Exhibit 10.3
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of July 31, 1998 by and between
XXXXXX X. XXXXXXXX, AS TRUSTEE OF THE XXXXXXXX XXXX TRUST AND ALBA E. DEL XXXXX,
AS TRUSTEE OF THE XXXXXXXX DEL XXXXX TRUST (hereinafter collectively referred to
as "Sellers"), XXXXXXXX CARIBBEAN CORPORATION (hereinafter referred to as
"Buyer") and HERITAGE INSURANCE COMPANY (CARIBBEAN), LIMITED (hereinafter
referred to as the "Corporation").
WITNESSETH:
IN CONSIDERATION of the promises and mutual covenants herein contained, the
parties hereto, intending to be legally bound, agree as follows:
1. SUPERSEDING EFFECT
This Stock Purchase Agreement (the "Agreement") supersedes all oral or
written agreements between the parties and constitutes the entire agreement
between the parties, except for paragraphs 6, 7 and 8 of a Preliminary
Acquisition Agreement dated June 4, 1998 between the parties hereto respecting
this transaction (the "Preliminary Acquisition Agreement").
2. STOCK TO BE PURCHASED
The Buyer shall purchase from the Sellers all the issued and
outstanding capital stock of the Corporation, consisting of two hundred fifty
thousand (250,000) shares of common stock, two hundred thousand (200,000) of
which are owned by the Xxxxxxxx Xxxx Trust and forty-nine thousand nine hundred
ninety-nine (49,999) of which are owned by the Xxxxxxxx Del Xxxxx Trust (the
"Corporation's Stock"), thus transferring every asset reflected on the
Corporation's financial statements and all other off-balance sheet assets,
including all of the Corporation's right, title and interest in and to all
tangible and intangible assets of the Corporation. Notwithstanding anything to
the contrary in this agreement, Buyer shall not assume any liabilities or
obligations of the Corporation not disclosed in the Corporation's unaudited
financial statements for the quarter ending June 30, 1998, or specifically
assumed and provided for in this Agreement.
3. ACQUISITION PRICE
The total purchase price for the Corporation's Stock will be equal to
1.5 times the net aggregate stated capital and surplus as appearing on the
Closing Financial Statements (as hereinafter defined), subject to adjustment as
stated below (the "Acquisition Price"). The "Closing Financial Statements" means
those financial statements to be provided by Sellers to Buyer, for the period
from January 1, 1997 ending December 31, 1997, and a balance sheet for the
Corporation as at December 31, 1997, provided that the Closing (as hereinafter
defined) shall occur on or before October 31, 1998. Said Closing Financial
Statements shall be certified by a certified public accountant satisfactory to
Buyer and shall contain an unqualified expression of opinion that, after an
audit conducted by said accountant in accordance with generally accepted United
States auditing
standards, the financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied.
The Acquisition Price may be reduced with the consent of the Seller,
based on developments or events that have a materially adverse effect on the
Corporation or its Business prior to Closing.
4. PAYMENT
A. At Closing Buyer shall pay the Sellers One Million Two Hundred Fifty
Thousand Dollars ($1,250,000.00) by certified check or other immediately
available funds or wire transfer.
B. The balance of the Acquisition Price shall be paid by delivery to
Sellers at Closing of such number of shares of Class A Common Stock of Buyer
valued at $6.50 per share as are necessary to equal the Acquisition Price (the
"Acquisition Shares"); provided, however, that in the event Buyer issues Class A
Common Stock of Buyer for a price less than $6.50 per share at any time prior to
January 1, 2000, the number of Acquisition Shares shall be proportionately
increased and provided, further, that Sellers shall have the right for a 180-day
period commencing three (3) years from the Closing, to require Buyer to redeem
from Sellers the Acquisition Shares at a price of $8.30 per share (prorated by
any subsequent increase in the number of shares delivered to Sellers resulting
from a reduction in the issue price per share below $6.50). Sellers acknowledge
that (i) Buyer is in the process of becoming a publicly held company under the
Securities Act of 1933 of the United States, as amended (the "Securities Act"),
and as such the Acquisition Shares held by Sellers will be subject to the
provisions of Rule 144 of the Securities Act regarding the disposal of such
shares to third parties; and (ii) the Class A Common Stock currently is not
listed or traded on any stock exchange or other quotation system, and there can
be no assurance that the initial public offering will be completed or that an
active public market for Buyer's Class A Common Stock will develop or be
sustained in the event of a successful completion of the initial public
offering.
5. CLOSING
The Closing of the transaction contemplated by the Agreement shall
occur in accordance with the following (the "Closing"):
A. Place
The Closing shall take place at the offices of Xxxxxx, Topper and
Feuerzeig, 0X Xxxxxxxxxxxxx Xxxx, Xx. Xxxxxx, U.S. Virgin Islands. The Closing
date will be scheduled to coincide with Buyer's acquisition of Guardian
Insurance Company, Inc. but only after (i) completion of due diligence to the
satisfaction of Buyer and (ii) the receipt of regulatory consents from
applicable governmental authorities, including the specific approval of this
transaction by the insurance regulatory authorities for the British Virgin
Islands (the "Closing Date"); provided, however, that the Closing shall in all
events be held by no later than October 31, 1998. If for any reason the Closing
shall not take place on or before October 31, 1998, and the deadline date has
not been extended by mutual agreement, by written notice to the other party,
either party may cancel the transaction after any such deadline date and neither
party shall have any further obligation to the other.
