Exhibit 10.01
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BUY-OUT AGREEMENT
This Agreement is entered into as of August 20, 2004, by and among
Lumbermens Mutual Casualty Company, an Illinois mutual insurance company
("Lumbermens"), American Motorists Insurance Company, an Illinois stock
insurance company, American Manufacturers Mutual Insurance Company, an Illinois
mutual insurance company, American Protection Insurance Company, an Illinois
stock insurance company, and Xxxxxx Lloyds Insurance Company, a Texas Lloyds
company (individually, Lumbermens and each of the other companies identified
above are referred to herein as a "Xxxxxx Company" and, collectively, as the
"Xxxxxx Companies"), Unitrin, Inc., a Delaware corporation ("Unitrin"), Unitrin
Services Company, an Illinois corporation ("USC"), Trinity Universal Insurance
Company, a Texas stock insurance company ("Trinity") and those of other
subsidiaries and affiliates of Trinity not named in this paragraph that are
also signatories to this Agreement (individually, Trinity and each of such
other subsidiaries and affiliates are referred to herein as a "Trinity Company"
and, collectively, as the "Trinity Companies").
WHEREAS, Trinity, USC and the Xxxxxx Companies have entered into an
Asset Purchase Agreement, dated as of April 19, 2002 (the "Asset Purchase
Agreement"), pursuant to which Trinity and USC acquired certain assets of, and
assumed control over, certain business operations of the Xxxxxx Companies
formerly known as the Individual and Family Group business unit and currently
operated by the Trinity Companies as the Xxxxxx Auto and Home unit ("KAH"),
which underwrites, administers and sells certain types of personal lines
property and casualty insurance policies ("Policies");
WHEREAS, Unitrin and Lumbermens have entered into a Stock Purchase
Agreement, dated as of April 19, 2002 (the "Stock Purchase Agreement") pursuant
to which Unitrin acquired all of the issued and outstanding capital stock of
the Xxxxxx Enterprise Group, Inc. (currently known as Xxxxxx Auto and Home
Group, Inc.), including certain of its subsidiaries engaged in the
underwriting, administering and selling of certain Policies via the Internet
("Xxxxxx Direct");
WHEREAS, certain Trinity Companies and the Xxxxxx Companies have
entered into a Policy Conversion Agreement, dated as of June 28, 2002 (the
"Policy Conversion Agreement"), pursuant to which such Trinity Companies
acquired the right to replace the Xxxxxx Companies upon renewal of certain
Policies underwritten on and after the Conversion Date (as defined in the
Policy Conversion Agreement), while the Xxxxxx Companies retained all
liabilities associated with both Policies that were issued by any Xxxxxx
Company through KAH prior to the Conversion Date and certain other Policies
that have been or will be issued or renewed on Xxxxxx Company paper on and
after the Conversion Date for a Xxxxxx Company's own account (collectively, all
such Policies are referred to hereinafter as "Xxxxxx Policies");
WHEREAS, Trinity and the Xxxxxx Companies have entered into an
Administrative Services Agreement, dated as of June 28, 2002 (the "Services
Agreement"), pursuant to which Trinity provides administrative and claims
services to Xxxxxx with respect to the Xxxxxx Policies;
WHEREAS, certain Trinity Companies and the Xxxxxx Companies have
entered into an Amended and Restated Reinsurance Agreement, dated as of June 6,
2003 (the "Reinsurance Agreement"), pursuant to which Trinity reinsures on an
indemnity reinsurance basis certain Policies issued on Xxxxxx Company paper on
and after the Conversion Date (the "Ceded Policies"), and provides
administrative services for such Ceded Policies;
WHEREAS, Trinity and Lumbermens have entered into a Transition
Bridging Agreement, dated June 28, 2002 (the "Transition Agreement"), pursuant
to which the Xxxxxx Companies have provided certain services for KAH and Xxxxxx
Direct during a transition period following the closing of the acquisition
transactions contemplated by the Asset Purchase Agreement and the Stock
Purchase Agreement;
WHEREAS, Trinity and Lumbermens have entered into an Employee
Agreement, dated June 28, 2002 (the "Employee Agreement"), pursuant to which
the Xxxxxx Companies provided Trinity with certain employees who furnished
certain services to KAH and Xxxxxx Direct during a transition period following
the closing of the acquisition transactions contemplated by the Asset Purchase
Agreement and the Stock Purchase Agreement;
WHEREAS, pursuant to the Policy Conversion Agreement, certain Trinity
Companies are obligated to pay the Xxxxxx Companies certain commissions and
contingent bonus commissions (collectively, the "Commissions") with respect to
certain Policies produced on behalf of KAH or marketed, underwritten, issued
and administered by Xxxxxx Direct;
WHEREAS, pursuant to the Reinsurance Agreement, certain Trinity
Companies are obligated to reimburse the Xxxxxx Companies for certain premium
taxes, policy fees and assessments incurred by the Xxxxxx Companies with
respect to the Ceded Policies (the "Reimbursement Obligations");
WHEREAS, pursuant to the Services Agreement, the Xxxxxx Companies are
obligated to pay Trinity certain fees in compensation for services provided to
the Xxxxxx Companies by Trinity with respect to the Xxxxxx Policies (the
"Service Fees");
WHEREAS, pursuant to the Stock Purchase Agreement, Lumbermens is
obligated to pay Unitrin certain reserve adjustments under the Stock Purchase
Agreement;
WHEREAS, pursuant to the Employee Agreement, the parties have
disagreed about Trinity's obligation to reimburse Lumbermens for the cost of
certain pension benefits, but in the interest of settling the dispute, Trinity
agrees subject to the terms and conditions of this Agreement to reimburse
Lumbermens for the cost of certain pension benefits with respect to the
employees provided to Trinity pursuant to such Agreement (the "Pension Costs");
WHEREAS, the Commissions owed to the Xxxxxx Companies are presently
being paid as earned over a period extending to 2008;
WHEREAS, the Xxxxxx Companies would benefit from the current receipt
of potential future Commission obligations that will come due from the Trinity
Companies;
WHEREAS, the parties have agreed upon an estimate of such future
Commission obligations, and the Trinity Companies are willing to pay such
estimated obligations in a lump sum to the Xxxxxx Companies;
WHEREAS, the parties therefore wish to effect a final settlement of
all obligations with respect to the payment of Commissions, Service Fees,
certain reserve adjustments under the Stock Purchase Agreement and Pension
Costs and certain Reimbursement Obligations; and
WHEREAS, the Trinity Companies wish to purchase from Lumbermens an
extension of the term of the current license to a one hundred-year license to
use the Xxxxxx Brands (as defined in the Asset Purchase Agreement) in
connection with the promotion and conduct of personal lines property and
casualty insurance business, and Lumbermens wishes to provide the Trinity
Companies with such a license on the terms and conditions set forth herein.
