EXECUTION COPY
AGREEMENT
This Agreement (this "Agreement") is made and entered into as of this 25th
day of July, 1996 by and among Xxxxx X. Xxxxxx Insurance Associates, a
California corporation (the "Company"), Xxxxx Insurance Company, a California
corporation ("Purchaser"), Xxxxx Financial, a California corporation ("Xxxxx")
and the individual shareholders of the Company who are named in SCHEDULE 1.1
hereof (individually a "Shareholder" and collectively, the "Shareholders").
RECITALS
WHEREAS, the Company is an insurance agency focusing on individual and
commercial accounts in the State of California (the "Business"), and is licensed
to sell insurance in the State of California and elsewhere and the Shareholders
own common stock of the Company;
WHEREAS, Purchaser desires to acquire an equity position in the Company by
purchasing an aggregate of 2,997 shares of common stock, no par value, of the
Company (the "Shares") from the Shareholders and the Shareholders desire to sell
such Shares to the Company. The amount of Shares that the Shareholders are
willing to sell to Purchaser are identified on SCHEDULE 1.1 next to each
Shareholder's name; and
WHEREAS, Xxxxx and the Company wish to provide for an xx-xxxxx.xxxxxxxx
relationship with regards to certain business opportunities;
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
representations, warranties and covenants herein set forth, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 PURCHASE AND SALE OF SHARES. On the terms and subject to the
conditions set forth in this Agreement, at the Closing, each of the Shareholders
shall sell, transfer, convey and deliver to Purchaser, and Purchaser shall
purchase and accept from each Shareholder, the portion of the Shares identified
on SCHEDULE 1.1 hereof as being sold by each Shareholder. At the Closing a
certificate or certificates representing the shares to be sold by each
Shareholder, registered in the name of the Shareholder, duly endorsed by the
Shareholder for transfer to the Purchaser, shall be delivered to Purchaser. On
submission of the certificate or certificates to Company for transfer, the
Company will issue to Purchaser, a certificate representing the Shares,
registered in the
Purchaser's name. The Certificate issued to Purchaser shall have the legend
required by Corporations section 25102(h) removed.
1.2 PURCHASE PRICE FOR SHARES AND PAYMENT TERMS. On the Closing Date (as
that term is described in Section 1.3), Purchaser shall pay to each Shareholder,
by delivery of certified or cashier's checks, the amounts set forth on SCHEDULE
1.1 which represent each Shareholders portion of an aggregate $400,000
(representing $133.465 per share) down payment on the total purchase price of
$702,975 for the Shares (representing $234.56 per share). The remaining portion
of the purchase price will be paid over 36 months in equal aggregate monthly
payments of $8,415.97, which will be made by company check and which will be due
by the first of each calendar month. The monthly payments for all of the Shares
will be made separately to each of the Shareholders ($2,103.99 each/month). The
Purchaser shall not owe any interest on the portion of the purchase price paid
over time. The deferred payment obligations will be evidenced by a promissory
note in the form of SCHEDULE 1.2 hereof.
1.3 CLOSING. The Closing of the transactions contemplated by this
Agreement (the "Closing") shall occur at the offices of Purchaser located in
Pasadena, California at 10:00 a.m., on the next business day following the
satisfaction of the last unsatisfied condition set forth in Article V hereof
(the "Closing Date") unless the parties hereto agree in writing upon a different
time, date or place.
ARTICLE II
CERTAIN UNDERSTANDINGS AND AGREEMENTS
2.1 XXXXX INVESTMENT MANAGEMENT COMPANY ("PIMCO"). Xxxxx and the Company
have agreed to cooperate with each other in the development of certain business
opportunities within the insurance industry. These opportunities will include by
way of example (i) developing additional insurance premium flows to Purchaser,
(ii) expense consolidation and product development opportunities for Paula's
non-insurance company affiliates, and (iii) merger and acquisition opportunities
for both Purchaser and Xxxxx. In order to implement this arrangement, Xxxxx and
the Company have agreed to designate their arrangement by name and the name
chosen is Xxxxx Investment Management Company ("PIMCO"). Xxxxx will establish in
its accounting books a separate account to be known as PIMCO. Xxxxx will pay all
direct PIMCO expenses (travel, lodging, meals) as an advance against any
revenues that are credited in a like manner. Xxxxx will file a fictitious
business name in all necessary jurisdictions identified as "Xxxxx Financial dba
PIMCO" and "dba Xxxxx Investment Management Company."
Initially, the PIMCO representatives will be Xxxxxxx X. Xxxxxx for Xxxxx
and Xxxxx X. Xxxxxx III for the Company. Xxxxx will not enter into any
additional PIMCO agreements with California based entities except CAPAX
Management and Insurance Services, Inc. ("CAPAX"). The parties agree that
whenever a PIMCO agreement with CAPAX is executed by Xxxxx, then all three
parties will enter into a group memo of understanding not inconsistent with the
prior existing PIMCO arrangements. The representatives of the parties identified
from time to time to participate in PIMCO shall be designated as Managing
Directors of PIMCO for the limited purpose of effectuating the goals of PIMCO.
