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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JULY 9, 1998
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RISCORP, INC.
(Exact name of Registrant as specified in its Charter)
FLORIDA 0-27462 65-0335150
(State or Other (Commission (IRS Employer
Jurisdiction of File No.) Identification No.)
Incorporation)
One Sarasota Tower, Suite 608
Sarasota, Florida
(Address of principal 34236
executive offices) (Zip Code)
Registrant's telephone number, including area code: (941) 366-5015
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS
Pursuant to an Asset Purchase Agreement dated June 17, 1997, by and
among RISCORP, Inc. ("RISCORP"), certain of its subsidiaries named therein, and
Zenith Insurance Company ("Zenith"), a wholly owned subsidiary of Zenith
National Insurance Corp., RISCORP and its subsidiaries sold substantially all
of their operating assets and certain liabilities to Zenith. The closing of the
transaction occurred on April 1, 1998.
In connection with the closing of this transaction, Zenith paid $35
million in cash, a portion of which was placed in escrow pursuant to the terms
of the Asset Purchase
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Agreement. The final purchase price to be paid by Zenith will be the excess, if
any, of the book value of the transferred assets over the transferred
liabilities assumed by Zenith at closing. On June 9, 1998, RISCORP delivered to
Zenith a closing date balance sheet (the "Proposed Business Balance Sheet")
representing the audited statement of transferred assets and transferred
liabilities as of April 1, 1998. The Proposed Business Balance Sheet indicated
RISCORP's calculation of the final purchase price to be approximately $141
million, less the $35 million previously paid by Zenith.
Pursuant to the terms of the Asset Purchase Agreement, on July 9,
1998, Zenith provided to RISCORP a list of suggested adjustments to the
Proposed Business Balance Sheet. These suggested adjustments totaled $209
million and principally related to differences in the estimation of losses and
loss adjustment expense reserves and the estimate of the allowance for
uncollectible receivables. The adjustments proposed by Zenith reflect Zenith's
position that the aggregate value of the liabilities assumed by it exceed the
value of the assets transferred by as much as $68 million. While RISCORP is
still in the process of evaluating the basis for the adjustments proposed by
Zenith, based on its preliminary analysis RISCORP intends to dispute Zenith's
suggested changes and vigorously defend its determination of the Proposed
Business Balance Sheet. The parties have engaged a nationally recognized
independent accounting firm to serve as neutral auditors and neutral actuaries
to resolve the items in dispute related to the determination of the final
purchase price. If Zenith should prevail in the dispute resolution process, it
is possible that the final purchase price for this transaction could be the $35
million already received by RISCORP.
Pursuant to other provisions of the Asset Purchase Agreement, Zenith
has provided notice to RISCORP of certain alleged breaches of the
representations, warranties or covenants made by RISCORP therein. RISCORP has
disputed the allegations asserted by Zenith and has also provided notice to
Zenith of certain breaches of covenants made by Zenith in the Asset Purchase
Agreement. RISCORP also anticipates a dispute with Zenith with respect to its
entitlement to certain security deposits held by various state insurance
departments and other regulatory agencies that were not transferred to Zenith
at closing. RISCORP intends to vigorously defend all allegations asserted by
Zenith with respect to these and other matters and intends to take such actions
as it deems necessary to ensure Zenith fully complies with its obligations
under the Asset Purchase Agreement.
NOTE ON FORWARD-LOOKING INFORMATION
This report contains statements that constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities and Exchange Act of 1934, as
amended. The words "believe," "estimate," "expect," "intend," "anticipate," and
similar expressions and variations thereof identify certain of such
forward-looking statements, which speak only as of the dates on which they were
made. The Registrant undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events, or otherwise. Readers are cautioned that any such forward-looking
statements are
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not guarantees of future performance and involve risks and uncertainties, and
that actual results may differ materially from those indicated in the
forward-looking statements as a result of various factors. Readers are
cautioned not to place undue reliance on these forward-looking statements,
which are subject to a number of risks and uncertainties that could cause
actual results to differ materially from those projected. These risks and
uncertainties include but are not limited to the following: (i) uncertainties
with respect to the final purchase price to be paid by Zenith under the Asset
Purchase Agreement; (ii) the value of the transferred assets and the
transferred liabilities; (iii) the ability of RISCORP to recover any amounts
from Zenith for breaches of covenants under the Asset Purchase Agreement; (iv)
Zenith's ability to recover from RISCORP certain assets not transferred to it
at closing; and (v) other risks detailed herein and from time to time in the
Registrant's other reports and filings with the Securities and Exchange
Commission.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
RISCORP, INC.
Dated: July 20, 1998 By:
/s/ WALTER E. RIEHEMANN
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Walter E. Riehemann
VICE PRESIDENT & TREASURER
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