SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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) January 6, 1999
FPIC INSURANCE GROUP, INC.
(Exact name of registrant as specified in its charter)
Florida 1-11983 59-3359111
(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation or organization Number) Identification
No.)
1000 Riverside Avenue, Suite 800, Jacksonville, Florida 32204
(Address of principal executive offices)
Registrant's telephone number, including area code: (904) 354-5910
Page 1 of 4 Pages
Exhibit Index is located at Page 4
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Item 2. Acquisition or Disposition of Assets
On January 6, 1999, FPIC Insurance Group, Inc. ("FIG") acquired all of
the outstanding capital stock of Administrators for the Professions, Inc., a New
York corporation ("AFP"). FIG acquired AFP from the former AFP shareholders,
Seth I. Goldberg, M.D., Glenn T. Goldberg, M.D., the Estate of Donald D.
Goldberg, Peter Demetriou, Elias Halvatzis, Seymour Sadkin, the Estate of Philip
Slater, and Susan Barbiero pursuant to a Stock Purchase Agreement dated as of
November 25, 1998, as amended by First Amendment to Stock Purchase Agreement
dated as of December 23, 1998. AFP is the attorney-in-fact and performs
management and administrative services for Physicians' Reciprocal Insurers, a
New York reciprocal insurer that provides medical professional liability
insurance.
The consideration paid by FIG to acquire the stock of AFP was
negotiated between FIG and the former AFP shareholders and consisted of $44.0
million in cash and 214,286 shares of common stock, par value $.10 per share of
FIG, which shares were divided, in accordance with the Stock Purchase Agreement,
among certain of the former AFP shareholders as follows: Seth I. Goldberg,
35,714 shares; Glenn T. Goldberg, 35,714 shares; and the Estate of Donald
Goldberg, 35,714 shares. Prior to the purchase by FIG of the stock of AFP, no
relationship existed between FIG, its affiliates, or any officer or director of
FIG or its affiliates, or any associate of such officers and directors, and the
former shareholders of AFP.
Approximately 25% of the cash consideration used to complete the
purchase of the stock of AFP was provided from FIG's working capital and the
remainder was provided by advances under FIG's $75 million revolving,
floating-rate credit facility established pursuant to a Credit Agreement dated
January 4, 1999 between FIG and SunTrust Bank, North Florida, National
Association.
A copy of the Stock Purchase Agreement, as amended, is attached hereto
as Exhibit 2.1 and is incorporated in its entirety herein. The foregoing
description is modified by such reference.
Reference is made to the press release filed as Exhibit 99.1 hereto.
The information set forth in Exhibit 99.1 is hereby incorporated by reference
herein.
Important Considerations Related to Forward-Looking Statements
This Form 8-K contains certain forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934 (the "Exchange
Act"). These forward-looking statements may be found in the press release
attached as Exhibit 99.1 to the Form 8-K. These statements relate to FIG's
growth strategy and are based on current expectations that involve a number of
risks and uncertainties that are inherent in any growth strategy as well as
those risks and uncertainties that have been discussed in the Company's prior
reports under the Exchange Act.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial statements of business acquired:
Financial information will be filed by amendment to this Form
8-K no later than March 23, 1999.
(b) Pro forma financial information:
Pro forma financial information will be filed by amendment to
this Form 8-K no later than March 23, 1999.
(c) Exhibits:
(2.1) Stock Purchase Agreement dated as of November 25, 1998
and First Amendment to Stock Purchase Agreement dated as of December 23, 1998.
Page 2 of 4 Pages
Exhibit Index is located at Page 4
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(99.1) FPIC Insurance Group, Inc. Press Release dated January
6, 1999.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
FPIC INSURANCE GROUP, INC.
Date: January 19, 1999 By: /s/ Robert B. Finch
____________________________
Robert B. Finch
Executive Vice President and
Chief Financial Officer
Page 3 of 4 Pages
Exhibit Index is located at Page 4
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EXHIBIT INDEX
Exhibit Number
(2.1) Stock Purchase Agreement dated as of November 25, 1998 and First
Amendment to Stock Purchase Agreement dated as of December 23,
1998.
(99.1) FPIC Insurance Group, Inc.'s Press Release dated January 6,
1999.
Page 4 of 4 Pages
Exhibit Index is located at Page 4
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STOCK PURCHASE AGREEMENT
among
The Estate of Donald D. Goldberg,
Seth I. Goldberg, M.D.,
Glenn T. Goldberg, M.D.,
Peter Demetriou,
Elias Halvatzis,
Seymour Sadkin,
The Estate of Philip Slater, and
Susan Barbiero
as the Sellers,
and
FPIC INSURANCE GROUP, INC.
as Purchaser
as of November 25, 1998
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TABLE OF CONTENTS
ARTICLE I
Sale and Purchase of AFP Shares................................................2
Section 1.1 Sale of AFP Shares by the Sellers........................2
Section 1.2 Purchase of AFP Shares by Purchaser. ....................2
Section 1.3 Purchase Consideration...................................2
Section 1.4 PRI Relationship.........................................2
Section 1.5 Closing..................................................3
ARTICLE II
Covenants......................................................................4
Section 2.1 PRI Board of Governors...................................4
Section 2.2 Noncompetition Agreements................................4
Section 2.3 Bruce Goldberg Noncompetition Agreement..................4
Section 2.4 SIG Consulting and Noncompetition Agreement..............5
Section 2.5 Subscriber Approvals.....................................5
Section 2.6 Other Approvals..........................................6
Section 2.7 Reserves.................................................6
Section 2.8 Dividends................................................6
Section 2.9 Management Agreement Compensation........................7
Section 2.10 Reinsurance Agreement...................................8
Section 2.11 Management Agreement....................................8
Section 2.12 Additional Covenants of the Sellers.....................8
(a) Access to Information...............................8
(b) Conduct of Business.................................9
(c) Disposition of Shares..............................12
(d) Resignations.......................................12
(e) Intercompany Accounts..............................12
(f) Payment of Liabilities.............................12
(g) Preservation of Business...........................13
(h) Investment Portfolio Requirements..................13
(i) Notice and Cure....................................13
(j) Further Actions....................................14
(k) Reasonable Efforts.................................14
Section 2.13 Covenants of Purchaser.................................14
(a) Further Actions....................................14
(b) Reasonable Efforts.................................14
Section 2.14 Bonomo Employment Agreement............................14
Section 2.15 Lease Security.........................................15
ARTICLE III
Representations and Warranties................................................15
Section 3.1 Representations and Warranties of the Sellers. .........15
(a) Status of the Goldberg Sellers. ...................15
(b) Power and Authority. ..............................16
(c) No Conflicts. .....................................16
(d) Consents and Approvals. ...........................17
(e) Organization and Good Standing of AFP;
Authority to Conduct Business. ...............18
(f) Capital Structure of AFP...........................19
(g) Subsidiaries.......................................19
(h) Financial Statements...............................20
(i) Statement Accuracy.................................20
(j) Intercompany Accounts..............................20
(k) Undisclosed Liabilities............................21
(l) Litigation.........................................21
(m) Real and Personal Property.........................22
(n) Leases and Rental Contracts........................22
(o) Contracts..........................................23
(p) Compliance with Other Instruments and Laws.........24
(q) Regulatory Filings.................................25
(r) Absence of Certain Changes.........................26
(s) Taxes..............................................27
(t) Insurance Policies.................................29
(u) Transactions with Interested Persons...............30
(v) Bank and Brokerage Accounts........................30
(w) Disclosure.........................................30
(x) Employee Benefit Plans.............................31
(y) Employees..........................................34
(z) Patents, Trademarks, Etc...........................35
(aa) Brokers...........................................35
(bb) Computer Software.................................35
(cc) Books and Records.................................36
(dd) No Investment Company.............................37
(ee) No Implied Warranties.............................37
(ff) Status............................................37
(gg) Power and Authority. .............................37
(hh) No Conflicts. ....................................38
(ii) Consents and Approvals............................38
(jj) Ownership.........................................39
(kk) Intercompany Accounts.............................39
(ll) Noncompetition....................................39
(mm) Status............................................40
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(nn) Power and Authority. .............................40
(oo) No Conflicts. ....................................40
(pp) Consents and Approvals............................41
(qq) Ownership.........................................41
(rr) Intercompany Accounts.............................42
(ss) Noncompetition. .................................42
Section 3.2 Representations and Warranties of the Goldberg Sellers
Regarding PRI...........................................42
(a) Power and Authority................................42
(b) No Conflicts.......................................43
(c) Consents and Approvals.............................43
(d) Organization and Good Standing of PRI;
Authority to Conduct Business................44
(e) Subsidiaries.......................................44
(f) Financial Statements...............................44
(g) Statement Accuracy.................................45
(j) Intercompany Accounts..............................47
(k) Undisclosed Liabilities............................47
(l) Litigation.........................................47
(m) Real and Personal Property.........................48
(n) Leases and Rental Contracts........................48
(o) Contracts..........................................48
(p) Compliance with Other Instruments and Laws.........50
(q) Regulatory Filings.................................51
(r) Taxes..............................................52
(s) Insurance Policies.................................54
(t) Transactions with Interested Persons...............54
(u) Bank and Brokerage Accounts........................54
(v) Disclosure.........................................55
(w) Employees..........................................55
(x) Surplus Relief.....................................55
(y) Insurance Issued by PRI............................55
(z) Patents, Trademarks, Etc...........................58
(aa) Computer Software.................................58
(bb) No Threatened Cancellation........................58
(cc) Books and Records.................................59
(dd) No Investment Company.............................59
(ee) Investment Portfolio..............................59
Section 3.3 Representations and Warranties of Purchaser..............59
(a) Organization and Good Standing.....................60
(b) Power and Authority................................60
(c) No Conflicts.......................................60
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(d) Consents and Approvals.............................61
(e) Disclosure.........................................61
(f) Brokers............................................62
(g) Purchaser's Examination............................62
ARTICLE IV
Conditions Precedent..........................................................63
Section 4.1 Purchaser...............................................63
(a) Representations and Warranties.....................64
(b) Performance of Obligations.........................64
(c) Threatened or Pending Proceedings..................64
(d) Approvals and Consents.............................64
(e) Corporate and Other Approvals and Consents.........65
(f) Legal Opinions.....................................65
(g) No Adverse Change..................................65
(h) Amended and Restated Management Agreement..........65
(i) Reinsurance Agreement..............................66
(j) Bonomo Employment Agreement........................66
(k) Board of Governors.................................66
(l) BG Agreement.......................................66
(m) SIG Agreement......................................66
(n) Noncompetition Agreements..........................67
(o) Resignations.......................................67
(p) 338(h)(10) Election................................67
(r) Secretary's Certificates...........................68
Section 4.2 Conditions to the Obligations of the Sellers............68
(a) Representations and Warranties.....................68
(b) Performance of Obligations.........................69
(c) Threatened or Pending Proceedings..................69
(d) Approvals and Consents.............................69
(e) Legal Opinion......................................69
ARTICLE V
Indemnification...............................................................70
Section 5.1 Survival of Representations and Warranties...............70
Section 5.2 Indemnification.........................................71
ARTICLE VI Confidentiality...................................................75
Section 6.1 Confidentiality.........................................75
ARTICLE VII
Miscellaneous.................................................................76
Section 7.1 Tax Matters.............................................76
(a) Liability for Taxes................................76
(b) ...................................................77
(c) Cooperation on Tax Matters.........................77
(d) 338(h)(10) Election................................78
Section 7.2 Plan Amendment..........................................79
Section 7.3 Plan Matters............................................79
Section 7.4 Expenses................................................80
Section 7.5 Guaranty................................................81
Section 7.6 Litigation Defense......................................81
Section 7.7 Notices.................................................82
Section 7.8 Termination.............................................83
Section 7.9 Amendment...............................................84
Section 7.10 Counterparts...........................................84
Section 7.11 Governing Law..........................................84
Section 7.12 Entire Agreement.......................................84
Section 7.13 Waivers................................................84
Section 7.14 Headings...............................................85
Section 7.15 Assignment.............................................85
Section 7.16 Further Assurances.....................................85
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is made as of November 25,
1998, among The Estate of Donald D. Goldberg (the "DDG Estate"), Seth I.
