ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is made and entered
into this 8th day of December, 1994 by and among Oregon Ag Insurance Services,
Inc., an Oregon corporation ("Purchaser"), Agri-Comp, Inc., an Oregon
corporation ("ACI"), Oregon-Comp, Inc. an Oregon corporation ("OCI") and Oregon
Risk Management, Inc., an Oregon corporation ("ORM" and collectively with ACI
and OCI, the "Companies") and the individuals executing this Agreement under the
heading "Shareholders" (collectively, the "Shareholders") and, with respect to
Sections 1.6 and 6.5 only, Xxxxx Financial, a California corporation (the
"Guarantor").
RECITALS
WHEREAS, ACI is a workers' compensation insurance agent focusing on
agricultural clients in the State of Oregon, OCI is a non-agricultural workers'
compensation insurance agent in the State of Oregon and ORM is a commercial
insurance package placement agent for ACI's clients; and
WHEREAS, Purchaser desires to acquire substantially all of the non-
cash assets of the Companies, including the rights associated with the names
"Agri-Comp, Inc.," "Oregon-Comp, Inc." and "Oregon Risk Management, Inc." and to
assume certain selected liabilities of the Companies in exchange for the
consideration set forth herein, and the Companies desire that such assets be so
sold;
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
representations, warranties and covenants herein set forth, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 PURCHASE AND SALE OF PURCHASED ASSETS. On the terms and subject
to the conditions set forth in this Agreement, at the Closing, the Companies
shall sell, assign, transfer, convey and deliver to Purchase, and Purchaser
shall purchase and accept from the Companies, all of the right, title and
interest of each of the Companies in and to the Purchased Assets (as defined
below), free and clear of all
Liens (as defined below) other than Permitted Liens (as defined below).
"Purchased Assets" shall mean all personal properties and assets,
tangible and intangible of ACI, OCI and ORM including without limitation the
names "Agri-Comp, Inc.," "Oregon-Comp, Inc." and "Oregon Risk Management, Inc."
but excluding the Excluded Assets (as defined in Section 1.2 below).
"Lien" shall mean any pledge, security interest, lien, charge,
encumbrance, equity or option of whatsoever nature.
"Permitted Liens" shall mean (i) Liens for taxes not yet due and
payable or being contested in good faith and for which adequate reserves have
been taken, and (ii) mechanics', carriers', workers', repairers', materialmens',
warehousemens' and other similar liens arising or incurred in the ordinary
course of business.
Without limiting the foregoing, the Purchased Assets shall include the
following:
(a) REGULATORY LICENSES. All of the Licenses to the extent
transferable, Filings and Rating Records of each of the Companies as defined in
Sections 2.25, 2.26, 2.28 and 2.30 below.
(b) TANGIBLE PERSONAL PROPERTY. All the Tangible Personal
property.
"Tangible Personal Property" shall mean all machinery,
equipment, electrical devices, vehicles, furniture, fixtures, office materials
and supplies, hardware, tools, spare parts, phone numbers and other tangible
personal property of every kind and description owned by any of the Companies,
including without limitation, those listed and described on SCHEDULE 2.8 hereto,
and any additions, improvements, replacements and alterations thereto made
between the date of this Agreement and the Closing Date in the ordinary course
of business.
(c) ASSUMED CONTRACTS. All the Assumed contracts.
"Assumed Contracts" shall mean all right, title and interest of
the Companies in and to the contracts and agreements listed or referred to on
SCHEDULE 1.1(c) hereto, together with the contracts and agreements entered into
between the date of this Agreement and the Closing Date in accordance with the
terms of this Agreement and contracts
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entered into in the ordinary course of business pursuant to which the Companies'
obligations do not exceed $5,000 per year and which are terminable on less than
ninety days' notice without penalty.
(d) INTANGIBLE RIGHTS. All the Intellectual Property.
"Intellectual Property" shall mean all intangible rights of the
Companies, including, without limitation, (i) all trademarks and service marks
and all applications therefor and registrations and recordings thereof, together
with the goodwill of the Companies symbolized by and associated with such
trademarks and service marks, (ii) all trade dress connected or used with such
trademarks and service marks and all applications, registrations and recordings
thereof, (iii) all trade secrets, proprietary information and know-how, (iv) all
franchises, patents, jingles, slogans, logotypes and other intangible rights,
(v) all customer lists, in each case including, without limitation, those listed
and described on SCHEDULES 2.29 AND 2.31 hereto (vi) all rights with respect to
the goodwill and renewal rights of ACI with respect to the Policyholders (as
defined in Section 2.29) and of the Companies with respect to the Other
Policyholders (as defined in Section 2.31), (vii) all rights of the Companies to
write Other Insurance (as defined in Section 2.31) and any additions or
modifications thereof made by the Companies in the ordinary course of business
between the date of this Agreement and the Closing Date to any items described
in clauses (i)-(vii) above.
(e) FILES AND RECORDS. All files and other records of the
Companies, wherever located, including without limitation, all available
schematics, blueprints, engineering data, customer lists, correspondence,
reports, specifications, projections, statistics, market research data,
marketing plans, sales records and histories, promotional graphics, original art
work, mats, plates, negatives and other advertising, marketing or related
materials, and all other technical and financial information, accounting and
personnel records concerning the Purchased Assets.
(f) CLAIMS. All of the Companies' warranty or other claims,
refunds, causes of action, chooses in action, rights to recovery (including
rights to insurance proceeds or other recoveries for damaged assets acquired by
Purchaser), rights of set-off and rights of recoupment.
(g) ACCOUNTS RECEIVABLE AND RUN-OFF COMMISSIONS. All accounts
receivable and run-off commissions of the Companies as of the Closing Date which
will be earned
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and paid by SAIF after the Closing Date pertaining to unexpired workers
compensation insurance policies. The mechanism for determining which run-off
commissions are earned after the Closing Date is set forth in SCHEDULE 2.18
hereof. Commissions due to, or from, the Companies as a result of any post-
Closing premium audits shall be apportioned by multiplying such commissions by a
fraction, the numerator of which is the number of full months of the term of the
policy relating to any particular commission after the Closing Date and the
denominator is the total number of months of such policy, with the result being
the amount of such commission transferred to Purchaser as a Purchased Asset, or,
if a negative number, assumed by Purchaser as an Assumed Liability (as defined
below). The remaining amount of such commission (a "Retained Commission
Adjustment") will be retained by the Companies or, if negative, paid by the
Companies as a Retained Liability (as defined below). Each Company shall
promptly remit to Purchaser the full amount of any accounts receivable received
by such Company or run-off commissions earned and paid after the Closing Date by
SAIF to such Company other than those which have been retained by the Companies
as described in Section 1.2(b) below and such Company will promptly endorse such
run-off commissions to Purchaser. Each Company agrees to use its best efforts
to collect all accounts receivable and run-off commissions sold to Purchaser
hereunder including, if necessary, the institution of litigation with the
applicable account debtor at the Companies' expense.
1.2 EXCLUDED ASSETS. Notwithstanding the foregoing, the Purchased
Assets shall not include the following assets of the Companies (collectively,
the "Excluded Assets"):
(a) CORPORATE RECORDS; TAX RETURNS. The stock books, stock
ledgers, shareholder lists, minute books, corporate seals and similar corporate
records of the Companies, as well as all tax returns of the Companies and any
and all records that the Companies are required to retain pursuant to applicable
law.
(b) ACCOUNTS RECEIVABLE. All accounts receivable of the
Companies as of the Closing Date which were earned prior to the Closing Date
plus all Retained Commission Adjustments less any unearned commissions received
by the Companies prior to the Closing Date.
(c) CASH AND INVESTMENTS. All cash, cash equivalents and
securities.
(d) OTHER EXCLUDED ASSETS. The assets of Sellers set forth on
SCHEDULE 1.2(b) hereto.
