STOCK AND ASSET PURCHASE AGREEMENT
by and among
FIGGIE INTERNATIONAL INC.,
XXXXX XXXX HOLDINGS, INC.,
XXXXX HILL SERVICES, INC.
and
FRONT ROYAL, INC.
Dated: October 21, 1994
Table of Contents
Page
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ARTICLE I
DEFINITIONS
1.1 Affiliate ............................................... 2
1.2 Agreement ............................................... 2
1.3 Annual Statutory Statements ............................. 2
1.4 Assignment Agreement .................................... 2
1.5 Xxxx of Sale ............................................ 3
1.6 Bond Salvage and Indemnification Agreement .............. 3
1.7 Bond Escrow Agreement ................................... 3
1.8 Bond Indemnification Fund ............................... 3
1.9 Bond Litigation ......................................... 3
1.10 Bond Recoverable ........................................ 3
1.11 Business Day ............................................ 4
1.12 Buyer ................................................... 4
1.13 Buyer's Closing Certificate ............................. 4
1.14 Buyer's Employees ....................................... 4
1.15 Cardinal ................................................ 4
1.16 Closing ................................................. 4
1.17 Closing Date ............................................ 4
1.18 Code .................................................... 5
1.19 Colony .................................................. 5
1.20 Colony Shares ........................................... 5
1.21 Companies ............................................... 5
1.22 Contracts ............................................... 5
1.23 Deposit ................................................. 5
1.24 Employee Plans .......................................... 5
1.25 Employees ............................................... 5
1.26 Equipment ............................................... 5
1.27 Equipment Leases ........................................ 6
1.28 ERISA ................................................... 6
1.29 ERISA Affiliate ......................................... 6
1.30 Escrow Agent ............................................ 6
1.31 Figgie .................................................. 6
1.32 Figgie's Closing Certificate ............................ 6
1.33 Xxxxxxxx ................................................ 6
1.34 Xxxxxxxx Shares ......................................... 6
1.35 Xxxxxxxx Surplus Note ................................... 7
1.36 Holdback Payment ........................................ 7
1.37 Holdings ................................................ 7
1.38 HSR Act ................................................. 7
1.39 INA ..................................................... 7
1.40 Indemnity Claim ......................................... 7
1.41 Intellectual Property ................................... 7
1.42 Knowledge ............................................... 7
1.43 Law ..................................................... 7
1.44 Lease ................................................... 8
1.45 Lien .................................................... 8
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1.46 LLG&M.................................................... 8
1.47 Material Adverse Effect.................................. 8
1.48 Ohio Code................................................ 8
1.49 Ohio Department.......................................... 8
1.50 Opinion of Buyer's Counsel............................... 8
1.51 Opinions of Figgie's Counsel............................. 9
1.52 Pension Plan............................................. 9
1.53 Permits.................................................. 9
1.54 Permitted Liens.......................................... 9
1.55 Purchased Assets......................................... 9
1.56 Purchased Stock.......................................... 9
1.57 Purchase Price........................................... 9
1.58 Quarterly Statutory Statements .......................... 9
1.59 SAP...................................................... 10
1.60 Services................................................. 10
1.61 Services Agreements...................................... 10
1.62 Software Licenses........................................ 10
1.63 Statutory Statements..................................... 10
1.64 Sublease................................................. 10
1.65 Subsidiary............................................... 10
1.66 Tax Indemnity Agreement.................................. 11
1.67 Xxxxxxxxxxx Report....................................... 11
1.68 Virginia Code............................................ 11
1.69 Virginia Commission...................................... 11
ARTICLE II
PURCHASE AND SALE OF STOCK AND ASSETS
2.1 Transfer of Stock and Assets............................. 11
2.2 Sublease................................................. 12
2.3 Assumption of Liabilities................................ 12
2.2 Purchase Price........................................... 12
2.5 Allocation of Purchase Price............................. 13
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FIGGIE, HOLDINGS AND SERVICES
3.1 Organization and Good Standing........................... 13
3.2 Licenses and Permits..................................... 13
3.3 Capitalization........................................... 14
3.4 Authority, Validity and Enforceability................... 15
3.5 No Violation or Breach................................... 16
3.6 Title to Shares and Purchased Assets..................... 17
3.7 Subsidiaries............................................. 17
3.8 Consents................................................. 17
3.9 Statutory Statements..................................... 18
3.10 Insurance Regulatory Filings............................. 18
3.11 Policy Forms............................................. 19
3.12 Transactions with Interested Persons..................... 19
3.13 Reinsurance Policies..................................... 20
3.14 Litigation............................................... 21
3.15 No Brokers............................................... 22
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3.16 Absence of Certain Changes............................... 22
3.17 Taxes.................................................... 24
3.18 Contracts................................................ 27
3.19 Compliance with Other Instruments and Laws............... 28
3.20 Employees................................................ 28
3.21 Employee Benefit Matters................................. 28
3.22 Intellectual Property.................................... 30
3.23 Disclosure............................................... 31
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Organization and Good Standing........................... 31
4.2 Authority, Validity and Enforceability................... 32
4.3 No Violation or Breach................................... 32
4.4 Consents................................................. 33
4.5 Purchase for Investment.................................. 33
4.6 Litigation............................................... 33
4.7 No Brokers............................................... 34
ARTICLE V
CERTAIN HATTERS PENDING THE CLOSING
5.1 Carry on in Regular Course............................... 34
5.2 Indebtedness............................................. 35
5.3 Issuance of Stock........................................ 35
5.4 Compensation............................................. 35
5.5 Compliance with Law...................................... 36
5.6 Access to Information.................................... 36
5.7 Cooperation; Best Efforts................................ 37
5.8 Consents................................................. 37
5.9 Publicity................................................ 38
5.10 No Solicitation.......................................... 38
5.11 Articles and Bylaws...................................... 38
5.12 Services Agreements...................................... 39
5.13 Telephone System......................................... 39
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
6.1 Compliance with Agreement................................ 40
6.2 Proceedings and Instruments Satisfactory................. 40
6.3 No Litigation............................................ 41
6.4 Representations and Warranties........................... 41
6.5 Ratings.................................................. 42
6.6 Tax Recoverable.......................................... 42
6.7 Deliveries at Closing.................................... 42
6.8 Regulatory Approvals..................................... 42
6.9 Consents................................................. 42
6.10 Resignation of Directors and Officers.................... 43
6.11 Employee Plans........................................... 43
6.12 Waiting Periods.......................................... 43
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6.13 Policyholders' Surplus................................... 43
ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF FIGGIE, HOLDINGS AND SERVICES
7.1 Compliance with Agreement................................ 44
7.2 Proceedings and Instruments Satisfactory ................ 44
7.3 No Litigation............................................ 45
7.4 Representations and Warranties........................... 45
7.5 Deliveries at Closing.................................... 45
7.6 Regulatory Approvals..................................... 45
7.7 Consents................................................. 46
7.8 Waiting Periods.......................................... 46
ARTICLE VIII
CERTAIN ADDITIONAL COVENANTS AND AGREEMENTS
8.1 Employees................................................ 46
8.2 Employee Benefit Plan Matters............................ 48
8.3 Transfer Taxes and Fees.................................. 48
8.4 Records.................................................. 48
8.5 Access................................................... 49
8.6 Cooperation.............................................. 50
8.7 Confidentiality.......................................... 50
8.8 Review of Reserves....................................... 50
8.9 Holdback Payment......................................... 51
8.10 Use of Name.............................................. 51
ARTICLE IX
INDEMNIFICATION
9.1 Survival of Representations and Warranties............... 52
9.2 Indemnification by Figgie, Holdings and
Services................................................. 53
9.3 Indemnification by Buyer................................. 54
9.4 Limitation of Liability.................................. 55
9.5 Notice of Indemnity Claims............................... 56
9.6 Indemnity Amounts to be Computed on After-Tax
Basis.................................................... 57
9.7 Reduction in Holdback Payment............................ 58
9.8 Arbitration.............................................. 59
9.9 Remedies Cumulative...................................... 60
ARTICLE X
TERMINATION
10.1 Termination.............................................. 61
10.2 Effect of Termination.................................... 61
10.3 Amendment................................................ 62
10.4 Extension; Waiver........................................ 62
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ARTICLE XI
DEPOSIT; PAYMENTS ON TERMINATION
11.1 Deposit.................................................. 62
11.2 LLG&M.................................................... 63
11.3 Distribution............................................. 64
11.4 Payment to Figgie........................................ 64
11.5 Payment to Buyer......................................... 64
11.6 Instructions to LLG&M.................................... 65
ARTICLE XII
MISCELLANEOUS
12.1 Entire Agreement......................................... 65
12.2 Expenses................................................. 66
12.3 Governing Law............................................ 66
12.4 Assignment............................................... 66
12.5 Further Assurances....................................... 66
12.6 Notices.................................................. 67
12.7 Counterparts; Headings................................... 68
12.8 Interpretation........................................... 68
12.9 Severability............................................. 68
12.10 No Reliance.............................................. 68
Exhibits
Exhibit 1.4 Assignment Agreement
Exhibit 1.5 Xxxx of Sale
Exhibit 1.6 Bond Salvage and Indemnification Agreement
Exhibit 1.7 Bond Escrow Agreement
Exhibit 1.13 Buyer's Closing Certificate
Exhibit 1.32 Figgie's Closing Certificate
Exhibit 1.50 Opinion of Buyer's Counsel
Exhibit 1.51 Opinions of Figgie's Counsel
Exhibit 1.64 Sublease
Exhibit 1.66 Tax Indemnity Agreement
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Schedules
Schedule 1.9 Bond Litigation
Schedule 1.26A Equipment
Schedule 1.26B Excluded Equipment
Schedule 1.27 Equipment Leases
Schedule 1.42 Knowledge
Schedule 1.54 Permitted Liens
Schedule 1.62A Software Licenses
Schedule 1.62B Excluded Software Licenses
Schedule 2.5 Allocation of Purchase Price
Schedule 3.2 Licensed Jurisdictions
Schedule 3.8 Consents
Schedule 3.10 Deficiencies in Regulatory Filings
Schedule 3.11 Policy Forms
Schedule 3.12 Related Party Transactions
Schedule 3.13 Reinsurance Contracts and Treaties
Schedule 3.14 Litigation
Schedule 3.15 Brokers
Schedule 3.16 Certain Changes
Schedule 3.17 Taxes
Schedule 3.18 Contracts
Schedule 3.20 Employees
Schedule 3.22 Intellectual Property
Schedule 4.4 Consents
Schedule 6.6 Tax Recoverable
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STOCK AND ASSET PURCHASE AGREEMENT
THIS STOCK AND ASSET PURCHASE AGREEMENT is made as of the 21st day of
October, 1994, by and among FIGGIE INTERNATIONAL INC., a Delaware corporation
("Figgie"), XXXXX HILL HOLDINGS, INC., a Delaware corporation ("Holdings"),
XXXXX XXXX SERVICES, INC., a Delaware corporation ("Services"), and FRONT ROYAL,
INC. a North Carolina corporation ("Buyer").
RECITALS
WHEREAS, Figgie owns, directly or indirectly, all of the outstanding
capital stock of Holdings, Services, Colony Insurance Com?any, a Virginia
corporation ("Colony"), and Xxxxxxxx Insurance Company, a Virginia corporation
("Xxxxxxxx"); and
WHEREAS, Figgie, Holdings and Services desire to sell, and Buyer desires to
purchase, all of the outstanding capital stock of Colony and Xxxxxxxx and
certain of Services' assets;
NOW, THEREFORE, in consideration of the mutual covenants, conditions and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, it is agreed that:
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ARTICLE I
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
specified:
1.1 Affiliate. "Affiliate" shall mean, with respect to a specified person,
another person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the person
specified. "Control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
person, whether through the ownership of voting securities, by contract or
otherwise.
