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EXHIBIT 10.36
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made as of the 8th day
of May, 2001, by and between Pelagian LLC, a Texas limited liability company
("Buyer"), and Central Reserve Life Insurance Company, an Ohio life insurance
company ("Seller").
RECITALS
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WHEREAS, Seller owns of record 1,000 shares of the voting common stock
("Shares") of United Benefit Life Insurance Company, an Ohio life insurance
company ("Company"), which Shares constitute all of the issued and outstanding
shares of the capital stock of the Company; and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, all of the Shares on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises, the
agreements and promises herein set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
ARTICLE I. PURCHASE AND SALE OF THE SHARES
SECTION 1.01 PURCHASE OF THE SHARES FROM SELLER. Subject to and upon the terms
and conditions of this Agreement, at the Closing, Seller shall sell, transfer,
convey, assign and deliver to Buyer, and Buyer shall purchase, acquire and
accept from Seller, all of the Shares, free and clear of any Encumbrances. At
the Closing, Seller shall deliver to Buyer certificates evidencing the Shares
duly endorsed in blank, or with stock powers duly executed in proper form for
transfer with signatures guaranteed.
SECTION 1.02 PURCHASE PRICE.
(a) Buyer agrees to pay to Seller at the Closing, and Seller agrees to
accept from Buyer, as full consideration for the Shares, the amount
of the Company's statutory capital and surplus as of the close of
business on the Closing Date determined upon SAP, which amount shall
be payable in the form of the promissory note attached hereto as
Exhibit A ("Note") and shall be subject to adjustment as may be
required pursuant to Section 1.02(b) ("Purchase Price"). At the
option of Seller, (i) Buyer's obligations under the Note shall be
secured by the Shares pursuant to a pledge agreement containing
terms mutually agreeable to Buyer and Seller, or (ii) Buyer shall
agree pursuant to a negative pledge agreement that the Shares shall
not become subject to any Encumbrances while obligations under the
Note remain outstanding and unpaid.
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(b) Adjustments.
(i) The Purchase Price shall be subject to adjustment on the
date that is eighteen (18) months from the Closing Date (the "Tax
Adjustment Date") if Buyer determines that the liability or
receivable accrued on the Company's books as of the Closing Date
for Taxes (including but not limited to premium taxes) is less than
the actual liability or receivable so determined, by decreasing the
amount payable by Buyer under the Note by any such difference.
(ii) The Purchase Price shall be subject to further adjustment
on the date that is one (1) year from the Closing Date (the
"Reserves Adjustment Date") if Buyer determines that the liability
accrued on the Company's books as of the Closing Date for all
incurred losses, loss adjustment expenses, and unearned premiums
with respect to the Company's business is less than the actual
liability so determined, by decreasing the amount payable by Buyer
under the Note by any such difference.
(iii) Buyer shall notify Seller in writing of any such
adjustment required to be made hereunder by the close of business
on the first Business Day following the Tax Adjustment Date or the
Reserves Adjustment Date.
(c) CLOSING. The Closing shall take place at 0000 Xxxxxxxx Xxxxx, Xxxxx
000, Xxxxx, Xxxxx, at 10:00 a.m. (local standard time), within five (5)
Business Days after satisfaction or waiver of all conditions precedent set
forth in Article VIII hereof as the parties may agree, or at such other place,
time or date as may be mutually agreed upon by the parties (the "Closing
Date").
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller, at and as of the date hereof
and again at and as of the Closing Date, as follows:
SECTION 2.01 ORGANIZATION AND AUTHORITY. Buyer is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Texas and has full corporate power, right and authority to own its
properties and assets and to carry on its business as it is now being conducted,
and to enter into and carry out its obligations under this Agreement.
SECTION 2.02 AUTHORIZATION. This Agreement has been duly authorized, executed
and delivered by Buyer. This Agreement is the legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms
(subject to the effect of any applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors' rights generally and subject to
the general principles of equity).
SECTION 2.03 NO CONFLICT. Subject to making the filings and to obtaining the
approvals
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and consents set forth in Section 5.02, none of (i) the execution and delivery
of this Agreement by Buyer, (ii) the consummation by Buyer of the transactions
provided for herein, or (iii) the transfer on the stock records of the Company
of the Shares to Buyer on the Closing Date, does, nor will with the passage of
time, the giving of notice or otherwise, (a) conflict with, or result in a
breach of the terms, conditions or provisions of, or constitute a default (or an
event which, with notice or lapse of time or both, could become a default)
under, or result in creation of an Encumbrance on any of the properties or
assets of Buyer pursuant to (x) the Articles of Organization or Operating
Agreement of Buyer, or (y) any indenture, mortgage, lease, agreement, contract,
note or other instrument or obligation to which Buyer is a party or by which
Buyer or any of its properties or assets may be bound or affected; (b) be in
violation of, conflict with or result in the breach of any permit,
authorization, license, law, rule, regulation, ordinance, writ, order, judgment,
injunction or decree of any governmental or public body or authority of the
United States of America to which Buyer is subject or by which Buyer or any of
its properties or assets is bound; or (c) result in the creation or imposition
of any Encumbrance upon Buyer or any of its properties or assets.
SECTION 2.04 GOVERNMENTAL APPROVAL. Except for the filing with the Insurance
Department of each of the States listed on Schedule 4.01 of such applications or
notification as may be required in order to obtain any approvals necessary for
the consummation of the transactions contemplated hereby, no notice to, filing
with, authorization of, exemption by, or consent or approval of, any regulatory
authority is necessary for the consummation by Buyer of the transactions
contemplated by this Agreement.
SECTION 2.05 SATISFACTION OF CONDITIONS. Buyer is not aware of any reason why
the conditions set forth in Article VIII hereof would not be satisfied on or
before the Closing Date.
SECTION 2.06 LITIGATION. There is no action, suit or proceeding pending against,
or, to the knowledge of Buyer, threatened against or affecting, Buyer or any of
its properties before any court or arbitrator or any governmental body, agency
or official that in any manner challenges the validity of or seeks to prevent,
enjoin, alter or materially delay any of the transactions contemplated hereby.
SECTION 2.07 BROKERS AND FINDERS. None of Buyer or any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finder's fees to any Person, and no broker or finder has acted directly or
indirectly for Buyer, in connection with this Agreement or the transactions
contemplated hereby.
SECTION 2.08 ACCURACY OF REPRESENTATIONS, WARRANTIES AND OTHER STATEMENTS. The
representations and warranties of Buyer set forth in this Agreement, and in any
clarification delivered pursuant hereto, do not contain any untrue statement of
a material fact or omit to state any fact necessary to make the statements made
not misleading.
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ARTICLE III. REPRESENTATIONS OF SELLER REGARDING
SELLER AND THE SHARES
Seller represents and warrants to Buyer, at and as of the date hereof
and again at and as of the Closing Date, as follows:
SECTION 3.01 ORGANIZATION AND AUTHORITY. Seller is a stock insurance corporation
duly organized, validly existing and in good standing under the laws of the
State of Ohio. Seller has full corporate power, right and authority to own its
properties and assets, including but not limited to the Shares, to carry on its
business as it is now being conducted and to enter into and carry out its
obligations under this Agreement.
SECTION 3.02 AUTHORIZATION. This Agreement has been duly authorized, executed
and delivered by Seller. This Agreement is the legal, valid and binding
obligation of Seller, enforceable against it in accordance with its terms
(subject to the effect of any applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors' rights generally and subject to
the general principles of equity).
SECTION 3.03 NO CONFLICT. Subject to making the filings and to obtaining the
approvals and consents set forth in Section 5.02, none of (i) the execution and
delivery of this Agreement by Seller, (ii) the consummation by Seller of the
transactions provided for herein, or (iii) the transfer on the stock records of
the Company of the Shares to Buyer on the Closing Date, does, nor will with the
passage of time, the giving of notice or otherwise, (a) conflict with, or result
in a breach of the terms, conditions or provisions of, or constitute a default
(or an event which, with notice or lapse of time or both, could become a
default) under, or result in creation of an Encumbrance on any of the properties
or assets of Seller pursuant to (x) the Articles of Incorporation or the Bylaws
of Seller, or (y) any indenture, mortgage, lease, agreement, contract, note or
other instrument or obligation to which Seller is a party or by which it or any
of its respective properties or assets, may be bound or affected; (b) be in
violation of, conflict with or result in the breach of any permit,
authorization, license, law, rule, regulation, ordinance, writ, order, judgment,
injunction or decree of any governmental or public body or authority of the
United States of America to which Seller is subject or by which it or any of its
properties or assets is bound; or (c) result in the creation or imposition of
any Encumbrance upon Seller or any of its properties or assets.
