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STOCK PURCHASE AGREEMENT
BETWEEN
MERCURY FINANCE COMPANY
AND
FRONTIER INSURANCE GROUP, INC.
MARCH 28, 1997
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TABLE OF CONTENTS
ARTICLE I
TRANSACTION
1.1. Purchase and Sale of Stock ............................................ 1
1.2. Consideration ......................................................... 1
1.3. No Assumption of Seller's Liabilities ................................. 1
ARTICLE II
THE CLOSING AND TRANSFER OF STOCK
2.1. The Closing ........................................................... 2
2.2. Deliveries at the Closing ............................................. 2
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
3.1. Due Organization ...................................................... 3
3.2. Capitalization; Ownership of Company and Subsidiaries ................. 4
3.3. Authorization of Transaction .......................................... 4
3.4. Consents and Approvals; No Violations ................................. 5
3.5. SAP Financial Statements .............................................. 5
3.6. Assets ................................................................ 5
3.7. Investments ........................................................... 6
3.8. Events Subsequent to Balance Sheet Date ............................... 6
3.9. Tax Matters ........................................................... 6
3.10. Legal Compliance ...................................................... 6
3.11. Reserves .............................................................. 7
3.12. Intellectual Property ................................................. 7
3.13. Contracts ............................................................. 7
3.14. Legal Proceedings ..................................................... 8
3.15. Employee Plans ........................................................ 8
3.16. Certain Business Relationships with the Company ....................... 9
3.17. Sales Practices ....................................................... 9
3.18. Brokers' Fees ......................................................... 9
3.19. Insurance ............................................................. 9
3.20. Disclaimer ............................................................ 9
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1. Organization of Buyer ................................................ 10
4.2. Authorization of Transaction ......................................... 10
4.3. Consents and Approvals; No Violations ................................ 10
4.4. Acquisition of Stock for Investment .................................. 10
4.5. Buyer's Business Investigation ....................................... 11
4.6. Financing ............................................................ 11
4.7. Brokers' Fees ........................................................ 11
ARTICLE V
COVENANTS OF SELLER
5.1. Interim Conduct of Business .......................................... 11
5.2. Access ............................................................... 12
5.3. Consummation ......................................................... 12
5.4. HSR Consent .......................................................... 13
5.5. Other Actions ........................................................ 13
5.6. Outstanding Claims ................................................... 13
ARTICLE VI
COVENANTS OF BUYER
6.1. Consummation ......................................................... 13
6.2. HSR Consent .......................................................... 13
6.3. Other Actions ........................................................ 13
6.4. Records and Documents ................................................ 14
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
7.1. Accuracy of Warranties and Performance of Covenants .................. 14
7.2. No Pending Action .................................................... 14
7.3. HSR .................................................................. 14
7.4. Insurance Approvals .................................................. 14
7.5. Termination of Tax Sharing Agreement ................................. 14
7.6. Surplus As Regards Policyholders and Stockholder's Equity ............ 14
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ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
8.1. Accuracy of Warranties and Performance of Covenants .................. 15
8.2. No Pending Action .................................................... 15
8.3. HSR .................................................................. 15
8.4. Insurance Approvals .................................................. 15
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
9.1. Survival ............................................................. 15
9.2. Indemnification ...................................................... 16
9.3. General Provisions Relating to Indemnification ....................... 16
ARTICLE X
TERMINATION
10.1. Termination or Abandonment .......................................... 17
10.2. Effect of Termination ............................................... 18
ARTICLE XI
CERTAIN EMPLOYEE BENEFITS MATTERS
11.1. Transfer of ERISA Plans ............................................. 18
11.2. Continuation of Employee Benefit Plans .............................. 18
ARTICLE XII
OTHER AGREEMENTS
12.1. Assistance with A.M. Best ........................................... 19
12.2. Non-competition ..................................................... 19
12.3. Continuation of Relationship ........................................ 19
12.4. Delivery of Financial Statements .................................... 19
12.5. Reconciliation of Intercompany Accounts ............................. 20
12.6. Taxes ............................................................... 20
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ARTICLE XIII
GENERAL PROVISIONS
13.1. Amendments and Waiver ............................................... 21
13.2. Notices ............................................................. 21
13.3. Expenses ............................................................ 22
13.4. Counterparts ........................................................ 22
13.5. Successors and Assigns; Beneficiaries ............................... 22
13.6. Entire Agreement .................................................... 22
13.7. Announcements ....................................................... 22
13.8. Partial Invalidity .................................................. 22
13.9. Governing Law ....................................................... 23
SCHEDULES
SCHEDULE 3.0 PERSONS WITH KNOWLEDGE
SCHEDULE 3.2 OWNERSHIP OF COMPANY AND SUBSIDIARIES
SCHEDULE 3.4 CONSENTS AND APPROVALS; NO VIOLATIONS
SCHEDULE 3.5 SAP FINANCIAL STATEMENTS
SCHEDULE 3.6 ASSETS
SCHEDULE 3.8 EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END
SCHEDULE 3.9 TAX MATTERS
SCHEDULE 3.10 LEGAL COMPLIANCE
SCHEDULE 3.12 INTELLECTUAL PROPERTY
SCHEDULE 3.13 CONTRACTS
SCHEDULE 3.14 LEGAL PROCEEDINGS
SCHEDULE 3.15 EMPLOYEE PLANS
SCHEDULE 3.19 INSURANCE
SCHEDULE 5.1 INTERIM CONDUCT OF BUSINESS
ANNEX A TAX DISAFFILIATION AGREEMENT
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, is made and entered into this 28th day of
March, 1997 (the "AGREEMENT"), by and between Mercury Finance Company, a
Delaware corporation ("SELLER") and Frontier Insurance Group, Inc., a Delaware
corporation ("BUYER").
WHEREAS, Xxxxxx Property Insurance Company, a Missouri corporation (the
"COMPANY"), directly and through subsidiaries, is engaged in the business of
providing insurance, warranty administration and related products and services
(the "BUSINESS"); and
WHEREAS, the authorized capital stock of the Company consists solely of
4,000 shares of common stock, par value $1,000 per share, all of which shares
are issued and outstanding (collectively, the "STOCK"); and
WHEREAS, all of the Stock is owned both of record and beneficially solely
by Seller; and
WHEREAS, Buyer desires to purchase the Stock from Seller and Seller desires
to sell the Stock to Buyer upon the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements herein contained, and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, Seller and Buyer agree as follows:
ARTICLE I
TRANSACTION
1.1. PURCHASE AND SALE OF STOCK. Subject to the terms and conditions set
forth in this Agreement, at the Closing (as hereinafter defined) Seller will
sell, convey, assign, transfer and deliver to Buyer, and Buyer will purchase,
acquire and accept from Seller, the Stock, for the consideration specified below
in this Article I.
1.2. CONSIDERATION. The aggregate consideration for the Stock (the
"AGGREGATE CONSIDERATION") shall be Ninety-Two Million Dollars ($92,000,000).
