AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ZENITH AGC ACQUISITION INSURANCE COMPANY,
ZENITH INSURANCE COMPANY,
ZENITH NATIONAL INSURANCE CORP.,
ASSOCIATED GENERAL COMMERCE SELF-INSURERS' TRUST FUND
and
AGC RISK MANAGEMENT GROUP INC.
As of October 7, 1996
TABLE OF CONTENTS
Page
----
ARTICLE I
THE MERGER; EFFECTIVE TIME; CLOSING
1.1 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
SURVIVING CORPORATION
2.1 Articles of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III
MERGER CONSIDERATION
3.1 Right to Receive Merger Consideration . . . . . . . . . . . . . . . . . . 2
3.2 Determination of Adjusted GAAP Net Worth. . . . . . . . . . . . . . . . . .3
3.3 Payment of Merger Consideration . . . . . . . . . . . . . . . . . . . . . .3
3.4 Assumption of Liability for Assessments . . . . . . . . . . . . . . . . . .4
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE FUND
4.1 Organization and Qualification. . . . . . . . . . . . . . . . . . . . . . 4
4.2 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.3 Authority Relative to This Agreement. . . . . . . . . . . . . . . . . . . 5
4.4 Consents and Approvals; No Violation. . . . . . . . . . . . . . . . . . . 5
4.5 Financial Statements and Reports. . . . . . . . . . . . . . . . . . . . . 6
4.6 Reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.7 Absence of Certain Changes or Events. . . . . . . . . . . . . . . . . . . 7
4.8 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.9 No Regulatory Disqualifications . . . . . . . . . . . . . . . . . . . . . 9
4.10 Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.12 Employee Benefit Plans; Labor Matters . . . . . . . . . . . . . . . . . . 10
4.13 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.14 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.15 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.16 Fairness Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.17 Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
i
4.19 No Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.20 Noncompliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.21 Management and Service Agreements.. . . . . . . . . . . . . . . . . . . . 13
4.22 Investment Portfolio and Other Assets . . . . . . . . . . . . . . . . . . 14
4.23 Intercompany and Affiliate Transactions; Insider Interests. . . . . . . . 14
4.24 Officers, Directors, Trustees and Employees . . . . . . . . . . . . . . . 14
4.25 No Material Adverse Change. . . . . . . . . . . . . . . . . . . . . . . . 14
4.26 No Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . 14
4.27 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ZENITH,
ZENITH INSURANCE AND ZENITH NATIONAL
5.1 Corporate Organization and Qualification. . . . . . . . . . . . . . . . . 15
5.2 Authority Relative to This Agreement. . . . . . . . . . . . . . . . . . . 15
5.3 Consents and Approvals; No Violation. . . . . . . . . . . . . . . . . . . 16
5.4 Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.5 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS
6.1 Conduct of Business of the Fund . . . . . . . . . . . . . . . . . . . . . 16
6.2 Alternative Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.3 Members' Approval; Proxy Statement. . . . . . . . . . . . . . . . . . . . 19
6.4 Satisfaction of Conditions, Receipt of
Necessary Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.5 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.6 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.7 Indemnification of Trustees and Officers. . . . . . . . . . . . . . . . . 21
6.8 Guaranty by Zenith Insurance and Zenith
National. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.9 Merger of Zenith and Zenith Insurance.. . . . . . . . . . . . . . . . . . 21
6.10 Termination of RMG Management
Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.11 Dividend Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.12 Financial Statements and Reports. . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VII
CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGER
7.1 Conditions to Each Party's Obligations to Effect the Merger . . . . . . . 22
7.2 Additional Conditions to the Obligations of Zenith. . . . . . . . . . . . 23
7.3 Additional Conditions to the Obligations of the Fund. . . . . . . . . . . 25
ii
ARTICLE VIII
TERMINATION
8.1 Termination by Mutual Consent . . . . . . . . . . . . . . . . . . . . . . 26
8.2 Termination by Either Zenith or the Fund. . . . . . . . . . . . . . . . . 26
8.3 Termination by Zenith . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.4 Termination by the Fund . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.5 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1 Payment of Expenses and Other Payments. . . . . . . . . . . . . . . . . . 27
9.2 Survival of Representations and Warranties. . . . . . . . . . . . . . . . 28
9.3 Modification or Amendment . . . . . . . . . . . . . . . . . . . . . . . . 28
9.4 Waiver and Extension. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.5 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.8 Entire Agreement; Assignment. . . . . . . . . . . . . . . . . . . . . . . 30
9.9 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.10 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.11 Validity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.12 Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.13 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
iii
EXHIBITS
Exhibit 7.2(e) Form of Opinion of Xxxxxx X. Xxxxxxxxxx,
Esq., Counsel to the Fund
Exhibit 7.2(f) Form of Consulting Agreement
Exhibit 7.2(g) Form of Transfer Agreement
Exhibit 7.3(d) Form of Opinion of Counsel to Zenith
Exhibit 7.3(f) Form of Management Agreement
iv
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of October
7, 1996, by and among ZENITH AGC ACQUISITION INSURANCE COMPANY, a Florida
corporation (together with its successors and assigns, "Zenith"), ZENITH
INSURANCE COMPANY, a California corporation ("Zenith Insurance"), ZENITH
NATIONAL INSURANCE CORP., a Delaware corporation ("Zenith National"), ASSOCIATED
GENERAL COMMERCE SELF-INSURERS' TRUST FUND, a qualified Florida self-insurers
fund f/k/a Associated General contractors Self-Insurers' Trust Fund (the
"Fund"), and AGC RISK MANAGEMENT GROUP INC., a Florida not-for-profit
corporation ("RMG").
RECITALS
WHEREAS, the respective Boards of Directors of Zenith, Zenith
Insurance and Zenith National, and the Board of Trustees of the Fund have,
subject to the conditions of this Agreement, determined that the Merger (as
defined in Section 1.1) and the other transactions contemplated by this
Agreement are in the best interests of their stockholders and policyholders,
respectively, and have approved this Agreement and the transactions contemplated
hereby; and
WHEREAS, Zenith, Zenith Insurance and Zenith National, on one hand,
and the Fund, on the other hand, require (each from the other) certain
representations, warranties, covenants and agreements in connection with the
Merger;
WHEREAS, on October 7, 1996 the parties hereto signed the original
Agreement and Plan of Merger and such parties desire to amend and restate such
Agreement as of such date; and
WHEREAS, this Amended and Restated Agreement and Plan of Merger is
being executed on December 17, 1996 as of October 7, 1996.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, Zenith,
Zenith Insurance, Zenith National, the Fund and RMG hereby agree as follows:
ARTICLE I
THE MERGER; EFFECTIVE TIME; CLOSING
1.1 THE MERGER. Subject to the terms and conditions of this Agreement,
at the Effective Time, the Fund shall be merged with and into Zenith and the
separate existence of the Fund shall thereupon cease (the "Merger"). Zenith
shall be the successor or surviving corporation in the Merger and shall continue
to be governed by the Laws of the State of Florida under the name "Zenith AGC
Acquisition Insurance Company," and the separate corporate existence of Zenith
with all its rights, privileges, immunities, powers and franchises shall
continue unaffected by the Merger. The corporation surviving the Merger is
sometimes hereinafter referred to as the "Surviving Corporation."
The Merger shall have the effects set forth herein and in the FBCA and the
FIL. From and after the Effective Time, the Surviving Corporation shall
possess all of the assets and other rights, privileges, immunities, powers
and purposes of Zenith and the Fund, and shall be liable for all of the
liabilities of each of Zenith and the Fund.
1.2 EFFECTIVE TIME. As soon as practicable after the satisfaction or
waiver of the conditions to the Merger set forth in this Agreement, Zenith and
the Fund will cause appropriate articles of merger (the "Articles of Merger") to
be executed and filed with the Secretary of State of the State of Florida, as
provided in the FBCA. Subject to the approval of the Articles of Merger by the
Secretary of State of the State of Florida, the Merger will become effective as
of 10:00 a.m. on December 31, 1996 or, if later, the date and time of the filing
of the Articles of Merger (the "Effective Time").
1.3 CLOSING. The Fund shall as promptly as practicable notify Zenith,
and Zenith shall as promptly as practicable notify the Fund, when the conditions
to such party's or parties' obligation to effect the Merger contained in Section
7.1 have been satisfied or waived. The Closing shall take place (a) at the
offices of RMG, 0000 Xxxx Xxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx, at 10:00
a.m., Florida time, on the Closing Date or (b) at such other place, time and
date as Zenith and the Fund may agree.
ARTICLE II
SURVIVING CORPORATION
2.1 ARTICLES OF INCORPORATION. The Articles of Incorporation of Zenith
shall be the Articles of Incorporation of the Surviving Corporation until
thereafter amended as provided by Law and the Articles of Incorporation.
2.2 BY-LAWS. The By-Laws of Zenith, as in effect immediately prior
to the Effective Time, shall be the By-Laws of the Surviving Corporation
until htereafter amended as provided by Law, the Articles of Incorporation
and the By-Laws.
2.3 DIRECTORS. The directors of Zenith at the Effective Time shall,
from and after the Effective Time, be the directors of the Surviving Corporation
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
Articles of Incorporation and Surviving Corporation's By-laws.
2.4 OFFICERS. The officers of Zenith at the Effective Time shall, from
and after the Effective Time, be the initial officers of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Articles of Incorporation and the By-Laws.
ARTICLE III
MERGER CONSIDERATION
2
3.1 RIGHT TO RECEIVE MERGER CONSIDERATION.
As of the Effective Time, each Member Distributee shall, by virtue of
the Merger and without any action on the part of such Member Distributee, be
entitled to receive, in accordance with the Plan of Distribution, its pro rata
portion (based on premiums paid during the five-year period ending on the
Effective Date) of the cash payments to be made pursuant to Section 3.3
(collectively, the "Merger Consideration").
3.2 DETERMINATION OF ADJUSTED GAAP NET WORTH.
(a) Prior to the Closing Date, Zenith Insurance shall retain a "big
six" accounting firm selected by the Management Group (the "Accountant") to
perform the audits and prepare the reports required pursuant to this Section
3.2; provided, however, that if the Management Group fails to select an
accounting firm within 3 business days prior to the Closing Date, Zenith
Insurance may select the accounting firm that will act as the Accountant.
(b) Within sixty (60) days after the Effective Date, the Accountant
shall conduct and complete an audit of the Fund's statement of financial
position as of the Effective Date, which shall be prepared in accordance with
GAAP without giving effect to the Merger (the "Closing Balance Sheet"). The
Accountant shall deliver its audit report on the Closing Balance Sheet to
Zenith, Zenith Insurance, Zenith Insurance's auditors and the Management Group.
RMG shall cooperate with the Accountant in connection with such audit, including
the provision of customary representation letters. The Accountant's audit
report on the Closing Balance Sheet shall be final and binding on all of the
parties hereto.
(c) From time to time after the Effective Date, but prior to each
payment required pursuant to Section 3.3 (b), (c) and (d), the Accountant shall
audit a revised statement of financial position of the Fund as of the Effective
Date, prepared in accordance with GAAP without giving effect to the Merger
(each, a "Revised Closing Balance Sheet"). The Accountant shall issue, and
deliver to Zenith, Zenith Insurance, Zenith Insurance's auditors and the
Management Group, a special report on each Revised Closing Balance Sheet, in
accordance with the American Institute of Certified Public Accountants'
Statements on Auditing Standards. Each of the Accountant's special reports
shall be final and binding on all of the parties hereto.
(d) "Adjusted GAAP Net Worth" shall mean, as of any date, (i) the
amount reflected as "member distribution payable" on the most recently prepared
Revised Closing Balance Sheet, plus (ii) $1,600,000, minus (iii) 50% of the
Accountant's fees and expenses for auditing the Closing Balance Sheet and any
Revised Closing Balance Sheet that has been prepared, minus (iv) payments made
to Members after the Effective Date in respect of Loss Sensitive Policies to the
extent that the amount reflected as "member distribution payable" on the most
recently prepared Revised Closing Balance Sheet represents an accrual for such
payments.
3.3 PAYMENT OF MERGER CONSIDERATION. Zenith shall pay the Merger
Consideration to the Member Distributees, as follows:
(a) As soon as practical after the Effective Time, Zenith shall make
payments to Member Distributees equal, in the aggregate, to $1,140,000;
3
(b) On or before December 31, 0000, Xxxxxx shall make payments to
Member Distributees equal, in the aggregate, to 50% of the amount by which (i)
the Fund's Adjusted GAAP Net Worth, as of the date of payment, net of any
amounts included therein that represent accruals for payments due to Members
under Loss Sensitive Policies, exceeds (ii) the amount paid pursuant to
paragraph (a) hereof;
(c) On or before December 31, 0000, Xxxxxx shall make payments to
Member Distributees equal, in the aggregate, to 50% of the amount by which (i)
the Fund's Adjusted GAAP Net Worth, as of the date of payment, net of any
amounts included therein that represent accruals for payments due to Members
under Loss Sensitive Policies, exceeds (ii) the sum of the amounts paid pursuant
to paragraphs (a) and (b) hereof; and
(d) On or before December 31, 0000, Xxxxxx shall make payments to
Member Distributees equal, in the aggregate, to the sum of:
(i) 100% of the amount by which the Fund's Adjusted GAAP Net Worth,
as of the date of payment, exceeds the sum of the amounts paid pursuant to
paragraphs (a), (b) and (c) hereof;
(ii) interest accrued at the rate of 7% per annum on each of the
amounts paid pursuant to the foregoing paragraphs (a), (b) and (c) and
clause (d)(i) hereof, in each case, from the Effective Date until the
respective date of payment of such amounts pursuant to this Section 3.3
(each, a "Payment Date");
(iii) interest accrued at the rate of 7% per annum on the interest
calculated pursuant to the foregoing clause (ii) from the respective
Payment Date until the date of payment pursuant to this clause (d).
3.4 ASSUMPTION OF LIABILITY FOR ASSESSMENTS. From and after the
Effective Time, Zenith hereby assumes all Liability for Assessments and Zenith
shall indemnify and hold harmless the Members against any Liability for
Assessments.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE FUND AND RMG
Except as described in the appropriate sections of the Disclosure
Schedule, the Fund and RMG represent and warrant to Zenith, Zenith Insurance and
Zenith National that:
4.1 ORGANIZATION AND QUALIFICATION.
(a) The Fund is a self-insurance trust fund duly organized, validly
existing and in good standing under the Laws of the State of Florida. RMG is a
not-for profit corporation duly organized, validly existing and in good standing
under the Laws of the State of Florida. Each of the Fund and RMG has all
requisite power and authority and all necessary governmental Consents to
4
own, lease and operate its properties and to carry on its business as it is
now being conducted. The Fund and RMG have heretofore made available to
Zenith complete and correct copies of the Fund's Declaration of Trust and
RMG's Articles of Incorporation and By-Laws, respectively, each in effect as
of the date hereof.
(b) The Fund is (i) duly licensed or authorized as a self-insurance
trust fund in the State of Florida, (ii) not required to be licensed or
authorized as a self-insurance trust fund or insurance company in any
jurisdiction other than the State of Florida, and (iii) duly authorized in the
State of Florida to write the line of business reported as being written in the
SAP Statements.
(c) RMG is (i) duly licensed or authorized as a managing general
agent and was previously licensed as a service company in the State of Florida,
and (ii) not required to be licensed or authorized as a managing general agent
or service company in any jurisdiction other than the State of Florida.
4.2 SUBSIDIARIES. The Fund has no Subsidiaries. Except for RMG, the
Fund does not directly or indirectly have any equity or similar interest in, or
any interest convertible into or exchangeable or exercisable for any equity or
similar interest in, any corporation, partnership, joint venture or other
business association or entity that directly or indirectly conducts any activity
which is material to the Fund. RMG has one member, which member is the Fund.
4.3 AUTHORITY RELATIVE TO THIS AGREEMENT. The Fund and RMG have the
requisite power and authority to execute and deliver this Agreement and, subject
to approval of this Agreement by the Requisite Percentage of Voting Members in
accordance with the FIL as contemplated by Section 6.3 of this Agreement, to
consummate the transactions contemplated hereby. This Agreement and the
consummation by the Fund and RMG of the transactions contemplated hereby have
been duly and validly authorized by the Board of Trustees of the Fund and the
Board of Directors of RMG, respectively, and no other proceedings on the part of
the Fund or RMG are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby (other than the approval of this Agreement by
the Requisite Percentage of Voting Members in accordance with the FIL). This
Agreement has been duly and validly executed and delivered by the Fund and RMG
and, assuming this Agreement constitutes the valid and binding agreement of
Zenith, Zenith Insurance and Zenith National, constitutes the valid and binding
agreement of the Fund and RMG, enforceable against the Fund and RMG in
accordance with its terms, except that the enforcement hereof may be limited by
(a) bankruptcy, insolvency, reorganization, moratorium or other similar Laws now
or hereafter in effect relating to creditors' rights generally and (b) general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).