1.2 Agreement. "Agreement" shall mean this Stock and Asset Purchase
Agreement, together with the Exhibits and Schedules attached hereto as the same
may be amended from time to time in accordance with the terms hereof.
1.3 Annual Statutory Statements. "Annual Statutory Statements" shall mean
the annual statutory convention statements of the Companies as at December 31,
1993, filed with the Virginia Commission pursuant to the Virginia Code or with
the Ohio Department pursuant to the Ohio Code, as applicable.
1.4 Assignment Agreement. "Assignment Agreement" shall mean the Assignment
Agreement in the form of Exhibit 1.4 to be delivered by Buyer to Figgie,
Holdings and Services at the Closing pursuant to Section 7.5 hereof.
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1.5 Xxxx of Sale. "Xxxx of Sale" shall mean a xxxx of sale in the form of
Exhibit 1.5 to be delivered by Figgie, Holdings and Services to Buyer at the
Closing pursuant to Section 6.7 hereof.
1.6 Bond Salvage and Indemnification Agreement. "Bond Salvage and
Indemnification Agreement" shall mean the agreement among Buyer, the Companies,
Figgie, Holdings and Services with respect to the Bond Recoverable and the Bond
Litigation in the form of Exhibit 1.6.
1.7 Bond Escrow Agreement. "Bond Escrow Agreement" shall mean the escrow
agreement in the form of Exhibit 1.7.
1.8 Bond Indemnification Fund. "Bond Indemnification Fund" shall mean the
fund established pursuant to the Bond Salvage and Indemnification Agreement and
the Bond Escrow Agreement.
1.9 Bond Litigation. "Bond Litigation" shall mean any and all actions,
proceedings, investigations, claims or counterclaims pending or threatened at
any time against or affecting the Companies, Services, Holdings, Figgie, any
Affiliate of the foregoing, or INA with respect to the Bond Recoverable,
including but not limited to the matters set forth on Schedule 1.9.
1.10 Bond Recoverable. "Bond Recoverable" shall mean all rights and
obligations of the Companies and their Affiliates in connection with their
participation prior to the Closing Date in any investor bond program through
which any of the Companies or their Affiliates have or had any liability,
including, but not
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limited to, the investor bond program in which INA acted as primary underwriter.
For purposes of this definition of Bond Recoverable, Affiliates of the Companies
shall mean all Affiliates of the Companies prior to the Closing Date.
1.11 Business Day. "Business Day" shall mean any day except a Saturday,
Sunday or any day on which United States chartered banking institutions are
required by Law to close.
1.12 Buyer. "Buyer" shall mean Front Royal, Inc., a North Carolina
corporation.
1.13 Buyer's Closing Certificate. "Buyer's Closing Certificate" shall mean
the certificate of Buyer in the form of Exhibit 1.13.
1.14 Buyer's Employees. "Buyer's Employees" shall have the meaning set
forth in Section 8.1 hereof.
1.15 Cardinal. "Cardinal" shall mean Cardinal Casualty Company, an Ohio
corporation.
1.16 Closing. "Closing" shall mean the conference held at 10:00 a.m., local
time, on the Closing Date, at the offices of Hunton & Xxxxxxxx, 000 Xxxx Xxxx
Xxxxxx, Xxxxxxxx, Xxxxxxxx. All transactions occurring at the Closing shall be
deemed to have occurred simultaneously, and no one transaction shall be deemed
to be complete until all transactions are completed.
1.17 Closing Date. "Closing Date" shall mean a date which is three Business
Days after satisfaction or waiver of the conditions set forth in Sections 6.8
and 7.6 [regulatory approvals], 6.9 and 7.7 [Consents], and 6.12 and 7.8 [HSR]
or
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such other date as Figgie and Buyer may mutually agree upon, but in no event
later than December 30, 1994.
1.18 Code. "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.19 Colony. "Colony" shall mean Colony Insurance Company, a Virginia
corporation.
1.20 Colony Shares. "Colony Shares" shall mean 200,000 shares of the Common
Stock, $10.00 par value per share, of Colony.
1.21 Companies. "Companies" shall mean, collectively, Cardinal, Colony and
Xxxxxxxx.
1.22 Contracts. "Contracts" shall have the meaning set forth in Section
3.18 hereof.
1.23 Deposit. "Deposit" shall have the meaning set forth in Section 11.1
hereof.
1.24 Employee Plans. "Employee Plans" shall mean the employee benefit plans
of the Companies and the ERISA Affiliates, which shall include without
limitation any contract, agreement, loan or arrangement which is an "employee
benefit plan," as defined in Section 3(3) of ERISA.
1.25 Employees. "Employees" shall have the meaning set forth in Section
3.20 hereof.
1.26 Equipment. "Equipment" shall mean all equipment, furniture, fixtures,
furnishings, software, parts and other items of tangible and intangible personal
property owned or leased by Figgie, Holdings, Services, the Companies or their
Affiliates and
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located at the Companies' offices at 0000 Xxxxxxxxxx Xxxx Xxxxx, Xxxx Xxxxx,
Xxxxxxxx, including but not limited to those items listed on Schedule 1.26A, and
other than such equipment, furniture, fixtures, etc., listed on Schedule 1.26B.
1.27 Equipment Leases. "Equipment Leases" shall mean the equipment lease
obligations of Services listed on Schedule 1.27.
1.28 ERISA. "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
1.29 ERISA Affiliate. "ERISA Affiliate" shall mean each trade or business,
whether or not incorporated, which with any of the Companies or Services is
treated as a single employer under Code Section 414(b), (c), (m) or (o).
1.30 Escrow Agent. "Escrow Agent" shall mean Wilmington Trust Company, who
shall hold the Bond Indemnification Fund in accordance with the provisions of
the Bond Escrow Agreement.
1.31 Figgie. "Figgie" shall mean Figgie International Inc., a Delaware
corporation.
1.32 Figgie's Closing Certificate. "Figgie's Closing Certificate" shall
mean the certificate of Figgie, Holdings and Services in the form of Exhibit
1.32.
1.33 Xxxxxxxx. "Xxxxxxxx" shall mean Xxxxxxxx Insurance Company, a Virginia
corporation.
1.34 Xxxxxxxx Shares. "Xxxxxxxx Shares" shall mean 1,500 shares of the
Common Stock, $1,000.00 par value per share, of Xxxxxxxx.
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1.35 Xxxxxxxx Surplus Note. "Xxxxxxxx Surplus Note" shall mean the surplus
note issued by Xxxxxxxx to Figgie on August 1, 1994, in the original principal
amount of $1,000,000.00.
1.36 Holdback Payment. "Holdback Payment" shall mean an amount equal to
$750,000.00, less the indemnification payments satisfied pursuant to Section 9.7
hereof, which amount shall be paid by Buyer to Figgie pursuant to Section 8.9
hereof.
1.37 Holdings. "Holdings" shall mean Xxxxx Xxxx Holdings, Inc., a Delaware
corporation.
1.38 HSR Act. "HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976 (15 U.S.C. ss. 18(a), as amended).
1.39 INA. "INA" shall mean the Insurance Company of North America and
meaning set shall have its successors and assigns.
1.40 Indemnity Claim. "Indemnity Claim" shall have the meaning set forth in
Section 9.5 hereof.
1.41 Intellectual Property. "Intellectual Property" shall have the meaning
set forth in Section 3.22 hereof.
1.42 Knowledge. "Knowledge", as to each of the parties, shall mean the
actual knowledge of the persons listed on Schedule 1.42 after due inquiry of
such party.
1.43 Law. "Law" shall mean any federal, state, local or other law or
governmental requirement of any kind, and the rules, regulations, permits,
licenses and orders promulgated thereunder.
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1.44 Lease. "Lease" shall mean the lease between Holdings and Virginia
Center, Inc., with respect to the property located at 0000 Xxxxxxxxxx Xxxx
Xxxxx, Xxxx Xxxxx, Xxxxxxxx.
1.45 Lien. "Lien" shall mean any lien, pledge, charge, security interest,
encumbrance, title retention agreement, restriction, advance, claim or option.
1.46 LLG&M. "LLG&M" shall mean LeBoeuf, Lamb, Xxxxxx & XxxXxx, New York,
New York, who shall hold the Deposit in accordance with the provisions of
Article XI hereof.
1.47 Material Adverse Effect. "Material Adverse Effect" shall mean
reasonably likely to have an effect on the properties, business, results of
operations, condition (financial or otherwise) or affairs of one of the
Companies, any combination of the Companies or all of the Companies in the
aggregate, resulting in (a) claims, losses or liabilities of 525,000.00 or more
or (b) a diminution in operating income or profits in the two-year period
following the Closing of $100,000.00 or more.
1.48 Ohio Code. "Ohio Code" shall mean the Ohio Insurance Code and the
regulations thereto.
1.49 Ohio Department. "Ohio Department" shall mean the Ohio Department of
Insurance.
1.50 Opinion of Buyer's Counsel. "Opinion of Buyer's Counsel" shall mean
the opinion of Hunton & Xxxxxxxx, counsel to Buyer, and the opinion of Vorys,
Xxxxx, Xxxxxxx & Xxxxx, special Ohio insurance regulatory counsel to Buyer, in
the form of Exhibit 1.50.
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1.51 Opinions of Figgie's Counsel. "Opinions of Figgie's Counsel" shall
mean the opinion of LLG&M, special counsel to Figgie, and the opinion of Xxxxxx
Xxxxxxx, inside corporate counsel to Figgie, in the form of Exhibit 1.51.
1.52 Pension Plan. "Pension Plan" shall have the meaning set forth in
Section 3.21 hereof.
1.53 Permits. "Permits" shall mean all licenses, permits and other
governmental authorizations, registrations and approvals required to conduct the
business of the Companies.
1.54 Permitted Liens. "Permitted Liens" shall mean the liens described on
Schedule 1.54.
1.55 Purchased Assets. "Purchased Assets" shall mean the Xxxxxxxx Surplus
Note, all of the Equipment and any Intellectual Property not owned by the
Companies.
1.56 Purchased Stock. "Purchased Stock" shall mean all of the outstanding
capital stock of Colony and all of the outstanding capital stock of Xxxxxxxx.
1.57 Purchase Price. "Purchase Price" shall mean $15.0 million plus the
Holdback Payment.
1.58 Quarterly Statutory Statements. "Quarterly Statutory Statements" shall
mean the quarterly statutory convention statements of the Companies as at March
31, 1994 and June 30, 1994 filed with the Virginia Commission pursuant to the
Virginia Code or with the Ohio Department pursuant to the Ohio Code, as
applicable.
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1.59 SAP. "SAP" shall mean statutory accounting practices prescribed or
permitted by the Virginia Commission, with respect to Colony and Xxxxxxxx, and
the Ohio Department, with respect to Cardinal.
1.60 Services. "Services" shall mean Xxxxx Hill Services, Inc., a Delaware
corporation.
1.61 Services Agreements. "Services Agreements" shall mean (a) the three
Services Agreements, each dated as of January 1, 1993, between, in each case,
one of the Companies and Services and (b) the oral services agreements among
each of the Companies, Services and Figgie, each of which are listed on Schedule
3.12.
1.62 Software Licenses. "Software Licenses" shall mean all licenses related
to software used by the Companies or Services, including but not limited to
those items listed on Schedule 1.62A, and other than such software licenses
listed on Schedule 1.62B.