Goldberg, M.D. ("SIG"), Glenn T. Goldberg, M.D. ("GTG" and together with the DDG
Estate and SIG, each a "Goldberg Seller" and collectively, the "Goldberg
Sellers"), Peter Demetriou ("Demetriou"), Elias Halvatzis ("Halvatzis"), Seymour
Sadkin ("Sadkin"), The Estate of Philip Slater (the "Slater Estate"), and Susan
Barbiero ("Barbiero" and (i) together with Demetriou, Halvatzis, Sadkin, and the
Slater Estate, collectively, the "Non-Goldberg Sellers" and each a "Non-Goldberg
Seller" and (ii) together with the other Non-Goldberg Sellers and the Goldberg
Sellers, the "Sellers" and each, a "Seller"), and FPIC Insurance Group, Inc., a
Florida corporation ("Purchaser").
P R E A M B L E
The Sellers are the record and beneficial owners of all of the issued and
outstanding capital stock of Administrators for the Professions, Inc., a New
York corporation ("AFP"). Purchaser desires to purchase all of the issued and
outstanding capital stock of AFP (the "AFP Shares"), and the Sellers desire to
sell to Purchaser all of the AFP Shares, all subject to the terms and conditions
hereinafter set forth.
ACCORDINGLY, the parties hereto agree as follows:
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ARTICLE I
Sale and Purchase of AFP Shares
Section 1.1 Sale of AFP Shares by the Sellers. Subject to the terms and
conditions of this Agreement, on the Closing Date (as defined in Section 1.5
hereof) and for the consideration set forth in Section 1.3 hereof, the Sellers
shall sell to Purchaser the AFP Shares.
Section 1.2 Purchase of AFP Shares by Purchaser. Subject to the terms and
conditions of this Agreement, on the Closing Date, Purchaser shall purchase the
AFP Shares for the consideration set forth in Section 1.3 hereof.
Section 1.3 Purchase Consideration.
The aggregate consideration to be paid by Purchaser for the AFP Shares
shall be U.S. $44,000,000 in cash and 214,286 shares of common stock, par value
$.10 per share of Purchaser (the "Purchase Consideration"), which shall be
divided among and payable to the Sellers as provided in Schedule 1.3.
Section 1.4 PRI Relationship. The Sellers acknowledge that the
relationships of AFP with PRI and with the insureds of PRI is a unique, key
asset of AFP and of fundamental and material importance to Purchaser in
determining to execute and deliver this Agreement and to complete the purchase
of the AFP Shares. Therefore, each Seller acknowledges and agrees that such
Seller shall not at any time following the Closing in any manner induce or
attempt to induce PRI to terminate its relationship or contractual agreements
with AFP and its Affiliates. For purposes of this Agreement, an "Affiliate" of a
person or entity shall mean any other person or entity that
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controls, is controlled by, or is under common control with such person or
entity, whether by ownership, agreement, or otherwise. Notwithstanding any other
provision of this Agreement, the provisions of this Section 1.4 shall survive
the execution and delivery of this Agreement and the Closing.
Section 1.5 Closing. If this Agreement is not terminated pursuant to
Section 7.5 hereof, the sale and purchase of the AFP Shares shall take place at
a closing (the "Closing") to be held in New York, New York at the offices of
LeBoeuf, Lamb, Greene & MacRae, L.L.P., counsel to Purchaser, on the later of
January 4, 1998 or the fifth business day after the satisfaction or waiver of
satisfaction of the conditions contained in Article IV hereof or on such other
date as is mutually agreed upon by the parties (such date being herein referred
to as the "Closing Date"). At the Closing, the Sellers shall (i) deliver to
Purchaser certificates representing the AFP Shares (along with appropriate stock
powers endorsed in blank), free and clear of all liens, charges, security
interests, and other encumbrances and claims of others, and with all transfer
and other applicable taxes paid, and (ii) shall deliver or cause to be delivered
to Purchaser (a) all minute books of AFP, along with all other corporate
records, documents, certificates and licenses of AFP that may be in the hands or
control of AFP or the Sellers, and (b) such other certificates, opinions and
documents required to be delivered pursuant to the terms of this Agreement as a
condition precedent to Purchaser's obligations hereunder. At the Closing,
Purchaser shall (a) deliver to the Sellers the cash portion of the Purchase
Consideration by wire transfer to such bank account as the Sellers shall have
advised Purchaser in writing at least 3 business days prior to the Closing Date
and the certificates representing the stock portion of the Purchase
Consideration and (b)
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deliver to the Sellers such other certificates, opinions and documents required
to be delivered pursuant to the terms of this Agreement as a condition precedent
to the Sellers' obligations hereunder.
ARTICLE II
Covenants
Section 2.1 PRI Board of Governors. The Sellers shall use reasonable
efforts (i) to cause three persons designated by Purchaser to be elected to the
Board of Governors of Physicians Reciprocal Insurers ("PRI") effective as of the
Closing and (ii) to cause any resignations of existing members of the PRI Board
of Governors necessitated thereby to occur.
Section 2.2 Noncompetition Agreements. At the Closing, GTG shall enter into
a Noncompetition Agreement with AFP in the form attached hereto as Exhibit
2.2(a) and the DDG Estate shall enter into a Noncompetition Agreement with AFP
in the form attached hereto as Exhibit 2.2(b).
Any agreements, documents, instruments, filings, or forms required to be
entered into by AFP pursuant to or in accordance with this Agreement may
hereinafter be referred to as the "AFP Agreements."
Section 2.3 Bruce Goldberg Noncompetition Agreement. The AFP Sellers (i)
shall use reasonable efforts to cause Bruce Goldberg to terminate all of his
positions (including all officer, director and other positions) with AFP and PRI
as of or prior to the Closing with no cost or
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liability to AFP or PRI (other than those set forth in the BG Agreement, defined
below) and (ii) shall cause AFP to, and shall use reasonable efforts to cause
Bruce Goldberg to, enter into a Noncompetition Agreement in the form attached
hereto as Exhibit 2.3 (the "BG Agreement"), which shall be effective as of the
Closing.
Section 2.4 SIG Consulting and Noncompetition Agreement. As of the Closing,
(i) SIG shall terminate all of his positions (including all officer, director
and other positions) with AFP and PRI with no cost or liability to AFP or PRI
(other than those set forth in the SIG Agreement, defined below) and (ii) SIG
shall, and the AFP Shareholders shall cause AFP to, enter into a Consulting and
Noncompetition Agreement in the form attached hereto as Exhibit 2.4 (the "SIG
Agreement").
Section 2.5 Subscriber Approvals. In the event that the Insurance
Department of the State of New York (the "New York Department") requires PRI, or
applicable law otherwise requires PRI, to obtain the approval prior to the
Closing of the Subscribers of PRI (the "Subscribers") to the transactions
contemplated hereunder or in connection with this Agreement or under or in
connection with the PRI Agreements or the AFP Agreements, then as soon as
reasonably practicable, the Goldberg Sellers shall cause AFP and/or PRI to send
notice to the Subscribers and conduct a Subscribers meeting or otherwise obtain
such Subscriber approval in accordance with all applicable laws. AFP shall
permit Purchaser to review all materials to be sent to the Subscribers in
connection with obtaining such Subscriber approval. All such materials and the
methods of solicitation shall be submitted to Purchaser for approval, which
approval shall not be unreasonably withheld.
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Section 2.6 Other Approvals. As soon as practicable after the execution of
this Agreement, the Sellers shall, and shall cause AFP and PRI to, make any and
all submissions and filings and take any and all other actions as may be
required to obtain, as soon as reasonably practicable, any and all necessary
approvals or authorizations from the New York Department and any other required
governmental entities or bodies or third parties to permit the execution,
delivery, and performance (prior to, at and following the Closing) of the PRI
Agreements, the AFP Agreements, and any other agreements or instruments
contemplated by this Agreement in compliance with all applicable laws,
regulations, and other legal requirements.
Section 2.7 Reserves. The Sellers covenant that, except as set forth on
Schedule 2.7, (i) since June 30, 1998, neither AFP nor PRI has caused or
allowed, and through the Closing they will not permit AFP to cause or allow, the
levels of PRI's 1997 and prior years reserves to be changed from the levels
shown on the PRI Statutory Statements (as defined in Section 3.2(g)) for the
period ending June 30, 1998 and (ii) since December 31, 1997, PRI has recorded
incurred losses and loss adjustment expenses on its books at a ratio at least
equal to the ratio at which incurred losses and loss adjustment expenses were
recorded on its books for 1997, as shown on the PRI Statutory Statements for the
period ending December 31, 1997, and through the Closing they will cause AFP to
continue to record incurred losses and loss adjustment expenses on PRI's books
at a ratio at least equal to the ratio at which incurred losses and loss
adjustment expenses were recorded on PRI's books for the period ending September
30, 1998, as shown on the PRI Statutory Statements for the period ending
September 30, 1998.
Section 2.8 Dividends. Prior to the Closing, AFP shall be permitted to
continue to pay
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cash dividends to the Sellers in respect of their capital stock of AFP;
provided, that (i) such payments are consistent with past practices, (ii) such
payments do not violate any other covenants contained in this Agreement and
(iii) the Sellers shall cause AFP to retain a net worth, consisting of cash and
cash equivalents, of at least $200,000 as of the Closing. The Sellers shall not
permit AFP to pay any other dividends. Within forty five (45) days following the
Closing, Purchaser shall cause AFP's independent auditors to make a final
calculation of the net worth of AFP as of the Closing and shall pay to the
Sellers the positive net worth of AFP as of the Closing, which amount shall be
allocated among the Sellers consistent with the proportions set forth in
Schedule 1.3. In the event that it is determined that AFP has a negative net
worth as of the Closing, the Sellers shall promptly pay to Purchaser an amount
equal to the difference between $0 and AFP's net worth as of the Closing. The
payment obligations under this Section 2.8 shall be in addition to and not
limited by any other payment or indemnification provisions in this Agreement.
For purposes of this Section 2.8, "net worth" shall mean AFP's assets minus its
liabilities determined in accordance with GAAP, as defined herein.
Section 2.9 Management Agreement Compensation. On or before March 15, 1999,
AFP shall finalize its calculation of the compensation due to it for the year
ended December 31, 1998 under the Management Agreement. Based on such
calculation, (i) in the event PRI owes AFP any amounts due under the Management
Agreement for the year ended December 31, 1998, Purchaser shall cause AFP or PRI
to promptly pay the Sellers an amount equal to such amounts due, allocated among
the Sellers consistent with the proportions set forth in Schedule 1.3, or (ii)
in the event AFP is obligated to return an amount to PRI under the Management
Agreement for the year
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ended December 31, 1998, the Sellers shall promptly pay Purchaser an amount
equal to such amount. The provisions of Sections 5.2(c) and (e) of this
Agreement shall not apply to the payments required by the immediately preceding
sentence.
Section 2.10 Reinsurance Agreement. The Sellers shall cause AFP to propose
to PRI that it execute and deliver as of December 31, 1998 a Reinsurance
Agreement with Florida Physicians Insurance Company, Inc. ("FPIC") in the form
attached hereto as Exhibit 2.10 (the "New Reinsurance Agreement"), which shall
replace the current reinsurance agreement of PRI listed on Schedule 2.10 (the
"Current Reinsurance Agreement"); it being understood that the execution and
delivery thereof by PRI is subject to the independent discretion of the PRI
Board of Governors.
Section 2.11 Management Agreement. The Sellers shall (a) cause AFP to
propose to PRI that it execute and (b) cause AFP to execute at the Closing an
amendment and restatement of the Management Agreement dated as of January 1,
1997 between PRI and AFP (the "Management Agreement") in the form attached
hereto as Exhibit 2.11 (the "Amended and Restated Management Agreement"); it
being understood that the execution and delivery thereof by PRI is subject to
the independent discretion of the PRI Board of Governors.
Section 2.12 Additional Covenants of the Sellers. Subject to the
Confidentiality Agreement dated August 4, 1998, among AFP, PRI and Purchaser,
from the date hereof through the Closing Date, the Sellers will and will cause
AFP to:
(a) Access to Information. To the extent necessary to analyze the
transactions contemplated by this Agreement, during normal business hours, give
Purchaser and its attorneys, accountants, agents and representatives reasonable
access to all the properties, books, records,
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contracts, commitments, employee benefit plans, documents, instruments and other
records of or pertaining to AFP and PRI and permit Purchaser and its attorneys,
accountants, agents and representatives to consult with and ask questions of the
officers and employees of AFP and PRI. The Sellers will and will cause AFP to
deliver to Purchaser all quarterly or annual financial statements of AFP and PRI
and all audited statements of AFP and PRI prepared or filed subsequent to the
date of this Agreement.