4.4 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution,
delivery or performance of this Agreement by the Fund or RMG nor the
consummation by the Fund or RMG of the transactions contemplated hereby nor
compliance by the Fund or RMG with any of the provisions hereof will (a)
conflict with or result in any breach of any provision of the Declaration of
Trust of the Fund, or the Articles of Incorporation or By-Laws of RMG; (b)
require any Consent of any governmental or regulatory authority, except (i) the
filing of the Articles of Merger pursuant to the FBCA and appropriate documents
with other relevant authorities, (ii) the filing of appropriate documents with,
and approval of, the Florida Commissioner; (c) result in a Default under any of
the terms, conditions or provisions of any Contract to which the Fund or RMG may
be a party, or Permit by
5
which the Fund or RMG or any of their assets may be bound, except for such
Defaults as to which requisite waivers or consents have been obtained; or (d)
assuming the Consents and Permits referred to in this Section 4.4 are duly
and timely obtained or made and the approval of this Agreement by the
Requisite Percentage of Voting Members has been obtained, violate any Order
or Law applicable to the Fund or RMG or any of their assets.
4.5 FINANCIAL STATEMENTS AND REPORTS.
(a) SAP STATEMENTS. The Fund has delivered to Zenith complete and
correct copies of all SAP Statements relating to periods ending, or prepared as
of any date, on or after December 31, 1993. Each SAP Statement (and the
exhibits and schedules relating thereto) was prepared in accordance with SAP
applied on a consistent basis (except for changes, if any, disclosed therein)
and is complete in all material respects, and each SAP Statement fairly presents
(in accordance with SAP) the financial position of the Fund, as of the
respective dates thereof, or its earnings and changes in surplus or cash flows,
as the case may be, for and during the respective periods covered thereby.
There were no material liabilities affecting the Fund as of December 31, 1995
required in accordance with SAP to be reflected or disclosed in the SAP
Statements for the period then ended, or as of June 30, 1996 required in
accordance with SAP to be reflected or disclosed in the SAP Statements for the
period then ended, which are not so reflected or disclosed.
(b) GAAP STATEMENTS.
(i) The Fund has delivered to Zenith the Interim Statements and the
GAAP Statements. The GAAP Statements and Interim Statements (including the
notes thereto) have been prepared in accordance with GAAP applied on a
consistent basis throughout the period indicated and present fairly the
financial position of the Fund, as of the respective dates thereof, and the
results of its operations and cash flows for the periods then ended,
subject, in the case of the Interim Statements, to normal year-end
adjustments which will not, in the aggregate, in the opinion of the
Trustees of the Fund, be material.
(ii) RMG has delivered to Zenith its audited financial statements for
the fiscal year ended September 30, 1995, together with the notes related
thereto. Such financial statements (including the notes thereto) have been
prepared in accordance with GAAP applied on a consistent basis throughout
the period indicated and present fairly the financial position of RMG as of
the respective dates thereof and the results of its operations and cash
flows for the periods then ended.
(c) The Fund has filed all SAP Statements, together with all exhibits
and schedules thereto, required to be filed with or submitted to the appropriate
regulatory authorities of the State of Florida on forms prescribed or permitted
by such authority. The Fund has filed all other required forms, reports and
documents with the Florida Commissioner required to be filed or submitted by it
pursuant to the FIL and the rules and regulations thereunder, all of which have
complied in all material respects with all applicable requirements of such laws
and the rules promulgated thereunder. None of such forms, reports or documents,
including, without limitation, any financial statements or schedules included
therein at the time filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
6
4.6 RESERVES.
(a) Section 4.6 of the Disclosure Schedule sets forth the methodology
used by the Fund in developing the reserves for incurred losses, incurred loss
adjustment expenses, incurred but not reported losses and loss adjustment
expenses for incurred but not reported losses as set forth in the SAP
Statements. All such reserves in respect of insurance or reinsurance treaties
or agreements established or reflected in the SAP Statements were determined in
accordance with commonly accepted actuarial standards applied on a consistent
basis and are in compliance, in all material respects, with the requirements of
the FIL, as well as those of any other applicable insurance laws.
(b) All reserves and accrued liabilities for estimated losses,
settlements, costs and expenses from pending suits, actions and proceedings
included in each SAP Statement were determined in accordance with SAP and
generally accepted actuarial assumptions and Statement of Financial Accounting
Standards No. 5 issued by the Financial Accounting Standards Board.
4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as specifically
provided for in this Agreement and except as set forth in Section 4.7 of the
Disclosure Schedule, since December 31, 1995, the Fund and RMG have operated
their respective businesses only in the ordinary course of business and
consistent with past practice, and except in the ordinary course of business and
consistent with past practice, neither the Fund nor RMG has:
(i) declared, set aside or paid any dividends or declared or made any
other distributions of any kind to its policyholders;
(ii) incurred any obligation or liability (fixed or contingent), or
series of related obligations or liabilities, other than ordinary course
obligations arising pursuant to the terms of its insurance or reinsurance
treaties and contracts;
(iii) made any change in its accounting or reserving methods or
practices, other than those required to be made by regulatory agencies or
by the Financial Accounting Standards Board, or made any change in
depreciation or amortization policies or rates adopted by it which change
materially affects any financial statement item (without giving effect to
any offsetting change);
(iv) made any change in the underwriting, establishment of reserves,
investment or claims adjustment policies and practices or change in any
activity which (A) has had the effect of accelerating the recording and
billing of premiums or accounts receivable or delaying the payment of
expenses or establishing loss reserves in connection with any accounts or
business of the Fund, or (B) has had the effect of materially altering,
modifying or changing the historic, financial or accounting practices or
policies of the Fund, including accruals of, and reserves for, tax
liabilities;
(v) amended its Declaration of Trust or By-laws or merged with or
into or consolidated with any other person, or changed or agreed to change
in any manner the character of its business;
7
(vi) suffered any material damage, destruction or loss, whether or
not covered by insurance;
(vii) entered into any agreement, commitment or transaction
(including, without limitation, any capital expenditure, capital financing
or sale of assets) for any material amount, other than ordinary course
obligations pursuant to the terms of its insurance or reinsurance treaties
and contracts;
(viii) allowed any Lien on any tangible or intangible asset, or any
sale, transfer, assignment or lease of any tangible or intangible asset;
(ix) effected any cancellation of any debt or waiver or release of
any material right or claim other than under its insurance or reinsurance
treaties and contracts;
(x) made any payment, discharge or satisfaction of any claim,
liability or obligation (absolute, accrued, contingent or otherwise), other
than ordinary course payments pursuant to the terms of its insurance or
reinsurance treaties and contracts;
(xi) been subjected to any labor dispute, litigation or governmental
investigation material to their business or their financial condition;
(xii) made any loan or advance to any person;
(xiii) purchased, leased or acquired any assets or properties of any
person;
(xiv) increased or agreed to increase any salary, wages, benefits or
other forms of compensation payable or to become payable to any of its
current or former officers, directors, trustees or employees, or any bonus
or severance payments or arrangements made to, for or with any of its
officers, directors, trustees or employees, or any supplemental retirement
plan or other program or special remuneration or compensation for any of
its officers, directors, trustees or employees, other than those which have
been approved by Zenith;
(xv) terminated or amended or failed to perform its obligations or
caused the occurrence of any default under any agreement the result of
which had, or in the future can reasonably be expected to have, a Material
Adverse Effect;
(xvi) entered into any agreement, whether in writing or otherwise, to
do any of the foregoing; or
(xvii) entered into any material transaction or commitment of any
kind other than in the ordinary course of business.
4.8 LITIGATION. Except as disclosed in the financial statements
delivered pursuant to Section 4.5 or as set forth in Section 4.8 of the
Disclosure Schedule, there is no Litigation pending or, to the knowledge of the
Fund, threatened against or affecting the business operations or financial
condition of the Fund or RMG. Neither the Fund nor RMG is in default with
respect to any judgement,
8
order, writ, injunction or decree of any court or any Federal, state,
municipal or other governmental department, commission, board, bureau, agency
or instrumentality.
4.9 NO REGULATORY DISQUALIFICATIONS. To the knowledge of the Fund, no
event has occurred and no condition exists or, to the extent it is within the
reasonable control of the Fund, will occur or exist with respect to the Fund or
RMG that, in connection with obtaining any regulatory Consents required for the
Merger, would cause the Fund or RMG to fail to satisfy on its face any
applicable statute or written regulation of any applicable insurance regulatory
authority, which is reasonably likely to adversely affect the Fund's or RMG's
ability to consummate the transactions contemplated hereby.
4.10 PROXY STATEMENT. The Proxy Statement will comply with the FIL,
except that no representation is made by the Fund with respect to information
supplied in writing by Zenith or any affiliate of Zenith specifically for
inclusion in the Proxy Statement. None of the information as to the Fund or RMG
contained in the Proxy Statement will contain, and none of the information
heretofore furnished to Zenith or its representatives by the Fund contains, any
untrue statement of a material fact required to be stated therein or omits to
state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
4.11 TAXES. Except as disclosed in Section 4.11 of the Disclosure
Schedule (with paragraph reference corresponding to those set forth below) or in
the SAP Statements or the GAAP Statements or as disclosed in writing to Zenith
prior to the date hereof:
(a) All Tax Returns required to be filed with respect to the Fund and
RMG have been duly and timely filed, and all such Tax Returns are true, correct
and complete. All Taxes that are due and payable by the Fund and RMG have been
paid or adequate provision has been made on the Fund's and RMG's books and
records in accordance with GAAP or SAP, as the case may be, for the payment of
such Taxes. There are no Liens on any of the assets of the Fund except for
statutory Liens for current Taxes.
(b) With respect to any period for which Tax Returns have not yet
been filed, or for which Taxes are not yet due or owing, the Fund or RMG, as the
case may be, has made due and sufficient current accruals for such Taxes in
accordance with SAP and GAAP, and such current accruals are duly and fully
provided for in the GAAP Statements of the Fund or RMG, as the case may be.
(c) The Fund and RMG have complied (and until the Effective Time will
comply) with all applicable Laws relating to information reporting and the
withholding of Taxes in connection with amounts paid or owing to any third
party.
(d) Neither the Fund nor RMG have been audited or examined by the
Internal Revenue Service. Except as set forth in Section 4.11(d) of the
Disclosure Schedule, the Fund and RMG have not been required to file any state,
local or foreign income or franchise Tax Returns. There are no outstanding
agreements, waivers or arrangements extending the statutory period of
limitations applicable to any claim for, or the period for the collection or
assessment of, Taxes due from the Fund or RMG for any taxable period. The Fund
has delivered to Zenith copies, which are true,
9
correct and complete, of each of the federal income and state premium Tax
Returns, for each of the last three taxable years, filed by the Fund and RMG.
(e) No audit or other proceeding by any court, governmental or
regulatory authority, or similar person is pending or to the knowledge of the
Fund, threatened with respect to any Taxes due from the Fund or RMG or any Tax
Return filed by or relating to the Fund or RMG. No assessment of Tax has been
proposed, orally or in writing, against the Fund or RMG.
(f) Neither the Fund nor RMG is a party to, nor is either of them
bound by, nor does either have any obligation under, any tax sharing contract,
and neither the Fund nor RMG has any liability for indemnification of third
parties with respect to Taxes or liabilities for Taxes as a transferee.
(g) For all tax years for which the applicable statute of limitations
has not yet expired, the Fund's and RMG's respective tax reserves have been
computed in accordance with the requirements of the Code.
4.12 EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) GENERAL COMPLIANCE WITH LAW. Each Plan has been operated in
accordance with its terms and the requirements of ERISA, the Code, and all other
applicable Laws. All reports and disclosures relating to the Plans required to
be filed or furnished to any governmental entity, participants or beneficiaries
prior to the Closing have been filed in a timely manner and in accordance in all
material respects with applicable Law, except as set forth in Section 4.12(a) of
the Disclosure Schedule. Section 4.12 of the Disclosure Schedule contains a
true and complete list of each Plan and ERISA Affiliate Plan.
(b) ERISA TITLE IV LIABILITY; DEFINED BENEFIT PLANS. (i) Neither the
Fund nor RMG, nor any ERISA Affiliate of the Fund or RMG has incurred any direct
or indirect liability under, arising out of, or by operation of Title IV of
ERISA that has not been satisfied in full, and no fact or event exists that
could reasonably be expected to give rise to any such liability, other than
liability for premiums due the PBGC (which premiums have been paid when due);
(ii) for each Plan and ERISA Affiliate Plan which is subject to Title IV of
ERISA, the aggregate accumulated benefit obligation (as determined under
Statement of Financial Accounting Standards No. 87) of such Plan or ERISA
Affiliate Plan does not exceed the fair market value of the assets of such Plan
or ERISA Affiliate Plan; (iii) no Plan or any trust established thereunder that
is subject to Section 302 of ERISA and Section 412 of the Code has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA and Section
412 of the Code), whether or not waived; (iv) all contributions required to be
made with respect thereto (whether pursuant to the terms of any Plan or
otherwise) have been timely made; (v) no Lien exists under Section 412(n) of the
Code or Section 4068 of ERISA with respect to any assets of the Fund or RMG;
(vi) no tax under Section 4971 of the Code has been incurred with respect to any
Plan; and (vii) the Fund and RMG and each ERISA Affiliate of the Fund and RMG
does not sponsor, maintain, contribute to, or is required to contribute (and has
not within the past six (6) years contributed) to a "multiemployer pension
plan," as defined in Section 3(37) of ERISA, or a plan described in Section
4063(a) of ERISA.
10
(c) PROHIBITED TRANSACTIONS; FIDUCIARY DUTIES. (i) Neither the Fund,
RMG, nor any Plan, nor any trust created thereunder and any trustee or
administrator thereof has engaged in a transaction in connection with which the
Fund or any ERISA Affiliate, any Plan, any such trust, or any trustee or
administrator thereof, or any party dealing with any Plan or any such trust,
which could result in a civil penalty assessed pursuant to Section 409 or 502(i)
of ERISA or a tax imposed pursuant to Section 4975 of the Code; and (ii) the
Fund and all fiduciaries (as defined in Section 3(21) of ERISA) with respect to
the Plans, have complied in all respects with Section 404 of ERISA.
(d) DETERMINATION LETTERS. (i) Each Plan intended to be qualified
under Section 401(a) of the Code has received a favorable determination letter
from the Internal Revenue Service with respect to the Tax Reform Act of 1986 and
other applicable Laws, or an application was filed for such determination letter
on a timely basis, and (ii) nothing has occurred from the date of such letter or
such filing that could reasonably be expected to affect the qualified status of
such Plan.
(e) NO ACCELERATION OF LIABILITY. The consummation of the
transactions contemplated by this Agreement will not (i) entitle any current or
former employee, trustee, director or officer of the Fund or RMG to severance
pay, unemployment compensation or any other payment, except as expressly
provided in this Agreement or (ii) accelerate the time of payment or vesting, or
increase the amount of compensation or benefit due any such employee, trustee,
director or officer.
(f) ABILITY TO TERMINATE PLANS; POST-RETIREMENT PLANS. Each Plan is
terminable in accordance with the terms expressly set forth therein, except as
may be limited by applicable Law. No Plan provides death, medical or other
benefits with respect to current or former employees after retirement or other
termination of service, other than coverage mandated by applicable Law.
(g) EMPLOYEE RELATIONS. Except to the extent set forth in Section
4.12(g) of the Disclosure Schedule, (i) there is no labor strike, dispute,
slowdown, stoppage or lockout actually pending or threatened against or
affecting the Fund or RMG and during the past three years there has not been any
such action; (ii) no union claims to represent the employees of the Fund or RMG;
(iii) neither the Fund nor RMG is a party to or bound by any collective
bargaining or similar agreement with any labor organization, or work rules or
practices agreed to with any labor organization or employee association
applicable to employees of the Fund or RMG; (iv) none of the employees of the
Fund or RMG are represented by any labor organization and the Fund and RMG do
not have any knowledge of any current union organizing activities among the
employees of the Fund or RMG, nor does any question concerning representation
exist concerning such employees; (v) true and correct copies of all written
personnel policies, rules and procedures applicable to employees of the Fund or
RMG have heretofore been delivered to Zenith by the Fund and RMG; (vi) there is
no grievance arising out of any collective bargaining agreement or other
grievance procedure pending against the Fund or RMG; (vii) neither the Fund nor
RMG has received notice of the intent of any federal, state, local or foreign
agency responsible for the enforcement of labor or employment laws to conduct an
investigation of the Fund or RMG, nor is such an investigation in progress;
(viii) there are no employment contracts or severance agreements with any
employees of the Fund or RMG; and (ix) no employee of the Fund or RMG has
suffered an "employment loss" (as defined in the Worker Adjustment and
Retraining Notification Act) during the three (3) month period prior to the
Closing.