In making this designation, nothing shall be deemed
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to have created a partnership, joint venture, or any other relationship between
Xxxxx and its subsidiaries and the Company and its subsidiaries other than that
summarized herein or as may be indicated from time to time in a Memorandum of
Understanding which is executed concurrently herewith or subsequent to the
execution of this Agreement. No PIMCO party or representative shall have
authority, acting individually, to bind either PIMCO, or any PIMCO participant.
None of the parties to the PIMCO arrangement shall be liable for the acts of the
other parties which are beyond the scope of the understandings about PIMCO
expressed in this Agreement or in any related Memoranda of Understanding.
It is understood and agreed that each of the participants in PIMCO are
engaged in other enterprises, including enterprises in competition with each
other, and that the participants need not offer business opportunities to the
other participants of PIMCO but may take advantage of those opportunities for
their own accounts or for the accounts of other enterprises with which they are
associated. None of the other participants shall have any right to any income or
profit derived by a party from any enterprise or opportunity permitted under
this section. Notwithstanding the foregoing, each PIMCO party shall be obligated
to disclose to each other all opportunities to invest in, acquire, or
consolidate with, any commercial brokerage entities which come to such party's
attention.
All of the foregoing arrangements relate to PIMCO arrangements for the
State of California only ("California PIMCO"). Nothing herein will prevent Xxxxx
from entering into PIMCO type arrangements with entities outside of California
(including using the name PIMCO); PROVIDED that such entities will not share in
PIMCO revenues or expenses from California PIMCO operations and Xxxxxx will not
share in non-California PIMCO revenue or expenses. To this end, non-California
PIMCO accounting records will be kept separate from those of the California
PIMCO accounts.
2.2 OVERRIDE PAYMENT. The Purchaser hereby agrees that the Company shall
be entitled to an override equal to 1% of all workers' compensation premiums
billed and collected by the Purchaser from business submitted by the Company or
any of its affiliates. This override shall be payable pursuant to the terms of
the existing Agency-Company Agreement between the Company and the Purchaser and
will continue to be paid so long as the PIMCO arrangement discussed in SCHEDULE
2.4 hereof continues in effect.
2.3 CENTRALIZED COMMERCIAL PACKAGE BUSINESS ADMINISTRATION. Attached to
this Agreement as SCHEDULE 2.3 is a Memorandum of Understanding regarding the
Centralized Commercial/Personal Package Business Administration. This Memorandum
of Understanding is in furtherance of an idea developed by PIMCO and is between
the Company and Xxxxx. The terms of the Memorandum of Understanding are
incorporated herein by reference. The execution of the Memorandum of
Understanding in the form attached as SCHEDULE 2.3 is a condition precedent to
the obligation of the Shareholders to sell their Shares to Purchaser and to the
obligations of any of the parties hereunder.
2.4 MERGERS AND ACQUISITION ACTIVITIES. Attached to this Agreement as
SCHEDULE 2.4 is a Memorandum of Understanding regarding the identification and
pursuit of merger and
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acquisition opportunities for Xxxxx and Purchaser. This Memorandum of
Understanding is in furtherance of an idea developed by PIMCO and is between the
Company and Xxxxx. The terms of the Memorandum of Understanding are incorporated
herein by reference. The execution of the Memorandum of Understanding in the
form attached as SCHEDULE 2.4 is a condition precedent to the obligation of the
Shareholders to sell their Shares to Purchaser and to the obligations of any of
the parties hereunder.
2.5 RIGHT TO PURCHASE SHARES. The Shareholders, or their designee(s) (who
are either the Company or other Company shareholders), shall have the right to
purchase the Shares, in whole, but not in part, from the Purchaser at any time
following the third anniversary of the Closing by giving written notice to the
Purchaser of the Shareholders', or their designee's, election to take such
action.
In the event any permitted party exercises this right, the Purchaser will
deliver to the buyer, within 15 days of receipt of the exercise notice, the
Shares, duly endorsed for transfer to the buyer. Upon delivery of the Shares,
the buyer shall be obligated to pay the Purchaser (I) 2.0 times (II) 6.25% of
the Company's gross commissions, excluding contingent commissions, (net of
business in which the Company does not have an economic interest determined on a
basis consistent with SCHEDULE 3.7 hereto, "Uncontrolled Business") for the 12
month period ending with the calendar month preceding the date of the exercise
notice. The purchase price will be paid in four installments, the first,
constituting 57% of the total, will be due upon delivery of the certificates.
The remainder will be due in three equal annual installments payable on the
first, second and third anniversaries of the delivery of the certificates. The
remaining payment obligation will be evidenced by a promissory note in the form
of SCHEDULE 1.2 hereof.
The Company's gross commission (net of Uncontrolled Business and
contingent commissions) will be calculated on the same basis which was used to
determine the initial purchase price paid for the Shares. Namely, it will
include all commissions, except contingent commissions, of each of the
Partnerships (as defined below) and AgPro (as defined below) and any other
similarly situated affiliates of the Company. It will exclude the revenue
attributed to the portion of the books of business of the Company and its
affiliates which would be owned by producers, partners or third parties in the
event of a sale of substantially all of the Company's and its affiliates' books
of business to a third party.