(b) Conduct of Business. Subject to the terms of this Agreement, conduct
AFP's and PRI's business in the ordinary course and consistent with past
practices, and not permit AFP or PRI to:
(i) issue or sell any of AFP's capital stock, or any options,
warrants, calls or securities convertible into such capital
stock, or enter into any agreement to do any of the foregoing, or
make any change in its capital structure either by way of stock
split, stock dividend or otherwise;
(ii) purchase, redeem or otherwise acquire or retire any capital stock
or declare or pay any dividends or make any distribution in
respect of capital stock except as permitted in Section 2.8;
(iii)enter into or assume any contract or commitment, or, except as
required by the terms of this Agreement, terminate or amend any
existing contract or commitment, other than in the ordinary
course of business except for contracts of reinsurance, which
shall not be
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entered into, assumed or amended without the prior written
consent of Purchaser, which consent shall not unreasonably be
withheld;
(iv) incur or prepay any indebtedness for borrowed money except in the
ordinary course of business and consistent with past practice
and, in any event, not in excess of $25,000 in the aggregate;
(v) make any loans or advance any funds to anyone, or extend credit
except in the ordinary course of business and consistent with
past practice and, in any event, not in excess of $25,000 in the
aggregate;
(vi) enter into, amend or accelerate any payment or contribution under
any employment, agency or consulting agreement or Benefit Plan
(as defined in Section 3.1(x)) except as expressly provided
herein;
(vii)without the prior written consent of Purchaser, which consent
shall not be unreasonably withheld, except in the ordinary course
of business and consistent with past practice, hire any new
employees or enter into or amend any employment agreement that
cannot unconditionally be terminated without liability (other
than liability for services already rendered) at any time on or
after the Closing (other than as required by this Agreement or by
applicable law), or grant any other material benefit to, its
current directors, officers, agents or employees except in the
ordinary course of business and
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consistent with past practice; provided, however, that AFP may
pay annual bonuses to its employees to the extent (A) consistent
with past practice and (B) reserved on AFP's books as of December
31, 1998;
(viii) create or assume any mortgage or other lien or encumbrance on,
or dispose of, any of its assets or properties other than (i)
liens for current property taxes, if any, not yet due and
payable, and (ii) liens created by law or incurred in the
ordinary course of business and consistent with past practice,
for amounts not yet due and payable, which do not materially
impair the use of or title to the assets subject to such lien;
(ix) acquire any assets or any properties, or enter into any
agreements to acquire any assets or properties, in each case,
exceeding $2,500 per each asset or property, or $25,000 in the
aggregate, and other than in the ordinary course of business;
(x) merge or consolidate with any other corporation, or acquire or
agree to acquire any stock or other equity interests (except
investments in the ordinary course of business) of any person,
firm, association, corporation or other business organization;
(xi) other than as required by this Agreement, make any change in
AFP's Articles of Incorporation or Bylaws or in the Management
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Agreement or any other document governing AFP's relationship as
attorney-in-fact of PRI;
(xii)except in the ordinary course of business, enter into any
arrangement with any person with respect to any United States or
foreign patents, patent applications, trademarks, applications
for registration of trademarks, trade names, fictitious names,
copyrights, know-how or trade secrets owned by, or in any way
relating to its businesses;
(xiii) other than as required by this Agreement, make any election
with respect to the computation of taxes or take any position in
any tax return could have an adverse effect on AFP or PRI; or
(xiv)other than as required by this Agreement, enter into any
agreement to do any of the foregoing.
(c) Disposition of Shares. Other than as required by this Agreement, not
dispose of, encumber or grant any rights regarding any of the AFP Shares.
(d) Resignations. Deliver to Purchaser the resignations of all of the
directors of AFP and the officers, of AFP as may be designated by Purchaser at
least three business days prior to the Closing Date, effective on the Closing
Date.
(e) Intercompany Accounts. Prior to the Closing, deliver to Purchaser a
complete and correct list and summary description of all AFP Intercompany
Accounts (as defined in Section 3.1(j)) and PRI Intercompany Accounts (as
defined in Section 3.2(j)), all of which shall be settled
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in full and cancelled prior to the Closing, with no material effect on the
capital or AFP or PRI.
(f) Payment of Liabilities. Pay all liabilities and obligations of AFP in
the ordinary course of business.
(g) Preservation of Business. Use all reasonable efforts to (i) preserve
intact AFP's present business organization, reputation, and relations with PRI
and its policyholders, and with AFP's and PRI's employees, agents, customers,
and suppliers, (ii) maintain all material licenses of AFP and PRI to do business
in each jurisdiction in which they are so licensed, (iii) maintain in full force
and effect all material agreements of AFP and PRI (except as otherwise
contemplated by this Agreement) and (iv) maintain all material assets and
properties of AFP in good working order and condition, ordinary wear and tear
excepted.
(h) Investment Portfolio Requirements. The Sellers shall, and shall cause
AFP to, notify and obtain the written approval of Purchaser, which approval
shall not be unreasonably withheld, prior to making any investment that is
inconsistent with the investment guidelines established by PRI's Board of
Governors unless, in the reasonable judgment of AFP, the change is required in
order for AFP to fulfill its statutory, contractual, or fiduciary duties to PRI
as its attorney-in-fact, in which case, Purchaser's approval shall not be
required, but AFP shall notify Purchaser of such change.
(i) Notice and Cure. Notify Purchaser promptly in writing of, and
contemporaneously provide Purchaser with complete and correct copies of any and
all information or documents relating to, and use all reasonable efforts to cure
before the Closing, any event, development, transaction, or circumstance
occurring after the date of this Agreement that causes
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or is likely to cause any covenant or agreement of the Sellers or any of them
under this Agreement to be breached, or that renders or could render untrue any
representation or warranty of the Sellers or any of them contained in this
Agreement as if the same were made on or as of the date of such event,
development, transaction, or circumstance. The Sellers and each of them also
shall use all reasonable efforts to cure, before the Closing, any violation or
breach of any representation, warranty, covenant, or agreement made by the
Sellers or any of them contained in this Agreement, whether occurring or arising
before or after the date of this Agreement. Notwithstanding the foregoing, with
respect to the cure of a breach of a representation or warranty arising after
the date of this Agreement, the Sellers' reasonable efforts shall not require
the Sellers to take any action that would have a Material Adverse Effect on any
Seller.
(j) Further Actions. Execute, acknowledge and deliver any further
documents, including but not limited to any financial statements of AFP or PRI
filed with the New York Department after the date hereof, reasonably required by
this Agreement.
(k) Reasonable Efforts. Use its reasonable efforts to fulfill, as soon as
practicable, all of the conditions contained in Section 4.1 hereof.
Section 2.13 Covenants of Purchaser. From the date hereof through the
Closing Date, Purchaser will:
(a) Further Actions. Execute, acknowledge and deliver any further documents
reasonably required by this Agreement.
(b) Reasonable Efforts. Use its reasonable efforts to fulfill, as soon as
practicable, all of the conditions contained in Section 4.2 hereof.
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Section 2.14 Bonomo Employment Agreement. Purchaser (i) acknowledges that
contemporaneously with the execution of this Agreement, Anthony Bonomo
("Bonomo") has executed and delivered to Purchaser an Employment Agreement with
AFP that will be effective upon the Closing (the "Bonomo Employment Agreement")
and (ii) agrees that it will cause AFP to execute the Bonomo Employment
Agreement as of the Closing.
Section 2.15 Lease Security. Purchaser and the Goldberg Sellers shall take
such actions as are reasonably required to cause the security deposit plus all
interest or other amounts earned thereon deposited by Goldberg Associates with
Manhasset Associates ("Landlord"), pursuant to the Option to Lease Real Estate
dated April 12, 1994 between Goldberg Associates and Landlord, to be returned to
Goldberg Associates at or prior to the Closing, which reasonably required
actions of Purchaser may include depositing a substitute security deposit.
ARTICLE III
Representations and Warranties
Section 3.1 Representations and Warranties of the Sellers.
The DDG Estate, SIG, and GTG jointly and severally represent and warrant to
Purchaser as follows:
(a) Status of the Goldberg Sellers. Each of the Goldberg Sellers who are
natural persons are over the age of 21 and competent to execute, deliver, and
perform such Seller's obligations under this Agreement. Seth Goldberg is the
duly appointed personal representative of the DDG Estate, is over the age of 21,
and is competent to execute, deliver, and cause to be
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performed on behalf of the DDG Estate the obligations to be performed by the DDG
Estate under this Agreement.
(b) Power and Authority. Each of the Goldberg Sellers has all requisite
power and authority to execute, deliver and perform their respective obligations
under this Agreement and any other agreement required hereby to be executed by
such Goldberg Seller. This Agreement constitutes, and each of any other
agreements required hereby to be executed by any Goldberg Seller will constitute
when executed and delivered, valid and legally binding obligations of each such
Seller, enforceable in accordance with its respective terms, except as
enforceability may be limited by principles of equity, bankruptcy,
reorganization, insolvency, moratorium or other laws affecting creditors rights
generally. AFP has all requisite power and authority to execute, deliver and
perform the AFP Agreements. The execution, delivery and performance of the AFP
Agreements have been duly authorized by all requisite action on behalf of AFP.
Each of the AFP Agreements will constitute when executed and delivered, valid
and legally binding obligations of AFP enforceable against it in accordance with
their respective terms, except as enforceability may be limited by principles of
equity, bankruptcy, reorganization, insolvency, moratorium or other laws
affecting creditors rights generally.
(c) No Conflicts. The execution and delivery of this Agreement and any
other agreement required hereby to be executed and delivered by any Goldberg
Seller and the consummation of the transactions contemplated hereby by the
Goldberg Sellers or by AFP in accordance with the terms hereof and thereof will
not violate any existing provision of the Articles of Incorporation, Bylaws or
any other organizational documents of AFP or any provision
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contained in the Management Agreement or the Subscriber's Agreement between PRI
and its subscribers (the "Subscriber Agreement") or of any law or violate any
existing term or provision of any order, writ, judgment, injunction or decree of
any court or any other governmental department, commission, board, bureau,
agency or instrumentality applicable to AFP, the Goldberg Sellers, the personal
representatives of the DDG Estate or any of them, other than to the extent such
violation would not have a Material Adverse Effect on or affecting AFP or would
not adversely affect the validity of this Agreement or any action taken or to be
taken by any party pursuant hereto or in connection with the transactions
contemplated hereby, or conflict with or result in a breach of any of the terms,
conditions or provisions of any agreement to which AFP or the Goldberg Sellers
or the personal representatives of the DDG Estate or any of them is a party, or
by which any of them or their respective properties are bound, other than to the
extent such breach would not have a Material Adverse Effect on or affecting AFP
or constitute an event that might permit an early termination of or otherwise
materially affect any such agreement.
"Material Adverse Effect" or "Material Adverse Change" shall mean any
change, effect, event, development, condition or state of facts of any character
that either individually or in the aggregate with all other such changes or
effects is materially adverse to the business, assets, liabilities, properties,
condition, operations or results of operations taken as a whole of the person or
entity to which such definition relates.
(d) Consents and Approvals. No consent, license, approval, order or
authorization of, or registration, declaration or filing with, any governmental
authority, agency, bureau or commission, or any third party is required to be
obtained or made by the Goldberg Sellers or any
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of them or by the personal representatives of the DDG Estate or by AFP in
connection with the execution, delivery, performance, validity, and
enforceability of this Agreement, the AFP Agreements, or the sale of the AFP
Shares, except for any filing that may be required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended ("HSR"), and approval of the New
York Department of the Amended and Restated Management Agreement and the New
Reinsurance Agreement and except for such consents, licenses, approvals, orders,
authorizations, registrations, declarations or filings that, if not obtained or
made by the Goldberg Sellers or any of them or by the personal representatives
of the DDG Estate or by AFP, would not have a Material Adverse Effect on or
affecting AFP, PRI, Purchaser or their Affiliates or the value of AFP or PRI to
Purchaser and would not affect the validity of this Agreement or any action
taken or to be taken by any party pursuant hereto or in connection with the
transactions contemplated hereby.
(e) Organization and Good Standing of AFP; Authority to Conduct Business.