4.13 INTENTIONALLY OMITTED.
11
4.14 INTELLECTUAL PROPERTY. (a) Each of the Fund and RMG is the owner
of, or a licensee under a valid license for, all items of intellectual property
which are material to its business as currently conducted, including, without
limitation, (i) copyrights, patents, trademarks, logos, service marks, trade
names, service names, all applications therefor and all registrations thereof,
and (ii) rights and licenses, computer software, trade secrets, know-how,
inventions, processes, formulae and other intellectual property rights
(collectively, the "Intellectual Property"); (b) with respect to all
Intellectual Property owned by the Fund or RMG, the Fund or RMG, as the case may
be, is the sole owner and has the exclusive right to use such Intellectual
Property, and such owned Intellectual Property is not subject to any Liens; (c)
there is no infringement or other adverse claim against the rights of the Fund
or RMG with respect to any of the Intellectual Property; and (d) neither the
Fund nor RMG has not been charged with, nor to the knowledge of the Fund or RMG,
is the Fund or RMG threatened to be charged with nor is there any basis for any
such charge of, infringement or other violation of, nor has the Fund or RMG
infringed, nor is it infringing upon, any unexpired rights of any third party in
any of the Intellectual Property.
4.15 BROKERS AND FINDERS. Neither the Fund nor RMG has employed any
investment banker, broker, finder, consultant or intermediary in connection with
the transactions contemplated by this Agreement which would be entitled to any
investment banking, brokerage, finder's or similar fee or commission in
connection with this Agreement or the transactions contemplated hereby.
4.16 FAIRNESS OPINION. The Fund has engaged Xxxxxxx Xxxxx, as financial
advisor to the Fund, to render a fairness opinion with respect to the
consideration to be received by the Members in the Merger. Upon receipt of such
opinion, a copy thereof will be provided to Zenith.
4.17 TITLE TO PROPERTY.
(a) Each of the Fund and RMG (i) has good, valid and marketable title
to all of its properties, assets and other rights that do not constitute real
property, free and clear of all Liens, and (ii) owns, or has valid leasehold
interests in or valid contractual rights to use, all of the assets, tangible and
intangible, used by, or necessary for the conduct of, its business.
(b) Each of the Fund and RMG:
(i) is in peaceful and undisturbed possession of the space and/or
estate under each real property lease under which it is a tenant, and there
are no defaults by it as tenant thereunder; and
(ii) has good and valid rights of ingress and egress to and from all
the real property leased by it from and to the public street systems for
all usual street, road and utility purposes.
4.18 INSURANCE. Section 4.18 of the Disclosure Schedule is a
complete and accurate list of all primary, excess and umbrella policies of
general liability, fire, products liability, employers' liability, directors'
and officers' liability, workers' compensation, bonds and any other form of
insurance owned or held by or on behalf of or providing insurance coverage to
the Fund and RMG, including the following information for each such policy:
type(s) of insurance coverage provided;
12
name of insurer; effective dates of the oplicy; policy number; per occurrence
and annual aggregate deductibles or self-insured retention; and per
occurrence and annual aggregate limits of liability; and the extent, if any,
to which the limits of liability of any products liability or general
liability insurance have been invaded or exhausted. The Fund and RMG are,
and have been continuously since January 1, 1995, insured with financially
responsible insurers in such amounts and against such risks and losses as are
customary for companies conducting the business as conducted by the Fund and
RMG during such time period. Neither the Fund nor RMG is in Default under,
nor have they received any notice of cancellation or termination with respect
to, any insurance policy of the Fund or RMG. The insurance policies of the
Fund and RMG are valid and enforceable policies. The Fund and RMG maintain
all insurance coverage required to be maintained pursuant to the FIL,
including, without limitation, excess insurance in accordance with Florida
Administration Code Rule 4-190.061.
4.19 NO DEFAULT. Neither the Fund nor RMG is in Default under any term,
condition or provision of (a) its Declaration of Trust, or Articles of
Incorporation, respectively, (b) any Contract or other instrument or obligation
to which it is a party or by which it or any of its properties or assets may be
bound or affected; (c) any Order applicable to it or any of its properties or
assets; or (d) any Permit necessary for it to conduct its business as currently
conducted.
4.20 NONCOMPLIANCE WITH LAWS. The businesses of the Fund and RMG are
being conducted in compliance with all applicable Laws. Except as set forth in
Section 4.20 of the Disclosure Schedule, since January 1, 1993, neither the Fund
nor RMG has received any written notification or written communication from any
agency or department of federal, state, or local government (a) asserting that
the Fund or RMG is not in compliance with any of the Laws, Orders or Permits of
any governmental agency or authority or that any such agency or authority
enforces, or (b) requiring the Fund or RMG to enter into or consent to the
issuance of a cease and desist order, formal agreement, directive or commitment
which restricts the conduct of its business or which affects its capital, its
credit or reserve policies, its management, or the payment of dividends.
4.21 MANAGEMENT AND SERVICE AGREEMENTS.
(a) All management and/or service agreements entered into by the Fund
as now in force are set forth in Section 4.21 of the Disclosure Schedule, and to
the extent required under applicable Law, are in a form acceptable to applicable
regulatory authorities or, to the extent required by Law, have been filed and
not objected to by such authorities within the period provided for objection.
(b) Except as set forth in Section 4.21 of the Disclosure Schedule,
each agreement set forth in Section 4.21 of the Disclosure Schedule is valid and
binding against the Fund and each other party thereto, and is in full force and
effect in accordance with its terms. Except as set forth in Section 4.21 of the
Disclosure Schedule, the Fund and each other party thereto is and has been in
compliance with the terms of such agreements. There are no defaults (or
circumstances or events that, with the giving of notice or lapse of time or
both, would become defaults) with respect to any such contract or other
agreement and no such contract or other agreement contains any provisions
providing that the other party thereto may terminate the same by reason of the
transactions contemplated by this Agreement or any other provision which would
be altered or otherwise become applicable by reason of such transactions.
13
4.22 INVESTMENT PORTFOLIO AND OTHER ASSETS. Section 4.22 of the
Disclosure Schedule contains the Fund's investment guidelines and a list of the
securities and other investments in the Fund's investment portfolio, as of June
30, 1996, with information included thereon as to the amortized cost of each
such investment and the market value thereof as of such date. None of such
investments included in the investment portfolio is in default in the payment of
principal or interest or dividends or materially impaired. All such investments
included in such portfolio comply with all insurance laws and regulations of
each of the states to which the Fund is subject relating thereto including,
without limitation, Florida Administrative Code Rule 4-190.071.
4.23 INTERCOMPANY AND AFFILIATE TRANSACTIONS; INSIDER INTERESTS.
Section 4.23 of the Disclosure Schedule lists all intercompany agreements or
arrangements of any kind between or among the Fund, RMG or their officers,
directors, trustees or policyholders.
4.24 OFFICERS, DIRECTORS, TRUSTEES AND EMPLOYEES. The Fund and RMG
have previously delivered to Zenith true and correct information as to (a) the
name of each of the Fund's officers, directors, trustees and employees, (b) the
name of each of RMG's officers, directors and employees as of September 30,
1996, and (c) the total compensation of all such officers, directors, employees
and trustees.
4.25 NO MATERIAL ADVERSE CHANGE. Since December 31, 1995, there has
been no change in the business, properties, assets, condition (financial or
otherwise), liabilities or operations of the Fund or RMG which, individually or
in the aggregate has had, or is reasonably likely to have, a Material Adverse
Effect. The Fund is not aware of any fact or facts which, individually or in
the aggregate, is or are reasonably likely to have a Material Adverse Effect.
4.26 NO UNDISCLOSED LIABILITIES. Except for liabilities and
obligations (x) incurred in the ordinary course of business and consistent with
past practice or (y) pursuant to the terms of this Agreement, since December 31,
1995 to the date hereof, neither the Fund nor RMG has incurred any liabilities
or obligations of any nature, whether or not accrued, contingent or otherwise,
that have, or would be reasonably likely to have, individually or in the
aggregate a Material Adverse Effect or would be required by GAAP or SAP to be
reflected on a balance sheet of the Fund or RMG (including the notes thereto).
4.27 FULL DISCLOSURE. The representations and warranties made by the
Fund in this Agreement, or in any documents referenced or delivered pursuant
hereto or thereto, do not, and will 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 are made, not false or
misleading. Copies of all documents heretofore or hereafter delivered or made
available to Zenith pursuant hereto were or will be complete and accurate copies
of such documents.
14
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ZENITH,
ZENITH INSURANCE AND ZENITH NATIONAL
Each of Zenith, Zenith Insurance and Zenith National represents and
warrants to the Fund that:
5.1 CORPORATE ORGANIZATION AND QUALIFICATION.
(a) Zenith, Zenith Insurance and Zenith National are corporations
duly organized, validly existing and in good standing under the Laws of the
States of Florida, California and Delaware, respectively, and each is qualified
and in good standing as a foreign corporation in each jurisdiction where the
properties owned, leased or operated, or the business conducted, by it require
such qualification. Zenith is a wholly owned subsidiary of Zenith Insurance,
and Zenith Insurance is a wholly owned subsidiary of Zenith National. Zenith,
Zenith Insurance, Zenith National, and each Subsidiary of Zenith Insurance has
all requisite corporate power and authority and all necessary governmental
Consents to own, lease and operate its properties and to carry on its business
as it is now being conducted.
(b) Zenith Insurance is (i) duly licensed or authorized as an
insurance company in its jurisdiction of incorporation, (ii) duly licensed or
authorized as an insurance company in each other jurisdiction where it is
required to be so licensed or authorized, and (iii) duly authorized in its
jurisdiction of incorporation and each other applicable jurisdiction to write
each line of business reported as being written in Zenith's Annual Statement for
the year ended December 31, 1995. Zenith, Zenith Insurance and Zenith National
have heretofore provided to the Fund complete and correct copies of their
charters and bylaws, each as in effect as of the date hereof.
(c) Prior to the Effective Time, Zenith will be duly licensed or
authorized as an insurance company in the State of Florida and duly authorized
in the State of Florida to write workers' compensation insurance business.
5.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Zenith, Zenith
Insurance and Zenith National has the requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement and the consummation by Zenith, Zenith
Insurance and Zenith National of the transactions contemplated hereby have been
duly and validly authorized by the Boards of Directors of Zenith, Zenith
Insurance and Zenith National, and no other corporate proceedings on the part of
Zenith, Zenith Insurance or Zenith National are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by Zenith, Zenith Insurance and
Zenith National and, assuming this Agreement constitutes the valid and binding
agreement of the Fund and RMG, constitutes the valid and binding agreement of
Zenith, Zenith Insurance and Zenith National, enforceable against Zenith, Zenith
Insurance and Zenith National in accordance with its terms, except that the
enforcement hereof may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or other similar Laws now or hereafter in effect relating to
creditors' rights generally and (b) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity).
15
5.3 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution,
delivery or performance of this Agreement by Zenith or Zenith Insurance nor the
consummation by Zenith or Zenith Insurance of the transactions contemplated
hereby nor compliance by Zenith or Zenith Insurance with any of the provisions
hereof will (a) conflict with or result in any breach of any provision of the
Articles of Incorporation or By-Laws of Zenith or Zenith Insurance; (b) require
any Consent of any governmental or regulatory authority, except (i) in
connection with the applicable requirements of the HSR Act, (ii) the filing of
the Articles of Merger pursuant to the laws of the State of Florida, the filing
of an agreement of merger pursuant to the laws of the State of California, and
the filing of appropriate documents with the relevant authorities of other
states in which Zenith Insurance or any of its Subsidiaries is authorized to do
business, (iii) the filing of appropriate documents with, or approval of, the
respective Commissioners of Insurance of the states of Florida, California and
other states in which Zenith Insurance conducts business; (c) result in a
Default under any of the terms, conditions or provisions of any Contract to
which Zenith, Zenith Insurance or any of its Subsidiaries or any of their
respective assets may be bound, except for such Defaults as to which requisite
waivers or consents have been obtained; or (d) assuming the Consents referred to
in this Section 5.3 are duly and timely obtained or made, violate any Order or
Law applicable to Zenith, Zenith Insurance or any of its Subsidiaries or to any
of their respective assets.
5.4 PROXY STATEMENT. None of the information supplied by Zenith or
its affiliates in writing specifically for inclusion in the Proxy Statement
will, at the time the Proxy Statement is mailed, at the time of the Special
Meeting, or at the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
5.5 BROKERS AND FINDERS. Zenith and its affiliates have not employed
any investment banker, broker, finder, or intermediary in connection with the
transactions contemplated by this Agreement which would be entitled to any
investment banking, brokerage, finder's or similar fee or commission in
connection with this Agreement or the transactions contemplated hereby.
ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS
6.1 CONDUCT OF BUSINESS OF THE FUND. During the period from the date of
this Agreement to the Effective Time (unless Zenith shall otherwise agree in
writing and except as otherwise contemplated by this Agreement), the Fund will
conduct its operations according to its ordinary and usual course of business
consistent with past practice and shall use all reasonable efforts to preserve
intact its current business organization, keep available the services of its
current officers and employees, maintain its Permits and Contracts and preserve
its relationships with customers, suppliers and others having business dealings
with it. Without limiting the generality of the foregoing, and except as
otherwise contemplated by this Agreement, the Fund will not, without the prior
written consent of Zenith:
16
(i) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Fund (other than the Merger);
(ii) except as set forth in Section 6.1(ii) of the Disclosure
Schedule, adopt any amendments to its Declaration of Trust;
(iii) make any acquisition, by means of merger, consolidation or
otherwise, or enter into any agreement for the disposition, of assets or
securities;
(iv) other than in the ordinary course of business consistent with
past practice, incur any indebtedness for borrowed money or guarantee any
such indebtedness or make any loans, advances or capital contributions to,
or investments in any other person other than the Fund;
(v) grant any increases in the compensation of any of its directors
or trustees or, except in the ordinary course of business and in accordance
with past practice, grant any increases in the compensation of any of its
officers, employees or agents;
(vi) except in connection with the transactions contemplated by this
Agreement, enter into any new or amend any existing employment agreement
or, except as may be consistent with Fund policies in effect as of the date
of this Agreement, enter into any new or amend any existing severance or
termination agreement with any officer or employee of the Fund;
(vii) except as may be required to comply with applicable Law,
become obligated under any new pension plan, welfare plan, multiemployer
plan, employee benefit plan, severance plan or similar plan, which was not
in existence on the date hereof, or amend any Plan;
(viii) amend, increase, accelerate the payment or vesting of the
amount payable or to become payable under or fail to make any required
contribution to, any benefit plan or increase any non-salary benefits
payable to any employee or former employee, except in the ordinary course
of business consistent with past practice;
(ix) change any method of accounting or accounting practice by the
Fund, except for any such required change in GAAP or applicable statutory
accounting principles;
(x) change its investment guidelines or policies or conduct
transactions in investments except in compliance with its investment
guidelines and policies and approved programs or transactions and all
applicable insurance Laws;
(xi) enter into any Contract to purchase, or to lease for a term in
excess of one year, any real property, provided that the Fund may as a
tenant renew any existing lease for a term not to exceed two years;
17
(xii) enter into any insurance, reinsurance, coinsurance or
similar Contract, whether as insurer, reinsurer or reinsured, except in the
ordinary course of business consistent with past practice;
(xiii) enter into any Contract with any insurance agent or broker
that provides, by its terms, for exclusivity (including, without
limitation, by territory, product, or distribution) or that is not
terminable by its terms within 180 days by the Fund without substantial
premium or penalty or, in the case of career agents, without commission
renewal liability, except to the extent that the Contract provides for
vesting commissions;
(xiv) (x) take, or agree or commit to take any action that would
make any representation and warranty of the Fund hereunder inaccurate at
the Effective Time (except for representations and warranties which speak
as of a particular date, which need be accurate only as of such date), (y)
omit, or agree or commit to omit, to take any action necessary to prevent
any such representation or warranty from being inaccurate at the Effective
Time (except for representations and warranties which speak as of a
particular date, which need be accurate only as of such date), or (z) take,
or agree or commit to take, any action that would result in, or is
reasonably likely to result in, any of the conditions of the Merger set
forth in Article VII not being satisfied;
(xv) authorize, recommend, propose or announce an intention to do any
of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing; or
(xvi) settle any tax audit, or make or change any tax election or
file amended Tax Returns.
