SECURITIES PURCHASE AGREEMENT
Exhibit
2.1
This
Securities Purchase Agreement (hereinafter referred to as “this Agreement”) is
made as of September 29, 2006, by AJB Ventures Inc., a New York corporation
(hereinafter referred to as “Buyer”), Xxxxxxx X. Xxxxxx (hereinafter referred to
as “Xxxxxx”), Buyer’s principal shareholder, and FPIC Insurance Group, Inc., a
Florida corporation (hereinafter referred to as “Seller”).
RECITALS
Seller
desires to sell, and Buyer desires to purchase (and Xxxxxx desires that Buyer
purchase), all of the issued and outstanding shares (the “Shares”) of capital
stock of Administrators for the Professions, Inc., a New York corporation
(“AFP”), Seller’s 80% membership interest (the “LLC Interest”) in Professional
Medical Administrators, LLC, a New York limited liability company (“PMA”), and
all of the issued and outstanding shares (the “PRM Shares” and, collectively
with the Shares and the LLC Interest, the “Securities”) of capital stock of
Physicians Reciprocal Managers, Inc., a Pennsylvania corporation (“PRM”), for
the consideration and on the terms set forth in this Agreement.
AGREEMENT
The
parties, intending to be legally bound, agree as follows:
1. CERTAIN
DEFINITIONS
For
purposes of this Agreement, the following terms have the meanings specified
or
referred to in this Section 1:
“338
Election” shall have the meaning ascribed to such term in Section
2.6(a).
“Acquired
Companies” shall mean AFP, the AFP Subsidiaries, PMA and PRM,
collectively.
“AFP”
shall have the meaning ascribed to such term in the Recitals of this
Agreement.
“AFP
Subsidiaries” shall mean FPIC Intermediaries, Inc., a New York corporation, and
Group Data Corporation, a New York corporation, jointly.
“Agreement
Regarding Insurance” shall have the meaning ascribed to such term in Section
2.4(a)(vii).
“Agreement
Terminating Intercompany Contracts and Accounts” shall have the meaning ascribed
to such term in Section 2.4(a)(vi).
“Agreement
With Certain Employees” shall have the meaning ascribed to such term in Section
2.4(a)(iv).
“Breach”
shall mean, with respect to a representation, warranty, covenant, obligation,
or
other provision of this Agreement or any instrument delivered pursuant to this
Agreement, the occurrence or existence of (a) any inaccuracy in or breach of,
or
any failure to perform or comply with, such representation, warranty, covenant,
obligation, or other provision, or (b) any claim (by any Person) or other
occurrence or circumstance that is or was inconsistent with such representation,
warranty, covenant, obligation, or other provision.
“Closing”
shall have the meaning ascribed to such term in Section 2.3.
“Closing
Date” shall have the meaning ascribed to such term in Section 2.3.
“Closing
Date Balance Sheet” shall have the meaning ascribed to such term in Section
2.5(a).
“Closing
Date Payment” shall have the meaning ascribed to such term in Section
2.2.
“Closing
Date Working Capital” shall have the meaning ascribed to such term in Section
2.5(a).
“Consent”
shall mean any approval, consent, ratification, waiver, or other authorization
from any Person or under any Contract or Legal Requirement (including any
Governmental Authorization).
“Contemplated
Transactions” shall mean all of the transactions contemplated by this Agreement,
including:
(a)
the sale of the Securities by Seller to Buyer; and
(b)
the execution and delivery by each of the parties thereto of the Noncompetition
Agreement, each Agreement With Certain Employees, the General Release, the
Agreement Terminating Intercompany Contracts, Accounts and the Agreement
Regarding Insurance and other agreements referred to herein.
“Contract”
shall mean any agreement, contract, obligation, commitment, promise,
arrangement, understanding or undertaking (whether written or oral and whether
express or implied) that is legally binding.
“Damages”
shall mean all liabilities, obligations, claims, demands, damages (including
governmental penalties or punitive damages), diminution in value, penalties,
settlements, causes of action, costs and expenses, including, without
limitation, the costs paid in connection with an indemnified party’s
investigation and evaluation of any claim or right asserted against such
indemnified party and all reasonable attorneys’, experts’ and accountants’ fees,
expenses and disbursements and court costs including, without limitation, those
incurred in connection with
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the
indemnified party’s enforcement of this Agreement and the indemnification
provisions of Section 5 of this Agreement.
“Domain
Name
Assignment” shall have the meaning ascribed to such term in Section
2.4(a)(xv).
“Encumbrance”
shall mean any charge, claim, community property interest, condition, equitable
interest, lien, option, pledge, security interest, right of first refusal,
or
restriction of any kind, including any restriction on use, voting, transfer,
receipt of income, or exercise of any other attribute of ownership.
“GAAP”
means generally accepted accounting principles in the United States, as
promulgated by the American Institute of Certified Public Accountants,
consistently applied.
“General
Release” shall have the meaning ascribed to such term in Section
2.4(a)(v).
“Governmental
Authorization” shall mean any approval, consent, license, permit, waiver, or
other authorization issued, granted, given, or otherwise made available by
or
under the authority of any Governmental Body or pursuant to any Legal
Requirement.
“Governmental
Body” shall mean any:
(a)
nation, state, county, city, town, village, district, or other jurisdiction
of
any nature;
(b)
federal, state, local, municipal, foreign, or other government;
(c)
governmental or quasi-governmental authority of any nature (including any
governmental agency, branch, department, official, or entity and any court
or
other tribunal);
(d)
multi-national organization or body; or
(e)
body exercising, or entitled to exercise, any administrative, executive,
judicial, legislative, police, regulatory, or taxing authority or power of
any
nature.
“Income
Taxes” means all income Taxes (including any Taxes on or based upon net income,
gross income, income as specially defined, earnings, profits or selected items
of income, earnings or profits (including state Taxes imposed on subchapter
S
corporations)).
“IRC”
means the Internal Revenue Code of 1986, as amended, or any successor law,
and
regulations issued by the IRS pursuant to the Internal Revenue Code of 1986,
as
amended, or any successor law.
“IRS”
means the United States Internal Revenue Service or any successor agency, and,
to the extent relevant, the United States Department of the
Treasury.
“Legal
Requirement” shall mean any federal, state, local, municipal, foreign,
international, multinational, or other Order, constitution, law, ordinance,
principle of common
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“LLC
Interest” shall have the meaning ascribed to such term in the Recitals of this
Agreement.
“Noncompetition
Agreement” shall have the meaning ascribed to such term in Section
2.4(a)(iii).
“Officers’
General Release” shall have the meaning ascribed to such term in Section
2.4(a)(ix).
“Order”
means any award, decision, injunction, judgment, order, ruling, subpoena, or
verdict entered, issued, made, or rendered by any court, administrative agency,
or other Governmental Body or by any arbitrator.
“Ordinary
Course of Business” with respect to an action taken by a Person, shall
mean:
(a)
such action is consistent with the past practices of such Person and is taken
in
the ordinary course of the normal day-to-day operations of such
Person;
(b)
such action is not required to be authorized by the board of directors of such
Person (or by any Person or group of Persons exercising similar authority)
and
is not required to be specifically authorized by the parent company (if any)
of
such Person; and
(c)
such action is similar in nature and magnitude to actions customarily taken,
without any authorization by the board of directors (or by any Person or group
of Persons exercising similar authority), in the ordinary course of the normal
day-to-day operations of other Persons that are in the same line of business
as
such Person.
“Organizational
Documents” shall mean (a) the articles or certificate of incorporation and the
bylaws of a corporation; (b) the partnership agreement and any statement of
partnership of a general partnership; (c) the limited partnership agreement
and
the certificate of limited partnership of a limited partnership; (d) the
certificate of organization and the operating agreement or regulations of any
limited liability company; (e) any charter or similar document adopted or filed
in connection with the creation, formation, or organization of a Person; and
(f)
any amendment to or restatement of any of the foregoing.
