION
By: /s/ R. Xxxxx Xxxxxxx
--------------------------------
R. Xxxxx Xxxxxxx, President
PROFESSIONALS INSURANCE
COMPANY MANAGEMENT GROUP
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Xxxxxx X. Xxxxx, President
The undersigned hereby agrees to execute and deliver, and to perform its
obligations under, Article II, the Mutual Guaranty (Exhibit 2.3(a)), the
Subscription Agreement (Exhibit 1.1(e)), Section 8.4 and Section 8.5 and
executes the Agreement solely for such purposes.
MICHIGAN EDUCATIONAL
EMPLOYEES MUTUAL INSURANCE
COMPANY
By: /s/ R. Xxxxx Xxxxxxx
--------------------------------
R. Xxxxx Xxxxxxx, President
SCHEDULES
Schedule 1.1(a) -- Contracts
Schedule 1.1(b) -- Excluded Assets
Schedule 2.8(a) -- Obligations to Solicitors
Schedule 2.8(b) -- Assumed Liabilities
Schedule 2.10 -- Allocation of Purchase Price
Schedule 3.3 -- The Agency's Requisite Consents; Nonviolation
Schedule 3.4(a) -- Title to Assets
Schedule 3.4(d) -- Leased Property
Schedule 3.5(e) -- Undisclosed Liabilities or Obligations
Schedule 3.6 -- Contracts and Leases
Schedule 3.7 -- Defaults
Schedule 3.8 -- Litigation
Schedule 3.9 -- Intellectual Property
Schedule 3.10 -- Licenses and Permits
Schedule 3.12 -- Events Since the Balance Sheet Date
Schedule 3.13 -- Insurance
Schedule 3.14 -- Employees of the Business
Schedule 3.16 -- Employee Benefit Plans
Schedule 3.19 -- Guarantees
Schedule 3.20 -- Certain Advances
Schedule 3.21 -- Tax Status of MEIA I and MELA
Schedule 3.22 -- Related Party Transactions
EXHIBITS
Exhibit 1.1(c) -- Noncompetition Agreement
Exhibit 1.1(d) -- Release
Exhibit 1.1(e) -- Subscription Agreement
Exhibit 2.3(a) -- Mutual Guaranty
Exhibit 2.3(b) -- Professionals Guaranty
Exhibit 2.3(c) -- Inter-Creditor Agreement
Exhibit 2.9 -- Escrow Agreement
Exhibit 2.12(a) -- Liquidating Trust Agreement
Exhibit 2.12(b) -- Assignment and Assumption Agreement
Exhibit 6.2(a) -- Warranty Xxxx of Sale and Assignment
Exhibit 6.2(b) -- Assignment of Lease
Exhibit 6.2(c) -- Consent and Estoppel
Exhibit 6.2(d) -- Opinion of Xxxxxx & Xxxxxx
Exhibit 6.2(e) -- Officers' Certificate of MEIA I and MELA
Exhibit 6.2(f) -- Opinion of Xxxxxxxx Xxxxxx Xxxxxxxx and Xxxx
Exhibit 6.2(g) -- Opinion of Xxxxxx Xxxxxxx PLLC
Exhibit 6.2(h) -- Officers' Certificate of Professionals
Exhibit 6.2(i) -- Officers' Certificate of XXXX XX