NOW, THEREFORE, the parties, in consideration of the foregoing
premises, the mutual agreements and covenants contained herein, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, agree as follows:
ARTICLE I
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SETTLEMENT AND RELEASE
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Section 1.1. Settlement_Payment. On August 31, 2004 or such other date
as the parties may mutually agree (the "Closing Date") and subject to the
satisfaction or waiver of all conditions to closing set forth in Sections 4.1
and 4.2 of this Agreement, Trinity shall pay Lumbermens for the benefit of all
of the Xxxxxx Companies a Net Settlement Amount of $31,929,734 in immediately
available funds. The Net Settlement Amount is comprised of:
(a) $13,003,892 in full satisfaction of all obligations of the Trinity
Companies that are parties to the Policy Conversion Agreement to pay
commissions pursuant to Section 7.1 thereof, plus
(b) $18,444,530 in full satisfaction of all obligations of such
Trinity Companies to pay bonus commissions pursuant to Section 7.2 of the
Policy Conversion Agreement, plus
(c) $4,036,377 in full satisfaction of all obligations of the Trinity
Companies that are parties to the Reinsurance Agreement to reimburse the Xxxxxx
Companies pursuant to Section VIII.B(1) thereof, the Trinity Companies hereby
agreeing that they will not write greater than $3.0 million of premium on the
Xxxxxx Companies' paper on or after July 1, 2004, plus
(d) $798,300 in full satisfaction of Trinity's agreement to reimburse
Lumbermens for certain pension costs pursuant to Section 7 of the Employee
Agreement, plus
(e) $165,979 in full satisfaction of any obligation of the Trinity
Companies to reimburse the Xxxxxx Companies for all IBM lease payments and any
other costs incurred by the Xxxxxx Companies that were to be assumed and
discharged by the Trinity Companies, less
(f) $3,499,380 in full satisfaction of all obligations of the Xxxxxx
Companies to pay administrative fees to Trinity pursuant to Sections 10(b) and
10(c) of the Services Agreement, less
(g) $923,562 in full satisfaction of all obligations of Lumbermens
pursuant to Article 13A (Post-Closing Reserve Adjustments) of the Stock
Purchase Agreement, less
(h) $96,402 in full satisfaction of all obligations of Lumbermens to
reimburse the Trinity Companies for assigned risk assessments borne by the
Trinity Companies to the extent such assessments have been levied by reason of
the inclusion of the premiums from commercial lines business of the Xxxxxx
Companies used in the premium base in the assessment.
Any payment made pursuant to this Section 1.1 shall be final, and no
party hereto shall be entitled to any subsequent adjustment of, or correction
to, the amount of such payment; provided, however, that the parties agree that
the amount of $3,499,380 in administrative fees credited in the above
calculation represents fees payable to Trinity for administrative services up
to the Closing Date and no part of such amount is attributable to fees which
would have become payable by the Xxxxxx Companies pursuant to Section 10(b) of
the Service Agreement for any subsequent period during which Trinity provides
services to the Xxxxxx Companies pursuant to the Service Agreement.
Notwithstanding anything contained herein to the contrary, Trinity remains
obligated to perform services to the Xxxxxx Companies pursuant to the Service
Agreement without any right to additional payment from any Xxxxxx Company,
other than payments due pursuant to Section 10(a) thereof; provided, further,
that nothing contained herein shall be construed to reduce, modify or otherwise
affect the obligations of any party pursuant to Section 9 of the Service
Agreement.
Section 1.2. Termination of Transition and Employee Agreements. The
parties hereby agree that, upon receipt by Lumbermens of the payment described
in Section 1.1 of this Agreement, both the Transition Agreement and the
Employee Agreement shall have been fully performed and shall have no further
force and effect.
Section 1.3. Release of Unitrin, USC and Trinity Companies. Subject
to, and in consideration of, the terms and conditions of this Agreement,
effective as of 12:01 a.m., Central Time on the Closing Date, each Xxxxxx
Company does hereby remise, release, acquit and forever discharge Unitrin, USC
and each Trinity Company and their respective directors, officers, employees,
agents, representatives, Affiliates (as defined below), successors and assigns
(collectively, the "Trinity Releasees") of and from any and all actions, causes
of action, suits, debts, sums of money, accounts, reckonings, bonds, bills,
covenants, contracts, controversies, agreements, promises, variances,
trespasses, damages, judgments, executions, claims, rights of subrogation,
indemnity, contribution, demands, and liabilities against the Trinity Releasees
whatsoever, whether known on unknown, in law or in equity, arising under or in
connection with the Terminated Trinity Obligations (as defined below), which
any Xxxxxx Company ever had, now has, or hereafter can, shall or may have,
against the Trinity Releasees, from the beginning of the world to the end of
the world.