SECTION 3.04 GOVERNMENTAL APPROVAL. Except for filings required to be made with
the Insurance Department of each of the States listed on Schedule 4.01 of such
applications or notifications as may be required in order to obtain any
approvals necessary for the consummation of the transactions contemplated
hereby, no notice to, filing with, authorization of, exemption by, or consent or
approval of, any regulatory authority is necessary for the consummation by
Seller of the transactions contemplated by this Agreement.
SECTION 3.05 SATISFACTION OF CONDITIONS. Seller is not aware of any reason why
the
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conditions set forth in Article VIII hereof would not be satisfied on or before
the Closing Date.
SECTION 3.06 TITLE AND POWER TO SELL. Seller has indefeasible, good and
marketable title to the Shares, free and clear of any and all proxies, voting
trusts, restrictions on transfer, Encumbrances with respect thereto, Taxes,
options, warrants, purchase rights, contracts, commitments, equities, claims,
and demands. Seller is not a party to any option, warrant, purchase right, or
other contract or commitment that could require Seller to sell, transfer, or
otherwise dispose of any capital stock of the Company (other than this
Agreement). Seller is not a party to any voting trust, proxy, or other agreement
or understanding with respect to the voting of any capital stock of the Company.
The Shares are validly issued and outstanding, fully paid and nonassessable.
Seller has the full corporate power, right and authority to transfer, convey and
sell to Buyer at the Closing the Shares. The certificates representing the
Shares do not contain any restrictive legend or reference to any agreement. `
SECTION 3.07 LITIGATION.
(a) There is no action, suit or proceeding against, or, to the knowledge
of Seller threatened against or affecting, Seller or any Affiliate
of Seller or any of their respective properties before any court or
arbitrator or any governmental body, agency or official which in any
manner challenges the validity of or seeks to prevent, enjoin, alter
or materially delay any of the transactions contemplated hereby.
(b) Seller is not a party to any claim, action, suit, investigation or
proceeding, pending or threatened, or subject to any order, judgment
or decree which would have a material adverse effect on the
financial condition or business of Seller.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLER
WITH RESPECT TO THE COMPANY
Seller represents and warrants to Buyer, at and as of the date hereof
and again at and as of the Closing Date, as follows:
SECTION 4.01 ORGANIZATION AND AUTHORITY. The Company is a stock insurance
corporation duly organized, validly existing and in good standing under the laws
of the State of Ohio and is duly qualified and in good standing as a foreign
insurance corporation authorized to transact business under the laws of each
jurisdiction listed on Schedule 4.01. Schedule 4.01 lists all of the states in
which the Company has full corporate power and authority and holds active
licenses (including, without limitation, licenses or Certificates of Authority
from Insurance Departments), permits or authorizations necessary to transact the
business of insurance (the "Certificates of Authority," and each a "Certificate
of Authority"), and sets forth the date of issuance, the scheduled expiration
date of each such Certificate of Authority and a description of the scope of
authority granted each such Certificate of Authority. Except as disclosed on
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Schedule 4.01, no such Certificate of Authority is the subject of any
administrative proceeding for suspension or revocation or any similar
proceedings which would adversely affect or limit a Certificate of Authority or
the Company's authority to write the line or classes of insurance set forth on
Schedule 4.01, and/or which would require notice and an opportunity to be heard;
no such suspension or revocation has been threatened by any licensing authority
and, to the best of Seller's knowledge, after due examination and inquiry, there
is no sustainable basis for any suspension or revocation. The Company transacts
no business directly or indirectly in any jurisdiction other than those
enumerated on Schedule 4.01 in which the transaction of business requires the
licensing or qualification of the Company to do business. Complete and correct
copies of all Certificates of Authority, charter(s), bylaws and minute book
(containing the records of meetings of stockholders, the board of directors and
any committees of the board of directors), the stock certificate book, and stock
record book, reflecting all amendments thereto, have been delivered to Buyer
prior to the execution and delivery of this Agreement. The Company has all
requisite corporate power and authority to carry on all of its business as the
same is being conducted and to own or otherwise possess all of the properties
and assets (whether tangible, intangible or mixed) it owns or otherwise
possesses.
SECTION 4.02 SUBSIDIARIES. The Company has no subsidiaries and the Company does
not own more than five percent (5%) of the voting securities of any individual,
partnership, firm, association, corporation, joint stock company, trust or any
similar entity or any combination of the foregoing acting in concert ("Person").
SECTION 4.03 CAPITALIZATION OF THE COMPANY. The authorized capital stock of the
Company consists of 1,000 shares of common stock, $2,500 par value per share,
all of which are validly issued and outstanding, fully paid and nonassessable
and all are held of record by the Seller. The Shares constitute all of the
issued and outstanding capital stock of the Company. Seller is the lawful record
and beneficial owner of the Shares, free and clear of any and all Encumbrances.
None of Seller, the Company or the Company's directors has made any commitments
to issue or to sell any of the Shares or any warrants, options, purchase rights,
subscription rights, conversion rights, exchange rights or convertible
securities or evidences of indebtedness of the Company. Between the date hereof
and the Closing Date, Seller will not, and will not cause or permit the Company
to, issue or enter into any subscription, option agreement or other commitment
of any kind in respect of the issuance, transfer, sale or encumbrance of any of
the Shares and Seller shall retain full record and beneficial ownership of the
Shares until the Closing. The Company holds no capital stock or other equity
securities in its treasury. The Company has no shares of capital stock or other
equity securities outstanding other than the Shares and has no outstanding
options, warrants, rights to subscribe to, proxies, voting trusts, puts, calls,
commitments or agreements of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, shares of capital stock of the
Company. The Shares were acquired by Seller free and clear of any proxies,
voting trusts, restrictions on transfer or Encumbrances thereto, and neither
Seller nor the Company has any liability to any former holder of any shares of
capital stock of the Company (including both common and
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preferred shares, or any interest therein) or to any other Person or
governmental authority relating to the purchase, sale, redemption, retirement or
cancellation thereof.
SECTION 4.04 CONFLICT WITH OTHER INSTRUMENTS. Subject to
making the filings and to obtaining the approvals set forth in and to obtaining
the consents set forth in Schedule 5.02, none of (i) the execution and delivery
of this Agreement by Seller, (ii) the consummation by Seller of the transactions
provided for herein, or (iii) the transfer on the stock records of the Company
of the Shares to Buyer on the Closing Date, does nor will with the passage of
time, the giving of notice or otherwise, (a) conflict with, or result in a
breach of the terms, conditions or provisions of, or constitute a default (or an
event which with notice or lapse of time or both could become a default) under,
or result in creation of an Encumbrance on any of the properties or assets of
the Company pursuant to (x) the Articles of Incorporation or the Bylaws of the
Company or (y) any indenture, mortgage, lease, agreement, contract, note or
other instrument or obligation to which the Company is a party or by which it or
any of its properties or assets may be bound or affected; (b) be in violation
of, conflict with or result in the breach of any permit, authorization, license,
law, rule, regulation, ordinance, writ, order, judgment, injunction or decree of
any governmental or public body or authority of the United States of America to
which the Company is subject or by which it or any of its properties or assets
are bound; or (c) result in the creation or imposition of any Encumbrance upon
the Company or any of its properties or assets.
SECTION 4.05 GOVERNMENTAL APPROVAL. Except for the filing with the Insurance
Department of each of the States listed on Schedule 4.01 of such applications or
notifications as may be required in order to obtain any approvals necessary for
the consummation of the transactions contemplated hereby, no notice to, filing
with, authorization of, exception by, or consent or approval of, any regulatory
authority is necessary for the consummation by Company of any of the
transactions contemplated by this Agreement.