“XxXXX”
shall mean Pennsylvania Physicians’ Reciprocal Insurers, a Pennsylvania
insurance reciprocal.
“Person”
shall mean any natural person, corporation, general partnership, limited
partnership, limited liability company, proprietorship, joint venture, trust,
association, union, entity, or other form of business organization or any
Governmental Body whatsoever.
“PMA”
shall
have the meaning ascribed to such term in the Recitals of this
Agreement.
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“PRI”
shall mean Physicians’ Reciprocal Insurers, a New York insurance
reciprocal.
“PRM”
shall have the meaning ascribed to such term in the Recitals of this Agreement.
“PRM
Closing” shall have the meaning ascribed to such term in Section
2.8.
“PRM
Consent” shall have the meaning ascribed to such term in Section
2.4(a)(xii).
“PRM
Purchase Price” shall have the meaning ascribed to such term in Section 2.2.
“PRM
Shares” shall have the meaning ascribed to such term in the Recitals of this
Agreement.
“Proceeding”
shall mean any action, arbitration, audit, hearing, investigation, litigation,
or suit (whether civil, criminal, administrative, investigative, or informal)
commenced, brought, conducted, or heard by or before, or otherwise involving,
any Governmental Body or arbitrator.
“Purchase
Price” shall have the meaning ascribed to such term in Section 2.2.
"Related
Person" means, with respect to a particular individual:
(a)
each other member of such individual's Family;
(b)
any Person that is directly or indirectly controlled by such individual or
one
or more members of such individual's Family;
(c)
any Person in which such individual or members of such individual's Family
hold
(individually or in the aggregate) a Material Interest; and
(d)
any Person with respect to which such individual or one or more members of
such
individual's Family serves as a director, officer, partner, managing member,
executor, or trustee (or in a similar capacity); and,
with
respect to a specified Person other than an individual:
(i)
any Person that directly or indirectly controls, is directly or indirectly
controlled by, or is directly or indirectly under common control with such
specified Person;
(ii)
any Person that holds a Material Interest in such specified Person;
(iii)
each Person that serves as a director, officer, partner, managing member,
executor, or trustee of such specified Person (or in a similar
capacity);
(iv)
any Person in which such specified Person holds a Material
Interest;
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(v)
any Person with respect to which such specified Person serves as a general
partner, managing member or a trustee (or in a similar capacity);
and
(vi)
any Related Person of any individual described in clause (b) or
(c).
For
purposes of this definition, (a) the "Family" of an individual includes (i)
the
individual, (ii) the individual's spouse and former spouses, (iii) any other
natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides with
such individual, and (b) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of voting securities or other voting interests representing at least 35% of
the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 35% of the outstanding equity securities or
equity interests in a Person.
“Representative”
with respect to a particular Person, means any director, officer, employee,
agent, consultant, advisor or other representative of such Person, including
legal counsel, accountants and financial advisors.
“Securities”
shall have the meaning ascribed to such term in the Recitals of this
Agreement.
“Seller's
Closing Documents” shall have the meaning ascribed to such term in Section
3.2(a).
“Services
Agreement” shall have the meaning ascribed to such term in Section
2.4(a)(xi).
“Shares”
shall have the meaning ascribed to such term in the Recitals of this
Agreement.
“Retained
Subsidiaries” means each Subsidiary of Seller other than the Acquired
Companies.
“Subsidiary”
shall mean with respect to any Person (the “Owner”), any corporation or other
Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its
Subsidiaries.
“Taxes”
means, with respect to any Person, (i) all Income Taxes and all gross receipts,
sales, use, ad valorem, transfer, franchise, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property or windfall
profits taxes, alternative or add-on minimum taxes, customs duties and other
taxes, fees, assessments or charges of any kind whatsoever, together with all
interest and penalties, additions to tax, and other additional amounts imposed
by any taxing authority (domestic or foreign) on such Person, and (ii) any
liability for the payment of any amount of the type described in the foregoing
clause (i) as a result of (A) being a “transferee” (within the meaning of
Section 6901 of the IRC or any other
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“Transition
Agreement”) shall have the meaning ascribed to such term in Section
2.4(a)(xvi).
“Working
Capital Adjustment” shall have the meaning ascribed to such term in Section
2.5(c).
2. SALE
AND TRANSFER OF SECURITIES; CLOSING; PRM CLOSING
2.1
SECURITIES
Subject
to the terms and conditions of this Agreement, at the Closing or the PRM
Closing, as the case may be, Seller will sell and transfer good title to the
Securities to Buyer free and clear of all Encumbrances, and Buyer will purchase,
and Xxxxxx will cause Buyer to purchase, the Securities from
Seller.
2.2
PURCHASE PRICE
(a) As
full consideration for the Securities, Buyer shall pay to Seller the sum of
Forty Million Dollars ($40,000,000) (the “Purchase Price”). The Purchase Price
shall be subject to adjustment pursuant to the terms of Section 2.5. At the
Closing, Buyer shall pay to Seller, in respect of the Shares and the LLC
Interest, as an advance of and on account of the Purchase Price the sum of
Thirty-Nine Million Nine Hundred Seventy-Five Thousand Dollars ($39,975,000)
(the “Closing Date Payment”).
(b) Buyer
shall pay to Seller at the PRM Closing, on account of the Purchase Price, the
sum of Twenty-Five Thousand Dollars ($25,000) (the “PRM Purchase Price”) in
respect of the PRM Shares.
2.3
CLOSING
The
purchase and sale of the Shares and the LLC Interest (the “Closing”) provided
for in this Agreement will take place at the offices of Buyer's counsel on
the
date hereof (the “Closing Date”), effective as of the close of business on the
Closing Date.
2.4
CLOSING OBLIGATIONS
(a) Seller
Deliveries.
At the Closing, Seller will deliver, or caused to be delivered, to
Buyer:
(i)
the certificate or certificates representing the Shares, accompanied by duly
executed stock powers in a form mutually agreeable to Seller and Buyer
transferring the Shares to Buyer;
(ii)
an assignment of the LLC Interest in a form of mutually agreeable to Seller
and
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(iii)
a noncompetition agreement in a form mutually agreeable to Seller and Buyer
(the
“Noncompetition Agreement”), executed by Seller;
(iv)
a separate agreement in a form mutually agreeable to Seller and Buyer (each,
an
“Agreement With Certain Employees”), regarding agreements with, and a release of
claims by, each of the employees of the Acquired Companies listed in
Schedule
2.4(a)(iv)
who has executed a counterpart Agreement with Certain Employees and delivered
it
to Buyer for delivery to Seller pursuant to Section 2.4(b)(ii), executed by
Seller;
(v)
a mutual general release in a form mutually agreeable to Seller and Buyer (the
“General Release”) between Seller and each of the Retained Subsidiaries, on the
one hand, and Xxxxxx, on the other hand, executed by Seller and
Xxxxxx;
(vi)
an agreement terminating all pre-Closing Contracts, and releasing and
extinguishing all pre-Closing intercompany accounts, between one or more of
the
Acquired Companies, on the one hand, and Seller and/or one or more of the
Retained Subsidiaries, on the other hand, in a form mutually agreeable to Seller
and Buyer (the “Agreement Terminating Intercompany Contracts and Accounts”),
executed by Seller and each of the Retained Subsidiaries;
(vii)
an agreement regarding certain reinsurance and commutation matters in a form
mutually agreeable to Seller and Buyer (the “Agreement Regarding Insurance”)
with PRI, executed by First Professionals Insurance Company, Inc.