B. Deliveries and Payment
(1) At the Closing the Sellers shall deliver to the Buyer (or to a
designated wholly-owned subsidiary of the Buyer) those items set forth in
Section 6, and Buyer shall deliver to Sellers the Acquisition Shares as set
forth in Section 4.
(2) At the Closing the Sellers shall deliver to the Buyer (or to a
designated wholly-owned subsidiary of the Buyer) a certificate signed by the
President and Secretary of the Corporation and guaranteed by the Sellers to the
effect that there has been no material adverse change in the financial condition
or business of the Corporation as of the Closing Date.
C. Memorandum of Closing
On the Closing Date, the parties shall execute a Memorandum of Closing
which shall state the events that occurred at the Closing. All transactions at
the Closing shall be considered to take place simultaneously. No delivery shall
be considered to be made until all transactions are completed.
6. DOCUMENTS TO BE DELIVERED BY SELLERS AT CLOSING
The originals of all documents set forth below shall be delivered by
the Sellers or the Corporation to Buyer (or to a designated wholly-owned
subsidiary of the Buyer) at the Closing except for items B, C, D, G, H, K, O and
P, which shall be provided at least ten (10) business days before the Closing:
A. The Corporation Stock Certificates, free and clear of all
encumbrances, fully paid, non-assessable, and duly endorsed in blank.
B. All leases to which the Corporation is a party, together with the
written consent of any landlord as may be required under such leases.
E. The Corporation's license(s) to do business in the
jurisdictions in which it operates.
D. Broker/Agent Agreements to which the Corporation is a party.
E Contracts requiring performance after the Closing and contracts with
warranties which shall remain in effect after the Closing.
F. Warranties on the Corporation's equipment assets.
G. Opinion letters of the Corporation's counsel and the counsel for the
Sellers, as described in Section 14 and Section 15.
H. Certificate of good standing of the Corporation (and of any
subsidiaries thereof) certified by the Registrar of Companies or any other
appropriate official in the British Virgin Islands, as of no more than four
weeks prior to the Closing Date.
I. Resignations of all present directors and officers of the
Corporation effective on the Closing Date.
J. Minute book(s), stock transfer book(s), stock certificate book
and corporate seal(s) of the Corporation.
K. Noncompetition Agreements as described in Section 12 of this
Agreement.
L. Documentation that the Corporation's insurance contract forms have
been filed and approved as required pursuant to British Virgin Islands law.
M. Written approval of the sale of the Corporation by the beneficiaries
(or their guardians) of the Xxxxxxxx Xxxx Trust and the Xxxxxxxx Del Xxxxx Trust
in a form satisfactory to Buyer.
N. Annual or other reports filed by the Corporation under British
Virgin Islands law.
O. The Closing Financial Statements (as defined in Section 3). These
shall be provided to Buyer as soon as they are available.
P. The certificate specified in Subsection 5B(2) above.
Q. Any other instruments and documents that are required to fulfill the
obligations of the Sellers under this Contract.
7. CONDITIONS TO THE OBLIGATIONS OF THE BUYER
The obligations of Buyer to proceed with the Closing are subject to the
satisfaction on or before the Closing Date of all of the following conditions:
A. Sellers shall have complied with each of their covenants and
agreements contained herein, and each of Sellers' representations and warranties
contained in Section 9 shall be true on and as of the Closing Date.
B. Delivery of the items required to be delivered by Sellers pursuant
to Section 6.
C. Approval by the insurance authorities for the British Virgin Islands
and by any other regulatory authority as may be required for the lawful transfer
of ownership or control of the Corporation by any jurisdiction in which the
Corporation does business.
D. Completion of due diligence to the reasonable satisfaction of Buyer
in accordance with the terms of Section 21 of this Agreement.
E. No material adverse change in the financial condition of the
Corporation from that stated in the Closing Financial Statements, or in the
relationships with the insurance agents or reinsurers with whom the Corporation
does business.
F. No material change in the conduct of the Corporation's business
pending Closing, in accordance with the terms of Section 19 of this Agreement.
8. CONDITIONS TO THE OBLIGATIONS OF SELLER AND THE CORPORATION
The conditions of Seller and Corporation to proceed with the Closing
are subject to the satisfaction on or before the Closing Date of all of the
following conditions:
A. Buyer shall have complied with each of their covenants and
agreements contained herein, and each of Buyer's representations and warranties
contained in Section 11 of this Agreement shall be true on and as of the Closing
Date.
B. Delivery of the items required to be delivered by Buyer pursuant to
Section 5B of the Agreement.
C. Approval by the insurance authorities for the British Virgin Islands
and by any other regulatory authority as may be required for the lawful transfer
of ownership or control of the Corporation by any jurisdiction in which the
Corporation does business.
D. Buyer shall have executed the employment agreements with Xxxxxxx
Xxxxxxxx and Xxxxxxx Xxxxxxx.
E. Buyer shall have delivered to Seller a resolution of the Board of
Directors of Buyer approving the purchase of the Corporation's Stock, the
issuance and delivery of the Acquisition Shares and the execution and delivery
of any other documents required to be delivered by Buyer under this Agreement.