SECTION 4.06 FINANCIAL STATEMENT OF THE COMPANY. The Company's Financial
Statements have been prepared on a basis consistent with GAAP and fairly present
the financial position and results of operations of the Company as of the dates
thereof and for the periods covered thereby. In the case of interim fiscal
periods, all adjustments, consisting only of normal recurring items, have been
made, subject to year-end adjustments none of which, individually or in the
aggregate, will be material. The Annual Statements and the Quarterly Statements
have been prepared in conformity with SAP and present fairly the admitted
assets, liabilities and capital and surplus of the Company at the dates stated
therein on the basis of accounting described herein consistently applied. Copies
of the Company's Financial Statements, the Annual Statements and the Quarterly
Statements (i) were timely filed with the Insurance Department of each of the
States listed on Schedule 4.01, (ii) were prepared in compliance with the rules
and regulations of the Insurance Department of each of the States listed on
Schedule 4.01 as in effect as of the date filed, and (iii) were true, complete
and correct when and as filed. Except as set forth in the Company's Financial
Statements, the Annual Statements and the Quarterly
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Statements, the Company has no liabilities, required to be disclosed or provided
for therein (or in the notes or supplemental schedule thereto) prepared in
accordance with GAAP or SAP, absolute, accrued, contingent or otherwise. All
Assessments against the Company that relate to events occurring or business done
prior to the Closing Date have been paid or properly reserved on the books and
records of the Company. The amounts reserved by the Company for any estimated
Assessments that have not been finalized and satisfied will be adequate to cover
the amount required to be paid or expended in the future as a result of the
Assessment. Attached hereto as Schedule 4.06 are the Company's Financial
Statements, Annual Statements and Quarterly Statements.
SECTION 4.07 REPORTS. The Company has filed all Company Reports. As of their
respective dates, the Company Reports complied with the statutes, rules and
regulations enforced or promulgated by the regulatory authority with which they
were filed and were true, correct and complete as filed.
SECTION 4.08 NO REAL PROPERTY; OTHER ASSETS.
(a) The Company has no real property.
(b) The Company has good and marketable title to all of its assets, free
and clear of any and all Encumbrances, and valid leasehold interests
in the properties and assets used by it, located on its premises, or
shown on the Quarterly Statement dated March 31, 2001, or acquired
after the date thereof, free and clear of all Encumbrances, except
for properties and assets disposed of in the Ordinary Course of
Business since the date of the Quarterly Statement dated March 31,
2001.
SECTION 4.09 TAXES. Schedule 4.09 lists all federal, state, local and foreign
tax returns filed by, or which include, the Company for taxable periods ended on
or after December 31, 1998, indicates those Tax Returns that have been audited,
and indicates those Tax Returns that currently are the subject of audit. Except
as set forth on Schedule 4.09:
(a) The Company has duly and timely filed all Tax Returns that it was
required to file. All such Tax Returns were correct and complete in
all respects. All Taxes owed by the Company (whether or not shown on
any Tax Return) have been paid. The Company does not have
outstanding any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a
jurisdiction where the Company does not file Tax Returns that it is
or may be subject to taxation by that jurisdiction. There are no
liens or security interests on any of the assets of the Company that
arose in connection with any failure (or alleged failure) to pay any
Tax other than liens for Taxes not yet due and payable.
(b) The Company is a member of the Affiliated Group, and the Affiliated
Group files a consolidated federal income tax return. The Company
has not been a member of an affiliated group filing a consolidated
federal income tax return other than the
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Affiliated Group. Seller has duly and timely filed all income tax
returns that it was required to file for each taxable period during
which the Company was a member of the Affiliated Group. All such
income tax returns were correct and complete in all respects. All
Income Taxes owed by the Affiliated Group (whether or not shown on
any Tax Return) have been paid for each taxable period during which
the Company was a member of the Affiliated Group.
(c) The Company has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, foreign
Person, or other third party.
(d) There is no basis upon which any taxing authority can successfully
levy any additional Taxes against the Company for any period for
which Tax Returns have been filed. There are no actions, suits,
proceedings, examinations, audits, assessments, disputes or claims
concerning any Taxes or Tax Returns of the Company claimed or raised
by any authority.
(e) Neither the Company nor any member of the Affiliated Group has
waived any statute of limitations in respect of Taxes or agreed to
any extension of time with respect to a Tax assessment or
deficiency.
Seller has delivered to the Buyer correct and complete copies of all federal
income Tax Returns, examination reports, and statements of deficiencies assessed
against or agreed to by the Company since January 1, 1998.
SECTION 4.10 NO EMPLOYEES AND AGENTS AND BENEFITS.
(a) Except as set forth on Schedule 4.10(a), the Company has no employees
or agents, including insurance agents or agencies. The agreements
pursuant to which any insurance agent or insurance agency currently or
previously licensed by the Company or licensed by Seller or its
Affiliates to sell policies issued by the Company have been terminated.
(b) The Company has not, since calendar year 1999, maintained or
contributed, or has not been required to contribute, to any retirement,
pension, savings, profit-sharing, bonus incentive compensation,
deferred compensation, stock option or stock compensation, welfare
benefit, severance or termination, retiree medical, dental, life or
disability insurance, supplemental retirement, or other material
employee benefit plans, programs, or arrangements, including but not
limited to any "employee benefit plans," within the meaning of Section
3(3) of ERISA, and will not incur, with respect to any event occurring
prior to the Closing Date, any liability under ERISA.
SECTION 4.11 CONTRACTS. Except for (i) the contracts, commitments, plans,
agreements, leases and licenses described in Schedule 4.11 (copies of which have
been previously
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delivered to Buyer), (ii) the forms of insurance policies described in Section
4.12(a) (including any Schedules thereto) and the insurance policies, in such
forms, issued by the Company, (iii) the Administrative Agreements described in
Schedule 4.12(c), (iv) the Reinsurance Agreements, and (v) this Agreement, the
Company is not a party to or subject to any contracts, commitments, plans,
agreements, leases or licenses.
SECTION 4.12 INSURANCE; REINSURANCE; CLAIMS AND SERVICE AGREEMENTS.
(a) Schedule 4.12(a) contains a complete and correct list of all types
of insurance policies currently in force by the Company. Seller has
made available to Buyer complete and correct copies of all forms of
insurance policies of the Company together with all forms of
endorsements thereto.
(b) Schedule 4.12(b) contains a complete and correct list of all
reinsurance agreements to which the Company is a party (the
"Reinsurance Agreements"). Copies of all such Reinsurance Agreements
have been made available to Buyer. Except as set forth on Schedule
4.12(b), as of the date hereof, each such Reinsurance Agreement is
still force and effect and will remain in full force and effect
after the Closing.
(c) Schedule 4.12(c) contains a complete and correct list of all claims
and service administration agreements to which the company is a
party ("Administrative Agreements"). Copies of all such
Administrative Agreements have been made available to Buyer. Except
as set forth on Schedule 4.12(c), as of the date hereof, each such
Administrative Agreement is in full force and effect.
(d) To the best of Seller's knowledge, no default of or breach by any
party under any Reinsurance Agreement or Administrative Agreement
has occurred and no basis exists for the declaration of any default
or termination right thereunder, except for agreements that, prior
to the Closing Date, have or will have expired by their terms or
have been terminated in accordance with this Agreement, and, to the
knowledge of Seller, each party such the Reinsurance Agreements was,
at the date each Reinsurance Agreement was executed and delivered,
and is currently solvent and financial capable of fulfilling its
obligations thereunder.
(e) To the best of Seller's knowledge, the Company has not written any
insurance that does not comply in all respects with the guidelines
set forth for such insurance in the Reinsurance Agreement pursuant
to which such insurance policy is reinsured. To the knowledge of
Seller, the Company has not written any insurance that has not been
reinsured pursuant to a Reinsurance Agreement listed in Schedule
4.12(b).
SECTION 4.13 LITIGATION AND OTHER PROCEEDINGS. Except as set forth in Schedule
4.13, to the knowledge of Seller, the Company (i) is not a party to any claim,
action, suit, investigation or proceeding, pending or threatened, or subject to
any order, judgment or
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decree, which would have an adverse effect on the financial condition or
business of the Company, and (ii) is not a party to any claim, action, suit,
investigation or proceeding, pending or threatened for any bad faith or
extra-contractual claims, or claims giving rise to punitive damages (in each
case, excluding any and all damages based on amounts recoverable under the terms
of the applicable insurance policy or policies) arising out of any action or
inaction by the Company, was required to be taken by the Company, with respect
to the denial of coverage or otherwise under either the Company's insurance
policies and there does not exist any basis therefor.
SECTION 4.14 COMPLIANCE WITH LAWS.
(a) To the best of Seller's knowledge, the Company has complied with all
applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and
all agencies thereof). The Company has all permits, licenses,
Certificates of Authority, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local
or foreign governmental or regulatory bodies, including all state
insurance authorities, that are required in order to permit them to
carry on their business as currently conducted (the "Licenses"), and
the Licenses are in full force and effect. The conduct of its
business by the Company does not violate or infringe any applicable
domestic (federal, state or local) or foreign or alien law, statute,
ordinance, license or regulation now in effect. Neither Seller nor
the Company has been a party to any material investigation or
proceeding instituted by any such state authority, and neither
Seller nor the Company is in violation or, or has infringed, any
statute, regulation, ordinance, license or been subject to any
judgment, ruling, investigation, proceeding or injunction or order
of any such state authority which violation would have an adverse
effect on the ability of Buyer to consummate the transaction
contemplated hereby.