2.6 Purchaser Put Option. The Purchaser shall have the right to sell the
Shares to the Shareholders, or their designee(s) (who are limited to the Company
and other Company Shareholders), at any time following the third anniversary of
the Closing by giving written notice to the Company of the Purchaser's election
to take such action. In the event the Purchaser exercises this right, (i) all of
the provisions of Section 2,5 above will apply except that the consideration for
the purchase of the Shares shall be calculated using a factor of 1.825, instead
of 2,0, in the formula described in Section 2.5 above; and (ii) the payment of
the purchase consideration shall be made with a 10% down payment at closing and
the remainder paid in 120 equal monthly installments, with the first installment
due on the first of the month after the date the Shares are delivered to the
Company, and subsequent installments due on the first of each
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month after that date. In the event an amendment is made to the Buy-Sell
Agreement or any other document to change the price or the terms of a Company or
Company shareholder transfer as compared to the price and terms of this Section
2.6, the price and terms of this Section 2.6 will be amended to the same extent.
Notwithstanding any of the foregoing, an agreement between the Company or one of
its shareholders and another Company shareholder to repurchase such
shareholder's shares as an isolated event and which does not have general
application to all parties to the Buy-Sell Agreement will not require that the
price or terms of this Section 2.6 be amended.
2.7 RESERVATION OF RIGHTS. Nothing in this Agreement shall in any way
impair the rights of the Shareholders or the Purchaser to enter into an
agreement with respect to the ownership of the Shares which is not based on the
foregoing terms.
2.8 RIGHT OF FIRST REFUSAL. Any transfer, sale, assignment, hypothecation,
encumbrance, or alienation of any of the Shares other than according to the
terms of this Agreement, shall be void and shall not transfer any right, title,
or interest in or to the Shares, or any of them, to the purported transferee,
buyer, assignee, pledgee, or encumbrancer.
Purchaser shall be permitted to treat the Shares as an admitted asset for
insurance regulatory purposes, giving certain rights of encumbrance to the
California Commissioner of Insurance on behalf of the Purchasers' policyholders.
In the event the Purchaser receives a BONA FIDE offer to purchase the
Shares from an unaffiliated third party, the Purchaser shall be free to sell to
such third party so long as the Purchaser first offers the Shareholders or their
designees (who shall be limited to the Company and other Company shareholders),
the right to match such offer. The Purchaser shall provide the Shareholders with
written notice of any such offer and the terms of the offer. The Shareholders
shall have 15 days from receipt of such notice to notify the Purchaser that the
Shareholders, or their designees, will match the price and payment terms of the
offer. Each Shareholder shall have the right to purchase that portion of the
Shares offered for sale that the number of shares owned by him or her at that
time (including any shares held in a voting trust) shall bear to the total
number of shares owned by all the Shareholders. Provided, however, that if any
Shareholder does not purchase his or her full proportionate allotment of the
Shares and no other individual or entity is designated by all of the
Shareholders, the unaccepted Shares may be purchased by the other Shareholders
or their designees. If the Purchaser does not receive an exercise notice(s) that
covers all of the Shares from any of the Shareholders within the 15 day period,
it will be free to sell all the Shares to the third party. Once so sold, the
Shares will not be subject to Section 2.5 or 2.6 hereof. However, any subsequent
sales of the Shares contemplated by a buyer who acquired the Shares pursuant to
this Section 2.8 shall be subject to the Shareholders' right of first refusal
and the procedures contained in this Section 2.8. Further, neither the Purchaser
nor any subsequent buyer of the Shares shall have any right to sell the Shares
to any party (i) licensed to sell insurance in any state, or (ii) affiliated
with any entity so licensed. Concurrently with the issuance of the Shares by the
Corporation, the secretary of the Corporation shall stamp the Shares in a
prominent manner with the following legend:
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The transfer, sale, assignment, hypothecation, encumbrance,
or alienation of the shares represented by this certificate is
restricted by an Agreement dated July 25, 1996. A copy of the
Agreement is available for inspection during normal business
hours at the principal executive office of the Corporation,
0000 X. Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxx 00000. All the terms
and provisions of the Agreement are hereby incorporated by
reference and made a part of this certificate.
Upon any repurchase of the Shares by the Shareholders or any designee(s),
the Shares shall no longer be subject to this Section 2.8, the Secretary of the
Corporation shall remove the legend, and the Shares shall instead be subject to
the Stock Restriction and Buy-Sell Agreement for Xxxxx X. Xxxxxx Insurance
Associates dated October 15, 1990, as amended (the Buy-Sell Agreement").