F. Buyer shall have simultaneously closed the transaction pursuant to
which it acquires the shares of stock of Guardian Insurance Company from
Unlimited Holdings, Inc. pursuant to the terms of a stock purchase agreement of
even date executed by and between the Buyer and said company.
9. REPRESENTATIONS OF CORPORATION AND SELLERS
The Corporation and Sellers warrant and represent as follows, which
representations shall survive the Closing for five (5) years except those
dealing with taxes that will survive for the applicable statute of limitations
period:
A. Corporation's Right to Be Sold
The Corporation has the full power and right to execute this Contract.
The Corporation will present a director's resolution approving the sale of the
Corporation's Stock, a certificate of good standing, a certificate of incumbency
as to officers and directors and any other corporate documentation reasonably
requested by Buyer.
B. Stock Ownership
Sellers are the owners, free and clear of any lien or encumbrance, of
the Corporation's Stock. Said Corporation Stock constitutes all of the issued
and outstanding shares of the Corporation. The Sellers have not issued or
granted any options or other rights to purchase the Corporation's Stock; neither
is there any contract or other obligation on the part of the Sellers or the
Corporation to issue any stock of the Corporation to any third party.
C. Capitalization
The entire authorized capital stock of the Corporation consists of two
hundred fifty thousand (250,000) shares of common stock, of which presently two
hundred forty-nine thousand nine hundred ninety-nine (249,999) are issued and
outstanding, fully paid and non-assessable.
D. Subsidiaries, Cross-Guarantees and Inter-Company Transfers
The Corporation does not have any subsidiaries. The Corporation has not
guaranteed or agreed to guarantee any debts of its shareholders, or of any of
its officers, directors or employees, or any other person or entity whatsoever.
There are no accounts receivable or transfers between the Sellers and the
Corporation that are being questioned from an accounting standpoint or by any
regulatory body. Notwithstanding the foregoing, the parties acknowledge that
accounts receivable due from Unlimited Holdings in the amount of $36,000.00
appearing on the closing Financial Statements shall, in consideration of the
results of operations subsequent to December 31, 1997, be deemed settled at
Closing.
E. Organization and Standing of the Corporation
The Corporation is a corporation duly organized, validly existing and
in good standing under the laws of the British Virgin Islands. A copy of the
Corporation's Articles of Association and Memorandum of Association and all
amendments thereto as of the date of this Agreement, duly certified by the
Registrar of Companies, is attached hereto as Exhibit "A". A copy of the
Corporation's By-Laws, certified by the Corporation's Secretary, and all
amendments thereto as of the date of this Agreement is attached hereto as
Exhibit "B". Said copies of the Articles of Association and the Memorandum of
Association, and the Bylaws are complete and correct as of the date of this
Agreement. The Corporation is qualified to do business and is doing business in
the British Virgin Islands, and is qualified to operate and is in good standing
in the British Virgin Islands and any other jurisdiction in which the nature of
the business conducted by it and the property owned by it makes such
qualification necessary.
F. Title
The Corporation is the owner of and has good and marketable title, free
from any and all encumbrances, to all assets of the Corporation except as set
forth in Exhibit "C", entitled "Encumbered Assets of the Corporation", dated
July 31, 1998.
G. Financial Statements
The financial statements referenced in Subsections 9G (1) and (2) below
which have been delivered to Buyer and attached hereto as Exhibit "D", together
with the Closing Financial Statements (as defined in Section 3), once they are
delivered to Buyer in accordance with Subsection 6O, (the "Financial
Statements") accurately set forth the results of operations of the Corporation
for the applicable periods, and such balance sheets present a true and complete
statement of the financial condition, assets and liabilities of the Corporation
for the applicable periods. There has not been any material adverse change in
the financial condition of the Corporation from that stated in the Financial
Statements, or in the relationships with the insurance agents or reinsurers with
whom the Corporation does business.
(1) Statements of profit and loss of the Corporation for the calendar
years 1995 through 1997, inclusive, and balance sheets for the Corporation as of
December 31 for each of said three (3) years were certified by Price Waterhouse,
LLP, a certified public accountant and contain an unqualified expression of
opinion that said statements have been prepared in accordance with generally
accepted accounting principles consistently applied; and
(2) A statement of profit and loss of the Corporation for the calendar
quarter ending June 31, 1998, unaudited and verified by the Corporation's
President and Treasurer;
(3) In the event that Buyer determines that it is required to provide
financial statements of the Company in order to comply with federal or state
securities law requirements, Seller shall provide, or shall cause the
Corporation to provide, to Buyer audited financial statements (including a
balance sheet and statements of income and cash flows) for the Corporation for
the Corporation's most recent fiscal year and unaudited financial statements for
all interim periods specified in Rules 3-01 and 3-02 of Regulation S-X
promulgated by the Securities and Exchange Commission (the "SEC"). In addition,
Sellers shall direct, or shall cause the Corporation to direct, the
Corporation's independent certified public accountants to cooperate with the
Buyer for purposes of developing and compiling the financial information desired
by Buyer in order to comply with federal or state securities law requirements;
H. Compliance with Laws
To the best of Seller's knowledge and belief, the Corporation has
complied with all applicable laws of the British Virgin Islands and all laws,
rules and regulations applicable in the jurisdictions in which it operates and
has the following licenses: License dated_____________ issued by the Supervisor
of Insurance of the British Virgin Islands with an expiration date of
___________ authorizing the Corporation to engage in the business of an
insurance company pursuant to Insurance Business (Special Provisions) Xxx 0000
of the Laws of the British Virgin Islands, and specific authority to write the
following kinds of insurance:
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I. Contracts to Sell or Mortgage Assets or Stock
Other than as set forth in the Preliminary Acquisition Agreement,
neither the Corporation nor the Sellers have entered into any contract to sell,
assign, pledge or mortgage all or any part of the Corporation's Stock or its
assets or Sellers' interest in either.