(viii)
the resignations of Xxxx Xxxxx, Xxxxxxx Xxxxxx III and Xxxxx Xxxxx as officers,
directors, managers and governors, as applicable, of the Acquired Companies
(other than PRM), PRI and XxXXX;
(ix)
a mutual general release in a form mutually agreeable to Seller and Buyer (the
“Officers’ General Release”) between Xxxx Xxxxx, Xxxxxxx Xxxxxx III and Xxxxx
Xxxxx, on the one hand, and PRI and each of the Acquired Companies (other than
PRM), on the other hand, executed by Xxxx Xxxxx, Xxxxxxx Xxxxxx III and Xxxxx
Xxxxx;
(x)
a certificate executed by the Secretary or an Assistant Secretary of Seller
certifying on behalf of Seller as of the Closing Date (A) a true and correct
copy of all requisite resolutions or actions of Seller’s board of directors
approving the execution and delivery of this Agreement and the consummation
of
the transactions contemplated hereunder, and (B) incumbency
matters;
(xi)
an Amended and Restated Services Agreement in a form mutually agreeable to
Seller and Buyer (the “Services Agreement”), between PRM and AFP, executed by
PRM;
(xii)
a Consent of PRM, in a form mutually agreeable to Seller and Buyer (the “PRM
Consent”) to the transfer of the LLC Interest, executed by PRM;
(xiii)
an assignment to PMA of all right, title and interest, if any, of First
Professionals
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(xiv)
if requested by Buyer, the 338 Election;
(xv)
an assignment of all right, title and interest, if any, of Seller in the
“xxxxxx.xxx,”“xxx.xxx” and “xxxxxxxxx.xxx” domain names subject to retention of
a limited, non-exclusive license with respect to the “medmal” domain name, in a
form mutually agreeable to Seller and Buyer (the “Domain Name Assignment”),
executed by Seller; and
(xvi)
an Agreement for IT Transition Services between Buyer and the Acquired
Companies, on the one hand, and Seller and/or one or more of the Retained
Subsidiaries, on the other hand, in a form mutually agreeable to Seller and
Buyer (the “Transition Agreement”), executed by Seller, PRM and each of the
Retained Subsidiaries, executed by Seller and such Retained
Subsidiaries.
(b)
Buyer
Deliveries.
At the Closing, Buyer will deliver or cause to be delivered to
Seller:
(i)
the Closing Date Payment by wire transfer of immediately available funds to
the
account set forth on Schedule
2.4(b)(i);
(ii)
each Agreement With Certain Employees in Buyer’s possession that has been
executed by an individual listed in Schedule
2.4(a)(iv);
(iii)
the General Release, executed by Xxxxxx and each of the Acquired Companies
(other than PRM);
(iv)
the Agreement Terminating Intercompany Contracts and Accounts, executed by
each
of the Acquired Companies (other than PRM);
(v)
the Agreement Regarding Insurance, executed by PRI, together with a copy of
the
application submitted to the New York State Department of Insurance for its
Consent to the commutation transactions contemplated by the Agreement Regarding
Insurance;
(vi)
a Consent in a form mutually agreeable to Seller and Buyer with respect to
the
transfer of the LLC Interest, executed by the Estate of Xxxxx Xxxxxxxx and
PRI;
(vii)
the Officers’ General Release, executed by each of the Acquired Companies (other
than PRM);
(viii)
the Services Agreement, executed by AFP;
(ix)
the Domain Name Assignment, executed by Buyer;
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(x)
a certificate executed by the Secretary or an Assistant Secretary of Buyer
certifying on behalf of Buyer as of the Closing Date (A) a true and correct
copy
of all requisite resolutions or actions of Buyer’s board of directors approving
the execution and delivery of this Agreement and the consummation of the
transactions contemplated thereunder, and (B) incumbency matters;
(xi)
evidence that PRI’s Board of Governors has authorized the execution, delivery
and performance by PRI of the Agreement Regarding Insurance;
(xii)
evidence that letter of credit number F503274 issued by SunTrust Bank for the
benefit of 000 Xxxx Xxxxx LLC has been terminated and that no draw had been
made
under such letter of credit prior to its termination and that Seller has no
liability or potential liability in respect of the letter of credit securing
tenant’s obligations with respect to AFP’s Lake Success office and
(xii)
The Transition Services Agreement, executed by Buyer and the Acquired
Companies.
2.5
DELIVERY OF CLOSING DATE BALANCE SHEETS; WORKING CAPITAL ADJUSTMENT
(a) Seller
will prepare (in accordance with Company Accounting Principles) and will cause
PriceWaterhouseCoopers LLC, Seller's certified public accountants, and Buyer
will prepare (in accordance with Company Accounting Principles) and will cause
Buyer’s certified public accountants, to audit a combined balance sheet of the
Acquired Companies (other than PRM), classified as to current and non-current
assets and liabilities, as of the Closing Date and as at the time immediately
prior to the time of Closing but following and reflecting the transactions
and
payments contemplated by the Agreement Terminating Intercompany Contracts and
Accounts (each, a “Closing Date Balance Sheet”). Seller and Buyer each will
deliver its respective Closing Date Balance Sheet to the other within sixty
days
after the Closing Date (the “Closing Date Balance Sheet Delivery Period”).
(b) If
Seller’s and Buyer’s Closing Date Balance Sheets show the same Adjusted Working
Capital, then the “Closing Date Working Capital” will mean the Adjusted Working
Capital reflected in the Closing Date Balance Sheets. If Seller’s and Buyer’s
Closing Date Balance Sheets do not show the same Adjusted Working Capital,
then,
unless Buyer and Seller otherwise agree in writing within fifteen days following
the end of the Closing Date Balance Sheet Delivery Period, the issues in dispute
may be submitted to Ernst & Young or such other firm of certified public
accountants as the parties may mutually agree (the “Accountants”) for
resolution. Either or both of Buyer and Seller may elect to make such
submission, with each party making such a submission providing a copy of its
submission to the other party. If the dispute is submitted to the Accountants
then, in such event (i) each party will furnish to the Accountants (x) its
own
Closing Date Balance Sheet either with its submission to the Accountants if
such
party is a submitting party or within five (5) business days of receipt of
the
other party’s notice of submission of the dispute to the Accountants and (y)
thereafter, promptly upon demand, such workpapers and other documents and
information relating to the disputed issues as the Accountants may request
and
are available to that party (or its independent public
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(c)
If the Closing Date Working Capital is greater than $2,875,000, Buyer will,
and
Xxxxxx will cause Buyer to, pay the difference to Seller, and if the Closing
Date Working Capital is less than $2,875,000, Seller will pay the difference
to
Buyer, in each case as an adjustment to the Purchase Price (the “Working Capital
Adjustment”). Such payment will be made, together with interest at the rate of
8% per annum compounded daily beginning on the Closing Date and ending on the
date of payment, on or before the tenth business day following the final
determination of the Closing Date Working Capital, by wire transfer of
immediately available funds to the account designated by the receiving party
in
writing for such purpose.
(d) For
purposes of this Section 2.5, the following definitions shall
apply:
(i) “Adjusted
Current Assets” shall mean the combined current assets of the Acquired Companies
(other than PRM) as determined in accordance with the Company Accounting
Principles.
(ii) “Adjusted
Current Liabilities” shall mean the combined current liabilities of the Acquired
Companies (other than PRM) as determined in accordance with the Company
Accounting Principles; but shall specifically include all tax liabilities
payable under or in connection with the state tax returns of the Acquired
Companies (excluding consolidated tax returns of Seller that include any of
the
Acquired Companies) to be filed in accordance with Section 6.5 relating to
and
accruing for periods prior to the Closing Date.
(iii) “Adjusted
Working Capital” shall mean Adjusted Current Assets less Adjusted Current
Liabilities.