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1.3 ASSUMPTION OF CERTAIN LIABILITIES. Purchaser is not assuming any
debt, liability or obligations of any of the Companies, whether known or
unknown, fixed or contingent, except for the liabilities of the Companies to be
paid or performed after the Closing Date under the Assumed Contracts listed in
SCHEDULE 1.1(c) (the "Assumed Contracts") which are assigned by the Companies to
the Purchaser (the "Assumed Liabilities"). Except as and to the extent
otherwise expressly provided in this Agreement, Purchaser does not, and shall
not, assume or be deemed to assume, nor shall Purchaser discharge, be
responsible for or liable with respect to any other liabilities or obligations
of the Companies or any other person, whether arising prior to, on or after the
Closing Date (collectively, the "Retained Liabilities"), including without
limitation: (a) any liability or obligations of the Companies arising out of or
relating to any contract or agreement not fully and effectively assigned to and
specifically assumed by Purchaser pursuant to this Agreement; (b) any liability
or obligations of the Companies arising out of or relating to any employee
benefit (including health) plans, programs, policies or other arrangements or
agreements which provide the Companies' employees with benefits, including the
payment of severance pay or special bonuses, if any, to terminated employees
under agreements or policies not constituting Assumed Contracts, (c) any
liability or obligations of the Companies arising out of any litigation, claim,
arbitration or other similar proceeding relating to the Purchased Assets before
the Closing Date, regardless of whether or not such litigation, claim,
arbitration or other similar proceeding is pending, threatened or asserted
before, on or after the Closing Date, (d) any liabilities and obligations of the
Companies' relating to the Excluded Assets, (e) any and all liabilities and
obligations, direct or indirect, fixed or contingent, for Taxes, whether or not
such Taxes are assessed prior to, on or after the Closing date and (f) accounts
payable of the Companies as of the Closing Date.
"Tax" or "Taxes" means all federal, state, local and foreign taxes,
including without limitation, income, profits, franchise, license, employment,
estimated, transfer, premium, withholding, property, excise, sales, and use
taxes (including any interest, penalties, deposits or additions with respect
thereto).
1.4 PURCHASE PRICE FOR PURCHASED ASSETS. On the Closing Date,
Purchaser shall pay to the Companies, by wire transfer or delivery of a
certified or cashier's check the following payments: ACI--$756,000, OCI--
$24,000 and ORM--$120,000. Purchaser will thereafter pay ACI a second and third
aggregate installment of the purchase price for the ACI Purchased Assets on
April 1, 1996 and April 1, 1997, respectively (the "Installments"). The amount
of each such
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installment shall vary depending on the aggregate workers' compensation
insurance earned premiums placed with Xxxxx Insurance Company by Purchaser or
its affiliates in calendar year 1995 to accounts serviced by Purchaser after the
Closing Date (the "Measurement Premiums"). The amount of each installment shall
equal 10% of the Measurement Premiums, with a minimum of $450,000 per
installment and a maximum of $750,000 per installment. It is Xxxxx Insurance
Company's intent to write 100% of the renewals submitted by Purchaser, however,
nothing in this section shall require Xxxxx Insurance Company or its affiliates
to write any insurance policy that does not meet its standard underwriting
criteria. The parties agree that one component of the foregoing pricing is
based upon ACI's January 1995 renewal workers' compensation insurance policies
being written by Xxxxx Insurance Company. In the event Xxxxx Xxxxxxxx is
terminated by Purchaser, without cause (where "cause" is defined as those events
described in Section 9 of SCHEDULE 3.7 which provide for automatic termination),
any unpaid installments will be paid as follows: (i) if Xx. Xxxxxxxx is
terminated prior to April 1, 1996, promptly following such termination, the
minimum amount of both installments will be paid to ACI and on April 1, 1996 all
remaining balances, if any, of both installments will be paid; and (ii) if Xx.
Xxxxxxxx is terminated after April 1, 1996, the entire second installment will
be promptly paid following termination. In the event the Purchaser fails to
make any payment to ACI with respect to the second installment within 10 days
following receipt of notice from ACI that such payment is due, the third
installment shall be accelerated and immediately due and payable. In the event
of a partial payment of the second installment due to a dispute over the actual
amount of the second installment, no acceleration shall occur. In the event of
a dispute over the amount due under the second or third installment which cannot
be resolved by the parties within 60 days of the due date of such installment,
the parties agree that either party may submit the dispute to binding
arbitration with such arbitrator and with such procedures which the parties
shall mutually agree upon.
The Companies have reviewed Xxxxx Insurance Company's reinsurance
treaty's limitations and exclusions prior to the execution hereof and hereby
represent that approximately $150,000 of the Companies' combined calendar year
1994 written premiums fall within one or more of the limited or excluded
categories of such treaty. Notwithstanding the foregoing, even if Xxxxx
Insurance Company declines to underwrite any of the Companies' submissions from
the Companies' expiration inventory as of the Closing Date, the Companies will
receive credit for the 1994 premiums relating to the rejected policies for the
purpose of computing
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the amount of the second and third installments due to ACI under this Section
1.4.
The parties agree to allocate the purchase price among the Purchased
Assets for all purposes in accordance with SCHEDULE 1.4 hereto.
1.5 POSSIBLE ADDITIONAL PAYMENT. In the event that Xxxxx Insurance
Company's return on equity (as more fully defined below, "XXX") relating to
policies underwritten by Xxxxx Insurance Company generated by Purchaser from
accounts serviced by Purchaser post-Closing ("Oregon Accounts") during the three
year period beginning January 1, 1995 exceeds 14% per year, ACI shall receive
50% of Xxxxx Insurance Company's XXX from Oregon Accounts in excess of 14%, up
to a maximum amount equal to $780,000 plus the actual amount paid to ACI as the
second and third installments of the purchase price for the ACI Purchased
Assets, to be valued as of June 30, 1998 and payable on July 31, 1998. Nothing
in this section shall require Xxxxx Insurance Company or its affiliates to write
any insurance policy that does not meet its standard underwriting criteria.
XXX is defined in SCHEDULE 1.5 hereof.
1.6 GUARANTY. The Guarantor hereby agrees to guarantee the prompt
payment of each of the Installments when, and to the extent, due pursuant to the
terms of Section 1.4 hereof. Further, the Guarantor agrees to use its best
efforts to maintain its ability to draw under its existing line of credit with
First Interstate Bank of California amounts equal to the maximum amount of all
unpaid Installments until such time as such Installments have been paid pursuant
to Section 1.4 hereof. The Guarantor will notify the Companies of any material
change to its existing line of credit. In the event the existing line of credit
is terminated, the Guarantor will use its best efforts to replace such line of
credit and to maintain its ability to draw under such line to the extent
required in this Section 1.6.
1.7 CLOSING. The Closing of the transactions contemplated by this
Agreement (the "Closing") shall occur at the offices of ACI located in Salem,
Oregon at 10:00 a.m., on the next business day following the satisfaction of the
last unsatisfied condition set forth in Article V hereof (the "Closing Date")
unless the parties hereto agree in writing upon a different time, date or place.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
Each of the Companies and each of the Shareholders jointly and
severally represent and warrant to Purchaser that:
2.1 MARKETABLE TITLE. Each Company has good and marketable title to
the Purchased Assets which are to be transferred to Purchaser by such Company
pursuant hereto, free and clear of any and all Liens except Permitted Liens.
2.2 POWER AND AUTHORITY. Each of the Companies and each of the
Shareholders has the full right, power and authority to enter into this
Agreement and, in the case of each Company, to transfer, convey and sell to
Purchaser at the Closing the Purchased Assets to be sold to Purchaser by such
Company hereunder.
2.3 LITIGATION. No Company or Shareholder is a party to, subject to
or bound by any agreement or judgment, order, writ, prohibition, injunction or
decree of any court, governmental body or arbitrator which would prevent the
execution or delivery of this Agreement by such Company or Shareholder or the
transfer, conveyance and sale of the Purchased Assets to be sold by any such
Company to Purchaser pursuant to the terms hereof.
2.4 NO BROKERAGE FEES. No broker or finder has acted for any Company
or Shareholder in connection with this Agreement or the transactions
contemplated hereby and no broker or finder is entitled to any brokerage or
finder's fees or other commissions in respect of such transactions based in any
way on agreements, arrangements or understandings made by or on behalf of any of
the Companies or the Shareholders.
2.5 AUTHORIZATION OF AGREEMENT. This Agreement and all other
agreements and instruments to be executed by the Shareholders and the Companies
in connection herewith have been (or upon execution will have been) duly
executed and delivered by the Shareholders and the Companies, have been
effectively authorized by all necessary action, corporate or otherwise, and
constitute (or upon execution will constitute) valid and binding obligations of
each Shareholder and each Company enforceable in accordance with their
respective terms, except as enforcement may be limited by law pertaining to
bankruptcy, insolvency or the enforcement of creditors' rights and by general
equitable principles.
