STOCK PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is entered into as of December
31, 1997 among Bear Xxxxxxx Acquisition Corp. XVI ("Buyer"), Reliance National
(U.K.) Ltd. ("RNUK") and Reliance Insurance Company ("RIC", and together with
RNUK, "Sellers").
R E C I T A L S
WHEREAS, Sellers own all of the outstanding Common Stock, par value
$.50 per share (the "Common Stock"), of Prometheus Funding Corp. ("Prometheus")
free and clear of all liens; and
WHEREAS, Sellers wish to sell, and Buyer wishes to purchase, the Common
Stock.
A G R E E M E N T
NOW, THEREFORE, in consideration of the matters recited above, and the
mutual covenants and agreements contained herein, the parties to this Agreement
hereby agree as follows:
1. Sale and Purchase of the Common Stock. Subject to all terms and
conditions of this Agreement and effective upon receipt by Sellers of the
Purchase Price (as defined below), Sellers hereby irrevocably sell and transfer
to Buyer all of Sellers' right, title, and interest in and to the Common Stock,
free and clear of all liens and encumbrances of any nature whatsoever, other
than applicable registration requirements under federal and state securities
laws with respect to the resale of the Common Stock. The sale of the Common
Stock is without any representation or warranty, express or implied, except as
expressly set forth in this Agreement. Sellers will deliver to Buyer
certificates representing the Common Stock, duly registered in the name of Buyer
with all signatures guaranteed. Sellers will pay any transfer taxes required to
be paid in connection with the transfer of the Common Stock.
2. Purchase Price. Upon receipt by Buyer of the certificates
representing the Common Stock, Buyer hereby agrees to pay to Sellers on the date
hereof (the "Closing Date") the amount of $7,454,000 (the "Purchase Price"). The
Purchase Price shall be paid in immediately available U.S. dollar funds by wire
transfer to the accounts of Sellers as provided to Buyer under separate cover,
which shall be allocated to Sellers pro rata in accordance with their respective
ownership of the Common Stock.
3. Representations and Warranties of Both Buyer and Sellers.
(a) Each party to this Agreement represents and warrants that no
registration or filing with, notice to, or consent or approval of, or
any other action by any federal, state or other governmental agency,
authority or regulatory body, foreign or domestic, or any other person
is required to be made or obtained by such party for or in connection
with the due execution, delivery and performance of this Agreement by
such party.
(b) Each party to this Agreement represents and warrants that no
proceedings are pending and, to the best of such party's knowledge, no
proceeding is threatened against or affecting such party, before any
federal, state or other governmental agency, authority, administrative
or regulatory body, arbitrator, court or other tribunal, foreign or
domestic, that individually or in the aggregate could adversely affect
any action taken or to be taken by such party under this Agreement.
(c) Each party to this Agreement represents and warrants that it (i) has
become a party hereto solely in reliance upon its independent
investigation of Prometheus, this Agreement, all applicable laws and
regulations, and all aspects of the transactions evidenced by or
referred to in this Agreement as it deemed necessary or appropriate,
except that each party acknowledges that the other party is relying on
the representations, warranties, covenants, agreements and indemnities
contained in this Agreement, (ii) is an "accredited investor" as such
term is defined in Regulation D promulgated under the Securities Act of
1933, as amended, (iii) has substantial experience in making
investments of the type contemplated by this Agreement, (iv) is capable
of evaluating the merits and risks of the transactions contemplated by
this Agreement, and (v) has received and reviewed copies of such
information including, without limitation, the representations and
warranties referred to herein as is necessary or appropriate to enable
it to decide whether to enter into this Agreement.
(d) Each party to this Agreement represents and warrants that (i) it has
full power and authority to enter into this Agreement and to perform
its obligations under this Agreement in accordance with the terms of
this Agreement, (ii) this Agreement has been duly authorized, executed
and delivered by such party and such action and the performance of its
obligations hereunder will not violate any provision of its charter,
bylaws, any contract to which it is a party, or any law, rule,
regulation, order, writ, judgment, decree, determination or award
applicable to it, and (iii) this Agreement constitutes a legal, valid
and binding obligation of such party, enforceable against it in
accordance with its terms.
(e) Each party to this Agreement acknowledges and agrees that neither the
other party nor any director, officer, agent, employee, legal counsel
or other representative of the other has made or given any
representation, indemnity or warranty, express or implied, of any kind
or character with respect to Prometheus, any applicable law or
regulation, this Agreement, the transactions contemplated by this
Agreement or any other matter, except as expressly set forth in this
Agreement.