AFP is a corporation, duly organized, validly existing and in good standing
under the laws of the State of New York. AFP has all requisite corporate power
and authority to carry on its business as presently conducted and to own or
lease and to operate its properties as currently operated. AFP is duly licensed
and in good standing to carry on its business as presently conducted and to own
or lease and to operate its properties as currently operated, including, without
limitation, to act as the attorney-in-fact for PRI and to perform its
obligations under the Management Agreement. The Goldberg Sellers have delivered
to Purchaser correct and complete copies of the material license(s) of AFP
certified by the New York Department. AFP is not transacting any insurance
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administration or other business in any state requiring a material license
therefor in which it is not so licensed. The Goldberg Sellers have caused to be
delivered to Purchaser correct and complete copies of the Articles of
Incorporation and the Bylaws of AFP, certified by the Secretary of State of the
State of New York and the Secretary of AFP, respectively. Since the date of each
such certifications there has been no amendment to the Articles of Incorporation
or Bylaws of AFP.
(f) Capital Structure of AFP. The authorized capital stock of AFP consists
solely of 200 shares of Common Stock, no par value, 100 of which are issued and
outstanding (the "AFP Shares"). The Goldberg Sellers and each of them owns
beneficially and of record the number of AFP Shares listed on Schedule 3.1 (f)
hereto (collectively, the "Goldberg AFP Shares"). Except as set forth on
Schedule 3.1(f), all of the Goldberg AFP Shares are free and clear of all liens,
charges, security interests and other encumbrances and of claims of any person
other than the Goldberg Sellers (the interest of whom will be extinguished on
the Closing Date), and none of the Goldberg AFP Shares is the subject of any
agreement, other than this Agreement, under which any such lien, charge,
security interest, encumbrance or other claim might arise. All of the Goldberg
AFP Shares shall be transferred to Purchaser free and clear of all liens,
charges, security interests and other encumbrances and of claims of any person
other than the Goldberg Sellers (the interest of whom will be extinguished on
the Closing Date). All of the AFP Shares have been duly authorized and are
validly issued, fully paid and nonassessable, and there are no existing or
outstanding securities convertible into capital stock of AFP, or options,
warrants, calls, commitments, or agreements, other than this Agreement, of any
character that relate to the authorization, issuance, delivery, sale, purchase
or redemption of shares of capital stock of AFP.
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(g) Subsidiaries. AFP does not own, beneficially or of record, 5% or more
of the voting securities or other interests of any corporation, partnership,
joint venture or other entity.
(h) Financial Statements. The Goldberg Sellers have delivered or caused to
be delivered to Purchaser complete and correct copies of the audited financial
statements of AFP as of and for the years ended December 31, 1995, 1996 and
1997, together with notes thereto, and the unaudited financial statements of AFP
as of and for the nine-month period ended September 30, 1998 (the "AFP Financial
Statements").
(i) Statement Accuracy. The AFP Financial Statements have been, (and all
additional financial statements of AFP delivered to Purchaser will be) in each
such case, prepared in accordance with GAAP and such accounting practices have
been applied on a consistent basis throughout the periods involved, except with
respect to the unaudited AFP Financial Statements, as set forth on Schedule
3.1(i). The AFP Financial Statements present fairly the financial position, the
assets, and the liabilities (whether absolute, accrued, contingent, or
otherwise) of AFP as of the respective dates thereof and the results of
operations and changes in capital and surplus and in cash flow for the
respective periods then ended, and were prepared in accordance with GAAP except
as expressly set forth or disclosed in the notes, exhibits or schedules thereto
and with respect to the unaudited AFP Financial Statements (including unaudited
financial statements that may be delivered), as set forth on Schedule 3.1(i).
(j) Intercompany Accounts. Set forth in Schedule 3.1(j) is a complete and
correct list and summary description of all intercompany accounts payable and
receivable ("Intercompany Accounts") between AFP and each Seller, and between
AFP and any Affiliate of any Seller, other
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than PRI (the "AFP Intercompany Accounts"), all of which will be settled in full
on or prior to the Closing Date.
(k) Undisclosed Liabilities. AFP does not have any material liabilities,
whether absolute, accrued, contingent, matured, unmatured or otherwise, except
(a) as and to the extent reflected or reserved against on the AFP Financial
Statement for the nine-month period ended September 30, 1998, which has been
provided to Purchaser, (b) liabilities of a nature similar to those reflected on
the AFP Financial Statement for the nine-month period ended September 30, 1998
to the extent such liabilities would have been required to be reflected in such
AFP Financial Statement and incurred by AFP solely in the ordinary course of
business and consistent with prior practices since the date of such AFP
Financial Statement, and (c) liabilities set forth on Schedule 3.1(k) or another
Schedule hereto or liabilities of a character that would have been set forth on
such Schedules if not for the materiality or dollar threshold contained in the
representations to which such Schedules relate.
(l) Litigation. Except as set forth on Schedule 3.1(l), there is no
judicial, administrative or regulatory action, proceeding, investigation or
inquiry or administrative charge or complaint pending or, to the knowledge (as
hereinafter defined) of the Goldberg Sellers or any of them, threatened, that
has had or is reasonably likely to have a Material Adverse Effect on or
affecting AFP or that has or is reasonably likely to adversely affect the
capitalization, ownership, or value or marketability of any of the services of
AFP, or that questions the validity of this Agreement or any action taken or to
be taken by any party pursuant hereto or in connection with the transactions
contemplated hereby.
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When used in this Agreement, "knowledge" of a person or persons means the
actual current recollection of such person and constructive knowledge of such
matters as would have been known had such person made an investigation and
performed such due diligence as is reasonable in light of the facts and
circumstances.
(m) Real and Personal Property. Set forth in Schedule 3.1(m) hereto is a
list and summary description of all material real and tangible personal property
owned by AFP or used in AFP's business (the "AFP Assets"). AFP has, or prior to
the Closing Date will have, good and marketable title to the AFP Assets, free
and clear of all liens, security interests and other encumbrances and claims,
except for leases and contracts set forth in Schedule 3.1(n) and except to the
extent such liens or encumbrances would not have a Material Adverse Effect on or
affecting AFP or PRI, or the value of AFP or PRI to Purchaser and would not
affect the validity of this Agreement or any action taken or to be taken by any
party pursuant hereto or in connection with the transactions contemplated
hereby. AFP does not use or propose to use any AFP Assets except as set forth in
Schedule 3.1(m) or covered by a lease set forth in Schedule 3.1(n). To the
extent such AFP Assets are used by AFP in the current operations of its
business, such AFP Assets are suitable for their intended use and are in good
condition and repair, subject to ordinary wear and tear. The AFP Assets
constitute all of the real and tangible personal property necessary to conduct
the business of AFP as presently conducted.
(n) Leases and Rental Contracts. Set forth in Schedule 3.1(n) hereto is a
list and summary description of all material leases and contracts under which
AFP leases, as lessor or lessee, or rents, any real or personal property. All
such leases and contracts are in full force and
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effect without any existing material default or breach thereunder by AFP, or to
the Goldberg Sellers' knowledge, or the knowledge of any of them, without any
existing material default or breach by any other party thereto.
(o) Contracts. Set forth in Schedule 3.1(o) hereto (with section references
corresponding to those set forth below) is a complete and correct list as of the
date hereof of all written or oral agreements, contracts and commitments of the
following types, with an annual cost or benefit to AFP of U.S. $10,000 or more,
to which AFP is a party or by which AFP is bound or otherwise affected as of the
date hereof: (i) mortgages, indentures, security agreements, loan and credit
agreements and other agreements and instruments relating to the borrowing of
money or evidence of credit where AFP is debtor, (ii) contracts for the
provision of data-processing services, (iii) finder's, franchise, distribution,
sales or brokerage agreements, (iv) contracts or options to purchase or sell
real property, (v) contracts for the purchase of materials, supplies or
equipment, or for providing services, (vi) contracts with any Affiliate or with
any officer or director of AFP or any officer or director of any Affiliate, or
to the knowledge of the Goldberg Sellers or any of them, any corporation
controlled by such officer or director, (vii) agreements and instruments
representing loans or commitments to loan to officers, directors, employees or
agents of AFP or of any Affiliate, (viii) contracts of any kind to which the
United States government or any of its agencies is a party, or under any
federal, state or local law, regulation or executive order, (ix) partnership or
joint venture agreements of any kind and (x) other agreements, contracts and
commitments of any nature material to AFP. The Goldberg Sellers have delivered
or made available to Purchaser complete and correct copies of all written
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agreements, contracts and commitments, together with all amendments thereto and
waivers and consents with respect thereto. All of such agreements, contracts and
commitments referred to in clauses (i) through (x) of the preceding sentence are
in full force and effect and AFP has, and to the Goldberg Sellers' knowledge, or
the knowledge of any of them, all other parties to such agreements, contracts
and commitments have, performed in all material respects all of the obligations
required to be performed by them to date and are not in default thereunder in
any material respect. Except as disclosed on Schedule 3.1(o), no agreement,
contract or commitment to which AFP is a party, or by which AFP or any of its
properties is bound, specifically limits its freedom to compete in any line of
business or with any person or entity.
(p) Compliance with Other Instruments and Laws. AFP is not in violation of
any term of its Articles of Incorporation, Bylaws, or of any judgment, decree or
order in which it is named, or in any violation of any term of any other
instrument, contract or agreement, including, without limitation, the Management
Agreement, or of any statute, law, ordinance, rule, governmental regulation,
permit, concession, grant, franchise, license, order, or other governmental
authorization or approval applicable to it or any of its properties, the
violation of which has had or would be reasonably likely to have a Material
Adverse Effect on or affecting AFP, PRI, Purchaser or their Affiliates or would
affect the validity of this Agreement or any action taken or to be taken by any
party pursuant hereto or in connection with the transactions contemplated
hereby. All material permits, concessions, grants, franchises, other licenses
and other governmental authorizations and approvals necessary for the conduct of
the business of AFP have been duly obtained and are in full force and effect,
and, there are no proceedings pending
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or, to the knowledge of the Goldberg Sellers or any of them, threatened that may
result in the revocation, cancellation, or suspension, or any adverse
modification, of any thereof. The execution, delivery and performance of, and
compliance with, this Agreement, and the consummation of the transactions
contemplated hereby by the Goldberg Sellers in accordance with the terms hereof,
will not result in any such violation or be in conflict with or result in any
default under any of the foregoing referred to in this Section 3.1(p),
including, without limitation, the Management Agreement, or result in the
creation of any mortgage, pledge, lien, charge or encumbrance upon any of AFP's
properties or the AFP Assets or the loss, revocation, cancellation, suspension
or modification of any licenses or material contractual rights held by AFP
pursuant to any of the foregoing or result in any such revocation, cancellation,
suspension or modification except to the extent such violation or conflict would
not have a Material Adverse Effect on or affecting AFP and would not adversely
affect the validity of this Agreement or any action taken or to be taken by any
party pursuant hereto or in connection with the transactions contemplated
hereby.
(q) Regulatory Filings. AFP has filed or otherwise provided all reports,
data, other information and applications required to be filed with or otherwise
provided to the New York Department and all other federal, state or local
governmental authorities (including, without limitation, insurance departments)
with jurisdiction over AFP and all required regulatory approvals in respect
thereof are in full force and effect and AFP is not in violation of any material
regulatory filing or undertaking of or affecting it. The Goldberg Sellers have
furnished or made available to Purchaser complete and correct copies of all
material complaints filed by any
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regulatory agency, of which the Goldberg Sellers have knowledge, and other
material regulatory proceedings initiated or pending with respect to AFP at any
time within the preceding five years.
(r) Absence of Certain Changes. Since December 31, 1997, except as set
forth on Schedule 3.1(r), AFP has not (i) issued, sold or delivered or agreed to
issue, sell or deliver any additional shares of its capital stock or any
options, warrants or rights to acquire any such capital stock, or securities
convertible into or exchangeable for such capital stock, (ii) mortgaged, pledged
or subjected to any material lien, lease, security interest or other charge or
encumbrance, any of its assets, tangible or intangible, except for assets
subjected to any lien, security interest or other charge or encumbrance in the
ordinary course of its business not involving in the aggregate a material
portion of its assets, (iv) acquired or disposed of any assets or properties, or
entered into any agreement or other arrangements for any such acquisition or
disposition, except for assets or properties acquired or disposed of in the
ordinary course of business, (v) declared, made, paid or set apart any sums for
any dividend or other distribution to its shareholders or any other affiliate or
purchased or redeemed any shares of its capital stock or granted any option,
warrant or right to purchase any such capital stock, or reclassified such
capital stock, (vi) paid or become obligated to pay any service fees or other
sums to any of the Sellers or any Affiliate, (vii) forgiven or canceled any
debts or claims or waived any rights of material value, (viii) entered into any
transaction other than in the ordinary course of business, (ix) granted any
rights or licenses under any of its trade names or entered into general agency
arrangements, (x) suffered any Material Adverse Change; provided, that the
representation contained in this clause (x) shall not apply to a change in
general economic conditions or general competitive developments arising after
the date
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of this Agreement, (xi) suffered any damage, destruction or loss, whether or not
covered by insurance or reinsurance, resulting in or reasonably likely to result
in a Material Adverse Effect on or affecting AFP, or (xii) suffered any strike,
picketing, boycott or other labor trouble adversely affecting its business,
operations or prospects.