1.63 Statutory Statements. "Statutory Statements" shall mean, collectively,
the Annual Statutory Statements and the Quarterly Statutory Statements.
1.64 Sublease. "Sublease" shall mean the Sublease between Holdings and
Buyer, substantially in the form of Exhibit 1.64.
1.65 Subsidiary. "Subsidiary" of any person shall mean any corporation or
other business entity a majority of the voting stock (or other beneficial
interests) of which, entitled to vote for the election of directors (or their
counterparts), is owned by such person or a Subsidiary of such person.
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1.66 Tax Indemnity Agreement. "Tax Indemnity Agreement" shall mean the tax
indemnity agreement by and among Buyer, Figgie, Holdings and the Companies in
the form of Exhibit 1.66.
1.67 Xxxxxxxxxxx Report. "Xxxxxxxxxxx Report" shall mean the actuarial
report dated as of June 30, 1994 prepared by Xxxxxxxxxxx regarding the reserves
of the Companies.
1.68 Virginia Code. "Virginia Code" shall mean the Virginia Insurance Code,
and the regulations thereto.
1.69 Virginia Commission. "Virginia Commission" shall mean the Virginia
State Corporation Commission.
ARTICLE II
PURCHASE AND SALE OF STOCK AND ASSETS
2.1 Transfer of Stock; and Assets. On the Closing Date, Figgie, Holdings
and Services, as the case may be, shall sell, convey, transfer, assign, and
deliver to Buyer, and Buyer shall acquire, the Purchased Stock and the Purchased
Assets. At the Closing, subject to the terms and conditions of this Agreement,
Holdings agrees to transfer and deliver to Buyer one or more certificates
evidencing all of the issued and outstanding capital stock of Colony and
Xxxxxxxx, and Services agrees to transfer and deliver title to the Equipment, in
each case free and clear of all Liens except, in the case of title to the
Equipment, for Permitted Liens. In full payment for the Purchased Stock and the
Purchased Assets, Buyer shall assume the Equipment Leases and the
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Software Licenses and shall pay the Purchase Price, as provided in Sections 2.4
and 8.9 hereof.
2.2 Sublease. At the Closing, Holdings and Buyer will enter into the
Sublease.
2.3 Assumption of Liabilities. At the Closing, Buyer will assume all of
Services' obligations under the Equipment Leases and the Software Licenses that
accrue on or after the Closing Date. Figgie and Buyer shall cooperate with each
other to facilitate the payment of each party's pro rata portion of such
obligations during the payment period in which the Closing occurs.
2.4 Purchase Price. At the Closing, Buyer will pay the Purchase Price (less
the Holdback Payment, which amount shall be payable as provided in Section 8.9
hereof) as follows:
(a) Buyer shall pay by wire transfer to the Escrow Agent the amount of
the Bond Indemnification Fund as required by the Bond Salvage and
Indemnification Agreement;
(b) Buyer shall direct LLG&M to distribute to Figgie the Deposit and
shall provide Figgie with written confirmation, in a form reasonably
satisfactory to Figgie, that LLG&M has received such directive; and
(c) Buyer shall pay by wire transfer to an account designated by
Figgie the difference between (i) $15.0 million and (ii) the sum of the
amounts specified in clauses (a) and (b) of this Section 2.4.
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2.5 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Purchased Stock and the Purchased Assets in accordance with Schedule
2.5.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FIGGIE, HOLDINGS AND SERVICES
Each of Figgie, Holdings and Services represents and warrants, jointly and
severally, to Buyer as follows:
3.1 Organization and Good Standing. Each of Figgie, Holdings and Services
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Each of Colony and Xxxxxxxx is a corporation duly
organized, validly existing and in good standing under the laws or the
Commonwealth of Virginia. Cardinal is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio. Each of the
Companies has all requisite corporate power and authority to conduct its
business as currently conducted and to own or lease and to operate its
properties.
3.2 Licenses and Permits. Each of the Companies has all Permits required in
each of the jurisdictions listed on Schedule 3.2 to engage in the business of
writing insurance policies of the type specified on Schedule 3.2. Each of the
Companies is duly licensed and qualified to transact those lines of insurance
business in those states and jurisdictions listed on Schedule 3.2. Except as set
forth on Schedule 3.2, all such Permits are
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owned by the Companies, are in full force and effect and none of the Companies,
Services, Holdings or Figgie has received any notice of any event, inquiry,
investigation or proceeding that could result in a penalty or fine in excess of
$5,000.00, singly or in the aggregate, or in the suspension, revocation or
limitation on any such Permit, and to the Knowledge of Figgie, Holdings, the
Companies or Services, there is no basis for any such fine, penalty, suspension,
revocation or limitation. Each of the Companies possesses the minimum statutory
capital and surplus as required by each such jurisdiction for the type of
insurance written by the Companies in each jurisdiction set forth on Schedule
3.2.
3.3 Capitalization.
(a) Colony. The authorized capital stock of Colony consists of 200,000
shares of Common Stock, $10.00 par value per share, 200,000 of which are
issued and outstanding and owned of record and beneficially by Holdings,
free and clear of any Liens. All such outstanding shares have been duly
authorized and validly issued and are fully paid and non-assessable.
(b) Xxxxxxxx. The authorized capital stock of Xxxxxxxx consists of
1,500 shares of Common Stock, $1,000.00 par value per share, 1,500 of which
are issued and outstanding, and owned of record and beneficially by
Holdings free and clear of any Liens. All such outstanding
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shares have been duly authorized and validly issued and are fully paid and
non-assessable.
(c) Cardinal. The authorized capital stock of Cardinal consists of
1,000 shares of Common Stock, 51,500.00 par value per share, 1,000 of which
are issued and outstanding, 995 shares of which are owned of record and
beneficially by Colony free and clear of any Liens and one share of which
is owned of record and beneficially by each of Xxxxxx Xxxxx, Xxxx Xxxxx,
Xxxx X. Xxxxxx, X. X. Xxxxxxx and V. A. Chiarucci. All such outstanding
shares have been duly authorized and validly issued and are fully paid and
non-assessable.
(d) Services. All of the issued and outstanding shares of capital
stock of Services are owned of record and beneficially by Holdings.
(e) No Rights. No subscriptions, options, warrants, calls or rights of
any kind, to purchase or otherwise acquire, and no securities convertible
into capital stock of Colony, Xxxxxxxx or Cardinal, are outstanding or
claimed by any person.
3.4 Authority, Validity and Enforceability. Each of Figgie, Holdings and
Services has full corporate power and authority to execute, deliver and perform
its obligations under this Agreement and to consummate the transactions required
of it contemplated hereby. The execution, delivery and performance by Figgie,
Holdings and Services of this Agreement and the consumma-
-15-
tion of the transactions contemplated hereby, as the case may be, have been duly
and validly authorized by each of Figgie's, Holdings' and Services' Board of
Directors and by the shareholders of Services. No other action or proceeding on
the part of Figgie, Holdings and Services is necessary to authorize this
Agreement or the consummation of the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by each of Figgie,
Holdings and Services and constitutes a valid, legal and binding obligation of
Figgie, Holdings and Services, as the case may be, enforceable in accordance
with its terms.
3.5 No Violation or Breach. The execution, delivery and performance by
Figgie, Holdings and Services of this Agreement does not, and the consummation
of the transactions required by each contemplated hereby will not (with or
without the giving of notice or the lapse of time or both):
(a) violate or require any consent or approval under any provision of
the respective Articles of Incorporation or bylaws of Figgie, Holdings,
Services, or any of the Companies; or
(b) except as set forth in Section 3.8 hereof, violate or result in a
default of, or require any consent or approval under, or result in the
termination of or loss of any right (including any right of acceleration,
termination or cancellation) in or with respect to, any Contract, Permit,
Equipment Lease or Software License; or
-16-
(c) violate or result in a default of, or require any consent or
approval under any judgment, settlement, consent, injunction, decree, order
or ruling of any court or governmental authority, to which Figgie,
Holdings, Services, or any of the Companies is a party or is otherwise
subject; or
(d) result in any Lien upon any properties, assets, business or
agreements of the Companies howsoever arising.
3.5 Title to Shares and Purchased Assets. Upon delivery to Buyer of
certificates representing the Colony Shares and the Xxxxxxxx Shares, Buyer will
acquire good and valid title to the Colony Shares and the Xxxxxxxx Shares free
of any Liens other than (a) Liens that arise solely as a result of Buyer's
actions and (b) restrictions on transferability generally imposed on transfers
of securities by federal and state securities laws and state insurance laws.
Upon execution and delivery of the Xxxx of Sale and the Assignment Agreement,
Buyer will acquire the Purchased Assets free of any Liens, other than the
Permitted Liens.
3.7 Subsidiaries. Colony has no Subsidiaries other than Cardinal. Neither
Cardinal nor Xxxxxxxx has any Subsidiaries.
3.8 Consents. Except as set forth in Schedule 3.8, no consent, license,
approval, order or authorization of, or registration, filing or declaration
with, any governmental authority, is required to be obtained or made, and no
consent of any third party is required to be obtained, by Figgie, Holdings,
-17-
the Companies or Services in connection with the execution, delivery and
performance of this Agreement and the transactions contemplated hereby.
3.9 Statutory Statements. Figgie, Holdings, the Companies and Services have
delivered to Buyer the Statutory Statements. The Statutory Statements were
prepared in accordance with SAP as it existed at the time they were submitted to
the Virginia Commission or the Ohio Department, as applicable, and such
accounting practices were applied on a consistent basis throughout the periods
indicated, except as disclosed thereon or in the notes thereto. No material
deficiency has been asserted with respect to the Statutory Statements by either
the Virginia Commission or the Ohio Department.
3.10 Insurance Regulatory Filings. Since January 1, 1992, each of the
Companies has filed or otherwise provided all reports, data, other information
and applications required to be filed or otherwise provided to the Virginia
Commission, the Ohio Department and all other federal, state or local
governmental authorities with jurisdiction over any of the Companies except
where the failure to file would not have a Material Adverse Effect. Figgie has
furnished to Buyer copies of all reports or examinations (whether financial,
market conduct or other) issued by the Virginia Commission, the Ohio Department
and all other state insurance regulatory authorities in respect of any of the
Companies received since January 1, 1992. Except as listed on Schedule 3.10, no
deficiencies material to the financial
-18-
condition, operations or prospects of any of the Companies have been asserted by
the Virginia Commission, the Ohio Department or any other state insurance
regulatory authority with respect to any reports or filings made on behalf of
any of the Companies since January 1, 1992. Figgie has supplied Buyer with
copies of all written responses submitted on behalf of any of the Companies
since January l, 1992, in respect of any report or examination (whether
financial, market conduct or other) of any of the Companies by the Virginia
Commission, the Ohio Department or any other state regulatory authority. Figgie
has made available to Buyer all files of the Companies relating to
correspondence with the Virginia Commission, the Ohio Department or any other
insurance regulatory authority.
3.11 Policy Forms. All forms of insurance policies which have been issued
by the Companies since January 1, 1992 are listed on Schedule 3.11. Such forms
are in compliance in all material respects with all applicable Law and, to the
extent required under applicable Law, are on forms approved by the insurance
regulatory authority of the jurisdiction where issued or have been filed with
and not objected to by such authority within the period provided for objection.
