Exhibit 2.1
================================================================================
STOCK PURCHASE AGREEMENT
FOR THE STOCK OF
ARISTA INSURANCE COMPANY
BY AND BETWEEN
DELTA DENTAL PLAN OF INDIANA, INC.
AND
ARISTA INVESTORS CORP.
DATED AS OF JUNE 15, 2001
================================================================================
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of the 15th day of June, 2001, by and among DELTA DENTAL PLAN OF
INDIANA, INC., an Indiana non-profit corporation ("Buyer"), and ARISTA INVESTORS
CORP., a New York corporation ("Seller") (together, the "Parties").
WITNESSETH
WHEREAS, Seller owns all 200 issued and outstanding shares of
common stock, par value $1,000.00 per share (the "Shares"), of ARISTA INSURANCE
COMPANY, an insurance company organized, existing and licensed to write health
insurance under the laws of New York (the "Company"); and
WHEREAS, in accordance with the terms and conditions of this
Agreement, Buyer desires to purchase the Shares from Seller and Seller desires
to sell the Shares to Buyer;
NOW, THEREFORE, in consideration of the covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties, intending
to be legally bound hereby, do hereby covenant and agree as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used herein, the following terms
shall have the following respective meanings (all terms defined in this Section
1.1 or in other provisions of this Agreement in singular shall have the same
meanings when used in the plural and VICE VERSA):
"AFFILIATE" means a Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned Person.
"AGREEMENT" shall have the meaning as set forth in the
introductory paragraph.
"ANNUAL STATUTORY STATEMENTS" means the annual financial
statements of the Company prepared in accordance with statutory accounting
principles applicable to the Company and as filed with the New York Department
of Insurance for the years ended December 31, 1998, 1999 and 2000, in each case
including all exhibits, interrogatories, notes and schedules thereto and any
auditor's report, actuarial opinion, affirmation or certification filed in
connection therewith.
"ASSUMPTION DATE" shall have the meaning as set forth in
Section 6.3.
"BUSINESS DAY" shall mean a day on which banks in the State of
Indiana are open for business.
2
"BUYER" shall have the meaning as set forth in the
introductory paragraph.
"BUYER'S AGENTS" shall have the meaning as set forth in
Section 8.1.
"CERTIFICATE OF AUTHORITY" shall mean the license, permit or
authorization issued by the State of New York authorizing the Company to
transact the business of insurance in New York.
"CLOSING" shall have the meaning as set forth in Section 4.1.
"CLOSING DATE" shall have the meaning as set forth in Section
4.1.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" shall have the meaning as set forth in the first
recital.
"CONTROL" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person,
whether through the ownership of stock or as trustee or executor, by contract or
credit arrangement or otherwise.
"DOLLARS" OR "$" shall mean lawful money of the United States
of America.
"FINAL CLOSING BALANCE SHEET" shall mean an unaudited balance
sheet of the Company as of the Closing Date prepared in accordance with
statutory accounting principles by the Company or Seller and accepted by Buyer.
"FINANCIAL STATEMENT" shall have the meaning as set forth in
Section 6.8.
"GAAP" shall mean generally accepted accounting principles in
effect in the United States of America, consistently applied from reporting
period to reporting period.
"HOLDING COMPANY SYSTEM" means any holding company system
within the meaning of New York Insurance Law ss. 1501 of which Company is a
member.
"INDEMNIFIED PARTY" shall have the meaning as set forth in
Section 11.4.
"INDEMNIFYING PARTY" shall have the meaning as set forth in
Section 11.4.
"INVESTMENT PORTFOLIO" means the assets of the Company listed
on the "Investment Portfolio Schedule" attached hereto and incorporated herein,
which "Investment Portfolio Schedule" shall be updated by the Seller as of the
Closing Date.
"LAW" means any law (including common law), constitution,
statute, treaty, regulation, code, ordinance, order, injunction, writ, decree,
or award of any Official Body.
3
"LIEN" shall have the meaning as set forth in Section 2.1.
"MATERIAL" or "MATERIALLY" shall mean a reduction of more than
Twenty-Five Thousand Dollars ($25,000.00) in the Company's total assets
(excluding its Certificate of Authority), and with respect to the Company's
Certificate of Authority, the loss (by surrender, suspension or revocation) of,
or any restriction on the Company's ability to write health insurance in New
York under, the Company's New York Certificate of Authority.
"OFFICIAL BODY" means any government or political subdivision,
or any administrative agency, authority, bureau, commission, department or
instrumentality of either, or any court, tribunal, grand jury or arbitrator, in
each case, whether foreign or domestic.
"PARTIES" shall have the meaning as set forth in the
introductory paragraph.
"PERSON" means an individual, corporation, partnership,
association, trust, unincorporated organization, or other legal entity.
"PRE-CLOSING BUSINESS" means all of the Company's activities
prior to the Closing, including all insurance policies or insurance contracts
issued by the Company prior to the Closing Date and any policies or contracts
that the Company is required by law to continue or renew beyond the Closing
Date.
"PRE-CLOSING BUSINESS LIABILITIES" shall have the meaning as
set forth in Section 12.1(a).
"PRELIMINARY CLOSING BALANCE SHEET" shall have the meaning as
set forth in Section 3.1.
"PURCHASE PRICE" shall have the meaning as set forth in
Section 3.1.
"QUARTERLY STATUTORY STATEMENT" means the Quarterly Statement
of the Condition and Affairs of the Company, when filed with the New York
Department of Insurance, for the quarterly periods ended September 30, 2000, and
all subsequent quarterly periods for which quarterly financial statements are
required which end prior to the Closing Date.
"REQUIRED DISCLOSURES" shall have the meaning as set forth in
Section 13.1.
"SAP" means, with respect to a reinsurance or insurance
company, the statutory accounting procedures and practices prescribed or
permitted from time to time or as of a specified date (as the context requires)
by the New York Department of Insurance and applied in a consistent manner
throughout the periods involved.
"SELLER" shall have the meaning as set forth in the
introductory paragraph.
"SHARES" shall have the meaning as set forth in the first
recital.
4
"SUBSIDIARY" or "SUBSIDIARIES" of any Person means any
corporation, partnership, joint venture or other legal entity of which such
Person (either alone or through or together with any other subsidiary), owns,
directly or indirectly, 50% or more of the stock or other equity interests the
holders of which are generally entitled to vote for the election of the board of
directors or their governing body of such corporation or other legal entity.
"TAX RETURNS" shall have the meaning as set forth in Section
6.11(a).
"TAXES" shall have the meaning as set forth in Section
6.11(a).
1.2 ACCOUNTING TERMS AND DETERMINATIONS.
(a) Except as otherwise expressly provided herein, (i) all
accounting terms used herein, (ii) all financial statements and certificates and
reports as to financial matters required to be delivered to a Party (unless the
Parties agree otherwise in writing), and (iii) all calculations for purposes of
this Agreement shall be interpreted, prepared, and made in accordance with SAP.
(b) To enable the making of consistent calculations for the
purposes of this Agreement, the Company shall not change the last day of its
fiscal year from December 31.
ARTICLE II
SALE OF STOCK
2.1 PURCHASE AND SALE OF STOCK. On the terms and subject to
the conditions of this Agreement, at the Closing Seller shall sell, convey,
assign, transfer and deliver to Buyer, and Buyer shall purchase and acquire from
Seller, the Shares free and clear of any and all claims, charges, security
interests, liens, pledges, options, puts, calls, encumbrances, rights,
restrictions or other agreements of any kind whatsoever, recorded or unrecorded
("Liens").
2.2 INSTRUMENTS OF CONVEYANCE AND TRANSFER. At the Closing,
Seller shall deliver to Buyer (i) stock certificates evidencing the Shares duly
endorsed to Buyer or accompanied by stock powers duly executed in favor of
Buyer, in proper form for transfer, and (ii) other good and sufficient
instruments of conveyance and assignment, reasonably satisfactory in form and
substance to Buyer and sufficient to vest in Buyer all of Seller's right, title
and interest in and to the Shares, free and clear of all Liens.
2.3 OTHER DOCUMENTS. At the Closing, Seller and Buyer shall
deliver to each other the certificates and other documents described in Articles
IX and X.