(iv) “Company
Accounting Principles” shall mean GAAP, as further defined to reflect the
principles and methods of AFP and PMA utilized in the preparation of their
respective financial statements as of and for the year ended December 31, 2005,
and further adjusted to reflect the following:
(A) the
accounts receivable due to PMA and the other Acquired Companies from the
Pennsylvania Medical Care Availability and Reduction of Error Fund shall be
deemed to equal $2,103,500 and to be fully collectible on a current basis with
no reserve applied against such accounts receivable;
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(B) the
accounts payable by PMA to PRI shall be deemed to equal $1,674,000 and to be
payable on a current basis with no adjustment;
(C) there
shall be deemed to be no accounts payable or other current liabilities of any
of
the Acquired Companies (other than PMA as provided in clause (B) above) to
PRI
relating to the accounts receivable due to PMA and the other Acquired Companies
from the Pennsylvania Medical Care Availability and Reduction of Error
Fund;
(D) there
shall be deemed to be no accounts payable or other obligations or liabilities
of
any of the Acquired Companies to or on behalf of FPIC or any of the Retained
Subsidiaries and there shall be deemed to be no accounts payable or other
current obligations or liabilities of any of the Acquired Companies to or on
behalf of Juma Technology, Xxxxx Carpet or Office Worx;
(E) there
shall be deemed to be no accounts receivable or other obligations or liabilities
owed by FPIC or any of the Retained Subsidiaries to or on behalf of any of
the
Acquired Companies;
(F) all
payments and distributions by and of the Acquired Companies to FPIC or any
of
the Retained Subsidiaries on or prior to the Closing Date shall be reflected
either as payments in respect of preexisting liabilities owed to such Persons
to
the extent thereof, with any excess reflected as a dividend or return of
capital, as the case may be; and
(G) other
than as set forth on Schedule
2.5(d)(iv)(G), in
respect of the period between and including July 1, 2006 and the Closing Date
there shall not be recognized (i) any conversion of any current asset into,
or
any incurrence of an account payable or other current liability for, a capital
or other non-current asset, (ii) any payment prior to, or shortening of, the
due
date of any non-current liability or obligation of any of the Acquired
Companies.
2.6
TAX ELECTION; ALLOCATION OF PURCHASE PRICE
(a)
At Buyer’s request, Seller and Buyer shall timely make and file with the IRS an
election pursuant to Section 338(h)(10) of the IRC (and any corresponding
elections under the laws of Florida and of any other state in which Seller
files
income tax returns on a consolidated basis with AFP) to treat the purchase
of
the Shares by Buyer as an acquisition by Buyer of the assets of AFP and the
AFP
Subsidiaries for federal (and applicable state) income tax purposes. In order
to
effect the election under Section 338(h)(10), Buyer shall prepare, and Seller
shall execute and deliver to Buyer at Closing, IRS Form 8023 with respect to
the
purchase of AFP and AFP Subsidiaries (the “338 Election”).
(b)
Buyer and Seller agree that the amount of the Purchase Price allocated to the
Shares is $39,225,000 and the amount of the Purchase Price allocated to the
LLC
Interest is $750,000.
(c)
Within ninety (90) days after the determination of the Closing Date Working
Capital pursuant to Section 2.5, Buyer shall provide to Seller a schedule
calculating the aggregate deemed sales price for AFP and AFP Subsidiaries as
defined under Treasury Regulation §1.338-
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2.7
PRICE PROTECTION
In
the event that at any time on or before December 31, 2011, as a result of one
or
more transactions (“Disposition Transactions”), Xxxxxx and/or his Related
Persons (collectively with Xxxxxx, the “Xxxxxx Group”) sell or otherwise
transfer to a third-Person or to Buyer or any of its Related Persons) any part
of their directly or indirectly owned equity interests in the Buyer, the
Acquired Companies or their successors, taken as a whole, acquired by Xxxxxx
on
or before the Closing Date, or the Buyer or the Acquired Companies sell, assign
or otherwise transfer to a third-Person (either directly or through a transfer
to one or more members of the Xxxxxx Group and thereafter a transfer by one
or
more members of the Xxxxxx Group to a third-Person) any of the net (after
related expenses) economic benefits of providing management services to PRI
or
its successors whether under the Amended and Restated Management Agreement
dated
January 1, 1999, as amended, between AFP and PRI or otherwise (all such equity
interests and economic benefits being hereinafter in this Section 2.7 referred
to as “Equity”), then Xxxxxx and/or the Acquired Companies (with joint and
several liability among Xxxxxx and the Acquired Companies) shall pay to Seller,
by wire transfer of immediately available funds to the account designated by
Seller to Buyer in writing for such purpose, within ten days of the consummation
of the relevant Disposition Transaction, an amount equal to the Applicable
Percentage (as defined below in this Section 2.7) of the Excess Proceeds (as
defined below in this Section 2.7) when and as the Excess Proceeds are received
by or otherwise directly or indirectly inure to the benefit (e.g., through
equity ownership of an entity that receives the proceeds) of any member of
the
Xxxxxx Group. For purposes of this Section 2.7, neither the incurrence or
issuance of debt or debt securities by Buyer or any Affiliated Companies, the
issuance of equity securities by Buyer or any Affiliated Companies to
third-Persons, the subsequent redemption of any such equity securities, nor
foreclosures on Equity pledged or otherwise hypothecated by a member of the
Xxxxxx Group will be treated as Disposition Transactions, except to the extent
the proceeds of such transactions are distributed or transferred to Xxxxxx.
In
furtherance of the foregoing provisions of this Section 2.7, the term
“Disposition Transactions” shall also include any transaction that is in
substance a Disposition Transaction but the strict form of which is not
otherwise a Disposition Transaction to the extent that a substantial purpose
of
the form of such transaction is to avoid the provisions of this Section
2.7.
13
For
purposes of this Section 2.7:
| (x) |
“Applicable
Percentage” shall mean the
following:
|
|
Date
of Triggering Event
|
Applicable
Percentage
|
|
On
or prior to
December 31, 2007
|
50%
|
|
After
December 31,
2007 and on or prior to December 31, 2008
|
40%
|
|
After
December 31,
2008 and on or prior to December 31, 2009
|
30%
|
|
After
December 31,
2009 and on or prior to December 31, 2010
|
20%
|
|
After
December 31,
2010 and on or prior to December 31, 2011
|
10%
|
(y) “Excess
Proceeds” means the Value of all consideration directly or indirectly payable to
or for the benefit of a member of the Xxxxxx Group, including but not limited
to
the Xxxxxx Group’s aggregate, pro rata, indirect ownership of all consideration
payable to or inuring to the benefit of the Buyer or any of the Acquired
Companies or their affiliates, in respect of Disposition Transactions, whenever
received, to the extent such Value exceeds $400,000 for each 1% of Equity
transferred for such consideration. Notwithstanding the foregoing, (i) no
proceeds of any sale of assets or issuance of debt or equity securities by
Buyer
or any of the Acquired Companies shall be deemed to be payable to or for the
benefit of any member of the Xxxxxx Group if and to the extent such proceeds
are
paid to and used in the operations of Buyer or the Acquired Companies, and
(ii)
no payments to Xxxxxx of reasonable compensation for services rendered in the
ordinary course of the business of Buyer or any of the Acquired Companies shall
be deemed to be Excess Proceeds or otherwise subject to this section. For
purposes of this definition, “Value” means the amount of any cash or cash
equivalents plus
the fair market value of any other securities or assets plus
the amount of any indebtedness incurred by Buyer or the Acquired Companies
in
connection with the acquisition of the Securities that the transferee directly
or indirectly acquires or takes the transfer subject to or provides funds (not
otherwise reflected in Value) for the repayment thereof.