For purposes of this Agreement, the term "Terminated Trinity
Obligations" shall mean any obligation or liability of any Trinity Releasee
under the terms and conditions of (a) either the Transition Agreement or the
Employee Agreement, (b) Article VII of the Policy Conversion Agreement, (c)
Section VIII.B(1) of the Reinsurance Agreement, (d) Article 13A of the Stock
Purchase Agreement, and (e) Section 2.2 of the Asset Purchase Agreement.
For purposes of this Agreement, the term "Affiliate" means, with
respect to any person, at the time in question, any other person controlling,
controlled by or under common control with such person. "Person" means any
individual, corporation, partnership, firm, joint venture, association, limited
liability company or other entity. "Control" (including the terms
"controlling," "controlled by" and "under common control with") means the
possession, direct or indirect, of the power to direct or cause the direction
of the management and policies of a person, whether through the ownership of
voting securities, the holding of policyholders' proxies, by contract other
than a commercial contract for goods or non-management services, or otherwise,
unless the power is the result of an official position with or corporate office
held by the person. Except as provided otherwise in this Agreement, control is
rebuttably presumed to exist if any person, directly or indirectly, owns,
controls, holds with the power to vote, or hold shareholders' proxies
representing 10% or more of the voting securities of any person, or holds or
controls sufficient policyholders' proxies, or is entitled by contract or
otherwise, to nominate, appoint or elect the majority of the board of directors
or comparable governing body of any other persons.
Section 1.4. Release of Xxxxxx. Subject to, and in consideration of,
the terms and conditions of this Agreement, effective as of 12:01 a.m., Central
Time, on the Closing Date, each of Unitrin, USC and the Trinity Companies, do
hereby remise, release, acquit, and forever discharge each of the Xxxxxx
Companies and their respective directors, officers, employees, agents,
representatives, Affiliates, successors and assigns, (collectively, the "Xxxxxx
Releasees") of and from any and all actions, causes of action, suits, debts,
sums of money, accounts, reckonings, bonds, bills, covenants, contracts,
controversies, agreements, promises, variances, trespasses, damages, judgments,
executions, claims, rights of subrogation, indemnity, contribution, demands,
and liabilities against the Xxxxxx Releasees whatsoever, whether known or
unknown, in law or in equity, arising under or in connection with Terminated
Xxxxxx Obligations (as defined below), which Unitrin, USC and the Trinity
Companies ever had, now have, or hereafter can, shall or may have against the
Xxxxxx Releasees, from the beginning of the world to the end of the world.
For purposes of this Agreement, the term "Terminated Xxxxxx
Obligations" shall mean any obligation or liability of any Xxxxxx Releasee
under the terms and conditions of (a) either the Transition Agreement or the
Employee Agreement, (b) Sections 10(b) and 10(c) of the Services Agreement, (c)
Article 13A of the Stock Purchase Agreement, and (d) any obligations under the
Stock Purchase Agreement, the Asset Purchase Agreement and/or any other
agreement as they relate to reimbursement of the Trinity Companies for any
commercial lines assigned risk assessments payable by either the Xxxxxx
Companies, Xxxxxx Auto or Xxxxxx Independence. In addition, the term
"Terminated Xxxxxx Obligations" shall include any obligation or liability that
any Xxxxxx Releasee would have had under Article VIII.C of the Reinsurance
Agreement if not for the deletion of the words "premium taxes and policy fees,
if any, or other" from the first sentence of Article VIII.C thereof pursuant to
Section 1.7 below.
Section 1.5. Limitations on Access and Cooperation. In the event that
payment is made to Lumbermens pursuant to Sections 1.1 and 1.6 of this
Agreement, each Xxxxxx Company hereby waives any right it may have under the
Asset Purchase Agreement, Stock Purchase Agreement, Policy Conversion
Agreement, Services Agreement and Reinsurance Agreement to examine or make
copies of records, books, files, reports, data and any other information
maintained by Unitrin, USC or any Trinity Company or to contact any employee of
Unitrin, USC or any Trinity Company, in either case for the purpose of
reviewing or investigating the amount paid pursuant to either Section 1.1 or
Section 1.6 or the calculation of such amount. Section 1.6. License of "Xxxxxx"
Name. Unitrin shall pay Lumbermens $300,000 in immediately available funds as
consideration for the extension of the license to use of the Xxxxxx Brands from
a term of five years as set forth in the Asset Purchase Agreement to a term of
one hundred years. In order to effectuate this extension, the parties agree to
the amendment of the Asset Purchase Agreement as provided in this Section 1.6.
Effective as of the Closing Date, subject to the satisfaction or waiver of all
conditions to closing set forth in Section 4.1 of this Agreement, the Asset
Purchase Agreement is amended as follows:
Section 5.14(a) is amended to read as follows:
For the period beginning on the Closing Date and ending on
the one hundredth anniversary of the Closing Date, Lumbermens
hereby grants to the Trinity Companies and Unitrin, Inc.
(each a "Licensee" and collectively the "Licensees," and all
future references in this Section 5.14 to "Trinity Companies"
shall be changed to read "Licensees") and their respective
Affiliates a limited, non-exclusive, royalty-free,
non-transferable right to use the xxxx "Xxxxxx" and the
Xxxxxx logo set forth in Schedule 5.14(a) (collectively, the
"Xxxxxx Xxxxx") and the Internet domain names set forth in
Schedule 5.14(b) (collectively, the "Xxxxxx Domain Names,"
and together with the Xxxxxx Xxxxx, the "Xxxxxx Brands")
solely in connection with the promotion and conduct of the
Personal Lines Insurance business in all fifty states and the
District of Columbia in accordance with the procedures,
guidelines and standards furnished by Lumbermens to the
Trinity Companies and their Affiliates from time to time (the
"Standards") and subject to the terms and conditions herein.