2.6 FINANCIAL STATEMENTS. Included in SCHEDULE 2.6 are the balance
sheets of each Company as of December 31, 1991, 1992 and 1993 and as of
September 30, 1994 and the
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related statements of income, statements of stockholders' equity and statements
of cash flows for the years ended December 31, 1991, 1992 and 1993 and the
period ended September 30, 1994 (collectively, the "Financial Statements"). The
Financial Statements (i) were prepared in accordance with the books and records
of each Company; (ii) were prepared on a fully accrued basis; (iii) fairly
present each Company's financial condition and the results of its operations as
of the relevant dates thereof and for the periods covered thereby; (iv) contain
and reflect adequate provisions for all reasonably anticipated liabilities for
all taxes, whether federal, state, local or foreign, with respect to the periods
then ended and all prior periods; and (v) with respect to contracts and
commitments for the sale of goods or the provision of services by each Company,
contain and reflect adequate reserves for all reasonably anticipated material
losses and costs and expenses in excess of expected receipts.
2.7 ABSENCE OF CERTAIN CHANGES. Except as set forth on SCHEDULE 2.7
hereto, since September 30, 1994, there has not been (i) any declaration or
payment of non-cash dividends by any Company or any transfer of assets of any
kind whatsoever by any Company to any of the Shareholders or otherwise; (ii) any
transaction not in the ordinary course of business; (iii) any material adverse
change in the results of operations, condition (financial or otherwise), assets,
liabilities (whether absolute, accrued, contingent or otherwise), business or
prospects of any Company; (iv) any damage, destruction or loss, whether or not
covered by insurance, which has had or may have a material and adverse effect on
any of the properties, business or prospects of any Company other than relating
to the termination of ACI's agreement with SAIF (as defined below); (v) any sale
or transfer of any of the assets of any Company or any cancellation of any debts
or claims, except sales in the ordinary course of business of inventory or
immaterial amounts of other tangible personal property not required in the
Companies' businesses; (vi) any mortgage, pledge or subjection to lien, charge
or encumbrance of any kind, except liens for taxes not due, of any of the
Companies' assets; (vii) any amendment, modification or termination of any
Assumed Contract; (viii) any increase in, or commitment to increase, the
compensation payable or to become payable to any officer, employee or agent of
any of the Companies, or any bonus payment or similar arrangement made to or
with any of such officers, employees or agents; (ix) any adoption of a plan or
agreement or amendment to any plan or agreement providing any new or additional
"fringe benefits"; (x) any material alteration in the manner of keeping the
books, accounts or records of any Company, or in the accounting practices
therein reflected; or (xi) any other event or condition of any character which
has had or may have a material and adverse
9
effect on the condition (financial or otherwise), assets, properties, business
or prospects of any Company.
2.8 TANGIBLE PERSONAL PROPERTY. There is listed on SCHEDULE 2.8 a
description of each item of Tangible Personal Property owned by or in the
possession of the Companies having on the date hereof either a depreciated book
value or estimated fair market value per unit in excess of $1,000; and (ii) a
description of the owner of, and any agreement relating to the use of, each such
item of Tangible Personal Property not owned by one of the Companies and the
circumstances under which such property is used. Except as indicated in
SCHEDULE 2.8:
(a) Each item of Personal Property not owned by the Companies is
in such condition that upon the return of such property to its owner in its
present condition at the end of the relevant lease term or as otherwise
contemplated by the applicable agreement between one of the Companies and the
owner or lessor thereof, the obligations of such Company to such owner or lessor
will be discharged;
(b) Each item of Tangible Personal Property is in operating
condition and repair and is currently in use in connection with the operation of
one of the Companies' businesses; and
(c) The Companies own or otherwise have the right to use,
subject to the validity and performance of lease or other contractual
obligations and provisions with respect to such Tangible Personal Property, all
of the Tangible Personal Property now used by them in the operation of their
respective businesses or the use of which is necessary for the performance of
any material contract, letter of intent or proposal to which such Company is a
party.
2.9 INTANGIBLE PERSONAL PROPERTY. There is listed on SCHEDULE 2.9
(i) a description of the items of Intellectual Property other than those
specific items of Intellectual Property described in Sections 2.29 and 2.31
below. Except as indicated in SCHEDULE 2.9:
(a) No actions or other judicial or adversary proceedings
concerning any Intellectual Property has been initiated, there is no known basis
for any such action or proceeding and, to the best knowledge of each Company and
each Shareholder, no such action or proceeding is threatened;
(b) The Companies have the unrestricted right and authority to
use the Intellectual Property and such use does not conflict with, infringe upon
or violate any rights of any other person, firm or corporation;
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(c) There are no outstanding, nor any threatened, disputes or
other disagreements with respect to any licenses or similar agreements or
arrangements described in SCHEDULE 2.9 except as described in such schedule;
(d) One of the Companies is the owner of all right, title and
interest in and to each item of Intellectual Property, free and clear of all
Liens; and
(e) Purchaser shall be permitted to do business under the names
"Agri-Comp, Inc.," "Oregon-Comp, Inc." and "Oregon Risk Management, Inc." or
derivations thereof following the Closing Date.
2.10 AGREEMENT NOT IN BREACH OF OTHER INSTRUMENTS. Neither the
execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby or thereby will violate, or result in a breach
of, any of the terms and provisions of, or constitute a default under, or
conflict with (i) any agreement, indenture or other instrument to which any
Company or Shareholder is a party or by which it is bound; (ii) the Articles of
Incorporation or Bylaws of each Company; or (iii) any judgment, decree, order or
award of any court, governmental body or arbitrator applicable to any Company or
Shareholder, or any law, rule or regulation applicable to each Company or
Shareholder.
2.11 INSURANCE. SCHEDULE 2.11 sets forth a true and correct list of
all insurance policies of any nature whatsoever maintained by the Companies at
any time during the three (3) years prior to the date of this Agreement and the
annual or other premiums payable from time to time thereunder. Except for the
cancellation of a policy due to an insurer's election to discontinue the
insurance of a class of risks (which decision was applicable to all like
policyholders), no Company has received any notice or other communication from
any such insurance company within the three (3) years preceding the date hereof
cancelling or materially amending or materially increasing the annual or other
premiums payable under any of said insurance policies, and to the best knowledge
of the Companies and the Shareholders, no such cancellation, amendment or
increase of premiums is pending or threatened.
2.12 EMPLOYMENT AGREEMENTS. Except as set forth in SCHEDULE 2.12,
there is no (i) employment, commission, profit sharing, deferred compensation,
bonus, stock option, stock purchase, pension, retainer, consulting, retirement,
health, welfare, or incentive plan or contract to which any Company is a party,
or by which it is or may be bound; or (ii) plan and agreement under which
"fringe benefits" (including, but not limited to, vacation plans or programs,
sick leave plans or
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programs, dental or medical plans or programs, and related or similar benefits)
are afforded to employees of any Company. Each Company has complied in all
material respects with all applicable laws, rules and regulations relating to
the employment of labor, including without limitation, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and those relating to wages,
hours and the payment and withholding of taxes and other sums as required by
appropriate governmental authorities. Further, in addition to the general
representations made herein, it is specifically represented that none of the
Companies nor any other corporation which is a member of a controlled group of
corporations, as defined at Internal Revenue Code Section 414(b) which includes
any of the Companies, either maintains a "defined benefit pension plan," as
defined in Section 3(35) of ERISA, or has any liability for unfunded pension
contributions to any defined benefit pension plan previously maintained by any
of said corporations, that none of said corporations has within the past three
years made any contributions to a "multi-employer plan," as defined at Section
3(37) of ERISA and that none of the Companies maintains any other plan or
arrangement under which former employees, or their beneficiaries, are entitled,
or current employees will be entitled following termination of employment, to
medical, health, life insurance or other benefits other than pursuant to benefit
continuation rights granted by either federal or state law.