5
ARTICLE III
CONSIDERATION FOR THE SHARES
3.1 PURCHASE PRICE. As consideration for the Shares, Buyer
agrees to pay Seller Three Hundred Thousand Dollars ($300,000) plus an amount
equal to the Company's capital and surplus as of the Closing Date (together, the
"Purchase Price"). The Purchase Price shall be calculated based on an estimate
of the statutory capital and surplus of the Company as of the Closing Date using
a projected balance sheet prepared by Seller or the Company in accordance with
SAP and dated as of the Closing Date and delivered to Buyer not less than five
days prior to the Closing Date (the "Preliminary Closing Balance Sheet").
3.2 PAYMENT OF PURCHASE PRICE. On the Closing Date, Buyer
shall deliver to Seller the Purchase Price in immediately available funds by
wire transfer to an account designated by Seller in writing at least two (2)
Business Days prior to Closing.
3.3 PURCHASE PRICE ADJUSTMENT. Not later than thirty (30) days
after the Closing Date, Seller shall begin to calculate the Purchase Price based
on the actual statutory capital and surplus of the Company shown on the Final
Closing Balance Sheet. Upon Seller's request, Buyer shall provide Seller with
all books, records, documents and any other information in its possession that
Seller reasonably determines is necessary to prepare and complete the Final
Closing Balance Sheet. Within sixty (60) days after the Closing Date, Seller
shall provide to Buyer the Final Closing Balance Sheet and the underlying
documentation to enable Buyer to validate the Final Closing Balance Sheet. The
Buyer shall notify the Seller of any disagreement with the Final Closing Balance
Sheet no later than fifteen (15) days after Buyer's receipt of the Final Closing
Balance Sheet. If Buyer does not deliver such notice to Seller within the
fifteen (15) day period, the Final Closing Balance Sheet shall be deemed final
for purposes of this Section. If Buyer delivers such notice to the Seller, Buyer
and Seller shall work together in good faith to resolve the dispute prior to the
ninetieth (90th) day following the Closing Date. In the event Seller and Buyer
are unable to agree on the Final Closing Balance Sheet within ninety (90) days
after the Closing, Seller and Buyer shall retain an independent, nationally
recognized and mutually acceptable accounting firm to determine the Final
Closing Balance Sheet. The fees of such accounting firm shall be borne equally
by Seller and Buyer. Seller and Buyer shall abide by the decision of the
accounting firm, which shall be final and binding on both parties. If the actual
capital and surplus of the Company determined from the Final Closing Balance
Sheet or by the accounting firm, whichever applies, is greater than the capital
and surplus of the Company determined from the Preliminary Closing Balance
Sheet, Buyer shall pay such excess to Seller. If the actual capital and surplus
of the Company determined from the Final Closing Balance Sheet or by the
accounting firm, whichever applies, is less than the capital and surplus of the
Company determined from the Preliminary Closing Balance Sheet, Seller shall pay
such difference to Buyer. Any payment due under this Section shall be made
within fifteen (15) days after the earlier of the date (i) the Final Closing
Balance Sheet becomes final, (ii) the parties' mutually agree to the Final
Closing Balance Sheet, or (iii) written notice of the accounting firm's
decision. Notwithstanding any provision of this Agreement to the contrary, the
agreement of the parties or the determination of the mutually acceptable
accounting firm with respect to the Final Closing Balance Sheet shall under no
circumstances be deemed to constitute a bar or limitation on the right of either
party to recover fully from the other party for the other party's breach of any
warranty, representation or covenant made in this Agreement merely because such
warranty,
6
representation or covenant is related to the information or documents used in
completing the Final Closing Balance Sheet.
ARTICLE IV
CLOSING
4.1 CLOSING. The closing for the transactions contemplated by
this Agreement (the "Closing") shall take place at Seller's offices located at
000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, at 10:00 a.m. local time, on the fifth
Business Day after the date on which all of the conditions set forth in Articles
IX and X are satisfied or waived, or at such other date, time, and place as the
Parties shall agree; PROVIDED, however, that Closing may not occur until the New
York Department of Insurance has either approved in writing Buyer's purchase of
the Shares or such transaction is deemed approved pursuant to New York Insurance
Law ss.1506. The date on which the Closing takes place shall be the "Closing
Date."
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
5.1 ORGANIZATION; POWER; GOOD STANDING. Buyer is a non-profit
corporation duly organized and validly existing under the laws of Indiana and
has all requisite corporate power and authority to own, lease and operate its
properties, to carry on its business as now being conducted, to enter into this
Agreement and all other agreements and instruments it is required to execute and
deliver pursuant hereto, to perform its obligations hereunder and thereunder,
and to consummate the transactions contemplated hereby and thereby.
5.2 AUTHORITY RELATIVE TO AGREEMENT. Buyer's execution,
delivery and performance of this Agreement and the transactions contemplated
hereby have been duly and effectively authorized and ratified by all necessary
corporate action by Buyer. This Agreement has been duly executed by Buyer and is
a valid and legally binding obligation of Buyer enforceable in accordance with
its terms except as the same may be limited or otherwise affected by applicable
bankruptcy, insolvency, receivership, reorganization, rehabilitation or other
laws affecting creditors' rights or contractual obligations generally or by the
exercise of judicial discretion and general principles of equity, whether
applied by a court of law or in equity.
5.3 EFFECT OF AGREEMENT. Except for the filings with and
approvals by the New York Superintendent of Insurance required pursuant to New
York Insurance Law ss. 1506, Buyer's execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not
(i) require the consent, approval or authorization of, notice to, action by or
filing with, any Person or Official Body or (ii) violate, with or without the
giving of notice or the passage of time, or both, any provisions of Law
applicable to Buyer that would have a material adverse effect on the Buyer's
ability to perform its obligations under this Agreement.
7
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF SELLER
Subject to the qualifications set forth in the Disclosure
Schedules attached hereto, Seller hereby represents and warrants to Buyer as
follows:
6.1 ORGANIZATION; POWER; GOOD STANDING. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware and has all requisite corporate power and authority to own the
Shares and to enter into this Agreement and all other agreements and instruments
it is required to execute and deliver pursuant hereto, to perform its
obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby.
6.2 INCORPORATION AND QUALIFICATION OF THE COMPANY.
(a) The Company:
(i) Is an insurance company duly organized and
validly existing under the laws of New York holding a New York
Certificate of Authority authorizing it to conduct the
business of accident and health insurance in New York as
specified in paragraph 3(i) of Section 1113 of the New York
Insurance Law;
(ii) Has filed when due (or prior to the expiration
of any extensions of time granted to the Company) all filings
and/or statements required to be filed with the New York
Department of Insurance or the New York Superintendent of
Insurance; and
(iii) Has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its
business as now being conducted.
(b) Seller has delivered to Buyer true and complete copies of
the Company's Articles of Incorporation and Bylaws in effect on the date hereof,
which Articles of Incorporation and Bylaws shall be true and correct as of the
Closing Date.
6.3 NO EXISTING BUSINESS. All of the insurance policies or
contracts issued by the Company have been completely transferred to Guardian
Life Insurance Company via an Assumption Reinsurance Agreement effective as of
July 1, 1998 (the "Assumption Date") or have been terminated without any
continuing liability of the Company, the Company has not issued any policies or
contracts of insurance since the Assumption Date, and the Company has no
policies or contracts of insurance in-force or effective as of the date of this
Agreement and will have no such policies or contracts of insurance in-force or
effective as of the Closing Date.
8
6.4 CAPITAL STOCK AND SUBSIDIARIES OF THE COMPANY.
(a) The Shares constitute all the authorized, issued and
outstanding shares of capital stock of the Company. The Company has no
authorized but unissued shares of capital stock or any other class of capital
stock, equity security, preferred stock, bonds, debentures, notes, debt
instruments, evidence of indebtedness or other securities of any kind in the
Company that are authorized or outstanding. The Shares have been duly authorized
and validly issued, are fully paid and non-assessable, and were not issued in
violation of any preemptive rights. As of the date hereof, there is no, and as
of the Closing Date there will be no, (i) option, warrant, right, call,
subscription, agreement, commitment or understanding of any nature whatsoever
obligating the Company to issue any additional shares of common stock or any
securities convertible into or evidencing the right to subscribe for any shares
of its common stock; or (ii) voting trust or any other agreement or
understanding with respect to the voting common stock of the Company.
(b) The Company (i) has no Subsidiaries and (ii) does not own,
directly or indirectly, by contract, proxy or otherwise, alone or in combination
with any other Person, any material interest or investment (whether equity or
debt) in any Person.