2.8
PRM CLOSING
(a) The
purchase and sale of the PRM Shares (the “PRM Closing”) provided for in this
Agreement will take place at the offices of Buyer's counsel following, and
subject to, the receipt by Buyer of all requisite approvals of the Pennsylvania
Insurance Department necessary to allow such sale (the “PA Approvals”) on a date
mutually agreeable to Seller and Buyer and in the absence of such approval
on
the fifth business day after the receipt by Buyer of the last PA
14
(b) Buyer
covenants and agrees to file promptly after the date hereof all necessary
applications for PA Approvals and to use reasonable commercial efforts to obtain
the PA Approvals as quickly as reasonably practicable. If the PRM Closing does
not occur by December 31, 2006, Seller may cause PRM to seek to obtain PaPRI’s
agreement to terminate PRM’s Attorney-in-Fact Agreement with XxXXX and Buyer
shall use reasonable commercial efforts to assist Seller with respect thereto.
If Seller nevertheless is unsuccessful in such efforts for more than 60 days,
at
Seller’s request Buyer shall use reasonable commercial efforts to find as
quickly as reasonably possible a new attorney-in-fact for XxXXX, acceptable
to
the Pennsylvania Insurance Department, to replace PRM, in which event Buyer
may
elect not to purchase PRM by written notice to Seller.
2.9
PRM CLOSING OBLIGATIONS
(a) At
the PRM Closing, Seller will deliver, or cause to be delivered, to Buyer the
following:
(i)
certificate or certificates
representing the PRM Shares, accompanied by duly executed stock powers in
substantially the form of stock power delivered pursuant to Section 2.4(a)(i),
transferring the PRM Shares to Buyer; and
(ii)
instruments and documents referenced in Section 2.4(a)(vi), (viii) and (ix)
substituting PRM for AFP and the AFP Subsidiaries.
.
(b) At
the PRM Closing, Buyer will pay the PRM Purchase Price to Seller by wire
transfer of immediately available funds to the account set forth on Schedule
2.4(b)(i).
(c) Seller
represents, covenants and agrees with Buyer that upon the PRM Closing, PRM
will
have $25,000 in cash assets (and all other assets existing on the Closing Date
and all pre-tax income realized between the Closing Date and the PRM Closing
Date) and will have no liabilities that were incurred on or after the Closing
Date other than obligations and liabilities in respect of documents and
instruments executed and delivered by PRM on the Closing Date as expressly
contemplated by this Agreement.
3. REPRESENTATIONS
AND WARRANTIES OF SELLER
Seller
represents and warrants to Buyer as follows:
3.1
ORGANIZATION OF SELLER AND ACQUIRED COMPANIES
Seller
is a corporation duly organized and validly existing under the laws of the
State
of Florida. Each of the Acquired Companies is duly organized and validly
existing under the laws of Pennsylvania (with respect to Physicians Reciprocal
Managers, Inc.) or the State of New York (with respect to the other Acquired
Companies).
15
3.2
AUTHORITY; NO CONFLICT; CONSENTS
(a)
Seller's execution and delivery of this Agreement, and Seller’s and each
Retained Subsidiary’s execution of the agreements, documents and instruments to
be delivered hereunder by Seller and the Retained Subsidiaries pursuant to
Section 2.4(a) (collectively, “Seller's Closing Documents”) to which it is or
will be a party, and the performance by Seller and the Retained
Subsidiaries of
their respective obligations hereunder and thereunder, have been duly and
validly authorized by all requisite action on the part of Seller and each of
the
Retained Subsidiaries (including in each case its board of directors). The
Board
of Directors (or, in the case of PMA, the Managing Member) of each of the
Acquired Companies has duly and validly authorized the relevant Acquired
Company’s execution, delivery and performance of this Agreement and the
agreements, documents and instruments to be executed hereunder by such Acquired
Company. This Agreement constitutes the legal, valid, and binding obligation
of
Seller, enforceable against Seller in accordance with its terms. Upon the
execution and delivery by Seller and the Retained Subsidiaries of Seller’s
Closing Documents, Seller's Closing Documents will constitute the legal, valid,
and binding obligations of Seller and the Retained Subsidiaries, as applicable
to each, enforceable against each in accordance with their respective terms.
Seller has the absolute and unrestricted right, power, authority, and capacity
to execute and deliver this Agreement, and Seller and the Restricted
Subsidiaries have the absolute and unrestricted right, power, authority, and
capacity to execute and deliver Seller's Closing Documents, and to perform
their
respective obligations under this Agreement and Seller's Closing
Documents.
(b)
Neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time):
(i)
contravene, conflict with, or result in a violation of (A) any provision of
Seller’s or any Retained Subsidiary’s Organizational Documents, or (B) any
resolution adopted by the board of directors or the stockholders of Seller
or
any Retained Subsidiary or any Acquired Company; or
(ii)
assuming the correctness of Buyer’s and Xxxxxx’x representations and warranties
contained in Section 4.2 with respect to the Buyer-Related Signers, contravene,
conflict with, or result in a violation of, or give any Governmental Body or
other Person the right to challenge any of the Contemplated Transactions or
to
exercise any remedy or obtain any relief under, any Legal Requirement or any
Order to which Seller or any of the Retained Subsidiaries may be subject or
any
Contract to which any of them is a party or by which any of them may be
bound.
(c)
Neither Seller nor any of the Retained Subsidiaries is or will be required
to
give any notice to or obtain any Consent from any Person in connection with
the
execution and delivery of this Agreement or the consummation or performance
of
any of the Contemplated Transactions; provided the Consents contemplated by
Section 2.5 are delivered on or prior to the Closing.
3.3
THE SECURITIES
16
Seller
(i) is the lawful owner, of record and beneficially, of the Securities, and
(ii)
has good and marketable title to the Securities, free and clear of any and
all
Encumbrances whatsoever and with no restriction on the voting rights and other
incidents of record and beneficial ownership pertaining thereto, other than
as
set forth in the Operating Agreement of PMA. Except for this Agreement and,
with
respect to the LLC Interest, the Operating Agreement of PMA, there are no
Contracts between Seller and any other Person with respect to the acquisition,
disposition, transfer, registration or voting of, or any other matters in any
way pertaining or relating to, any of the Securities. The Securities comprise
Seller’s entire ownership interest in the Acquired Companies.
3.4
CAPITALIZATION
The
authorized capital stock of AFP is Two Hundred (200) shares of Common Stock
of
which Ninety-Eight (98) are outstanding, and there are no warrants options,
agreements or granted any rights issued to or held by or with any Person to
acquire any shares or interests in AFP. All such outstanding shares are duly
and
validly issued and outstanding, fully paid and non-assessable, and are held
of
record and beneficially by Seller without Encumbrance. The LLC Interest
represents eighty percent (80%) of the membership interests in PMA, and there
are no warrants or options, or (except to the extent set forth in the Operating
Agreement of PMA with respect to the LLC Interest) agreements or rights, issued
to or held by or with any Person to acquire any units or interests in
PMA.
3.5
NO CONTRACTS RESTRICTING ACQUIRED COMPANIES
There
are no Contracts between Seller or any of the Acquired Companies and any third
Person that restrict the rights of the Acquired Companies to do business in
any
way in any geographic location or region.
3.6
NO ACTIONS CREATING CERTAIN LIABILITIES
Neither
Seller nor any of its officers has taken any action that created any existing
liability, obligation or commitment, fixed or contingent, of AFP without the
actual knowledge of AFP’s board of directors.
3.7
LEASES, LICENSES AND EQUIPMENT
Neither
Seller nor any of the Retained Subsidiaries leases or licenses any of their
assets to any of the Acquired Companies or permits any of the Acquired Companies
to use any of the equipment or other physical assets of Seller or any of the
Retained Subsidiaries, as contrasted to the Acquired Companies’ use of computer
software licenses, insurance coverages and similar items available to the
Acquired Companies as subsidiaries of Seller under master agreements covering
Seller and its subsidiaries generally.