1.3. NO ASSUMPTION OF SELLER'S LIABILITIES. It is understood that none of
Buyer, the Company or any Subsidiary (as hereinafter defined) is assuming any
liability of Seller as a result of this Agreement, except as may be expressly
set forth herein.
ARTICLE II
THE CLOSING AND TRANSFER OF STOCK
2.1. THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of XxXxxxxxx, Will &
Xxxxx, counsel to the Seller, 000 X. Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000,
commencing at 9:00 a.m. local time on the third business day following the date
on which the last of the conditions to Closing in Articles VII and VIII have
been fulfilled or waived in accordance with this Agreement or such other date as
the parties may mutually determine (the "CLOSING DATE").
2.2. DELIVERIES AT THE CLOSING.
(a) Deliveries by Seller. At the Closing, Seller will execute, acknowledge
(if appropriate), and deliver to Buyer:
(i) certificates for the Stock with duly executed stock
powers to effect the transfer of ownership of the Stock to Buyer;
(ii) a copy of all charter documents of the Company and of
each Subsidiary certified by the Secretary of State of its jurisdiction of
incorporation as of a recent date;
(iii) certificates of the Secretary of the Company and of
each Subsidiary certifying copies of the By-laws, minute books and stock
record books of the Company and each such Subsidiary as of the Closing
Date;
(iv) the officer's certificate specified in Section 7.1;
(v) the draft financial statements of the Company and its
Subsidiaries for the year ended December 31, 1996 prepared in all material
respects in accordance with SAP and GAAP;
(vi) resignations of non-employee directors;
(vii) opinions of counsel to Seller opining as to the
matters set forth in Section 3.1(a), the record ownership of the Stock and
the record ownership of the capital stock of the Subsidiaries as set forth
on Section 3.2 of the Disclosure Schedule including Buyer's title to the
Stock, the due authorization and enforceability of this Agreement and the
transactions contemplated hereby and the matters set forth in the first
sentence of Section 3.4; and
(viii) all other documents, instruments and writings
required to be delivered by Seller at or prior to the Closing Date pursuant
to this Agreement.
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(b) Deliveries by Buyer. At the Closing, Buyer will execute, acknowledge
(if appropriate), and deliver to the Company:
(i) the Aggregate Consideration by wire transfer of
immediately available funds to an account designated by Seller;
(ii) the officer's certificate specified in Section 8.1;
and
(iii) all other documents, instruments and writings
required to be delivered by Buyer at or prior to the Closing Date pursuant
to this Agreement.
(c) Deliveries by the Parties. At the Closing, Buyer and Seller will enter
into and deliver the Tax Disaffiliation Agreement attached hereto as Annex A.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as of the date hereof as set
forth below. For purposes of this Agreement, the phrase "TO THE KNOWLEDGE OF
SELLER," "TO THE KNOWLEDGE OF THE COMPANY AND/OR A SUBSIDIARY," or other
language of similar effect, shall mean to the actual knowledge of the persons
listed on Schedule 3.0, after reasonable inquiry.
3.1. DUE ORGANIZATION.
(a) The Company and each of the Subsidiaries is a corporation validly
existing and in corporate good standing under the laws of its state of
incorporation, and has all requisite power and authority, corporate and
governmental, to own, lease and operate their respective assets and to carry on
the Business as now conducted, except where the failures to have such power or
authority would not in the aggregate have a material adverse effect on the
business, operations or financial condition of the Business taken as a whole (a
"MATERIAL ADVERSE EFFECT").
(b) The Company and each Subsidiary is duly qualified or licensed to do
business as a foreign corporation and is in good standing in all jurisdictions
in which the ownership, leasing or operation of its assets or the conduct of the
Business requires such qualification, except where the failures to be so
qualified or licensed would not in the aggregate have a Material Adverse Effect.
(c) Seller is validly existing and in good standing under the laws of the
State of Delaware.
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3.2. CAPITALIZATION; OWNERSHIP OF COMPANY AND SUBSIDIARIES.
(a) The aggregate authorized capital stock of the Company consists of 4,000
shares of common stock, par value $1,000 per share, all of which shares are
issued and outstanding. The Stock is the only issued and outstanding capital
stock of the Company.
(b) Section 3.2 of the Disclosure Schedule sets forth each direct and
indirect subsidiary of the Company (the "SUBSIDIARIES"), its jurisdiction of
incorporation, the authorized capital stock of each Subsidiary, and the issued
and outstanding capital stock of each Subsidiary. Except as set forth in Section
3.2 of the Disclosure Schedule, none of the issued and outstanding capital stock
of any Subsidiary is owned (beneficially or legally) by persons other than the
Company or another Subsidiary.
(c) All the outstanding shares of Stock and of the capital stock of the
Subsidiaries have been duly authorized, validly issued, fully paid and
nonassessable, with no preemptive rights of third parties attaching thereto.
Except as set forth in Section 3.2 of the Disclosure Schedule, there are no
outstanding options, rights, warrants, conversion rights or other agreements or
commitments to which the Company or a Subsidiary is a party or by which they are
bound, providing for the issuance of additional capital stock or for any other
adjustment, purchase or transfer affecting the ownership interests in the
Company or a Subsidiary.
(d) Seller owns (beneficially and of record) all of the Stock. Seller has
good title to all of the Stock, and has the right, power and capacity to sell,
assign and transfer the same to Buyer, without the consent of any other person,
free and clear of all liens or encumbrances. Seller has not entered into any
contract, agreement or arrangement with respect to the disposition or voting of
the Stock. Upon completion of the transactions contemplated hereby, Buyer will
have good title to the Stock free and clear of all liens or encumbrances, except
those created by or on behalf of Buyer.
3.3. AUTHORIZATION OF TRANSACTION. Seller has full corporate power and
authority to execute and deliver this Agreement and the other documents to be
executed and delivered by it at Closing (collectively, the "TRANSACTION
DOCUMENTS") and to perform its obligations hereunder and thereunder. All acts or
proceedings required to be taken by Seller to authorize the execution, delivery
and performance of the Transaction Documents and all transactions contemplated
thereby have been duly and properly taken. This Agreement has been, and the
documents to be delivered at Closing will be, duly executed and delivered by
Seller and, assuming this Agreement has been duly authorized, executed and
delivered by Buyer, constitute lawful, valid and legally binding obligations of
Seller, enforceable in accordance with their terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights and remedies.