2.9 CONFIDENTIALITY. The parties hereto and their respective agents,
accountants and attorneys shall keep confidential any information (unless
readily ascertainable from public or published information or sources) obtained
from any other party hereto. Confidential Information shall mean any and all
information not generally available to the public, the disclosure of which could
be detrimental to the party to which it pertains and includes all information
provided by any party hereto to another party except information which (i)
becomes generally available to the public other than as a result of disclosure
by the receiving party or its representatives, or (ii) was available to the
receiving party on a non-confidential basis prior to its disclosure to the
receiving party by the providing party or its representatives.
Each party hereto further agrees that it will not otherwise disclose any
such information to any third party (other than to its agents, accountants and
attorneys in connection with the consummation of the transactions contemplated
by this Agreement) except upon the written consent of the furnishing party, or
except as required by law. Such obligation of confidentiality shall not extend
to any information which is shown to be or to have been generally known to
others engaged in the same trade or business as the furnishing party, or that is
or shall be public knowledge through no act or omission by the party to whom the
information was furnished or any of its directors, officers, employees,
professional advisors or other representatives.
None of the parties shall use the Confidential Information except for the
express purposes of this Agreement and the related understandings. Specifically,
but not by way of limitation, no party shall use any Confidential Information
obtained from any party to engage in unfair competition against said party. Each
of the parties' obligations to maintain the confidentiality of the Confidential
Information and not to use it to compete unfairly against the other parties
hereto are of a special and unique character which gives them a particular
value.
Further, it is agreed that the parties cannot be reasonably or adequately
compensated in damages in an action at law in the event of a breach of the
obligations contained in this paragraph. Therefore, each of the parties agrees
that injunctive and other equitable relief shall be appropriate in the event of
a breach. The obligations and remedies provided in this paragraph are cumulative
and in addition to, and not in lieu of, any obligations, rights, or remedies
created by applicable law
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relating to unfair competition, or misappropriation or threat of disclosure
of trade secrets or confidential information and survives the termination of the
Agreement.
Each party hereto agrees not to hire, or solicit to hire, any employee
of any other party hereto during the term of the PIMCO arrangements or for a
period of two years thereafter except as expressly set forth herein or in the
Memoranda of Understanding attached hereto as SCHEDULE 2.3 and SCHEDULE 2.4.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to Purchaser that:
3.1 POWER AND AUTHORITY. The Company has the full right, power and
authority to enter into this Agreement.
3.2 CAPITALIZATION. The authorized capitalization of the Company
consists of 100,000 authorized shares of Common Stock, no par value, 47,945 of
which are issued and outstanding on the date hereof. All such issued and
outstanding shares have been validly authorized and issued and are validly
outstanding, fully paid and nonassessable. There are not, and on the Closing
Date there will not be, outstanding (i) any options, warrants or other rights of
any kind whatsoever to purchase from the Company any capital stock of the
Company; (ii) any securities convertible into or exchangeable for shares of such
stock; or (iii) any other commitments of any kind for the issuance of additional
shares of capital stock or options, warrants or other securities of the Company.
3.3 LITIGATION. The Company is not a party to, subject to or bound by any
agreement, judgment or order of any court, governmental body or arbitrator
which would prevent the execution or delivery of this Agreement by the
Company or the sale of the Shares pursuant to the terms hereof after the
Company and others have obtained the consents to this transaction
contemplated herein.
3.4 NO BROKERAGE FEES. No broker or finder has acted for the Company
in connection with this Agreement or the transactions contemplated hereby.
3.5 AUTHORIZATION OF AGREEMENT. This Agreement and all other agreements
and instruments to be executed by the Company in connection herewith have
been (or upon execution will have been) duly executed and delivered by the
Company, have been effectively authorized by all necessary action, corporate
or otherwise, and constitute (or upon execution will constitute) valid and
binding obligations of the Company enforceable in accordance with their
respective terms.
3.6 FINANCIAL STATEMENTS. Included in SCHEDULE 3.6 is the Statement of
Income for the Company's fiscal year ending May 31, 1996 and Statements
of Income for the Xxxxxx-Xxxxxx Insurance Associates, Xxx-Xxxxxx
Insurance Agency, Xxxxxxxxx-Xxxxxx and Xxxxxxxx-Xxxxxx
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partnerships (the "Partnerships") and AgPro Insurance Services ("AgPro")
all for the 12 months ending May 31, 1996 (collectively, the "Financial
Statements"). The Financial Statements (i) were prepared in accordance with the
books and records of the Company, the Partnerships or AgPro, respectively; and
(ii) fairly present the Company's, the Partnerships' or AgPro's results of
operations for the periods covered thereby;
3.7 ECONOMIC INTERESTS. Except as set forth on SCHEDULE 3.7 hereto, the
Company has 100% economic interest in all of the insurance business included in
the Financial Statements for the Company. The Company has an economic interest
in the insurance business of each of the Partnerships and AgPro to the extent
set forth in SCHEDULE 3.7. The business amounts set forth in SCHEDULE 3.7 do not
include any contingent commission amounts.