6.5 AUTHORITY RELATIVE TO AGREEMENT. Seller's execution,
delivery and performance of this Agreement have been duly and effectively
authorized by all necessary corporate action by Seller. This Agreement has been
duly executed by Seller and is a valid and legally binding obligation of Seller
enforceable in accordance with its terms except as the same may be limited or
otherwise affected by applicable bankruptcy, insolvency, receivership,
reorganization, rehabilitation or other laws affecting creditors' rights or
contractual obligations generally or by the exercise of judicial discretion and
general principles of equity, whether applied by a court of law or in equity.
6.6 EFFECT OF AGREEMENT. Except for the filings with and
approvals by the New York Superintendent of Insurance required pursuant to New
York Insurance Law ss. 1506, Seller's execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby and
thereby will not:
(a) Require the consent, approval or authorization of, notice
to, action by or filing with, any Person or Official Body;
(b) Violate, with or without the giving of notice or the
passage of time, or both, any provisions of Law applicable to Seller or
the Company that would have a material adverse effect on the Seller's
ability to perform its obligations under this Agreement; or
(c) With or without the giving of notice or the passage of
time, or both, conflict with or result in a breach or termination of
any provision of, or constitute a default under, or accelerate the
performance or maturity of, or result in the creation of any Lien upon
any of the Shares or any of the Company's assets pursuant to any
corporate charter, bylaw, indenture, mortgage, deed of trust, lease,
contract, note, bond, license, franchise, permit or other grant of
authority, agreement or other instrument, or any order, judgment,
award, decree, statute, ordinance, regulation or
9
any other restriction of any kind or character, to which Seller or the
Company is a party, or by which Seller, the Company, any of the Shares,
or any property of the Company may be bound.
6.7 SHARE OWNERSHIP.
(a) Seller is beneficially and of record the legal owner, free
and clear of any Liens, of the Shares. Seller, on the Closing Date, will convey
to Buyer good and marketable title to the Shares free and clear of all Liens,
and Seller has the absolute right to sell, assign, transfer, and deliver the
same to Buyer. Upon the sale of the Shares to Buyer, Buyer will acquire legal
and equitable and good and marketable title to the Shares, free and clear of all
Liens and will be entitled to all rights of a holder of the Shares.
(b) There are no contracts, agreements, arrangements,
commitments, understandings, rights of first refusal or options, whether written
or oral, express or implied, other than this Agreement, relating to a sale,
assignment, conveyance, transfer or delivery of any of the Shares.
6.8 FINANCIAL STATEMENTS. Seller has delivered to Buyer true
and complete copies of the Company's Annual Statutory Statements and will
deliver immediately upon filing true and complete copies of the Quarterly
Statutory Statements filed with the New York Department of Insurance after the
date hereof (collectively, the "Financial Statements"). Each of the Financial
Statements was or will be prepared in accordance with SAP consistently applied
throughout the periods involved and in accordance with the books and records of
the Company and presents fairly the Company's statutory financial position,
operations, and cash flows for the respective periods then ended, except that
the Quarterly Statutory Statements are subject to normal recurring year-end
adjustments. Each of the Financial Statements (a) complies in all material
respects with the New York Insurance Law, (b) was complete and correct in all
material respects when filed, and (c) was filed with or submitted to the New
York Department of Insurance in a timely manner on forms prescribed or permitted
by the New York Department of Insurance. No Material deficiency has been
asserted with respect to any of the Financial Statements by the New York
Department of Insurance or any other Official Body. The Company has no debts,
obligations (including obligations as a guarantor, insurer, or reinsurer), or
liabilities of any nature except as reported in the Financial Statements.
6.9 UNDISCLOSED ASSETS AND LIABILITIES. The Company has no
assets or liabilities not disclosed in the Financial Statements. There were, as
of the date of the Financial Statements, no liabilities or obligations of any
kind, whether accrued, absolute, contingent or otherwise, whether or not such
liabilities or obligations would have been required to be disclosed on a balance
sheet prepared in accordance with SAP or GAAP. There is no known basis for, as
of the date of the Financial Statements, any assertion against the Company of
any claim or liability of any nature in any amount not fully disclosed in the
Financial Statements. All assets disclosed in the Financial Statements are owned
by the Company free and clear of all liens, encumbrances, security interests and
charges, although some assets are held in custodial accounts in satisfaction of
the requirements imposed on the Company by the New York Insurance Law.
10
6.10 ABSENCE OF CERTAIN CHANGES OR EVENTS. The Company has not
since September 30, 2000:
(a) Solicited, negotiated, agreed to issue, issued, or renewed
an insurance policy or contract;
(b) Incurred any obligation or liability (contingent or
otherwise), other than obligations or liabilities, the performance of
which will not, individually or in the aggregate, have a Material
adverse effect on the Company's financial condition or results of
operations;
(c) Discharged or satisfied any Lien or paid any Material
obligation or liability (contingent or otherwise);
(d) Made any Material additions to or sold, assigned,
transferred, conveyed, leased or otherwise disposed of or agreed to
sell, assign, transfer, convey, lease or otherwise dispose of any of
its Material tangible or intangible assets or properties;
(e) Canceled or compromised any Material debt or claim;
(f) Waived or released any of its material rights;
(g) Disposed of, transferred, granted or allowed to lapse any
of its rights under any concessions, leases, licenses, agreements,
patents, inventions, trademarks, trade names, or copyrights, or with
respect to any know-how;
(h) Made or granted any wage or salary increase or entered
into any employment contract with any director, officer, or employee;
(i) Entered into any transaction, contract, or commitment;
(j) Made or committed to make any charitable contribution;
(k) Entered or agreed to enter into any agreement or
arrangement granting any preferential rights to purchase any of its
assets, properties, or rights;
(l) Paid any expenses of, or made any advances to, any
Affiliate or incurred any liabilities to, or otherwise become indebted
to, any Affiliate;
(m) Mortgaged, pledged, or subjected to any Lien any of its
assets or properties (whether tangible or intangible);
(n) Suffered any Material casualty loss, destruction, or
damage, whether or not such loss, destruction, or damage shall have
been covered by insurance;
11
(o) Suffered any Material adverse change in its operations,
assets, liabilities, properties, business or in its or their condition,
financial or otherwise;
(p) Declared any dividend or made any payment or other
distribution in respect of its capital stock to its shareholders;
(q) Purchased, redeemed, issued, sold or otherwise acquired or
disposed of any of its shares of capital stock, any evidence of its
indebtedness, or other of its securities or granted any options,
warrants or other rights to purchase or convert any obligation into any
shares of capital stock, evidence of indebtedness, or other securities
of the Company;
(r) Engaged in any forward selling or granted any unusual
credit or other sales terms to customers;
(s) Introduced any material change with respect to the
operation of its business, including its method of accounting;
(t) Hired any employees or through negotiations or otherwise,
made any commitment or incurred any Material liability to any labor
organization;
(u) Amended its Articles of Incorporation or Bylaws from the
versions provided to Buyer, merged with or into or consolidated with
any other entity, voluntarily or involuntarily dissolved or liquidated
(other than the Company's adoption of a plan of complete liquidation
for tax purposes under Section 332 of the Code as described in section
14.12 of this Agreement, which does not terminate the Company's
corporate existence or impact its New York Certificate of Authority),
or changed or agreed to change in any manner the rights of its
outstanding common stock or the character of its principal business;
(v) Entered into any transactions with any Affiliate or any
other entity on a non-arm's-length basis other than those referenced in
(h) and (i) above;
(w) Settled or agreed to settle any claim, action, suit,
proceeding or investigation other than in the ordinary course of
business;
(x) Entered into any Material contract with any Official Body;
(y) Made any capital expenditures or commitments for capital
expenditures;
(z) Terminated, amended, failed in any material respect to
perform obligations under, or suffered the occurrence of any default
under any Material contract, lease, agreement or license;
12
(aa) Made any Material revaluation of any assets or Material
write down of the value of any inventory; or
(bb) Incurred, assumed, become subject to, or agreed to incur,
assume or become subject to, any liability under or in respect of any
guarantee or endorsement, other than endorsements of notes, bills or
checks presented to banks for collection or deposit in the ordinary
course of business.
6.11 TAX MATTERS.
(a) All federal, state, local, and foreign income, premium,
gross income, gross receipts, excise, property, sales, use, franchise, payroll,
informational and other tax returns and reports of the Company and the
affiliated group (as defined in the Code) of which the Company was a member
(collectively, the "Tax Returns") have been timely filed (including pursuant to
extensions) with the appropriate Official Bodies in all jurisdictions in which
such Tax Returns are required to be filed, and all such Tax Returns properly
reflect in all material respects the taxes of the Company and its affiliated
group for the periods covered thereby (the "Taxes"). All federal, state, local,
and foreign income, excise, property, sales, use, franchise, and payroll Taxes,
assessments, interest, penalties, deficiencies, fees and other governmental
charges or impositions that are due from the Company with respect to the periods
covered thereby have been properly paid as and when due.