6.2 ALTERNATIVE PROPOSALS. The Fund will not authorize, and will use
its best efforts to cause its officers, trustees, directors, employees or agents
not to, directly or indirectly, solicit, initiate or encourage any inquiries
relating to, or the making of any proposal which constitutes, an Alternative
Proposal, or recommend or endorse any Alternative Proposal, or participate in
any discussions or negotiations, or provide third parties with any nonpublic
information, relating to any such inquiry or proposal or otherwise facilitate
any effort or attempt to make or implement an Alternative Proposal; provided,
however, that the Fund may, and may authorize and permit its officers, trustees,
directors, employees or agents to provide third parties with nonpublic
information reasonably necessary to facilitate an Alternative Proposal,
recommend or endorse any Alternative Proposal with or by any third party, and
participate in discussions and negotiations with any third party relating to any
Alternative Proposal, if the Fund's Board of Trustees, after having consulted
with and considered the advice of outside counsel, has reasonably determined in
good faith that the failure to do so would be inconsistent with its fiduciary
duties to the Fund's Members under applicable Law. If the Fund enters into a
definitive agreement with respect to any Alternative Proposal, it shall
concurrently with entering into such agreement pay, or cause to be paid to
Zenith the expenses outlined in Section 9.1(b). The Fund will immediately cease
and cause to be terminated any activities, discussions or negotiations conducted
prior to the date of this Agreement with any parties other than Zenith with
respect to any of the foregoing. The Fund shall immediately advise Zenith
following the receipt by it of any Alternative Proposal and the material terms
and conditions thereof, and the identity of the
18
person making any such Alternative Proposal, and advise Zenith of any
developments with respect to such Alternative Proposal immediately upon the
occurrence thereof.
6.3 MEMBERS' APPROVAL; PROXY STATEMENT. The Fund shall duly call, give
notice of, convene and hold the Members' Meeting as soon as practicable
following the execution of this Agreement for the purpose of obtaining the
approval of the Requisite Percentage of the Voting Members with respect to this
Agreement and the Merger. The Fund shall use its best efforts to obtain and
furnish the information required to be included by it in the Proxy Statement to
be furnished to the Fund's Members regarding the Merger. Zenith shall have the
right to approve the form and contents of the Proxy Statement and any
preliminary versions thereof prior to the time it is filed with the Florida
Commissioner. After consultation with Zenith, the Fund shall respond promptly
to any comments made by the Florida Commissioner with respect to the Proxy
Statement and any preliminary version thereof, and cause the Proxy Statement to
be mailed to its Voting Members, at the earliest practicable time following the
execution of this Agreement. The Fund shall use its best efforts to obtain the
approval of the Requisite Percentage of the Voting Members with respect to this
Agreement and the Merger, and the Fund shall, through its Board of Trustees,
subject to its fiduciary duties under applicable Law, recommend to its Members
approval of this Agreement, unless, in each case, the members of the Board of
Trustees of the Fund, after having consulted with and considered the advice of
outside counsel, reasonably determine in good faith that under the circumstances
the foregoing actions would be reasonably likely to result in a breach of their
fiduciary duties to the Members under applicable Law. Notwithstanding the
foregoing, the Board of Trustees of the Fund may at any time prior to the
Effective Time withdraw, modify, or change any recommendation and declaration
regarding this Agreement, or recommend and declare advisable any other offer or
proposal, if the Board of Trustees, after consultation with its outside counsel,
has reasonably determined in good faith that the making of such recommendation,
or the failure to withdraw, modify or change its recommendation, would be
reasonably likely to result in a breach of their fiduciary duties to the Members
under applicable Law. Additionally, the Board of Trustees of the Fund may
withdraw, modify or change any recommendation or declaration regarding this
Agreement if the fairness opinion rendered by Xxxxxxx Xxxxx in connection with
this Agreement and the Related Documents determines the value of the
consideration to be received by the Members of the Fund not to be fair to the
Members, from a financial point of view.
6.4 SATISFACTION OF CONDITIONS, RECEIPT OF NECESSARY APPROVALS. Subject
to the terms and conditions herein provided, each of the parties hereto agrees
to (i) promptly effect all necessary registrations, submissions and filings,
including, but not limited to, filings under the HSR Act and submissions of
information requested by governmental authorities, which may be necessary or
required in connection with the consummation of the transactions contemplated by
this Agreement, (ii) to use its best efforts to secure federal and state
antitrust clearance (including taking steps to avoid or set aside any
preliminary or permanent injunction or other order of any federal or state court
of competent jurisdiction or other governmental authority), (iii) use its best
efforts to take all other action and to do all other things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement and (iv) use its best efforts to
obtain all other necessary or appropriate Consents (including but not limited to
any required Consents of the Commissioners). Each of the parties hereto
acknowledges that certain actions may be necessary with respect to the foregoing
in making notifications and obtaining Consents which are material to the
consummation of the transactions contemplated hereby, and each of the parties
hereto agrees to take such action as is necessary to complete such notifications
and obtain such Consents,
19
provided, however, that nothing in this Section 6.4 or elsewhere in this
Agreement shall require any party hereto to hold separate or make any
divestiture of any asset or otherwise agree to any restriction on their
operations which would in any such case be material to the assets,
liabilities or business of, (a) in the case of the Fund or RMG, the Fund, and
(b) in the case of Zenith, Zenith Insurance or Zenith National, Zenith
National and its Subsidiaries, taken as a whole, in order to obtain any
Consent required by this Agreement. All necessary registrations, submissions
and filings under the HSR Act or in connection with securing federal or state
antitrust clearance, shall be at the cost of Zenith, provided, however, that
the HSR Act filing fee shall be shared equally by Zenith and the Fund.
Additionally, Zenith shall be primarily responsible for all filings required
hereunder, unless such filings are specifically required of the Fund or RMG,
in which case the Fund or RMG, as the case may be, shall promptly make such
filings following receipt of written notification of the requirement for such
filings.
6.5 ACCESS TO INFORMATION.
(a) Upon reasonable notice, the Fund shall afford to officers,
employees, counsel, accountants and other authorized representatives of Zenith
("Representatives"), in order to evaluate the transactions contemplated by this
Agreement, reasonable access, during normal business hours throughout the period
prior to the Effective Time, to its properties, books and records and, during
such period, shall furnish promptly to such Representatives all information
concerning its business, properties and personnel as may reasonably be
requested.
(b) Zenith agrees that it will not, and will cause its
Representatives not to, use any information obtained pursuant to this Section
6.5 for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement.
(c) Zenith will hold, and will use its best efforts to cause its
Representatives to hold, in strictest confidence, unless compelled to disclose
by judicial or administrative process, or, in the opinion of its counsel, by
other requirements of Law, all documents and information concerning the Fund
furnished to Zenith or its Representatives in connection with the transactions
contemplated by this Agreement (except to the extent that such information can
be shown to have been (i) previously known by Zenith or its Representatives,
(ii) in the public domain through no fault of Zenith or its Representatives, or
(iii) later lawfully acquired by Zenith or its Representatives from other
sources (unless Zenith knows that such other sources are not entitled to
disclose such information)) and will not release or disclose such information to
any other person, except its Representatives in connection with this Agreement,
provided that such Representative shall have first been advised by Zenith of the
confidentiality provision of this Section 6.5.
(d) Notwithstanding the provisions hereof, during the period prior to
the Effective Time, the parties shall take appropriate precautions to ensure
that competitively sensitive information is not exchanged in a manner which is
inconsistent with applicable Law.
6.6 PUBLICITY. Zenith and the Fund will consult with each other and
will mutually agree upon any press releases or public announcements pertaining
to the Merger and shall not issue any such press releases or make any such
public announcements prior to such consultation and agreement, except as may be
required by applicable Law or by obligations pursuant to any listing agreement
with any national securities exchange, in which case the party proposing to
issue such press
20
release or make such public announcement shall use its best efforts to
consult in good faith with the other party before issuing any such press
releases or making any such public announcements.
6.7 INDEMNIFICATION OF TRUSTEES AND OFFICERS. Zenith shall indemnify
and hold harmless the Indemnified Parties from and against all costs, damages,
judgments, attorney's fees, expenses, obligations and liabilities of whatsoever
kind or nature, without limitation as to time, amount or otherwise, which the
Indemnified Parties may incur or sustain in connection with any claim, action,
suit, proceeding or investigation arising out of or pertaining to any action or
omission in their capacity as trustee, fiduciary, officer, employee or agent of
the Fund or RMG (including, without limitation, any which arise out of or relate
to actions or omissions which relate to the Merger and the transactions
contemplated by this Agreement); provided, however, that Zenith shall not be
obligated to indemnify the Indemnified Parties if and to the extent that such
costs, damages, judgments, attorney's fees, expenses, obligations or liabilities
arise as a result of (a) a violation of criminal law resulting in a conviction,
(b) any deliberately dishonest or fraudulent act or omission, or (c) any act or
omission committed in bad faith or with malicious purpose or constituting gross
negligence, and, in the case of any claim, action, suit, proceeding or
investigation arising out of or pertaining to the Merger or any transaction
contemplated by this Agreement or the Related Documents, Zenith shall not be
obligated to indemnify the Indemnified Parties if and to the extent that all
material aspects of the Merger and the transactions contemplated by this
Agreement and the Related Documents were not fully described and disclosed in
the Proxy Statement. At its option, Zenith may provide insurance policies of
its choosing which insure and cover Zenith's obligation of indemnification to
the Indemnified Parties as contained herein; provided, however, that the
provision of such insurance polices by Zenith shall not relieve Zenith from its
obligation of indemnification to the Indemnified Parties; and provided further,
that any deductibles required under any such insurance policies shall be the
sole responsibility of Zenith.
6.8 GUARANTY BY ZENITH INSURANCE AND ZENITH NATIONAL. Zenith Insurance
and Zenith National hereby jointly and severally guarantee the performance by
Zenith of its covenants and obligations under this Agreement and the Related
Documents. The parties acknowledge and agree that this guaranty by Zenith
Insurance and Zenith National constitutes an important inducement to the Fund to
execute this Agreement and, consequently, constitutes an essential part of the
consideration to be received by the Fund hereunder. This guaranty by Zenith
National shall survive the merger of Zenith and Zenith Insurance, and shall
continue in full force until all obligations of Zenith (and all obligations of
Zenith Insurance acquired pursuant to the merger of Zenith and Zenith Insurance)
under this Agreement and the Related Documents have been satisfied and
discharged. Zenith Insurance and Zenith National shall not be discharged from
liability under this guaranty so long as any obligation of Zenith existing under
this Agreement or the Related Documents remains outstanding and unperformed.
This guaranty by Zenith Insurance and Zenith National shall inure to the benefit
of the Fund, its Members, the Indemnified Parties and the parties to the Related
Documents.
6.9 MERGER OF ZENITH AND ZENITH INSURANCE. As soon as practical after
the Effective Time, Zenith, Zenith Insurance and Zenith National shall cause
Zenith to be merged with and into Zenith Insurance, with (a) Zenith Insurance as
the surviving corporation in such merger, (b) the outstanding shares of Zenith
being cancelled and no shares of Zenith Insurance being issued in exchange
therefor, and (c) the outstanding shares of Zenith Insurance remaining
outstanding and unaffected by such merger, all in accordance with the GCL and
the FBCA. The merger of Zenith and Zenith Insurance shall have the effect set
forth in the GCL, including (i) the separate existence
21
of Zenith shall cease, (ii) Zenith Insurance shall succeed, without other
transfer, to all the rights and property of Zenith, and (iii) Zenith
Insurance shall be subject to all the debts and liabilities of Zenith in the
same manner as if Zenith Insurance had itself incurred them.
6.10 TERMINATION OF RMG MANAGEMENT AGREEMENTS. The Fund and RMG hereby
agree that, from and after the Effective Time, all management agreements between
RMG and the Fund are hereby terminated and of no further force or effect.
6.11 DIVIDEND PAYMENTS. As soon as practical after the Effective Time,
Zenith shall, subject to the approval of the Florida Department, pay dividends
on the Fund's Loss Sensitive Policies equal to $1,381,583.
6.12 FINANCIAL STATEMENTS AND REPORTS.
(a) As promptly as practicable after the date hereof, but in no event
later than five business days prior to the Closing Date, the Fund and RMG shall
prepare and deliver to Zenith financial statements of the Fund that present
fairly the financial position of the Fund as of September 30, 1996, and the
results of its operations and cash flows for the period then ended in accordance
with GAAP (the "September Financial Statements").
(b) As promptly as practicable after the date hereof, but in no event
later than five business days prior to the Closing Date, the Fund and RMG shall
cause Milliman & Xxxxxxxxx, Inc. to prepare and deliver to Zenith an actuarial
review of the Fund's reserves as of September 30, 1996.
(c) As promptly as practicable after the Fund or RMG files or submits
any financial statement or other report to the insurance regulatory authorities
of the State of Florida (but in no event later than five business days
thereafter), the Fund and RMG shall deliver to Zenith a true and correct copy of
each such statement and report, together with all exhibits and schedules
thereto.
(d) After the date hereof, the Fund and RMG shall continue to prepare
in the ordinary course and shall deliver, as soon as available, to Zenith, true
and complete copies of such financial statements (including, but not limited to,
annual and quarterly financial statements prepared in accordance with GAAP and
SAP), reports or analyses as may be prepared or received by the Fund or RMG and
as relate to any of the business, operations or affairs of the Fund or RMG,
including, without limitation, normal internal reports which the Fund or RMG
prepares and special reports (such as those of financial consultants).
ARTICLE VII
CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGER
7. 1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger are subject to the
satisfaction or, where permissible, waiver at or prior to the Closing Date of
the following conditions (provided that any such condition may not be waived
without the consent of the Florida Commissioner):
22
(a) MEMBER APPROVAL. This Agreement shall have been duly approved by
the Requisite Percentage of the Voting Members in accordance with applicable
Law.
(b) FAIRNESS OPINION. Xxxxxxx Xxxxx shall have delivered to the Fund
and Zenith its written opinion that the transactions contemplated by this
Agreement and the Related Documents are fair, from a financial point of view, to
the Members.
(c) NO INJUNCTIONS. There shall not be in effect any Law or Order of
a court or governmental or regulatory agency of competent jurisdiction directing
that the transactions contemplated herein not be consummated; PROVIDED, HOWEVER,
that, subject to the terms and provisions herein provided, prior to invoking
this condition each party shall use its reasonable efforts to have any such
Order vacated.
(d) GOVERNMENTAL FILINGS AND CONSENTS. Subject to the terms and
provisions herein provided all governmental Consents legally required for the
consummation of the Merger and the transactions contemplated hereby shall have
been obtained and be in effect on the Closing Date (including but not limited to
the approval of the Commissioners and any Consents which may be required under
the insurance Laws of any state in which Zenith Insurance conducts any business
or owns any assets), without any limitations unacceptable to Zenith, and the
waiting periods under the HSR Act shall have expired or been terminated.
7.2 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF ZENITH. The obligation
of Zenith to effect the Merger is subject to the satisfaction at or prior to the
Closing Date of the following conditions, any or all of which may be waived in
whole or in part by Zenith, to the extent permitted by applicable Law:
(a) REPRESENTATIONS AND WARRANTIES. For purposes of this Section
7.2(a), the accuracy of the representations and warranties of the Fund and RMG
set forth in Article IV of this Agreement shall be assessed as of the date of
this Agreement and as of the Closing Date with the same effect as though all
such representations and warranties had been made on and as of the Closing Date
(provided that representations and warranties which are confined to a specified
date shall speak only as of such date). All representations and warranties set
forth in Article IV which are qualified by reference to materiality shall be
true and correct as qualified and all other representations and warranties set
forth in Article IV of this Agreement shall be true and correct in all material
respects.
(b) PERFORMANCE. Each of the Fund and RMG shall have performed, in
all material respects, all covenants and agreements herein required to be
performed by it prior to the Closing Date.
(c) OFFICER'S CERTIFICATE. Zenith shall have received on the Closing
Date a certificate, dated the Closing Date and executed by the Chairman of the
Board of Trustees of the Fund, certifying as to the fulfillment of the
conditions specified in Sections 7.2(a) and (b) hereof.