3.4. CONSENTS AND APPROVALS; NO VIOLATIONS. Except for (a) applicable
requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"), and (b)
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filings and/or notices and related approvals required under the insurance laws
of the jurisdictions set forth in Section 3.4 of the Disclosure Schedule (the
"SELLER INSURANCE FILINGS"), no filing with, and no permit, authorization,
consent or approval of, any public body or authority, domestic or foreign, is
necessary for the consummation by Seller of the transactions contemplated by
this Agreement. Neither the execution and delivery of this Agreement by Seller
nor the consummation by Seller of the transactions contemplated hereby nor
compliance by Seller with any of the provisions hereof will (a) conflict with
or result in any breach of any provision of the certificate of incorporation
of Seller, the Company or a Subsidiary, (b) except as set forth in Section
3.4 of the Disclosure Schedule, result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or acceleration under
any of the terms, conditions or provisions) of any indenture, license,
contract, agreement or other instrument or obligation to which the Company, a
Subsidiary or Seller is a party or by which any of them or any of their
properties or assets may be bound or (c) assuming that the filings and consents
contemplated hereby are duly and timely made, violate any order, writ,
injunction, decree, statute, treaty, rule or regulation applicable to the
Company, any Subsidiary or Seller or any of their properties or assets, except
in the case of (b) or (c) for violations, breaches or defaults which, in the
aggregate, would not have a Material Adverse Effect.
3.5. SAP FINANCIAL STATEMENTS. The Annual Convention Statement for the
years ended December 31, 1995 and 1996 (collectively, the "ANNUAL STATEMENTS")
of the Company and each Subsidiary listed on Section 3.5 of the Disclosure
Schedule (collectively, the "INSURANCE SUBSIDIARIES"), as filed with the
insurance department reflected thereon has been delivered to or made available
for Buyer. Each Annual Statement was prepared in all material respects in
accordance with statutory accounting practices prescribed or permitted by the
applicable insurance regulator of the state in which filed ("SAP") and presents
fairly the statutory financial condition, assets, liabilities, surplus and other
funds of the Company as of such date and the statutory results of operations and
cash flows of the Company for the periods therein specified. The Annual
Statement for the year ended December 31, 1995 has been audited by KPMG Peat
Marwick LLP as indicated by its report thereon. December 31, 1996 is referred to
herein as the "BALANCE SHEET DATE" and the SAP balance sheets of the Company and
the Subsidiaries as of December 31, 1996 referred to herein are collectively
referred to as the "MOST RECENT BALANCE SHEET."
3.6. ASSETS. The Company and each Subsidiary has good title to, or a valid
leasehold interest in, the properties and assets used by them, reflected on the
Most Recent Balance Sheet or acquired after the date thereof, free and clear of
any and all liens and encumbrances, except for (a) liens or encumbrances for
current Taxes (as hereinafter defined) not yet due and payable, (b) liens or
encumbrances which would not, in the aggregate, have a Material Adverse Effect,
(c) mechanics', carriers', workers' and other similar liens or encumbrances
arising or incurred in the ordinary course of business, (d) in the case of
properties or assets acquired after the Balance Sheet Date, liens or
encumbrances securing all or part of the purchase price thereof and (e) liens
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or encumbrances set forth in Section 3.6 to the Disclosure Schedule, except for
properties and assets disposed of in the ordinary course of business since the
Balance Sheet Date.
3.7. INVESTMENTS. The Company is in possession of all documentation
reasonably necessary to evidence ownership of its invested assets reflected on
the Most Recent Balance Sheet.
3.8. EVENTS SUBSEQUENT TO BALANCE SHEET DATE. Except as provided in Section
3.8 to the Disclosure Schedule, since the Balance Sheet Date, the Business has
been operated in the ordinary course and there has not been any change in the
business, financial condition, operations or results of operations of the
Business, except such changes which, in the aggregate, are not reasonably likely
to have a Material Adverse Effect. Except as set forth in Section 3.8 of the
Disclosure Schedule, there have not occurred any of the events set forth in
Section 5.1 hereof since the Balance Sheet Date.
3.9. TAX MATTERS. Except as provided on Section 3.9 of the Disclosure
Schedule, each of Seller, the Company and the Subsidiaries has filed all Tax
returns that it was required to file, and has paid all Taxes shown thereon as
owing. All such Tax returns were completed and filed in accordance with
applicable law in all material respects. None of Seller, the Company and the
Subsidiaries 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. Except
as provided on Section 3.9 of the Disclosure Schedule, none of Seller, the
Company nor any Subsidiary is subject to or, to the knowledge of Seller,
threatened with any action, suit, proceeding, investigation, audit or claim with
respect to the payment of any Tax. Except as provided on Section 3.9 of the
Disclosure Schedule, none of the Company and the Subsidiaries is a party to any
Tax allocation or sharing agreement with the Seller or its affiliates. As used
herein, "TAX" or "TAXES" means any federal, state, local, or foreign income,
gross receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, registration, value added, excise, natural resources,
severance, stamp, occupation, premium, profit, customs, duties, real property,
personal property, capital stock, intangibles, social security, employment,
unemployment, disability, payroll, license, employee, or other tax, withholding
tax, or levy, of any kind whatsoever, including any interest, penalties, or
additions to tax in respect of the foregoing.
3.10. LEGAL COMPLIANCE. Except as provided on Section 3.10 of the
Disclosure Schedule to the knowledge of the Seller, the Business is in
compliance with all applicable laws (including rules, regulations, codes, plans,
injunctions, licensing requirements, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof), except where such violation or non-compliance would not
reasonably be expected to have a Material Adverse Effect.
3.11. RESERVES. The reserves for unpaid losses and loss adjustment
expenses, including IBNR, in the Annual Statements of the Company and the
Insurance Subsidiaries on the Most Recent Balance Sheet were estimated in
accordance with SAP and Seller believes such reserves are adequate for the
purposes established.
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3.12. INTELLECTUAL PROPERTY. Except as set forth on Section 3.12 to the
Disclosure Schedule, with respect to all patents, trademarks, copyrights,
registrations and licenses of the Business (the "INTELLECTUAL PROPERTY"), (a)
the Company or a Subsidiary is the owner or has the right to use the
Intellectual Property in the manner in which it is currently being used, (b) no
action, suit or proceeding is pending against the Company or, to the Seller's
knowledge, threatened with respect to the Intellectual Property (c) to the
knowledge of Seller, none of the Intellectual Property infringes upon the rights
of others or is subject to any outstanding order, decree or judgment, and (d)
there are no royalty, commission or similar arrangements, and no licenses,
sublicenses or agreements, pertaining to any of the Intellectual Property.
Notwithstanding anything contained herein to the contrary, none of the Company
or the Subsidiaries has any right to the corporate name of Seller or any
derivative thereof.
3.13. CONTRACTS. Section 3.13 of the Disclosure Schedule lists the
following contracts and other agreements to which the Company or a Subsidiary
is a party:
(a) any agreement providing for reinsurance;
(b) any agreement providing for the distribution of
insurance related products of the Company or a Subsidiary by third parties
with a remaining term of one year or greater;
(c) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease
payments in excess of $100,000 per annum;
(d) any agreement (or group of related agreements) under
which the Company or a Subsidiary has created, incurred, assumed, or
guaranteed any indebtedness for borrowed money;
(e) any agreement imposing noncompetition obligations on
the Company or a Subsidiary;
(f) any defined benefit pension, profit sharing, stock
option, stock purchase, stock appreciation, deferred compensation,
severance, welfare or other plan or arrangement for the benefit of
employees of the Company or a Subsidiary;
(g) any agreement for the employment of any individual not
terminable upon ninety (90) days or less notice;
(h) any agreement not made in the ordinary course of
business; and
(i) any other agreement (or group of related agreements)
the performance of which involves consideration in excess of $250,000 per
annum.