(b) Since November 1, 1992, the Company has not been a member
of an affiliated group filing a consolidated federal income Tax Return other
than a group the common parent of which is the Seller.
(c) The Company has not received any notice, assessment, or
proposed assessment by the Internal Revenue Service or any other taxing
authority in connection with any Tax Returns which would have a Material effect
on the Company or its tax liability, and there are no pending tax examinations
of any Tax Returns nor claims in respect of the Tax Returns asserted against the
Company or its properties. There has been no intentional disregard of any
applicable statute, regulation, rule, revenue ruling or revenue procedure in the
preparation of any Tax Return applicable to the Company.
(d) There are no tax Liens on any of the assets or properties
of the Company, except for Liens for current Taxes not yet due and payable. To
the best of Seller's knowledge, there is no basis for any additional assessment
of any Taxes, penalties, or interest with respect to the Company. The Company
has not waived any law or regulation fixing, or consented to the extension of,
any period of time for assessment of any Taxes, which waiver or consent is
currently in effect, and the Company does not have any liability for the Taxes
of any Person other than the Company under (i) Reg. ss.1.1502-6 under the Code
(or any similar provision of state, local or foreign law), (ii) as a transferee
or successor, (iii) by contract, or (iv) otherwise.
(e) The Company has accrued on its books and records, in
accordance with GAAP, reserves adequate to pay all material Taxes not yet due
and payable.
13
(f) The Company has complied in all material respects with the
provisions of the Laws of each Official Body having jurisdiction over the
Company's operations as such laws relate to the payment, withholding, and
reporting of Taxes and has, within the time and in the manner prescribed by law,
withheld and paid over to the proper Official Bodies all amounts required in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party.
(g) Seller has made available to Buyer copies of all relevant
Tax Returns requested by Buyer.
(h) Neither Seller nor Company have granted any powers of
attorney to any person with respect to the Company relating to any Tax for any
taxable period.
6.12 NO MATERIAL CONTRACTS. The Company is not a party to any
contract that is Material to the Company's ability to transact the business of
insurance. DISCLOSURE SCHEDULE 6.12 lists all contracts to which the Company is
a party. The Company shall, and the Seller shall cause the Company to, terminate
all such contracts without any continuing or future liability to the Company
prior to the Closing Date.
6.13 LITIGATION. There are no claims, actions, suits,
proceedings, investigations, labor grievances, or arbitrations pending or
threatened against the Company, its officers or directors (in their capacities
as such), or its assets in law or equity; nor does Seller know of any facts that
would provide a basis for any such claim, action, suit, proceeding,
investigation, labor grievance, or arbitration, and the Company is not subject
to any judgment, order, or decree in any lawsuit, judicial or administrative
proceeding, or arbitration, which may have an adverse effect on its business
practices or on its ability to acquire any property or conduct business as
currently being conducted.
6.14 INTELLECTUAL PROPERTY RIGHTS. There are no trade names,
trademarks, copyrights, registrations, patents, applications, technical
information, data, blueprints, drawings, computer hardware and software (other
than hardware and software generally available in the market), manufacturing
procedures, process and the like used or held by the Company .
6.15 INSURANCE. All insurable assets of the Company belonging
to or used in its businesses are insured for the Company's benefit against those
risks, in those coverage amounts, and for those periods of time set forth on the
insurance summary contained on DISCLOSURE SCHEDULE 6.15.
6.16 ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE. Seller shall
cause the Company to pay all accounts payable and recover all accounts
receivable prior to the Closing Date. Seller shall reimburse the Company to the
full extent that any accounts receivable included on the Final Closing Balance
Sheet are not collected within 60 days of the Closing Date, and the Company
shall assign its rights to such accounts receivable to Seller. If the accrued
value on the Final Closing Balance Sheet of any such accounts payable or
accounts receivable differ from the actual amounts paid or received by the
Company, the parties shall adjust the amounts due accordingly.
14
6.17 PERMITS AND LICENSES.
(a) Excluding the insurance license discussed in subsection
(b), the Company has all governmental licenses, permits, and authorizations
necessary to carry on the business it now conducts (collectively, the
"Permits"), and all such Permits are valid and in full force and effect, except
for such Permits the absence of which, individually or in the aggregate, would
not adversely effect the Company's business.
(b) Except as disclosed on DISCLOSURE SCHEDULE 6.17(B), all
reports, statements, documents, registrations, filings and submissions to the
New York Department of Insurance and other state insurance regulatory
authorities complied in all material respects with applicable law in effect when
filed, and no deficiencies have been asserted by any such regulatory authority
with respect to such reports, statements, documents, registrations, filings or
submissions that have not been satisfied. Seller represents and covenants that,
except as described in Section 6.2(a), neither it nor the Company has taken or
omitted, or will take or omit, any action adversely affecting or otherwise
causing a termination or cancellation of its Certificate of Authority prior to,
concurrent with, or following the transfer of the Shares to Buyer.
6.18 COMPANY'S MINUTE BOOKS, STOCK BOOK, OFFICERS AND
DIRECTORS. The minute books of the Company, which have been made available to
Buyer for its inspection, contain true and complete records of all meetings and
consents in lieu of meetings of the Company's Board of Directors (and any
committee thereof) and shareholders since incorporation and accurately reflect
all transactions referred to in such minutes and consents in lieu of meetings.
The Company's stock book, which has been made available to Buyer for its
inspection, is true and complete. Attached as DISCLOSURE SCHEDULE 6.18 is a true
and correct list of the officers and directors of the Company as of the date of
this Agreement, and none of such officers or directors shall have resigned from
the Company prior to the Closing Date.
6.19 COMPLIANCE WITH APPLICABLE LAW. The conduct of the
Company's business does not violate (a) the terms of the Company's Articles of
Incorporation or Bylaws, (b) any applicable domestic or foreign Laws, or (c) any
right or patent, trademark, trade name, copyright, know-how or other proprietary
right of third parties.
6.20 ADVERSE AGREEMENTS; NO ADVERSE CHANGE.
(a) The Company is not a party to nor subject to any
agreement, instrument, charter or other corporate restriction, judgment, order,
writ, injunction, decree, rule or regulation that adversely affects the Company
or its business operations, prospects, assets or condition, financial or
otherwise.
(b) Since September 30, 2000, there has not been any Material
adverse change in, nor any development materially adversely affecting, the
Company's business, assets, financial position or results of operations
(including, without limitation, any fire or other casualty loss to any of the
assets or properties of the Company).
15
6.21 AGENTS. The Company does not have any contracts or other
arrangements with a managing general agent, third party administrator, broker,
intermediary, agent, or other kind of producer.
6.22 EMPLOYEES. The Company has not had any employees since
February 5, 1999, and will have no employees as of the Closing Date.
6.23 REINSURANCE. Except as disclosed on DISCLOSURE SCHEDULE
6.23, for which no premium will be due after Closing, the Company is not a party
to any reinsurance or retrocession contract, either as a cedant or reinsurer.
6.24 BROKERAGE. Seller represents and warrants to Buyer that
Seller shall discharge without any obligation on the part of Buyer any and all
obligations or liabilities in connection with this Agreement or the transactions
contemplated hereby owed to Mergers & Acquisitions. Seller also represents and
warrants to Buyer that, other than the obligations to Mergers & Acquisitions
that Seller shall satisfy and discharge, Seller has not incurred any obligations
or liabilities, contingent or otherwise, for brokerage or finders' fees or
agents' commissions or other like payments in connection with this Agreement or
the transactions contemplated hereby. Seller agrees to indemnify and hold Buyer
harmless against and in respect of any such obligations or liabilities based in
any way on agreements, arrangements or understandings claimed to have been made
by Seller with any third party and not disclosed herein.
6.25 CAPITALIZATION AND SURPLUS REQUIREMENTS. Seller
represents and warrants that Seller will cause the Company to maintain not less
than the minimum statutory capitalization and surplus requirements necessary to
retain the Certificate of Authority issued to it by the New York Department of
Insurance.