Such right to use is hereinafter referred to as "License."
After the second sentence of Section 5.14(b), insert the
following new sentence:
Notwithstanding any such revision to the Standards, the
Trinity Companies shall not be required to modify any actual
use of the Xxxxxx Brands that complies with the Standards in
effect prior to the revision.
In the seventh sentence of Section 5.14(b), insert the phrase
"when reasonably requested by Lumbermens" after the word
"provide" and before the word "Lumbermens."
In Section 5.14(c), strike the eighth sentence and replace it
with the following:
Lumbermens and its Affiliates shall obtain such registrations
or renewals of any of the Xxxxxx Brands in such jurisdictions
as it deems appropriate or necessary. If any of the Trinity
Companies or any of their respective Affiliates wish to
obtain any such registration or renewal, including any
Internet domain name registration or other registration
containing the term "Xxxxxx" it shall notify Lumbermens in
writing. If within thirty (30) days of such notice Lumbermens
does not take active steps to obtain such registration or
renewal, the Trinity Companies are hereby authorized to take
such actions on behalf of Lumbermens. In such case,
Lumbermens shall execute all papers reasonably requested by
the Licensees to effect any necessary or appropriate
registration, maintenance or renewal of any of the Xxxxxx
Brands and, to the extent Lumbermens fails to execute all
such papers, Lumbermens hereby appoints the Licensees as its
attorney in fact authorized to execute such papers on behalf
of Lumbermens. Lumbermens acknowledges and agrees that the
foregoing power of attorney is coupled with an interest and
is irrevocable while the License remains in effect.
In Section 5.14(c), strike the tenth sentence and replace it
with the following:
Lumbermens shall have the first right, but not the obligation
to bring any action in the courts, administrative agencies or
otherwise to prevent the infringement, dilution, imitation,
simulation, illegal use or misuse of any of the Xxxxxx Brands
("Unauthorized Use"). If within thirty (30) days of any
notice from the Trinity Companies of any Unauthorized Use in
connection with the marketing, issuance, administration or
sale of Personal Lines Insurance Lumbermens elects not to
assert a claim, the Trinity Companies are hereby authorized
to take any action in the courts, administrative agencies or
otherwise as they deem necessary to prevent the Unauthorized
Use, and the Trinity Companies are authorized to include
Lumbermens and its Affiliates as party plaintiffs in any such
action.
Section 5.14(f) is amended to replace reference to "fifth
anniversary" to read "one hundredth anniversary."
Add a new Section 5.14(g) as follows:
Notwithstanding the provisions of Section 11.9, at any time
after the fifth anniversary of the Closing Date, all of the
rights and obligations, but in any case not less than all of
such rights and obligations, of the Trinity Companies with
respect to the Xxxxxx Brands under this Section 5.14 may be
assigned in full by the Trinity Companies, without the prior
written consent of Lumbermens, to a purchaser of all or
substantially all of the assets of the Personal Lines
Insurance business with which the Xxxxxx Brands are used,
provided such purchaser expressly agrees in writing to assume
all of the obligations of this Section 5.14 and the Trinity
Companies expressly agree in writing to guarantee the
obligations of such purchaser to Lumbermens, in a form
reasonably acceptable to Lumbermens. Further, subparts (vii),
(viii) and (ix) of the first paragraph of Section 5.14(d)
shall apply only from the Closing Date through the fifth
anniversary of the Closing Date.
Section 1.7. Additional Amendment to the Reinsurance Agreement. The
parties hereby agree to, and do hereby, amend the Reinsurance Agreement by
deleting the words "premium taxes and policy fees, if any, or other" from the
first sentence of Section VIII.C thereof.
Section 1.8. Finality of Prior Payments. Notwithstanding anything
contained in this Article I to the contrary, any and all amounts that were due
and payable under the Policy Conversion Agreement and Services Agreement with
respect to periods ending on or before June 30, 2004, are hereby acknowledged
by the parties hereto to have been paid in full satisfaction and no party shall
have any right to dispute or challenge any overpayment, underpayment or
nonpayment, including, without limitation, any overpayment, underpayment or
nonpayment made, or not made, in error, of any such amount.
ARTICLE II
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REPRESENTATIONS AND WARRANTIES OF XXXXXX
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Each of the Xxxxxx Companies hereby represents and warrants to
Unitrin, USC and each Trinity Company, as of the date hereof and as of the
Closing Date, as follows:
Section 2.1. Organization and Good Standing. Each of the Xxxxxx
Companies is an insurance company duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and has full
power and authority to own or lease its property, to conduct its business as
presently conducted and to enter into this Agreement and consummate the
transactions described herein.
Section 2.2. Authorization. Each of the Xxxxxx Companies has the full
corporate power and authority, and has taken all corporate action necessary, in
order to execute, deliver and perform its respective obligations under this
Agreement and to consummate the transactions contemplated herein. This
Agreement has been duly executed and delivered by each of the Xxxxxx Companies
and constitutes the valid and legally binding obligations of such companies,
enforceable against such companies in accordance with its terms, subject to
bankruptcy, receivership, insolvency, reorganization, moratorium or similar
laws affecting or relating to creditors' rights generally and subject to
general principles of equity.
Section 2.3. Consents and Approvals. Except for the consents and
approvals listed in Section 4.1(b) of this Agreement, the Xxxxxx Companies are
not required to obtain any consent or approval of any third person for the
consummation by any Xxxxxx Company of the transactions contemplated by this
Agreement.