2.13 TAX RETURNS. Except as disclosed in SCHEDULE 2.13:
(a) Each Company has duly and timely filed with the appropriate
federal, state, local and foreign taxing authorities all Tax returns required to
be filed through the date hereof, and each Company has paid all Taxes owed. No
Company has requested any extension of time within which to file any such
return;
(b) All Tax returns filed by the Companies are complete and
accurate in all material respects; and
(c) There are no material liens for Taxes upon the assets of
any Company, except for statutory liens for Taxes not yet due or delinquent.
2.14 LITIGATION. Except as listed in SCHEDULE 2.14:
(a) There is no action, suit or proceeding to which any Company
is a party (either as a plaintiff or defendant) pending before any court or
governmental agency, authority or body or arbitrator; there is no action, suit
or proceeding threatened against any Company; and to the best
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knowledge of each Shareholder, there is no basis for any such action, suit or
proceeding;
(b) No Company, nor any officer, director or employee of any Company,
has been permanently or temporarily enjoined by any order, judgment or decree
of any court or any governmental agency, authority or body from engaging in
or continuing any conduct or practice in connection with the business,
assets, or properties of the Companies; and
(c) There is not in existence on the date hereof any order, judgment or
decree of any court or other tribunal or other agency enjoining or requiring any
Company to take any action of any kind with respect to its business, assets or
properties.
2.15 RESERVED.
2.16 RESERVED.
2.17 ASSUMED CONTRACTS. SCHEDULE 1.1(c) sets forth the Assumed
Contracts which consist of a list of each contract, agreement, purchase order,
lease, license, indenture or commitment, written or oral, to which any Company
is a party and has ongoing rights or obligations or by which any of their
respective assets are bound, except agreements for the purchase or sale by the
Companies of goods, materials, supplies or services in the ordinary course of
business involving less than $5,000 in consideration in each such case and less
than $25,000 in the aggregate. True and complete copies of each of the Assumed
Contracts, or where they are oral, true and complete written summaries thereof,
have been delivered to Purchaser by the Companies. Except as set forth in
SCHEDULE 1.1(c):
(a) Each of the Assumed Contracts is a valid and binding
agreement of one of the Companies and all other parties thereto, subject to
cancellation upon payment of an appropriate cancellation fee as set forth in
such Assumed Contracts;
(b) Prior to date of the Closing there has not occurred any
material default under any of the Assumed Contracts on the part of any Company
or on the part of any other party thereto, nor has any event occurred which with
the giving of notice or the lapse of time, or both, would constitute any
material default on the part of any Company under any of the Assumed Contracts
nor has any event occurred which with the giving of notice or the lapse of time,
or both, would constitute any material default on the part of any other party to
any of the Assumed Contracts; and
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(c) No consent of any party to any of the Assumed Contracts is
required by the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby.
2.18 ACCOUNTS RECEIVABLE AND RUN-OFF COMMISSIONS. Attached hereto as
SCHEDULE 2.18 is a complete listing of the accounts receivable and run-off
commissions of the Companies as of September 30, 1994, a statement regarding
whether such accounts receivable and run-off commissions were or will be earned
or received prior to the Closing Date, and a listing of the status of such
accounts receivable and runoff commissions as of December 7, 1994, including all
cash collections, credits or write-offs. Except as disclosed in SCHEDULE 2.18,
the accounts receivable and run-off commissions of the Companies arose out of
the ordinary course of business.
2.19 NO UNDISCLOSED LIABILITIES. To the Shareholders' knowledge,
except as disclosed on SCHEDULE 2.19 and except as and to the extent
specifically reflected or reserved against in the December 31, 1993 balance
sheets included in the Financial Statements, no Company has any liabilities or
obligations of any nature, whether absolute, accrued, contingent or otherwise,
and whether due or to become due (including, without limitation, any liability
for Taxes and interest, penalties and other charges payable with respect to any
such liability or obligation).
2.20 CONFLICTS OF INTEREST. Other than as disclosed on SCHEDULE
2.20, no officer, director or shareholder of any of the Companies or any
affiliate of any such person now has or within the last three (3) years had,
either directly or indirectly:
(a) An equity or debt interest in any corporation, partnership,
joint venture, association, organization or other person or entity which
furnishes or sells or during such period furnished or sold services or products
to any of the Companies, or purchases or during such period purchased from any
of the Companies any goods or services, or otherwise does or during such period
did business with any of the Companies; or
(b) A beneficial interest in any Assumed Contract.
2.21 REGULATORY APPROVALS. All consents, approvals, authorizations
and other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by each of the Companies and Shareholders and which are
necessary for (i) the execution and delivery by each of the Companies and
Shareholders of this Agreement and the documents to be
14
executed and delivered by the Companies and Shareholders in connection herewith,
and (ii) Purchaser to continue the businesses of the Companies as presently
conducted (except writing policies with SAIF), have been obtained and satisfied.
2.22 RESERVED.
2.23 RESERVED.
2.24 RESERVED.
2.25 LICENSES. SCHEDULE 2.25 sets forth all licenses, permits or
authority (collectively, the "Licenses") issued to any of the Companies by any
state insurance department or other insurance regulatory body or agency
(collectively, a "State Insurance Department"). The Licenses set forth on
SCHEDULE 2.25 constitute each license, permit or authority that it is necessary
or appropriate for each of the Companies to obtain from a State Insurance
Department with respect to the transaction of its business. All of the Licenses
are currently in effect. None of the Licenses has at any time been suspended,
revoked, terminated or limited or expired. No notice of any violation has been
received at any time by any of the Companies with respect to any License, and
there is no proceeding or investigation, whether pending or threatened, or any
basis therefor, that could result in the suspension, revocation, termination or
limitation of any License.
2.26 EMPLOYEE LICENSES. SCHEDULE 2.26 sets forth all licenses,
permits or authority (the "Employee Licenses") issued to any employee or
independent contractor of the Companies by a State Insurance Department. All of
the Employee Licenses are currently in effect and constitute each license,
permit or authority that it is necessary or appropriate for the employees or
independent contractors of the Companies to obtain from a State Insurance
Department with respect to the performance of their respective job
responsibilities for the Companies and as contemplated by Purchaser. All of the
Employee Licenses will remain in effect and will not be subject to suspension,
revocation, termination or limitation in any manner as a result of the
consummation of the transactions contemplated by this Agreement. Except for the
notices required by each State Insurance Department regarding the commencement
of authority of such employee to act for Purchaser and the termination of
authority of such employee to act for any of the Companies, Purchaser, any of
the Companies or any employee holding an Employee License will not be required
to obtain any consent, approval or action of, or make any filing with or give
any notice to, any State Insurance Department with respect to any Employee
License as a
15
result of the consummation of the transactions contemplated by this Agreement.
2.27 COMPLIANCE WITH LAWS: ABSENCE OF REGULATORY PROCEEDINGS. Each
of the Companies has complied with all applicable laws and regulations relating
to the conduct of its business. None of the Companies has received service or
other notice of any litigation, action, suit, proceeding or investigation by or
on behalf of any State Insurance Department that is presently pending or
threatened against any of the Companies or relates to the business of the
Companies, nor do the Companies have any knowledge of any basis therefor. Since
January 1, 1992, none of the Companies has been a party to or has been involved
in any litigation, action, suit, proceeding or investigation by or on behalf of
any State Insurance Department. None of the Companies has entered into or has
been subject to any consent decrees, settlements, orders, stipulations or other
agreements or understandings with any State Insurance Department with respect to
the conduct of the business of the Companies or otherwise.
2.28 RESERVED.
2.29 POLICYHOLDERS. SCHEDULE 2.29 sets forth all of the
policyholders (the "Policyholders") that have policies of workers' compensation
insurance for which any of the Companies is currently receiving a commission or
has received a commission on or after January 1, 1992. Except as disclosed to
Purchaser in writing, one of the Companies is currently the agent of record for
each of the Policyholders. After the Closing Date, Purchaser shall have an
unconditional right with respect to each Policyholder to engage in the
solicitation, quotation and sale of Xxxxx Insurance Company's policies of
workers' compensation insurance (and ancillary services related thereto) without
any restriction or limitation of any kind. Neither the State Accident Insurance
Fund Corporation ("SAIF") nor any other person or entity has any right (whether
pursuant to any agreement or understanding or otherwise), pursuant to an
agreement between any of the Companies and such person or entity, to preclude
or limit the solicitation, quotation or sale of Xxxxx Insurance Company's
policies of workers' compensation insurance (and ancillary services related
thereto) by Purchaser to any Policyholders after the Closing Date. After the
Closing Date, Purchaser will be entitled to the goodwill and renewal rights with
respect to each of the Policyholders, without any restriction or limitation of
any kind. Except as disclosed in writing to Purchaser, neither any of the
Companies nor any of the Shareholders has any actual knowledge that any of the
Policyholders will not purchase workers' compensation insurance issued by Xxxxx
Insurance Company and sold by Purchaser.