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With respect to each such agreement, except as described on Section 3.13 of the
Disclosure Schedule (i) the agreement is a legal, valid and binding obligation
of the Company or the Subsidiary, as applicable, and (ii) to Seller's knowledge
no party is in breach or default thereunder, and no event has occurred which
with notice or lapse of time would constitute a breach or default of any such
contract, except for such as would not be reasonably expected to have a Material
Adverse Effect.
3.14. LEGAL PROCEEDINGS. (a) Except as set forth in Section 3.14 to the
Disclosure Schedule, (i) neither the Company nor a Subsidiary is engaged in or a
party to or, to the knowledge of Seller, threatened with any action, suit or
other legal proceeding involving the Company, a Subsidiary or their assets,
other than routine litigation which, in the aggregate, would not reasonably be
expected to have a Material Adverse Effect, (ii) Seller has no knowledge of any
investigation threatened by any governmental or regulatory authority with
respect to the Company, a Subsidiary, or their assets, and (iii) neither the
Company nor a Subsidiary is subject to any judgment, order, writ, injunction,
stipulation or decree of any court or any governmental agency which in the
aggregate would reasonably be expected to have a Material Adverse Effect.
(b) Except with respect to any and all actions, suits, claims or other
legal proceedings related, directly or indirectly, to accounting irregularities
of the Seller, including any and all claims and demands by creditors and
stockholders of Seller as a result of the foregoing, Seller is not subject to
or, to Seller's knowledge, threatened with any action, suit or other legal
proceeding which could be reasonably anticipated to delay or prevent
consummation of the transactions contemplated by this Agreement.
3.15. EMPLOYEE PLANS.
(a) ERISA Plans
(i) Section 3.15 to the Disclosure Schedule lists all of
the following types of plans maintained by Seller: (a) employee pension
benefit plans ("PENSION BENEFIT PLANS"), as defined in Section 3(2) of the
Employment Retirement Income Security Act of 1974, as amended ("ERISA"),
and (b) employee welfare benefit plans ("WELFARE BENEFIT PLANS"), as
defined in Section 3(1) of ERISA. True and complete copies of all Pension
Benefit Plans and Welfare Benefit Plans have been made available to Buyer.
(ii) The Seller and all entities under "common control" (as
defined in Section 4001(b)(1) of ERISA) with the Seller do not and have not
contributed to any multiemployer plan as defined in Section 3(37) of ERISA.
(b) Administration of Pension Benefit Plans
All contributions required to have been made by Seller under the terms of
any Pension Benefit Plans have been timely made, and all contributions due and
payable prior to the Closing Date with
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respect to any fiscal year of a Pension Benefit Plan ending prior to the Closing
Date have been made.
(c) Administration of Welfare Benefit Plans
With respect to the Welfare Benefit Plans, no material claims for benefits
are in dispute, and all such plans in all material respects have met all
applicable requirements, if any, of ERISA and the Code, including, but not
limited to, the requirements of the Consolidated Omnibus Budget Reconciliation
Act of 1985 ("COBRA") to provide health care continuation coverage (Section
4980B(f) of the Code).
3.16. CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY. Except as set forth
in Section 3.16 of the Disclosure Schedule, the Seller and its Affiliates (as
hereinafter defined) (a) have not been involved in any business arrangement or
relationship with the Company or any Subsidiary within the past 12 months, (b)
do not own any asset, tangible or intangible, which is used in the business of
the Company or a Subsidiary, other than assets involved in general and
administrative activities, and (c) do not owe any amount to, or is owed any
amount by, the Company or any Subsidiary.
3.17. SALES PRACTICES. The Seller and its Affiliates are in compliance with
all applicable laws (including rules and regulations but excluding licensing
requirements) of federal, state, local and foreign governments (and all agencies
thereof) with respect to their sales practices related to the sale of Insurance
Products (as hereinafter defined) of the Business, except where such violation
or non-compliance would not reasonably be expected to have a Material Adverse
Effect.
3.18. BROKERS' FEES. Neither the Seller, the Company nor any Subsidiary has
any liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this Agreement
for which the Buyer, the Company or any Subsidiary will be liable.
3.19. INSURANCE. Section 3.19 of the Disclosure Schedule lists all
insurance provided by Seller's insurance carriers covering the Company, its
Subsidiaries or their respective employees or directors, other than the employee
benefit plans listed on Section 3.15 to the Disclosure Schedule.
3.20. DISCLAIMER. Seller makes no representation or warranty with regard to
any statements, oral or written, with respect to the Stock, the Business, the
Company or any Subsidiary except as expressly provided in this Agreement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1. ORGANIZATION OF BUYER. Buyer is a corporation validly existing and in
good standing under the laws of the State of Delaware.
4.2. AUTHORIZATION OF TRANSACTION. Buyer has full corporate power and
authority to execute and deliver this Agreement and the Transaction Documents
and to perform its obligations thereunder. All acts or proceedings required to
be taken by Buyer to authorize the execution, delivery and performance of the
Transaction Documents and all transactions contemplated thereby have been duly
and properly taken. This Agreement has been, and the documents to be delivered
at Closing will be, duly executed and delivered by Buyer and, assuming this
Agreement has been duly authorized, executed and delivered by Seller,
constitutes lawful, valid and legally binding obligations of Buyer, enforceable
in accordance with their terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights and remedies.
4.3. CONSENTS AND APPROVALS; NO VIOLATIONS. Except for (a) applicable
requirements of the HSR Act, and (b) filings and/or notices and related
approvals required under the insurance laws of the jurisdictions set forth in
Section 3.4 of the Disclosure Schedule (the "BUYER INSURANCE FILINGS"), no
filing with, and no permit, authorization, consent or approval of, any public
body or authority, domestic or foreign, is necessary for the consummation by
Buyer of the transactions contemplated by this Agreement. Neither the execution
and delivery of this Agreement by Buyer nor the consummation by Buyer of the
transactions contemplated hereby nor compliance by Buyer with any of the
provisions hereof will (a) conflict with or result in any breach of any
provision of the certificate of incorporation of the Buyer, (b) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration under any of the terms, conditions or provisions) of any
indenture, license, contract, agreement or other instrument or obligation to
which the Buyer is a party or by which any of them or any of their properties or
assets may be bound or (c) assuming that the filings and consents contemplated
hereby are duly and timely made, violate any order, writ, injunction, decree,
statute, treaty, rule or regulation applicable to the Buyer or any of their
properties or assets, except in the case of (b) or (c) for violations, breaches
or defaults which, in the aggregate, would not have a Material Adverse Effect or
deprive Seller of the benefits anticipated by this Agreement.