(b) To the best of Seller's knowledge, each of Seller and the Company is
in compliance with all current voluntary and involuntary risk plans
and pools, including but not limited to state assigned risk pools,
residual risk pools and guaranty funds, and all orders, rules or
regulations issued by any state authority with respect thereto.
SECTION 4.15 BROKERS AND FINDERS. None of Seller or any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finder's fees to any Person, and no broker or finder has acted directly or
indirectly for Seller in connection with this Agreement or the transactions
contemplated hereby.
SECTION 4.16 REGULATORY AGREEMENTS. Except as set forth on Schedule 4.16, the
Company is not a party to any supervisory agreement, memorandum or
understanding, consent order, cease and desist order or condition of any
regulatory order or decree with
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or by the Insurance Department of any of the States listed on Schedule 4.01 or
any other regulatory authority that relates to the conduct of the business of
the Company.
SECTION 4.17 CONSENTS. Except as set forth on Schedule 4.17, no consents or
approvals of a party with whom Seller or the Company has contractual
relationships or has had such contractual relationships are required or will be
required to permit the consummation of the transactions contemplated by this
Agreement.
SECTION 4.18 AGREEMENTS WITH AFFILIATES. Except as set forth on Schedule 4.18,
the Company is not a party to or bound by any contract, commitment or
understanding with Seller or any Affiliate of Seller providing for reinsurance
or the purchase or sale of goods or services. Except as set forth on Schedule
4.18, all agreements with Seller or any such Affiliate of Seller providing for
reinsurance or the purchase or sale of goods or services which was previously in
force will be terminated by the Company as of the Closing Date, except as
expressly contemplated by this Agreement.
SECTION 4.19 ENVIRONMENTAL, HEALTH AND SAFETY MATTERS. Except as set forth on
Schedule 4.19, to the best of Seller's knowledge, the Company is and has been in
compliance with all applicable federal, state and local laws, administrative
rulings and regulations of any court, administrative agency or other
governmental or quasi-governmental authority, relating to the protection of the
environment (including but not limited to laws prohibiting the creation of a
public nuisance). To the knowledge of Seller, neither the Company nor any
current owner or user of the Real Property is a responsible party under Section
107 of the Comprehensive Environmental Response Compensation and Liability Act
of 1990, as amended, or is or has been subject to an action under Section 7003
or the Resource Conservation and Recovery Act of 1976, as amended, and neither
the Company, nor (to the knowledge of Seller) any current owner of the Real
Property has received notification from any federal, state or local government,
agency or regulatory body, of a violation under any federal, state or local law
regulating the Release, disposal or discharge of any toxic, explosive or other
Hazardous Substance in the Real Property. To the knowledge of Seller, no
Environmental Condition exists with respect to the Real Property.
SECTION 4.20 ABSENCE OF CERTAIN CHANGES. Except as set forth on Schedule 4.20
and except as explicitly provided in this Agreement, during the period from
December 31, 2000 through the Closing Date, there has been no change in the
Company's business, financial condition or operations, financial or otherwise,
which, in any case or in the aggregate, would have an adverse effect on the
business, financial condition or results of operations of the Company, including
but not limited to any change in statutory surplus of the Company as a result of
any catastrophic event (a "Material Adverse Change").
SECTION 4.21 CERTAIN FILINGS. To the knowledge of Seller, the Company has made
all filings of rates and policy forms with applicable insurance regulatory
authorities having jurisdiction over its affairs, and the conduct of business
has been consistent with such filings.
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SECTION 4.22 CONDUCT OF BUSINESS.
(a) Since December 31, 2000, the Company has not issued, renewed (except
with respect to mandatory renewal of policies of insurance) or
assumed any policies of insurance.
(b) Since December 31, 2000, the Company has not appointed any insurance
agent or managing general agent, entered into any claims or service
administration agreements or otherwise engaged in the business of
insurance.
SECTION 4.23 ACCURACY OF REPRESENTATIONS, WARRANTIES AND OTHER STATEMENTS. The
representations and warranties of Seller set forth in this Agreement, and in any
clarification delivered pursuant hereto, do not contain any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements made not misleading.
ARTICLE V. CONDUCT OF BUSINESS PRIOR TO THE CLOSING
SECTION 5.01 CONDUCT PRIOR TO CLOSING.
Seller hereby covenants and agrees that, prior to the Closing, and
except as otherwise explicitly provided in this Agreement, Seller will cause the
Company to operate its business only in the usual, regular and Ordinary Course
of Business, and to maintain its rights and franchises, including its
Certificates of Authority. From the date hereof until the Closing, Seller,
covenants and agrees that, except as otherwise explicitly provided in this
Agreement, it will not permit the Company to do or agree or commit to do any of
the following:
(a) Issue, renew or assume any policies of insurance, appoint any
insurance agents or managing general agents, enter into any claims
or service administration agreements or otherwise engage in the
insurance business, except to service existing business and handle
claims on existing policies;
(b) Incur any liabilities or obligations including any obligation for
borrowed money whether or not evidenced by a note, bond, debenture
or similar instrument, except for liabilities or obligations
incurred by the Company in the ordinary course of its insurance
business; or acquire any equity, debt or other investment securities
except for acquisitions of such securities in the ordinary course of
its insurance business;
(c) Declare or pay any dividend or make any other distribution with
respect to capital stock or allow the Company's statutory
capitalization to be below the amounts required by all applicable
statutes and regulations for the continued effectiveness of the
Certificates of Authority prior to the Closing;
(d) Purchase or otherwise acquire any assets, or any shares of any class
of stock of any corporation or business; merge into any other
corporation or entity or permit
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any other corporation or entity to merge into the Company or
consolidate with any other corporation or entity; liquidate, sell,
dispose of, or encumber any assets or acquire any assets; issue or
redeem any common shares; issue or grant any option, warrant,
conversion or stock appreciation right relating to its capital
stock; or enter into any contract or agreement to do anything
referred to in this Section 5.01(d);
(e) Propose or adopt any amendments to the Company's Articles of
Incorporation or Bylaws;
(f) Propose or adopt any changes to the accounting principles used by
the Company, except as required by GAAP or SAP, as the case may be,
and then only after consultation with Buyer; or
(g) Enter into any transactions (other than the termination of any
agreement as required or permitted hereby) with Seller or any
Affiliate of Seller.
SECTION 5.02 CONSENTS AND APPROVALS.
(a) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to cooperate with the other and use its best
efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable under
applicable laws, regulations and contractual arrangements to
consummate and make effective the transactions contemplated by this
Agreement, including, without limitation, using its best efforts to
obtain any necessary approvals or orders of any government
authority. Seller and Buyer hereby covenant and agree to take no
action (i) that would render any of their representations and
warranties contained herein untrue in any material respect at and as
of the Closing, or (ii) that would adversely affect the ability of
either of them to satisfy any of the conditions set forth in Article
VIII, including, without limitation, the ability to obtain approvals
of governmental authorities required for the transactions
contemplated hereby or materially increase the period of time
necessary to obtain such approvals. Seller shall promptly give to
Buyer, and Buyer shall promptly give to Seller, as the case may be,
written notification of the existence or occurrence of any condition
of which such party may become aware that might make any
representation or warranty herein then untrue or that might prevent
the consummation of the transactions contemplated hereby.
The Seller will cause the Company to give any notices to third
parties, and will cause the Company to use its reasonable best
efforts to obtain any third party consents, that the Buyer
reasonably may request in connection with the matters referred to in
Article IV above.
(b) Buyer, with the cooperation of Seller and the Company, shall prepare
and file within five (5) Business Days of the date hereof (unless
such delay is due to any
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action or inaction of Seller or the Company) (i) with the Insurance
Department of each of the States listed on Schedule 4.01 such
applications or notifications as may be required in order to obtain
any approvals necessary for the consummation of the transactions
contemplated hereby, and (ii) any pre-acquisition applications or
notifications as may be required to be made by Buyer prior to
Closing in order for Buyer to maintain, after the Closing Date, the
Certificates of Authority in effect on the date hereof. Insofar as
any such applications and notifications are required to be executed
or acknowledged by Seller and/or the Company, Seller shall cause the
same to be duly executed or acknowledged by the appropriate party in
a timely fashion. The parties shall use best efforts to cause any
conditions imposed by such regulatory authorities to the
consummation of the transactions contemplated hereby to be
satisfied.