3.8 AGREEMENT NOT IN BREACH OF OTHER INSTRUMENTS. Following receipt of the
consents to this transaction contemplated herein, neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby will violate, or result in a breach of, any of the terms and
provisions of, or constitute a default under, or conflict with (i) any agreement
to which the Company is a party or by which it is bound; (ii) the Articles of
Incorporation or Bylaws of the Company; or (iii) any applicable judgment, order
or award of any court, governmental body or arbitrator, or any law, rule or
regulation applicable to the Company.
3.9 REGULATORY APPROVALS. All consents, approvals, authorizations and
other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by the Company and which are necessary for the execution
and delivery by the Company of this Agreement and the related documents have
been obtained and satisfied or will be obtained and satisfied prior to closing.
3.10 OTHER INFORMATION. To the best knowledge of the Company, the
information concerning the Company set forth in this Agreement, the Financial
Statements, the Schedules attached hereto and any document, statement or
certificate furnished to the Purchaser in connection with the Purchaser's due
diligence review of the Company does not contain any untrue statement of a
material fact or omit to state a material fact required to be stated herein or
therein or necessary to make the statements and facts contained herein or
therein, in light of the circumstances in which they were made, not false or
misleading as of the date hereof or as of the Closing Date.
The Shareholders jointly and severally make the following representations
and warranties to the Company with respect to each Shareholder:
3.11 POWER AND AUTHORITY. Each Shareholder is the beneficial owner of the
Shares to be sold by such Shareholder, has the full right, power and authority
to enter into this Agreement and to sell to Purchaser at the Closing the Shares
to be sold by such Shareholder and, upon consummation of the purchase, the
Purchaser will acquire good and marketable title to such Shares, free and clear
of all covenants, conditions, restrictions, voting trust arrangements, liens,
security interests, charges, encumbrances, options and adverse claims or rights
whatsoever, except those restrictions created herein.
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3.12 LITIGATION. The Shareholder is not a party to, subject to or bound by
any agreement, judgment or order of any court, governmental body or arbitrator
which would prevent the execution or delivery of this Agreement by the
Shareholder or the sale of the Shares to be sold by such Shareholder pursuant to
the terms hereof after the Company and others have obtained the consents to this
transaction contemplated herein.
3.13 NO BROKERAGE FEES. No broker or finder has acted for the Shareholder
in connection with this Agreement or the transactions contemplated hereby.
3.14 AUTHORIZATION OF AGREEMENT. This Agreement and all other agreements
and instruments to be executed by the Shareholder in connection herewith have
been (or upon execution will have been) duly executed and delivered by the
Shareholder and constitute (or upon execution will constitute) valid and binding
obligations of the Shareholder enforceable in accordance with their respective
terms.
3.15 AGREEMENT NOT IN BREACH OF OTHER INSTRUMENTS. Following receipt of
the consents to this transaction contemplated herein, neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby will violate, or result in a breach of, any of the terms and
provisions of, or constitute a default under, or conflict with (i) any agreement
to which the Shareholder is a party or by which it is bound; or (ii) any
applicable judgment, order or award of any court, governmental body or
arbitrator, or any law, rule or regulation applicable to the Shareholder.
3.16 REGULATORY APPROVALS. All consents, approvals, authorizations and
other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by the Shareholder and which are necessary for the
execution and delivery by the Shareholder of this Agreement and the related
documents have been obtained and satisfied.
The Purchaser and Xxxxx represent and warrant to the Company and the
Shareholders that:
3.17 POWER AND AUTHORITY. The Purchaser and Xxxxx have the full right,
power and authority to enter into this Agreement and to fulfill their respective
obligations hereunder.
3.18 AUTHORIZATION OF AGREEMENT. This Agreement and all other agreements
and instruments to be executed by the Purchaser and Xxxxx in connection herewith
have been (or upon execution will have been) duly executed and delivered by the
Purchaser and Xxxxx, and have been effectively authorized by all necessary
action, corporate or otherwise, and constitute (or upon execution will
constitute) valid and binding obligations of the Purchaser and Xxxxx,
enforceable in accordance with their respective terms.
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ARTICLE IV
CONDITIONS TO OBLIGATIONS OF EACH PARTY
The obligations of each party to effect the transactions contemplated
hereby shall be subject to the fulfillment, at or prior to the Closing Date, of
the following conditions:
4.1 NO ACTION OR PROCEEDING. No claim, action, suit, investigation or
other proceeding shall be pending or threatened before any court or governmental
agency which presents a substantial risk of the restraint or prohibition of the
transactions contemplated by this Agreement or the obtaining of material damages
or other relief in connection therewith.
4.2 COMPLIANCE WITH LAW. There shall have been obtained all permits,
approvals, and consents of all governmental bodies or agencies which counsel for
Purchaser, the Company or the Shareholders may reasonably deem necessary or
appropriate so that consummation of the transactions contemplated by this
Agreement will be in compliance with applicable laws.