(d) DOCUMENTS. Zenith and its counsel shall have received all such
documents and instruments, or copies thereof, certified, if requested, as may be
reasonably requested in connection with the compliance with the conditions
precedent to Zenith's obligations hereunder.
23
(e) OPINION. Zenith shall have received an opinion prepared in
accordance with the Florida Opinion Standards established by the business
section of the Florida Bar Association, dated the Closing Date, from Xxxxxx X.
Xxxxxxxxxx, Esq., counsel to the Fund, in form and substance satisfactory to it
and its counsel and substantially in the form of Exhibit 7.2(e) hereto.
(f) CONSULTING AGREEMENT. The Management Group shall have entered
into an agreement with Zenith, substantially in the form annexed hereto as
Exhibit 7.2(f) (the "Consulting Agreement"), pursuant to which the Management
Group shall, for five years after the Effective Date, provide consulting
services to Zenith in connection with insurance business written by the Fund
prior to the Effective Date and the development of Zenith's workers'
compensation business in Florida, as required by Zenith as a condition to
entering into this Agreement. The Consulting Agreement shall provide, among
other things, that (i) each member of the Management Group shall be compensated
by Zenith for his or her services in the amount of $25,000 per year, and (ii)
the Management Group (other than Xxxxx Xxxxxxxxx) shall not engage in or
undertake any workers compensation insurance business beginning on the date of
the Effective Time and ending July 31, 2006.
(g) TRANSFER AGREEMENT. RMG and ZRM shall have entered into an
agreement, substantially in the form annexed hereto as Exhibit 7.2(g) (the
"Transfer Agreement"), pursuant to which (i) RMG shall transfer all of its
assets to ZRM, and ZRM shall assume all of the liabilities of RMG, (ii) ZRM may
seek to hire any employees of RMG that ZRM deems to be necessary or useful in
the operation or management of ZRM's business, and (iii) as soon as practical
after the Effective Time, RMG shall take all appropriate action to effect its
dissolution and liquidation in accordance with Florida law.
(h) ACCOUNTANT'S LETTER. Shores & Company, P.A. shall have delivered
to Zenith a letter, dated the Closing Date, in form and substance reasonably
satisfactory to Zenith, containing statements and information of the type
customarily included in accountants "comfort letters" with respect to the
September Financial Statements, including, without limitation, the following:
(i) Shores & Company, P.A. are independent with respect to the Fund;
(ii) with respect to the nine-month period ended September 30, 1996,
they have (A) performed the procedures specified by the American Institute
of Certified Public Accountants for a review of the interim financial
information as described in SAS No. 71, "Interim Financial Information," on
the September Financial Statements, and (B) inquired of certain officials
of the Fund and RMG who have responsibility for financial and accounting
matters; and
(iii) nothing came to their attention as a result of the foregoing
procedures that caused them to believe that (A) any material modifications
should be made to the September Financial Statements for them to be in
conformity with generally accepted accounting principles, or (B) there has
been any decrease in the Fund's "member distribution payable" as compared
with the amount shown in the September Financial Statements.
24
(i) TERMINATION OF PENSION PLAN. The Fund shall have taken all
appropriate action to effect the termination of the Associated General
Contractors Self-Insurers' Fund Pension Plan in accordance with applicable Law,
and Zenith shall have received evidence reasonably satisfactory to it of such
action.
(j) OPINION REGARDING GUARANTY FUND LIABILITY. Zenith shall have
received an opinion, dated the Closing Date, from counsel to Zenith, in form and
substance satisfactory to Zenith, to the effect that from and after the
Effective Time, none of Zenith National, Zenith or Zenith Insurance shall have
any liability under the Florida Self-Insurance Fund Guaranty Association Act,
FIL Section 631.90 ET. SEQ. ("FIGA"), except for liability of the Fund under
FIGA with respect to adjustments, if any, to the assessment of the Fund for the
1996 calendar year.
7.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF THE FUND. The
obligation of the Fund to effect the Merger is subject to the satisfaction at or
prior to the Closing Date of the following conditions, any and all of which may
be waived in whole or in part by the Fund to the extent permitted by applicable
Law:
(a) REPRESENTATIONS AND WARRANTIES. For purposes of this Section
7.3(a), the accuracy of the representations and warranties set forth in Article
V of this Agreement shall be assessed as of the date of this Agreement and as of
the Closing Date with the same effect as though all such representations and
warranties had been made on and as of the Closing Date (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). All representations and warranties set forth in
Article V of this Agreement which are qualified by reference to materiality
shall be true and correct and all other representations and warranties set forth
in Article V of this Agreement shall be true and correct in all material
respects.
(b) PERFORMANCE. Zenith, Zenith Insurance and Zenith National shall
have performed, in all material respects, all covenants and agreements herein
that are required to be performed by Zenith, Zenith Insurance and Zenith
National prior to the Closing Date.
(c) OFFICER'S CERTIFICATE. The Fund shall have received at the
Closing Date a certificate dated the Closing Date and executed by the Chief
Executive Officer or the Chief Financial Officer of Zenith certifying to the
fulfillment of the conditions specified in Sections 7.3(a) and (b) hereof.
(d) OPINION. The Fund shall have received an opinion, dated the
Closing Date, from counsel to Zenith, in form and substance satisfactory to it
and its counsel and substantially in the form of Exhibit 7.3(d) hereto.
(e) FORMATION OF ZRM. Zenith Insurance shall have formed ZRM and
appointed each of the members of the Management Group as a director of ZRM.
(f) MANAGEMENT AGREEMENT. Zenith shall have entered into an agreement
with ZRM, substantially in the form of Exhibit 7.3(f) hereto (the "Management
Agreement"), pursuant to which ZRM shall provide management services to Zenith
after the Merger.
25
ARTICLE VIII
TERMINATION
8.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Closing Date,
before or after the approval by Members of the Fund, by the mutual written
consent of Zenith and the Fund.
8.2 TERMINATION BY EITHER ZENITH OR THE FUND. This Agreement may be
terminated and the Merger may be abandoned by Zenith or the Fund, before or
after the approval by Members of the Fund, if (i) any court of competent
jurisdiction in the United States or some other governmental body or regulatory
authority shall have issued an Order permanently restraining, enjoining or
otherwise prohibiting the Merger and such Order shall have become final and
nonappealable, PROVIDED, that the party seeking to terminate this Agreement
pursuant to this clause (i) shall have used all reasonable efforts to remove
such Order, (ii) the Merger shall not have been consummated by December 31,
1996; PROVIDED that the right to terminate this Agreement pursuant to this
clause (ii) shall not be available to any party whose failure to fulfill any of
its obligations under this Agreement results in the failure of the Merger to
occur on or prior to such date, or (iii) this Agreement shall have been voted on
by Voting Members of the Fund and the vote shall not have been sufficient to
satisfy the condition set forth in Section 7.1(a).
8.3 TERMINATION BY ZENITH. This Agreement may be terminated by Zenith
and the Merger may be abandoned prior to the Closing Date, before or after the
approval by Members of the Fund, (i) in the event of a breach by the Fund or RMG
of any covenant or agreement contained in this Agreement which, by its nature,
cannot be cured prior to the Closing or which has not been cured within 30 days
after the giving of written notice to the Fund of such breach, (ii) in the event
of an inaccuracy of any representation or warranty of the Fund or RMG contained
in this Agreement which, by its nature, cannot be cured prior to the Closing or
which has not been cured within 30 days after the giving of written notice to
the Fund of such inaccuracy and which inaccuracy, in either case, would cause
the conditions set forth in Section 7.2(a) not to be satisfied, (iii) in the
event that any of the conditions precedent to the obligations of Zenith to
consummate the Merger cannot be satisfied or fulfilled by the date set forth in
Section 8.2(ii) of this Agreement, provided that the failure of such conditions
to be so satisfied shall not be as a result of Zenith's failure to fulfill its
obligations under this Agreement, or (iv) the Board of Trustees of the Fund
withdraws or materially modifies or changes its recommendation or approval of
this Agreement in a manner adverse to Zenith or Zenith Insurance.
8.4 TERMINATION BY THE FUND. This Agreement may be terminated by the
Fund and the Merger may be abandoned at any time prior to the Closing Date,
before or after the approval by Members of the Fund, (i) in the event of a
breach by Zenith, Zenith Insurance or Zenith National of any covenant or
agreement contained in this Agreement which, by its nature, cannot be cured
prior to the Closing or which has not been cured within 30 days after the giving
of written notice to Zenith of such breach, (ii) in the event of an inaccuracy
of any representation or warranty of Zenith, Zenith Insurance or Zenith National
contained in this Agreement which, by its nature, cannot be cured prior to the
Closing or which has not been cured within 30 days after the giving of written
notice to Zenith of such inaccuracy and which inaccuracy, in either case, would
cause the conditions set forth in Section 7.3(a) not to be satisfied, (iii) in
the event that any of the conditions precedent to the obliga-
26
tions of the Fund to consummate the Merger cannot be satisfied or fulfilled
by the date set forth in Section 8.2(ii) of this Agreement, provided that the
failure of such conditions to be so satisfied shall not be as a result of the
Fund's failure to fulfill its obligations under this Agreement, or (iv) prior
to the Members Meeting, the Board of Trustees of the Fund has (y) withdrawn
or modified or changed its recommendation or approval of this Agreement in a
manner adverse to Zenith or Zenith Insurance in order to approve and permit
the Fund to execute a definitive agreement relating to an Alternative
Proposal and (z) determined, based on the advice of outside legal counsel to
the Fund, that the failure to take such action as set forth in the preceding
clause (y) would be reasonably likely to result in breach of the Board of
Trustees' fiduciary duties under applicable Law; provided, however, that the
Board of Trustees of the Fund shall have been advised by such outside counsel
that notwithstanding a binding commitment to consummate transactions of the
nature contemplated by this Agreement entered into in the proper exercise of
their applicable fiduciary duties, such fiduciary duties would also be
reasonably likely to require the trustees to terminate this Agreement as a
result of such Alternative Proposal; provided, further, that the Fund shall
immediately advise Zenith following the receipt by it of any Alternative
Proposal and the details thereof, and advise Zenith of any developments with
respect to such Alternative Proposal immediately upon the occurrence thereof.
8.5 EFFECT OF TERMINATION. In the event of termination of this
Agreement and the abandonment of the Merger pursuant to this Article VIII,
written notice thereof shall as promptly as practicable be given to the other
party to this Agreement, and this Agreement shall terminate and the transactions
contemplated hereby shall be abandoned, without further action by any of the
parties hereto. If this Agreement is terminated as provided herein: (i) there
shall be no liability or obligation on the part of Zenith, Zenith Insurance,
Zenith National, the Fund, RMG or their respective trustees, officers and
directors, and all obligations of the parties shall terminate, except (A) for
the obligations of the parties pursuant to this Section 8.5, (B) for the
provisions of Section 9.1, and (C) that a party who is in breach of any of its
representations, warranties, covenants or agreements set forth in this Agreement
shall be liable for damages occasioned by such breach, including, without
limitation, any expenses incurred by the other party in connection with this
Agreement, and (ii) all filings, applications and other submissions made
pursuant to the transactions contemplated by this Agreement shall, to the extent
practicable, be withdrawn from the agency or person to which it has been made.
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1 PAYMENT OF EXPENSES AND OTHER PAYMENTS.
(a) Except as otherwise expressly provided herein, whether or not the
Merger shall be consummated and except as otherwise provided in this Agreement,
each party hereto shall pay its own expenses incident to preparing for, entering
into and carrying out this Agreement and the consummation of the transactions
contemplated hereby.
(b) The Fund shall pay, or cause to be paid, in same day funds to
Zenith the sum of all Expenses upon demand, if (i) Zenith terminates this
Agreement under Section 8.3(iv), (ii) the Fund terminates this Agreement under
Section 8.4(iv), or (iii) prior to any termination of this Agreement, an
Alternative Proposal shall have been made and within nine months of the
termination of this
27
Agreement a transaction constituting an Alternative Proposal is consummated
with respect to, or the Fund enters into an agreement with respect to, or
approves or recommends an Alternative Proposal, in each case made prior to
any termination of this Agreement; provided, however, that in the case of
(iii) above in this paragraph (b), no payment shall be made if this Agreement
has been terminated pursuant to Sections 8.4(i) and (ii) hereof. The amount
of Expenses so payable shall be the amount set forth in an estimate delivered
by Zenith, subject to upward or downward adjustment (not to be in excess of
the amount set forth in the definition of Expenses) upon delivery of
reasonable documentation therefor.
9.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties of the parties made in Articles IV and V hereof
shall not survive beyond the earlier of termination of this Agreement or the
Effective Time.
9.3 MODIFICATION OR AMENDMENT. Subject to the applicable provisions of
the FBCA, the GCL, the FIL and the California Insurance Code, at any time prior
to the Effective Time, the parties hereto may modify or amend this Agreement, by
written agreement executed and delivered by duly authorized officers of the
respective parties; PROVIDED, HOWEVER, that after approval of this Agreement by
the Members of the Fund, no amendment shall be made which changes the
consideration payable pursuant to the Merger or adversely affects the rights of
the Fund's Members hereunder without the approval of such Members.
9.4 WAIVER AND EXTENSION. At any time prior to the Effective Time,
the parties hereto may (a) 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 delivered pursuant hereto or (c) except to the extent prohibited by
Law, waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to this Agreement to assert
any of its rights under this Agreement or otherwise shall not constitute a
waiver of those rights.
9.5 COUNTERPARTS. For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
9.6 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the Laws of the State of Florida without giving
effect to the principles of conflicts of law thereof. Venue for the purposes
of any cause of action, of whatsoever kind or nature, by any party against
any other hereunder, shall be Orange County, Florida.
9.7 NOTICES. Any notice, request, instruction or other document to be
given hereunder by any party to the other parties shall be in writing and shall
be deemed given when delivered personally, upon receipt of a transmission
confirmation (with a confirming copy sent by overnight courier) if sent by
telecopy or like transmission, and on the next business day when sent by Federal
Express, Express Mail, or other reputable overnight courier, as follows:
28
(a) If to the Fund or RMG, to
Xxxxx Xxxxxxxxx
Associated General Commerce
Self-Insurers' Trust Fund
0000X Xxxxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxx 00000
(000) 000-0000 (telephone)
(000) 000-0000 (telecopier)
with a copy to:
Xxxxxx X. Xxxxxxxxxx, Esq.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
(000) 000-0000 (telephone)
(000) 000-0000 (telecopier)
(b) If to Zenith, Zenith Insurance or Zenith National, to
Xxxx X. Xxxxxxx, Esq.
Zenith Insurance Company
00000 Xxxxxx Xxxxxx
Xxxxxxxx Xxxxx, XX 00000-0000
(000) 000-0000 (telephone)
(000) 000-0000 (telecopier)
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Bertil Lundqvist, Esq.
(000) 000-0000 (telephone)
(000) 000-0000 (telecopier)
and
29
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, Esq.
(000) 000-0000 (telephone)
(000) 000-0000 (telecopier)
or to such other persons or addresses as may be designated in writing by the
party to receive such notice. Nothing in this Section 9.7 shall be deemed to
constitute consent to the manner and address for service of process in
connection with any legal proceeding (including litigation arising out of or in
connection with this Agreement), which service shall be effected as required by
applicable Law.
9.8 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (a) constitutes the
entire agreement among the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
among the parties or any of them with respect to the subject matter hereof and
(b) shall not be assigned by operation of law or otherwise.
9.9 PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto and their respective successors and
permitted assigns. Nothing in this Agreement, express or implied, other than
the right to receive the consideration payable in the Merger pursuant to Article
III hereof, is intended to or shall confer upon any other person any rights,
benefits or remedies of any nature whatsoever under or by reason of this
Agreement; PROVIDED, HOWEVER, that the provisions of Section 6.7 shall inure to
the benefit of and be enforceable by the Indemnified Parties or Fund Indemnified
Parties, as the case may be.
9.10 CERTAIN DEFINITIONS. As used herein:
"Accountant" shall have the meaning specified in Section 3.2.
"Adjusted GAAP Net Worth" shall have the meaning specified in
Section 3.2.
"Alternative Proposal" shall mean (i) any proposal or offer for a
merger, consolidation, asset acquisition, assumption reinsurance transaction, or
other business combination involving the Fund or any proposal or offer to
acquire a significant equity interest in, or a significant portion of the assets
of, the Fund, other than the transactions contemplated by this Agreement, or
(ii) any other transaction the consummation of which would reasonably be
expected to impede, interfere with, prevent or materially delay the Merger.
"Articles of Merger" shall have the meaning specified in Section 1.2.