(c) To the extent that the rights of the Company under any agreement,
which is not contemplated by this Agreement to be terminated as of
Closing, may not be transferred or assigned without the consent or
approval of another party thereto, Seller shall cause the Company to
use its reasonable efforts to obtain any such consent or to amend
the agreement such that no consent is required.
(d) Promptly after Closing, Buyer shall file with all applicable state
insurance authorities such registrations or other information as may
be required to comply with all applicable state insurance holding
company statutes.
SECTION 5.03 COVENANT NOT TO NEGOTIATE SALE OF THE COMPANY. During the period
between the date of this Agreement and the Closing Date, none of the Company or
Seller will (i) solicit, initiate, encourage or accept the submission of any
proposal or offer from any Person relating to the acquisition of the Company or
a substantial portion of the assets of the Company or the Shares from Seller,
whether directly or indirectly, or any merger, consolidation or similar
transaction, or (ii) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or facilitate
in any other manner any effort or attempt by any Person to do or seek any of the
foregoing. During the period between the date of this Agreement and the Closing
Date, Seller will notify Buyer immediately if any Person makes any proposal,
offer, inquiry, or contact with respect to any of the foregoing.
ARTICLE VI. ADDITIONAL AGREEMENTS
SECTION 6.01 CURRENT INFORMATION. During the period from the date of this
Agreement to the Closing, each of the parties will cause one or more of its
representatives to confer on a regular and frequent basis with representatives
of the other party with respect to the status of the ongoing operations of the
Company. Seller will promptly notify Buyer of any material change in the
operations of the Company. Seller will promptly notify Buyer of any material
change in the normal course of its or the Company's business or in the operation
of its properties and, to the extent permitted by applicable law, of any
governmental complaints, investigations or hearings (or communications
indicating that
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the same may be contemplated), or the institution or the threat of litigation
involving any of them which would, in any manner, challenge, prevent, alter or
delay any of the transactions contemplated hereby and each party will keep the
other party fully informed with respect to such events. Each party will also
promptly notify the other party of the status of regulatory applications and
third party consents filed pursuant to Section 5.02 or otherwise, including
without limitation providing copies of all written communications to and from
any applicable governmental agency. Each party will give prompt written notice
to the other of any material adverse development causing a breach of any of its
representations and warranties.
SECTION 6.02 ACCESS, INFORMATION AND CONFIDENTIALITY.
(a) Seller shall cause the Company to give to Buyer and its agents,
attorneys, employees, advisors and representatives full and free
access at all reasonable times to all of the properties, books,
contracts, documents and records of the Company, and shall furnish
to Buyer such information as Buyer may from time to time reasonably
request with respect to the affairs (financial, operational or
otherwise) of the Company (including permitting Buyer's
representatives to meet with Seller, officers and employees of the
Company, and their attorneys and accountants to obtain information
concerning the Company, subject to applicable proprietary interests
in such information by such accounts and any attorney-client
privilege which cannot be waived by the Company, Seller or any
Affiliate of Seller).
(b) Seller shall treat and hold as such all of the Confidential
Information, in respect of Buyer, refrain from using any such
Confidential Information except in connection with this Agreement,
and deliver promptly to Buyer or destroy, at the request and
option of Buyer, all tangible embodiments (and all copies) of such
Confidential Information which are in its possession. In the event
that Seller is requested or required (by oral question or request
for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, in respect of
Buyer, Seller shall notify Buyer promptly of the request or
requirement so that Buyer may seek at its own cost an appropriate
protective order or waive compliance with the provisions of this
Section 6.02(b). If, in the absence of a protective order or the
receipt of a waiver hereunder, Seller, on the advice of counsel, is
required to disclose any Confidential Information to any tribunal,
Seller may disclose such Confidential Information, in respect of
Buyer, to the tribunal; PROVIDED, HOWEVER, that Seller shall use
its best efforts to obtain, at the request of Buyer, an order or
other assurance that confidential treatment will be accorded to
such portion of such Confidential Information required to be
disclosed as Buyer shall designate.
(c) Buyer shall treat and hold as such all of the Confidential
Information in respect of Seller, refrain from using any such
Confidential Information except in connection with this Agreement,
and deliver promptly to Seller or destroy, at the request and
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option of Seller, all tangible embodiments (and all copies) of such
Confidential Information which are in its possession. In the event
that Buyer is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand, or similar process) to
disclose any Confidential Information in respect of Seller, Buyer
shall notify Seller promptly of the request or requirement so that
Buyer may seek at its own cost an appropriate protective order or
waive compliance with the provisions of this Section 6.02(c). If, in
the absence of a protective order or the receipt of a waiver
hereunder, Buyer, on the advice of counsel, is required to disclose
any Confidential Information in respect of Seller to any tribunal,
Buyer may disclose any Confidential Information in respect of Seller
to the tribunal; PROVIDED, HOWEVER, that Buyer shall use its best
efforts to obtain, at the request of Seller, an order or other
assurance that confidential treatment will be accorded to such
portion of such Confidential Information required to be disclosed as
Seller shall designate.
SECTION 6.03 PRESS RELEASES, ETC. No press release or other public disclosure of
matters related to this Agreement or any of the transactions contemplated
hereby, other than filings with applicable governmental authorities pursuant to
Article V shall be made by Seller without the consent of Buyer; PROVIDED,
HOWEVER, that Seller may make such disclosures as are required by law after
reasonable efforts in the circumstances to consult in advance with Buyer.
SECTION 6.04 EMPLOYEE BENEFITS AND OTHER MATTERS. Seller shall be solely
responsible for all benefits payable after the Closing Date to former employees
of the Company and their dependents and beneficiaries, including all
liabilities, if any, to former employees of the Company arising under ERISA, and
any federal or state "plant closing" or "tin parachute laws," if any, which
relate to events occurring prior to or after the Closing Date, including any
amounts payable thereunder for terminations after the Closing Date which
liability arises thereunder from the consummation of the transactions
contemplated by this Agreement.
SECTION 6.05 NOTICE TO POLICYHOLDERS. Buyer and Seller agree to cooperate in
making any required notification to current and former policyholders of the
Company as to the occurrence of the transactions contemplated by this Agreement.
The form of any such notice shall be subject in all cases to approval of Buyer.
SECTION 6.06 BOOKS AND RECORDS.
(a) The Company will retain its original files and records. Seller may
have access to those files that pertain to periods prior to the
Closing during normal business hours at the offices of the Company,
and may, at Seller's expense, make copies as necessary.
(b) The Company will retain all of its corporate records, including
minute books.
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SECTION 6.07 BALANCE SHEET. Seller agrees to provide Buyer with drafts of
Closing Date Balance Sheets for the Company at least fifteen (15) Business Days
prior to the Closing.
SECTION 6.08 RELIANCE ON REPRESENTATIONS.
(a) Buyer acknowledges that, other than the representations and
warranties expressly set forth in this Agreement or any Exhibit or
Schedule to this Agreement or any agreement contemplated hereby,
Seller has not made, and shall not be deemed to have made, any
representation or warranty and that Buyer has not relied on any
representations or warranties made by Seller that are not expressly
set forth in this Agreement or any Exhibit or Schedule to this
Agreement or any agreement contemplated hereby or on any
representations made by any Person other than Seller.
(b) Seller acknowledges that, other than the representations and
warranties expressly set forth in this Agreement or any Exhibit or
Schedule to this Agreement or any agreement contemplated hereby,
Buyer has not made, and shall not be deemed to have made, any
representation or warranty and that Seller has not relied on any
representations or warranties made by Buyer that are not expressly
set forth in this Agreement or any Exhibit or Schedule to this
Agreement or any agreement contemplated hereby or on any
representations made by any Person other than Buyer.
ARTICLE VII. TAX MATTERS SECTION
SECTION 7.01 INCOME TAXES.
(a) Seller shall include the income of the Company in Seller's federal
or state consolidated income tax returns for taxable periods ending
on or before the Closing Date, shall prepare or cause to be prepared
and file or cause to be filed on a timely basis all other income tax
returns of the Company for all Pre-Closing Tax Periods, and shall
pay all Taxes attributable to such income tax returns. Buyer shall
cause the Company to furnish Tax information to Seller for inclusion
in such income tax returns in accordance with the Company's past
custom and practice. Seller shall, if Buyer so requests, allow Buyer
an opportunity to review and comment upon such income tax returns of
the Company and such portions of Seller's federal or state
consolidated income tax returns as relate to the Company.