(s) Taxes. Except as set forth on Schedule 3.1(s):
All material Tax returns and information returns, reports, statements, and
forms (including estimated Tax and information returns, reports, statements, and
forms) (collectively, the "Returns") of AFP and of any member of any affiliated
group of corporations (within the meaning of Section 1504 of the Internal
Revenue Code of 1986, as amended (the "Code"), as in effect at the time of the
due date for the filing of such Returns) of which AFP is or was a member that
are required by law to be filed with any Taxing Authority have been timely filed
and are accurate, true, correct, and complete in all material respects. All
Returns filed with respect to Tax years of AFP through the Tax year ended
December 31, 1994 have been examined and closed or are Returns with respect to
which the applicable period for assessment under applicable law has expired.
None of the Returns filed by or on behalf of AFP is currently being audited by
any Taxing Authority. All material Taxes upon AFP or for which AFP may be
liable, or in respect of any of the assets, income or franchises of AFP, have
been paid by AFP or have been paid on AFP's behalf, or adequate accruals,
reserves and provisions have been established in accordance with GAAP on the
books of AFP for the payment of such Taxes. There are no requests for rulings or
determinations in respect of any Tax or Tax Asset pending between AFP and any
Taxing Authority. There are no Tax liens upon any of the properties or assets of
AFP. No
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Taxing Authority has provided AFP or any member of any affiliated group of
corporations of which AFP is or was a member with any written notice of any
audit, investigation, proceeding or claim with respect to any Taxes for which
AFP may be liable. Neither AFP nor any member of any affiliated group of
corporations (as defined above) of which AFP is or was a member has granted or
been requested to grant any waiver of any statute of limitations applicable to
any claim for Taxes or has agreed to any extension of time with respect to any
Tax assessment or deficiency for Taxes for which AFP may be liable. All
information set forth in the notes to the AFP Financial Statements relating to
Tax matters is true and complete in all material respects. The accruals and
reserves for Taxes established or to be established on the books of AFP for the
period beginning October 1, 1998, through the Closing Date will be adequate to
cover all such liabilities and reasonably estimated liabilities with respect to
such period, all in accordance with GAAP applied on a basis consistent with
prior periods. AFP is not a party to or bound by any contractual obligation to
pay any Tax, including any Tax indemnity, Tax sharing, Tax allocation or similar
agreement, arrangement, contract, or plan. AFP has made a valid election under
Section 1362 of the Code to be an S corporation effective for its tax year
beginning January 1, 1985 and that election has not been terminated or rendered
invalid. AFP is not a party to any agreement, contract, arrangement or plan that
has resulted or could result, separately or in the aggregate, in the payment of
any "excess parachute payments" within the meaning of Section 280G of the Code.
AFP does not own any material property subject to a lease that is not a "true"
lease for federal income Tax purposes. AFP has withheld and paid in a timely
manner to the proper Taxing Authority all Taxes required to have been withheld
and paid in connection with amounts paid or
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owing to any employee, independent contractor, creditor, Shareholder, or other
third party, and has complied with all information reporting and backup
withholding requirements. AFP neither has nor has had a permanent establishment
in any foreign country, as defined in any applicable Tax treaty or convention
between the United States and such foreign country. For purposes of this
Agreement, the term "Tax" means (i) any tax, or other like assessment or charge
of any kind whatsoever (including, but not limited to, withholding on amounts
paid to or by any person or entity and premium taxes), together with any
interest, penalty, addition to tax or additional amount imposed by any federal,
state, local, foreign or other governmental authority (a "Taxing Authority")
responsible for the imposition of any such Tax, (ii) liability for the payment
of any amount described in clause (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group, or being a party to any
agreement or arrangement as a result of which liability to a Taxing Authority is
determined or taken into account with reference to the liability of any other
person, and (iii) liability for the payment of any amount as a result of being
party to any tax sharing, allotment, allocation or similar agreement or with
respect to the payment of any amount of the type described in clause (i) or (ii)
as a result of any express or implied obligation (including, but not limited to,
an indemnification obligation). For purposes of this Agreement, the term "Tax
Asset" means any operating loss, net capital loss, investment tax credit,
foreign tax credit, charitable deduction or any other credit or tax attribute
that could reduce Taxes (including, without limitation, deductions and credits
related to alternative minimum Taxes).
(t) Insurance Policies. Set forth in Schedule 3.1(t) hereto is a complete
and correct list of the material insurance policies maintained by AFP for the
benefit of any of AFP, its
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Affiliates, officers or directors. Such policies are in full force and effect,
all premiums due thereon have been paid and AFP has complied in all material
respects with the provisions of such policies.
(u) Transactions with Interested Persons. No officer or director or, to the
Goldberg Sellers' knowledge or to the knowledge of any of them, any employee,
agent or broker (or spouse or any child thereof) of AFP, or of any Affiliate
thereof, owns, directly or indirectly, on an individual or joint basis, any
material interest in, or serves as an officer, employee or director of, any
customer, competitor or supplier of AFP or any person or entity that has a
material contract or arrangement with AFP (other than PRI), except as set forth
on Schedule 3.1(u), all of which will be terminated on or before the Closing
Date.
(v) Bank and Brokerage Accounts. Set forth in Schedule 3.1(v) hereto is a
complete and accurate list of each bank or trust company, other financial
institution, mutual fund or stock brokerage firm in which AFP has an account or
safe deposit box and each custodial account maintained by AFP and, in each case,
the names of such accounts, the account numbers and the names of all persons
authorized to draw thereon or to have access thereto. Except as set forth on
Schedule 3.1(v), there are no credit cards issued to any present or past
officer, employee or agent of AFP under which AFP has any current or potential
future liability.
(w) Disclosure. Neither this Agreement nor any schedule or exhibit hereto,
nor any certificate or other instrument required to be furnished to Purchaser by
or on behalf of the Goldberg Sellers or any of them or by or on behalf of AFP
pursuant to this Agreement contains or will contain when made or delivered any
untrue statement of a material fact, or fails to state
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or will fail to state when made or delivered a material fact necessary to make
the statements contained herein and therein not misleading, except to the extent
such misstatement or omission addresses a set of facts or circumstances that has
not had and cannot reasonably be expected to have a Material Adverse Effect on
or affecting AFP or PRI or the value of AFP or PRI to Purchaser and has not and
cannot reasonably be expected to affect the validity of this Agreement or any
action taken or to be taken by any party pursuant hereto or in connection with
the transactions contemplated hereby. Except as disclosed in this Agreement or
in a schedule hereto, there is no fact known to the Goldberg Sellers or any of
them that has caused or is reasonably likely to cause a Material Adverse Change
to or affecting AFP. The representations contained in this Section 3.1(w) shall
not apply to general economic conditions or general competitive developments
arising after the date of this Agreement.
(x) Employee Benefit Plans.
(i) All plans, funds and programs as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), any
deferred compensation agreements, severance pay agreements and any other
agreements, plans or programs, whether written or oral, (the "Benefit Plans")
currently maintained, or to which contributions are made, by AFP, or previously
maintained, or to which contributions have been made, by AFP for which AFP may
be subject to current or potential future liability, are listed and described in
Schedule 3.1(x) hereto. AFP has no obligation to establish, maintain or
contribute to any Benefit Plan other than those listed on Schedule 3.1(x).
(ii) The Goldberg Sellers and AFP have provided to or made available
Purchaser
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complete and correct copies of all plan documents of the Benefit Plans,
including but not limited to, trust agreements, insurance contracts, advance
determination letters from the Internal Revenue Service, summary plan
descriptions, employee oral communications, the last five years' Form 5500s and
the most recent actuarial statements and financial statements for any Benefit
Plan for which such a form or statement is required or has been prepared.
(iii) All assets of the Benefit Plans are held in trust or under an
insurance contract except as described in Schedule 3.1(x).
(iv) Except as set forth in Schedule 3.1(x), neither AFP nor any other
corporation, trade or business under common control with AFP (as determined
under Code ss.ss. 414(b) and (c)) (the "AFP Control Group") has established,
maintained or contributed to any employee benefit plan subject to Title IV of
ERISA or the funding requirements of Section 412 of the Code.
(v) AFP and each of the Benefit Plans have been and presently are in
material compliance, both in form and operation, with the applicable provisions
of ERISA, the Code and all other applicable laws. Each of the Benefit Plans that
is intended to be "qualified" pursuant to Code ss. 401(a) is so qualified and
has received a favorable determination letter from the Internal Revenue Service
(the "IRS") to such effect, and no action or amendment has been taken or made,
or has failed to be taken or made, to adversely effect such determination
letter. All reports required by any governmental agency and disclosures required
to be made to participants and beneficiaries with respect to the Benefit Plans
have been timely filed or made.
(vi) No litigation is pending or, to the knowledge of the Goldberg Sellers
or any of them, threatened with respect to any of the Benefit Plans. There is no
outstanding request for
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information or matters, other than routine benefit claims, concerning any of the
Benefit Plans hereto by participants, beneficiaries or governmental agencies.
Except as discussed in Section 7.8 hereof, neither AFP nor any Benefit Plan
fiduciary (as defined in ERISA ss. 3(21)) has engaged in any transaction in
violation of ERISA ss. 406(a) and (b) (for which no exemption exists under ERISA
ss. 408) or any "prohibited transaction" (as defined in ss. 4975(c)(2) or ss.
4975(d) of the Code).
(vii) All contributions, premiums or other payments for the Benefit Plans
attributable to all periods prior to the Closing Date have been made or accrued
on AFP's financial statements. The market value of the assets of each of the
Benefit Plans listed in Schedule 3.1(x) were at least equal to the "benefit
liabilities" of such Plans, as reflected on the most recent actuarial valuation
for such Plans, or reserves are established and listed therefor on the most
recent AFP Financial Statements.
(viii) Neither AFP nor any member of the AFP Control Group has, within the
five calendar years preceding the date of this Agreement, contributed to, has
been obligated to contribute to, or has otherwise participated in any
multiemployer plan, as defined in Section 4001(a)(3) of ERISA, nor in any
multiple employer plan as defined in Section 413(c) of the Code.
(ix) Except as set forth in Schedule 3.1(x), AFP has not provided, nor has
any obligation to provide, any medical, life, or similar benefits to employees
following termination of employment, except as required by ERISA ss. 601. AFP
has complied with ERISA ss. 601. AFP has not contributed to a "nonconforming
group health plan" (as defined in Code Section 5000(c))
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and no member of the AFP Control Group has incurred a tax under Code Section
5000(a) that is or could be a liability of AFP.
(x) All Benefit Plans and related contracts, trusts and agreements are
legally valid and binding and in full force and effect.
(xi) No individual shall accrue or receive additional benefits, service, or
accelerated vesting rights to any payment as a direct result of the transactions
contemplated by this Agreement. Neither the execution of this Agreement nor the
consummation of the transactions contemplated hereunder will directly or
indirectly result in any payment made or to be made to or on behalf of any
person to constitute a "parachute payment" within the meaning of Code Section
280G.
(y) Employees. Set forth in Schedule 3.1(y) hereto is a list of all
employees, agents, and consultants retained by AFP as of the date of this
Agreement together with their present rate of compensation (including bonuses)
and dates of hire and a description of any existing or proposed written or oral
agreements with any of them regarding such employment or engagement, other than
agreements described in Schedule 3.1(y) hereto. Neither any of the Goldberg
Sellers nor AFP is a party to any collective bargaining or other labor union
contract applicable to persons employed by AFP in its business or operations.
Neither any of the Goldberg Sellers nor AFP has breached or otherwise failed to
comply in any material respect with any provision of any such agreement or
contract and there are no formally filed grievances outstanding against it or
them, or to the Goldberg Sellers' knowledge, or the knowledge of any of them,
threatened against it or them, under any such agreement or contract. There are
no unfair labor
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practice complaints pending or, to the knowledge of the Goldberg Sellers or the
knowledge of any of them, threatened, against AFP nor any judicial or regulatory
proceeding, investigation or inquiry or employee complaint currently pending or,
to the knowledge of the Goldberg Sellers or the knowledge of any of them,
threatened against AFP relating to union representation. Except as disclosed in
Schedule 3.1(y), the Goldberg Sellers are not aware of any current activities or
proceedings of any labor union (or representatives thereof) to organize any
unorganized employees of AFP, nor of any strikes, slowdowns, work stoppages,
lockouts, or written threats thereof, by or with respect to any employees of
AFP. During the past five years, there have been no formally filed grievances
involving employees of AFP.