Section 2.4. No Insolvency Proceedings. None of the Xxxxxx Companies
has received a service of summons or other notice that the Illinois Director of
Insurance or the Division of Insurance of the Illinois Department of Financial
and Professional Regulation (the "Illinois Division") has initiated any
conservatorship, rehabilitation, liquidation or other insolvency proceedings
against any of the Xxxxxx Companies.
Section 2.5. Survival. All representations and warranties contained in
this Article II shall survive the consummation of the transactions contemplated
by this Agreement.
ARTICLE III
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REPRESENTATIONS AND WARRANTIES OF UNITRIN
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Unitrin, USC and each of the Trinity Companies hereby represents and
warrants to each of the Xxxxxx Companies, as of the date hereof and as of the
Closing Date, as follows:
Section 3.1. Organization and Good Standing. Unitrin, USC and each of
the Trinity Companies is a company duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and has full
power and authority to own or lease its properties, to conduct its business as
presently conducted and to enter into this Agreement and consummate the
transactions described herein.
Section 3.2. Authorization. Unitrin, USC and each of the Trinity
Companies have the full corporate power and authority, and have taken all
corporate action necessary, in order to execute, deliver and perform their
respective obligations under this Agreement and to consummate the transactions
contemplated herein. This Agreement has been duly executed and delivered by
Unitrin, USC and each of the Trinity Companies and constitutes the valid and
legally binding obligations of such companies, enforceable against such
companies in accordance with its terms, subject to bankruptcy, receivership,
insolvency, reorganization, moratorium or similar laws affecting or relating to
creditors' rights generally and subject to general principles of equity.
Section 3.3. Consents and Approvals. Unitrin, USC and the Trinity
Companies are not required to obtain any consent or approval of any third
person for the consummation by any of them of the transactions contemplated by
this Agreement.
Section 3.4 Survival. All representations and warranties contained in
this Article III shall survive the consummation of the transactions
contemplated by this Agreement.
ARTICLE IV
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CLOSING CONDITIONS
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Section 4.1. Conditions to Unitrin's Obligation to Close. The
obligations of Unitrin, USC and the Trinity Companies to make the payments
contemplated by Sections 1.1 and 1.6 of this Agreement and to provide the
release contemplated by Section 1.4 of this Agreement are subject to the
fulfillment on or before the Closing Date of the following conditions, any one
or more of which may be waived by them:
a) Representations and Warranties. The representations and
warranties of each Xxxxxx Company shall be true and correct in all
material respects on and as of the Closing Date with the same force
and effect as though made on and as of the Closing Date and Unitrin
shall have received a certificate signed by an officer of Lumbermens
confirming such fact;
b) Consents and Approvals. The Illinois Director of Insurance
shall have approved the Xxxxxx Companies consummation of the
transactions contemplated hereby and such approval shall be in a form
reasonably satisfactory to the parties hereto;
c) Payments to KAH Employees. The Xxxxxx Companies shall have
delivered to Unitrin on the Closing Date for the benefit of each of
the KAH Employees who so elects, a cashier's check made payable to
each KAH employee in an amount agreed upon by such employee and the
Xxxxxx Companies, in each employee's name, subject to the delivery to
Lumbermens of such employee's written release substantially in the
form of Exhibit A attached hereto by such employee of all obligations
of the Xxxxxx Companies owed to the employee under Section 4 of that
certain Benefits Agreement, dated April 11, 2002.
d) Prior Payment. No later than the earlier of (i) August 26,
2004 or (ii) two (2) Business Days (as defined below) prior to the
Closing Date, Unitrin shall have delivered to Lumbermens, in a
mutually agreed upon amount, the calculation and payment of all
payments due and payable to the Xxxxxx Companies for the period ended
June 30, 2004. As used herein, the term "Business Day" means a day
(other than a Saturday or Sunday) on which banks generally are open in
New York and Chicago for the conduct of substantially all of their
commercial lending activities; and
e) Other Documents. Lumbermens shall have delivered to Unitrin:
(a) copies of the resolutions (in form and substance reasonably
satisfactory to Unitrin) duly adopted by the board of directors of
each Xxxxxx Company authorizing the execution, delivery and
performance of this Agreement by such Xxxxxx Company, certified (in
form and substance reasonably satisfactory to Unitrin) by the
Secretary or an Assistant Secretary of each such Xxxxxx Company; (b)
certificates (in form and substance reasonably satisfactory to
Unitrin) of the Secretary or an Assistant Secretary as to the
incumbency and signatures of the officers of the Xxxxxx Companies
executing this Agreement; (c) certificate dated the Closing Date (in
form and substance reasonably satisfactory to Unitrin) of an officer
of Lumbermens certifying that, to his or her knowledge, none of the
Xxxxxx Companies has received, on or after the date hereof, a service
of summons or other notice from the Illinois Division not previously
received by any Xxxxxx Company, that the Illinois Director of
Insurance or the Illinois Division has initiated or intends to
initiate any conservatorship, rehabilitiation, liquidation or other
insolvency proceedings against any of the Xxxxxx Companies, and (d)
such other documents, certificates or records as Unitrin or its
counsel may reasonably request.