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2.30 RATING RECORDS. As of the date hereof, to the extent Rating
Records (as defined below) are needed for compliance with the ratings for
Policyholders listed in Schedule 2.29, ACI will provide all records
(collectively, the "Rating Records") with respect to the loss experience of each
Policyholder under workers' compensation policies issued by SAIF and other
workers' compensation insurers for those periods after ACI became the agent of
record for such Policyholder. On the Closing Date, the Rating Records will be
transferred to Purchaser and Purchaser will have the unconditional right to
retain and use the Rating Records and to permit Xxxxx Insurance Company to use
the Rating Records for any purpose. Neither SAIF nor any other person or entity
has any right (whether pursuant to any agreement or understanding or otherwise)
at any time (whether before or after the Closing Date) to preclude the transfer
of such records to Purchaser or the use of the Rating Records by Purchaser or
Xxxxx Insurance Company for any purpose, including, but not limited to, the
establishment of workers' compensation premium rates and rating plans and
systems for Xxxxx Insurance Company in the State of Oregon based on the loss
experience of the Policyholders that is set forth in the Rating Records. The
Rating Records are adequate in form and substance to permit Xxxxx Insurance
Company to establish with the Oregon Department of Consumer and Business
Services workers' compensation premium rates and rating plans and systems for
the classifications set forth in SCHEDULE 2.30 based on the loss experience of
the Policyholders that is set forth in the Rating Records. True and complete
copies of summaries of the loss experience of the Policyholders, individually
and in the aggregate, have been provided to Purchaser. The Rating Records are
maintained by ACI in such manner that they can be accessed by Purchaser without
unreasonable expense or delay and are complete in all material respects. The
Companies and the Shareholders have no reason to believe that Xxxxx Insurance
Company shall not be entitled to use the exemption from the fictitious grouping
regulations for "employers . . . who are primarily engaged in farming" under ORS
737.346(3)(c) with respect to workers' compensation insurance policies for a
grouping or combination of any or all of the Policyholders and other employers
who are primarily engaged in farming to establish preferred rates or forms for
such grouping or combination than those offered to the public generally and to
persons and entities not in such grouping or combination.
2.31 OTHER INSURANCE. The Companies may transfer to Purchaser, and
following the Closing Date the Purchaser shall have an unconditional right with
respect to solicitation, quotation and sale of insurance other than workers'
compensation insurance ("Other Insurance" such as ORM), whether or not issued by
Xxxxx Insurance Company, to any
17
person or entity to which any of the Companies has previously sold insurance (an
"Other Policyholder") without any restriction or limitation of any kind except
as set forth on SCHEDULE 2.31. SCHEDULE 2.31 sets forth all of the Other
Policyholders. There is no agreement or understanding or other restriction that
precludes or limits the solicitation, quotation or sale of insurance by
Purchaser to any Other Policyholder after the Closing Date except as set forth
on SCHEDULE 2.31. After the Closing Date, Purchaser will be entitled to the
goodwill and renewal rights with respect to each Other Policyholder, without any
restriction or limitation of any kind except as set forth on SCHEDULE 2.31.
2.32 APPOINTMENTS. The insurance companies that have appointed each
of the Companies and their employees as agents are set forth on SCHEDULE 2.32.
All of the appointments (the "Appointments") set forth on SCHEDULE 2.32 are
currently in effect, and the Companies have not received any notice that an
Appointment has been terminated or limited in any manner. True and complete
copies of the commission schedules for each insurance company that has appointed
any of the Companies have been provided to the Purchaser.
2.33 GRANDFATHERING. To the Shareholders' and the Companies'
knowledge, there will be no status, preferential treatment or advantage that
currently benefits any of the Companies with respect to regulation by any State
Insurance Department that will not apply to and benefit Purchasers as of the
Closing Date assuming that Purchaser has obtained the Licenses set forth in
Section 5.12 and there is no change in applicable laws and regulations. To the
Shareholders' and the Companies' knowledge, upon obtaining the Licenses set
forth in Section 5.12, Purchaser shall be authorized under applicable laws and
regulations to conduct the businesses conducted by the Companies in the same
manner as the Companies are authorized to conduct such businesses.
2.34 OTHER SERVICES; FILES. To the Shareholders' and the Companies'
knowledge, neither SAIF nor any other person or entity has any right (whether
pursuant to an agreement or understanding or otherwise) to preclude or limit the
performance of services by Purchaser that are ancillary to the sale of
insurance, including, but not limited to, loss prevention services and seminars.
Each of the Companies shall have the unconditional right to transfer to
Purchaser any file or documentation currently in the possession of such Company
relating to the Policyholders listed in SCHEDULE 2.29 and Other Policyholders
listed in SCHEDULE 2.31.
The Purchaser represents and warrants to the Companies that:
18
2.35 POWER AND AUTHORITY. Each of the Purchaser and the Guarantor
has the full right, power and authority to enter into this Agreement and to
fulfill its respective obligations hereunder.
2.36 AUTHORIZATION OF AGREEMENT. This Agreement and all other
agreements and instruments to be executed by each of the Purchaser and the
Guarantor in connection herewith have been (or upon execution will have been)
duly executed and delivered by the Purchaser or the Guarantor, as the case may
be, and have been effectively authorized by all necessary action, corporate or
otherwise, and constitute (or upon execution will constitute) valid and binding
obligations of each of the Purchaser and the Guarantor enforceable in accordance
with their respective terms, except as enforcement may be limited by law
pertaining to bankruptcy, insolvency or the enforcement of creditors' rights and
by general equitable principles.
2.37 GOOD STANDING. Each of the Purchaser and the Guarantor has been
duly incorporated and is validly existing as a corporation in good standing
under the laws of the State of Oregon and California, respectively, with
corporate power and authority to own, lease and operate its respective
properties and to conduct its respective business.
ARTICLE III
CERTAIN UNDERSTANDINGS AND AGREEMENTS
3.1 CONDUCT OF BUSINESS. The business of the Companies shall be
conducted from the date hereof through the earlier of the termination of this
Agreement or the Closing Date in accordance with prior practice and in the
ordinary course of business, and without limiting the generality of the
foregoing, none of the Companies shall (except with the prior written consent of
Purchaser): (i) make any change in its Articles of Incorporation or Bylaws as in
force and effect on the date hereof (except as is necessary in connection with
Section 4.9); (ii) issue any capital stock or options, warrants or other rights
of any kind whatsoever to purchase any capital stock or any securities
convertible or exchangeable for shares of such stock or commit to do any of the
foregoing; (iii) declare or pay any non-cash dividend or distribution on any
securities of the Companies; (iv) purchase or commit to purchase or lease
capital or fixed assets for prices and rentals (throughout the term of such
leases) exceeding $5,000 in each case and $25,000 in the aggregate; (v) enter
into any commitments, except commitments entered into in the ordinary and usual
course of business which will obligate the Companies after the Closing in
amounts exceeding $5,000 in each case and $25,000 in the aggregate;
19
(vi) terminate any executive employee except in the ordinary and usual course of
business; (vii) sell or transfer any of the assets of any Company, except in the
ordinary course of business; (viii) mortgage, pledge, or encumber any of the
assets of any Company; (ix) amend, modify or terminate any Assumed Contract
other than in the ordinary course of business; (x) make any increase in, or any
commitment to increase, the compensation payable to any Company's employees or
agents or pay any bonuses, other than routine annual increases made in the
ordinary course of business; (xi) materially alter the manner of keeping the
books, accounts or records of any Company or the accounting practices therein
reflected; or (xii) take any action to cause any of the representations and
warranties in Article II to become inaccurate.
3.2 PRESERVATION OF ORGANIZATION. The Shareholders will preserve
the Companies' respective business organizations (including the preservation of
their properties wherever located, including, but not limited to, any assets
which are material to the respective businesses of the Companies) and shall
conduct their businesses from the date hereof through the Closing Date in
accordance with prior practice and in the ordinary course of business.