J. Contracts
(1) All contracts material to the operation of the business of the
Corporation -- a full and complete list of which is attached hereto as Exhibit
"D.1" -- are in good standing, valid and binding on the parties thereto, free of
material default by any party thereto, and will continue to be the valid and
binding obligation of the parties thereto in accordance with their respective
terms after Closing;
(2) prior to the Closing Date Sellers shall have caused the Corporation
to deliver to Buyer correct and complete copies of all material contracts; and
(3) to the extent that the transaction contemplated by this Agreement
shall constitute an assignment of any material contract, which shall require the
consent of any party to such contract, such consent shall have been obtained in
writing on or before the Closing Date.
K. Taxes
The Corporation is not and shall not on the Closing Date be in default
for the payment of any tax accrued, imposed or assessed by the British Virgin
Islands, or any other jurisdiction in which the Corporation does business,
including withholding, insurance premium, gross receipts, personal or real
property, sales, use, social security and unemployment taxes, fees and
obligations.
L. Litigation
(1) Except as set forth in Exhibit "E" attached hereto, there
are no suits, claims, consent decrees or other proceedings in law or equity
pending, nor are there regulatory proceedings of any kind pending, or threatened
against the Corporation or, with respect to the Corporation's Stock, against the
Sellers.
(2) Except as set forth in Exhibit "E" attached hereto, there
are no suits, claims consent decrees or other proceedings in law or equity
pending or contemplated in which the Corporation or, with respect to the
Corporation's Stock, in which either of the Sellers is plaintiff or petitioner.
M. Judgments
There is not now nor shall there be at the time of Closing any
judgments, liens or other encumbrances outstanding against the Corporation
generally, or, with respect to the Corporation's Stock, against the Sellers.
N. Investigations
There are no investigations or other regulatory proceedings pending or
anticipated against the Corporation in the British Virgin Islands, or in any
other jurisdiction in which the Corporation does business, or, with respect to
the Corporation's Stock, pending or anticipated against the Sellers.
O. Power of Attorney
Neither Sellers nor the Corporation have a power of attorney
outstanding with respect to the Corporation's Stock or the Corporation's
business.
P. Directors, Officers and Bank Accounts
The Corporation has delivered to the Buyer a true and complete list,
attached hereto as Exhibit F as of the date of this Agreement, certified by an
authorized officer of the Corporation, setting forth the following:
(1) The names and addresses of all the Corporation's
directors and officers; and
(2) The name, address and account number of each bank in which
the Corporation has an account or safe deposit box and the names and addresses
of all persons authorized to draw thereon or to have access thereto.
Q. Government and Other Consents
No consent, authorization, license, permit, registration or approval
of, or exemption or other action by, any governmental or public body, commission
or authority is required in connection with (a) the execution, delivery and
performance by the Corporation or Sellers of this Agreement, or (b) the sale and
delivery of the Corporation's Stock to the Buyer.
R. Maintain Business as a Going Concern
The Sellers and the Corporation will use their best efforts to maintain
the Corporation as a going concern operating in its normal course of business as
a licensed British Virgin Islands insurance company .
S. Minute Books
The minute books of the Corporation accurately reflect all material
corporate action of its shareholders and Board of Directors.
T. Disclosures
The Buyer has been informed of all matters concerning or relating to
the Corporation or its affairs, assets, and business which are or could be
deemed material to making an informed judgment as to whether to enter into and,
at Closing, to consummate this Agreement.
U. Employee Benefit Plans
The Corporation is not bound by or liable under any "employee benefit
plan" or "pension plan" as such terms are defined in the United States
Employment Retirement Income Security Act of 1974 ("ERISA"), as amended, or
under any similar law in any jurisdiction in which the Corporation does
business.
V. Business Records
The books and records of the Corporation, including but not limited to all
of the books and records made available to Buyer for inspection during the
course of its due diligence investigation pursuant to Section 21 of this
Agreement, are maintained at the Corporation's principal place of business
located at Heritage Insurance Company, Xxxxxxx Building, P.O. Box 3442,
Roadtown, Tortola, BVI, and are intact, complete, true and accurate.
W. Year 2000 Compliance
The status of the Corporation's software and related hardware used in
connection with the Corporation's business with respect to their ability to
handle date information before, during, and after January 1, 2000, including,
but not limited to accepting date-sensitive input, performing date-sensitive
calculations, and providing date-sensitive output is reflected in the letter
attached hereto as Exhibit H.
10. THE TRUSTS
The Sellers warrant and represent as follows, which representations
shall survive the Closing for five (5) years:
A. Each Seller is a validly formed and existing inter vivos trust under
the laws of the Commonwealth of Puerto Rico.