3.12 Transactions with Interested Persons. No officer or director of any of
the Companies, Holdings, Figgie or Services owns, directly or indirectly, on an
individual or joint basis, any material interest in, or serves as an officer or
director of, any customer, competitor or supplier of any of the Companies,
-19-
Holdings or Services or any person or entity which has a material contract or
arrangement with any of the Companies, except for transactions on terms no less
favorable to such Company than those prevailing in comparable arm's-length
transactions. Schedule 3.12 lists or describes all contracts between Services,
Holdings or Figgie and any of the Companies and all services provided by
Services, Holdings or Figgie to any of the Companies other than contracts
relating to the Bond Recoverable.
3.13 Reinsurance Policies. Set forth in Schedule 3.13 is a complete and
accurate list of all in-force reinsurance contracts and treaties under which any
of the Companies has ceded or assumed reinsurance obligations. Each contract and
treaty set forth on Schedule 3.13 (or required to be set forth on Schedule 3.13)
is in full force and effect and will not be terminated or otherwise adversely
affected as a result of the transactions contemplated hereby. Except as set
forth on Schedule 3.13, such contract or treaty under which any of the Companies
cedes reinsurance obligations is qualified under all Laws applicable to
reinsurance policies and treaties to receive the statutory credit assigned to
such contract or treaty in the Statutory Statements at the time such Statutory
Statements were prepared. None of the Companies has violated any of the terms
and conditions of any such policies and treaties and, to the Knowledge of
Figgie, Services, Holdings and the Companies, all of the covenants to be
performed by any other party under any such policy and treaties were negotiated
with independent third parties in good faith at
-20-
arm's length, other than any such policies or treaties among the Companies and
their Affiliates as listed on Schedule 3.13. Schedule 3.13 separately sets forth
all contracts or treaties of reinsurance no longer in force to which any of the
Companies was a party, under which, to the Knowledge of Figgie, Holdings,
Services or the Companies, benefits or liabilities remain outstanding, except
for contracts or treaties which would not have a Material Adverse Effect.
3.14 Litigation. Except as set forth on Schedule 3.14, there is no action,
proceeding, investigation or claim pending or, to the Knowledge of Figgie,
Holdings, Services or any of the Companies, threatened against or affecting the
Companies or Services or their respective assets before any court or
governmental or regulatory authority or body that, if adversely determined,
would have a Material Adverse Effect or which questions the validity of this
Agreement or any action taken or to be taken pursuant hereto or in connection
with the purchase and sale of the Purchased Stock or the Purchased Assets other
than (a) litigation arising out of insurance policies written by any of the
Companies in the ordinary course and (b) the Bond Litigation. There is no state
of facts, and to the Knowledge of Figgie, Holdings, Services or any of the
Companies, there has occurred no event or group of related events that would
form the basis of any claim against any of the Companies or Services for
liability on account of breach of Contract, violation of statute or regulation,
or otherwise in connection with the performance of
-21-
the Contracts or the conduct of their respective businesses that, if adversely
determined, would have a Material Adverse Effect or which questions the validity
of this Agreement or any action taken or to be taken pursuant hereto or in
connection with the purchase and sale of the Purchased Stock or the Purchased
Assets other than (a) litigation arising out of insurance policies written by
any of the Companies in the ordinary course and (b) the Bond Litigation.
3.15 No Brokers. None of Figgie, Holdings, Services or any of the Companies
has employed any finder, broker, agent or other intermediary in connection with
the negotiation of this Agreement or the consummation of any of the transactions
contemplated hereby, other than those persons listed on Schedule 3.15 all of
whose fees shall be paid by Figgie.
3.16 Absence of Certain Changes. Except as set forth on Schedule 3.16,
since June 30, 1994:
(a) none of the Companies has incurred any obligation or liability
other than in the ordinary course of business; and
(b) none of the Companies or Services has:
(i) issued, sold or delivered or agreed to issue, sell or deliver
any shares of its capital stock; or any options, warrants or rights to
acquire any such capital stock, or securities convertible into or
exchangeable for such capital stock except for the transactions
contemplated by this Agreement;
-22-
(ii) incurred any obligations or liabilities, whether absolute,
accrued, contingent or otherwise (including, without limitation,
liabilities as guarantor or otherwise with respect to obligations of
others), other than obligations and liabilities incurred in the
ordinary course of business and obligations and liabilities under the
Contracts;
(iii) mortgaged, pledged or subjected to any Lien any of its
assets, tangible or intangible, other than Permitted Liens;
(iv) acquired or disposed of any assets or properties, or entered
into any agreement or other arrangement for any such acquisition or
disposition, except in the ordinary course of business;
(v) declared, made, paid or set apart any sum for any dividend or
other distribution to its shareholders or purchased or redeemed any
shares of its capital stock or any option, warrant or right to
purchase any such capital stock, or reclassified its capital stock;
(vi) entered into any employment agreement with any officer or
salaried employee that is not terminable at any time by the employer,
without cause and without penalty;
(vii) forgiven or cancelled any debts or claims or waived any
rights of material value;
-23-
(viii) conducted its business or entered into any transaction
other than in the ordinary course of business, except the Contracts;
(ix) granted any rights or licenses under any of its trade names
or entered into general agency arrangements;
(x) formed any Subsidiaries;
(xi) changed any method of accounting or accounting practice or
policy other than as required by GAAP or applicable Law (and except
with respect to changes in the accounting treatment of collection
costs associated with the Bond Recoverable);
(xii) been sued or, to the Knowledge of Figgie, Holdings,
Services or the Companies, threatened with any suit by any employee or
former employee;
(xiii) suffered or experienced any change in relations with or
material loss of any employees or customers; or (xiv) agreed to take
any action described in clauses (i) through (xiii).
3.17 Taxes. The Companies, Services, Holdings and Figgie are members of the
affiliated group, within the meaning of Section 1504(a) of the Code, of which
Figgie is the common parent, such affiliated group files a consolidated federal
income tax return, and except as disclosed on Schedule 3.17, none of the
Companies has ever filed a consolidated federal income tax return
-24-
with (or been included in a consolidated return of) a different affiliated
group. Each of the Companies and Services has filed or caused to be filed or (in
the case of returns or reports not yet due) will file all tax returns and
reports required to have been filed by or for it on or before the Closing Date,
and all material information set forth in such returns or reports is or (in the
case of returns or reports not yet filed) will be accurate and complete. Each of
the Companies and Services has paid or made adequate provision for or (with
respect to returns or reports not yet filed) will make adequate provision for
all taxes, additions to tax, penalties, and interest for periods covered by
those returns or reports. Each of the Companies is in compliance with, and its
records contain all information and documents (including, without limitation,
properly completed IRS Forms W-9) necessary to comply with, all applicable tax
information reporting and tax withholding requirements under federal, state,
local, and foreign laws, rules, and regulations, and such records identify with
specificity all accounts subject to backup withholding under Section 3406 of the
Code. Each of the Companies has collected or withheld all amounts required to be
collected or withheld by it for any taxes, and all such amounts have been paid
to the appropriate governmental agencies or set aside in appropriate accounts
for future payment when due. The balance sheets contained in the Statutory
Statements fully and properly reflect, as of their dates, the liabilities of
each of the Companies for all accrued taxes, additions to tax,
-25-
penalties, and interest. Except as disclosed on Schedule 3.17, there are no
unpaid taxes, additions to tax, penalties, or interest payable by any of the
Companies, Services or any other person that (a) are or could become a lien on
any asset, or otherwise adversely affect the business, properties, or financial
condition, of any of the Companies or (b) are or could become a lien on or
adversely affect Buyer's use of any of the Purchased Assets or could cause Buyer
to incur any liability. Schedule 3.17 describes all tax elections, consents, and
agreements made by or affecting any of the Companies, lists all types of taxes
paid and returns filed by or on behalf of any of the Companies, and expressly
indicates each tax with respect to which any of the Companies is or has been
included in a consolidated, unitary, or combined return. Except as disclosed on
Schedule 3.17, none of the Companies has granted (or is subject to) any waiver
of the period of limitations for the assessment of tax for any currently open
taxable period, and no unpaid tax deficiency has been asserted against or with
respect to any of the Companies by any taxing authority. None of the Companies
has made or entered into, or holds any asset subject to, a consent filed
pursuant to Section 341(f) of the Code and the regulations thereunder or a "safe
harbor lease" subject to former Section 168(f)(8) of the Internal Revenue Code
of 1954, as amended, and the regulations thereunder, nor is any of the Equipment
subject to such a safe harbor lease. Except as disclosed on Schedule 3.17, none
of the Companies is required to include in income any amount for an
-26-
adjustment pursuant to Section 481 of the Code or the regulations
thereunder.
3.18 Contracts. Schedule 3.18 contains a complete and correct list of all
agreements, contracts and commitments, written or oral, to which any of the
Companies is a party or by which any of the Companies is bound (collectively,
the "Contracts") excluding: (a) any of the foregoing listed on Schedule 3.13
[Reinsurance]; (b) insurance policies written by the Companies; and (c)
agreements, contracts and commitments in the ordinary course with obligations to
pay or perform services totalling less than $10,000.00 that are terminable
without cost or liability on notice of 30 days or less.
Figgie, Holdings or the Companies has delivered or made available to Buyer
complete and correct copies of all Contracts, Equipment Leases and Software
Licenses together with all amendments thereto and waivers and consents with
respect thereto and accurate descriptions of all oral agreements. Each of the
Contracts, Equipment Leases and Software Licenses is in full force and effect.
The Companies, and to the Knowledge of Figgie, Holdings, Services and the
Companies, the other parties to such agreements, contracts and commitments, have
in all material respects performed all obligations required to be performed by
them to date and are not in default in any material respect. None of the
Companies has outstanding any power of attorney, except routine powers of
attorney relating to representation before governmental agencies or given in
connection with being
-27-
licensed to conduct business in another jurisdiction and except for routine
authorizations given to managing general agents.
3.19 Compliance with Other Instruments and Laws. None of the Companies is
in violation of any term of its charter or by- laws or any Contract or of any
judgment, decree or order and none of the Companies is in violation of any Law,
permit, concession, grant, franchise, license or other governmental
authorization or approval applicable to it or any of its properties, except for
such violations that would not, individually or in the aggregate, have a
Material Adverse Effect. 3.20 Employees. Schedule 3.20 lists all persons (the
"Employees") employed by Services on August 22, 1994. None of the Companies has
any employees.
3.21 Employee Benefit Matters.
(a) None of the Companies, Services, any ERISA Affiliate or any
employee pension benefit plan (as defined in Section 3(2) of ERISA)
maintained or previously maintained by any of them (a "Pension Plan"), has
incurred any material liability, other than premiums, to the Pension
Benefit Guaranty Corporation ("PBGC") or to the Internal Revenue Service
with respect to any Pension Plan. There is not currently pending with the
PBGC with respect to any Pension Plan any filing with respect to any
reportable event under Section 4043 of ERISA nor has any reportable event
occurred as to which a filing is required and has not been made.
-28-
(b) Full payment has been made (or proper accruals have been
established) of all contributions which are required for periods prior to
the Closing Date under the terms of each Employee Plan, ERISA, or a
collective bargaining agreement, no accumulated funding deficiency (as
defined in Section 302 of ERISA or Section 412 of the Code) whether or not
waived, exists with respect to any Pension Plan (including any Pension Plan
previously maintained by the Companies, Services or any ERISA Affiliate),
and there is no "unfunded current liability" (as defined in Section 412 of
the Code) with respect to any Pension Plan.
(c) Neither the Companies, Services nor any ERISA Affiliate has
incurred any liability under Section 4201 of ERISA for a complete or
partial withdrawal from a multiemployer plan (as defined in Section 3(37)
of ERISA) which has not been satisfied in full.