3.3 ACCESS. Between the date hereof and the Closing Date, the
Companies will give to authorized representatives of Purchaser full access,
during normal business hours, in such manner as not to unduly disrupt normal
business activities, to any and all premises, properties, contracts,
commitments, books, records and affairs of the Companies, and will cause their
officers to furnish any and all financial, technical and operating data and
other information pertaining to the Companies' businesses as Purchaser shall
from time to time reasonably request. With the prior consent of the Companies,
the Purchaser may discuss the Companies and their products and services with the
Companies' customers and suppliers upon reasonable notice and during regular
business hours.
3.4 CONFIDENTIALITY. Until the Closing, the parties hereto and
their respective agents, accountants and attorneys shall keep confidential any
information (unless readily ascertainable from public or published information
or sources) obtained from any other party hereto. Each party hereto further
agrees that it will not otherwise disclose any such information to any third
party (other than to its agents, accountants and attorneys in connection with
the consummation of the transactions contemplated by this Agreement) except upon
the written consent of the furnishing party, or except as required by law. Such
obligation of confidentiality shall not extend to any information which is shown
to be or to have been
20
generally known to others engaged in the same trade or business as the
furnishing party, or that is or shall be public knowledge through no act or
omission by the party to whom the information was furnished or any of its
directors, officers, employees, professional advisors or other representatives.
3.5 EXCLUSIVE DEALINGS. From the date hereof until the earlier of
the Closing Date or the termination of this Agreement in accordance with its
terms, Purchaser shall have the exclusive right to purchase the Purchased Assets
and no Shareholder nor any officer, director, affiliate or representative
(including any investment banker or financial advisor) of any of the Companies
shall, directly or indirectly, solicit, encourage or participate in any
discussions or negotiations with, or provide any non-public information to, any
person, entity or group concerning any potential competing offer to acquire all
or any material portion of the business, properties, or capital stock of any of
the Companies whether by merger, purchase of assets or stock, tender offer,
joint venture or other similar transaction.
3.6 CONDITION TO TRANSFER OF CERTAIN CONTRACTS. The Companies agree
that between the date hereof and the Closing Date they will use their best
efforts to obtain the necessary consents to the assignment of each Assumed
Contract. As provided in Section 5.7 hereof, it is a condition precedent to the
obligations of Purchaser to close the transactions contemplated hereby that all
required consents be obtained for each such Assumed Contract.
3.7 NON-COMPETITION AGREEMENTS. On or before the Closing Date, Xxxxx
Xxxxxxxx shall have executed a non-competition agreement with the Purchaser
substantially in the form of SCHEDULE 3.7.
3.8 MONEY PURCHASE PLAN.
(a) ACI has adopted and currently maintains the Agri-Comp, Inc.
Money Purchase Plan, a prototype plan designed by State Farm Insurance Company
and State Farm Life and Accident Assurance Company (the "Money Purchase Plan" or
"Plan"). The Money Purchase Plan is in compliance with the requirements for
qualification under Section 401(a) of the Internal Revenue Code of 1986 and ACI
has received a favorable determination letter from the Internal Revenue Service
stating that the Plan conforms with the requirements for qualification under
said Section 401(a).
(b) ACI has made or will make prior to the Closing Date all
contributions required under the Money
21
Purchase Plan for the plan year which will end on December 31, 1994. ACI agrees
that it will not take any action either prior to the Closing Date or thereafter
which will cause any reduction in the rate of contribution required to be made
to the Plan for the plan year ending on December 31, 1994.
(c) Administration of the Money Purchase Plan complies in all
material respects with the terms of the Plan and with ERISA, including the
reporting and disclosure requirements set forth in Part 1 thereof.
(d) ACI agrees that prior to the Closing Date it will take such
action as may be necessary to terminate the Money Purchase Plan, and its
companion Trust, effective as of January 1, 1995 and that it will, prior to the
Closing Date, notify the Trustee, the Plan Sponsor, the participants and any
beneficiary of a deceased participant, of such termination, as required at Plan
Section B1.02. ACI agrees to promptly take or cause to be taken such action as
may be necessary to submit the Plan to the Internal Revenue Service with a
request that a favorable determination letter be issued stating that the
termination of the Plan does not adversely affect the qualified status of the
Plan under Section 401(a) of the Internal Revenue Code of 1986 and to submit
such additional information and documents, including remedial amendments under
Internal Revenue Code Section 401(b), and to take such other action as may be
required by the Internal Revenue Service as a condition to the issuance of a
favorable determination letter concerning the termination of the Plan. Upon
receipt of said favorable determination letter, ACI shall take or cause to be
taken such action as may be necessary to direct the Trustee of said Plan to
distribute to each participant, or beneficiary, his or her benefits under the
Plan, and, in doing so, to allow each participant and beneficiary the right to
elect to have his or her benefits directly rolled over into an individual
retirement account or another qualified plan, including a qualified plan of the
Purchaser or its affiliate, Xxxxx Financial.
3.9 PROFIT SHARING TERMINATION. Each Company agrees to give notice
of termination of the profit sharing arrangements between such Company and
Messrs. Xxxx Xxxxx and Xxxx Xxxxx immediately prior to the Closing Date
effective for the 1995 calendar year.
3.10 ENDORSEMENT OF XXXXX INSURANCE COMPANY. Effective upon the
Closing, ACI will endorse Xxxxx Insurance Company as a workers' compensation
insurer for the Policyholders.
3.11 MAINTENANCE OF EXISTENCE. ACI agrees to maintain its corporate
existence and maintain at least one
22
part-time licensed employee until at least October 1, 1995 in order to
facilitate the collection by ACI of run-off commissions due to ACI from SAIF
which are to be paid over to Purchaser pursuant to this Agreement.
ARTICLE IV
CONDITIONS TO OBLIGATIONS OF EACH PARTY
The obligations of each party to effect the transactions contemplated
hereby shall be subject to the fulfillment, at or prior to the Closing Date, of
the following conditions:
4.1 NO ACTION OR PROCEEDING. No claim, action, suit, investigation
or other proceeding shall be pending or threatened before any court or
governmental agency which presents a substantial risk of the restraint or
prohibition of the transactions contemplated by this Agreement or the obtaining
of material damages or other relief in connection therewith.
4.2 COMPLIANCE WITH LAW. There shall have been obtained all permits,
approvals, and consents of all governmental bodies or agencies which counsel for
Purchaser or the Companies may reasonably deem necessary or appropriate so that
consummation of the transactions contemplated by this Agreement will be in
compliance with applicable laws.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser to effect the transactions contemplated
hereby shall be, at the option of Purchaser, subject to the fulfillment, at or
prior to the Closing Date, of the following additional conditions:
5.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of the Companies and Shareholders contained in this Agreement and the
Schedules hereto shall be true and correct on the date such representations and
warranties were made and remain true and correct on the Closing Date. At the
Closing, the Companies and Shareholders shall have delivered to Purchaser a
certificate to such effect signed by each Company and each Shareholder.
5.2 SHAREHOLDERS' AND COMPANIES' PERFORMANCE. Each of the
obligations of each Shareholder and each Company to be performed on or before
the Closing Date pursuant to the terms of this Agreement shall have been duly
performed on or before
23
the Closing Date, and at the Closing, each Shareholder and each Company shall
have delivered to Purchaser a certificate to such effect.
5.3 NAME CHANGE. On or before the Closing Date, ACI, OCI and ORM
shall have amended their respective articles of incorporation with the Secretary
of State of the State of Oregon to change their respective corporate names to
names other than "Agri-Comp, Inc.", "Oregon-Comp, Inc." and "Oregon Risk
Management, Inc.", respectively and executed such other documents and
certificates as Purchaser shall reasonably require to permit Purchaser to change
its name, effective on the Closing Date, to "Agri-Comp, Inc." and/or to file a
fictitious business name statement that will allow it and/or Xxxxx Insurance
Company to do business in Oregon under the names "Agri-Comp, Inc.," "Oregon-
Comp, Inc." and "Oregon Risk Management, Inc." or derivatives thereof.