B. Xxxxxx X. Xxxxxxxx is the duly appointed, qualified and serving
trustee of the Xxxxxxxx Xxxx Trust, and Alba E. del Xxxxx is the duly appointed,
qualified and serving trustee of the Xxxxxxxx del Xxxxx Trust.
C. Each trustee has full authority to act in his/her individual
capacity as trustee and to bind his/her respective trust to this Agreement.
D. Each trustee has full power and authority under their respective
trust instruments to sell the Corporation's Stock and to execute and deliver on
behalf of the trust and the beneficiaries thereof all documents and instruments
necessary in connection therewith.
11. REPRESENTATION OF BUYER
Buyer warrants and represents as follows, which representations shall
survive the Closing for five (5) years:
A. Right to Buy
Buyer has the full power and right to execute this Agreement and has
the full right and power to acquire the Corporation's Stock and to issue the
Acquisition Shares provided herein. Buyer will present directors' resolutions
approving the purchase of the Corporation's Stock and any other corporate
documentation reasonably requested by Seller.
B. Organization and Standing of the Buyer
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the British Virgin Islands. The execution of this
Agreement and Buyer's performance thereunder has been duly authorized under the
terms of its corporate charter and governing documents and the Closing shall not
result in the breach of any contract or other obligations by which the Buyer
is bound.
12. COVENANT NOT TO COMPETE
A. At Closing the Sellers shall cause Xxxxxx X. Xxxxxxxx, Xxxxxxx X.
Xxxxxxxx, Xxxxxxx Xxxxxxx and W. Xxxxxxx Xxxxxxxx to enter into appropriate
covenants not to compete with the Corporation, which covenants not to compete
shall provide that the individual executing said agreement will not directly or
indirectly, either as an employee, partner, stockholder, officer, director,
proprietor, owner or otherwise, engage or become interested financially or
otherwise in any business in competition with the Corporation for five (5) years
in jurisdictions in which the Corporation is licensed or qualified or otherwise
conducts the business of insurance, specifically excepting, however, from the
scope of the agreement the Commonwealth of Puerto Rico.
B. If the Buyer sells the Corporation, its stock or all of its assets,
the Buyer shall have the right to assign the covenants set forth above. The
individuals executing said covenants shall remain bound by the terms of said
covenants to any and all subsequent purchasers of the Corporation, its stock or
all of its assets.
13. DAMAGE OR DESTRUCTION OF CORPORATION'S ASSETS
A. The Corporation shall maintain its assets in the condition as they
existed at the time of Buyer's inspection, ordinary wear and tear excepted.
B. However, if the Corporation's assets are damaged or destroyed, to
the extent of Twenty Percent (20%) or more of the value of such assets as set
forth in the Closing Financial Statements, or the Corporation loses insurance
accounts to the extent of Fifty Percent (50%) or more of such accounts prior to
Closing, Buyer's sole remedy shall be the right to terminate this Agreement
without any liability on either Buyer or Sellers.
14. OPINION OF CORPORATION'S COUNSEL
On the Closing Date, the Corporation shall deliver an opinion of the
Corporation's counsel dated the Closing Date, which shall opine that:
A. The Corporation's existence, good standing and authorized and
issued stock are as stated in Section 9.
B. This Agreement has been duly and validly authorized, executed and
delivered by the Corporation and constitutes the valid, binding and enforceable
obligation of the Corporation.
C. The Corporation has good and marketable title to all of its property
and assets covered by this Agreement.
D. Counsel does not know or have reasonable cause to know of any claim,
litigation, administrative proceeding, regulatory proceeding or governmental
investigation pending or threatened against the Corporation or its assets other
than those disclosed on Exhibit E.
15. OPINION OF SELLERS' COUNSEL
On the Closing Date, the Sellers shall deliver an opinion of the
Sellers' counsel dated the Closing Date, which shall opine that:
A. Each Seller is a validly formed and existing inter vivos trust under
the laws of the Commonwealth of Puerto Rico.
B. Xxxxxx X. Xxxxxxxx has full authority to act in his/her individual
capacity as trustee of the Xxxxxxxx Xxxx Trust, and to bind the trust to this
Agreement.
X. Xxxx E. del Xxxxx has full authority to act in his/her individual
capacity as trustee of the Xxxxxxxx Del Xxxxx Trust, and to bind the trust to
this Agreement.
D. The trustees have been duly authorized, and have the legal capacity,
to convey the Corporation's Stock and otherwise to perform according to the
terms of this Agreement.
16. INDEMNIFICATION OF BUYER BY THE PARTIES
A. Indemnification by Seller
The Seller hereby agrees to indemnify and hold the Buyer and its
successors and assigns harmless in respect of any and all liabilities and
expenses (including, without limitation, settlement costs and legal, accounting,
and other expenses in connection therewith) incurred by the Buyer and its
successors and assigns in connection with any breach of the representations and
warranties by Seller set forth in Section 9, of this Agreement, notice of which
have been received by Seller within a period of three (3) years from the Closing
date. These provisions shall survive the Closing.