(d) All Employee Plans that are "employee benefit plans," as defined
in Section 3(3) of ERISA, that are maintained by the Companies or Services
or previously maintained by the Companies or Services comply and have been
administered in compliance in all material respects with ERISA and all
other applicable legal requirements, including the terms of such plans,
collective bargaining agreements and securities laws. None of the Companies
has any material liability under any such plan.
-29-
(e) No prohibited transaction has occurred with respect to any
Employee Plan that is an "employee benefit plan" (as defined in Section
3(3) of ERISA) maintained by the Companies or Services or previously
maintained by the Companies or Services that would result, directly or
indirectly, in material liability under ERISA or in the imposition of a
material excise tax under Section 4975 of the Code.
(f) The funding under each Employee Plan that is an "employee welfare
benefit plan" (as defined in Section 3(1) of ERISA) does not exceed the
limitations under Section 419A(b) or 419A(c) of the Code. Neither the
Companies nor Services is subject to taxation on the income of any such
plan or any such plan previously maintained by the Companies, Services or
an ERISA Affiliate.
3.22 Intellectual Property. Schedule 3.22 contains an accurate and complete
list of all domestic and foreign letters patent, patents, patent applications,
patent licenses, software licenses and know-how licenses, trade names,
trademarks, copyrights, unpatented inventions, service marks, trademark
registrations and applications, service xxxx registrations and applications, and
copyright registrations and applications, software owned by the Companies,
Figgie or its Affiliates and used by any of the Companies in connection with the
operation of their respective businesses (collectively the "Intellectual
Property"). Unless otherwise indicated in Schedule 3.22, one or
-30-
more of the Companies owns the entire right, title and interest in and to the
Intellectual Property, (including, without limitation, the exclusive right to
use and license the same), and, to the Knowledge of Figgie, Holdings, Services
and the Companies, no person is infringing on the Companies' ownership or use of
the Intellectual Property.
3.23 Disclosure. None of this Agreement, the Statutory Statements or any
Schedule, Exhibit, certificate or agreement delivered in accordance with the
terms hereof contains any untrue statement of a material fact, or omits any
statement of a material fact, the disclosure of which is necessary in order for
the statements contained herein or therein not to be misleading in any material
respect. The parties hereto acknowledge that Figgie, Holdings and Services have
adequately disclosed the five counterclaims shown on Schedule 1.9 hereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Figgie as follows:
4.1 Organization and Good Standing. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of North Carolina. Buyer
has all requisite corporate power and authority to conduct its business as
currently conducted and to own or lease and to operate its properties.
-31-
4.2 Authority, Validity and Enforceability. Buyer has full corporate power
and authority to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions required of it contemplated hereby.
The execution, delivery and performance by Buyer of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by Buyer's Board of Directors. No other action or proceeding on the
part of Buyer is necessary to authorize the Agreement or the consummation of the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Buyer, and constitutes a legal, valid and binding
obligation of Buyer, enforceable in accordance with its terms.
4.3 No Violation or Breach. The execution, delivery and performance of this
Agreement by Buyer does not, and the consummation of the transactions required
by Buyer contemplated hereby, will not (with or without the giving of notice or
lapse of time or both):
(a) violate or require any consent or approval under, any provision of
the Articles of Incorporation or bylaws of Buyer;
(b) except as set forth in Section 4.4 hereof, violate or result in a
default of, or require any consent or approval under any agreement, policy,
instrument, contract, commitment, license, franchise, permit or trust to
which Buyer is a party or is otherwise subject; or
-32-
(c) violate or result in a default of, or require any consent or
approval under, any judgment, settlement, consent, injunction, decree,
order or ruling of any court or governmental authority to which Buyer is a
party or otherwise subject.
4.4 Consents. Except as set forth on Schedule 4.4, no consent, license,
approval, order or authorization of, or registration, filing or declaration
with, any governmental authority is required to be obtained or made, and no
consent of any third party is required to be obtained, by Buyer, in connection
with its execution, delivery and performance of this Agreement and the
transactions contemplated hereby.
4.5 Purchase for Investment. Buyer is purchasing the Colony Stock and
Xxxxxxxx Stock for its own account for investment and not with a view to any
distribution thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"). Buyer acknowledges that the offer and sale of
the Purchased Stock pursuant hereto are intended to be exempt from the
Securities Act pursuant to Section 4(2) thereof, and the Purchased Stock may not
be resold except pursuant to an effective registration statement or an exemption
from registration thereunder, and pursuant to registration or qualification (or
exemption therefrom) under applicable state securities laws.
4.6 Litigation. There is no action, proceeding, investigation or inquiry
pending or, to the Knowledge of Buyer, threatened against Buyer which questions
the validity of this
-33-
Agreement or any action taken or to be taken pursuant hereto or thereto or in
connection with the purchase and sale of the Purchased Stock or the Purchased
Assets.
4.7 No Brokers. Buyer has not employed any finder, broker, agent or other
intermediary in connection with the negotiation of this Agreement or the
consummation of the transactions contemplated hereby.
ARTICLE V
CERTAIN MATTERS PENDING THE CLOSING
5.1 Carry on in Regular Course. Except as provided in this Agreement,
between the date hereof and the Closing Date each of the Companies and Services
shall:
(a) carry on its respective business in the ordinary course and
substantially in the same manner as heretofore carried on;
(b) use its reasonable best efforts to preserve its respective
properties, business, and relationships with its respective clients and
customers;
(c) not dispose of any material asset of any of the Companies or of
the Equipment; and
(d) not make, declare or pay any dividend or distribution on any
shares of any of the Companies' capital stock.
-34-
Figgie will advise Buyer promptly in writing of any material adverse change
in the financial condition or business of any of the Companies.
5.2 Indebtedness. Without the prior written consent of Buyer, which shall
not be unreasonably withheld, none of the Companies nor Services shall:
(a) create, incur or assume any indebtedness for borrowed money;
(b) mortgage, pledge or otherwise encumber or subject to any Lien any
of its properties or assets other than Permitted Liens; or
(c) create or assume any other indebtedness except accounts payable
and other liabilities incurred in the ordinary course of business.
5.3 Issuance of Stock. None of the Companies shall issue any shares of
capital stock of any class or grant any warrants, options or rights to subscribe
for any shares of capital stock of any class or securities convertible into or
exchangeable for, or which otherwise confer on the holder any right to acquire,
any shares of capital stock of any class.
5.4 Compensation. Figgie or its Affiliates have delivered to Buyer a
complete list of the salaries and wages and commission schedules of all
Employees whose annualized total compensation exceeds $35,000.00. There have
been no changes in Employee Plans since December 31, 1993, except for changes
required by Law. Except as disclosed to Buyer prior to the date hereof, Services
-35-
shall not grant any increases in the salaries and wages or increases in
commission schedules of any Employee, institute any new employee benefits with
respect to such Employees or amend any Employee Plans to increase benefits
without the written consent of Buyer.
5.5 Compliance with Law. Each of the Companies and Services shall use its
best efforts to comply in all material respects with all applicable Law and with
all orders of any court or of any federal, state, municipal or other
governmental department, non-compliance with which could cause a material
adverse change in the assets or a material impairment to the business of any of
the Companies or Services.
5.6 Access to Information. At Buyer's expense, Buyer and its authorized
agents, officers and representatives, for the purpose of confirming the
representations and warranties contained in Article III, shall have reasonable
access to the properties, books, records, contracts, information and documents
of Holdings, Services and the Companies; provided, however, that such
examinations and investigations:
(a) shall be conducted during normal business hours;
and
(b) shall not unreasonably interfere with the operations and
activities of Holdings, Services or the Companies.
Figgie, Holdings, Services and the Companies shall cooperate in
all reasonable respects with Buyer's examinations and
-36-
investigations. Buyer shall maintain all information regarding Figgie, Holdings
and Services in complete confidence and shall not disclose such information to
any person except as required by Law; provided, however, Buyer shall not be
required to keep confidential information that by (a) is or becomes generally
available to the public other than as a result of disclosure by Buyer or (b) is
or becomes available to Buyer on a non-confidential basis from a source other
than Figgie, Holdings, Services or the Companies.
5.7 Cooperation; Best Efforts. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its reasonable best efforts
to take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper and advisable under applicable Law (including, without
limitation, the Virginia Code and Ohio Code), to consummate and make effective
the transactions contemplated by this Agreement. Holdings, Figgie, Services, the
Companies and Buyer agree to make their respective filing promptly pursuant to
the HSR Act and to use their reasonable best efforts and to cooperate with each
other to effect compliance with the HSR Act. Each of the parties hereto agrees
to make all required regulatory filings promptly after the date hereof and to
diligently pursue compliance with the Virginia Act and the Ohio Act.
5.8 Consents. Each of Figgie, Holdings, Services, the Companies and Buyer
shall diligently pursue obtaining consents of
-37-
all third parties and governmental authorities necessary to the consummation of
the transactions contemplated by this Agreement.
5.9 Publicity. All general notices, releases, statements and communications
to employees, suppliers, distributors and customers of the Companies, Holdings
and Services and to the general public and the press relating to the
transactions covered by this Agreement shall be made only at such times and in
such manner as may be mutually agreed upon by Figgie and Buyer.
5.10 No Solicitation. None of Figgie, Holdings, Services or the Companies
shall, after the date hereof until the earlier of the Closing or the termination
of this Agreement pursuant to Section 10.1 hereof, directly or indirectly,
through any officer, director, employee, agent or otherwise, solicit, initiate
or encourage submission of proposals or offers from any person relating to any
acquisition or purchase of all or (other than in the ordinary course of
business) a substantial portion of the assets of, or any equity interest in, any
of the Companies or any business combination with any of the Companies or,
participate any negotiations regarding, or furnish to any other person any
information with respect to, or otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing.
5.11 Articles and Bylaws. None of the Companies shall amend its Articles of
Incorporation or Bylaws or merge or consolidate with or into any other
corporation.
-38-
5.12 Services Agreements. The Companies, Figgie and Services shall
terminate each of the Services Agreements effective immediately prior to the
Closing. Upon termination of such agreements, the Companies shall pay to
Services the pro rata portion of the estimated fees and expenses, as determined
herein, owed by the Companies to Services and Figgie under the Services
Agreements for the month in which the Closing occurs. The pro rata apportionment
shall be based upon the number of days of that month during which the Services
Agreements have been in effect, not including the Closing Date, as a portion of
the total number of days in such month. The parties hereby agree that if the
Closing occurs in November, the monthly fees and expenses to be pro rated are
$522,000.00, and if the Closing occurs in December, the monthly fees and
expenses to be pro rated are $540,000.00. If for any reason the Closing occurs
in any month other than November or December, the parties agree to use the
monthly fee designated for November. Upon payment of the amounts provided by
this Section 5.12, all obligations of all of the parties under the Services
Agreements shall be deemed satisfied in full.
5.13 Telephone System. At the option of Figgie, Figgie or one of its
Affiliates will enter into a lease arrangement with Colony for all of the
telephonic equipment currently used by the Companies (i) at a monthly rate of
$2,200.00, (ii) for a term of 4 years from the Closing Date, (iii) providing for
a transfer of all such equipment to Colony at the termination of the lease for
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$1.00 and (iv) containing such other terms as may be agreeable to Buyer.
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent (it being the understanding of the parties that any
of such conditions, except as set forth in Sections 6.S [Regulatory Approvals]
and 6.12 [HSR], may be waived by Buyer):
6.1 Compliance with Agreement. Figgie, Holdings, the Companies and Services
shall have performed and complied in all material respects with all of their
respective obligations under this Agreement that are to be performed or complied
with by them prior to or on the Closing Date.