"Business of the Fund" shall mean workers' compensation insurance
business written by the Fund prior to the Effective Time and acquired by Zenith.
"California Commissioner" shall mean the Commissioner of Insurance of
the State of California.
30
"Closing" shall mean the closing of the transactions contemplated by
Article I of this Agreement.
"Closing Balance Sheet" shall have the meaning specified in Section
3.2.
"Closing Date" shall mean the date on which the Closing occurs.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Commissioners" shall mean the California Commissioner and the Florida
Commissioner.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by, or filing with or notification to,
a person pursuant to any Contract, Law, Order, or Permit.
"Consulting Agreement" shall have the meaning specified in Section
7.2(f).
"Contract" shall mean any written or oral agreement, arrangement,
commitment, contract, indenture, instrument, lease or other obligation of any
kind or character, or other obligation that is binding on any person or its
capital stock, properties or business.
"Default" shall mean (i) any breach or violation of or default under
any Contract, Order or Permit, (ii) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute a breach or
violation of or default under any Contract, Order or Permit, or (iii) any
occurrence of any event that with or without the passage of time or the giving
of notice would give rise to a right to terminate or revoke, change the current
terms of, or renegotiate, or to accelerate, increase, or impose any liability
under, or create any Lien in Connection with, any Contract, Order or Permit.
"Disclosure Schedule" shall mean the disclosure schedule attached
hereto.
"Effective Date" shall mean the date on which the Effective Time
occurs.
"Effective Time" shall have the meaning assigned thereto in Section
1.2.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean any corporation or trade or business,
whether or not incorporated, that together with an entity or any Subsidiary of
such entity would be deemed a "single employer" within the meaning of Section
4001 of ERISA, or considered as being members of a controlled group of
corporations, under common control, or members of an affiliated service group
within the meaning of Subsections 414(b), (c), (m) or (o) of the Code or Section
4001(a)(14) of ERISA.
31
"ERISA Affiliate Plan" shall mean each employee benefit, welfare and
compensation plan maintained, sponsored or contributed to be any ERISA
Affiliate.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Expenses" shall mean the out-of-pocket expenses of Zenith, Zenith
Insurance and Zenith National, in an amount not to exceed $150,000, payable in
accordance with Section 9.1(b).
"FBCA" shall mean the Florida Business Corporations Act.
"FIL" shall mean the Florida Insurance Laws and the related rules and
regulations thereunder as contained in the Florida Administrative Code, Rule
Section 4-190.56 et. seq., F.A.C.
"Florida Commissioner" shall mean the Commissioner of Insurance of the
State of Florida.
"GAAP" shall mean generally accepted accounting principles,
consistently applied throughout the specified period and in the immediately
prior comparable period.
"GAAP Statements" shall mean the audited financial statements of the
Fund as of, and for the fiscal years ended, December 31, 1993, 1994 and 1995,
together with the notes related thereto.
"GCL" shall mean the California General Corporation Law.
"Governmental Authority" shall mean the government of the United
States or any foreign country, any state or political subdivision thereof, or
any entity, body or authority exercising executive, legislative, judicial,
regulatory, administrative or other governmental functions or any court,
department, commission, board, agency, instrumentality or administrative body of
any of the foregoing.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended.
"Indemnified Parties" shall mean the Fund's present or former
trustees, officers, employees or agents covered by the Funds directors' and
officers' liability insurance prior to the Effective Time.
"Interim Statements" shall mean the financial statements that present
the financial position of the Fund as of June 30, 1996, and the results of its
operations and cash flows for the six months then ended in accordance with GAAP.
"Law" shall mean any law, ordinance, regulation, rule, or statute of
any governmental authority (Federal, state, local or otherwise) applicable to a
person or its properties, liabilities or business.
32
"Liability for Assessments" shall mean the amount of contingent
liability for which Members of the Fund are either jointly and severally liable,
or jointly and proportionately liable, by reason of their participation as
Members of the Fund.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, option, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest.
"Litigation" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, demand letter, governmental or other
administrative or other proceeding, whether at law or at equity, before or by
any federal, state or foreign court, tribunal, or agency or before any
arbitrator.
"Loss Sensitive Policy" shall mean a Retrospectively Rated Policy,
including the policies written by the Fund known as Deluxe Retention Plan,
Regular Retention Plan, Sliding Scale Plan and Retention Dividend Plan.
"Management Agreement" shall have the meaning set forth in Section
7.3(f).
"Management Group" shall mean, collectively, Xxxxxx Xxxx, Xxxx X.
Xxxxxx, Xxxxxx Xxxxxxx, Xxxxxx Xxxx, Xxxxxx Xxxxxx, Xx., and Xxxxx Xxxxxxxxx.
"Material Adverse Effect" shall mean any change or effect (or any
development that, insofar as can reasonably be foreseen, is likely to result in
any change or effect) that has a material adverse effect on (i) the business,
properties, assets, financial condition, or results of operations or prospects
of the Fund or RMG or (ii) the ability of the Fund or RMG to perform its
obligations under this Agreement.
"Member(s)" or "Member(s) of the Fund" shall mean each employer member
of the Fund who has executed an agreement to participate in the Fund and who has
agreed to become bound by an indemnity agreement, which binds such member to
individual, several, or proportionate liability as set forth in Sections 624.472
and 624.474 of the FIL, and as set forth in the indemnity agreement and/or
amendments thereto filed with the Florida Department of Insurance, or previously
filed with the Division of Workers Compensation, Florida Department of Labor and
Employment Security, and who have further agreed to assume all obligations
imposed upon them as set forth in the Florida Worker's Compensation Act, the
rules and regulations adopted from time to time by the trustees of the Fund and
the conditions of the application to the Department of Labor and Employment
Security for membership in the Fund.
"Member Distributee" shall mean each corporation, partnership,
person or other legal entity who was a Member of the Fund at any time during
the five-year period ending on the date of the Effective Time.
"Members' Meeting" shall mean the special meeting of the Members
contemplated by Section 6.3.
33
"Merger" shall have the meaning specified in Section 1.1.
"Merger Consideration" shall have the meaning specified in Section
3.1.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency or authority.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permit" shall mean any federal, state, local or foreign governmental
approval, authorization, certificate, declaration, easement, filing, franchise,
license, notice, permit, variance, clearance, exemption, closure or right to
which any person is a party or that is or may be binding upon or inure to the
benefit of any person or its securities, properties or business.
"Plan of Distribution" shall mean the plan of distribution relating to
the payment of the Merger consideration to the Member Distributees that has been
approved by the Florida Department of Insurance.
"Plans" shall mean the employee benefit, welfare and compensation
plans, programs, policies and arrangements maintained, sponsored or contributed
to or required to be contributed to by the Fund or RMG.
"Proxy Statement" shall mean, collectively, the letter to
policyholders, notice of meeting, proxy statement and form of proxy, or the
information statement, as the case may be, to be distributed to Members in
connection with the Merger, or any schedules required to be filed with the
Florida Commissioner in connection therewith.
"Xxxxxxx Xxxxx" shall mean Xxxxxxx Xxxxx & Associates, Inc.
"Related Documents" shall mean the Consulting Agreement, the
Management Agreement, the Transfer Agreement and the Proxy Statement.
"Requisite Percentage" shall mean 66 2/3%.
"Reserve Liabilities" shall mean all reserves and other liabilities
with respect to insurance and reinsurance and for claims and benefits incurred
but not reported, as established or reflected in the SAP Statements.
"Retrospectively Rated Policy" shall mean a policy whose premium is
established based on a review of policy experience subsequent to the expiration
of the policy period.
"Revised Closing Balance Sheet" shall have the meaning specified in
Section 3.2.
"RMG" shall mean AGC Risk Management Group, Inc., a not-for-profit
corporation organized under the Business Corporation Law of the State of
Florida.
34
"SAP" shall mean the accounting practices required or permitted by the
insurance regulatory authorities of the State of Florida, consistently applied
throughout the specified period.
"SAP Statements" shall mean all of the Funds' annual and quarterly
financial statements, together with all exhibits and schedules thereto, required
to be filed with or submitted to the appropriate insurance regulatory
authorities of the State of Florida on forms prescribed or permitted by such
authorities utilizing such accounting methods as have been required from time to
time by such authorities.
"September Financial Statements" shall have the meaning specified in
Section 6.12.
"Surviving Corporation" shall mean Zenith, as the corporation
surviving the Merger.
"Subsidiary" shall mean, when used with reference to any entity, any
corporation with a majority of the outstanding voting securities owned directly
or indirectly by such former entity.
"Tax Return" shall mean any report, return or other information
required to be supplied to a Governmental Authority in connection with any
Taxes.
"Taxes" shall mean all taxes, charges, fees, duties (including customs
duties), levies or other assessments, including without limitation, income,
gross receipts, net proceeds, ad valorem, turnover, real and personal property
(tangible and intangible), sales, use, franchise, excise, value added, stamp,
leasing, lease, user, transfer, fuel, excess profits, occupational, interest
equalization, windfall profits, severance, license, payroll, environmental,
capital stock, disability, employee's income withholding, other withholding,
unemployment and Social Security taxes, which are imposed by an Governmental
Authority, and such term shall include any interest, penalties or additions to
tax attributable thereto.
"Transfer Agreement" shall have the meaning set forth in Section
7.2(g).
"Voting Member" shall mean each Member who (i) as reflected on the
records of the Fund, was an owner of an in-force policy at the close of business
on the record date for determining Members entitled to vote at the Members'
Meeting, and (ii) casts a vote at the Members' Meeting.
"ZRM" shall mean a newly-formed Florida corporation, 100% of the stock
of which will be owned by Zenith Insurance or Zenith National.
"Date of this Agreement" and words of similar import (such as "date
hereof") shall mean October 7, 1996.
9.11 VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement each of which shall remain in full force and
effect.
35
9.12 CAPTIONS. The Article, Section and paragraph captions herein are
for convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
9.13 FURTHER ASSURANCES. Each of the Fund and RMG agrees that, upon the
reasonable request of Zenith, Zenith Insurance or Zenith National, it shall
cooperate and cause its affiliates, employees and agents to cooperate with
Zenith, Zenith Insurance and Zenith National to effect the orderly transition of
the business, operations and affairs of the Fund and RMG to Zenith and ZRM,
respectively. Without limiting the generality of the foregoing, RMG will (a)
give, and cause its affiliates, employees and agents to give, Zenith, Zenith
Insurance and Zenith National reasonable access to all books and records of the
Fund and RMG, (b) cooperate with Zenith, Zenith Insurance and Zenith National in
the preparation of any financial statements, reports or tax returns and in
making any filings or claims for refund or responding to any audit or inquiry of
any governmental or regulatory body, and (c) allow Zenith, Zenith Insurance and
Zenith National to control (i) the preparation of any tax return or amended tax
return to be filed by, or which includes, the Fund after the Closing Date, and
(ii) any contest with any taxing authority concerning taxes of the Fund.
(THE NEXT PAGE IS THE SIGNATURE PAGE)
36
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective duly authorized officers as of the date first
above written.
Attest: ZENITH AGC ACQUISITION
INSURANCE COMPANY
[seal]
____________________________ By:_______________________
Name:
Title:
Attest: ZENITH INSURANCE COMPANY
[seal]
____________________________ By:_______________________
Name:
Title:
Attest: ZENITH NATIONAL INSURANCE CORP.
[seal]
____________________________ By:_______________________
Name:
Title:
Attest: ASSOCIATED GENERAL COMMERCE
SELF INSURERS' TRUST FUND
[seal]
____________________________ By:_______________________
Name:
Title:
Attest: AGC RISK MANAGEMENT GROUP, INC.
[seal]
____________________________ By:_______________________
Name:
Title:
37
EXHIBIT 7.2(e)
OPINION OF XXXXXX X. XXXXXXXXXX, ESQ.,
COUNSEL TO THE FUND
Xxxxxx X. Xxxxxxxxxx, Esq. will deliver an opinion, subject to
customary assumptions, exceptions and conditions, to the effect that:
1. The Fund is a self-insurance trust fund duly organized, validly
existing and in good standing under the Laws of the State of Florida. RMG is a
not-for-profit corporation duly organized, validly existing and in good standing
under the Laws of the State of Florida. Each of the Fund and RMG has all
requisite power and authority and all necessary governmental Consents to own,
lease and operate its properties and to carry on its business as it is now being
conducted. The Fund and RMG have heretofore made available to Zenith complete
and correct copies of their Declaration of Trust and Articles of Incorporation,
respectively, and, in the case of RMG, its By-Laws, each in effect as of the
date hereof.
2. The Fund is (a) duly licensed or authorized as a self-insurance
trust fund in the State of Florida,(b) not required to be licensed or authorized
as a self-insurance trust fund or insurance company in any jurisdiction other
than the State of Florida, and (c) duly authorized in the State of Florida to
write the line of business reported as being written in the SAP Statements.
3. RMG is (a) duly licensed or authorized as a managing general agent
and was previously licensed as a service company in the State of Florida, and
(b) not required to be licensed or authorized as a managing general agent or
service company in any jurisdiction other than the State of Florida.
4. The Fund has no Subsidiaries. Except as set forth in Section 4.2
of the Disclosure Schedule, the Fund does not directly or indirectly have any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity that directly
or indirectly conducts any activity which is material to the Fund. RMG has one
member, which member is the Fund.
5. Each of the Fund and RMG has the requisite power and authority to
execute and deliver the Agreement and to consummate the transactions
contemplated thereby. The Agreement and the consummation by the Fund and RMG of
the transactions contemplated thereby have been duly and validly authorized by
the Board of Trustees of the Fund and the Board of Directors of RMG, and no
other proceedings on the part of the Fund or RMG are necessary to authorize the
Agreement or to consummate the transactions contemplated thereby. The Agreement
has been duly and validly executed and delivered by the Fund and RMG and,
assuming the Agreement constitutes the valid and binding agreement of Zenith,
Zenith Insurance and Zenith National, constitutes the valid and binding
agreement of the Fund and RMG, enforceable against the Fund and RMG in
accordance with its terms, except that the enforcement hereof may be limited by
(a) bankruptcy, insolvency, reorganization, moratorium or other similar Laws now
or hereafter in effect relating to creditors' rights generally and (b) general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).
6. Neither the execution, delivery or performance of the Agreement
by the Fund or RMG, nor the consummation by the Fund or RMG of the transactions
contemplated thereby nor compliance by the Fund or RMG with any of the
provisions thereof will (a) conflict with or result in any breach of any
1
provision of the Declaration of Trust of the Fund, or the Articles of
Incorporation or By-Laws of RMG;(b) require any Consent of any governmental or
regulatory authority, except the filing of Articles of Merger pursuant to the
FBCA;(c) result in a Default under any of the terms, conditions or provisions of
any Contract to which the Fund or RMG may be a party, or Permit by which the
Fund or RMG or any of their assets may be bound, except for such Defaults as to
which requisite waivers or consents have been obtained; or (d) violate any Order
or Law applicable to the Fund or RMG or any of their assets.
7. Except as disclosed in the financial statements delivered
pursuant to Section 4.5 of the Agreement or as set forth in Section 4.8 of the
Disclosure Schedule, there is no Litigation pending or, to my knowledge,
threatened against or affecting the business operations or financial condition
of the Fund or RMG. Neither the Fund nor RMG is in default with respect to any
judgement, order, writ, injunction or decree of any court or any Federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality.
8. The Proxy Statement complies with the FIL. None of the
information as to the Fund or RMG contained in the Proxy Statement contains any
untrue statement of a material fact required to be stated therein or omits to
state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Such counsel's opinion shall be limited to the laws of the State of
Florida and the federal laws of the United States of America, to the extent
specifically referred to in such opinion.
2
EXHIBIT 7.2(f)
CONSULTING AGREEMENT
CONSULTING AGREEMENT (this "Agreement"), dated as of December 18, 1996
by and among Xxxxxx Xxxx, Xxxx X. Xxxxxx, Xxxxxx Xxxxxxx, Xxxxxx Xxxx, Xxx
Xxxxxx, Xx., and Xxxxx Xxxxxxxxx (hereinafter collectively referred to as the
"Management Group") and ZENITH AGC ACQUISITION INSURANCE COMPANY, a Florida
corporation (together with its successors and assigns, "Zenith").