(b) Buyer shall prepare or cause to be prepared and file or cause to be
filed on a timely basis all other income tax returns with respect to
the Company for Post-Closing Tax Periods and shall (except as
otherwise provided below) pay all income Taxes attributable to such
income tax returns. Income Taxes attributable to the portion of the
Straddle Period that ends as of the close of the Closing Date shall
be the responsibility of the Seller. Seller shall pay the amount of
such Straddle Period Taxes, determined by Buyer, to Buyer upon five
(5) days' written
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notice from Buyer (which notice shall include a copy of the relevant
Straddle Period income tax return).
(c) If the Company is, under applicable law, entitled to carry back any
Tax attribute arising in a Post-Closing Tax Period to a Pre-Closing
Tax Period, Seller shall cooperate in securing a Tax refund and
shall pay the amount received to Buyer within three (3) days after
Seller or any member of Seller's Affiliated Group receives such
refund in cash or such refund is credited against the Tax liability
of Seller or any member of Seller's Affiliated Group. All federal,
state or local income tax refunds receivable (including but not
limited to any contingent receivables not reflected on the Closing
Date Balance Sheet) or premium tax refunds receivable that relate to
periods prior to the Closing that are received by the Company after
the Closing Date shall be paid to Seller by Buyer within three (3)
Business Days after Buyer or the Company receives such refund in
cash or such refund is credited against the income Tax liability of
Buyer or the Company.
(d) If Seller is responsible for filing an income tax return which
requires the signature of an officer of the Company, Seller shall
present a completed version of such return for the signature of the
officer and shall supply any support for such return the officer may
reasonably request. The officer shall promptly sign the return and
deliver it to Seller.
SECTION 7.02 TAX SHARING AGREEMENTS. All tax sharing agreements or similar
agreements with respect to or involving the Company (other than this Agreement)
shall be terminated as of the Closing Date and, after the Closing Date, the
Company shall not be bound thereby or have any liability thereunder
SECTION 7.03 TRANSFER TAXES. All Transfer Taxes of the Company for the
Pre-Closing Tax Period and all Transfer Taxes arising from the transactions
contemplated by this Agreement shall be paid by Seller when due, and Seller
shall, at its own expense, file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees, and, if required by applicable law, Buyer
will, and will cause its Affiliates to, join in the execution of any such Tax
Returns and other documentation.
SECTION 7.04 MISCELLANEOUS TAXES. Buyer shall be responsible for filing all
Miscellaneous Tax returns of the Company required to be filed for taxable
periods ending after the Closing Date and for paying all such Miscellaneous
Taxes shown to be due on such Tax Returns (irrespective of whether such Taxes
relate to transactions or events occurring in the Pre-Closing Tax Period or
Post-Closing Tax Period). Seller shall reimburse Buyer no later than the date on
which such Taxes are required to be paid for all such Taxes but only to the
extent the amount payable is attributable to the Pre-Closing Tax Period
(including transactions or events occurring during such period). For purposes of
determining such Miscellaneous Taxes attributable to the period through the
Closing Date, (i) ad valorem Taxes (including, without limitation, real and
Personal property
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Taxes) shall be accrued on a daily basis over the fiscal period of the taxing
authority for which the Taxes are levied irrespective of the lien or assessment
date of such Taxes, (ii) privilege Taxes not measured by sales, gross receipts,
wages, expenses or other similar periodic measures shall be accrued on a daily
basis over the period to which the privilege relates, and (iii) Taxes on, or
measured by, sales, gross receipts, wages, expenses or other similar periodic
measures shall be accrued for the period during which the sales, gross receipts,
wages, expenses or other periodic measures are actually earned or accrued (based
on an interim closing of the books as of the close of the Closing Date).
SECTION 7.05 COOPERATION AND CONTROVERSIES.
(a) Seller and Buyer shall reasonably cooperate, and shall cause their
respective Affiliates, agents, auditors, representatives, officers
and employees reasonably to cooperate, in preparing and filing all
Tax Returns (including amended returns and claims for refund),
including maintaining and making available to each other all records
necessary in connection with Taxes and in resolving all disputes and
audits with respect to all taxable periods relating to Taxes.
(b) In the event of an audit or other examination by any authority with
respect to Tax for which Seller is responsible under this Agreement
(in whole or in part), Buyer shall notify Seller of such audit or
examination and permit representatives of Seller reasonably
satisfactory to Buyer to participate in all relevant proceedings, at
Seller's expense. In the case of controversies relating to income
Taxes for periods ending on or before the Closing Date, Seller may,
at its expense, assume control of such proceedings, but Buyer shall
be entitled to continue to participate in such proceedings at
Buyer's expense and Seller shall not settle or compromise such
proceedings without the consent of Buyer, which shall not be
unreasonably withheld.
SECTION 7.06 TAX INDEMNITIES.
(a) Seller shall be liable for and shall indemnify and hold harmless
Buyer and the Company from and against any and all damages, losses
and expenses arising out of (i) any breach of any of Seller's
representations and warranties in Section 4.09 or any breach of
Seller's covenants in this Article VII, (ii) any liability for Taxes
of the Company for any Pre-Closing Tax Period, or (iii) any
liability for Taxes of Seller or the Affiliated Group for any
period. Buyer's obligation under the Note shall be subject to offset
by the foregoing indemnification obligation of Seller.
(b) Buyer shall indemnify and hold harmless Seller from and against any
and all damages, losses and expenses arising out of (i) any breach
of any of Buyer's covenants in this Article VII, (ii) any liability
for Taxes of the Company for any Post-Closing Tax Period, or (iii)
any transactions outside the ordinary course of business occurring
on the Closing Date subsequent to the Closing (other than
transactions contemplated by this Agreement).
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ARTICLE VIII. CONDITIONS
SECTION 8.01 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO CONSUMMATE THE CLOSING.
The respective obligations of each party to consummate the Closing shall be
subject to the fulfillment or waiver at or prior to the Closing of the following
conditions:
(a) The transactions contemplated by this Agreement shall have been
approved by the Insurance Departments of the States listed on
Schedule 4.01 and other regulators whose approval is required to
consummate the transactions contemplated hereby without any
condition which is, in the reasonable judgment of Buyer, materially
adverse to the condition (financial or otherwise) of Buyer or the
Company; all conditions required to be satisfied prior to the
Closing imposed by the terms of such approvals shall have been
satisfied; all waiting period relating to such approvals shall have
expired; and all notifications to any regulatory authorities that
are required shall have been made.
(b) Neither Buyer, Seller nor the Company shall be subject to any order,
decree or injunction of a court or agency of competent jurisdiction
which enjoins or prohibits the consummation of the Closing.
SECTION 8.02 CONDITIONS TO OBLIGATIONS OF BUYER TO CONSUMMATE THE CLOSING. The
obligations of Buyer to consummate the Closing shall be subject to the
fulfillment of waiver at or prior to the Closing of the following additional
conditions:
(a) Representations and Warranties. The representations and warranties
of Seller set forth in Articles III and IV hereof shall be true and
correct in all material respects as of the Closing as though made at
and as of the Closing (it being understood that representations and
warranties that speak of a specified date shall continue to speak as
of the date so specified), except as otherwise contemplated or
permitted by this Agreement or consented to in writing by Buyer, and
Buyer shall have received a certificate or certificates in such
reasonable detail as Buyer may request signed by the President or a
Vice President of Seller and dated the Closing Date to the foregoing
effect, and also covering the matters set forth in Section 8.02(b).
(b) Performance of Obligations. Seller shall have materially performed
all obligations required to be performed by it under this Agreement
prior to the Closing.
(c) Resignations of Officers and Directors. The members of the Boards of
Directors of the Company and the officers of the Company shall have
delivered resignations dated as of the Closing Date in form and
substance reasonably satisfactory to Buyer.
(d) No Material Adverse Change. Since the date of this Agreement, there
shall not have been any Material Adverse Change with respect to the
Company except as
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explicitly provided for in this Agreement.
(e) Consents. The Company shall also have secured written consents or
waivers under, or amendments of, all leases, licenses, contracts,
grants, or agreements to which the Company is a party or by which it
or any of its property is bound, to the extent necessary, in a
manner satisfactory in form and substance to Buyer, in order to
permit the consummation of the transactions contemplated by this
Agreement without adversely affecting the rights of the Company
under any such lease, license, contract, grant, or agreement,
unless, in the opinion of Buyer, any such adverse effects,
considered in the aggregate, would not be materially adverse to the
business of the Company.
(f) Inter-company Settlements. Seller shall have caused all
inter-company accounts and agreements to be settled and shall have
terminated all inter-company agreements with the Company, except for
those inter-company accounts or agreements contemplated by this
Agreement.