(f) Each party to this Agreement represents and warrants that (i) it has
not retained a broker or other intermediary to act on its behalf in
connection with the transactions contemplated by this Agreement, and
(ii) there are no claims or rights against it for brokerage commissions
or finder's fees in connection with this Agreement or the transactions
contemplated by this Agreement except that Sellers have engaged Bear
Xxxxxxx & Co. Inc. as their financial advisor and are responsible for
the fees thereof.
4. Representations and Warranties of Sellers. Sellers, jointly and
severally, represent, warrant and covenant to Buyer as follows:
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(a) Prometheus is duly organized, validly existing and in good standing
under the laws of the State of Delaware. Prometheus has the requisite
power and authority to carry on its business as presently conducted.
(b) Except as listed in Schedule 4(b) of the Sellers' letter of even date
hereof (the "Sellers' Letter"), there are no actions, suits,
proceedings, arbitrations or investigations pending or, to the
knowledge of Prometheus or Sellers, threatened in any court or before
any governmental or regulatory authority, agency, commission or
official, or any arbitration panel, against Prometheus or its
subsidiaries. Neither Prometheus nor any of its subsidiaries is in
default with respect to any order, writ, injunction or decree of any
court or other governmental or regulatory authority, agency, commission
or official.
(c) Neither Prometheus nor any of its subsidiaries has any employees or,
except as described in Schedule 4(c) of the Sellers' Letter, is a party
to or bound by any (i) employment contracts for any officers or
employees, (ii) stock option or stock appreciation plans or
arrangements, (iii) employee benefit plans, or other plans maintained
for the benefit of employees, whether subject to the Employee
Retirement Income Security Act of 1974, as amended, or otherwise, (iv)
profit sharing, bonus, incentive compensation, deferred compensation,
severance pay, pension, retirement or any similar employee benefit
plans or agreements, or (v) contracts with any labor union.
(d) Prometheus has authorized capital stock consisting of 200 shares of
Common Stock. There are 100.57 shares of the Common Stock issued and
outstanding, 78.57 shares of which are beneficially owned by RIC and 22
shares of which are beneficially owned by RNUK. All of the Common Stock
has been duly and validly issued, is fully paid and non-assessable, and
is owned by Sellers, free and clear of all liens, charges, claims and
encumbrances. There are no preemptive or similar rights to purchase or
otherwise acquire the Common Stock pursuant to any provisions of law,
the Certificate of Incorporation and/or by any other agreement. There
are no outstanding rights, subscriptions, warrants, options, conversion
rights or agreements of any kind to issue, purchase or otherwise
acquire any capital stock of Prometheus or any securities or other
instruments convertible into capital stock of Prometheus or any
agreements relating to the voting or other matters relating to such
capital stock.
(e) There are no outstanding declarations or any undistributed payments of
dividends or other distributions with respect to the capital stock of
Prometheus.
(f) Except as described in Schedule 4(f) of the Sellers' Letter, neither
Prometheus nor any of its subsidiaries is a party to any contract,
mortgage, indenture, note, guaranty, lease or agreement of any kind for
which it or they may be subject to any liability.
(g) The total assets of Prometheus consist only of cash and securities of
the types, quality and maturities listed in Schedule 4(g) of the
Sellers' Letter.
(h) Prometheus has never been included in the consolidated returns of
either Seller or any parent of either Seller. All taxes in respect of
periods beginning before the date hereof, have been paid, or an
adequate reserve has been established therefor on the books and records
of Prometheus.
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There are no liens for taxes (other than for current taxes not yet due
and payable) on the assets of Prometheus.
(i) Sellers have previously delivered to Buyer the audited balance sheet of
Prometheus as of December 31, 1996 (the "Audited Balance Sheet") and
the related statements of cash flow, income and changes in
shareholders' equity of Prometheus for the fiscal year then ended
(collectively, the "Audited Financial Statements"). Sellers have also
previously delivered to the Buyer the unaudited balance sheet of
Prometheus as of September 30, 1997 (the "Current Balance Sheet") and
the related statements of cash flow, income and changes in
shareholders' equity of Prometheus for the nine-month period then ended
(collectively, the "Current Financial Statements"). The Audited
Financial Statements and the Current Financial Statements
(collectively, the "Financial Statements") have been prepared in
accordance with generally accepted accounting principles applied
consistently with past practices and, in the case of the Audited
Financial Statements, have been certified without qualification by
Deloitte & Touche, LLP, Prometheus' independent public accountants,
and, in the case of the Current Financial Statements, have been
certified by Prometheus' chief financial officer. The Financial
Statements fairly present, as of their respective dates, the financial
condition, retained earnings, assets and liabilities of Prometheus and
the results of operations of Prometheus' business for the periods
indicated.