3.8
BROKERS OR FINDERS
Seller
and its officers and agents have incurred no obligation or liability, contingent
or
17
3.9
TAX FILINGS
Seller
has filed a consolidated federal income tax return with AFP, PRM and the AFP
Subsidiaries for the taxable year ended December 31, 2005, and is eligible
to
make an election under §338(h)(10) of the IRC.
3.10
TAX ELECTIONS
Seller
represents and warrants that during the period Seller has owned the LLC
Interest, PMA has not made an election pursuant to Treasury Regulation
§301.7701-3 to be treated as an association taxable as a corporation for all
or
any part of such period.
4. REPRESENTATIONS
AND WARRANTIES OF BUYER AND XXXXXX
Buyer
and Xxxxxx acknowledge to Seller that Xxxxxx is President and Chief Executive
Officer of each of the Acquired Companies and a member of the board of directors
or other governing body of each of the Acquired Companies, and has held such
positions or other senior executive officer and or/board of directors or
governing body positions for more than ten years, well before Seller’s
acquisition of the Acquired Companies in 1999, as a result of which Xxxxxx,
and
Buyer through Xxxxxx, have full knowledge regarding the Acquired Companies
and
their businesses, operations and financial matters, in many respects greater
than the knowledge of Seller and Seller’s officers or directors with respect to
such matters. Consequently, (i) neither Buyer nor Xxxxxx requires or seeks
with
respect to the Acquired Companies representations or warranties from Seller
of
the kind customarily given by sellers in stock purchase or similar agreements;
and (ii) Seller does seek, and Buyer and Xxxxxx are willing to provide Seller
with, certain representations and warranties regarding the Acquired Companies
in
this Article 4 that Buyer and Xxxxxx are in a better position than Seller to
provide.
Buyer
and Xxxxxx, jointly and severally, represent and warrant to Seller as
follows:
4.1
ORGANIZATION AND GOOD STANDING
Buyer
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of New York.
4.2
AUTHORITY; NO CONFLICT; CONSENTS
(a)
Buyer’s and Xxxxxx’x execution and delivery of this Agreement, and Buyer’s,
Xxxxxx’x, PRI’s and the Acquired Companies’ (other than PRM) (collectively, the
“Buyer-Related Signers”) execution of the agreements, documents and instruments
to be delivered by the
18
(b)
Neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time):
(i)
contravene, conflict with, or result in a violation of (A) any provision of
Buyer’s or PRI’s (other than AFP’s) Organizational Documents, or (B) any
resolution adopted by the board of directors (or similar governing body) or
the
owners of Buyer or PRI; or
(ii)
contravene, conflict with, or result in a violation of, or give any Governmental
Body or other Person the right to challenge any of the Contemplated Transactions
or to exercise any remedy or obtain any relief under, any Legal Requirement
or
any Order to which Buyer, PRI or any of the Acquired Companies (other than
PRM)
may be subject or any Contract to which any of them is a party or by which
any
of them may be bound.
(c)
Neither Buyer, PRI nor any of the Acquired Companies (other than PRM) is or
will
be required to make any filing with, give any notice to or obtain any Consent
from, the New York State Insurance Department in connection with the execution
and delivery of this Agreement or the consummation or performance of any of
the
Contemplated Transactions except any filings, notices and Consents that have
been completed and obtained as of the date hereof.
4.3
INVESTMENT INTENT
Buyer
is acquiring the Securities for its own account and not with a view to their
distribution within the meaning of Section 2(11) of the Securities Act of
1933.
4.4
BROKERS OR FINDERS
Buyer
and its officers and agents, and Xxxxxx and his agents, have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders'
fees
or agents' commissions or other similar payment in connection with this
Agreement or any of the Contemplated Transactions and will indemnify and hold
Seller harmless from any such payment alleged to be due by or through
19
Buyer
or Xxxxxx as a result of the action of Buyer or its officers or agents or Xxxxxx
or his agents.
5. INDEMNIFICATION;
REMEDIES
5.1
SURVIVAL
All
representations, warranties, covenants, and obligations in this Agreement and
any certificate or document delivered pursuant to this Agreement will survive
the Closing.
5.2
INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER
From
and after the Closing Date, Seller will indemnify and hold harmless Buyer,
and
its officers, directors, employees, shareholders, successors and assigns, in
their capacities as such, from and against all Damages that may be imposed
upon,
incurred by or asserted against any of them arising, directly or indirectly,
from or in connection with:
(a)
any Breach of any representation or warranty made by Seller in this Agreement
(as if such representation or warranty were made on and as of the Closing Date)
or in any certificate or document delivered pursuant to this
Agreement;
(b)
any Breach by Seller of any of its covenants or obligations in this Agreement;
(c)
any Tax for which any of the Acquired Companies (including PRM) may be liable
by
reason of having been part of a consolidated group including Seller on or before
the Closing Date and any state income Tax for which any of the Acquired
Companies (including PRM) may be liable in respect of any taxable period ending
on or prior to the Closing Date that exceeds amounts accrued in respect of
state
income Taxes on the Closing Date Balance Sheet (including amounts accrued
thereon in respect of such Taxes of PRM, which accrued Tax liabilities of PRM
were assumed by AFP prior to the Closing); or
(d)
any claim by any Person for brokerage or finder's fees or commissions or similar
payments based upon any Contract alleged to have been made by any such Person
with Seller (or any Person acting on its behalf) in connection with any of
the
Contemplated Transactions.
5.3
INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER AND XXXXXX
Buyer
and Xxxxxx, jointly and severally, will indemnify and hold harmless Seller,
and
its officers, directors, employees, shareholders, successors and assigns, in
their capacities as such, from and against all Damages that may be imposed
upon,
incurred by or asserted against any of them arising, directly or indirectly,
from or in connection with:
(a)
any Breach of any representation or warranty made by Buyer and Xxxxxx in this
Agreement or in any certificate or document delivered pursuant to this
Agreement;
(b)
any Breach by Buyer or Xxxxxx of any of its or his covenants or obligations
in
this
20
Agreement;
(c)
any claim against Seller or any of the Retained Subsidiaries relating to the
business or operations of, or policies of insurance issued by, PRI, whether
before, on or after the Closing Date other than policies of insurance issued
by
PRI and assumed by any of the Retained Subsidiaries pursuant to a reinsurance
treaty between PRI and such Retained Subsidiary; or
(d)
any claim by any Person for brokerage or finder's fees or commissions or similar
payments based upon any Contract alleged to have been made by any such Person
with Buyer or Xxxxxx (or any Person acting on its or his behalf) in connection
with any of the Contemplated Transactions.
5.4
TIME
LIMITATIONS
Seller
will have no liability (for indemnification or otherwise) with respect to any
representation or warranty, or covenant or obligation to be performed and
complied with on the Closing Date or the PRM Closing Date, as the case may
be,
unless on or before the first anniversary of the Closing Date Buyer notifies
Seller of a claim specifying the factual basis of that claim in reasonable
detail to the extent then known by Buyer. Buyer and Xxxxxx will have no
liability (for indemnification or otherwise) with respect to any representation
or warranty, or covenant or obligation to be performed and complied with on
the
Closing Date or the PRM Closing Date, as the case may be, unless on or before
the first anniversary of the Closing Date Seller notifies Buyer of a claim
specifying the factual basis of that claim in reasonable detail to the extent
then known by Seller. A claim for indemnification (including without limitation
a claim in respect of Seller’s indemnities under Section 5.2(c)) or
reimbursement not based upon any representation or warranty, or upon any
covenant or obligation to be performed and complied with on the Closing Date
or
the PRM Closing Date, as the case may be, may be made at any time subject to
any
applicable statute of limitations or other Legal Requirement.