B. Indemnification by Buyer
Buyer hereby agrees to indemnify and hold the Seller and its successors
and assigns harmless in respect of any and all liabilities and expenses
(including, without limitation settlement costs and legal, accounting and other
expenses in connection therewith) incurred by the Seller and its successors and
assigns in connection with any breach of the representations and warranties of
Buyer set forth in Section 10 of this Agreement, notice of which have been
received by Buyer within a period of three (3) years from the Closing Date.
These provisions shall survive the Closing.
C. Procedure for Indemnification
(i) The party claiming indemnification (the "Claimant"), shall give
reasonably prompt notice to the party from whom identification is claimed (the
"Indemnifying Party") of any claim whether between the parties or brought by a
third party, specifying: (a) the factual basis for such claim and (b) the amount
of the claim. If the claim relates to an action, suit or proceeding filed by a
third party against Claimant, such notice shall be given by Claimant within ten
(10) days after written notice of such action, suit or proceeding is received by
Claimant.
(ii) Following receipt of notice from the Claimant of a claim, the
Indemnifying Party shall have 20 days (or such shorter period of time as it
required to respond to the subject litigation or proceeding) to make such
investigation of the claim as the Indemnifying Party deems necessary or
desirable. For the purposes of such investigation, the Claimant agrees to make
available to the
Indemnifying Party or its authorized representative(s) the information relied
upon the Claimant to substantiate the claim. If the Claimant and the
Indemnifying Party agree at or prior to the expiration of said 20-day period (or
any mutually agreed upon extension thereof) to the validity and amount of such
claim, the Indemnifying Party shall immediately pay tot he Claimant the full
amount of the claim. If the Claimant and the Indemnifying Party do not agree,
the parties shall use their reasonable efforts to negotiate a resolution of such
dispute within said period (or any mutually agreed upon extension thereof.) If
the parties fail to agree within said period (or any mutually agreed upon
extension thereof), the Claimant may seek appropriate legal remedy.
(iii) With respect to any claim by a third party as to which the
Claimant is entitled to indemnification hereunder, the Indemnifying Party shall
have the right at its own expense, to participate in or assume control of the
defense of such claim, and the Claimant shall cooperate fully with the
Indemnifying Party. If the Indemnifying Party elects to assume control of the
defense of any third party claim, the Claimant shall have the right to
participate in the defense of such claim and retain separate co-counsel at its
own expense; provided (a) if requested to participate at Indemnifying Party's
request, (b) if the Claimant reasonably believes that a conflict of interest
exists between Claimant and the Indemnifying Party, (c) if the Indemnifying
Party does not admit to Claimant right to reimbursement or (d) if the
Indemnifying Party fails to promptly assume and prosecute the defense of such
third party claim, then the Claimant will be reimbursed for reasonable expenses
of its own counsel. The indemnifying Party will select counsel reasonably
satisfactory to the Claimant. The Indemnifying Party will not consent to an
entry of judgment or settlement without release of liability and, with respect
to nonmonetary terms, the Claimant's consent (not to be unreasonably withheld or
delayed).
(iv) If a claim, whether between the parties or by a third party,
requires immediate action the parties will make every effort to reach a decision
with respect thereto as expeditiously as possible.
(v) If the Indemnifying party does not elect control or otherwise
participate in the defense of any third party claim, it shall be bound by the
results obtained by the Claimant with respect to such claim.
17. FURTHER ASSURANCES
Buyer and Sellers shall execute any and all documents, prior to and
after the Closing Date, that are required to implement or confirm the terms and
intent of this Agreement.
18. DEFAULT BY THE SELLERS
If either Seller shall fail, refuse or be incapable of delivering any
of the Corporation's Stock to be sold hereunder, such failure, refusal or
incapacity shall not relieve either Seller of any obligation under this
Agreement. In such event, the Buyer, at its option, may either purchase the
remaining stock which it is entitled to purchase hereunder, or refuse to make
such purchase and terminate all of its obligations under this Agreement.
19. CONDUCT OF THE CORPORATION'S BUSINESS PENDING CLOSING
The Corporation and Sellers warrant and represent that, until the
Closing:
A. The business of the Corporation shall be conducted in its
ordinary course.
B. Without the written consent of the Buyer, the Corporation shall not
enter into any contract -- other than insurance contracts issued in the ordinary
course of business -- that shall (i) commit the Corporation to an expenditure in
excess of Two Thousand Five Hundred ($2,500.00) Dollars, or (ii) be for a term
lasting more than ninety (90) days after the Closing Date .
C. The Corporation shall comply with all laws, rules and regulations of
British Virgin Islands and federal, state, territorial, commonwealth, city, and
local governments applicable in any jurisdiction in which it operates.
D. The Corporation shall not knowingly violate or default under the
terms of any lease or contract used or useful in the conduct of the business of
the Corporation.
E. The Corporation shall not sell, exchange or otherwise encumber any
of the assets of the Corporation in any way whatsoever.
F. The Corporation shall not dispose of any of its assets except those
consumed in the regular conduct of the business.
G. The Corporation shall not increase the compensation payable to any
of the employees, officers, directors or consultants of the business, except
those specifically agreed by the Buyer to take effect August 1, 1998.
H. The Corporation shall not hire additional permanent employees for
use in the business or discharge any present employees of the business without
prior written notification to the Buyer.
I. The Sellers and Corporation shall preserve the goodwill of the
Corporation's customers and accounts and others having business relations with
the Corporation.