(g) Severance Payments. All severance payments and other costs, if any,
associated with the termination by the Company prior to the Closing
of all employees shall be paid in full by Seller.
SECTION 8.03 CONDITIONS TO OBLIGATIONS OF SELLER TO CONSUMMATE THE CLOSING. The
obligations of Seller to consummate the Closing shall be subject to fulfillment
or waiver at or prior to the Closing of the following additional conditions:
(a) Representations and Warranties. The representations and warranties
of Buyer set forth in Article II hereof shall be true and correct in
all material respects as of the Closing as though made at and as of
the Closing (it being understood that representations and warranties
that speak of a specified date shall continue to speak as of the
date so specified), except as otherwise contemplated or permitted by
this Agreement or consented to in writing by Seller, and Seller
shall have received a certificate or certificates in such reasonable
detail as Seller may request signed by the President or a Vice
President of Buyer and dated the Closing Date to the foregoing
effect, and also covering the matters set forth in Section 8.03(b).
(b) Note. Buyer shall have executed and delivered the Note and any
documents or agreements required by Seller to secure Buyer's
obligations under the Note.
(c) Performance of Obligations. Buyer shall have materially performed
all obligations required to be performed by it under this Agreement
prior to the Closing.
ARTICLE IX. INDEMNIFICATION
SECTION 9.01 GENERAL. From and after the Closing and in addition to the
indemnities
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elsewhere contained in this Agreement, the parties shall indemnify each other as
provided in this Article IX.
SECTION 9.02 SELLER'S INDEMNIFICATION COVENANTS. In addition to the
indemnification obligations expressly set forth elsewhere in this Agreement,
Seller shall, subject to this Article IX, indemnify, save and keep Buyer and its
successors and assigns, harmless against and from Losses sustained or incurred
by Buyer, the Company or their respective successors or assigns to the extent
that any such Loss arises out of or by virtue of:
(a) Any inaccuracy in the representation or warranty or the failure of
Seller to perform any covenant or agreement contained in this
Agreement made by Seller in this Agreement;
(b) Any unreserved liabilities of any kind existing or arising from
incidents or facts and circumstances relating to or affecting Seller
or the Company and occurring prior to the Closing Date; or
(c) Any failure by any reinsurer under the Reinsurance Agreements to
perform any covenant, representation or warranty, agreement or
undertaking on its part to be performed under the Reinsurance
Agreements.
Buyer's obligation under the Note shall be subject to offset by the foregoing
Losses.
SECTION 9.03 BUYER'S INDEMNIFICATION COVENANTS. Buyer shall indemnify, save and
keep Seller harmless against and from all Losses sustained or incurred by Seller
to the extent such Losses arise out of or by virtue of any inaccuracy in a
representation or warranty made by Buyer to Seller or any failure to carry out
any covenant or agreement made by Buyer with Seller herein.
SECTION 9.04 NOTICE. In the event of any claim by a party seeking
indemnification under this Article IX or any other Section of this Agreement
expressly providing for indemnification of one party by the other, the
Indemnified Party shall notify the Indemnifying Party in writing of such claim,
which notice shall describe the basis for such claim and, if then determinable
by the Indemnified Party, a reasonable estimate of the amount thereof.
SECTION 9.05 THIRD PARTY ACTIONS. In the event any claims is made, suit is
brought or tax audit or other proceeding is instituted against Buyer or the
Company which involves or appears reasonably likely to involve a Loss, the
Indemnified Party will, promptly after receipt of notice of any such claim, suit
or proceedings for which indemnification may be sought, notify, which notice
shall describe such claim, suit or proceeding in reasonable detail, the
Indemnifying Party of the commencement thereof. The failure to so notify the
Indemnifying Party of the commencement of any such claim, suit or proceeding
will relieve the Indemnifying Party from liability under Article IX hereof only
to the extent that such failure materially adversely affects the ability of the
Indemnifying Party to
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defend its interests in such claim, action or proceedings. The Indemnifying
Party (at its expense) shall have the right and shall be given the opportunity
to defend with its own counsel such claim, suit or proceedings. If the
Indemnifying Party does not elect to undertake the defense of any such claim,
suit or proceeding, within a reasonable period after notice of the same, the
Indemnified Party shall have the right to undertake the defense of such claim,
suit or proceeding any time prior to its final determination or settlement. The
Indemnified Party shall, at the Indemnifying Party's expense, have the right to
participate in the defense of such claim, suit or proceeding. No compromise or
settlement may be effected by the Indemnifying Party without the prior written
consent thereto of the Indemnified Party. The Indemnified Party agrees that it
will not unreasonably withhold its consent to a proposed compromise or
settlement. The Indemnified party shall not make any settlement with respect to
any such claim, suit or proceeding without prior notice to the Indemnifying
Party.
ARTICLE X. TERMINATION, AMENDMENT AND WAIVER
SECTION 10.01 TERMINATION. This Agreement may, by written notice, be terminated
at any time prior to the Closing:
(a) By mutual consent of Seller and Buyer;
(b) By either Buyer or Seller in the event of the material breach by the
other party of any representation, warranty or agreement contained
herein or in any schedule or document delivered herewith with cannot
be or has not been cured with thirty (30) days after written notice
to the party committing such breach;
(c) By Buyer if the condition sets forth in Section 8.03 shall not have
been met by June 30, 2001, or by the Seller if the condition set
forth in Section 8.02 shall not have been met by June 30, 2001; or
(d) By Buyer by giving written notice to the Seller on or before the
30th day following the date of this Agreement if the Buyer is not
reasonably satisfied with the results of its continuing business,
legal, environmental, and accounting due diligence regarding the
Company.
SECTION 10.02 EFFECT OF TERMINATION. If any party terminates this Agreement
pursuant to Section 10.01 hereof, all rights and obligations of the parties
hereunder shall terminate without any liability of any party to any other party
(except for any liability of any party then in breach).
SECTION 10.03 AMENDMENT. This Agreement and the Schedules hereto may be amended
by mutual agreement of the parties hereto at any time before the Closing. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
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SECTION 10.04 WAIVER. Any term, condition or provision of this Agreement may be
waived in writing at any time by the party which is entitled to the benefits
thereof.
ARTICLE XI. GENERAL PROVISION
SECTION 11.01 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive forever.
SECTION 11.02 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly received (i) on the date given
if delivered personally or by cable, telegram, telex or telecopy or (ii) on the
date received if mailed by registered or certified mail (return receipt
requested), to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) If to Buyer:
Pelagian LLC
C/O M. Xxxxx Xxxxx, Managing Member
0000 Xxxxxxxx Xx., Xxx. 000
Xxxxx, XX 00000
(b) If to Seller:
Central Reserve Life Insurance Company
00000 Xxxxxxxx Xxxx
Xxxxxxxxx, Xxxx 00000-0000
Attn.: President
SECTION 11.03 FURTHER ASSURANCES. From and after the Closing Date, Seller shall,
from time to time at the request of Buyer and without further consideration, do,
execute, acknowledge and deliver all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney and assurances as may be reasonably
required by Buyer to more effectively transfer, assign and set over, or to
confirm the sale of, the Shares on the Closing Date.
SECTION 11.04 INTEGRATED CONTRACT. This Agreement and the Schedules and Exhibits
to this Agreement and the other documents in writing referred to herein pursuant
hereto contain the entire understanding of the parties with respect to the
subject matter hereof and thereof and supersede all prior agreements and
understandings, both oral and written, between the parties with respect to the
subject matter hereof and thereof.
SECTION 11.05 MISCELLANEOUS. This Agreement (including exhibits, documents and
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instruments referred to herein) (a) is not intended to confer upon any Person
not a party hereto any rights or remedies hereunder; (b) shall not be assigned
by operation of law or otherwise, except that Buyer may assign its rights and
obligations under this Agreement to any Affiliate of Buyer; and (c) shall be
governed in all respects by the laws of the State of Texas (without respect to
conflict of laws). This Agreement may be executed in two (2) or more
counterparts which together shall constitute a legal agreement. The
representations and warranties of Seller in this Agreement and in any
certificate delivered pursuant hereto shall not be affected or deemed waived
because Buyer and/or its representatives prior to executing this Agreement could
have discovered by means of additional due diligence that any such statement,
representation or warranty is or might be inaccurate in any respect.
SECTION 11.06 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the parties and their respective
successors and permitted assigns.