4.4. ACQUISITION OF STOCK FOR INVESTMENT. Buyer is acquiring the Stock for
investment and not with a view toward any distribution thereof, and will dispose
of such Stock only in compliance with the Securities Act of 1933 and any
applicable state securities laws.
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4.5. BUYER'S BUSINESS INVESTIGATION. Buyer has conducted such investigation
of the Company, the Subsidiaries, and the Business as it has deemed necessary in
order to make an informed decision concerning the transactions contemplated
hereby. Buyer has reviewed all of the documents, records, reports and other
materials identified in the Disclosure Schedule hereto, and is familiar with the
content thereof. Buyer acknowledges that it has been given access to and has
visited and examined the premises of the Business and is familiar with the
condition thereof. For the purpose of conducting these investigations, Buyer has
employed the services of its own agents, representatives, experts and
consultants. All materials and information requested by Buyer have been provided
to Buyer to Buyer's satisfaction. Notwithstanding the foregoing, Buyer is
relying upon the accuracy of the representations and warranties of Seller is
entering into this Agreement and consummating the transactions contemplated
hereby.
4.6. FINANCING. Buyer has sufficient funds or available financing to fund
the consideration to be paid at Closing to Seller for the Stock.
4.7. BROKERS' FEES. Buyer has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which the Seller will be liable.
ARTICLE V
COVENANTS OF SELLER
5.1. INTERIM CONDUCT OF BUSINESS. Except as contemplated by this Agreement,
as set forth in Section 5.1 of the Disclosure Schedule or with the prior consent
of Buyer, from the date hereof until the Closing, Seller shall use all
reasonable efforts to operate the Business consistent with past practice and in
the ordinary course of business, or otherwise consistent with the terms of this
Agreement. Without limiting the generality of the foregoing and except as
otherwise provided in this Agreement or the transactions contemplated hereby or
as set forth in Section 5.1 to the Disclosure Schedule, the Seller will cause
the Company and each Subsidiary not to, prior to the Closing Date, without the
prior consent of Buyer, do any of the following:
(a) declare, set aside, or pay any dividend or make any
distribution with respect to its capital stock (whether in cash or in kind)
or redeem, purchase, or otherwise acquire any of its capital stock, other
than transactions solely between the Company and a Subsidiary;
(b) sell, lease, transfer, or assign any of its assets,
tangible or intangible, to any third party, other than in the ordinary
course of business or apply, utilize or otherwise dispose of any assets of
the Business to discharge any indebtedness or claims against Seller or any
of its Affiliates;
(c) impose any Lien upon any of its assets, tangible or
intangible;
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(d) change or authorize a change in the Certificate of
Incorporation or bylaws of the Company or any Subsidiary;
(e) issue, sell or otherwise dispose of any of its capital
stock, or grant any options, warrants, or other rights to purchase or
obtain (including upon conversion, exchange, or exercise) any of its
capital stock;
(f) guarantee any third party indebtedness;
(g) incur any borrowings from third parties in excess of
$100,000;
(h) enter into any agreement or transaction with Seller or
its Affiliates;
(i) merge or consolidate with any other person or entity or
acquire a material amount of assets of any other person or entity; or
(j) agree or commit to do any of the foregoing.
"AFFILIATES" for purposes of this Agreement shall mean any entity which
controls, or is controlled by, or is under common control with the Seller or the
Buyer, as the case may be.
5.2. ACCESS. (a) From the date hereof through the Closing Date, Seller
shall give Buyer and its representatives access during normal business hours and
under reasonable circumstances to all properties, records and appropriate
personnel of the Business and furnish Buyer with all financial and other
information in its possession relating to the Business and the Company as Buyer
may from time to time reasonably request.
(b) Prior to the Closing Date, Buyer and its agents shall have reasonable
access during normal business hours to the employees of the Company and its
Subsidiaries for purposes of making presentations and otherwise assuring a
smooth transition of ownership of the Company and its Subsidiaries from Seller
to Buyer; provided, however, that Buyer shall give Seller at least five (5)
business days' prior written notice of each presentation, including a written
description of the matters to be discussed at such presentation, and a
representative of the Seller, at Seller's request, shall be allowed to be
present at each such presentation.
5.3. CONSUMMATION. Subject to the terms and conditions provided herein,
Seller agrees to use all reasonable 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 and regulations to consummate and make effective the
transactions contemplated by the Agreement in accordance with its terms; except
that this covenant shall not require Seller to make any payment (other than
filing fees) or incur any economic burden not provided for herein.
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5.4. HSR CONSENT. As promptly as possible, but in any event not later than
three (3) business days after the execution hereof, Seller shall file with the
Federal Trade Commission (the "FTC") and the Antitrust Division of the United
States Department of Justice (the "ANTITRUST DIVISION") a premerger notification
in accordance with the HSR Act with respect to the sale of the Stock pursuant to
this Agreement. Seller shall furnish promptly to the FTC and the Antitrust
Division any additional information requested by either of them pursuant to the
HSR Act in connection with such filings and shall diligently take, or cooperate
in the taking of, all steps that are necessary or desirable and proper to
expedite the termination of the waiting period under the HSR Act.
5.5. OTHER ACTIONS. As promptly as possible, Seller shall make the Seller
Insurance Filings with governmental agencies in connection with the transactions
contemplated hereby. Seller shall keep Buyer informed as to the status of
discussions with the governmental agencies.
5.6. OUTSTANDING CLAIMS. Seller shall cause the Company to prepare and
deliver prior to the Closing Date a schedule setting forth the outstanding
claims as of March 31, 1997.
ARTICLE VI
COVENANTS OF BUYER
6.1. CONSUMMATION. Subject to the terms and conditions provided herein,
Buyer agrees to use all reasonable 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 and regulations to consummate and make effective the
transactions contemplated by the Agreement in accordance with its terms; except
that this covenant shall not require Buyer to make any payment or incur any
economic burden not provided for herein.
6.2. HSR CONSENT. As promptly as possible, but in any event not later than
three (3) business days after the execution hereof, Buyer shall file with the
FTC and the Antitrust Division, including payment of the required filing fee, a
premerger notification in accordance with the HSR Act with respect to the
purchase of the Stock pursuant to this Agreement. Buyer shall furnish promptly
to the FTC and the Antitrust Division any additional information requested by
either of them pursuant to the HSR Act in connection with such filings and shall
diligently take, or cooperate in the taking of, all steps that are necessary or
desirable and proper to expedite the termination of the waiting period under the
HSR Act.
6.3. OTHER ACTIONS. As promptly as possible, Buyer shall make the Buyer
Insurance Filings with governmental agencies in connection with the transactions
contemplated hereby. Buyer shall keep Seller informed as to the status of
discussions with the governmental agencies.