(z) Patents, Trademarks, Etc. There are no United States or foreign patents
or patent applications needed by AFP to operate its business. Set forth in
Schedule 3.1(z) hereto is a complete list and summary description of all
material trademarks, trade names, service marks, copyrights (whether registered
or as to which registration has been applied for in any jurisdiction) and
fictitious names of AFP and all common law trademarks used by AFP, none of which
is owned by or licensed to anyone other than AFP. Except as set forth on
Schedule 3.1(z), there is no existing or, to the knowledge of the Goldberg
Sellers or any of them, threatened infringement, misuse or misappropriation by
others or pending or threatened claims by AFP against others for infringement,
misuse or misappropriation of any patent, trademark, trade name, fictitious
name, copyright, trade secret or know-how relating to the business of AFP.
(aa) Brokers. All activities of the Goldberg Sellers and AFP relating to
this Agreement and the transactions contemplated hereunder have been carried on
by the Goldberg
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Sellers and AFP in such manner so as not to give rise to any valid claim by any
person for a finder's fee, brokerage commission or other like payment.
(bb) Computer Software. Set forth on Schedule 3.1(bb) hereto is a complete
and correct list and summary description of all material computer hardware,
software, programs, and similar systems owned by or licensed to AFP or being
utilized in connection with the business, operations, or affairs of AFP. The
material computer hardware, software, programs, and similar systems set forth on
Schedule 3.1(bb) hereto are all of the material computer hardware, software,
programs, and similar systems necessary to enable AFP to conduct its business as
presently conducted. AFP has the right to use, free and clear of any royalty or
other payment obligations (except as disclosed in Schedule 3.1(bb)), claims of
infringement or alleged infringement or other liens, all material computer
hardware, software, programs, and similar systems disclosed in Schedule 3.1(bb)
hereto. Except as set forth on Schedule 3.1(bb), neither the Goldberg Sellers or
any of them nor AFP is in material conflict with or in material violation or
infringement of, nor have the Goldberg Sellers or any of them or AFP received
any notice of any conflict with or violation or infringement of or any claimed
conflict with, any asserted rights of any other person with respect to any
material computer hardware, software, programs, or similar systems, including
without limitation any such item disclosed on Schedule 3.1(bb) hereto. Set forth
on Schedule 3.1(bb) is AFP's year 2000 Plan of Compliance with respect to the
computer hardware, software, programs and similar systems set forth on Schedule
3.1(bb). AFP has complied with, and is current with respect to, such Plan of
Compliance in all material respects.
(cc) Books and Records. The minute books and other similar records of AFP
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contain a complete and correct record, in all material respects, of all actions
taken at all meetings and by all written consents in lieu of meetings of the
shareholders and board of directors of AFP and of each committee thereof. The
books and records of AFP accurately reflect in all material respects the
business or condition of AFP and have been maintained in all material respects
in accordance with good business and bookkeeping practices.
(dd) No Investment Company. AFP is not, and has not registered as, an
investment company within the meaning of the Investment Company Act of 1940, as
amended. AFP does not maintain any separate account or similar fund for the
benefit of any policyholder or annuitant.
(ee) No Implied Warranties. The Goldberg Sellers acknowledge, represent,
warrant, and agree that no representations or warranties are being made by
Purchaser except to the extent set forth in this Agreement or in the exhibits,
schedules and documents attached hereto or required to be executed and delivered
in connection herewith. Except as set forth on a certificate to be delivered by
the Goldberg Sellers at the Closing, to the knowledge of the Goldberg Sellers or
any of them, as of the date of execution of this Agreement, none of the Goldberg
Sellers is aware of any facts or circumstances that would serve as the basis for
a claim by any Seller against Purchaser hereunder based upon a breach of any of
its representations and warranties contained in this Agreement.
Each Non-Goldberg Seller (other than the Slater Estate) represents and
warrants to Purchaser, with respect to himself or herself, as follows:
(ff) Status. Such Non-Goldberg Seller is over the age of 21 and competent
to execute, deliver, and perform such Non-Goldberg Seller's obligations under
this Agreement.
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(gg) Power and Authority. Such Non-Goldberg Seller has all requisite power
and authority to execute, deliver and perform such Non-Goldberg Seller's
obligations under this Agreement and any other agreement required hereby to be
executed by such Non-Goldberg Seller. This Agreement constitutes, and each of
any other agreements required hereby to be executed by such Non-Goldberg Seller
will constitute when executed and delivered, valid and legally binding
obligations of such Non-Goldberg Seller, enforceable in accordance with its
respective terms, except as enforceability may be limited by principles of
equity, bankruptcy, reorganization, insolvency, moratorium or other laws
affecting creditors rights generally.
(hh) No Conflicts. The execution and delivery of this Agreement and any
other agreement required hereby to be executed and delivered by such
Non-Goldberg Seller and the consummation of the transactions contemplated hereby
by such Non-Goldberg Seller in accordance with the terms hereof will not violate
any existing term or provision of any order, writ, judgment, injunction or
decree of any court or any other governmental department, commission, board,
bureau, agency or instrumentality applicable to such Non-Goldberg Seller, other
than to the extent such violation would not have a Material Adverse Effect on or
affecting AFP, PRI, Purchaser or their Affiliates or would not affect the
validity of this Agreement or any action taken or to be taken by any party
pursuant hereto or in connection with the transactions contemplated hereby, or
conflict with or result in a breach of any of the terms, conditions or
provisions of any agreement to which such Non-Goldberg Seller is a party, or by
which such Non-Goldberg Seller or his/her properties are bound, other than to
the extent such breach would not have a Material Adverse Effect on or affecting
AFP or constitute an event that might permit an early termination
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of or otherwise materially affect any such agreement to the extent that such
termination or effect would have a Material Adverse Effect on or affecting AFP.
(ii) Consents and Approvals. No consent, license, approval, order or
authorization of, or registration, declaration or filing with, any governmental
authority, agency, bureau or commission, or any third party is required to be
obtained or made by such Non-Goldberg Seller in connection with the execution,
delivery, performance, validity, and enforceability of this Agreement or the
sale of the AFP Shares owned by such Non-Goldberg Seller to Purchaser.
(jj) Ownership. Such Non-Goldberg Seller owns beneficially and of record
the number of AFP Shares listed on Schedule 3.1 (f) hereto opposite the name of
such Non-Goldberg Seller. Except as set forth on Schedule 3.1(f), all of such
AFP Shares owned by such Non- Goldberg Seller are free and clear of all liens,
charges, security interests and other encumbrances and of claims of any person
other than such Non-Goldberg Seller (the interest of whom will be extinguished
on the Closing Date), and none of the AFP Shares owned by such Non-Goldberg
Seller is the subject of any agreement, other than this Agreement, under which
any such lien, charge, security interest, encumbrance or other claim might
arise. All of the AFP Shares owned by such Non-Goldberg Seller shall be
transferred to Purchaser free and clear of all liens, charges, security
interests and other encumbrances and of claims of any person other than such
Non- Goldberg Seller (the interest of whom will be extinguished on the Closing
Date).
(kk) Intercompany Accounts. Set forth in Schedule 3.1(kk) is a complete and
correct list and summary description of all Intercompany Accounts payable and
receivable between AFP and such Non-Goldberg Seller, or any Affiliate thereof,
all of which shall be settled in full
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on or prior to the Closing Date.
(ll) Noncompetition. Such Non-Goldberg Seller and his, her or its
Affiliates (i) are not in possession of any confidential or proprietary
information or trade secrets of any nature relating to AFP or PRI or relating to
their businesses or interests and (ii) other than with respect to Demetriou who
serves as an insurance broker, do not have a proprietary or other interest of
any nature (other than a 2% or lesser ownership position in the outstanding
stock of a publicly held corporation) in, are not employed by and do not serve
in any other capacity for any person, corporation, company, partnership or other
entity engaged, within the State of New York, in the medical professional
liability insurance business or the business of providing management or other
services for or with respect to any medical professional liability insurer.
The Slater Estate represents and warrants to Purchaser as follows:
(mm) Status. Eve Slater ("ES") is the duly appointed personal
representative of the Slater Estate, is over the age of 21, and is competent to
execute, deliver, and cause to be performed the Slater Estate's obligations
under this Agreement.
(nn) Power and Authority. ES has all requisite power and authority to
execute, deliver and cause to be performed the Slater Estate's obligations under
this Agreement and any other agreement required hereby to be executed by or on
behalf of the Slater Estate. This Agreement constitutes, and each of any other
agreements required hereby to be executed by or on behalf of the Slater Estate
will constitute when executed and delivered, valid and legally binding
obligations of the Slater Estate, enforceable in accordance with its respective
terms, except as enforceability may be limited by principles of equity,
bankruptcy, reorganization, insolvency,
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moratorium or other laws affecting creditors rights generally.
(oo) No Conflicts. The execution and delivery of this Agreement and any
other agreement required hereby to be executed and delivered by or on behalf of
the Slater Estate and the consummation of the transactions contemplated hereby
by or on behalf of the Slater Estate in accordance with the terms hereof will
not violate any existing term or provision of any order, writ, judgment,
injunction or decree of any court or any other governmental department,
commission, board, bureau, agency or instrumentality applicable to the Slater
Estate or to ES, other than to the extent such violation would not have a
Material Adverse Effect on or affecting AFP, PRI, Purchaser or their Affiliates
or would not adversely affect the validity of this Agreement or any action taken
or to be taken by any party pursuant hereto or in connection with the
transactions contemplated hereby, or conflict with or result in a breach of any
of the terms, conditions or provisions of any agreement to which the Slater
Estate or ES is a party, or by which the Slater Estate or ES or their respective
properties are bound, or constitute an event that might permit an early
termination of or otherwise materially affect any such agreement, other than to
the extent such violation would not have a Material Adverse Effect on or
affecting AFP or constitute an event that might permit an early termination of
or otherwise materially affect any such agreement.
(pp) Consents and Approvals. No consent, license, approval, order or
authorization of, or registration, declaration or filing with, any governmental
authority, agency, bureau or commission, or any third party is required to be
obtained or made by or on behalf of the Slater Estate or ES in connection with
the execution, delivery, performance, validity, and
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enforceability of this Agreement or the sale of the AFP Shares owned by or on
behalf of the Slater Estate to Purchaser.
(qq) Ownership. The Slater Estate owns beneficially and of record the
number of AFP Shares listed on Schedule 3.1 (f) hereto (collectively, the
"Slater Estate AFP Shares"). Except as set forth on Schedule 3.1(f), all of the
Slater Estate AFP Shares are free and clear of all liens, charges, security
interests and other encumbrances and of claims of any person other than the
Slater Estate (the interest of whom will be extinguished on the Closing Date),
and none of the Slater Estate AFP Shares is the subject of any agreement, other
than this Agreement, under which any such lien, charge, security interest,
encumbrance or other claim might arise. All of the Slater Estate AFP Shares
shall be transferred to Purchaser free and clear of all liens, charges, security
interests and other encumbrances and of claims of any person other than the
Slater Estate (the interest of whom will be extinguished on the Closing Date).
(rr) Intercompany Accounts. Set forth in Schedule 3.1(rr) is a complete and
correct list and summary description of all Intercompany Accounts payable and
receivable between AFP and the Slater Estate, ES, or any Affiliate thereof.
(ss) Noncompetition. The Slater Estate and its Affiliates (i) are not in
possession of any confidential or proprietary information or trade secrets of
any nature relating to AFP or PRI or relating to their businesses or interests
and (ii) do not have a proprietary or other interest of any nature in, are not
employed by and do not serve in any other capacity for any person, corporation,
company, partnership or other entity engaged, within the State of New York, in
the medical professional liability insurance business or the business of
providing management or other
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services for or with respect to any medical professional liability insurer.