5.5 PROCEDURE
FOR INDEMNIFICATION--THIRD PARTY CLAIMS
(a)
Promptly after receipt by an indemnified party under Section 5.2 or Section
5.3
of notice of the commencement of any Proceeding against it, such indemnified
party will, if a claim is to be made against an indemnifying party under such
Section, give notice to the indemnifying party of the commencement of such
claim, but the failure to notify the indemnifying party will not relieve the
indemnifying party of any liability that it may have to any indemnified party,
except to the extent that the indemnifying party demonstrates that the defense
of such action is prejudiced by the indemnifying party's failure to give such
notice.
(b)
If any Proceeding referred to in Section 5.5(a) is brought against an
indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will be entitled to
participate in such Proceeding and, to the extent that it wishes (unless (i)
the
indemnifying party is also a party to such Proceeding and the indemnified party
determines in good faith that joint representation would be inappropriate,
or
(ii) the indemnifying party fails to provide reasonable assurance to the
indemnified party of its financial capacity to defend such Proceeding and
provide indemnification with respect to such
21
Proceeding),
to assume the defense of such Proceeding with counsel satisfactory to the
indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding,
the
indemnifying party will not, as long as it diligently conducts such defense,
be
liable to the indemnified party under this Article 5 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding,
in
each case subsequently incurred by the indemnified party in connection with
the
defense of such Proceeding, other than reasonable costs of investigation. If
the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made
in
that Proceeding are within the scope of and subject to indemnification; (ii)
no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding
or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that
are
paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of
the
commencement of any Proceeding and the indemnifying party does not, within
ten
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding,
the
indemnifying party will be bound by any determination made in such Proceeding
or
any compromise or settlement effected by the indemnified party.
(c)
Notwithstanding the foregoing, if an indemnified party determines in good faith
that there is a reasonable probability that a Proceeding may adversely affect
it
or its affiliates other than as a result of monetary damages for which it would
be entitled to indemnification under this Agreement, the indemnified party
may,
by notice to the indemnifying party, assume the exclusive right to defend,
compromise, or settle such Proceeding, but the indemnifying party will not
be
bound by any determination of a Proceeding so defended or any compromise or
settlement effected without its consent (which may not be unreasonably
withheld).
5.5
PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
A
claim for indemnification for any matter not involving a third-party claim
may
be asserted by notice to the party from whom or which indemnification is
sought.
6. GENERAL
PROVISIONS
6.1
EXPENSES
Except
as otherwise expressly provided in this Agreement, each party to this Agreement
will bear its respective expenses incurred in connection with the preparation,
execution, and performance of this Agreement and the Contemplated Transactions,
including all fees and expenses of its Representatives. In the event of
termination of this Agreement, the obligation of each party to pay its own
expenses will be subject to any rights of such party arising from a Breach
of
this Agreement by another party.
6.2
NOTICES
22
All
notices, consents, waivers, and other communications under this Agreement must
be in writing and will be deemed to have been duly given when (a) delivered
by
hand (with written confirmation of receipt), (b) sent by facsimile or electronic
mail, provided that a copy is mailed by registered or certified mail, return
receipt requested, or (c) when received by the addressee, if sent by a
nationally recognized overnight delivery service (receipt requested), in each
case to the appropriate addresses and facsimile numbers set forth below (or
to
such other addresses and telecopy numbers as a party may designate by notice
to
the other parties):
Seller: FPIC
Insurance Group, Inc.
000
Xxxxx Xxxxxx,
Xxxxx 0000
Xxxxxxxxxxxx,
Xxxxxxx
00000
Attn:
Xxxxxxx Xxxxxx,
Chief Financial Officer
Telephone:
000-000-0000
Facsimile:
000-000-0000
E-mail:
xxxxx.xxxxxx@xxxx.xxx
With
a copy to:
Xxxxxxxxx
&
Xxxxxx, P.A.
000X
Xxxxxxxxx
Xxx
Xxxxxxxxxxxx,
Xxxxxxx
00000
Attn:
Xxxxxxx X.
Xxxxxxxxx, Esq.
Telephone:
000-000-0000
Facsimile:
904-346-3299
E-mail:
xxxxxxxxxxx@xxxxxxxxx.xxx
Buyer
or Xxxxxx: AJB
Ventures Inc.
c/o
Administrators
for the Professions, Inc.
000
Xxxx Xxxxx
Xxxx
Xxxxxxxxx,
Xxx Xxxx
00000
Telephone:
000-000-0000 X000
Facsimile:
000-000-0000
E-mail:
x.xxxxxx@xxxxxx.xxx
With
a copy to:
Xxxxxx
Xxxxxxxx
LLP
000
Xxxxxx
Xxxx
000
Xxxxxxx
Xxxx
Xxxxxx,
Xxxxxxxxxxxx
00000
Attn:
A. Xxxx Xxx
III
Telephone:
000-000-0000
Facsimile:
000-000-0000
E-mail:
xxxx@xxxxxxxxx.xxx
23
6.3
JURISDICTION; SERVICE OF PROCESS
ANY
JUDICIAL PROCEEDINGS RELATING TO THIS AGREEMENT SHALL BE PROSECUTED IN THE
FEDERAL COURTS IN THE LOCATION OF THE DEFENDANT BUYER OR SELLER, AS THE CASE
MAY
BE AND THE PARTIES HEREBY CONSENT TO THE JURISDICTION AND VENUE OF SUCH COURTS.
Each party hereby irrevocably agrees that all claims in respect of such dispute
or proceeding shall be heard and determined in such courts (and the courts
hearing appeals from such courts). The parties hereby irrevocably waive, to
the
fullest extent permitted by applicable Law, any objection that they may now
or
hereafter have to the laying of venue of any such dispute brought in such court
or any defense of inconvenient forum in connection therewith. THE PARTIES HERETO
WAIVE THE RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY SUIT, ACTION OR
PROCEEDING SEEKING ENFORCEMENT OF SUCH PARTY’S RIGHTS UNDER THIS AGREEMENT. THE
FOREGOING WAIVER OF THE RIGHT TO A JURY TRIAL IS MADE KNOWINGLY, VOLUNTARILY
AND
INTENTIONALLY. Process in any action or proceeding referred to in this Section
6.3 may be served on any party anywhere in the world.
6.4
FURTHER ASSURANCES; ACCESS TO RECORDS AND PERSONNEL
(a)
Each party agrees from and after the Closing Date (a) to furnish upon request
to
each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the
other
party may reasonably request for the purpose of carrying out the intent of
this
Agreement and the documents referred to in this Agreement.
(b)
From and after the Closing Date, each of the parties will permit the other
party
reasonable access to such party’s officers and other appropriate personnel and
to any applicable books and records of or relating to the Acquired Companies
in
its possession, and the right to duplicate such records, to the extent that
the
requesting party has a reasonable business purpose relating to such party’s
ownership of the Acquired Companies for requesting such access or duplication,
including without limitation access by Seller relating to the Acquired
Companies’ having been part of Seller’s consolidated group for accounting and
tax purposes, and for purposes of the requirements of the Xxxxxxxx-Xxxxx Act,
through the Closing Date, and will cause such party’s officers and other
appropriate personnel to cooperate fully with the other party with respect
thereto. In particular, Seller will require such access and cooperation in
connection with the preparation and audit of the Closing Date Balance Sheet,
the
preparation of Seller’s consolidated financial statements for the period
beginning on January 1, 2006 and ending on the Closing Date and the preparation
of Seller’s consolidated federal income tax return for the same period and, with
respect to such matters, Buyer and Xxxxxx will cause the officers and applicable
personnel of the Acquired Companies to participate in the conduct of the
accounting closing and consolidation (including with respect to processes,
control review and certifications to Buyer, which certifications will include
the management certification letter from Xxxxxx as President of AFP and Xxxxxx
X. Xxxxxxxx as Chief Accounting Officer of AFP), and tax reporting, consistent
with past practices. Each party hereto will notify the other party of any
extension of any applicable statute of limitations related to such records
and
neither party shall permit the
24
destruction
of any such records without first taking best efforts to afford the other party
an opportunity to obtain such records. In addition, in the event and for so
long
as Seller is actively contesting or defending against any third party action,
suit, Proceeding, hearing, investigation, charge, complaint, claim, or demand
in
connection with (i) any Contemplated Transaction or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing
Date
involving the Acquired Companies or their business or operations, Buyer and
Xxxxxx will, and will cause the Acquired Companies to, cooperate with Seller
and
its counsel in the defense or contest, make available their personnel, and
provide such testimony and access to their books and records as shall be
reasonably necessary in connection with the defense or contest, subject to
appropriate confidential measures Buyer reasonably requires.