Section 4.2. Conditions to Xxxxxx'x Obligation to Close. The
obligation of the Xxxxxx Companies to provide the release contemplated by
Section 1.3 of this Agreement and to consent to the amendment of Section 5.14
of the Asset Purchase Agreement, as provided in Section 1.6 is subject to the
fulfillment on or before the Closing Date of the following conditions, any one
or more of which may be waived by them:
a) Representations and Warranties. The representations and
warranties of Unitrin, USC and each Trinity Company shall be true and
correct in all material respects on and as of the Closing Date with
the same force and effect as though made on and as of the Closing
Date, and Lumbermens shall have received a certificate signed by an
officer of Unitrin confirming such fact;
b) Consents and Approvals. The Illinois Director of Insurance
shall have approved the Xxxxxx Companies consummation of the
transactions contemplated hereby and such approval shall be in a form
reasonably satisfactory to the parties hereto;
c) Payment by Unitrin. Unitrin, USC and the Trinity Companies
shall have made the payments to Lumbermens, as contemplated by
Sections 1.1 and 1.6 of this Agreement, totaling $32,229,734 in
immediately available funds;
d) Release by KAH Employees. The Xxxxxx Companies shall have
received written releases substantially in the form attached hereto as
Exhibit A from each KAH employee who receives payment pursuant to
Section 4.1(c) of this Agreement of all obligations of the Xxxxxx
Companies owed said employee under Section 4 of that certain Benefits
Agreement, dated April 11, 2002; and
e) Prior Payment. No later than the earlier of (i) August 26,
2004 or (ii) two (2) Business Days prior to the Closing Date,
Lumbermens shall have received from Unitrin, in a mutually agreed upon
amount, the calculation and payment of all payments due and payable to
the Xxxxxx Companies for the period ended June 30, 2004; and
f) Other Documents. Unitrin shall have delivered to Lumbermens:
(a) certificates (in form and substance reasonably satisfactory to
Lumbermens) of the Secretary or an Assistant Secretary as to the
incumbency and signatures of the officers of Unitrin, USC and the
Trinity Companies executing this Agreement; and (b) such other
documents, certificates or records as Lumbermens or its counsel may
reasonably request.
Section 4.3. Reasonable Efforts. The Xxxxxx Companies shall promptly
take all reasonable action and make all necessary filings required to obtain
the approval of the Illinois Division required as a condition of closing
hereunder. Unitrin, USC and the Trinity Companies agree to take all reasonable
action to cooperate with the Xxxxxx Companies in their efforts to obtain the
required approval of the Illinois Director of Insurance.
ARTICLE V
TERMINATION PRIOR TO CLOSING
Section 5.1. Termination Prior to Closing. This Agreement may be
terminated at any time prior to the closing of the transactions contemplated
hereby:
a) by mutual consent of the parties;
b) by either Unitrin or Lumbermens giving written notice to the
other if any condition to its obligations (and those of its Affiliates
which are parties to this Agreement), as set forth in Article IV of
this Agreement is not satisfied or waived prior to August 31, 2004;
provided, however, such right to terminate shall not be available to
any party that breaches its obligations set forth in Section 4.3 of
this Agreement; or
c) by either Unitrin or Lumbermens giving written notice to the
other in the event that any governmental authority shall have issued
an order, decree or ruling or taken any other action (which order,
decree, ruling or other action the parties shall use commercially
reasonable efforts to terminate for a period of up to 7 calendar days)
in each case permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated hereby, and such efforts to
terminate such order, decree, ruling or other action shall have
failed.
ARTICLE VI
----------
INDEMNIFICATION
---------------
Section 6.1. Indemnification of Unitrin. The Xxxxxx Companies shall
indemnify, defend and hold harmless Unitrin, USC, the Trinity Companies and
their respective directors, officers, employees, representatives, Affiliates,
successors and permitted assigns (collectively, the "Unitrin Indemnitees") from
and against all actions, claims, losses, liabilities, damages, deficiencies,
costs, expenses (including reasonable fees and expenses of attorneys), interest
and penalties (collectively, referred to hereinafter as "Losses") asserted
against, imposed upon or incurred by such Unitrin Indemnitees resulting from,
arising out of, based upon or otherwise in respect of any of the following: (a)
any breach or inaccuracy in the representations and warranties contained in
Article II of this Agreement, (b) any breach, nonfulfillment or default in the
performance of any of the covenants and agreements of the Xxxxxx Companies
contained in this Agreement and (c) the enforcement of this indemnity.
Section 6.2. Indemnification of Xxxxxx. Unitrin, USC and the Trinity
Companies shall indemnify, defend and hold harmless the Xxxxxx Companies and
their respective directors, officers, employees, representatives, Affiliates,
successors and permitted assigns (collectively, the Xxxxxx Indemnitees") from
and against all Losses asserted against, imposed upon or incurred by such
Xxxxxx Indemnitees resulting from, arising out of, based upon or otherwise in
respect of any of the following: (a) any breach or inaccuracy in the
representations and warranties contained in Article III of this Agreement, (b)
any breach, nonfulfillment or default in the performance of any of the
covenants and agreements of Unitrin, USC or the Trinity Companies contained in
this Agreement, (c) the acts, omissions and/or performance by any Subject
Employee (as defined in the Employee Agreement) (except to the extent such acts
or omissions were pursuant to the written instructions of any of the Xxxxxx
Companies) during the Service Period (as defined in the Employee Agreement),
(d) any claims for any severance pay, if any, or any other amounts due or costs
incurred by the Xxxxxx Companies as a result of the termination of any Subject
Employee during the Service Period, except for severance payments relating to
Subject Employees who were notified or scheduled for termination prior to the
date of the Employee Agreement, , and (e) the enforcement of this indemnity.
Section 6.3. Indemnification Procedures. The procedures set forth in
Article IX of the Asset Purchase Agreement shall govern all indemnification
claims under this Agreement.
ARTICLE VII
-----------
MISCELLANEOUS
-------------
Section 7.1. Dispute Resolution. Any disputes arising out of this
Agreement that cannot be resolved by the parties shall be resolved in
accordance with the dispute resolution procedures contained in the Asset
Purchase Agreement.