J. There shall be no modifications in the financial condition of the
Corporation as set forth in the Closing Financial Statements, except as will
occur in the ordinary and regular conduct of the Corporation's business.
K. There will not be any changes in the legal structure of the
Corporation, or its Articles of Association, Memorandum of Association or
By-Laws.
L. No dividends will be declared or paid on the stock of the
Corporation.
M. The Corporation shall not enter into or renew any employment
contracts without the Buyer' s prior written consent (which shall not be
unreasonably withheld).
N. The Corporation shall not modify the fringe benefits offered to its
employees without the Buyer's prior written consent (which shall not be
unreasonably withheld).
O. The Corporation shall not grant any bonuses other than routine cash
bonuses to employees in accordance with past practice and in a commensurate
amount.
DC01/210351-1
P. The Corporation shall not engage in any transaction regarding its
stock or options with respect thereto different in character or scale than those
in which it has customarily engaged without the Buyer's prior written consent
(which shall not be unreasonably withheld).
Q. The Corporation shall not issue stock or cash dividends on the
Corporation's shares.
20. EMPLOYEES OF THE CORPORATION
The Sellers and Corporation warrant and represent that:
A. The employees of the Corporation do not have any interest in any of
the Corporation's property, real or personal or tangible or intangible.
B. The attached Exhibit G, entitled, "Employees of the Corporation",
dated July 31, 1998 sets forth all employees of the Corporation, their
compensation, vacations, holidays and other fringe benefits, and attaches a true
and complete copy of any employment contract with respect to said employees (or
any of them) by which the Corporation is bound.
21. DUE DILIGENCE AND INSPECTION OF RECORDS
The Buyer has the right to inspect, or have inspected by a Certified
Public Accountant or other appropriately qualified consultant or advisor
appointed by the Buyer and at Buyer's expense, the books and records of the
Corporation and the operations of the Corporation. Sellers and the Corporation
will make available to Buyer, Buyer's counsel, accountants, and other
representatives access to such information and documents regarding the
Corporation's business operations and financial records as Buyer may reasonably
request including a review of all insurance contracts, accounts, material
contracts, licenses, bonds, reports to regulatory authorities, agency
agreements, reinsurance agreements, litigation files (including environmental
cases, and other run-offs on previous property and casualty coverages) and all
regulatory files as to administrative proceedings involving the Corporation and
the status of any orders or consent decrees issued in connection therewith, and
any audit or other review of the Corporation's financial records. Sellers and
the Corporation will authorize the Corporation's attorneys and accountants to
discuss freely the affairs of the Corporation with the Buyer and its counsel,
accountants or other representatives. In accordance with the Preliminary
Acquisition Agreement, Buyer shall keep confidential and cause its agents,
attorneys and accountants to keep confidential the information reviewed during
due diligence.
22. LABOR RELATIONS
The Corporation warrants and represents that there is no employment
discrimination, wrongful discharge or other employment complaint or litigation
pending and no work stoppage pending or threatened with respect to the business
of the Corporation and no applications for certification of a collective
bargaining agent or other union organization activity with respect to the
Corporation or its employees are pending or anticipated.
23. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Buyer, Sellers and the
Corporation herein shall survive the Closing.
24. BINDING ON SUCCESSORS
Subject to Section 32, this Agreement shall be binding upon the heirs,
executors, administrators, successors and assigns of the Buyer and Sellers.
25. BROKERS AND EXPENSES
A. Buyer, Sellers and the Corporation warrant and represent to each
other that neither has employed any broker, finder or other person or entity in
connection with matters contemplated by this Agreement.
B. Buyer and Sellers shall indemnify each other from any claim and any
costs associated therewith by any such broker, finder, person or entity.
C. Each of the parties hereto shall pay all expenses and disbursements
incurred by it, its officers, employees, attorneys, accountants, financial
advisers and other agents and representatives in connection with this Agreement
and the performance of its obligations hereunder.
26. CHANGES TO SELLERS' WARRANTIES AND REPRESENTATIONS
If there are any changes to the Sellers' and the Corporation's
warranties or representations set forth in this Agreement, the Sellers or the
Corporation, as the case may be, shall notify the Buyer immediately in writing
of such changes by certified or registered mail, return receipt requested or by
delivery to Buyer's President in person of such writing.
27. SECTION HEADINGS
The heading or subheadings of sections contained herein are used for
convenience and ease of reference and shall not limit the scope or intent of the
section.
28. ARBITRATION AND APPLICABLE LAW
Any controversy or claim arising out of or relating to this Agreement
or the breach thereof, shall be settled by arbitration to be held in St. Xxxxxx,
U.S. Virgin Islands in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. Judgment upon the award rendered by the
arbitrators shall be final and may be entered in any court having jurisdiction
thereof. This Agreement shall be governed by the laws of the U.S. Virgin
Islands.
29. DOCUMENTS INCORPORATED BY REFERENCE
The following documents are hereby incorporated by reference:
A. Exhibit A entitled, "Articles of Association of the Corporation",
dated July 31, 1998.
B. Exhibit B entitled, "Bylaws of the Corporation", dated July 31,
1998.
C. Exhibit C entitled "Encumbered Assets of the Corporation", dated
July 31, 1998.
D. Exhibit D entitled "Financial Statements of the Corporation", dated
July 31, 1998.