W I T N E S S E T H:
WHEREAS, Zenith, Zenith Insurance Company, Zenith National Insurance
Corp., Associated General Commerce Self-Insurers' Trust Fund (the "Fund") and
AGC Risk Management Group, Inc. have heretofore entered into an Agreement and
Plan of Merger, dated as of October 7, 1996 (as the same may be amended from
time to time, the "Merger Agreement"), providing for, among other things, the
merger of the Fund with and into Zenith (the "Merger");
WHEREAS, pursuant to Section 7.2(f) of the Merger Agreement, the
obligation of Zenith to consummate the Merger is conditioned upon, among other
things, the Management Group and Zenith entering into this Consulting Agreement;
and
WHEREAS, Zenith desires to retain the Management Group's services as
independent contractors and consultants in order to procure for itself the
benefits of the extensive familiarity of the Management Group with the business
and operations of the Fund, and the Management Group desires to make such
services available to Zenith on the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants of the
parties hereto and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
FIRST: The Management Group and Zenith agree that the Management
Group will be retained as consultants for the period beginning at the Effective
Time (as defined in the Merger Agreement) and ending on the fifth anniversary
thereof (hereinafter referred to as the "Period"). The Management Group agrees
to provide Zenith, its subsidiaries and affiliates with consulting services as
requested by Zenith. Such consulting services shall be provided at mutually
convenient times as Zenith may reasonably request during the Period. There will
be no established schedule for the Management Group's services, and Zenith
agrees to provide the Management Group with reasonable notice of the dates,
times and places where the Management Group is or are to be available for
consultation. Except as expressly provided herein, Zenith acknowledges that the
services to be provided hereunder by the Management Group shall not require the
full-time services of the Management Group and shall not preclude the Management
Group from engaging in any other full-time or part-time activity or employment
in any business except for the Workers' Compensation Insurance Business (as
hereinafter defined). The Management Group (except Xxxxx Xxxxxxxxx) agrees that
they shall not engage in or undertake any Workers' Compensation Insurance
Business beginning on the date of this Agreement and for a period of five (5)
years following the end of the Period. Notwithstanding anything to the contrary
contained herein, it is expressly agreed and understood that Xxxxx Xxxxxxxxx
shall not engage
1
in any other full-time or part-time activity or employment during the Period
other than employment with Zenith Risk Management, Inc. It is the
expectation of the parties that the amount of time devoted by the Management
Group (except Xxxxx Xxxxxxxxx) to consulting services hereunder will decrease
during the Period as Zenith becomes more familiar with the business and
operations of the Fund. For purposes of this Agreement, "Workers'
Compensation Insurance Business" shall mean the business of providing
insurance coverage for income, medical, death, disability and/or
rehabilitation benefits to employers for employee job-related injuries or
diseases, and shall include any management, administration, or consulting
services relating thereto.
SECOND: In consideration of the foregoing services, Zenith agrees to
compensate each member of the Management Group in the amount of $25,000 per
year. Payment shall be made by Zenith within ten (10) days of the beginning of
each payment period, except that payment for the first payment period will be
made on the date of this Agreement.
THIRD: The Management Group agrees that, during the Period, the
Management Group (except Xxxxx Xxxxxxxxx) will be independent contractors and
therefore will be responsible for the payment of all taxes with respect to
payments made under this Agreement. All payments under this Agreement will be
made free and clear of, and without deduction or withholding for, any taxes. In
the event that applicable law requires that any withholding be made in respect
of the payments to be made hereunder, Zenith agrees to withhold such amounts as
may be required, pay such withheld amounts over to the applicable taxing
authority and pay to the Management Group the remainder of the amount specified
in paragraph SECOND hereof after deducting such withholding.
FOURTH: This Agreement may not be assigned by either party, other
than by Zenith to a subsidiary or affiliate of Zenith, at any time during the
Period without the prior written consent of the other party.
FIFTH: Any notice, request, instruction or other document to be given
hereunder by any party to the other parties shall be in writing and shall be
deemed given when delivered personally, upon receipt of a transmission
confirmation (with a confirming copy sent by overnight courier) if sent by
telecopy or like transmission, and on the next business day when sent by Federal
Express, Express Mail, or other reputable overnight courier as follows:
(a) If to the Management Group, to:
Xxxxxx Xxxx
Xxxx Xxxxxx, Xxxxx 00
0000 Xxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Xxxx X. Xxxxxx
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
2
Xxxxxx Xxxxxxx
000 X. Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Xxxxxx Xxxx
000 X. X. 0xx Xxxxxx
Xxxxxx Xxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Xxx X. Xxxxxx, Xx.
0000 X. X. 00xx Xxxxxx
Xxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
and
Xxxxx Xxxxxxxxx
0000 Xxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxxxxxx, Esq.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
(000) 000-0000 (telephone)
(000) 000-0000 (telecopier)
(b) If to Zenith, to it at:
Zenith AGC Acquisition Insurance Company
c/o Zenith Insurance Company
00000 Xxxxxx Xxxxxx
Xxxxxxxx Xxxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
3
with a copy to:
Bertil Lundqvist, Esq.
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
and
Xxxxxx X. Xxxxx, Esq.
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
or to such other persons or addresses as may be designated in writing by the
party to receive such notice. Nothing in this Section FIFTH shall be deemed to
constitute consent to the manner and address for service of process in
connection with any legal proceeding (including litigation arising out of or in
connection with this Agreement), which service shall be effected as required by
applicable law.
SIXTH: This Agreement will be governed by, and construed in
accordance with, the laws of the State of Florida without giving effect to the
principles of conflicts of law thereof. Venue for the purposes of any cause of
action, of whatsoever kind or nature, by any party against any other hereunder,
shall be Orange County, Florida.
SEVENTH: This Agreement constitutes the entire agreement among the
parties with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, among the parties or any
of them with respect to the subject matter hereof.
EIGHTH: All information disclosed by any party to the other party in
connection with this Agreement or the services to be provided hereunder shall be
kept confidential by the party receiving such information and no public
statements shall be issued by any party relating to such information without the
other party's prior written consent. The obligations contained in this
Paragraph EIGHTH shall survive the termination of this Agreement.
NINTH: This Agreement shall be binding upon and inure solely to the
benefit of each party hereto and their respective successors and permitted
assigns. Nothing in this Agreement, express or implied, is intended to or shall
confer upon any other person any rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement.
TENTH: For the convenience of the parties hereto, this Agreement may
be executed in any number of counterparts, each such counterpart being deemed to
be an original instrument, and all such counterparts shall together constitute
the same agreement.
4
ELEVENTH: The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement each of which shall remain in full force and effect.
TWELFTH: Zenith agrees to indemnify and hold harmless the Management
Group from and against all costs, damages, judgments, attorney's fees, expenses,
obligations and liabilities of whatsoever kind or nature, which, in good faith,
the Management Group may incur or sustain in connection with or arising from the
Management Group's performance hereunder, except such costs, damages, judgments,
attorney's fees, expenses, obligations or liabilities which may be incurred by
the Management Group as a result of (a) a violation of a criminal law resulting
in a conviction, (b) any deliberately dishonest or fraudulent act or omission,
or (c) any act or omission committed in bad faith or with malicious purpose or
constituting gross negligence.
THIRTEENTH: This Agreement shall terminate in the event that the
Merger Agreement is terminated, in which case the parties hereto shall have no
liability to each other under this Agreement (except as expressly provided in
the Merger Agreement). In the event that any member of the Management Group
shall die or become incapacitated such that he or she is unable to perform his
or her duties under this Agreement, then Zenith's obligation to compensate such
member of the Management Group pursuant to paragraph SECOND shall terminate.
(THE NEXT PAGE IS THE SIGNATURE PAGE)
5
IN WITNESS WHEREOF, the parties hereto have each executed this
Agreement as of the date first written above.
ZENITH AGC ACQUISITION
INSURANCE COMPANY
By:___________________________
Name:
Title:
______________________________
Xxxxxx Xxxx
______________________________
Xxxx X. Xxxxxx
______________________________
Xxxxxx Xxxxxxx
______________________________
Xxxxxx Xxxx
______________________________
Xxxxxx Xxxxxx, Xx.
______________________________
Xxxxx Xxxxxxxxx
EXHIBIT 7.2(g)
TRANSFER AGREEMENT
TRANSFER AGREEMENT (this "Agreement"), dated as of December 18, 1996,
by and between AGC RISK MANAGEMENT GROUP, INC., a Florida not-for-profit
corporation ("RMG"), and ZENITH RISK MANAGEMENT, INC., a Florida corporation
("ZRM"). Terms used but not otherwise defined herein shall have the respective
meanings ascribed to them in the Agreement and Plan of Merger dated as of
October 7, 1996, by and among Zenith AGC Acquisition Insurance Company, a
Florida corporation ("Zenith"), Zenith Insurance Company, a California
corporation ("Zenith Insurance"), Zenith National Insurance Corp., a Delaware
corporation ("Zenith National"), Associated General Commerce Self-Insurers'
Trust Fund, a qualified Florida self-insurers fund (the "Fund"), and AGC Risk
Management Group, Inc., a Florida not-for-profit corporation ("RMG") (as the
same may be amended from time to time, the "Merger Agreement").
W I T N E S S E T H:
WHEREAS, Zenith, Zenith Insurance, Zenith National, the Fund and RMG
have heretofore entered into the Merger Agreement providing for the merger of
the Fund with and into Zenith pursuant to the terms and conditions of the Merger
Agreement (the "Merger"), and the subsequent merger of Zenith with and into
Zenith Insurance; and
WHEREAS, pursuant to section 7.2(g) of the Merger Agreement, the
obligation of Zenith to consummate the Merger is conditioned upon, among other
things, the execution and delivery by RMG and ZRM of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants of the
parties hereto and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. As of the Effective Time, RMG hereby assigns, sells, transfers,
conveys and delivers to ZRM, its successors and assigns all of RMG's right,
title and interest in and to all of RMG's assets, including the assets
identified in SCHEDULE A hereto (collectively, the "Assets").
2. As of the Effective Time, ZRM hereby purchases and accepts the
assignment and transfer of all of RMG's right, title and interest in and to the
Assets, and hereby assumes the liabilities and obligations of RMG set forth on
SCHEDULE B hereto.
3. RMG hereby represents and warrants that (a) the Assets constitute
all of the assets currently being used by RMG in its business,(b) RMG has good
and marketable title to the Assets, with the free and unencumbered right to
transfer the same, and that the Assets are free and clear of all liens and
encumbrances, and (c) ZRM and its successors and assigns will have all right,
title and interest in and to the Assets upon the delivery of this Agreement.
4. RMG hereby agrees and acknowledges that ZRM may hire any
employees of RMG that ZRM deems to be necessary or useful in the operation or
management of ZRM's business.
1
RMG waives any and all claims it may have against ZRM or any former employee
of RMG which may be hired by ZRM, whether such claims are based on written
employment agreements with such employees or otherwise. RMG's waiver of its
rights pursuant to this paragraph shall be deemed to be for the benefit of
both ZRM and any such employee. RMG shall take any and all actions,
consistent with applicable law, as ZRM may request with respect to the Plans,
including but not limited to actions concerning the termination of any Plan
and/or the transfer, distribution and/or other disposition of the assets of
any Plan.
5. As soon as practical after the Effective Time, RMG shall take all
appropriate action to effect its dissolution and liquidation in accordance with
Florida law.
6. For the convenience of the parties hereto, this Agreement may be
executed in any number of counterparts, each such counterpart being deemed to be
an original instrument, and all such counterparts shall together constitute the
same agreement.
7. This Agreement shall be governed by, and construed in accordance
with the laws of the State of Florida without giving effect to the principles of
conflicts of law thereof. Venue for the purposes of any cause of action, of
whatsoever kind or nature by any party against any other hereunder, shall be
Orange County, Florida.
8. RMG and ZRM, as reasonably requested to do so by the other party
from time to time, shall, at their own expense, do, execute, acknowledge and
deliver any and all such other further acts, transfers and any instruments or
further assurances, approvals and consents as are necessary or proper in order
to accomplish and complete the transactions contemplated hereby and the purposes
hereof.
9. Any notice, request, instruction or other document to be given
hereunder by any party to the other parties shall be in writing and shall be
deemed given when delivered personally, upon receipt of the transmission
confirmation (with a confirming copy sent by overnight courier) if sent by
telecopy or like transmission, and on the next business day when sent by Federal
Express, Express Mail, or other reputable overnight courier, as follows:
(a) If to RMG, to:
Xxxxx Xxxxxxxxx
Associated General Commerce
Self-Insurers' Trust Fund
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
2
with a copy to:
Xxxxxx X. Xxxxxxxxxx, Esq.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(b) If to ZRM, to:
Xxxx X. Xxxxxxx, Esq.
Zenith Risk Management, Inc.
c/o Zenith Insurance Company
00000 Xxxxxx Xxxxxx
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Bertil Lundqvist, Esq.
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
and
Xxxxxx X. Xxxxx, Esq.
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
or to such other persons or addresses as may be designated in writing by the
party to receive such notice. Nothing in this paragraph 9 shall be deemed to
constitute consent to the manner and address for service of process in
connection with any legal proceeding (including litigation arising out of or in
connection with this Agreement), which service shall be effected as required by
applicable law.
10. This Agreement (a) constitutes the entire agreement among the
parties with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, among the parties or any
of them with respect to the subject matter hereof and (b) shall not be assigned
by operation of law or otherwise.
3
11. This Agreement shall be binding upon and inure solely to the
benefit of each party hereto and their respective successors and permitted
assigns. Nothing in this Agreement, express or implied, is intended to or shall
confer upon any other person any rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement.
12. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement each of which shall remain in full force and
effect.
(THE NEXT PAGE IS THE SIGNATURE PAGE)
4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective duly authorized officers as of the date first
above written.
AGC RISK MANAGEMENT GROUP, INC.
By:___________________________
Name:
Title:
ZENITH RISK MANAGEMENT, INC.
By:___________________________
Name:
Title:
SCHEDULE A
ASSETS
SCHEDULE B
ASSUMED LIABILITIES
EXHIBIT 7.3(d)
OPINION OF
COUNSEL TO ZENITH
Counsel to Zenith will deliver one or more opinions, subject to
customary assumptions, exceptions and conditions, to the effect that:
1. Each of Zenith, Zenith Insurance and Zenith National (collectively,
the "Companies") has been duly incorporated and is validly existing and in good
standing under the laws of the States of Florida, California and Delaware,
respectively. Each of the Companies is qualified to do business and is in good
standing as a foreign corporation under the laws of the States of _________.
2. Each of Zenith and Zenith Insurance is duly licensed as an insurance
company in the State of Florida, authorized to write workers' compensation
insurance.
3. Zenith Insurance is duly licensed or authorized as an insurance
company in the State of California, authorized to write the following lines of
business: _________.
4. Each of the Companies has the corporate power and corporate authority
to execute, deliver and perform all of its obligations under the Agreement. The
execution and delivery of the Agreement and the consummation by the Companies of
the transactions contemplated thereby have been duly authorized by all requisite
corporate action on the part of the Companies. The Agreement has been duly
executed and delivered by the Companies.
5. The Agreement constitutes the valid and binding obligation of the
Companies, enforceable against the Companies in accordance with its terms.
6. The execution and delivery by the Companies of the Agreement, and the
performance by the Companies of their obligations under the Agreement, in
accordance with its terms, do not conflict with the articles of incorporation,
the certificate of incorporation or the bylaws of any of the Companies.
7. Neither the execution, delivery or performance by the Companies of the
Agreement, nor the compliance by the Companies with the terms and provisions
thereof will contravene any provision of any Applicable Law (as hereinafter
defined). "Applicable Laws" shall mean those laws, rules and regulations of the
States of California and Florida, the general corporate law of the State of
Delaware and of the United States of America which, in our experience, are
normally applicable to transactions of the type contemplated by the Agreement.
8. No Governmental Approval (as hereinafter defined), which has not been
obtained or taken and is not in full force and effect, is required to authorize
or is required in connection with the execution, delivery or performance of the
Agreement by the Companies except (a) in connection with the applicable
requirements of the HSR Act, (b) the filing of articles of merger pursuant to
the FBCA, and the filing of an agreement of merger pursuant to the laws of the
State of California, (c) the filing of appropriate documents with the relevant
authorities of each state in which Zenith, Zenith Insurance or any of their
Subsidiaries is authorized to do business, (d) the filing of appropriate
documents with, and the approval of, the insurance regulatory authorities of the
states of Florida, California, and other states in which Zenith
Insurance conducts its business. "Governmental Approval" means any consent,
approval, license, authorization or validation of, or filing, recording or
registration with, any Governmental Authority pursuant to Applicable Laws.
2
EXHIBIT 7.3(f)
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT (this "Agreement"), dated as of December 18,
1996, by and between ZENITH INSURANCE COMPANY, a California corporation acting
by and through its authorized Board of Directors (hereinafter referred to as the
"Insurer"), and ZENITH RISK MANAGEMENT, INC., a Florida corporation ("ZRM").