6.4. RECORDS AND DOCUMENTS. Following the Closing Date, Buyer shall grant
to Seller and its respective representatives, at Seller's reasonable request,
reasonable access to and the right to
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make copies at Seller's expense of those records and documents covering any
period prior to the Closing related to the Business as may be reasonably
necessary for litigation, preparation of financial statements, Tax returns and
audits or other business purposes. If Buyer elects to dispose of such records,
Buyer shall first give Seller sixty (60) days' written notice, during which
period Seller shall have the right to take such records without further
consideration.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligation of Buyer to consummate the transactions contemplated by this
Agreement is subject to delivery of the items specified in Sections 2.2(a) and
2.2(c) and fulfillment prior to or at the Closing of the following conditions
(unless waived in writing in the sole discretion of Buyer):
7.1. ACCURACY OF WARRANTIES AND PERFORMANCE OF COVENANTS. The
representations and warranties of Seller contained herein shall be accurate in
all material respects as if made on and as of the Closing Date, except for
changes occurring in the ordinary course of the Business. Seller shall have, in
all material respects, performed all obligations and complied with each and all
of the covenants and agreements required to be performed or complied with on or
prior to the Closing. A Certificate of the President of Seller shall be
delivered to the foregoing effect.
7.2. NO PENDING ACTION. No order of any court, administrative agency or
other governmental authority shall be pending which prohibits the carrying out
of this Agreement or any of the significant transactions contemplated hereby or
declares unlawful the transactions contemplated hereby.
7.3. HSR. The waiting period under the HSR Act required to permit the
consummation of the transactions provided for herein shall have expired or
otherwise been terminated.
7.4. INSURANCE APPROVALS. Approvals required in connection with the Buyer
Insurance Filings shall have been obtained.
7.5. TERMINATION OF TAX SHARING AGREEMENT. The Income Tax Sharing Agreement
between the Company and its subsidiaries and Seller effected as of October 20,
1995 (the "TAX SHARING AGREEMENT") shall be terminated effective as of the
Closing Date.
7.6. SURPLUS AS REGARDS POLICYHOLDERS AND STOCKHOLDER'S EQUITY. The draft
financial statements of the Company and its Subsidiaries for the year ended
December 31, 1996 prepared in accordance with SAP to be delivered pursuant to
Section 2.2(a)(v) hereof shall reflect surplus as regards policyholders of not
less than $70,500,000 and the draft consolidated financial statements of the
Company and its Subsidiaries for the year ended December 31, 1996 prepared in
accordance with GAAP to be delivered pursuant to Section 2.2(a)(v) hereof shall
reflect total
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stockholder's equity of not less than $117,500,000, excluding the effects of
purchase accounting adjustments related to the acquisition of the Company by
Seller.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligation of Seller to consummate the transactions contemplated by
this Agreement is subject to delivery of the items specified in Sections 2.2(b)
and 2.2(c) and fulfillment prior to or at the Closing of the following
conditions (unless waived in writing in the sole discretion of Seller):
8.1. ACCURACY OF WARRANTIES AND PERFORMANCE OF COVENANTS. The
representations and warranties of Buyer contained herein shall be accurate in
all material respects as if made on and as of the Closing Date. Buyer shall
have, in all material respects, performed all obligations and complied with each
and all of the covenants and agreements required to be performed or complied
with on or prior to the Closing. A Certificate of the Chief Executive Officer or
Chief Financial Officer of the Buyer shall be delivered to the foregoing effect.
8.2. NO PENDING ACTION. No order of any court, administrative agency or
other governmental authority shall be pending which prohibits the carrying out
of this Agreement or any of the significant transactions contemplated hereby or
declares unlawful the transactions contemplated hereby.
8.3. HSR. The waiting period under the HSR Act required to permit the
consummation of the transactions provided for herein shall have expired or
otherwise been terminated.
8.4. INSURANCE APPROVALS. Approvals required in connection with the Seller
Insurance Filings shall have been obtained.
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
9.1. SURVIVAL. Unless otherwise specified herein, all covenants and
agreements contained herein or in any agreement or document delivered pursuant
hereto, shall survive the Closing until fully performed. All representations and
warranties contained herein or in any agreement or other document delivered
pursuant hereto shall survive the Closing for a period of eighteen (18) months
from the date hereof, after which they shall be of no further force or effect;
provided, however, that all representations and warranties set forth in Section
3.9 shall survive until the expiration of the applicable statute of limitations
and all representations and warranties set forth in Section 3.2 shall survive
indefinitely. Notwithstanding the foregoing, any claim for indemnification that
is asserted by written notice as provided in Section 9.3 within the applicable
survival period shall survive until resolved pursuant to a final non-appealable
judicial determination or otherwise.
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9.2. INDEMNIFICATION. Seller shall indemnify and hold harmless Buyer, and
Buyer shall indemnify and hold harmless Seller from and against any and all
loss, damage, cost or expense (including reasonable attorneys' fees and
expenses) caused by any misrepresentation, breach of warranty or failure to
fulfill any covenant or agreement contained herein or in any agreement or other
document delivered pursuant to the terms hereof. For purposes of the
indemnification provided by Seller pursuant to this Article IX only and for no
other purpose, the determination of whether there has been a misrepresentation
or breach of warranty shall be made without reference to the word "material" and
the words "Material Adverse Effect" contained in such representation and
warranty.
9.3. GENERAL PROVISIONS RELATING TO INDEMNIFICATION. (a) Seller shall not
be required to make any payments pursuant to this Article IX, unless and until
the aggregate amount of all claims pursuant to this Article IX shall exceed
$1,000,000 (the "THRESHOLD AMOUNT"), as to which Seller shall be responsible
only for the excess over the Threshold Amount. The maximum aggregate amount
recoverable from Seller pursuant to this Article IX shall not exceed an amount
equal to twenty-five percent (25%) of the Aggregate Consideration (the "CEILING
AMOUNT"). Notwithstanding anything contained herein to the contrary, the
Threshold Amount and Ceiling Amount shall not be applicable to claims for breach
of the representations and warranties contained in Sections 3.1(a), 3.2, 3.3,
4.1 and 4.2 and shall not be applicable to the Tax Disaffiliation Agreement;
provided, however, that the maximum aggregate amount recoverable from Seller for
breach of the representations and warranties contained in Sections 3.1(a), 3.2
and 3.3 shall not exceed the Aggregate Consideration.
(b) The party entitled to indemnification shall take all reasonable steps
to mitigate all indemnifiable liabilities and damages upon and after becoming
aware of any event which could reasonably be expected to give rise to any
liabilities and damages that are indemnifiable hereunder. No party shall be
entitled to indemnification to the extent of any available insurance, Tax or
other benefits resulting from the facts and circumstances relating to any
indemnifiable claim. To the extent that Buyer and/or the Company is entitled to
indemnification from ITT for any misrepresentation or breach of warranty
contained herein, neither Buyer nor the Company shall be entitled to
indemnification from the Seller pursuant to this Article IX.