6.2 Proceedings and Instruments Satisfactory. All proceedings, corporate or
other, to be taken by Figgie, Holdings, the Companies and Services in connection
with the transactions contemplated by this Agreement, and all documents incident
thereto, shall be reasonably satisfactory in form and substance to Buyer and
Buyer's counsel, and Figgie shall have made available to Buyer for examination
the originals or true and correct copies of all documents that Buyer may
reasonably request in connection with the transactions contemplated by this
Agreement.
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6.3 No Litigation. No investigation, suit, action or other proceeding shall
be threatened or pending before any court or governmental agency that seeks
restraint, prohibition, damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.
6.4 Representations and Warranties. The representations and warranties made
by Figgie, Holdings and Services in this Agreement shall be true and correct as
of the Closing Date with the same force and effect as though such
representations and warranties had been made on the Closing Date, except (a) as
such representations and warranties may be affected by the transactions
contemplated hereby and (b) for the exceptions to representations and warranties
described in Exhibit A to Figgie's Closing Certificate, which exceptions in the
aggregate shall not be reasonably expected to have an effect on the properties,
business, results of operations, condition (financial or otherwise) or affairs
of one of the Companies, any combination of the Companies or all of the
Companies in the aggregate, resulting in claims, losses, liabilities or
diminution in operating income or profits in the two year period following the
Closing of $500,000.00 or more. For purposes of determining the dollar amount of
the exceptions to such representations and warranties only amounts in excess of
the dollar thresholds set forth in the definition of Material Adverse Effect in
Section 1.47 shall be considered with respect to such representations and
warranties, that are qualified by Material Adverse Effect.
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6.5 Ratings. The rating assigned to any of the Companies by A. M. Best
shall not be lower than B+.
6.6 Tax Recoverable. Figgie, Holdings and Services shall have paid an
aggregate of $406,000.00 to the Companies, allocated among the Companies in
accordance with Schedule 6.6, as payment in full of all net tax refunds owed to
the Companies for taxes paid by or for any of the Companies through the Closing
Date.
6.7 Deliveries at Closing. Figgie, Holdings and Services shall have, or
shall cause to have, delivered to Buyer the following documents, each properly
executed and dated as of the Closing Date: (a) the Opinions of Figgie's Counsel;
(b) Figgie's Closing Certificate; (c) the Xxxx of Sale; (d) the Sublease; (e)
the Bond Salvage and Indemnification Agreement; (f) the Tax Indemnity Agreement;
(g) the Bond Escrow Agreement; and (h) certificates, duly endorsed to Buyer or
accompanied by stock powers, evidencing the Colony Shares and the Xxxxxxxx
Shares.
6.8 Regulatory Approvals. All required authorizations, registrations and
approvals from federal and state regulatory agencies with jurisdiction over
Holdings, Services, the Companies or Buyer to permit the sale of the Purchased
Assets and the Purchased Stock and the other transactions contemplated hereby
shall have been obtained and shall remain in full force and effect (without any
material term, condition or restriction that is reasonably unacceptable to
Buyer).
6.9 Consents. There shall have been obtained written consent with respect
to any Contract which requires any third
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party consent due to the consummation of the transactions contemplated by this
Agreement.
6.10 Resignation of Directors and Officers. Each member of the Board of
Directors and each officer of the Companies shall have resigned from such
positions effective on the Closing Date. Cardinal shall have redeemed for $1.00
per share the one share of Common Stock of Cardinal formed by each of Xxxxxx
Xxxxx, Xxxx Xxxxx, Xxxx X. Xxxxxx, X. X. Xxxxxxx and V. A. Chiarucci.
6.11 Employee Plans. Figgie shall have adopted and assumed any Employee
Plans (as defined in Section 3.3 of ERISA) maintained by any of the Companies or
Services.
6.12 Waiting Periods. All applicable waiting periods under Section 7A of
the Xxxxxxx Act and the HSR Act and the rules and regulations thereunder shall
have expired without indication from the Federal Trade Commission or the United
States Justice Department that the transactions contemplated hereby may be
consummated only upon terms which differ adversely from the description of the
transaction set forth in any filing made on behalf of Buyer for any governmental
approval.
6.13 Policyholders' Surplus. During the period from July 1, 1994 and the
last day of the month prior to the Closing Date for which statements are
available (but in no event more than 45 days prior to the Closing Date), the
policyholders' surplus of any one of the Companies, or any combination of the
Companies in the aggregate, shall not have decreased by $500,000.00 or more
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from the amount reflected in the June 30, 1994 Quarterly Statutory Statements.
ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF FIGGIE, HOLDINGS AND SERVICES
Each and every obligation of Figgie, Holdings and Services to be performed
on the Closing Date shall be subject to the satisfaction prior to or at the
Closing of the following express conditions precedent (it being the
understanding of the parties that any of such conditions, except as set forth in
Sections 7.6 [Regulatory Approvals] and 7.8 [HSR], may be waived by Figgie,
Holdings and Services):
7.1 Compliance with Agreement. Buyer shall have performed and complied in
all material respects with all of its obligations under this Agreement that are
to be performed or complied with by it prior to or on the Closing Date.
7.2 Proceedings and Instruments Satisfactory. All proceedings, corporate or
other, to be taken by Buyer in connection with the transactions contemplated by
this Agreement, and all documents incident thereto, shall be reasonably
satisfactory in form and substance to Figgie and Figgie's counsel, and Buyer
shall have made available to Figgie for examination the originals or true and
correct copies of all documents that Figgie may reasonably request in connection
with the transactions contemplated by this Agreement.
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7.3 No Litigation. No investigation, suit, action or other proceeding shall
be threatened or pending before any court or governmental agency that seeks
restraint, prohibition, damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.
7.4 Representations and Warranties. The representations and warranties made
by Buyer in this Agreement shall be true and correct in all material respects as
of the Closing Date with the same force and effect as though such
representations and warranties had been made on the Closing Date, except as such
representations and warranties may be affected by the transactions contemplated
hereby.
7.5 Deliveries at Closing. Buyer shall have, or shall cause to have,
delivered to Figgie the Purchase Price as provided in Section 2.4 hereof and the
following documents, each properly executed and dated as of the Closing Date:
(a) the Opinion of Buyer's Counsel; (b) Buyer's Closing Certificate; (c) the
Sublease; (d)the Assignment Agreement; (e) the Bond Salvage and Indemnification
Agreement; (f) the Tax Indemnity Agreement; (g) the Bond Escrow Agreement; and
(h) instructions to LLG&M to release the Deposit.
7.6 Regulatory Approvals. All required authorizations, registrations and
approvals from federal and state regulatory agencies and from any foreign
regulatory agencies, in either case with jurisdiction over Holdings, Services,
the Companies or Buyer to permit the sale of the Purchased Assets and the
Purchased
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Stock and the other transactions contemplated hereby shall have been obtained
and shall remain in full force and effect (without any material term, condition
or restriction that is reasonably unacceptable to Figgie).
7.7 Consents. There shall have been obtained written consent with respect
to any Contract which requires any third party consent due to the consummation
of the transactions contemplated by this Agreement.
7.8 Waiting Periods. All applicable waiting periods under Section 7A of the
Xxxxxxx Act and the HSR Act and the rules and regulations thereunder shall have
expired without indication from the Federal Trade Commission or the United
States Justice Department that the transactions contemplated hereby may be
consummated only upon terms which differ adversely from the description of the
transaction set forth in any filing made on behalf of Buyer for any governmental
approval.
ARTICLE VIII
CERTAIN ADDITIONAL COVENANTS AND AGREEMENTS
8.1 Employees. Immediately following the Closing, Buyer agrees to offer
employment to at least 80% of the Employees (the "Buyer's Employees") in
comparable positions (other than a position as an officer of Buyer) and at
comparable salary levels to those held and received by each of Buyer's Employees
immediately prior to the Closing Date. At least 21 days prior to the Closing
Date, Buyer will provide Services with a list of the
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Buyer's Employees. Buyer shall have sole responsibility for the selection of the
Buyer's Employees. Immediately prior to the Closing, Services shall terminate
the employment of all of Buyer's Employees contingent upon the Closing.
Effective as of the Closing Date, Buyer shall have sole responsibility and
liability for: (a) making all hiring and other employment decisions with respect
to the Companies; (b) salary, wages, benefits and compensation, including any
entitlement to vacation or vacation pay with respect to periods after the
Closing Date which may be payable to any of Buyer's Employees on account of
Buyer's Employees' employment by Buyer or any of the Companies; (c) compliance
with all laws and regulations relating to safety and health, equal employment
opportunity and any other employment or labor relations matters with respect to
the employment of the Buyer's Employees and the operation of the Companies after
the Closing Date; (d) any and all notices required, or claims made by Buyer's
Employees, pursuant to the Worker Adjustment and Retraining Notification Act;
and (e) any and all claims, actions, suits, proceedings, expenses, liabilities
or other payments relating to Buyer's (or after the Closing Date, a Company's)
employment of any of Buyer's Employees or relating to any other action taken by
Buyer (or after the Closing Date, any Company) concerning any of Buyer's
Employees. The preceding sentence to the contrary notwithstanding, Figgie,
Services and their employee welfare benefit plans shall be responsible for
satisfying any continuation coverage requirements under the Consolidated Omnibus
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Budget Reconciliation Act of 1985 and subsequent amendments for "qualifying
events" occurring on or before the Closing Date.
8.2 Employee Benefit Plan Matters. Holdings, Figgie, Services and the
Employee Plans shall remain responsible for any employee benefits earned or
accrued on or before the Closing Date. Buyer and the Companies shall have no
responsibility or obligation under or to the Employee Plans or to any
participant or beneficiary thereunder.
8.3 Transfer Taxes and Fees. Figgie and Buyer shall each pay 50% of all
fees, taxes or assessments charged to grantors, transferors or assignors and
grantees, transferees and assignees under applicable Law in connection with the
transactions contemplated hereunder, together with all other transfer, sales,
recording and filing fees resulting from the transfer of the Colony Shares, the
Xxxxxxxx Shares and the Purchased Assets to Buyer.
8.4 Records. Buyer shall preserve and keep, free of charge, all books,
papers and records included in the assets of the Companies relating to their
respective businesses for periods prior to the Closing Date for a period of not
less than ten years following the Closing Date; provided, however, prior to the
tenth year following the Closing Date, Buyer may destroy such materials if Buyer
provides Figgie thirty Business Days prior notice that Buyer intends to destroy
any or all of such books, papers and records and Figgie shall have the right to
review and remove any books, papers and records to be destroyed at Figgie's
expense.
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Buyer agrees to permit Figgie and its attorneys, accountants, agents and
designees access to such books, papers and records from and after the Closing
Date for all reasonable purposes. Any such examination shall be at the expense
of Figgie, shall be performed at the place where such books, papers and records
are regularly maintained and shall not unreasonably interfere with Buyer's or
the Companies' normal business activities.
8.5 Access. Buyer and Figgie and each of their authorized agents, officers
and representatives shall have reasonable access to the properties, books,
records, contracts, information and documents of Holdings, Services, the
Companies and each other to conduct such examinations and investigations of its
or their business as it deems necessary, provided that such examinations and
investigations: (a) shall be germane to rights or obligations arising out of
this Agreement, the operations of the Companies prior to the Closing Date or to
the transactions occurring between the Companies and their affiliates prior to
the Closing Date; (b) shall be conducted only in the presence of a designated
representative of Buyer or Figgie, as appropriate; (c) shall be during normal
business hours; (d) shall not unreasonably interfere with operations and
activities; and (e) shall be subject to prior approval if the information or
documents requested are, in the reasonable opinion of an officer, of a nature
that may compromise the competitive position of Buyer or Figgie. Buyer and
Figgie shall cooperate in all reasonable respects with each other's examinations
and investigations.