Section 7.2. Joint and Several Obligations. Each of the Xxxxxx
Companies shall be jointly and severally liable for all obligations under, or
relating to, this Agreement. Unitrin, USC and the Trinity Companies shall be
jointly and severally liable for all obligations under, or relating to, this
Agreement.
Section 7.3. Entire Agreement. This Agreement, together with the
Schedules hereto, constitutes the entire contract between the parties. No
amendment or modification hereof shall be of any force or effect unless in
writing and signed by the party or parties hereto against whom such amendment
or modification is sought to be enforced.
Section 7.4. No Third Party Beneficiaries. Nothing herein, express or
implied, is intended, or shall be construed to confer upon or give to any
person other than the signatories hereto and their respective legal
representatives, any rights or remedies under or by reason of this Agreement.
There are no third party beneficiaries of this Agreement and the transactions
contemplated hereby.
Section 7.5. Counterparts. This Agreement may be executed by the
parties in one or more counterparts, each of which shall constitute an
original. Each such counterpart shall become effective when one counterpart has
been signed by each party hereto.
Section 7.6. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS,
WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
Section 7.7. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given at the time
delivered to the persons at the addresses set forth below (or such other
address as may be provided hereunder):
(a) If to Unitrin, USC or Unitrin, Inc.
the Trinity Companies: Xxx Xxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: General Counsel
(b) If to the Xxxxxx Companies: Lumbermens Mutual Casualty
Company
Xxx Xxxxxx Xxxxx
Xxxx Xxxxx, XX 00000-0000
Attention: General Counsel
Section 7.8. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns but except as otherwise specifically provided herein,
the Agreement and the respective rights and obligations of the parties hereto
shall not be assignable by any party hereto without prior written consent of
the other parties hereto.
**The remainder of this page intentionally left blank**
IN WITNESS WHEREOF, each of the corporate parties hereto has caused
this Agreement to be executed in its name and on its behalf by its duly
authorized officers, all as of the date set forth above.
LUMBERMENS MUTUAL CASUALTY COMPANY
By: _____________________________________
Name: _____________________________________
Title: ___________________________________
AMERICAN MOTORISTS INSURANCE COMPANY
By: _____________________________________
Name: _____________________________________
Title: ___________________________________
AMERICAN MANUFACTURERS MUTUAL INSURANCE COMPANY
By: _____________________________________
Name: _____________________________________
Title: ___________________________________
AMERICAN PROTECTION INSURANCE COMPANY
By: ____________________________________
Name: ___________________________________
Title: ___________________________________
XXXXXX LLOYDS INSURANCE COMPANY
By: _____________________________________
Name: _____________________________________
Title: ___________________________________
UNITRIN, INC.
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
UNITRIN SERVICES COMPANY
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
TRINITY UNIVERSAL INSURANCE COMPANY
By: _____________________________________
Name: _____________________________________
Title: ___________________________________
UNITRIN ADVANTAGE INSURANCE COMPANY
By: _____________________________________
Name: _____________________________________
Title: ___________________________________
UNITRIN AUTO AND HOME INSURANCE COMPANY
By: _____________________________________
Name: _____________________________________
Title: ___________________________________
UNITRIN PREFERRED INSURANCE COMPANY
By: _____________________________________
Name: _____________________________________
Title: ___________________________________
XXXXXX INDEPENDENCE INSURANCE COMPANY
By: _____________________________________
Name: _____________________________________
Title: ___________________________________
TRINITY LLOYD'S INSURANCE COMPANY
By: _____________________________________
Name: _____________________________________
Title: ___________________________________
ALPHA PROPERTY & CASUALTY INSURANCE COMPANY
By: _____________________________________
Name: _____________________________________
Title: ___________________________________
UNITRIN COUNTY MUTUAL INSURANCE COMPANY
By: _____________________________________
Name: _____________________________________
Title: ___________________________________
CHARTER INDEMNITY COMPANY
By: _____________________________________
Name: _____________________________________
Title: ___________________________________
FINANCIAL INDEMNITY COMPANY
By: _____________________________________
Name: _____________________________________
Title: ___________________________________
MILWAUKEE CASUALTY INSURANCE CO.
By: _____________________________________
Name: _____________________________________
Title: ___________________________________
MILWAUKEE SAFEGUARD INSURANCE COMPANY
By: _____________________________________
Name: _____________________________________
Title: ___________________________________
SECURITY NATIONAL INSURANCE COMPANY
By: _____________________________________
Name: _____________________________________
Title: ___________________________________
TRINITY UNIVERSAL INSURANCE COMPANY OF
KANSAS, INC.
By: _____________________________________
Name: _____________________________________
Title: ___________________________________
UNION NATIONAL FIRE INSURANCE COMPANY
By: _____________________________________
Name: _____________________________________
Title: ___________________________________
UNITED CASUALTY INSURANCE COMPANY OF AMERICA
By: _____________________________________
Name: _____________________________________
Title: ___________________________________
UNITRIN DIRECT ADVANTAGE INSURANCE COMPANY
By: _____________________________________
Name: _____________________________________
Title: ___________________________________
UNITRIN DIRECT INSURANCE COMPANY
By: _____________________________________
Name: _____________________________________
Title: ___________________________________
VALLEY INSURANCE COMPANY
By: _____________________________________
Name: _____________________________________
Title: ___________________________________
VALLEY PROPERTY & CASUALTY INSURANCE COMPANY
By: _____________________________________
Name: _____________________________________
Title: ___________________________________
EXHIBIT A
FORM OF RELEASE
SETTLEMENT AND TERMINATION AGREEMENT
___________________________________________
THIS SETTLEMENT AND TERMINATION AGREEMENT (this "Agreement") is made
effective as of August ___, 2004 (the "Effective Date"), by and between
LUMBERMENS MUTUAL CASUALTY COMPANY ("Lumbermens") and the undersigned
individual (the "Employee").