4.3 MEMORANDUM OF UNDERSTANDING. The Memoranda of Understanding in the
forms attached hereto as SCHEDULE 2.3 AND SCHEDULE 2.4 shall have been executed
by all signatory parties and an original of each Memorandum of Understanding
shall have been delivered to each of the parties hereto.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser to effect the transactions contemplated
hereby shall be, at the option of Purchaser, subject to the fulfillment, at or
prior to the Closing Date, of the following additional conditions:
5.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of the Company and the Shareholders, contained in this Agreement and
the Schedules hereto shall be true and correct on the date such representations
and warranties were made and remain true and correct on the Closing Date. At the
Closing, the Company and each Shareholder shall have delivered to Purchaser
certificates to such effect signed by each party.
5.2 NO ADVERSE CHANGE. There shall not have occurred between the date
hereof and the Closing Date any material adverse changes in the results of
operations, condition (financial or otherwise), assets, liabilities (whether
absolute, accrued, contingent or otherwise), business or prospects of the
Company.
5.3 DUE DILIGENCE EXAMINATION. The Purchaser shall have completed to its
satisfaction an extensive examination of, and shall have obtained full and
complete disclosure regarding, the assets, properties, business and financial
condition of the Company and such examination shall not have revealed any fact,
or facts, which, individually or in the aggregate, could be expected to have a
material adverse effect on the results of operations, condition (financial or
otherwise), assets, liabilities (whether absolute, accrued, contingent or
otherwise), business or prospects of the
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Company; PROVIDED, HOWEVER, such examination shall not in any way relieve
the Company or any Shareholders of any liability for any misrepresentation in
this Agreement.
5.4 ADDITIONAL CLOSING DOCUMENTS OF COMPANY. Purchaser shall have
received at the Closing the following documents, dated the Closing Date:
A. Copies, certified by the Secretary or an Assistant
Secretary of the Company, of resolutions of the Board of Directors
of the Company authorizing the execution, delivery and performance of
this Agreement and all other agreements, documents and instruments
relating hereto and the consummation of the transactions contemplated
hereby. Such resolutions shall also acknowledge the Board of Directors
agreement to the matters discussed in paragraphs (B) and (C) below;
B. Copies of documents reasonably satisfactory to Purchaser's
counsel evidencing that:
(i) the Purchaser and the Shares will not be subject to any of
the provisions of the Buy-Sell Agreement or entitled to the rights
of any of the provisions of the Buy-Sell Agreement unless
repurchased by the Company or another party otherwise subject to the
Buy-Sell Agreement, and
(ii) the price to be paid by the Company or by shareholders of
the Company for shares of the Company's common stock subject to the
Buy-Sell Agreement upon transfer of such shares shall be equal to (I)
1.825, times (II) the percentage of the outstanding equity securities of
the Company being transferred, times (III) the Company's gross
commissions (excluding contingent commissions) net of business in which
the Company does not have an economic interest determined on a basis
consistent with SCHEDULE 3.7 hereto for the 12 month period ending with
the calendar month preceding the date of the notice of intent to
transfer such shares. Further, the payment of the purchase consideration
shall be made with a 10% down payment at closing and the remainder paid
in 120 equal monthly installments, but without interest.
C. A copy of the Bylaws of the Company which have been amended
(i) so that Article X thereof no longer refers to the Company's 1978
Shareholders Agreement and (ii) to state that the Purchaser and the
Shares are not subject to the provisions of Article X, as amended; and
D. Copies of waivers signed by each party to the Buy-Sell
Agreement waiving such parties rights to cause the Shares to be offered
to the Company or its shareholders under the terms of the Buy-Sell
Agreement prior to the sale of the Shares by the Shareholders to the
Purchaser.
E. Evidence reasonably satisfactory to the counsel for the
Purchaser that the Shares have been released from all provisions of the
Voting Trust Agreement to which the
Page 11 of 20
Shares are subject prior to their sale to the Purchaser such other
documents as Purchaser may reasonably request.
5.5 SCHEDULES. On or prior to the Closing Date the Company shall have
delivered to the Purchaser all schedules to this Agreement theretofore
undelivered and the information contained in such schedules shall be reasonably
acceptable to the Purchaser.
5.6 APPROVALS. On or prior to the Closing Date the Purchaser and Xxxxx
shall have received the approval of their respective Boards of Directors and
Paula's Preferred Shareholders to the transactions contemplated by this
Agreement. The Purchaser and Xxxxx shall notify the Company of such approvals in
writing within 48 hours of the receipt of approval. At Closing, Xxxxx and the
Purchaser will provide certified copies of the approving resolutions of each
parties' Board of Directors.
ARTICLE VI
INDEMNIFICATION
6.1 GENERAL. The Company shall indemnify and hold harmless Purchaser, in
respect of any and all claims, losses, damages, liabilities (absolute,
contingent, matured, unmatured or otherwise) and expenses, contingent or
otherwise, matured or unmatured, of any nature whatsoever (including, without
limitation, settlement costs and any legal or other expenses for investigating
or defending any actions or threatened actions) (collectively, a "Loss"),
reasonably incurred by the indemnified party in connection with or as a result
of each and all of the following (a "Breach"):
A. Any misrepresentation or breach of any representation or
warranty in this Agreement made by the Company;
B. The breach of any covenant, agreement or obligation
contained in this Agreement or any other instrument contemplated by this
Agreement of the Company; and
C. Any misrepresentation contained in any statement or
certificate furnished by the Company pursuant to this Agreement or in
connection with the transactions contemplated by this Agreement.