E. Exhibit D.1 entitled "Material Contracts of the Corporation", dated
July 31, 1998.
F. Exhibit E entitled, "Litigation of the Corporation and/or Sellers",
dated July 31, 1998.
G. Exhibit F entitled "Officers, Directors, Bank Accounts and Safe
Deposit Boxes of the Corporation," dated July 31, 1998.
H. Exhibit G entitled "Employees of the Corporation," dated July 31,
1998.
I. Exhibit H entitled "Status of Corporation's Software and Related
Hardware", dated July 31, 1998.
30. NOTICES AND CORRESPONDENCE
All notices and correspondence shall be sent by either party to the
other in all matters dealing with this Agreement to the following addresses:
(a) To the Sellers: XXXXXXXX XXXX TRUST
c/o Xxxxxx X. Xxxxxxxx
P.O. Box 9022992
Xxx Xxx Xxxx Xxxxxxx
Xxx Xxxx, XX 00000
XXXXXXXX DEL XXXXX TRUST
c/o Alba E. Del Xxxxx
P.O. Box 9021342
Xxx Xxx Xxxx Xxxxxxx
Xxx Xxxx, XX 00000
(b) To the Corporation: Xxxxxxx X. Xxxxxxxx
President
HERITAGE INSURANCE COMPANY
(CARIBBEAN), LIMITED
X.X. Xxx 0000
Xxxxxxxx, Xxxxxxx
Xxxxxxx Xxxxxx Xxxxxxx
with a copy to: Xxxxx X. Xxxxx
XXXXX & XXXXXXXX
0000 Xxxxxxxxxx
Xx. Xxxxxx, X.X. Xxxxxx
Xxxxxxx 00000
(c) To the Buyer: Xxxx X. de Jongh, Jr.,
President
XXXXXXXX CARIBBEAN CORPORATION
Xx. 00 Xxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxxx Amalie St. Xxxxxx
U.S. Virgin Islands 00801
with a copy to: Xxxxxx X. X'Xxxxx
XXXXXX, TOPPER AND FEUERZEIG
0X Xxxxxxxxxxxxx Xxxx
Xx. Xxxxxx, X.X. Xxxxxx
Xxxxxxx 00000
or any other address provided prior written notice is given to the other party.
31. INDEPENDENT COUNSEL
The Sellers acknowledge that they have used as their counsel for the
negotiation of this Agreement the attorneys also used by the Corporation in the
conduct of the Corporation's U.S. Virgin Islands business nevertheless, Sellers
are satisfied that they have received proper legal advice in connection with the
execution of this Agreement.
32. ASSIGNMENT
This Agreement is personal in nature and none of the parties hereto
shall, without the written consent of the others, assign or transfer its rights
or obligations hereunder to another company or person, except that the Buyer may
transfer all or any portion of its rights or obligations hereunder to any of its
wholly-owned subsidiaries without such prior written consent.
33. TERMINATION
This Agreement may be terminated by either Seller of Buyer, if the
terminating party is not then in breach of any material obligation under this
Agreement, on written notice to the other at any time prior to Closing as
follows:
(i) By Buyer or Seller, as the case may be, if the other shall be in
material breach of any of the provisions applicable to it hereunder and provided
that such material breach shall not have been cured within 30 days of receipt of
the breaching party of written notice describing in detail such breach;
(ii) By mutual agreement of Buyer and Seller at any time, set forth in
writing executed by other party;
(iii) By Buyer or Seller, if any of the conditions to their respective
performance obligations under Section 7 and 8 are not satisfied on or before
October 31, 1998; or
(iv) By Buyer or Seller by written notice to the other, if a court of
competent jurisdiction or other governmental authority shall have issued an
order, decree or ruling or taken any other action (which order, decree or ruling
the parties hereto shall use their best efforts to lift), in each case
permanently restraining, permanently enjoining or otherwise such order, decree,
ruling or other action shall have become final and nonappealable.
In the case of termination of this Agreement pursuant to this Section
33, each party will pay all of its costs and expenses and neither will have any
further liability or obligation of any nature to the other.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
which is effective as of July 31, 1998.
CORPORATION:
WITNESSES: HERITAGE INSURANCE COMPANY
(CARIBBEAN), LIMITED
/s/ J. Summer Xxxxxxx By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------- ----------------------------------
Xxxxxxx X. Xxxxxxxx, President
[Seal]
/s/ Xxxx X. Xxxxx
_________________________ Attest: _________________________________,
Secretary
SELLERS:
THE XXXXXXXX DEL XXXXX TRUST
_________________________ By: /s/ Alba E. Del Xxxxx
----------------------------------
Alba E. Del Xxxxx, Trustee
_________________________ [Seal]
THE XXXXXXXX XXXX TRUST
_________________________ By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------------
Xxxxxx X. Xxxxxxxx, Trustee
-------------------------
BUYER:
XXXXXXXX CARIBBEAN CORPORATION
/s/ J. Summer Xxxxxxx By: /s/ Xxxx X. de Jongh, Jr.
------------------------- --------------------------------
Xxxx X. de Jongh, Jr., President
[Seal]
/s/ Xxxx X. Xxxxx Attest: /s/ Xxxxxxxxx X'Xxxxx
------------------------- --------------------------------
Xxxxxxxxx X'Xxxxx, Secretary