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8.6 Cooperation. Buyer and Figgie will cooperate in all respects in
connection with the giving of any notices to any governmental authority or
self-regulatory organization or securing the permission, approval,
determination, consent or waiver of any governmental authority or other party
required in connection with the consummation of the transactions contemplated
under this Agreement. Buyer promptly will furnish to Figgie copies of the Forms
A filed with the Virginia Commission and the Ohio Department and all
correspondence with the Virginia Commission or the Ohio Department with respect
thereto.
8.7 Confidentiality. Following the Closing, Figgie, Holdings and Services
shall keep confidential all information concerning the business, operations,
properties, assets and financial affairs of the Companies and may disclose such
information only upon receipt of prior written consent from Buyer or if such
disclosure is required (a) in connection with Figgie's or Holdings' filing of
any state or federal income tax returns, (b) in connection with filings made
with the Securities and Exchange Commission or any national securities exchange,
or (c) by order of any judicial or administrative authority.
8.8 Review of Reserves. The parties hereby acknowledge that the Xxxxxxxxxxx
Report sets forth fairly the adequacy of the Companies' reserves as of June 30,
1994. Immediately following December 31, 1995 and December 31, 1996, Buyer shall
direct Xxxxxxxxxxx, or another actuarial firm reasonably acceptable to both
Buyer and Figgie, to review the development of the
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Companies' reserves for claims with loss dates arising on or prior to June 30,
1994. Such review shall cover the same matters set forth in the Xxxxxxxxxxx
Report and shall be conducted using actuarial techniques and assumptions that
are consistent with the techniques and assumptions used in the Xxxxxxxxxxx
Report. Buyer shall diligently pursue delivery of such reports by Xxxxxxxxxxx or
such other actuarial firm to Buyer and Figgie by no later than April 1, 1996 and
April 1, 1997, respectively. In the event either report indicates that the
reserves of the Companies, taken together, stated in the Xxxxxxxxxxx Report were
inadequate as of June 30, 1994, then Figgie, Holdings and Services shall
reimburse Buyer the amount of such inadequacy (the "Reserve Inadequacy") in
accordance with, and subject to the limits set forth in, Article IX hereof.
8.9 Holdback Payment. On the sixth anniversary of the Closing Date, Buyer
shall pay to Figgie the Holdback Payment.
8.10 Use of Name. From and after the Closing Date, none of Figgie,
Holdings, Services or their respective Affiliates shall use the name "Xxxxx
Xxxx" or any names similar thereto or variants thereof except for Holdings,
Services and Xxxxx Hill Assurance. Following the Closing, Figgie, Holding and
Services agree to promptly investigate and consider changing the name of
Holdings, Services and Xxxxx Xxxx Assurance to a name which is not similar to or
a variant of "Xxxxx Xxxx".
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ARTICLE IX
INDEMNIFICATION
9.1 Survival of Representations and Warranties. The right to enforce claims
for breaches of representations, warranties, covenants and agreements of Figgie,
Holdings, Services and Buyer contained in this Agreement and the respective
obligations of the parties with respect thereto, shall survive the making of
this Agreement, any investigations made by or on behalf of the parties hereto,
and the Closing Date, and shall continue in full force and effect until the
expiration of two years from the Closing Date (except (a) with respect to the
representations and warranties contained in Sections 3.17 [Taxes] and 3.21
[Employee Benefit Matters] of the Agreement the remedy for breach of which shall
continue in full force and effect until any claims or liabilities with respect
thereto shall be barred by the expiration of the applicable statute of
limitations or any extensions thereof, and (b) with respect to Section 3.3
[Capitalization] and the indemnification provided pursuant to Sections 9.2(c),
(e), (f) and (g) and 9.3(c), as to which there shall be no expiration), at which
respective times all such representations and warranties and liabilities shall
expire and terminate, except for any claims relating to any specific breaches of
any representations or warranties which are asserted in writing on or before the
applicable termination date. Each of the parties agrees to give notice to the
breaching party of any breach of any such representation, warranty, covenant, or
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agreement, describing such breach in reasonable detail, as soon as practicable
after the discovery thereof; provided, however, that the failure to receive such
notice shall not relieve the breaching party from any liability in respect to
such breach unless and to the extent that the breaching party shall be prevented
from curing such breach as a direct result of its failure to receive a timely
notice. Any claim for indemnification for which notice has been given within the
prescribed period may be prosecuted to conclusion notwithstanding the subsequent
expiration of such period.
9.2 Indemnification by Figgie, Holdings and Services. After the Closing
Date and subject to the limitations set forth below, including without
limitation the limitations described in Section 9.4, Figgie, Holdings and
Services jointly and severally agree to and do hereby indemnify and hold Buyer
and each of the Companies and their respective Affiliates, officers, directors
and employees harmless against any claims, suits, losses, expenses, damages,
obligations, liabilities (including costs and reasonable attorneys' fees)
(hereinafter referred to collectively as "Losses") which result from or are
related to any of the following:
(a) any breach or failure of any of Figgie, Holdings and Services to
perform any of its covenants or agreements set forth herein;
(b) the inaccuracy of any representation or warranty made herein by
Figgie, Holdings or Services (it being
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understood and agreed to by all the parties hereto that Buyer may recover,
subject to Section 9.4 hereof, all Losses incurred by it with respect to
the matters set forth on Exhibit A to Figgie's Closing Certificate);
(c) any liabilities of Figgie, Holdings, or Services or their
respective Affiliates (including but not limited to Xxxxx Hill Assurance),
except for those liabilities (i) incurred pursuant to this Article IX or
(ii) assumed by Buyer under the Assignment Agreement;
(d) any liabilities of the Companies arising prior to the Closing
other than those liabilities specifically set forth on the Statutory
Statements, this Agreement or the schedules to this Agreement;
(e) any Employee Plan or Pension Plan maintained prior to the Closing
Date by any of the Companies or maintained at any time by Figgie, Holdings
or Services;
(f) any actions of the Companies or Services prior to the Closing Date
relating to the Employees or any other persons employed by the Companies or
Services;
(g) claims under the Tax Indemnity Agreement; or
(h) any Reserve Inadequacy.
9.3 Indemnification by Buyer. After the Closing Date, and subject to the
limitations set forth below, including, without limitation, the limitations
described in Section 9.4, Buyer agrees to and does hereby indemnify and hold
Figgie, Holdings and Services and their respective Affiliates, officers,
directors and
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employees harmless against any Losses resulting to any of Figgie, Holdings and
Services from any of the following:
(a) any breach or failure of Buyer to perform any of its covenants or
agreements set forth herein:
(b) the inaccuracy of any representations or warranties made by Buyer
herein; or
(c) the conduct of the Companies' business after the Closing Date.
9.4 Limitation of Liability. Buyer shall not have any liability to
indemnify Figgie, Holdings or Services in respect of Losses incurred by Figgie,
Holdings or Services pursuant to Sections 9.3(a) and (b), and Figgie, Holdings
and Services shall not have any liability to indemnify Buyer in respect of
Losses incurred by Buyer or the Companies pursuant to Sections 9.2(a), (b), (d)
or (h), in either case unless and until the aggregate amount of such Losses
exceeds $10,000.00, in which event the party seeking indemnity may recover the
full amount of such Losses, other than the initial $10,000.000, provided that
recovery by either Buyer or Figgie (on its own behalf, or on behalf of Holdings
and Services) in respect of such Losses shall be limited to $750,000.00.
Notwithstanding the foregoing, Buyer may recover all Losses whenever incurred by
the Companies or Buyer pursuant to Sections 9.2(c), (e), (f) or (g) hereof
(without regard to the two-year limitation set forth in Section 9.1 or the
$750,000.00 limit referenced above), and each of Figgie, Holdings and Services
may recover all Losses whenever
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incurred pursuant to Section 9.3(c) (without regard to the two-year limitation
set forth in Section 9.1 or the $750,000.00 limit referenced above).
Any Losses incurred with respect to the Bond Litigation, the Bond
Recoverable and the Bond Salvage and Indemnification Agreement shall be
satisfied in accordance with the terms of the Bond Salvage and Indemnification
Agreement and the Bond Escrow Agreement.
Any Losses of the type covered by, or incurred pursuant to, the Tax
Indemnity Agreement shall be satisfied in accordance with the Tax Indemnity
Agreement.
9.5 Notice of Indemnity Claims. If a party intends to assert a claim for
indemnification (an "Indemnified Party") under this Article IX (an "Indemnity
Claim"), the Indemnified Party shall provide notice of such Indemnity Claim to
the party from whom indemnification is sought (the "Indemnifying Party") within
sixty days after becoming aware of such Indemnity Claim. The failure to receive
such notice shall not relieve the Indemnifying Party from any liability in
respect of such claim unless and to the extent that the Indemnifying Party shall
be prevented from curing such situation as a direct result of its failure to
receive timely notice. At the time the Indemnity Claim is made and thereafter,
the Indemnified Party shall provide the Indemnifying Party with copies of any
materials in its possession describing the facts or containing information
providing the basis for the Indemnity Claim. If the Indemnity Claim involves a
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claim by a third party (a "Third Party Indemnity Claim"), the Indemnifying Party
may assume and control at its expense the defense of the claim by the third
party, provided that the Indemnifying Party agrees in writing with respect to
such Third Party Indemnity Claim that it is obligated hereunder to indemnify and
hold the Indemnified Party harmless in accordance with the terms of this Article
IX; and provided, further, that the Indemnified Party shall be entitled to
participate in the defense of such claim at its own expense. The failure of the
Indemnifying Party to assume the defense of any such claim shall not affect any
indemnification obligation under this Agreement.
Neither an Indemnified Party nor an Indemnifying Party shall settle a
claim, suit, action or proceeding without the consent of the other party, which
shall not unreasonably be withheld. A party shall not be liable under this
Article IX for any such settlement effected without its consent. In the event an
Indemnified Party fails to consent to a settlement of a Third Party Claim
recommended by the Indemnifying Party, then the amount of indemnification
payable with respect to such Third Party Claim shall not exceed the amount of
such settlement offer plus all Losses incurred with respect to such claim prior
to the date the Indemnified Party rejected the settlement offer.
9.6 Indemnity Amounts to be Computed on After-Tax Basis. The amount of any
indemnification payable under any of the provisions of this Article IX shall be
(a) net of any federal or state income tax benefit realized or the then-present
value
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(based on a discount rate of 5%) of any such income tax benefit to be realized
by the Indemnified Party (or, where Buyer is the Indemnified Party, any of the
Companies) by reason of the facts and circumstances giving rise to the
indemnification, and (b) increased by the amount of any federal or state income
tax required to be paid by the Indemnified Party on the accrual or receipt of
the indemnification payment. For purposes of the preceding sentence, the amount
of any state income tax benefit or cost shall take into account the federal
income tax effect of such benefit or cost.
9.7 Reduction in Holdback Payment. Until the amount of the Holdback Payment
is zero and prior to the later of (a) April 30, 1997, and (b) 15 Business Days
after receipt by Figgie and Buyer of the report for the year ended December 31,
1996 prepared pursuant to Section 8.8 hereof (the "Holdback Payment Period"),
any indemnification claims pursuant to Section 9.2 hereof shall be satisfied by
reducing the amount of the Holdback Payment by the amount of such
indemnification payable to Buyer, the Companies and their respective Affiliates
pursuant to this Article IX. Buyer shall deliver to Figgie a notice setting
forth the aggregate amount of all indemnification claims satisfied pursuant to
this Section 9.7 through the date of such notice (a) on each August 15 and
February 15 during the Holdback Payment Period and (b) within 30 days after the
termination of the Holdback Payment Period.