6.5
TAX RETURNS
(a)
Seller shall include the taxable income or loss of AFP and the AFP Subsidiaries
on Seller’s consolidated federal and Florida and any other of Seller’s
applicable consolidated state income tax returns for all taxable periods through
the end of the Closing Date and shall pay any federal and Florida, and any
other
such state, income taxes attributable to any such income. The 2006 income of
AFP
and the AFP Subsidiaries shall be apportioned to the period up to and including
the Closing Date and the period after the Closing Date by closing the books
of
AFP and the AFP Subsidiaries as of the end of the Closing Date. All such tax
returns shall be prepared and filed in a manner consistent with prior practice,
except as required by a change in applicable law. Seller and Buyer shall deliver
to the other all tax returns filed by it pursuant to this Section promptly
after
such filing.
(b)
Buyer and Seller acknowledge that the purchase by Buyer of the LLC Interest
in
PMA will result in a termination of PMA for federal income tax purposes. Seller
shall include its share of the income or loss of PMA on Seller’s consolidated
federal income tax returns for all 2006 taxable periods through the end of
the
Closing Date and pay any federal, state and local income taxes of Seller
attributable to such income. The income of PMA shall be apportioned to the
period up to and including the Closing Date and the period after the Closing
Date by closing the books of PMA as of the end of the Closing Date. Seller
shall
prepare and file, after consultation with Buyer, the federal and state income
tax returns of PMA for its tax year ending on the Closing Date, which returns
shall include an election under Section 754 of the IRC if one has not already
been made. All such tax returns shall be prepared and filed in a manner
consistent with prior practice, except as required by a change in applicable
law.
(c)
Except as provided in subsections (a) and (b) of this Section 6.5, Buyer shall
prepare and file, and simultaneously provide Seller with a copy of, any state
and local Tax returns of AFP, the AFP Subsidiaries, PMA and, if the PRM Closing
has occurred before the time such return is due, PRM due after the Closing
Date
for periods that begin before the Closing Date and end on or after the Closing
Date. Buyer shall pay, or shall cause the relevant Acquired Company to pay,
except to the extent of Seller’s obligations in respect of such payment pursuant
to Seller’s indemnification obligation under Section 5.2(c), the amount of any
Taxes relating thereto with respect to AFP, the AFP Subsidiaries and, if
appropriate, PRM. If the PRM Closing has not occurred by the date any such
state
or local return of PRM is due, Buyer and Seller shall jointly
25
prepare
such return for PRM, and shall deliver such return to Seller together with
(by
wire transfer of immediately available funds to the account of Seller set forth
on Schedule
2.4(b)(i))
the amount of tax payable under such return (except to the extent that Seller
has caused PRM to have operations not existing as of the Closing Date), except
to the extent of Seller’s obligations in respect of such payment pursuant to
Seller’s indemnification obligation under Section 5.2(c), whereupon Seller will
cause such return to be filed and the related tax to be paid. All
such tax returns shall be prepared and filed in a manner consistent with prior
practice, except as required by a change in applicable law. Seller’s
indemnification obligation under Section 5.2(c) of this Agreement shall not
apply to any state or local tax returns filed by Buyer under this subsection
(c)
unless Seller has consented to such returns (which shall not be unreasonably
withheld or delayed).
6.6 FPIC
INTERMEDIARIES
Buyer
and
Xxxxxx shall cause (i) the name of FPIC Intermediaries, Inc. to be changed
as
soon as reasonably practicable following the Closing Date to a name that does
not contain the term “FPIC” or any derivation thereof, (ii) the Acquired
Companies to refrain from publicizing the name of “FPIC Intermediaries, Inc.”,
and (iii) the Acquired Companies to cease using the name FPIC Intermediaries,
Inc. or any name containing the term “FPIC” or any derivation
thereof in
any way after December 31, 2006, except pursuant to a non-exclusive license
agreement, expiring upon the name change contemplated by clause (i) of this
Section 6, on terms acceptable to Seller in its discretion.
6.7 WAIVER
The
rights
and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising any
right, power, or privilege under this Agreement or the documents referred to
in
this Agreement will operate as a waiver of such right, power, or privilege,
and
no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or
the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless
in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
6.8
ENTIRE AGREEMENT AND MODIFICATION
This
Agreement supersedes all prior Contracts between the parties with respect to
its
subject matter (including the letter of intent between Xxxxxx and Seller dated
September 1, 2006) and constitutes (along with the documents referred to in
this
Agreement) a complete and exclusive statement of the terms of the Contract
between the parties with respect to its subject matter. This Agreement may
not
be amended except by a written agreement executed by the
26
party
to be charged with the amendment.
6.9
ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither
Seller nor Buyer nor Xxxxxx may assign any of its rights under this Agreement,
except that Buyer may assign its rights under this Agreement as collateral
security to Buyer’s lenders pursuant to Article 9 of the Uniform Commercial
Code. Subject to the preceding sentence, this Agreement will apply to, be
binding in all respects upon, and inure to the benefit of the successors and
assigns of the parties. Nothing expressed or referred to in this Agreement
will
be construed to give any Person other than the parties to this Agreement any
legal or equitable right, remedy, or claim under or with respect to this
Agreement or any provision of this Agreement. This Agreement and all of its
provisions and conditions are for the sole and exclusive benefit of the parties
to this Agreement and their successors and assigns.
6.10
SEVERABILITY
If
any
provision of this Agreement is held invalid or unenforceable by any court of
competent jurisdiction, the other provisions of this Agreement will remain
in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to
the
extent not held invalid or unenforceable.
6.11
SECTION HEADINGS, CONSTRUCTION
The
headings
of Sections in this Agreement are provided for convenience only and will not
affect its construction or interpretation. All references to “Section” or
“Sections” refer to the corresponding Section or Sections of this Agreement. All
words used in this Agreement will be construed to be of such gender or number
as
the circumstances require. Unless otherwise expressly provided, the word
“including” does not limit the preceding words or terms.
6.12
TIME OF ESSENCE
With
regard
to all dates and time periods set forth or referred to in this Agreement, time
is of the essence.
6.13
GOVERNING LAW
This
Agreement will be governed by the laws of the State of New York without regard
to conflicts of laws principles.
6.14
COUNTERPARTS
This
Agreement may be executed in one or more counterparts, each of which will be
deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement.
IN
WITNESS
WHEREOF, the parties have executed and delivered this Agreement as of
27
the
date first written above.
[Signatures
Appear on Following Page.]
28
| Buyer: | ||
| AJB Ventures Inc. | ||
| |
|
|
| By: | /s/ Xxxxxxx X. Xxxxxx | |
|
Xxxxxxx X. Xxxxxx President
|
||
| Xxxxxx: | ||
| By: /s/ Xxxxxxx X. Xxxxxx | ||
|
Xxxxxxx X. Xxxxxx |
||
| Seller: | ||
| FPIC Insurance Group, Inc. | ||
| |
|
|
| By: | /s/ Xxxxxxx Xxxxxx, III | |
|
|
||
| Print Name: | Xxxxxxx Xxxxxx, III | |
|
|
||
| Title: | Chief Financial Officer | |
|
|
||
29