I. PURPOSE OF AGREEMENT
The Insurer hereby appoints ZRM, and ZRM hereby acknowledges its
appointment, as the Insurer's manager, for the purpose of providing, subject to
the provisions of applicable statutes and rules, all services which are
necessary and required in the planning, management and administration of the
day-to-day operations, business and affairs of the Insurer with respect to the
workers' compensation insurance business acquired from Associated General
Commerce Self-Insurers Trust Fund ("AGC-SIF"). For purposes of this Agreement,
all references to the business, operations, or affairs of the Insurer shall mean
the business, operations or affairs of the Insurer transacted in the State of
Florida and consisting of workers' compensation insurance business acquired from
AGC-SIF and any other insurance business mutually agreed upon by the parties
hereto.
II. DUTIES AND RESPONSIBILITIES OF ZRM
ZRM shall be responsible for managing and administering the affairs of
the Insurer as set forth in Article I, including, but not limited to, marketing,
underwriting, billing, claims administration, termination, reinstatement, safety
and loss prevention, policy issuance, accounting, regulatory reporting, and
general administration. Specifically, but without limitation, ZRM shall be
responsible for the following:
A. ERRORS AND OMISSIONS AND FIDELITY COVERAGE.
1. ZRM shall secure, place and provide on behalf of the Insurer,
errors and omissions coverage and fidelity coverage in an amount sufficient to
comply with applicable regulations which may be adopted from time to time by the
Florida Department of Insurance, hereinafter referred to as "Department."
2. ZRM with the concurrence of the Insurer, shall secure and place
on behalf of the Insurer, such additional errors and omissions coverage and
fidelity coverage as may be reasonably required from time to time to
sufficiently protect and ensure the integrity and continued sound operation of
the Insurer.
B. CLAIMS ADMINISTRATION.
1. All claims shall be reported to the Insurer in a timely manner
and all claims shall be adjusted by properly licensed persons.
1
2. Notice shall be sent by ZRM to the Insurer as soon as it becomes
known that the claim:
(a) Exceeds the limit set by the Insurer;
(b) Involves a coverage dispute;
(c) Exceeds ZRM's claims settlement authority;
(d) Is open for more than 6 months; or
(e) Is closed by payment of an amount set by the Department or
an amount set by the Insurer, whichever is less.
3. All paper and electronic claims files shall be the joint property
of the Insurer and ZRM. However, upon an order of liquidation of the Insurer,
the paper and electronic claims and related application files shall become the
sole property of the Insurer or its estate. ZRM shall have reasonable access to
and the right to copy the claims files on a timely basis.
4. Any settlement authority granted to ZRM may be terminated for
cause upon the Insurer's written notice to ZRM or upon the termination of this
agreement. The Insurer may suspend the settlement authority during the pendency
of any dispute regarding the cause for termination.
5. ZRM shall provide timely magnetic media transfer of data, as
required by the Insurer or the Department.
C. MARKETING.
ZRM shall provide a state-wide marketing program directed to licensed
insurance agents, and shall furnish state-wide marketing services designed and
tailored to ensure continued and orderly growth in both the number of
policyholders of the Insurer and the annual premium of the Insurer.
D. UNDERWRITING.
ZRM shall strictly adhere to the underwriting guidelines established
by the Insurer. Said guidelines are more specifically set forth in ADDENDUM "A"
and made part of this Agreement. The Insurer may suspend the underwriting
authority of ZRM during the pendency of any dispute regarding the cause for
termination as set forth in Article IV. The Insurer or ZRM must fulfill all
obligations on policies regardless of any disputes.
E. LOSS CONTROL.
1. ZRM shall be responsible for development of all safety programs,
safety rules and regulations as are required by the Florida Insurance Laws and
applicable provisions of the Florida Administrative Code, and shall further be
responsible for the submittal of such safety programs, rules and regulations.
2
2. ZRM shall be responsible for securing approval of safety programs
submitted in compliance with the Florida Insurance Laws and applicable
provisions of the Florida Administrative Code.
3. ZRM shall be responsible for the coordination and implementation
of approved loss control programs.
F. DATA PROCESSING AND REPORTING.
ZRM shall provide comprehensive data processing and reporting, on a
timely basis, all reports, statistical data, and information necessary to ensure
that all operations of the Insurer are conducted on a sound businesslike basis,
including, but not limited to, claims processing, billing, termination,
reinstatement, policy issuance, and disaster recovery capability in accordance
with the Insurer's disaster recovery program adopted by ZRM.
G. AUDIT, ACCOUNTING AND ADMINISTRATION.
1. ZRM shall require that all funds and/or remittances received from
agents and/or insureds be payable directly to the Insurer. All funds collected
for the account of the Insurer shall be held by ZRM in a fiduciary capacity in a
bank which is a member of the Federal Reserve System. This account shall be
used for all payments as directed by the Insurer. ZRM may retain no more than
sixty (60) days of estimated claims payments and allocated loss adjustment
expenses.
2. ZRM shall provide such audit, accounting and administrative
services as may be required from time to time to ensure the efficient and
cost-effective operations of the Insurer.
3. ZRM shall render accounts to the Insurer detailing all
transactions under the terms of this Agreement to the Insurer on a monthly or
more frequent basis, as determined from time to time by the Insurer.
4. Separate records of business written by ZRM shall be maintained
by ZRM. The Insurer shall have access and the right to audit and to copy all
electronic and paper books, bank accounts and records related to its business,
and such bank accounts and records shall be maintained in a form usable by the
Insurer. The Department shall have access to all books, bank accounts, and
records of ZRM, and such books, bank accounts and records shall be maintained in
a form usable to the Department. The records shall be retained according to
Section 626.561, Florida Insurance Laws.
H. REGULATORY REPORTING.
ZRM shall provide comprehensive regulatory reporting, on a periodic
basis and upon prescribed forms, as required by Florida Statutes and applicable
provisions of the Florida Administrative Code.
I. GENERAL ADMINISTRATION AND MISCELLANEOUS.
3
1. ZRM shall:
(a) At the request of the Insurer, represent the Insurer at all
hearings, meetings, conventions and administrative inquiries involving the
interests of the Insurer, and before any agency of the State of Florida, except
those requiring representation by an attorney-at-law.
(b) Provide such services as may be necessary in the development
of gross premiums, standard premiums, normal premiums, loss reserves and loss
funds.
(c) Coordinate and facilitate provision of rehabilitative
services to injured employees pursuant to the Florida Insurance Laws and
applicable provisions of the Florida Administrative Code. Any rehabilitation
services provided hereunder shall be from the approved list of providers of such
services maintained by the appropriate state agencies.
(d) File with the Department such reports as are required from
time to time, including, but not limited to: payroll records, accident
experience and compensation payments, summary loss reports and reports of
outstanding workers' compensation liabilities.
(e) Timely, routinely and as directed by the Insurer, provide to
the Insurer and its actuaries and certified public accountants, the data
necessary for a full, complete and ongoing evaluation of the Insurer's business
which is the subject of this Agreement.
(f) Attend management meetings of the Insurer as requested.
(g) As directed by the Insurer, make such reports as are
requested relating to matters of concern or general interest with respect to the
Insurer.
(h) Provide sufficient personnel to perform ZRM's duties and
obligations pursuant to this Agreement and maintain a sufficient number of
experienced and qualified personnel, employed on a full-time basis, to meet the
needs of the Insurer.
(i) Implement any managed care options required by Florida law.
2. ZRM shall not:
(a) Bind reinsurance or retrocessions on behalf of the Insurer.
(b) Commit the Insurer to participate in insurance or reinsurance
syndicates.
(c) Appoint any producer without assuring that the producer is
lawfully licensed to transact the type of insurance for which he is appointed.
(d) Without prior approval of the Insurer, pay or commit the
Insurer to pay a claim over a specified amount, net of reinsurance, which
exceeds $125,000.
4
(e) Collect any payment from a reinsurer or commit the Insurer to
any claims settlement with a reinsurer without prior approval of the Insurer.
If prior approval is given, a report must be promptly forwarded to the Insurer.
(f) Permit a producer or subproducer to serve on its Board of
Directors.
(g) Appoint a submanaging general agent.
(h) Enter into any contract or arrangement other than those
necessary to perform the services contemplated hereunder, without the approval
of the Insurer.
(i) Implement the hiring or firing of any senior officer of ZRM
except as reasonably and jointly determined by ZRM and the Insurer.
III. DUTIES, RESPONSIBILITIES AND RIGHTS OF THE INSURER
1. In consideration for the services provided under this Agreement,
the Insurer shall pay or advance funds to ZRM for all costs, fees and expenses
(as reasonably and jointly determined by the Insurer and ZRM) incurred by ZRM in
providing the services described under this Agreement. The Insurer shall pay
the costs of reinsurance as provided in any reinsurance contract and shall pay
the costs of any other insurance purchased in the name of, and for the
protection of, the Insurer. It is the intent of the Insurer and ZRM that
payment or advancement of funds shall be limited to the actual fair and
reasonable cost of the operations of ZRM.
2. All funds received by the Insurer shall be held by said Insurer
in a bank which is a member of the Federal Reserve System.
3. ZRM shall not share in interim profits.
4. The Insurer shall have ultimate control and responsibility over
the functions delegated to ZRM under this Agreement.
IV. TERM AND TERMINATION
A. This Agreement shall become effective as of the Effective Time (as
defined in the Agreement and Plan of Merger, dated as of October 7, 1996, by and
among the Insurer, Zenith Insurance Company, Zenith National Insurance Corp.,
AGC-SIF and AGC Risk Management Group, Inc.) and shall remain in force for a
period of five (5) years thereafter unless terminated earlier pursuant to the
following sentence. This Agreement may be terminated:
1. By mutual agreement of the parties hereto;
2. Upon dissolution of the Insurer, whether voluntary or due to
cessation of the Insurer's authority to operate within the State of Florida;
5
3. Upon dissolution of the Insurer due to insolvency or bankruptcy;
4. Upon ten (10) days' written notice by either party if the other
party is in material breach of any term, covenant or condition contained herein;
provided, however, that as a condition precedent to termination under this
clause, the terminating party shall give written notice to the other party, who
shall have thirty (30) days from the date of such notice to cure or correct the
grounds for termination. If the grounds for termination are not corrected or
cured during the thirty (30) day period, this Agreement may be terminated on the
termination date specified in the notice, but not prior to the expiration of the
thirty (30) day period described herein.
B. Should this Agreement be terminated, ZRM will cease providing
services, turn over to the Insurer all paper and electronic records and files of
the Insurer in the custody of ZRM, which shall include loss control records,
reports, surveys and correspondence, underwriting surveys and premium
calculations, all active and closed claims files, Insured's files, and readable
form copies of all regulatory filings. Notwithstanding the termination of this
Agreement, ZRM will, at the request and expense of the Insurer, continue to:
1. Provide continued administration of the open claims files;
2. Assist in the preparation of a payroll audit and any regulatory
audit, including but not limited to an annual financial audit, for the final
year this Agreement is in effect;
3. Cooperate with any successor manager or the Insurer in the
orderly transfer of all functions; and
4. Provide timely magnetic media transfer of data, as required by
the Insurer or the Department.
C. Unless canceled earlier, ZRM and the Insurer mutually agree to a
renegotiation and extension of this Agreement at the end of its initial five
year term.
V. ENTIRE AGREEMENT; ASSIGNMENT
This Agreement (a) constitutes the entire agreement among the parties
with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, among the parties or any
of them with respect to the subject matter hereof and (b) may not be assigned in
whole or in part by ZRM.
VI. INDEMNIFICATION
The Insurer agrees to indemnify and hold ZRM harmless from and against
all costs, damages, judgments, attorney's fees, expenses, obligations and
liabilities of whatsoever kind or nature, which, in good faith, ZRM may incur or
sustain in connection with or arising from ZRM's performance hereunder, except
such costs, damages, judgments, attorney's fees, expenses, obligations or
liabilities which may be incurred by ZRM as a result of (a) a violation of a
criminal law resulting in a conviction,
6
(b) any deliberately dishonest or fraudulent act or omission, or (c) any act
or omission committed in bad faith or with malicious purpose or constituting
gross negligence.
ZRM agrees to indemnify and hold the Insurer harmless from and against
all costs, damages, judgments, attorney's fees, expenses, obligations and
liabilities of whatsoever kind or nature, which the Insurer may incur or sustain
as a result of any acts or omissions within the scope of clauses (a), (b) or (c)
of the immediately preceding paragraph.
VII. EXCLUSIVITY AND OWNERSHIP OF PROPERTY
A. ZRM covenants that the Insurer shall be the only client of ZRM.
B. The Insurer shall be the owner of all computer hardware and software
(including software licenses) and any other property and property rights
acquired or developed by ZRM for purposes of this Agreement and the Insurer
shall have title to all such hardware, software, media, property and property
rights. The compensation payable to ZRM as provided for in Article III above
shall be deemed to include fair compensation for all such hardware, software,
property and property rights. ZRM shall execute all documents and take all
actions necessary in the Insurer's opinion to perfect title in the Insurer as
provided for herein.
VIII. EXPERIENCE AND QUALIFICATION OF ZRM;
FIDUCIARY DUTY.
1. ZRM represents and warrants that its principals and employees have
the experience and qualifications to meet the needs of the Insurer, including,
without limitation, claims administration, overall planning and coordination of
the business of the Insurer, providing summary data relating to the Insurer's
costs of providing benefits, and the skill and experience to prevent and correct
deficiencies which may arise in the operation of the Insurer.
2. ZRM acknowledges its fiduciary duty to the Insurer and agrees to
exercise good faith in all transactions on behalf of the Insurer and agrees to
fully, completely and promptly inform the Insurer of all of its material
communications (both oral and written) to and from the Department or other
regulatory authorities.
IX. NOTICES
Any notice, request, instruction or other document to be given
hereunder by any party to the other parties shall be in writing and shall be
deemed given when delivered personally, upon receipt of a transmission
confirmation (with a confirming copy sent by overnight courier) if sent by
telecopy or like transmission, and on the next business day when sent by Federal
Express, Express Mail, or other reputable overnight courier, as follows:
(a) If to ZRM, to:
7
Zenith Risk Management, Inc.
_________________
_________________
Telephone: ______________
Telecopy: ______________
(b) If to the Insurer, to:
Xxxx X. Xxxxxxx, Esq.
Zenith Insurance Company
00000 Xxxxxx Xxxxxx
Xxxxxxxx Xxxxx, XX 00000-0000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Bertil Lundqvist, Esq.
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
and
Xxxxxx X. Xxxxx, Esq.
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
X. CONSTRUCTION
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Florida without giving effect to the principles of
conflicts of laws thereof. Venue for the purposes of any cause of action, of
whatsoever kind or nature, by either party against the other hereunder, shall be
Orange County, Florida.
XI. COUNTERPARTS
For the convenience of the parties hereto, this Agreement may be
executed in any number of counterparts, each such counterpart being deemed to be
an original instrument, and all such counterparts shall together constitute the
same agreement.
8
XII. PARTIES IN INTEREST
This Agreement shall be binding upon and inure solely to the benefit
of each party hereto and their respective successors and permitted assigns.
Nothing in this Agreement, express or implied, is intended to or shall confer
upon any other person any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
XIII. VALIDITY
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, each of which shall remain in full force and effect.
XIV. CAPTIONS
The Section captions herein are for convenience of reference only, do
not constitute part of this Agreement and shall not be deemed to limit or
otherwise affect any of the provisions hereof.
9
IN WITNESS WHEREOF, the above-named parties have hereunto set their
hands and seals on the day above written for themselves, their assigns and
successors, and do hereby agree to fully perform the covenants and agreements as
hereinabove set forth.
ZENITH INSURANCE COMPANY
By:
------------------------
Name:
Title:
Attest:
By:
------------------------
Name:
Title: Secretary
ZENITH RISK MANAGEMENT, INC.
By:
-------------------------
Name:
Title:
Attest:
By:
--------------------------
Name:
Title: Secretary
ADDENDUM A
UNDERWRITING GUIDELINES
Maximum annual
premium volume: $60 million.
Basis of the rates
to be charged: Standard workers' compensation in accordance
with the insurance laws of the State of
Florida.
Types of risks which
may be written: Any risk except those excluded from time to
time under Zenith reinsurance treaties.
Maximum limits of liability: Statutory workers' compensation and $2
million employers' liability.
Applicable exclusions: None.
Territorial limitations: United States, subject to required licenses.
Policy cancellation
provisions: Statutory as per policy.
Maximum policy periods: One year.