Section 3.2 Representations and Warranties of the Goldberg Sellers
Regarding PRI. The Goldberg Sellers jointly and severally represent and warrant
to Purchaser as follows:
(a) Power and Authority. PRI has all requisite power and authority to
execute, deliver and perform the PRI Agreements. The execution, delivery and
performance of the PRI Agreements have been duly authorized by all requisite
action on behalf of PRI. Each of the PRI Agreements will constitute when
executed and delivered, valid and legally binding obligations of PRI enforceable
against it in accordance with their respective terms, except as enforceability
may be limited by principles of equity, bankruptcy, reorganization, insolvency,
moratorium or other laws affecting creditors rights generally.
(b) No Conflicts. The execution and delivery of the PRI Agreements and the
consummation of the transactions contemplated thereby by PRI in accordance with
the terms thereof will not violate any existing provision of the organizational
documents of PRI, the Management Agreement or the Subscriber Agreement or of any
law or violate any existing term or provision of any order, writ, judgment,
injunction or decree of any court or any other governmental department,
commission, board, bureau, agency or instrumentality applicable to PRI, other
than to the extent such violation would not have a Material Adverse Effect on or
affecting PRI, or conflict with or result in a breach of any of the terms,
conditions or provisions of any agreement to which PRI is a party, or by which
any of its properties are bound, other than to the extent such violation would
not have a Material Adverse Effect on or affecting PRI, or constitute an event
that might permit an early termination of or otherwise materially affect any
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such agreement.
(c) Consents and Approvals. No consent, license, approval, order or
authorization of, or registration, declaration or filing with, any governmental
authority, agency, bureau or commission, or any third party is required to be
obtained or made by or on behalf of PRI in connection with the execution,
delivery, performance, validity, and enforceability of the PRI Agreements other
than such consents, the failure of which to obtain would not have a Material
Adverse Effect on or affecting PRI, AFP, Purchaser or their Affiliates or the
value of AFP or PRI to Purchaser and would not affect the validity of this
Agreement or any action taken or to be taken by any party pursuant hereto or in
connection with the transactions contemplated hereby.
(d) Organization and Good Standing of PRI; Authority to Conduct Business.
PRI is a reciprocal insurance company, duly organized, validly existing and in
good standing under the laws of the State of New York. PRI has all requisite
power and authority to carry on its business as presently conducted and to own
or lease and to operate its properties as currently operated. PRI is duly
licensed and in good standing to write the lines of insurance and otherwise to
do business only in the State of New York. The Goldberg Sellers have delivered
to Purchaser correct and complete copies of all material insurance licenses of
PRI certified by the New York Department. PRI is not transacting any insurance
or reinsurance or other business in any state requiring a license therefor in
which it is not so licensed. The Goldberg Sellers have delivered to Purchaser
correct and complete copies of the current Management Agreement, the Subscriber
Agreement, and all other organizational documents of PRI.
(e) Subsidiaries. PRI does not own, beneficially or of record, 5% or more
of the
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voting securities or other interests of any corporation, partnership, joint
venture or other entity.
(f) Financial Statements. The Goldberg Sellers have delivered to Purchaser
complete and correct copies of (i) the Quarterly Statement of PRI filed by AFP
with the New York Department for the nine months ended September 30, 1998 (the
"PRI Quarterly Statement"), (ii) the Annual Statements of PRI filed with the New
York Department for the years ended December 31, 1995, 1996 and 1997, together
with the exhibits and schedules thereto (the "PRI Annual Statements"), and (iii)
the audited statutory financial statements of PRI for the years ended December
31, 1995, 1996 and 1997, together with notes thereto (the "PRI Audited
Statements").
(g) Statement Accuracy. The (i) statutory financial statements (the "PRI
Statutory Statements") of PRI contained in the PRI Annual Statements and the PRI
Quarterly Statement and any additional quarterly or annual statements delivered
to Purchaser and (ii) PRI Audited Statements and any additional audited
financial statements delivered to Purchaser, have been (or, if not yet
delivered, will be), in each such case, prepared in accordance with SAP
(subject, in the case of unaudited statements, to recurring year end and audit
adjustments normal in nature and amount) prescribed or permitted by the National
Association of Insurance Commissioners and the New York Department, and such
accounting practices have been applied on a consistent basis throughout the
periods involved, except as expressly set forth or disclosed in the notes,
exhibits or schedules thereto. The PRI Audited Statements and each of the PRI
Statutory Statements present fairly the financial position, the assets, and the
liabilities (whether absolute, accrued, contingent, or otherwise) of PRI as of
the respective dates thereof and the results of operations and changes in
capital and surplus and in cash flow for the respective periods then ended, all
in
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accordance with SAP. Since December 31, 1997, there has been no material adverse
change in the composition, nature or risk characteristics (credit quality or
otherwise) of PRI's investment portfolio.
(h) Reserves. All reserves and other similar amounts with respect to
insurance and annuity contracts as established or reflected in the PRI Statutory
Statements (i) were determined in accordance with commonly accepted actuarial
assumptions consistently applied, (ii) were fairly stated in accordance with
sound actuarial principles, (iii) were based on actuarial assumptions that are
in accordance with or stronger than those specified in the related insurance and
annuity contracts and the related reinsurance, coinsurance, and other similar
contracts, (iv) met the requirements of the insurance laws and regulations of
each applicable jurisdiction, (v) were computed on the basis of assumptions
consistent with those used in computing the corresponding items in the PRI
Statutory Statements for the immediately preceding comparable period, and (vi)
made good and sufficient provisions for the total amount of all matured and
actuarially anticipated unmatured benefits, dividends, losses, claims, expenses,
and other obligations and liabilities (whether absolute, accrued, contingent, or
otherwise) of PRI under all outstanding insurance and annuity contracts and
reinsurance, coinsurance, and other similar contracts pursuant to which PRI has
or could have any obligation or liability (whether absolute, accrued,
contingent, or otherwise) as of the date of such PRI Statutory Statements.
Except as set forth on Schedule 2.7, (i) since September 30, 1998, the levels of
PRI's 1997 and prior year reserves have not been changed from the levels shown
on the PRI Statutory Statements for the period ending June 30, 1998 and (ii)
since September 30, 1998, PRI has continued to record incurred losses and loss
adjustment
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expenses on its books at a ratio at least equal to the ratio at which incurred
losses and loss adjustment expenses were recorded on PRI's books for 1997, as
shown on the PRI Statutory Statements for the period ending September 30, 1998.
(i) Reserve Assets. PRI owns assets that qualify as legal reserve assets
under the insurance laws and regulations of each applicable jurisdiction in an
amount at least equal to all such required reserves and other similar amounts.
(j) Intercompany Accounts. Set forth in Schedule 3.2(j) is a complete and
correct list and summary description of all Intercompany Accounts between PRI
and each Seller or any Affiliate thereof (other than AFP), and between PRI and
any Affiliate thereof, other than AFP (the "PRI Intercompany Accounts").
(k) Undisclosed Liabilities. PRI does not have any material liabilities,
whether absolute, accrued, contingent, matured, unmatured or otherwise, except
(a) as and to the extent reflected or reserved against on the PRI Quarterly
Statement for the quarter ended September 30, 1998, and (b) liabilities of a
nature similar to those reflected on such PRI Quarterly Statement to the extent
such liabilities would have been required to be reflected on such PRI Quarterly
Statement and incurred by PRI solely in the ordinary course of business and
consistent with prior practices, not in the aggregate material, since the date
of the PRI Quarterly Statement, (c) reserves and other similar amounts with
respect to insurance and annuity contracts as established or reflected in the
PRI Statutory Statements and (d) liabilities set forth on Schedule 3.2(k) or
another Schedule hereto or liabilities of a character that would have been set
forth on such Schedules if not for the materiality or dollar thresholds
contained in the representations to which such
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Schedules relate.
(l) Litigation. Except as set forth on Schedule 3.2(l), there is no
judicial, administrative or regulatory action, proceeding, investigation or
inquiry or administrative charge or complaint pending or, to the knowledge of
the Goldberg Sellers or any of them, threatened, that has had or is reasonably
likely to have a Material Adverse Effect on or affecting PRI or that might
adversely affect the capitalization, ownership, or value or marketability of any
of the services of PRI, or that questions the validity of this Agreement or any
action taken or to be taken by any party pursuant hereto or in connection with
the transactions contemplated hereby.
(m) Real and Personal Property. Set forth in Schedule 3.2(m) hereto is a
list and summary description of all material real and tangible personal property
owned by PRI that is used or proposed to be used in PRI's business (the "PRI
Assets"). PRI has, or prior to the Closing Date will have, good and marketable
title to the PRI Assets, free and clear of all liens, security interests and
other encumbrances and claims, except for leases and contracts set forth in
Schedule 3.2(n), except to the extent such liens or encumbrances would not have
a Material Adverse Effect on PRI. PRI does not use or propose to use PRI Assets
except as set forth in Schedule 3.2(m) or covered by a lease set forth in
Schedule 3.2(n). To the extent such PRI Assets are used by PRI in the current
operations of PRI or are proposed to be used in the operations of its business,
all of the PRI Assets are suitable for their intended use and are in good
condition and repair, subject to ordinary wear and tear. The PRI Assets
constitute all of the real and tangible personal property necessary to conduct
the business of PRI as presently conducted.
(n) Leases and Rental Contracts. Set forth in Schedule 3.2(n) hereto is a
list and
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summary description of all material leases and contracts under which PRI leases,
as lessor or lessee, or rents, any material real or personal property. All such
material leases and contracts are in full force and effect without any existing
default or breach thereunder by PRI, or to the Goldberg Sellers' knowledge, or
to the knowledge of any of them, by the other party or parties thereto.
(o) Contracts. Set forth in Schedule 3.2(o) hereto (with section references
corresponding to those set forth below) is a complete and correct list as of the
date hereof of all written or oral agreements, contracts and commitments of the
following types, with an annual cost or benefit to PRI of U.S. $10,000 or more,
to which PRI is a party or by which PRI is bound or otherwise affected as of the
date hereof: (i) mortgages, indentures, security agreements, loan and credit
agreements and other agreements and instruments relating to the borrowing of
money or evidence of credit where PRI is debtor, (ii) contracts for the
provision of data-processing services, (iii) finder's, franchise, distribution,
sales or brokerage agreements, (iv) contracts or options to purchase or sell
real property, (v) contracts for the purchase of materials, supplies or
equipment, or for providing services, (vi) contracts with any Affiliate or with
any officer or director of PRI or any officer or director of any Affiliate, or
to the knowledge of the Goldberg Sellers or any of them, any corporation
controlled by such officer or director, (vii) agreements and instruments
representing loans or commitments to loan to officers, directors, employees or
agents of PRI or of any Affiliate, (viii) contracts of any kind to which the
United States government or any of its agencies is a party, or under any
federal, state or local law, regulation or executive order, (ix) partnership or
joint venture agreements of any kind and (x) other agreements, contracts and
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commitments of any nature material to PRI. The Goldberg Sellers have delivered
or made available to Purchaser complete and correct copies of all written
agreements, contracts and commitments, together with all amendments thereto and
waivers and consents with respect thereto. To the knowledge of the Goldberg
Sellers and to the knowledge of each of them, all of such agreements, contracts
and commitments referred to in clauses (i) through (x) of the preceding sentence
are in full force and effect. PRI has, and to the knowledge of the Goldberg
Sellers, and to the knowledge of any of them, all other parties to such
agreements, contracts and commitments have, performed in all material respects
all of the obligations required to be performed by them to date and are not in
default thereunder in any material respect. No agreement, contract or commitment
to which PRI is a party, or by which PRI or any of its properties is bound,
specifically limits its freedom to compete in any line of business or with any
person or entity.
(p) Compliance with Other Instruments and Laws. PRI is not in violation of
any term of its charter, Subscriber Agreement, the Management Agreement, or of
any judgment, decree or order in which it is named, or in any violation of any
term of any other instrument, contract or agreement, or of any statute, law,
ordinance, rule, governmental regulation, permit, concession, grant, franchise,
license or other governmental authorization or approval applicable to it or any
of its properties, the violation of which has had or would be reasonably likely
to have a Material Adverse Effect on or affecting PRI. All material permits,
concessions, grants, franchises, other licenses and other governmental
authorizations and approvals necessary for the conduct of the business of PRI
have been duly obtained and are in full force and effect, and, there are no
proceedings pending or, to the knowledge of the Goldberg Sellers or any of them,
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threatened that may result in the revocation, cancellation, or suspension, or
any adverse modification, of any thereof. The execution, delivery and
performance of, and compliance with, the PRI Agreements, and the consummation of
the transactions contemplated thereby by PRI in accordance with the terms
thereof, will not result in any such violation or be in conflict with or result
in any default under any of the foregoing referred to in this Section 3.2(p), or
result in the creation of any mortgage, pledge, lien, charge or encumbrance upon
any of the properties or assets of PRI or the loss, revocation, cancellation,
suspension or modification of any insurance license, other licenses or material
contractual rights held by PRI pursuant to any of the foregoing or result in any
such revocation, cancellation, suspension or modification.