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9.8 Arbitration. Any dispute arising between the parties hereto as to any
matter covered by this Agreement, including any claim for indemnification
pursuant to Section 9.2 or 9.3, shall be submitted to arbitration in the
following manner:
(a) The party desiring to submit such controversy to arbitration shall
give to the other party notice in writing, stating with specificity the
matter upon which arbitration is sought. The written notice shall also name
the arbitrator selected by such party, which arbitrator shall be a present
or retired insurance company executive unaffiliated with such party.
(b) Within ten Business Days following the receipt of such notice, the
other party shall give written notice to the party desiring arbitration of
the arbitrator selected by it, which second arbitrator shall likewise be a
present or retired insurance company executive unaffiliated with such
party.
(c) Upon the appointment of the second arbitrator, the two arbitrators
so chosen shall select a third arbitrator, which third arbitrator shall
likewise be a present or retired insurance company executive unaffiliated
with such party.
(d) The three arbitrators thus chosen shall give to each of the
parties hereto written notice of the time and place of hearing, which
hearing shall be held not less than
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ten Business Days, nor more than twenty Business Days, after the selection
of the third arbitrator.
(e) At the time and place appointed, the three arbitrators shall
proceed with the hearing unless for some good cause, of which a majority of
the arbitrators shall be the judge, it shall be postponed until some other
day within a reasonable time. The parties hereto shall have full
opportunity to be heard on any question thus submitted.
(f) The arbitrators shall be relieved of following judicial
formalities and the rules of evidence shall not apply to such hearing. The
determination by a majority of the arbitrators shall be made in writing and
a copy thereof delivered to each of the parties hereto. The arbitrators
shall in every case deliver their decision within sixty days after the
hearing, unless the parties shall otherwise agree to extend the time. The
arbitrators, as a part of their decision and award, shall decide the amount
of the costs of arbitration and by whom they shall be borne and paid.
9.9 Remedies Cumulative. Each indemnified party shall be entitled to the
indemnification provided in this Article IX from time to time and shall be
entitled to rely upon one or more provisions of this Agreement without waiving
its right to rely upon any other provision at the same time or at any other
time.
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ARTICLE X
TERMINATION
10.1 Termination. This Agreement may be terminated at any time prior to the
Closing as follows:
(a) by mutual written consent of Buyer and Figgie;
(b) by Figgie or Buyer, if the Closing Date shall not have occurred on
or before December 30, 1994 (provided that the right to terminate this
Agreement under this Section 10.1(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the
cause of or has resulted in the failure of the Closing Date to occur on or
before such date);
(c) by Buyer or Figgie, if any court of competent jurisdiction in the
United States or other United States governmental body shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the sale of the Purchased Stock or the Purchased
Assets and such order, decree, ruling or other action shall have become
final and nonappealable.
10.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 10.1, all further obligations of the parties under or pursuant to this
Agreement shall terminate without further liability of either party to the
other, other than the provisions of Article XI of this Agreement, which shall
survive any such termination.
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10.3 Amendment. This Agreement may not be amended except by an instrument
in writing signed on behalf of all of the parties.
10.4 Extension; Waiver. At any time prior to the Closing, the parties may
(a) by mutual consent extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document, certificate or writing delivered pursuant hereto or (c) waive
compliance with any of the agreements or conditions contained herein; provided,
however, any party that knowingly waives any representation, warranty, agreement
or condition with respect to another party under subsections (b) and (c) shall
thereafter be barred from seeking indemnification from such other party for such
waived breach of any representation, warranty, agreement or condition. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE XI
DEPOSIT: PAYMENTS ON TERMINATION
11.1 Deposit. On the date of the execution of this Agreement, Buyer will
deposit with LLG&M $1 million to be held in accordance with the provisions of
this Article XI (the "Deposit").
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11.2 LLG&M. LLG&M shall hold the Deposit in accordance with the following
terms:
(a) LLG&M's obligations are to be determined solely by the provisions
of this Article XI and any subsequent amendments (subject to consent by
LLG&M) hereto.
(b) Figgie and Buyer acknowledge that LLG&M will invest the Deposit
with Citibank, N.A., in a cash reserve account under the account title,
"LeBocuf, Lamb, Xxxxxx and XxxXxx as Escrow Agent under Stock and Asset
Purchase Agreement dated as of October 21, 1994 by Figgie International
Inc., Xxxxx Hill Holdings, Inc., Xxxxx Xxxx Services, Inc. and Front Royal,
Inc." Principal and interest earned on the Deposit shall be disbursed
according to Sections 11.3, 11.4 and 11.5 below.
(c) LLG&M shall not be responsible in any manner whatsoever for any
failure or inability of any party hereto to deliver monies or documents or
otherwise to honor any of the provisions of this Article XI.
(d) Figgie and Buyer will jointly and severally reimburse, indemnify
and hold harmless LLG&M against any loss, liability or expense, including
but not limited to counsel fees, incurred without bad faith or willful
misconduct on LLG&M's part arising out of or in conjunction with its
acceptance of, or the performance of, its duties and obligations under this
Article XI.
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(e) LLG&M shall not be liable for any error of judgment, or for any
act done or step taken or omitted by it in good faith or for any mistake in
fact or law, or for anything which it may do or refrain from doing in
connection with these instructions, except for its own willful misconduct.
11.3 Distribution. At the Closing, Buyer shall instruct LLG&M to
distribute, by wire transfer to an account designated by Figgie at least five
Business Days prior to the Closing Date, $1 million as part of the Purchase
Price as provided in Section 2.4. Any interest accrued on the Deposit during the
time it is held by LLG&M shall be distributed by LLG&M to Buyer. If the Closing
does not occur the Deposit will be distributed to Buyer or Figgie, as the case
may be, as provided in Sections 11.4, 11.5 and 11.6 below.
11.4 Payment to Figgie. If all the conditions to Buyer's obligations under
this Agreement set forth in Article VI have been satisfied on or before December
30, 1994, or any mutual extension thereof, and Buyer fails materially to perform
its obligations hereunder, Figgie may elect to terminate this Agreement pursuant
to Section 10.1(b) hereof and upon such termination LLG&M shall pay Figgie the
Deposit plus all interest earned thereon.
11.5 Payment to Buyer. In the event of any termination of this Agreement,
except as provided in Section 11.4 hereof, the Deposit plus all interest earned
thereon shall be paid to Buyer
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upon such termination. In addition, if all the conditions to Figgie's
obligations under this Agreement set forth in Article VII have been satisfied on
or before December 30, 1994, or any mutual extension thereof, and any of Figgie,
Holdings or Services fails materially to perform its obligations hereunder
because Figgie has failed to obtain all approvals required from Figgie's lending
institutions for the consummation of the transactions contemplated hereby, Buyer
may elect to terminate this Agreement pursuant to Section 10.1(b) hereof and
upon such termination LLG&M shall pay Buyer the Deposit plus all interest earned
thereon and Figgie shall pay Buyer an additional $500,000.00 in immediately
available funds.
11.6 Instructions to LLG&M. LLG&M shall release the Deposit to Buyer or
Figgie upon receipt of written instructions relating thereto signed by the
appropriate party according to the terms of this Agreement. If a dispute arises
as to the Deposit either Buyer or Figgie may submit such dispute to arbitration
as provided in Section 9.8 hereof and LLG&M shall dispose of the Deposit in
accordance with any written determination made pursuant to such arbitration.
ARTICLE XII
MISCELLANEOUS
12.1 Entire Agreement. This Agreement and the documents referred to herein
and to be delivered pursuant hereto constitute the entire agreement between the
parties pertaining to the
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subject matter hereof, and supersede all prior and contemporaneous agreements,
understandings, negotiations and discussions of the parties, whether oral or
written, and there are no warranties, representations or other agreements
between the parties in connection with the subject matter hereof, except as
specifically set forth herein or therein.
12.2 Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, subject to the provisions of Article XI, each of the
parties hereto shall pay the fees and expenses of their respective counsel,
investment bankers, financial advisors, accountants and other experts and the
other expenses incident to the negotiation and preparation of this Agreement and
consummation of the transactions contemplated hereby.
12.3 Governing Law. This Agreement shall be construed and interpreted
according to the laws of the Commonwealth of Virginia, without regard to the
conflicts of law rules thereof.
12.4 Assignment. This Agreement and each party's respective rights
hereunder may not be assigned at any time except as expressly set forth herein
without the prior written consent of the other party.
12.5 Further Assurances. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and directors of each party to this Agreement shall take all
such necessary action. Figgie, Holdings, Services, the Companies and Buyer will
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execute any additional instruments necessary to consummate the transactions
contemplated hereby.
12.6 Notices. All communications, notices and disclosures required or
permitted by this Agreement shall be in writing and shall be deemed to have been
given when delivered personally or by messenger or by overnight delivery
service, or when mailed by registered or certified United States mail, postage
prepaid, return receipt requested, or when received via telecopy, telex or other
electronic transmission, in all cases addressed to the person for whom it is
intended at his address set forth below or to such other address as a party
shall have designated by notice in writing to the other party in the manner
provided by this Section 12.6:
If to Buyer: Front Royal, Inc.
0000 Xxxxxxx Xxxx.
Xxxxx 000
Xxxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: J. Xxxx Xxxxx
Chief Executive Officer
and
Xxxxx X. Xxxxx
Chief Financial Officer
With a copy to: Hunton & Xxxxxxxx
Riverfront Plaza, East Tower
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: T. Xxxxxx Xxxxx, III, Esq.
If to Figgie, Services
or Holdings: Figgie International Inc.
0000 Xxxxxxx Xxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Xxxxxx Xxxxxxxxxx
Chief Financial Officer
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With a copy to: LeBoeaf, Lamb, Xxxxxx & XxxXxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx Xxxxx, Esq.
12.7 Counterparts; Headings. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Agreement. The Table of Contents
and Article and Section headings in this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
12.8 Interpretation. Unless the context requires otherwise, all words used
in this Agreement in the singular number shall extend to and include the plural,
all words in the plural number shall extend to and include the singular and all
words in any gender shall extend to and include all genders. All references to
contracts, agreements, leases, Employee Benefit Plans or other understandings or
arrangements shall refer to oral as well as written matters.
12.9 Severability. If any provision, clause or part of this Agreement, or
the application thereof under certain circumstances, is held invalid, the
remainder of this Agreement, or the application of such provision, clause or
part under other circumstances, shall not be affected thereby.
12.10 No Reliance. No third party is entitled to rely on any of the
representations, warranties and agreements contained in this Agreement and
Figgie, Holdings, Services, Buyer and the Companies assume no liability to any
third party because of any
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reliance on the representations, warranties and agreements of Figgie, Holdings,
Services, Buyer and the Companies contained in this Agreement, other than
Sections 8.1 and 8.2 (which are intended to be for the benefit of the persons
covered thereby and may be enforced by such persons).
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
FIGGIE INTERNATIONAL INC.
By:_______________________________
Its:______________________________
XXXXX XXXX HOLDINGS, INC.
By:_______________________________
Its: President
XXXXX HILL SERVICES, INC.
By:_______________________________
Its: President
FRONT ROYAL, INC.
By:_______________________________
Its:______________________________
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