SECTION 11.07 HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 11.08 AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Requisite Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
SECTION 11.09 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
SECTION 11.10 INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES. The Exhibits,
Annexes, and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
SECTION 11.11 SPECIFIC PERFORMANCE. Each of the parties acknowledges and agrees
that the other parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the parties agrees that
the other parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over
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the parties and the matter (subject to the provisions set forth herein), in
addition to any other remedy to which they may be entitled, at law or in equity.
ARTICLE XII. DEFINITIONS
DEFINITIONS. The following terms, as used herein, shall have the following
meanings:
Section 12.01 "Administrative Agreements" has the meaning set forth in
Section 4.12(c).
Section 12.02 "Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under direct or indirect
common control with such Person, and shall include (i) any officer or director
or general partner of such Person and (ii) any Person of which such Person or
any Affiliate (as defined in clause (i) above) of such Person shall, directly or
indirectly, beneficially own either at least five percent (5%) of the
outstanding equity securities having the general power to vote or at least five
percent (5%) of all equity interests.
Section 12.03 "Affiliated Group" means the affiliated group, as that term is
defined by Section 1504(a) of the Code, of which Seller is a member.
Section 12.04 "Agreement" has the meaning set forth in the Preamble
Section 12.05 "Annual Statements" means the audited statutory financial
statements (including the notes and supplemental schedules thereto) of the
Company as of and for the years ended December 31, 1998, 1999 and 2000.
Section 12.06 "Assessments" means all costs and obligations associated with
requirements by governmental or quasi-governmental authorities based upon
premiums paid or policies issued or any other policy-related obligations.
Section 12.07 "Business Day" means any day except a Saturday, Sunday or any
other day on which the commercial banks in Dallas, Texas are authorized or
permitted by law to close.
Section 12.08 "Buyer" has the meaning set forth in the Preamble.
Section 12.09 "Certificate of Authority" has the meaning set forth in Section
4.01.
Section 12.10 "Closing" means the closing of the transactions contemplated
by this Agreement.
Section 12.11 "Closing Date" has the meaning set forth in Section 1.02(c).
Section 12.12 "Closing Date Balance Sheet" means a statutory balance sheet
prepared as
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of the Closing Date, in accordance with SAP.
Section 12.13 "Code" means the Internal Revenue Code of 1986, as amended.
Section 12.14 "Company" has the meaning set forth in the Recitals.
Section 12.15 "Company's Financial Statements" means the audited balance sheets
of the Company as of December 31, 2000, and the related audited income
statements, statements of shareholders' equity and statements of cashflows for
the years ended December 31, 2000, and the Company's unaudited balance sheet and
the related income statement, statement of shareholders' equity and statement of
cashflows for the Company for the quarter ended March 31, 2001.
Section 12.16 "Company Reports" means all reports, registrations and statements,
together with any amendments required to be made with respect thereto, of the
Company that were required to be filed with (i) the Insurance Department of each
of the States listed on Schedule 4.01, and (ii) any other applicable state or
foreign insurance or licensing authority (including but not limited to all
annual statements and quarterly statements).
Section 12.17 "Confidential Information" means any and all information
concerning the businesses and affairs of the Company that is not generally or
readily obtainable by the public or is not publicly known.
Section 12.18 "Encumbrance" shall mean any lien, pledge, mortgage, Security
Interest, assessment, claim, lease, charge, option, right of first refusal,
imperfection of title, easement, transfer restriction under any shareholder or
similar agreement, encumbrance or any other restriction or limitation of any
kind whatsoever.
Section 12.19 "Environmental Condition" shall mean conditions of the
environment, including but not limited to natural resources (including flora and
fauna), soil, surface water, groundwater, any present or potential drinking
water supply, subsurface strata or the ambient air, relating to or arising out
of the use, handling, storage, treatment, recycling, generation, transportation,
spilling, leaking, pumping, pouring, emptying, discharging, injection, escaping,
leaching, disposal, dumping, Release or threatened Release of Hazardous
Substances upon the Real Property by either of the Company or their agents,
lessees, representatives or predecessors in interest.
Section 12.20 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
Section 12.21 "GAAP" means generally accepted accounting principles, as defined
by the Financial Accounting Standards Board, consistently applied.
Section 12.22 "Hazardous Substance" means any one or more of any substance
defined
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as a hazardous substance or deemed hazardous or toxic under any and all
laws regulating, relating to, or imposing liability on hazardous or toxic
substance, material, compound, mixture, solution, element, pollutant or waste
regulated under any federal, state or local statute, ordinance or regulation.
Section 12.23 "Income Tax" means any Tax (other than Transfer Tax) which is, in
whole or in part, based on or measured by income or gains, and any corporate
franchise Tax.
Section 12.24 "Indemnified Party" means the party hereto being indemnified.
Section 12.25 "Indemnifying Party" means the party hereto against whom a claim
for indemnification has been asserted.
Section 12.26 "Insurance Department" means, for each of the States listed on
Schedule 4.01, the appropriate insurance regulatory authority of such State.
Section 12.27 "Licenses" has the meaning set forth in Section 4.14.
Section 12.28 "Losses" (or in the singular, "Loss") means all liabilities,
demands, claims, actions or causes of action, suits, proceedings,
investigations, judgments, orders, assessments, losses, fines, penalties, costs
(including reasonable attorneys' fees, expert witness fees and reasonable
reimbursement for time of employees and officers and other costs of handling,
processing or defending), damages and expenses, including, without limitation,
those asserted by any federal, state, local or foreign governmental entity, or
third party, amounts paid in settlement.
Section 12.29 "Material Adverse Change" has the meaning set forth in Section
4.20.
Section 12.30 "NAIC" means the National Association of Insurance Commissioners.
Section 12.31 "Note" has the meaning set forth in section 1.02(a).
Section 12.32 "Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice.
Section 12.33 "Person" has the meaning set forth in Section 4.02.
Section 12.34 "Post-Closing Tax Period" shall mean all taxable period that begin
on or after the day following the Closing Date and the portion ending after the
Closing Date of any taxable period that includes (but does not end on) the
Closing Date.
Section 12.35 "Pre-Closing Tax Period" means all taxable periods ending on or
before the close of the Closing Date and the portion ending at the close of the
Closing Date of any taxable period that includes (but does not end on) the
Closing Date.
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Section 12.36 "Purchase Price" means the consideration paid for the Shares as
calculated pursuant to Section 1.02.
Section 12.37 "Quarterly Statements" means the statutory financial statements
(including the notes and supplemental schedules thereto) of the Company and as
of and for each of the fiscal quarters ended June 30, 2000, September 30, 2000,
December 31, 2000 and March 31, 2001.
Section 12.38 "Real Property" means any real estate owned or leased at any time
by the Company, or any improvements thereon.
Section 12.39 "Reinsurance Agreements" has the meaning set forth in Section
4.12(b).
Section 12.40 "Release" has the meaning set forth in Section 101(22) of the
Comprehensive Environmental Response Compensation and Liability Act of 1990, as
amended.
Section 12.41 "Reserves Adjustment Date" has the meaning set forth in Section
1.02(b)(ii).
Section 12.42 "SAP" means the statutory accounting practices prescribed or
permitted by the Insurance Department of the applicable State, consistently
applied.
Section 12.43 "Seller" has the meaning set forth in the Preamble.
Section 12.44 "Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable or for Taxes that
the taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
Section 12.45 "Shares" has the meaning set forth in the Recitals.
Section 12.46 "Straddle Period" means a taxable period that includes but does
not end on the Closing Date.
Section 12.47 "Tax Adjustment Date" has the meaning set forth in Section
1.02(b)(i).
Section 12.48 "Taxes" means all taxes, charges, fees, levies or other
assessments of whatever kind or nature, including, without limitation, all net
income, gross income, gross receipts, premium, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
estimated, severance, stamp, occupancy or property taxes, custom duties, fees,
assessments or charges of any kind whatever (together
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with any interest, penalty or addition to tax).
Section 12.49 "Tax Returns" means all returns, amended returns, declarations,
reports estimates, information returns and statements required or permitted to
be filed under federal, state, local or foreign law relating to Taxes by, or
including, the Company.
Section 12.50 "Transfer Tax" means all transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement.
IN WITNESS WHEREOF, Buyer and Seller have caused this Agreement to be signed by
their respective officers thereunto duly authorized, all as of the date first
written above.
SELLER
Central Reserve Life Insurance Company
By: /s/ Xxxxxxx X. Xxxx
-------------------
Print Name: Xxxxxxx X. Xxxx
-----------------
Title: President
---------
BUYER
Pelagian LLC
By: /s/ M. Xxxxx Xxxxx, Manager
---------------------------
Print Name: M. Xxxxx Xxxxx
Title: Manager
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