(c) The party seeking indemnification shall give written notice to the
indemnifying party of the facts and circumstances giving rise to any claim for
indemnification as soon as reasonably possible but in any event within thirty
(30) days after it obtains knowledge of the basis for a claim for
indemnification hereunder.
(d) With respect to each third party claim subject to this Article IX (a
"THIRD PARTY CLAIM"), the party seeking indemnification (the "INDEMNIFIED
PARTY") must give prompt notice to the indemnifying party (the "INDEMNIFYING
PARTY") of the Third Party Claim. The Indemnifying Party may, at its sole cost
and expense, upon notice to the Indemnified Party within thirty (30) days after
the Indemnifying Party receives notice of the Third Party Claim, assume the
defense of the Third Party Claim, with counsel of its choice without prejudice
to the right of the
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Indemnifying Party to contest its obligation to indemnify the Indemnified Party
in respect to the claims asserted therein. The Indemnifying Party shall not
consent to a settlement of, or the entry of any judgment arising from, any Third
Party Claim, unless the Indemnified Party consents thereto, which consent shall
not be unreasonably withheld. The Indemnifying Party shall provide the
Indemnified Party with ten (10) days' prior notice before it consents to a
settlement of, or the entry of a judgment arising from, any Third Party Claim.
The Indemnified Party shall be entitled to participate in the defense of (but
not control) any Third Party Claim, the defense of which is assumed by the
Indemnifying Party, with its own counsel and at its own expense. In no event
shall the Indemnified Party consent to a settlement of, or the entry of any
judgment arising from any Third Party Claim. The parties shall cooperate in the
defense of any Third Party Claim and the relevant records of each party shall be
made available on a timely basis.
(e) After the Closing, the indemnification rights provided hereunder shall
be the exclusive remedy of Seller and Buyer with respect to any dispute arising
out of or related to this Agreement.
9.4. WARN ACT. Buyer and Seller agree that for purposes of the Worker
Adjustment and Retraining Notification Act (the "WARN ACT"), the Closing Date
shall be the "effective date" as such term is used in the WARN Act. Buyer
acknowledges and represents that it has no present intent to engage in a "mass
layoff" or "plant closing" as defined in the WARN Act with respect to the
Company or a Subsidiary. Buyer agrees that from and after the Closing Date it
shall be responsible for any notification required under the WARN Act with
respect to the Company or any Subsidiary and shall indemnify Seller and hold the
Seller harmless from and against all fines, other payments and related expenses
(including reasonable attorneys fees and expenses) which may become due under
the WARN Act with respect to the Company or a Subsidiary or actions with respect
thereto.
ARTICLE X
TERMINATION
10.1. TERMINATION OR ABANDONMENT. Notwithstanding anything contained in
this Agreement to the contrary, this Agreement may be terminated and abandoned
at any time prior to the Closing:
(a) by the mutual written consent of Seller and Buyer;
(b) by Seller or Buyer, if any court of competent
jurisdiction or governmental body, authority or agency having jurisdiction
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other
action shall have become final and nonappealable;
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(c) by Buyer after May 31, 1997, if one or more of the
conditions to the obligation of Buyer to Close as set forth in Article VII
has not been fulfilled by the date of termination; and
(d) by Seller after May 31, 1997, if one or more of the
conditions to the obligation of Seller to Close as set forth in Article
VIII has not been fulfilled by the date of termination.
10.2. EFFECT OF TERMINATION. If any party terminates this Agreement
pursuant to Section 10.1 above, all 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); provided, however, that the provisions
of this Section 10.2 and the Confidentiality Agreement of the parties dated
February 4, 1997 (the "CONFIDENTIALITY AGREEMENT") shall survive termination of
this Agreement.
ARTICLE XI
CERTAIN EMPLOYEE BENEFITS MATTERS
11.1. TRANSFER OF ERISA PLANS. No assets or liabilities of any ERISA Plan
will be transferred pursuant to the Agreement from Seller to Buyer; except with
respect to the Buyer's liability under COBRA for "qualifying events" (as defined
in Section 4980B(f)(3) of the Code) occurring on or after the Closing;
notwithstanding the foregoing, to the extent permitted by the Code and
underlying regulations, participants in the Seller's defined contribution plan
may rollover to the Buyer's defined contribution plan (to the extent permitted
by such plan) any portion of the taxable lump sum distribution received from
Seller's plan; provided, however, that nothing contained herein shall obligate
Buyer's plan to accept a rollover in a form other than cash. Seller shall 100%
vest all participants in Seller's 401(k) plan who were employed by the Company
as of the Closing Date.
11.2. CONTINUATION OF EMPLOYEE BENEFIT PLANS. If requested by Buyer, for a
period of up to thirty (30) days following the Closing Date, Seller agrees to
maintain the employees of the Company on the Seller's employee benefit plans to
the same extent such plans are currently being provided to the Company's
employees. Buyer shall reimburse the Seller for any and all costs and expenses
related to continuing to provide the employee benefit plans to the Company's
employees as set forth above.
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ARTICLE XII
OTHER AGREEMENTS
12.1. ASSISTANCE WITH A.M. BEST. If requested by Buyer, Seller will use
commercially reasonable efforts for a period of up to 90 days following the
Closing Date to assist and cooperate with Buyer to cause A.M. Best to upgrade
its rating of the Company and its Subsidiaries. Buyer shall discharge all
out-of-pocket expenses of Seller in performing such action.
12.2. NON-COMPETITION. For a period of three (3) years from the date
hereof, Seller and its Affiliates agree not to acquire an insurance company
which directly writes credit life, credit disability, property, warranty,
involuntary unemployment and/or accidental death and dismemberment insurance
(the "INSURANCE PRODUCTS").
12.3. CONTINUATION OF RELATIONSHIP. Seller and its Affiliates agree through
December 31, 1997 and to use their commercially reasonable efforts from January
1, 1998 through December 31, 1998 to continue to sell the Insurance Products in
the same manner as is currently being done by the Seller and its Affiliates;
provided, however, that the commissions paid by the Company to the Seller and
its Affiliates are competitive with other third party providers and current
market terms and that the Company provides the type of service to the Seller and
delivers and administers the Insurance Products consistent with current market
practices. The Buyer and the Company agree to provide to Seller and its
Affiliates the type of service and to deliver and administer the Insurance
Products consistent with current market practices. Following Closing, the Buyer
and the Company agree to cede any in-force insurance policies and any new
insurance policies to be written related to Insurance Products sold by the
Seller and its Affiliates to a reinsurance captive to be formed by Seller.