The Shareholders shall jointly and severally indemnify and hold harmless
Purchaser, in respect of any Loss reasonably incurred by the indemnified party
in connection with or as a result of each and all of the following (a "Breach"):
A. Any misrepresentation or breach of any representation or
warranty in this Agreement made by a Shareholder;
B. The breach of any covenant, agreement or obligation
contained in this Agreement or any other instrument contemplated by this
Agreement of a Shareholder; and
Page 12 of 20
C. Any misrepresentation contained in any statement or
certificate furnished by a Shareholder pursuant to this Agreement or in
connection with the transactions contemplated by this Agreement.
6.2 NOTICE OF CLAIM FOR INDEMNIFICATION. Whenever any claim shall arise
for indemnification under this Article VI, the indemnified party shall promptly
notify the indemnifying party of the claim and, when known, the facts
constituting the basis for such claim.
6.3 MANNER OF INDEMNIFICATION. All indemnification hereunder shall be
effected by payment of cash or delivery of a certified or cashier's check in the
amount of the indemnification liability; PROVIDED. HOWEVER, that the indemnified
party shall have the right to offset any matured, unmatured, absolute or
contingent liability for which the indemnified party shall seek indemnification
from the indemnifying party pursuant to this Article VI against any payments due
to the indemnifying party, including, if applicable, payments due from the
Purchaser to the Company in the nature of commissions and due to the
Shareholders for deferred purchase price payments hereunder; PROVIDED that any
offset with respect to an unmatured or contingent liability must be reasonable
under the circumstances both in terms of the amount of the offset and when the
offset is made.
Any such liability, deficiency or indemnity shall be paid by the
indemnifying party within thirty (30) days from the date the indemnified party
notifies the indemnifying party that it has incurred or has become subject to
the referenced liability or deficiency and provides the indemnifying party with
documentation demonstrating that the indemnified party has incurred such
liability or deficiency.
6.4 PURCHASER/XXXXX INDEMNIFICATION. The Purchaser and Xxxxx shall jointly
and severally indemnify and hold harmless the Company and the Shareholders, in
respect of any and all claims, losses, damages, liabilities (absolute,
contingent, matured, unmatured or otherwise) and expenses, contingent or
otherwise, matured or unmatured, of any nature whatsoever (including, without
limitation, settlement costs and any legal or other expenses for investigating
or defending any actions or threatened actions) (collectively, a "Loss"),
reasonably incurred by the indemnified party in connection with or as a result
of each and all of the following (a "Breach"):
A. Any misrepresentation or breach of any representation or
warranty in this Agreement made by the Purchaser or Xxxxx;
B. The breach of any covenant, agreement or obligation
contained in this Agreement or any other instrument contemplated by this
Agreement of the Purchaser or Xxxxx; and
C. Any misrepresentation contained in any statement or
certificate furnished by the Purchaser or Xxxxx pursuant to this
Agreement or in connection with the transactions contemplated by this
Agreement.
Page 13 of 20
The procedures relating to the foregoing indemnification shall be the same
as those set forth in Sections 6.2-6.3 above.
6.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties made in Article III hereof shall survive the Closing for a period of
four years from the Closing Date, or until the date the Shares are repurchased
by the Shareholders or the Company, if earlier.
6.6 E&O INDEMNIFICATION. The Company agrees to indemnify and hold
harmless Pan American Underwriters, Inc. ("PAU") from any and all Losses
incurred by such party in connection with, or as a result of, the Company's
negligence, or alleged negligence, or willful or grossly negligent, or alleged
willful or grossly negligent, actions in carrying out its obligations under the
Memorandum of Understanding in the form of SCHEDULE 2.3. Xxxxx agrees to cause
PAU to indemnify and hold harmless the Company from any and all Losses incurred
by such party in connection with, or as a result of, PAU's negligence, or
alleged negligence, or willful or grossly negligent, or alleged willful or
grossly negligent, actions in carrying out its obligations under the Memorandum
of Understanding in the form of SCHEDULE 2.3. The Company agrees, and Xxxxx
agrees to cause PAU to agree, to name the other party as an "additional named
insured" on each party's respective professional errors and omissions insurance
policy. The parties will exchange certificates of insurance evidencing such
actions.
ARTICLE VII
TERMINATION
7.1 TERMINATION. This Agreement may be terminated:
A. By written consent of the parties hereto;
B. By Purchaser or by the Company if the terminating party is
not in default hereunder, and if the Closing shall not have occurred on
or before August 30, 1996 or such later date, if any, to which Purchaser
and the Company shall agree in writing; or
C. By Purchaser if, in the course of its due diligence review,
it discovers material information not previously disclosed to Purchaser
which Purchaser reasonably believes has a material adverse effect on the
value of the Shares. In such event, the notice of termination delivered
by Purchaser to the Company shall specify in reasonable detail such
information.