ARTICLE VII
TERMINATION
7.1 TERMINATION. This Agreement may be terminated at any time
before the Closing:
(a) By mutual consent of Buyer and Seller;
(b) By Buyer upon written notice of termination of its
obligation to consummate the transaction delivered to Seller, if Buyer
has determined that there has been any Material breach, individually or
in the aggregate, of any representation, warranty, or covenant of
Seller, stating in particularity the default or defaults on which the
notice is based; PROVIDED that Seller shall, after receipt of such
notice, have 30 days in which to cure such breach and, if so cured,
Buyer shall, for that reason, have no right to terminate this
Agreement;
(c) By Seller upon written notice of termination of its
obligation to consummate the transaction delivered to Buyer, if Seller
has determined that there has
16
been any Material breach, individually or in the aggregate, of any
representation, warranty, or covenant of Buyer, stating in
particularity the default or defaults on which the notice is based,
PROVIDED, that Buyer shall, after receipt of such notice, have 30 days
in which to cure such breach and, if so cured, Seller shall, for that
reason, have no right to terminate this Agreement;
(d) By either Party, upon written notice of termination to the
other Party, if (i) the New York Department of Insurance has not
approved Buyer's purchase of the Shares within 90 days after Buyer
filed its Form A Statement or (ii) Buyer's purchase of the Shares has
not been statutorily deemed approved during such time. The right to
terminate this Agreement under this subsection shall not be available
to a Party whose failure to fulfill any obligation under this Agreement
shall have been the cause of, or shall have resulted in, the New York
Department of Insurance's failure to approve the purchase within the 90
days or prevented the purchase from being statutorily deemed approved
within the 90 days.
7.2 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to subsections (a) or (d) of Section 7.1, such termination shall be
without liability of either Party, or any director, officer, employee, agent,
consultant or representative of such Party, to the other Party, except as
specifically provided in this Agreement. If this Agreement is terminated
pursuant to subsections (b) or (c) of Section 7.1, the rights and remedies
granted hereby are cumulative and non-exclusive of any other right or remedy
available to the terminating party at law or in equity.
ARTICLE VIII
TRANSACTIONS PRIOR TO THE CLOSING DATE
8.1 ACCESS TO INFORMATION AND RECORDS. Throughout the period
prior to the Closing Date during normal business hours and upon reasonable
advance notice, Seller shall give to Buyer and Buyer's employees, counsel,
accountants and other consultants and representatives ("Buyer's Agents") full
access to the Company's assets, books, contracts, commitments, and records for
such purposes as Buyer deems appropriate and will furnish to Buyer or Buyer's
Agents during such period all such information concerning the affairs of the
Company as Buyer or Buyer's Agents may reasonably request. Buyer and Buyer's
Agents shall hold in strict confidence all information so obtained from Seller,
and, if the transactions herein provided for are not consummated as
contemplated, Buyer and Buyer's Agents will return all such information and any
documents prepared by Buyer or Buyer's Agents incorporating such information.
8.2 CONDUCT OF THE COMPANY'S BUSINESS PENDING THE CLOSING
DATE. Seller hereby agrees that, prior to the Closing Date, it will:
(a) Prevent the Company from soliciting, negotiating,
promising to issue, or issuing new insurance policies or contracts;
(b) Not terminate any Agent appointments without prior consent
of Buyer;
17
(c) Maintain the Company's books, accounts, and records in the
usual, regular and ordinary manner, on a basis consistent with prior
years; endeavor to comply with all Laws and contractual obligations
applicable to the Company and its business and assets; and perform the
Company's obligations without default;
(d) Make or enter into no contract affecting the Company's
assets;
(e) Make no renovation affecting the Company's assets that
involves any substantial obligation on the part of the Company;
(f) Make no dividends, redemptions or other distributions on
account of or in respect of the Company's capital stock; and
(g) Make no material change in the Company's statutory
accounting procedures without first obtaining Buyer's consent to such
change.
Seller agrees that it will enter into no transaction and will use its best
efforts to prevent any event that would result in any of Seller's or the
Company's representations and warranties contained in this Agreement not being
true and correct at and as of the time immediately after the occurrence of such
transaction or event.
8.3 CONSENTS. The Parties agree that they shall cooperate with
each other to obtain prior to the Closing Date (to the extent reasonably
possible) all consents, assignments, and approvals as may be required, including
those set forth in the Disclosure Schedules, in order to enable them to perform
their obligations hereunder and to consummate the transactions contemplated
hereby. Seller shall not be responsible for any fees or charges incurred in
connection with Buyer obtaining such consents or approvals that must be obtained
by Buyer. Buyer shall not be responsible for any fees or charges incurred in
connection with Seller obtaining such consents or approvals that must be
obtained by Seller.
8.4 UPDATE DISCLOSURE; BREACHES. From and after the date of
this Agreement until the Closing Date, Seller or Buyer shall notify the other
Party in writing of (a) the occurrence or non-occurrence of any event that would
cause any representation or warranty contained in this Agreement to be untrue or
inaccurate in any Material respect; (b) any failure of Seller or Buyer, as the
case may be, to comply with or satisfy any covenant, condition, or agreement to
be complied with or satisfied by them pursuant to this Agreement in any Material
respect; and (c) any other Material matter that may occur from and after the
date of this Agreement, which, if existing on the date of this Agreement, would
have been required to be described herein; PROVIDED, HOWEVER, that the delivery
of any notice pursuant to this Section 8.4 shall not cure any breach of any
representation or warranty requiring disclosure of such matter prior to the date
of this Agreement or otherwise limit or affect the remedies available hereunder
to the Party receiving such notice. Such written notice shall be delivered
within five (5) business days after the notifying Party obtains knowledge of
such matter.
18
ARTICLE IX
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
The obligation of Buyer to consummate its purchase of the
Shares from Seller shall be subject to the satisfaction at or prior to the
Closing Date of the conditions set forth below.
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE.
Seller shall have performed in all material respects its obligations under this
Agreement required to be performed at or prior to the Closing Date (including,
without limitation, its obligation to obtain the release of the Shares from any
and all Liens), and the representations and warranties of Seller contained in
this Agreement shall be true and correct in all material respects at and as of
the Closing Date as if made at and as of such time, except as contemplated by
this Agreement.
9.2 OFFICER'S CERTIFICATE. Buyer shall have received a
Certificate from the President or other proper officer of Seller, dated as of
the Closing Date, to the effect that Seller has, to the extent incumbent on it
to do so, fulfilled the conditions specified in this Article IX. Such
Certificate shall include a schedule containing an update of the information
disclosed in the Disclosure Schedules to Article VI as of a date not more than
three days prior to the Closing Date.
9.3 PROCEEDINGS AND INCUMBENCY. There shall have been
delivered to Buyer from Seller a certificate in form and substance satisfactory
to Buyer, dated as of the Closing Date, and signed on behalf of Seller,
certifying as to (a) true copies of the Articles of Incorporation and Bylaws of
the Company as in effect on such date; (b) true copies of all corporate action
taken by Seller relative to this Agreement; and (c) the names, true signatures
and incumbency of the officer or officers of Seller authorized to execute and
deliver this Agreement or any other agreements, documents, certificates or
instruments contemplated hereby.
9.4 RESIGNATION OF COMPANY'S DIRECTORS AND OFFICERS. Buyer
shall have received the resignations, effective as of the Closing, of all the
directors and officers of the Company.
9.5 ACTUAL OR THREATENED ACTIONS. There shall not be any
actual or, in the opinion of Buyer, threatened action or proceeding by or before
any Official Body that seeks to restrain, prohibit or invalidate the
transactions contemplated by this Agreement or that might affect the right of
Buyer to consummate its purchase of the Shares or to own the Shares after the
Closing Date.
9.6 CONSENTS. Seller and Buyer shall have obtained such
consents from all Persons and Official Bodies as are necessary to consummate the
purchase contemplated hereunder.
9.7 NO NEW BUSINESS ACTIVITY. From September 30, 2000, through
the Closing Date, the Company shall not have engaged in any new business
activities.
9.8 COMPLIANCE WITH LAWS. Seller shall have complied with all
applicable Laws, including, without limitation, the securing of the approval of
all Official Bodies and the expiration of all waiting periods under such Laws.
19
9.9 REGULATORY APPROVAL. The New York Superintendent of
Insurance shall have approved in writing Buyer's acquisition of the Shares or
such transaction is deemed approved pursuant to New York Insurance Law ss. 1506,
and such approval shall be in full force and effect without any appeal thereof
having been filed by any person.