5.4 NO ADVERSE CHANGE. There shall not have occurred between the
date hereof and the Closing Date any material adverse changes in the results of
operations, condition (financial or otherwise), assets, liabilities (whether
absolute, accrued, contingent or otherwise), business or prospects of the
Companies.
5.5 COMPLIANCE WITH LAW. There shall have been obtained any and all
permits, approvals and consents of and there shall have been made any and all
filings with all governmental bodies or agencies which counsel for Purchaser may
reasonably deem necessary or appropriate so that consummation of the
transactions contemplated by this Agreement will be in compliance with
applicable laws.
5.6 DUE DILIGENCE EXAMINATION. The Purchaser shall have completed to
its satisfaction an extensive examination of, and shall have obtained full and
complete disclosure regarding, the assets, properties, business and financial
condition of the companies and such examination shall not have revealed any
fact, or facts, which, individually or in the aggregate, could be expected to
have a material adverse effect on the results of operations, condition
(financial or otherwise), assets, liabilities (whether absolute, accrued,
contingent or otherwise), business or prospects of the Companies; PROVIDED,
HOWEVER, such examination, or any activities undertaken by the Purchaser to
assist the Companies to prepare the schedules to this Agreement, shall not in
any way relieve any of the Shareholders of any liability for any breach of or
misrepresentation in this Agreement.
5.7 CONSENTS TO ASSIGNMENT OF CERTAIN CONTRACTS. All necessary
consents to the assignment of all Assumed
24
Contracts shall have been obtained in writing and delivered at the Closing to
Purchaser.
5.8 ADDITIONAL CLOSING DOCUMENTS OF COMPANY. Purchaser shall have
received at the Closing the following documents, dated the Closing Date:
(a) Copies, certified by the Secretary or an Assistant
Secretary of each Company, of resolutions of the Board of Directors and
shareholders of each Company authorizing the execution, delivery and performance
of this Agreement and all other agreements, documents and instruments relating
hereto and the consummation of the transactions contemplated hereby; and
(b) Such other documents as Purchaser may reasonably request.
5.9 APPROVALS BY OREGON INSURANCE REGULATORS. On or prior to the
Closing Date, the Purchaser shall have received evidence reasonably satisfactory
to the Purchaser that the insurance regulators of the State of Oregon have
approved premium rates and a rating plan for Purchaser/Xxxxx Insurance Company,
doing business as Agri-Comp, Inc. or a derivative thereof, that gives effect to
SAIF's historical workers' compensation loss experience and that the farming
exemption to the fictitious grouping rules under the Oregon Insurance Code shall
be available to Purchaser/Xxxxx Insurance Company, doing business as Agri-Comp,
Inc. or a derivative thereof, on and after the Closing Date.
5.10 UNDERSTANDING REGARDING RUN-OFF OF COMMISSIONS AND SERVICING.
On or prior to the Closing Date Purchaser shall become satisfied with respect to
(i) Purchaser's entitlement to commissions from policies written or renewed with
SAIF prior to the Closing Date, (ii) Purchaser's obligations to service such
policies following the Closing Date, if any, (iii) Purchaser's use of SAIF
records and other information relating to historical loss experience following
the Closing Date and (iv) any other aspects of ACI's relationship with SAIF
prior to the Closing Date and Purchaser's relationship with SAIF following the
Closing Date which Purchaser believes should be clarified prior to closing.
5.11 RECEIPT OF LICENSES AND APPOINTMENTS. On or prior to the
Closing Date, Purchaser shall have received all types of Licenses held by the
Companies as well as any other licenses that Purchaser believes are necessary or
appropriate and shall have received such appointments other than SAIF that
Purchaser believes are necessary or appropriate.
25
5.12 SCHEDULES. On or prior to the Closing Date the Companies shall
have delivered to the Purchaser all schedules to this Agreement theretofore
undelivered and the information contained in such schedules shall be reasonably
acceptable to the Purchaser.
ARTICLE VI
INDEMNIFICATION
6.1 GENERAL. The Companies and the Shareholders, jointly and
severally, shall, subject to the last sentence of this Section 6.1, indemnify
and hold harmless Purchaser, in respect of any and all claims, losses, damages,
liabilities (absolute, contingent, matured, unmatured or otherwise) and
expenses, contingent or otherwise, matured or unmatured, of any nature
whatsoever (including, without limitation, settlement costs and any legal or
other expenses for investigating or defending any actions or threatened actions)
(collectively, a "Loss"), reasonably incurred by the indemnified party in
connection with or as a result of each and all of the following (a "Breach"):
(a) Any misrepresentation or breach of any representation or
warranty in this Agreement made by any Company or Shareholder;
(b) The breach of any covenant, agreement or obligation
contained in this Agreement or any other instrument contemplated by this
Agreement of any Company or Shareholder;
(c) Any misrepresentation contained in any statement or
certificate furnished by any Company or Shareholder pursuant to this Agreement
or in connection with the transactions contemplated by this Agreement; and
(d) Any action, liability or Loss relating to any contract or
arrangement to which any Company is a party other than the Assumed Liabilities
or relating to the conduct of business by any of the Companies before, on or
after the Closing Date.
Any such liability, deficiency or indemnity shall be paid by the
indemnifying party within thirty (30) days from the date the indemnified party
notifies the indemnifying party that it has incurred or has become subject to
the referenced liability or deficiency and provides the indemnifying party with
documentation demonstrating that the indemnified party has incurred such
liability or deficiency. Under no circumstances will the maximum liability of
the indemnifying party under this Article VI exceed the aggregate payments made
and due to be made by Purchaser to the Companies under
26
Section 1.4 hereof except in the event of fraudulent misrepresentation. The
respective Shareholders of each individual Company shall not be obligated to
jointly or severally indemnify Purchaser for Losses relating to any Company
other than those in which such Shareholder is a shareholder; e.g., Xx. Xxxxx
will have no indemnification obligation for Breaches relating to ACI and Xx.
Xxxxxxxx shall have none for Breaches relating to ORM.
6.2 NOTICE OF CLAIM FOR INDEMNIFICATION. Whenever any claim shall
arise for indemnification under this Article VI, the indemnified party shall
promptly notify the indemnifying party of the claim and, when known, the facts
constituting the basis for such claim.
6.3. THIRD PARTY CLAIMS. If a claim by a third party is made against
an indemnified party, and if such indemnified party intends to seek indemnity
with respect thereto hereunder, the indemnified party shall promptly (and in any
case within thirty days of such claim being made and within the period provided
in Section 6.5, if applicable) notify the indemnifying party of such claim. The
indemnifying party shall have thirty (30) days after receipt of such notice to
undertake, conduct and control, through counsel of its own choosing and at its
own expense, the settlement or defense thereof, and the indemnified party shall
cooperate with it in connection therewith; PROVIDED that (a) the indemnifying
party shall permit the indemnified party to participate in such settlement or
defense through counsel chosen by the indemnified party, provided the fees and
expenses of such counsel shall be borne by the indemnified party and (b) the
indemnifying party shall promptly reimburse the indemnified party for the full
amount of any Loss resulting from such claim and all related expenses incurred
by the indemnified party within the limits of this Article VI (except for
expenses contemplated by clause (a) preceding). So long as the indemnifying
party is reasonably contesting any such claim in good faith, the indemnified
party shall not pay or settle any such claim. Notwithstanding any of the
foregoing, the indemnified party shall have the right to pay or settle any such
claim, provided that in such event it shall waive any right to indemnity
therefor by the indemnifying party. If the indemnifying party does not notify
the indemnified party within thirty (30) days after the receipt of the
indemnified party's notice of claim of indemnity hereunder that it elects to
undertake the defense thereof, the indemnified party shall have the right to
contest, settle or compromise the claim in the exercise of its reasonable
judgment (but with due regard for obtaining the most favorable outcome
reasonably likely under the circumstances, taking account of costs and
expenditures) at the expense of the indemnifying party.
27
6.4 MANNER OF INDEMNIFICATION. All indemnification hereunder shall
be effected by payment of cash or delivery of a certified or cashier's check in
the amount of the indemnification liability; PROVIDED, HOWEVER, that the
indemnified party shall have the right to offset any matured, unmatured,
absolute or contingent liability for which the indemnified party shall seek
indemnification from the indemnifying party pursuant to this Article VI against
any payments due to the indemnifying party, including, if applicable, payments
due from the Purchaser to ACI for the second and third installment payments of
the purchase price for the ACI Purchased Assets, on a PRO RATA basis; PROVIDED
that any offset with respect to an unmatured or contingent liability must be
reasonable under the circumstances both in terms of the amount of the offset and
when the offset is made.