7.2 TERMINATION OF PROVISIONS OF MEMORANDA OF UNDERSTANDING. The
continuation or termination of the arrangements to be put into place between the
Company and Xxxxx or its affiliates pursuant to the Memoranda of Understanding
executed in connection with this Agreement, as they may be modified from time to
time, will be governed by the terms of such Memoranda and changes in the
ownership of the Shares will not necessarily cause any changes in such
arrangements.
Page 14 of 20
ARTICLE VIII
MISCELLANEOUS
8.1 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed given if delivered personally
or mailed by certified or registered mail, postage prepaid, return receipt
requested, addressed as follows:
To Purchaser or Xxxxx:
Xxxxx Insurance Company
000 Xxxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
If to the Company or the Shareholders:
c/o Xxxxx X. Xxxxxx Insurance Associates
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx III
8.2 ASSIGNABILITY AND PARTIES IN INTEREST. This Agreement shall not be
assignable by any of the parties hereto without the prior written consent of the
other parties. This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors.
8.3 GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of California.
8.4 COUNTERPARTS. This Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute but one and the same instrument.
8.5 BEST EFFORTS. The Company, the Shareholders, the Purchaser and Xxxxx
will each agree to use their best efforts to bring about the transactions
contemplated by this Agreement.
8.6 PUBLIC ANNOUNCEMENTS. The parties hereto agree that they will not make
any disclosures about the existence or contents of this Agreement or the
transactions contemplated herein or cause to be publicized in any manner
whatsoever by way of interviews, responses to questions or inquiries, press
releases or otherwise any aspect or proposed aspect of this transaction without
prior written notice to and approval of the other parties, except as may be
otherwise necessary to comply with applicable law; provided, however, that the
parties hereto
Page 15 of 20
may, on a confidential basis, advise their respective agents, accountants,
attorneys and prospective lenders.
8.7 COMPLETE AGREEMENT. This Agreement, the exhibits hereto and the
Schedules hereto delivered pursuant to this Agreement and all other documents
between the parties dated the date of the Closing to be delivered at the Closing
contain the entire agreement between the parties hereto with respect to the
transactions contemplated herein and, except as provided herein, supersede all
previous oral and written and all contemporaneous oral negotiations,
commitments, writings and understandings.
8.8 MODIFICATIONS AMENDMENTS AND WAIVERS. This Agreement may not be
modified or amended, and no provision or benefit hereof may be waived, except in
a written document executed by the party against whom enforcement is sought.
8.9 SEVERABILITY. Any provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction.
8.10 PAYMENT OF EXPENSES. Each party shall bear its own expenses in
connection with the preparation of this Agreement and the consummation of the
transactions contemplated herein.
8.11 FURTHER ASSURANCES. Each party hereto shall do and perform or cause
to be done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments and documents as
any other party hereto reasonably may request in order to carry out the intent
and accomplish the purposes of this Agreement.
8.12 ATTORNEYS' FEES. In the event of any action or proceeding brought by
either party against the other arising out of this Agreement, or any Memoranda
of Understanding executed pursuant to the Agreement, the prevailing party, if
any, shall be entitled to recover its reasonable attorneys fees incurred in such
action or proceeding, including any appeal, with the amount of such fees, as
well as a determination of prevailing party status, if any, to be determined by
a judge of the court sitting without a jury.
Page 16 of 20
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be signed as of the date first above written.
XXXXX X. XXXXXX INSURANCE XXXXX INSURANCE COMPANY
ASSOCIATES
By: /s/ Xxxxx X. Xxxxxx III By: /s/ Xxxxxxx X. Xxxxxx
----------------------- --------------------------
Xxxxx X. Xxxxxx III Xxxxxxx X. Xxxxxx
President President
XXXXX FINANCIAL
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------
Xxxxxxx X. Xxxxxx
President
Page 17 of 20
SHAREHOLDERS
Xxxxx X. Xxxxxx III
Family Living Trust
U/T/D October 14, 1987
By: /s/ Xxxxx X. Xxxxxx III /s/ Xxxx Xxxxxxxx
--------------------------- ----------------------------
Trustee Xxxx Xxxxxxxx
/s/ Xxx Xxxxxx /s/ Xxxx Xxxxxx
--------------------------- ----------------------------
Xxx Xxxxxx Xxxx Xxxxxx
Xxxx 18 of 20
SPOUSAL CONSENTS
The undersigned spouses of the Shareholders hereby acknowledge and agree to
the transactions contemplated herein, including without limitation, the sale of
the Shares free and clear of any and all marital/community property rights. The
undersigned also agree to any and all amendments to this Agreement which may be
entered into by the Shareholders after the date hereof.
/s/ Xxxxxx Xxxxxx /s/ Xxxxxxxx Xxxxxxxx
---------------------------- -------------------------------
Xxxxxx Xxxxxx Xxxxxxxx Xxxxxxxx
/s/ Xxxxx Xxxxxx
----------------------------
Xxxxx Xxxxxx
Xxxx 19 of 20