9.10 DELIVERY OF NOTICE TO DEPOSITORY INSTITUTIONS AND
CUSTODIANS. Seller shall have caused an authorized officer of Company to have
delivered to all depository institutions and custodians holding any of the
Company's assets written notice of the transactions contemplated by this
Agreement and the identity of the Company's post-Closing officers having
authority from and after the Closing Date over the Company's assets and
accounts, which such officers the Buyer will identify to the Seller not less
than three (3) days prior to the Closing Date.
ARTICLE X
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
The obligation of Seller to consummate its sale of the Shares
to Buyer shall be subject to the satisfaction at or prior to the Closing Date of
the conditions set forth below.
10.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE. Buyer shall
have performed in all material respects its obligations under this Agreement
required to be performed by it at or prior to the Closing Date, and the
representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects at and as of the Closing Date as if
made at and as of such time, except as contemplated by this Agreement.
10.2 OFFICER'S CERTIFICATE. Seller shall have received a
Certificate from Buyer's President or other proper officer, dated as of the
Closing Date, to the effect that Buyer has, to the extent incumbent on it to do
so, fulfilled the conditions specified in this Article X.
10.3 PROCEEDINGS AND INCUMBENCY. There shall have been
delivered to Seller from Buyer a certificate in form and substance satisfactory
to Seller, dated as of the Closing Date, and signed on behalf of Buyer
certifying as to (a) true copies of all corporate action taken by Buyer relative
to this Agreement, and (b) the names, true signatures and incumbency of the
officer or officers of Buyer authorized to execute and deliver this Agreement or
any other agreements, documents, certificates or instruments contemplated
hereby.
10.4 ACTUAL OR THREATENED ACTIONS. There shall not be any
actual or, in the opinion of Seller, threatened action or proceeding by or
before any Official Body that seeks to restrain, prohibit or invalidate the
transactions contemplated by this Agreement or that might affect the right of
Seller to consummate its sale of the Shares to Buyer.
10.5 CONSENTS. Seller and Buyer shall have obtained such
consents from all Persons and Official Bodies as are necessary to consummate the
purchase contemplated hereunder.
20
10.6 COMPLIANCE WITH LAWS. Buyer shall have complied with all
applicable Laws, including, without limitation, the securing of the approval of
all Official Bodies and the expiration of all waiting periods under such Laws.
10.7 REGULATORY APPROVAL. The New York Superintendent of
Insurance shall have approved in writing Buyer's acquisition of the Shares or
such transaction is deemed approved pursuant to New York Insurance Law ss. 1506,
and such approval shall be in full force and effect without any appeal thereof
having been filed by any person.
ARTICLE XI
NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
11.1 SURVIVAL OF REPRESENTATIONS, ETC. All representations,
warranties, and agreements made by Seller and Buyer in this Agreement and the
remedies of Buyer and Seller with respect thereto shall survive the Closing and
remain in effect for a period of one year after the Closing Date; provided,
however, that the representations and warranties set forth in Section 6.11 ("Tax
Matters") shall survive and remain in full force and effect until the close of
business on the 120th day following the expiration of the applicable statute of
limitations with respect to the Tax liabilities in question (giving effect to
any waiver, mitigation, or extension thereof). Neither the period of survival
nor the liability of Seller or Buyer, as the case may be, shall be reduced by
any investigation made at any time by or on behalf of such investigating Party.
If written notice of a claim has been given prior to the expiration of the
applicable representation, warranties, covenants, and agreements by one Party to
the other Party, then the relevant representations, warranties, covenants, and
agreements shall survive as such claim, until the claim has been finally
resolved.
11.2 GENERAL INDEMNIFICATION BY SELLER. Seller shall defend,
hold harmless, and indemnify Buyer, its Affiliates, and their respective
directors, officers, employees and agents from and against all claims, actions,
damages, liabilities, losses, or costs and expenses, including reasonable
attorneys' fees, whether joint or several, to which Buyer, or its Affiliates
become subject, insofar as such claims, actions, damages, liabilities, or losses
arise out of or are based upon (a) any failure of Seller or any of its
Affiliates to perform or observe any covenant, agreement, or duty under this
Agreement; (b) any Material breach, individually or in the aggregate, by Seller
or any of its Affiliates of the representations and warranties contained in this
Agreement; or (c) any failure of Seller or any of its Affiliates to comply with
applicable federal, state or local Laws regarding confidential health care
information.
11.3 GENERAL INDEMNIFICATION BY BUYER. Buyer shall defend,
hold harmless, and indemnify Seller, its Affiliates and their respective
directors, officers, employees and agents from and against all claims, actions,
damages, liabilities, losses, or costs and expenses, including reasonable
attorneys' fees, whether joint or several, to which Seller or its Affiliates
become subject, insofar as such claims, actions, damages, liabilities, or losses
arise out of or are based upon (a) any failure of Buyer or any of its Affiliates
to perform or observe any covenant, agreement, or duty under this Agreement; (b)
any Material breach, individually or in the aggregate, by Buyer or any of its
Affiliates of the representations and warranties contained in this Agreement; or
(c) any failure of
21
Buyer or any of its Affiliates to comply with applicable federal, state or local
Laws regarding confidential health care information.
11.4 REPRESENTATION, COOPERATION, AND SETTLEMENT.
(a) The Party entitled to indemnification under this Article
XI (the "Indemnified Party") agrees to give prompt written notice to the other
Party (the "Indemnifying Party") of any claim against the Indemnified Party
which might give rise to a claim by the Indemnified Party against the
Indemnifying Party based on the indemnity agreements contained in this Article
XI, stating the nature, basis, and amount of the claim.
(b) Except as otherwise expressly provided herein, the
Indemnifying Party shall have full responsibility and authority with respect to
the disposition of any action, suit or proceeding for which it is financially
responsible under this Agreement. In the event any action, suit or proceeding is
brought against the Indemnified Party with respect to which the Indemnifying
Party may have liability under the indemnity agreements contained in this
Article XI; however, the Indemnified Party shall have the right, without
prejudice to the Indemnifying Party's rights under this Agreement, at the
Indemnified Party's sole expense, to be represented by counsel of its own
choosing and with whom counsel for the Indemnifying Party shall confer in
connection with the defense of any such action, suit, or proceeding. The
Indemnifying Party shall make available to the Indemnified Party and its counsel
and accountants all books and records of the Indemnifying Party relating to such
action, suit or proceeding, and the Parties agree to render to each other such
reasonable assistance as may be requested in order to insure the proper and
adequate defense of any such action, suit or proceeding; provided, however, that
the Indemnifying Party shall not be obligated to make books and records
available to the Indemnified Party: (i) to the extent that making such books and
records available to the Indemnified Party would jeopardize a legal privilege
relating to such books and records, or (ii) in any litigation or dispute
settlement procedure between the Parties. The determination regarding whether a
disclosure will or will not jeopardize a legal privilege shall be determined by
the Indemnifying Party, and in the absence of bad faith or manifest error, such
determination shall be deemed conclusively correct.
(c) The total indemnity obligations of either Party under this
Article XI shall in no event exceed the total Purchase Price.
22
ARTICLE XII
PRE-CLOSING BUSINESS LIABILITIES
12.1 INDEMNIFICATION BY SELLER OF PRE-CLOSING BUSINESS
LIABILITIES. Seller agrees to defend, indemnify, and hold harmless the Company
and the Company's Affiliates, as well as their respective directors, officers,
employees and agents from and against all claims, actions, damages, liabilities,
losses, or costs and expenses (including attorneys' fees) arising out of or
based upon (a) Pre-Closing Business, or (b) any claim made against the Company
or the Buyer asserted by any person who was prior to Closing an officer or
director of the Company and based upon alleged facts or circumstances existing
prior to Closing, in either case (i) that exceed reserves, if any, on the Final
Closing Balance Sheet and (ii) regardless of whether such claims, actions,
damages, liabilities, losses, or costs and expenses arise or are incurred
before, on, or after the Closing Date ("Pre-Closing Business Liabilities").
Seller's maximum indemnity obligations hereunder shall not exceed the total
Purchase Price paid by Buyer.
12.2 NOTICE OF PRE-CLOSING BUSINESS LIABILITIES INDEMNITY.
Buyer shall notify Seller of a claim for reimbursement of Pre-Closing Business
Liabilities reasonably promptly after such liabilities are discovered, subject
to the requirement that any such claims be submitted to Seller by July 31, 2004
and the indemnifiable event was asserted against the Company prior to July 1,
2004. With respect to claims for which notice is given to Seller within the
above-stated time periods, the indemnification rights of Buyer and the
indemnification obligations of Seller shall continue in effect until payment or
other resolution of such claims, including the final resolution of any
litigation threatened or pending for which notice of a claim was made.