(j) As of the Closing Date, neither Prometheus nor any of its subsidiaries
have liabilities or obligations of any nature whether accrued,
absolute, contingent, unasserted or otherwise, and whether due or to
become due, other than those listed on Schedule 4(j) of the Sellers'
Letter.
(k) Sellers have in place the insurance program described on Schedule 4(k)
of the Sellers' Letter and such program names or will name Buyer as an
additional insured thereon. Sellers will not cancel such program during
the currently scheduled term thereof, unless such program is being
replaced with a program which contains similar coverage.
(l) Prometheus has in place the insurance program described in Schedule
4(l) of the Sellers' Letter.
5. Indemnification; Expenses.
(a) Sellers, jointly and severally, hereby agree to indemnify, defend and
hold Buyer and its officers, partners, directors, employees, agents,
representatives, and affiliates, other than Prometheus and its
subsidiaries, (each a "Buyer Indemnitee") harmless from and against any
and all claims, demands, actions, controversies, suits, liabilities,
losses, damages, set-offs, judgments, awards, fines, penalties, costs
and expenses (including all reasonable attorneys' fees and
disbursements) (collectively, "Losses") as incurred by Buyer
Indemnitees arising by reason of or resulting from (i) the settlement
of the Union Indemnity litigation with the New York Insurance
Department in excess of the scheduled payments as listed on Schedule
5(a) of the Sellers' Letter; (ii) payments in excess of an aggregate of
$9,037,837 (net of any insurance or reinsurance recoveries) that relate
to improper sales practices or errors or omissions by Prometheus or its
subsidiaries or their predecessors (such $9,037,837 includes payments
of fees under the Management Agreement referred to in Schedule 4(f) of
the Sellers' Letter); provided, however, in the case of
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payments by Prometheus for the Pension Opt Out matter referred to in
Schedule 4(b) of the Sellers' Letter, payments aggregating in excess of
$4,000,000, provided further that no indemnification shall be made with
respect to Losses arising out of liabilities assumed by Prometheus
pursuant to the proviso to Section 1.2 of such Management Agreement or
arising after the termination of such Management Agreement, if such
Management Agreement is terminated by Buyer or Prometheus (other than
RIC acting on behalf of Prometheus) without RIC's consent prior to
December 31, 2012; (iii) claims asserted by any and all creditors,
claimants or policyholders of Union Indemnity with respect to any
Losses suffered in connection with the management, operations or
insolvency of Union Indemnity; (iv) liabilities relating to Xxxxx X.
Xxxx employee post-retirement medical, long-term disability and life
insurance claims; (v) liabilities relating to items 2, 3, 4, 6 (to the
extent it relates to any liabilities of Prometheus to any person other
than RIC) and 8 on Schedule 4(f) of the Sellers' Letter; and (vi) any
breach of Sellers' representations, warranties, covenants, agreements
or covenants contained herein to the extent such breach involves
matters other than those covered by clauses (i), (ii), (iii), (iv) and
(v) above. In the event that any Buyer Indemnitee has a judgment
rendered against it (whether or not final) with respect to liabilities
of Prometheus and its subsidiaries, Sellers will promptly, but no later
than three days thereafter, post a bond against such judgment or
discharge such judgment. Sellers agree that they will not assert any
claims, counterclaims, defenses or setoffs with regard to its
obligation to such Buyer Indemnitees to post such bond or discharge
such judgment.
(b) Notwithstanding anything in this Agreement to the contrary, in the
event that Sellers (i) make payment to Buyer or any other person or
entity pursuant to the preceding paragraph, and (ii) hold rights,
claims or causes of action (collectively, the "Sellers Reimbursement
Rights") against any person or entity by reason thereof, (x) the
Sellers Reimbursement Rights shall, as between Sellers and Buyer, be
Sellers' alone, and (y) Buyer shall have no interest in the Sellers
Reimbursement Rights.
(c) Buyer hereby agrees to indemnify, defend and hold Sellers and their
respective officers, directors, employees, agents, representatives, and
controlling persons or entities (each a "Seller Indemnitee") harmless
from and against any and all claims, demands, actions, controversies,
suits, liabilities, losses, damages, set-offs, judgments, awards,
fines, penalties, costs and expenses (including all reasonable
attorneys' fees and disbursements) as incurred arising by reason of or
resulting from any breach of Buyer's representations, warranties,
agreements or covenants contained herein.