6.5 PURCHASER INDEMNIFICATION. The Purchaser and the Guarantor
shall, jointly and severally, indemnify and hold harmless the Companies in
respect of all Losses reasonably incurred by the Companies in connection with or
as a result of any misrepresentation or breach of representation or warranty in
this Agreement made by the Purchaser or any failure by the Purchaser to comply
with all of the obligations assumed by the Purchaser under the Assumed
Contracts. The procedures relating to the foregoing indemnification shall be
the same as those set forth in Sections 6.2-6.4 above.
6.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties made in Article II hereof shall survive the Closing for a period
of three years from the Closing Date.
ARTICLE VII
TERMINATION
7.1 TERMINATION. This Agreement may be terminated:
(a) By written consent of the parties hereto;
(b) By Purchaser or by any Company if the terminating party or
parties is/are not in default hereunder, and if the Closing shall not have
occurred on or before January 2, 1995 or such later date, if any, to which
Purchaser and the Companies shall agree in writing; or
(c) By Purchaser if, in the course of its due diligence review,
it discovers material information not previously disclosed to Purchaser which
Purchaser reasonably believes has a material adverse effect on the value of the
Purchased Assets. In such event, the notice of termination
28
delivered by Purchaser to the Companies shall specify in reasonable detail such
information.
ARTICLE VIII
MISCELLANEOUS
8.1 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed given if delivered personally
or mailed by certified or registered mail, postage prepaid, return receipt
requested, addressed as follows:
To Purchaser: Xxxxx Financial
000 Xxxxx Xxxx Xxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxxx X. Xxxxxxxxx
With a copy to: Xxxxxxx X. Xxxxxx, Esq.
Xxxxxx, Xxxx & Xxxxxxxx
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
If to the c/o: Xx. Xxxxxxx X. Xxxxxxxx
Shareholders or 000 Xxxxxxx Xxx S.E.
the Companies: Xxxxx, Xxxxxx 00000
With a copy to: Xxxxxxx X. Xxxxx
0000 Xxxxxx Xxxx X.X.
Xxxxx, Xxxxxx 00000
and
Xxxxxx Xxxxxxx, Esq.
000 Xxxxxxxx Xxxxxx X.X.
Xxxxx 000
Xxxxx, Xxxxxx 00000
8.2 ASSIGNABILITY AND PARTIES IN INTEREST. This Agreement shall not
be assignable by any of the parties hereto without the prior written consent of:
(i) in the case of any Shareholder or Company, Purchaser and (ii) in the case of
Purchaser, each Company. Notwithstanding the foregoing, Purchaser acknowledges
that prior to the date of this Agreement, ACI has adopted a plan of complete
liquidation, and such plan of liquidation calls for the distribution of the
assets of ACI to its sole shareholder, Xxxxxxx Xxxxxxxx ("Assignee"). The
assets to be distributed include without limitation this Agreement and all
rights arising hereunder, as well as any and all other agreements between ACI
and Purchaser. Notwithstanding any other provision contained
29
herein to the contrary, Purchaser does hereby irrevocably consent to the
assignment and transfer of this Agreement and all rights arising hereunder,
together with any other agreements ancillary hereto and entered into by
Purchaser with ACI in connection with this Agreement and all rights arising
thereunder, to Assignee. To evidence any such assignment, Assignee shall submit
to Purchaser written notice of her mailing address and a copy of a written
assignment executed by ACI in favor of Assignee, and thereafter Purchaser shall
make all payments at such address and to the order of Assignee. The foregoing
shall in no way discharge any of the Companies or the Shareholders from their
respective indemnification or other obligations hereunder. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors.
8.3 GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Oregon.
8.4 COUNTERPARTS. This Agreement may be executed simultaneously in
one or more counterparts, each of which shall be deemed an original, but all of
which shall constitute but one and the same instrument.
8.5 BEST EFFORTS. The Companies, Shareholders and Purchaser each
agree to use its best efforts to bring about the transactions contemplated by
this Agreement.
8.6 PUBLIC ANNOUNCEMENTS. The parties hereto agree that they will
not make any disclosures about the existence or contents of this Agreement or
the transactions contemplated herein or cause to be publicized in any manner
whatsoever by way of interviews, responses to questions or inquiries, press
releases or otherwise any aspect or proposed aspect of this transaction without
prior written notice to and approval of the other parties, except as may be
otherwise necessary to comply with applicable law; provided, however, that the
parties hereto may, on a confidential basis, advise their respective agents,
accountants, attorneys and prospective lenders.
8.7 COMPLETE AGREEMENT. This Agreement, the exhibits hereto and the
Schedules hereto delivered pursuant to this Agreement and all other documents
between the parties dated the date of the Closing to be delivered at the Closing
contain the entire agreement between the parties hereto with respect to the
transactions contemplated herein and, except as provided herein, supersede all
previous oral and written and all contemporaneous oral negotiations,
commitments, writings and understandings. The Shareholders are not relying on
any
30
inducement whatsoever other than that represented by such agreements in
executing and delivering this Agreement.
8.8 MODIFICATIONS AMENDMENTS AND WAIVERS. This Agreement may not be
modified or amended, and no provision or benefit hereof may be waived, except in
a written document executed by the party against whom enforcement is sought.
8.9 SEVERABILITY. Any provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction.
8.10 PAYMENT OF EXPENSES. Each party shall bear its own expenses in
connection with the preparation of this Agreement and the consummation of the
transactions contemplated herein. Except as specifically approved by Purchaser
in writing, no fees and expenses incurred in connection with the preparation of
this Agreement or the exhibits, schedules or closing documents relating thereto
and the consummation of the transactions contemplated herein or therein shall be
paid by the Companies out of the Purchased Assets.
8.11 FURTHER ASSURANCES. Each party hereto shall do and perform or
cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments and
documents as any other party hereto reasonably may request in order to carry out
the intent and accomplish the purposes of this Agreement.
8.12 ATTORNEYS' FEES. In the event of any action or proceeding
brought by either party against the other arising out of this Agreement, the
prevailing party, if any, shall be entitled to recover its reasonable attorneys
fees incurred in such action or proceeding, including any appeal, with the
amount of such fees, as well as a determination of prevailing party status, if
any, to be determined by a judge of the court sitting without a jury.
8.13 DEFINITION OF KNOWLEDGE. Unless expressly indicated herein to
the contrary, whenever the phrase "knowledge," "best knowledge" or to a parties
"knowledge" is used herein, "knowledge" shall mean the party actually knew, or
should have known after reasonable investigation, the fact at issue.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed as of the date first above written.
OREGON AG INSURANCE SERVICES, INC.
By /s/ Xxxxxxx X. Xxxxxx
---------------------------------
Xxxxxxx X. Xxxxxx
Senior Vice President
AGRI-COMP, INC.
By /s/ Xxxx X. Xxxxxxx
---------------------------------
Xxxx X. Xxxxxxx, President
OREGON-CORP, INC.
By /s/ Xxxx X. Xxxxxxx
---------------------------------
Xxxx X. Xxxxxxx, President
OREGON RISK MANAGEMENT, INC.
By /s/ Xxxxx Xxxxxxxx
---------------------------------
Xxxxx Xxxxxxxx, President
32
SHAREHOLDERS
ACI:
/s/ Xxxxxxx X. Xxxxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxxxx
OCI:
/s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Xxxxxxx X. Xxxxxxxx
/s/ Xxxxx Xxxxxxxx
-----------------------------------
Xxxxx Xxxxxxxx
ORM:
/s/ Xxxxx Xxxxxxxx
-----------------------------------
Xxxxx Xxxxxxxx
/s/ Xxxxxxx X. Xxxxx
-----------------------------------
Xxxxxxx X. Xxxxx
WITH RESPECT TO SECTIONS 1.6 AND 6.5
ONLY:
XXXXX FINANCIAL
By /s/ Xxxxxxx X. Xxxxxx
---------------------------------
Xxxxxxx X. Xxxxxx
Senior Vice President
33