ARTICLE XIII
ADDITIONAL AGREEMENTS
13.1 PUBLIC ANNOUNCEMENTS. With respect to this Agreement and
the transactions contemplated by it, prior to the Closing Date Buyer and Seller
shall consult with one another before (a) issuing or permitting the Company to
issue any press release , (b) otherwise making or permitting the Company to make
any public statements, and (c) all notices to third parties. It is expressly
understood, however, that Buyer, Seller, and their Affiliates are permitted to
make such disclosures as are required by applicable Laws or to obtain any
consent required to consummate this Agreement ("Required Disclosures"). If
practicable, the Party making a Required Disclosure shall provide the other
Party with an opportunity to review and comment upon it, but the content and
timing of the Required Disclosure shall be determined by the Party subject to
the Required Disclosure.
13.2 FURTHER ASSURANCES.
(a) After the Closing, each Party shall execute and deliver
such documents and other papers and take such further actions as may be
reasonably required, and not otherwise inconsistent with any other provisions of
this Agreement, to carry out the provisions hereof and to give effect to the
transactions contemplated hereby.
23
(b) If, in order to properly prepare documents required to be
filed with any Official Body, it is necessary that a Party or any of its
successors be furnished with information relating to the Company that is in the
possession of the other Party, the Party possessing such information agrees to
use commercially reasonable efforts to furnish such information to the
requesting Party at the requesting Party's cost.
13.3 INTRA-COMPANY ARRANGEMENTS. Seller shall cause to be
terminated, on or before the Closing Date, each and every agreement, instrument,
or other arrangement between the Company and Seller or any of Seller's
affiliates, including without limitation any tax sharing agreements, without
obligation of or to the Company extending beyond the Closing Date regardless of
whether an action or event that would have given rise to any obligation of or to
the Company occurred prior to, contemporaneously with or after termination of
such agreement, instrument, or other arrangement.
13.4 TAX MATTERS.
(a) Seller will include the income of the Company (including
any deferred income triggered into income by Reg. ss.1.1502-13 and any excess
loss accounts taken into income under Reg. ss.1.1502-19) on the Seller's
consolidated federal income Tax Returns for all periods through the Closing Date
and pay any federal income Taxes attributable to such income. The Company will
furnish Tax information to Seller for inclusion in its federal consolidated
income Tax Return for the period which includes the Closing Date in accordance
with the Company's past custom and practice. The income of the Company will be
apportioned to the period up to and including the Closing Date based on the
actual income or loss shown on the Company's books and records for the period up
to the Closing Date, and all other income of the Company shall be apportioned to
the period after the Closing Date.
(b) Seller agrees to indemnify Buyer from and against any
Taxes Buyer may suffer resulting from, arising out of, relating to, in the
nature of, or caused by any liability of the Company under Reg. ss. 1.1502-6 for
Taxes of any Person other than the Company who was a member of the affiliated
group (as defined in the Code) of which Seller and the Company were members.
(c) Seller shall be responsible for all personal property
taxes, franchise taxes, or any other taxes (other than federal income tax) owed
by the Company and attributable to the year in which Closing occurs based upon
the number of days during the taxable period that the Company was owned by
Seller, but only to the extent that a reserve or liability for such taxes was
not established on the Final Closing Balance Sheet.
(d) Buyer shall notify Seller and Seller shall notify Buyer,
as the case may be, as expeditiously as possible of any potential Tax liability
that could give rise to liability to Seller or to Buyer, as the case may be,
under this Agreement. Seller, at its sole expense, shall have the exclusive
authority to represent the Company before any taxing authority or any court
regarding any Taxes that may give rise to liability on the part of Seller under
this Agreement.
24
(e) Except as specifically contemplated in this Section 13.4,
Buyer shall have the sole right to control any audit or examination by any
taxing authority, initiate any claim for refund or amend any Tax Return, and
contest, resolve and defend against any assessment for additional Taxes, notice
of tax deficiency or other adjustment of Taxes of, or relating to, the Company
with respect to any Post-Closing Tax Periods; PROVIDED, HOWEVER, that with
respect to any audit or examination by any taxing authority that might affect
the Tax consequences of the operations of the Company for any period ending on
or prior to the Closing Date, Buyer shall notify Seller thereof, keep Seller
reasonably informed and shall not agree to or reject any proposed settlement,
adjustment or compromise without Seller's consent, which shall not be
unreasonably withheld or delayed.
(f) Seller and Buyer shall: (i) each provide the other, and
Buyer shall cause the Company to provide Seller, with such assistance as may
reasonably be requested by any of them in connection with the preparation of any
Tax Return, or any audit or other examination by any taxing authority or
judicial or administrative proceeding relating to the liability of the Company
for Taxes; (ii) each retain and provide the other, and Buyer shall cause the
Company to retain and provide Seller, with any records or other information
which may be relevant to such return, audit, examination or proceeding; (iii)
each provide the other with any final determination of any such audit,
examination or proceeding that affects any Tax liability for which the other
party has responsibility as provided herein; and (iv) execute and deliver such
powers of attorney and other documents as are necessary to carry out the intent
of this Section 13.4. Seller and Buyer shall use their respective best efforts
to retain all Tax relevant documents in their possession or control pertaining
to the business of the Company conducted prior to the Closing for the greater of
(A) two (2) years after the expiration of the statute of limitations for all of
the Tax Returns or reports filed for the Company for all periods ending on or
before the Closing Date, (B) six (6) years after the date of such documents, or
(C) six (6) years after the Closing Date. Buyer shall not extend the statute of
limitations for the assessment of any Tax for which Seller may be required to
indemnify Buyer without Seller's permission. Such permission shall not be
unreasonably denied by Seller.
13.5 OFFICE SPACE AND COMPANY'S RECORDS. Seller agrees to
store Company's required records in compliance with the New York State Insurance
Department's rules and regulations at Seller's offices located at 000 Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx for a period of up to nine months following the
Closing Date without charge to Buyer or Company. The Parties acknowledge that
the foregoing does not constitute a sublease or license but merely a service
which Seller has agreed to render, and that if Seller receives notice of any
violation of the terms of its lease for space at that address (the "Lease")
because of the arrangement contemplated hereby, Company will cooperate with
Seller to cure any alleged default under the Lease.
The Parties agree and acknowledge that Seller and Buyer may
enter into an agreement for space and services extending beyond such nine month
period after the date of this Agreement, any such agreement to be in accordance
with the terms of Seller's then existing Lease.
13.6 SELLER'S RIGHT, TITLE AND INTEREST IN CERTAIN ASSETS
AFTER CLOSING. The Seller shall retain any and all of the right, title and
interest of the Company, and/or its current or former subsidiaries, with respect
to each of the following, none of which shall be included on the Preliminary
Closing Balance Sheet or the Final Closing Balance Sheet:
25
(a) All federal, state and/or local tax refunds or credits
provided by any governmental body or any person acting on
behalf of such governmental body for periods ending on or
before the Closing Date, whether or not such refunds or
credits are received or determined to be due prior to the
Closing Date.
(b) All refunds or credits provided by any insurance regulatory
authority including, but not limited to Section 332 refunds
due by the New York State Department of Insurance, for periods
ending on or before the Closing Date, whether or not such
refunds or credits are received or determined to be due prior
to the Closing Date.
(c) All claim recoveries related to the insurance business written
by the Company prior to the Closing Date.
(d) Any recovery in any form received by the Company after Closing
from the action titled AMERICAN ACCIDENT & HEALTH INSURANCE
CO. V. XXXXXXX X. XXXXXXX & CO., (Index Xx. 00000/00), Xxxxxxx
Xxxxx xx Xxx Xxxx, Xxxxxx of Nassau.