WHEREAS, Lumbermens and, among others, the Employee had entered into
that certain Benefits Agreement dated April 11, 2002 (the "Benefits
Agreement"); and
WHEREAS, Lumbermens and the Employee now desire to terminate
paragraph 4 of the Benefits Agreement without any further liability of
Lumbermens under the Benefits Agreement; and
WHEREAS, due to Lumbermens' financial condition, Lumbermens is
subject to corrective orders issued by the Illinois Department of Insurance,
now the Illinois Department of Financial and Professional Regulation -
Division of Insurance (the "DOI"), and pursuant thereto, the DOI must approve
the termination of paragraph 4 of the Benefits Agreement on the terms and
conditions set forth herein; and
WHEREAS, Lumbermens and the Employee have mutually agreed to
terminate paragraph 4 of the Benefits Agreement on the terms and conditions
set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Paragraph 4 of the Benefits Agreement shall be terminated
effective as of the Effective Date, and thereafter Lumbermens shall have no
other or further obligation to the Employee under paragraph 4 of the Benefits
Agreement as of and from the Effective Date.
2. On the Effective Date, Lumbermens shall pay to the Employee the
following dollar amount, $____________, less applicable federal and state tax
withholding for wages, by cashiers check made payable to the Employee and
delivered to the Employee's current employer. The Employee shall specify his
or her home address and social security number on the signature page hereof,
such information to be used by Lumbermens for tax reporting purposes. The
payment made hereunder shall be subject to any applicable reporting and/or
withholding requirements.
3. As of the Effective Date (but subject to receipt of his or her
aforesaid payment), the Employee by signing below, for himself or herself and
his or her heirs, successors and assigns, does hereby release and discharge
Lumbermens and its past, present, and future agents, affiliates, employees,
officers, directors, shareholders, successors and assigns (collectively,
"Xxxxxx"), from any and all claims, liabilities, actions, causes of action,
damages, debts, obligations, expenses (including attorneys' fees), sums of
money, controversies, agreements, judgments, executions, demands or suits
whatsoever, in law or in equity, known or unknown, whether based on tort,
contract, or other theories of recovery (collectively, "Claims"), which the
Employee does or may have (or which might in the future accrue to him or her)
arising out of or in any way concerning paragraph 4 of the Benefits Agreement,
but excluding any breach of this Agreement.
4. This Agreement is subject to and conditioned upon the receipt by
Lumbermens on or before the Effective Date of (a) from the Employee, a copy of
this Agreement signed by the Employee, and (b) from the DOI, all approvals, in
form and substance reasonably satisfactory to Lumbermens, which may be
required for Lumbermens to enter into and perform this Agreement.
5. The Employee represents and warrants to Lumbermens that he or she
is currently employed by a wholly owned subsidiary of Unitrin, Inc. on the
Effective Date and has been constantly so employed since January 2003.
6. The Employee acknowledges that he or she is executing a copy of
this Agreement prior to the execution by Lumbermens.
7. This Agreement, when executed by both the Employee and Lumbermens,
shall inure to the benefit of and be binding upon the parties hereto and their
respective heirs, successors, and assigns. This Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State
of Illinois, without regard to conflict of laws principles.
8. This Agreement may be executed in counterpart, and by the
different parties on different counterpart signature pages, which taken
together shall constitute one and the same agreement. Any of such counterparts
shall for all purposes be deemed an original.
9. The Employee acknowledges and agrees that this Agreement is for
the sole benefit of the parties hereto and that Lumbermens shall owe no duty
hereunder to any other person or entity. No other person or entity shall be
deemed a third-party beneficiary of this Agreement or have any rights
hereunder (unless explicitly granted by the terms hereof). The rights granted
hereunder to the Employee may only be enforceable by the Employee and his or
her respective heirs.
10. LUMBERMENS MAKES NO REPRESENTATIONS OR WARRANTIES REGARDING OR IN
CONNECTION WITH THIS AGREEMENT. THE EMPLOYEE HEREBY CONFIRMS THAT HE OR SHE
HAS MADE HIS OR HER OWN INVESTIGATION OF THE MERITS OF SIGNING OR NOT SIGNING
THIS AGREEMENT AND HAS HAD FULL OPPORTUNITY TO CONSULT WITH COUNSEL REGARDING
THIS AGREEMENT. The Employee represents and warrants to Xxxxxx that in
executing this Agreement, the Employee has had the opportunity, in his or her
discretion, to consult with an attorney of his or her choice; that the terms
of this Agreement have been read; that if the Employee has chosen to consult
with an attorney, has had the terms and consequences of this Agreement
(including risks, complications, and costs) explained to him or her by that
attorney; and that the Employee fully understands the terms and consequences
of this Agreement. The Employee shall bear all attorneys' fees and costs
arising from the Employee's own counsel in connection with this Agreement and
all related matters. The Employee further acknowledges and represents that, in
executing this Agreement, he or she has not relied on any inducements,
promises, or representations made by Lumbermens or Xxxxxx or any party
representing or serving Lumbermens or Xxxxxx. The Employee represents and
warrants that his or her execution of this Agreement is fully informed and
free and voluntary.
IN WITNESS WHEREOF, the undersigneds have executed this Agreement as
of the date first above written.
LUMBERMENS MUTUAL CASUALTY COMPANY
By:______________________________
Print Name:______________________
Title:___________________________
THE EMPLOYEE:
Sign Name:______________________________
Print Name:_____________________________
Social Security Number:_________________
Home Address:
_____________________________
_____________________________
_____________________________
_____________________________