12.4. DELIVERY OF FINANCIAL STATEMENTS. Within sixty (60) days after the
date that Buyer is required to file the initial current report on Form 8-K with
the Securities and Exchange Commission with respect to the transactions
contemplated hereby, Seller will deliver to Buyer audited consolidated financial
statements of the Company and its Subsidiaries for the three-year period ended
December 31, 1996, which audited financial statements shall be prepared in
accordance with generally accepted accounting principles ("GAAP") and Seller
will deliver to Buyer unaudited GAAP consolidated financial statements of the
Company and its Subsidiaries for the three months ended March 31, 1997 as soon
as they are available. Any and all costs and expenses associated with preparing
the audited GAAP consolidated financial statements of the Company and its
Subsidiaries for the two years ended December 31, 1995 shall be borne by the
Company. In addition, Seller will deliver audited financial statements of the
Company and each Insurance Subsidiary for the year ended December 31, 1996
prepared in accordance with SAP on or before June 1, 1997. Following the Closing
Date, Buyer shall cause the Company and its and Buyer's employees to assist and
cooperate with Seller and its representatives and auditors in completing the
financial statements set forth above, including, but not limited to, giving
Seller and its representatives and auditors access during normal business hours
and under reasonable
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circumstances to all records of the Business and furnishing Seller and its
representatives and auditors with all financial and other information necessary
to complete such financial statements, as Seller and its representatives and
auditors may from time to time reasonably request. Seller agrees to provide
Buyer and its representatives access to the Seller's representatives and
auditors during normal business hours and under reasonable circumstances with
respect to the matters covered in this Section 12.4.
12.5. RECONCILIATION OF INTERCOMPANY ACCOUNTS. (a) Within 30 days from the
Closing Date, the Buyer and the Company agree to pay the Seller all amounts owed
to Seller by the Company related to the provision of employee benefits to the
employees of the Company through the Closing Date and for any subsequent period
and for payroll services provided by Seller to the Company through the Closing
Date.
12.6. TAXES. (a) The parties understand and agree that, up to and including
the Closing Date, the Company shall continue to make payments to the Seller as
required by the Tax Sharing Agreement, with respect to both (i) all amounts
otherwise due and payable (but which have not previously been paid) to Seller
for all Tax periods ending prior to the Closing Date and (ii) the estimated
United States federal income Tax of the Company and the Subsidiaries for the
current Tax period which will end on the Closing Date, computed in accordance
with the provisions of Section 2(c)(i) of the Tax Disaffiliation Agreement
(each, a "RELEVANT TAX PERIOD").
(b) When the United States federal Tax return for a Relevant Tax Period,
with respect to the operations of the Company and the Subsidiaries, has been
completed by Buyer and the Company and accepted by Seller, the parties will
compare the Tax amounts shown to be due and payable thereunder (the "TAXES DUE")
with the aggregate payments made by the Company to the Seller with respect
thereto under the Tax Sharing Agreement (the "ESTIMATED TAX PAYMENTS"). If the
Taxes Due exceed the Estimated Tax Payments for any such Tax return, Buyer and
the Company will promptly pay to Seller the amount of such excess. If the
Estimated Tax Payments exceed the Taxes Due for any such Tax return, Seller will
promptly pay to Buyer and the Company the amount of such excess.
(c) The parties agree that each of the 1995 and 1996 Tax returns shall be
completed, and any Tax payments required under the preceding paragraph with
respect thereto shall be made, as promptly as possible but in no event later
than sixty (60) days after the Closing Date. With respect to the 1997 Tax period
ending on the Closing Date, the parties agree that the Tax return shall be
completed, and any required payment regarding any deficiency or excess between
the Taxes Due and the Estimated Tax Payments between the parties shall be made,
as promptly as possible but in no event later than March 15, 1998.
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ARTICLE XIII
GENERAL PROVISIONS
13.1. AMENDMENTS AND WAIVER. No amendment, waiver or consent with respect
to any provision of this Agreement shall in any event be effective, unless the
same shall be in writing and signed by the parties hereto, and then such
amendment, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
13.2. NOTICES. All notices, requests, consents, demands and other
communications hereunder must be in writing and shall be personally delivered or
sent by facsimile transmission with confirming copy sent by overnight carrier
(such as Express Mail, Federal Express, etc.) and a delivery receipt obtained
and addressed to the intended recipient as follows:
(a) If to Seller:
Mercury Finance Company
000 Xxxxx Xxxxx
Xxxxx 000
Xxxx Xxxxxx, Xxxxxxxx 00000
Telecopy: 000-000-0000
Attn: Xxxxxxx X. Xxxxxx, Xx.
and Xxxx X. Xxxxxx
With copies to:
XxXxxxxxx, Will & Xxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Telecopy No.: 000-000-0000
Attn: Xxxxx X. Xxxxx, P.C.
and Xxxx X. Xxxxxxxx
(b) If to Buyer:
Frontier Insurance Group, Inc.
000 Xxxx Xxxxxx Xxxxx Xxxx
Xxxx Xxxx, Xxx Xxxx 00000
Telecopy No.: (000) 000-0000
Attn: Xxxxxx X. Ruulen, President and
Chief Executive Officer
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With copies to:
Xxxxxxx Xxxxxx & Green, P.C.
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy No.: (000) 000-0000
Attn: Xxxxxx Xxxxxx, Esq.
Any party may change its address or add or change parties for receiving notice
by written notice given to the others named above.
13.3. EXPENSES. Except as otherwise expressly provided herein, each party
to this Agreement shall pay its own costs and expenses in connection with the
transactions contemplated hereby.
13.4. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
13.5. SUCCESSORS AND ASSIGNS; BENEFICIARIES. This Agreement shall bind and
inure to the benefit of the parties named herein and their respective permitted
successors and assigns. No party may assign any rights, benefits, duties or
obligations under this Agreement without the prior written consent of the other
party. No third party shall be entitled to enforce any provision hereof and no
third party is intended to benefit from this Agreement.
13.6. ENTIRE AGREEMENT. This Agreement and the documents referred to herein
contain the entire agreement and understanding among the parties with respect to
the transactions contemplated hereby and supersede all other agreements,
understandings and undertakings among the parties on the subject matter hereof
provided that the terms of the Confidentiality Agreement shall survive until
Closing.
13.7. ANNOUNCEMENTS. No announcement of the specific terms of this
Agreement shall be made by any party without the written approval of the other
party (which approval shall not be unreasonably withheld), except for filings
required under the HSR Act and other regulatory filings and disclosures made
based upon advice of counsel. Each party shall promptly advise the other of any
such contemplated announcements.
13.8. PARTIAL INVALIDITY. In the event that any provision of this Agreement
shall be held invalid or unenforceable by any court of competent jurisdiction,
such holding shall not invalidate or render unenforceable any other provision
hereof.
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13.9. GOVERNING LAW. This Agreement shall be interpreted in accordance with
the substantive laws of the State of Illinois applicable to contracts made and
to be performed wholly within said State.
* * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
FRONTIER INSURANCE GROUP, INC. MERCURY FINANCE COMPANY
By: By:
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Its: Its:
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