13.7 BUYER'S CONTINUING RESPONSIBILITY. The Buyer shall, within ten
(10) business days of receipt of any correspondence, notices, requests, demands
and/or written communications with regard to any matters set forth in Section
13.6 of this Agreement and any correspondence, notice, request, demand and/or
written communication related to the Pre-Closing Business or the third party
administration business performed by the Company or any prior affiliate of the
Company prior to the Closing Date, deliver to Seller such correspondence,
notices, requests, demands and/or written communications. The Buyer also shall
deliver any and all such refunds, credits or other amounts received by the Buyer
or by the Company related to those matters set forth in Section 13.6 of this
Agreement, to Seller within ten (10) business days of receipt by the Buyer
and/or the Company. Notwithstanding any provisions of this Agreement to the
contrary, the obligations of the Buyer pursuant to this Section 13.7 shall
continue until the final resolution of the matters referred to in Section 13.6.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
14.1 WAIVERS AND AMENDMENT.
(a) Either Party may, by written notice to the other, (i)
extend the time for the performance of any of the obligations or other actions
of the other Party; (ii) waive any inaccuracies in the representations or
warranties of the other Party contained in this Agreement; (iii) waive
compliance with any of the covenants of the other Party contained in this
Agreement; and (iv) waive or modify performance of any of the obligations of the
other Party.
(b) This Agreement may be amended, modified, or supplemented
only by a written instrument executed by the Parties. Except as provided in the
preceding sentence, no action taken pursuant to this Agreement, including,
without limitation, any investigation by or on behalf of any Party, shall be
deemed to constitute a waiver by the Party taking such action of compliance with
26
any representations, warranties, covenants, or agreements contained herein. The
waiver by a Party of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach.
14.2 OCCURRENCE OF CONDITIONS PRECEDENT. The Parties agree to
use their best efforts to cause all conditions precedent to their obligations
under this Agreement to be satisfied.
14.3 NOTICES. All notices, requests, claims, demands, and
other communications that are required or may be given under this Agreement
shall be in writing and given (and shall be deemed to have been duly received,
if so given) by personal delivery, telegram, telecopy, or telex, or by
registered or certified mail, return receipt requested, postage prepaid, to the
Parties at the following addresses:
If to Buyer: Delta Dental Plan of Indiana, Inc.
0000 Xxxxxx Xxxx
Xxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx, Esq.
with a copy to: Xxxxx & Xxxxxxx
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
If to Seller: Arista Investors Corp.
000 Xxxx Xxxxxx
Xxx Xxxx. XX 00000
Attention: Xxxxxxx Xxxxxx, President
with a copy to: Morrison, Cohen, Singer & Xxxxxxxxx, LLP
000 Xxxxxxxxx Xxxxxx
Xxxxx 0
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxx, Esq.
or to such other address as a Party shall have specified by written notice to
the other.
14.4 INCORPORATION OF DISCLOSURE SCHEDULES; ENTIRE AGREEMENT.
The Disclosure Schedules attached hereto are an integral part of this Agreement
and are incorporated herein by this reference and the specific references
thereto contained herein. This Agreement supersedes all prior discussions and
agreements among the Parties with respect to the subject matter of this
Agreement, and this Agreement, including the Disclosure Schedules and
certificates attached hereto and to be delivered in connection herewith,
constitute the sole and entire agreement between Buyer and Seller with respect
to the subject matter hereof.
14.5 BINDING EFFECT; BENEFITS. This Agreement shall inure to
the benefit of and be binding upon the Parties and their successors. Nothing in
this Agreement, expressed or implied, is
27
intended to confer on any other person, other than the Parties or their
successors, any rights, remedies, obligations or liabilities under or by reason
of this Agreement.
14.6 NON-ASSIGNABILITY. This Agreement and any rights pursuant
to it shall not be assignable by either Party without the prior written consent
of the other; provided, however, that Buyer may assign its rights and delegate
its duties hereunder to any affiliate of Buyer, except for (a) its obligation to
pay the Purchase Price to the extent such Purchase Price is not paid by Buyer's
assignee and (b) its indemnity obligations under Article XI hereof. Such
assignee shall thereafter be the "Buyer" for all purposes under this Agreement
and the transactions contemplated hereby. Any assignment in violation hereof
shall be null and void and of no force or effect.
14.7 APPLICABLE LAW. This Agreement and the legal relations
between the Parties shall be governed by and in accordance with the internal
laws of Indiana.
14.8 SEVERABILITY. If any term or provision of this Agreement
shall be held to be invalid or unenforceable for any reason, such term or
provision shall be ineffective to the extent of such invalidity or
unenforceability without invalidating the remaining terms or provisions hereof,
and the Agreement shall be construed as if such invalid or unenforceable term or
provision had not been contained herein.
14.9 HEADINGS. The headings contained in this Agreement are
for reference purposes only and shall not affect the meaning or interpretation
of this Agreement.
14.10 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be one and the same instrument.
14.11 OTHER SELLER DELIVERABLES AT CLOSING. In addition to the
Seller deliverables at Closing identified elsewhere in this Agreement, at
Closing, Seller shall deliver, or cause the Company to deliver, to a
representative of the Company designated by the Buyer physical custody and
control of all the Company's books, records and assets not being held on deposit
in any state under the insurance laws of the state. In connection with any of
the Company's assets being held on deposit in any state under the insurance laws
of the state, Seller shall deliver to Buyer evidence of the Company's ownership
of the deposit.
14.12 THE COMPANY'S PLAN OF COMPLETE LIQUIDATION. The Company
has adopted a plan of complete liquidation pursuant to Section 332 of the Code
in the form attached hereto as Exhibit A, which such plan does not and will not
adversely impact the Company's corporate existence or its New York Certificate
of Authority. Pursuant to such plan, the Company has distributed all of its
assets to the Seller during calendar year 1999, except for its corporate
charter, its New York Certificate of Authority and sufficient assets to meet the
state law minimum capital and surplus requirements ("Retained Assets"), and the
Seller has assumed all of the liabilities of the Company. The Seller has treated
the Retained Assets as distributed to the Company in a final liquidating
distribution and then contributed by the Seller to the capital of a new
corporation, which is treated for Federal income tax purposes as a new
corporation, for which it has obtained a new employer identification number.
28
14.13 CODE SECTION 338 ELECTION. Seller and Buyer shall take
all actions necessary and appropriate (including timely filing such forms, tax
returns, elections, schedules and other documents as may be required), at each
party's cost and expense, to effect and preserve a timely Section 338(h)(10)
election in accordance with the requirements of Section 338 of the Internal
Revenue Code of 1986 (and any corresponding elections under state or local tax
law) (collectively, the "Section 338(h)(10) Elections"). Seller shall be
responsible for the preparation and filing of all forms and documents required
in connection with the Section 338(h)(10) Elections and shall provide Buyer with
copies thereof for its review prior to the Closing Date. Buyer and Seller shall
cooperate fully with each other and make available to each other such tax data
and other information as may be reasonably required by Buyer or Seller in order
to timely file the Section 338(h)(10) Elections and any other required
statements or schedules. Seller will include any income, gain, loss, deduction,
or other tax item resulting from the Section 338(h)(10) Elections on its tax
returns to the extent required by applicable law. Seller shall also pay any tax
attributable to the making of the Section 338(h)(10) Elections and will
indemnify Buyer and Company and will hold Buyer and Company harmless from and
against any adverse consequences arising out of any failure to pay such tax.
14.14 COMPANY'S NAME. Buyer has no intention to cause the
Company to conduct business following the Closing Date under the name Arista
Insurance Company, and Buyer shall cause the Company to file with the New York
Department of Insurance any documents necessary to change the legal name of the
Company from "Arista Insurance Company" as soon as reasonably practicable after
the Closing Date, but in no event later than 90 days after Closing. Buyer shall
thereafter continue to pursue diligently the name change.
14.15 LIMITATION OF LIABILITY.
(a) In no event shall either party be liable to the other for
any incidental, indirect, special, consequential or punitive damages.
(b) Notwithstanding any provision of this Agreement to the
contrary, except for Seller's liability for Taxes pursuant to the
indemnification in Section 13.4(b), Seller's total aggregate liability
individually and collectively for any and/or all of the following, (i) any
indemnification by Seller under this Agreement, including, without limitation,
the indemnifications provided for in Sections 6.24, 11.4(c) and 12.1 and (ii)
any other claim, action or proceeding, whether in tort, contract, strict
liability or any other legal theory and whether at law or in equity, known or
unknown, shall not exceed in the aggregate the Purchase Price.
IN WITNESS WHEREOF, the Parties have executed this Agreement
under their respective hands and seals as of the day and year first written
above.
DELTA DENTAL PLAN OF INDIANA, INC.
/s/ Xxxx X. Xxxxxxx, Xx.
-----------------------------------------
Xxxx X. Xxxxxxx, Xx., Treasurer
29
ARISTA INVESTORS CORP.
/s/ Xxxxxxx Xxxxxx
---------------------------------
Xxxxxxx Xxxxxx, President
30