(d) Notwithstanding anything in this Agreement to the contrary, in the
event that Buyer (i) makes payment to Sellers or any other person or
entity pursuant to the preceding paragraph, and (ii) holds rights,
claims or causes of action (collectively, "Buyer Reimbursement Rights")
against Prometheus or any other person or entity by reason thereof, (x)
the Buyer Reimbursement Rights shall, as between Sellers and Buyer, be
Buyer's alone, and (y) Sellers shall have no interest in the Buyer
Reimbursement Rights.
(e) If a third party commences any action against either of Sellers or
against Buyer for which such party (the "Indemnified Party") is
entitled to indemnification under this Agreement, such Indemnified
Party will promptly notify the other party (the "Indemnifying Party")
in writing of
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such commencement. The Indemnifying Party may, at its election and at
its own expense and without limiting its obligation to indemnify the
Indemnified Party, assume control of the defense of such action. Each
Indemnified Party shall cooperate in the defense or prosecution of such
action. In any event, the party that has assumed defense of such action
shall provide the other party with copies of all notices, pleadings,
and other papers filed or received in connection with such action, and
in no event shall the Indemnified Party consent or agree to a
settlement of any such action without the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld.
(f) Except as otherwise expressly provided for herein, each party to this
Agreement shall bear its own costs and expenses (including but not
limited to attorneys' fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby.
(g) If any Indemnifying Party shall fail to pay its obligation to any
Indemnified Party within three days after its obligation to make such
payment arises, such Indemnifying Party shall pay such Indemnified
Party, in addition to such payment obligation, interest on such payment
obligation at the "prime rate" (as set forth in the Eastern Edition of
the Wall Street Journal) from the date such obligation was due until
the date of payment.
6. Acknowledgements by Buyer. Buyer acknowledges that (a) the Common
Stock has not been registered under the Securities Act of 1933, as amended, and
may only be sold pursuant to an effective registration statement under such Act,
or pursuant to an exemption from such Act; (b) Sellers are shareholders of
Prometheus, and prior to November 2, 1992, were not involved in the day-to-day
operations of Prometheus and its subsidiaries and predecessors, all of which
operations were sold on such date, and (c) while Sellers have endeavored to
determine the status of all matters covered by the representations, warranties
and covenants contained in Section 4 hereof, none of Sellers, their affiliates
or any of their respective officers, directors, employees or agents has
knowledge sufficient to assess the accuracy of such representations, warranties
and covenants, and, accordingly, such representations, warranties and covenants
are made solely to allocate risk of loss as between Buyer on one hand and
Sellers on the other hand. This acknowledgement in no way limits the rights of
Buyer Indemnitees under Section 5 hereof.
7. Retiree Benefits. RIC has assumed all of the liabilities of
Prometheus and its subsidiaries under the (a) Xxxxx X. Xxxx retiree medical
program for retired and disabled participants, (b) Xxxxx X. Xxxx long term
disability program and (b) Xxxxx X. Xxxx retiree life insurance program. To the
extent reasonably practicable, Buyer agrees that it will cause Prometheus and
its subsidiaries to execute and deliver to RIC, at RIC's expense, such other
documents or instruments as may be necessary or desirable, in the opinion of
RIC, to reflect RIC's retention of such programs and the absence of any rights
or liabilities of Prometheus and its subsidiaries with respect thereto,
including, but not limited to, any right of Prometheus or its subsidiaries to
receive premiums from participants in such programs.
8. Notices.
(a) Unless otherwise specifically provided herein, any notice or other
communication required or permitted to be given hereunder shall be in
writing addressed to the parties at their addresses set
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forth below and shall be deemed to have been properly given only if
telecopied, delivered, sent by an overnight mail, or messenger service,
or sent by first-class mail, postage prepaid, addressed to the party to
be notified at the address for such party set forth below, and shall be
deemed to have been given on the day it is received (if telecopied or
hand-delivered), on the first business day after it is sent (if sent by
an overnight mail or messenger service), or the third business day
after it is sent (if sent by first-class mail); by giving notice as
provided above, any party may designate a different address for
notices, statements, demands, consents, approvals or other
communications intended for it:
Notices to Buyer:
Bear Xxxxxxx Acquisition Corp. XVI
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xx. Xxxxxxxx X. Xxxxxx
with a copy to:
Xxxx Xxxxxxx & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Block, Esq.
Notices to Sellers:
Reliance Insurance Company
Xxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx
and
Reliance National (U.K.) Ltd.
c/o Reliance Group Holdings, Inc.
Xxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
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(b) Each party hereby irrevocably consents to the service by certified or
registered mail, return receipt requested, to be sent to its address
stated above or to such other address as it may designate from time to
time by notice given in the manner provided above, of any process in
any action to enforce, interpret or construe any provision of this
Agreement.
9. Survival of Representations and Warranties. The representations,
warranties, covenants and indemnities of the parties contained herein shall
survive the execution, delivery and performance of this Agreement.
10. Confidentiality. The terms of this Agreement shall remain
confidential and shall not be disclosed by either party hereto without the prior
written consent of the other, except that (i) either party to this Agreement may
disclose such terms if and to the extent required by applicable laws, rules, or
regulations, including, without limitation, the rules of any self regulatory
organization, or ordered by a court of competent jurisdiction or a governmental
agency, (ii) either party to this Agreement may disclose such terms to its
representatives and advisors if they agree to keep all such information
confidential, and (iii) either party to this Agreement may disclose such terms
in connection with enforcement of its rights hereunder.
11. Miscellaneous Provisions.
(a) Neither this Agreement nor any term hereof may be changed, waived,
discharged or terminated, except by an instrument in writing signed by
all of the parties hereto. No failure on the part of any party to
exercise, and no delay in exercising, any right under this Agreement
shall operate as a waiver thereof by such party, nor shall any single
or partial exercise of any right under this Agreement preclude any
other or further exercise thereof or the exercise of any other right.
The rights and remedies of each party provided in this Agreement (i)
are cumulative and are in addition to, and not exclusive of, any rights
or remedies provided by law, except to the extent that this Agreement
expressly limits or otherwise expressly affects any party's rights or
remedies, and (ii) are not conditional or contingent on any attempt by
such party to exercise any of its rights under any other document
against any other party or any other entity.
(b) This Agreement and, to the extent permitted by law, the transactions
contemplated by this Agreement shall be governed by, and construed and,
to the extent permitted by law, enforced in accordance with, the laws
of the State of New York without giving effect to the principles of
conflicts of law thereof.
(c) Any controversy or claim arising under or pursuant to this Agreement
shall be referred to a panel of three arbitrators, each of whom shall
be selected by the American Arbitration Association. The arbitration
panel shall settle any controversy, dispute or claim between Sellers
and Buyer. The prevailing party shall be entitled to be reimbursed for
its reasonable attorneys' fees and expenses incurred in connection with
such arbitration. Such arbitration shall be conducted in accordance
with the Commercial Arbitration Rules of the American Arbitration
Association and judgment upon the award rendered by such arbitration
panel shall be binding on the parties hereto and may be entered in any
court having jurisdiction. The locale of the arbitration shall be New
York, New York.
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(d) This Agreement (including, without limitation, the representations,
warranties, and covenants contained herein) shall be binding upon and
inure to the benefit of Sellers and Buyer and their respective
successors and assigns.
(e) Each party to this Agreement hereby agrees to take such additional
actions and to execute and deliver such additional documents and
instruments as may be necessary to effect the transactions contemplated
by, and to carry out the intent of, this Agreement.
(f) Title and headings of sections in this Agreement are for convenience of
reference only and shall not be used to define or limit or otherwise
affect the provisions hereof.
(g) This Agreement may be executed in one or more counterparts, each of
which, when executed and delivered, shall be an original, but all of
which together shall constitute but one agreement binding on all of the
parties hereto. Transmission by telecopier of an executed counterpart
of this Agreement shall be deemed to constitute due and sufficient
delivery of such counterpart, provided that any party that delivers a
counterpart by telecopier shall, promptly after such delivery, deliver
the original of such counterpart of this Agreement to the other party
hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
BUYER:
BEAR XXXXXXX ACQUISITION CORP. XVI
By: /s/ Xxxxx Xxxxxx
-------------------------------
Name: Xxxxx Xxxxxx
Title: Secretary
SELLERS:
RELIANCE NATIONAL (U.K.) LTD. RELIANCE INSURANCE COMPANY
By: /s/ Xxxxxx X. Xxxxxxxxx By: /s/ Xxxxxx X. Xxxxxxxx
----------------------- ----------------------
Name: Xxxxxx X. Xxxxxxxxx Name: Xxxxxx X. Xxxxxxxx
Title: Attorney-in-fact Title: Senior Vice President
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