(q) Regulatory Filings. AFP has filed or otherwise provided on behalf of
PRI all reports, data, other information and applications required to be filed
with or otherwise provided to the New York Department and all other federal,
state or local governmental authorities (including, without limitation,
insurance departments), unless the failure to make such filing would not have a
Material Adverse Effect on or affecting PRI, with jurisdiction over PRI and all
required regulatory approvals in respect thereof are in full force and effect
and PRI is not in violation of any regulatory filing or undertaking of or
affecting it. The Goldberg Sellers have furnished or made available to Purchaser
complete and correct copies of (i) the most recent reports on examination issued
by state insurance regulatory authorities in respect of PRI, (ii) the most
recent insurance holding company registrations and annual reports filed with
respect to PRI, if any, (iii) all other regulatory undertakings of or affecting
PRI and (iv) all material complaints filed by any regulatory agency of which any
Goldberg Seller has knowledge and other material
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regulatory proceedings initiated or pending with respect to PRI at any time
within the preceding five years. Since December 31, 1993, no deficiencies
material to the financial condition or operations of PRI have been asserted by
any state regulatory authorities with respect to any reports or filings made by
PRI or by AFP on behalf of or with respect to PRI. The Goldberg Sellers have
furnished to Purchaser copies of all written responses submitted by AFP in
respect of the most recent examination report of PRI made by a state insurance
regulatory authority. AFP on the Closing Date will have substantially completed,
in the ordinary course of its business, consistent with its historical practice
and to the extent practicable, the preparation of all reports, data, other
information and applications that it will be required to file on behalf of PRI
as its attorney-in-fact with any federal, state or local governmental authority
(including, without limitation, insurance departments) within sixty (60) days
following the Closing Date and such unmade filings will be in form and substance
sufficient to enable AFP to complete and make such filings on a timely basis
following the Closing Date.
(r) Taxes. Except as set forth on Schedule 3.2(r):
All material Tax Returns of PRI and of any member of any affiliated group
of corporations (within the meaning of section 1504 of the Code, as in effect at
the time of the due date for the filing of such Returns) of which PRI is or was
a member that are required by law to be filed with any Taxing Authority have
been timely filed and are accurate, true, correct, and complete in all material
respects. All Returns filed with respect to Tax years of PRI through the Tax
year ended December 31, 1994 have been examined and closed or are Returns with
respect to which the applicable period for assessment under applicable law has
expired. None of the
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Returns filed by or on behalf of PRI is currently being audited by any Taxing
Authority. All material Taxes upon PRI or for which PRI may be liable, or in
respect of any of the assets, income or franchises of PRI, have been paid by PRI
or have been paid on PRI's behalf, or adequate accruals, reserves and provisions
have been established in accordance with GAAP on the books of PRI for the
payment of such Taxes. There are no requests for rulings or determinations in
respect of any Tax or Tax Asset pending between PRI and any Taxing Authority.
There are no Tax liens upon any of the properties or assets of PRI. No Taxing
Authority has provided PRI or any member of any affiliated group of corporations
of which PRI is or was a member with any written notice of any audit,
investigation, proceeding or claim with respect to any Taxes for which PRI may
be liable. Neither PRI nor any member of any affiliated group of corporations
(as defined above) of which PRI is or was a member has granted or been requested
to grant any waiver of any statute of limitations applicable to any claim for
Taxes or has agreed to any extension of time with respect to any Tax assessment
or deficiency for Taxes for which PRI may be liable. All information set forth
in the notes to the PRI Audited Statements relating to Tax matters is true and
complete in all material respects. The accruals and reserves for Taxes
established or to be established on the books of PRI for the period beginning
October 1, 1998, through the Closing Date will be adequate to cover all such
liabilities and reasonably estimated liabilities with respect to such period,
all in accordance with SAP applied on a basis consistent with prior periods. PRI
is not a party to or bound by any contractual obligation to pay any Tax,
including any Tax indemnity, Tax sharing, Tax allocation or similar agreement,
arrangement, contract, or plan. PRI is not a party to any agreement, contract,
arrangement or plan that has
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resulted or could result, separately or in the aggregate, in the payment of any
"excess parachute payments" within the meaning of Section 280G of the Code. PRI
does not own any material property subject to a lease that is not a "true" lease
for federal income Tax purposes. PRI has withheld and paid in a timely manner to
the proper Taxing Authority all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, Shareholder, or other third party, and has complied with all
information reporting and backup withholding requirements. PRI neither has nor
has had a permanent establishment in any foreign country, as defined in any
applicable Tax treaty or convention between the United States and such foreign
country.
(s) Insurance Policies. Set forth in Schedule 3.2(s) hereto is a complete
and correct list of all material insurance policies maintained by or for the
benefit of any of PRI or its affiliates, officers or directors. Such policies
are in full force and effect, all premiums due thereon have been paid and the
insured has complied in all material respects with the provisions of such
policies.
(t) Transactions with Interested Persons. No officer or director or, to the
Goldberg Sellers' knowledge, any employee, agent or broker (or spouse or any
child thereof) of PRI, or of any Affiliate (other than AFP), owns, directly or
indirectly, on an individual or joint basis, any material interest in, or serves
as an officer, employee or director of, any customer, insurance agency,
competitor or supplier of PRI (other than AFP) or any person or entity that has
a material contract or arrangement with PRI (other than AFP).
(u) Bank and Brokerage Accounts. Set forth in Schedule 3.2(u) hereto is a
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complete and accurate list of each bank or trust company, other financial
institution, mutual fund or stock brokerage firm in which PRI has a material
account or safe deposit box and each custodial account maintained by PRI and, in
each case, the names of such accounts, the account numbers and the names of all
persons authorized to draw thereon or to have access thereto. There are no
credit cards issued to any present or past officer, employee or agent of PRI
under which PRI has any current or potential future liability.
(v) Disclosure. Neither this Agreement nor any schedule or exhibit to this
Agreement or any certificate required to be furnished to Purchaser with respect
to PRI pursuant to this Agreement contains or will contain when made or
delivered any untrue statement of a material fact, or fails to state or will
fail to state when made or delivered a material fact necessary to make the
statements contained herein and therein not misleading, except to the extent
such misstatement or omission addresses a set of facts or circumstances the
existence of which has not had and cannot reasonably be expected to have a
Material Adverse Effect on or affecting PRI or AFP or the value of PRI or AFP to
Purchaser. Except as disclosed in this Agreement or in a Schedule hereto, there
is no fact known to the Goldberg Sellers that has caused or is reasonably likely
to cause a Material Adverse Change to or affecting PRI. The representations
contained in this Section 3.2(v) shall not apply to general economic conditions
or general competitive developments arising after the date of this Agreement.
(w) Employees. PRI has no, and never has had any, employees, agents, or
consultants (other than AFP, as its attorney-in-fact) and does not maintain and
is not subject to, and never has maintained or been subject to, any Benefit Plan
or, except as set forth on Schedule
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3.2(w), any retirement, benefit or compensation arrangements with or for the
benefit of any consultant, trustee or other individual.
(x) Surplus Relief. At September 30, 1998 PRI was not, currently is not and
on the Closing Date will not be, subject to any surplus relief obligations or
reinsurance contracts involving financings.
(y) Insurance Issued by PRI. Except as required by law or as set forth on
Schedule 3.2(y):
(i) all insurance benefits payable by PRI and, to the knowledge of
the Goldberg Sellers, or any of them, by any other person that is
a party to or bound by any reinsurance, coinsurance, or other
similar contract with PRI have been paid or accrued in accordance
with the terms of the insurance, annuity, and other contracts
under which they arose, except to the extent such payment is
being contested in good faith by PRI;
(ii) no outstanding insurance or annuity contract issued, reinsured,
or underwritten by PRI or by AFP on behalf of PRI as its
attorney-in-fact entitles the holder thereof or any other person
to receive dividends, distributions, or other benefits based on
the revenues or earnings of any company or any other person;
(iii)all insurance and annuity contracts offered, issued, reinsured,
or underwritten by PRI or by AFP on behalf of PRI as its
attorney-in-fact have been duly approved under all applicable
insurance laws and regulations;
(iv) the respective underwriting standards utilized and ratings
applied by PRI or by AFP on behalf of PRI as its attorney-in-fact
and, to the knowledge of the Goldberg Sellers, or any of them, by
any other person that is a party to or bound by any reinsurance,
coinsurance, or other similar contracts with PRI conform in all
material respects to industry-accepted practices and to the
standards and ratings required pursuant to the terms of the
respective reinsurance, coinsurance, or other similar contracts;
(v) all amounts (including without limitation amounts based on paid
and unpaid losses) to which PRI is entitled under reinsurance,
coinsurance, assumption, fronting, or other similar contracts by
which PRI insures, or is insured by, a third person against loss
or liability from risks assumed, are fully collectible;
(vi) each insurance agent or general agent and each broker, at the
time such agent or broker offered, wrote, sold, or produced
business for PRI, was duly licensed as an insurance agent or
broker, as the case may be, for the business offered, written,
sold, or produced by such agent or broker in the particular
jurisdiction in which such agent or broker offered, wrote, sold,
or produced such business for PRI and
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no such insurance agent, general agent or any group of affiliate
agents or broker has written 5% or more of PRI's total in-force
premium;
(vii)no such insurance agent violated (with or without notice or
lapse of time or both, would have violated) any material term or
provision of any law or any writ, judgment, decree, injunction,
or similar order applicable to, or engaged in any
misrepresentation with respect to, the writing, sale, or
production of business for PRI.
(z) Patents, Trademarks, Etc.. There are no United States or foreign
patents or patent applications needed by PRI to operate its business. Set forth
in Schedule 3.2(z) hereto is a complete list and summary description of all
trademarks, trade names, service marks, copyrights (whether registered or as to
which registration has been applied for in any jurisdiction) and fictitious
names of PRI and all common law trademarks used by PRI, none of which is owned
by or licensed to anyone other than PRI. There is no existing or, to the
knowledge of the Goldberg Sellers or any of them, threatened material
infringement, misuse or misappropriation by others or pending or threatened
claims by PRI against others for infringement, misuse or misappropriation of any
patent, trademark, trade name, fictitious name, copyright, trade secret or
know-how relating to the business of PRI.
(aa) Computer Software. No computer hardware, software, programs, or
similar systems are owned by or licensed to PRI. Neither the Goldberg Sellers or
any of them nor PRI is in material conflict with or in material violation or
infringement of, nor have the Goldberg
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Sellers or any of them or PRI received any notice of any conflict with or
violation or infringement of or any claimed conflict with, any asserted rights
of any other person with respect to any material computer hardware, software,
programs, or similar systems.
(bb) No Threatened Cancellation. Since January 1, 1997, no policyholder,
group of policyholder affiliates, or persons writing, selling or producing
insurance business that individually or in the aggregate accounts for 5% or more
of the premium of PRI for the year ended December 31, 1997, has terminated or,
to the knowledge of the Goldberg Sellers or any of them, threatened to terminate
its relationship with PRI.
(cc) Books and Records. The minute books and other similar records of PRI
contain a complete and correct record, in all material respects, of all actions
taken at all meetings and by all written consents in lieu of meetings of the
shareholders and board of directors of PRI and of each committee thereof. The
books and records of PRI accurately reflect in all material respects the
business or condition of PRI and have been maintained in all material respects
in accordance with good business and bookkeeping practices.
(dd) No Investment Company. PRI is not, and has not registered as, an
investment company within the meaning of the Investment Company Act of 1940, as
amended. PRI does not maintain any separate account or similar fund for the
benefit of any policyholder or annuitant.
(ee) Investment Portfolio. Set forth in Schedule 3.2(ee) hereto is a
complete and correct list of all stocks, notes, debentures, bonds, mortgage
loans, policy loans and other securities and investments owned of record and
beneficially by PRI, which constitute the entire investment portfolio of PRI
(the "Investment Assets"). PRI has good and marketable title to the
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Investment Assets. As of the Closing, PRI's investment portfolio shall consist
of the Investment Assets, including any changes made to the Investment Assets in
accordance with Section 2.12(h) of this Agreement, and PRI shall own and have
good and marketable title to all such Investment Assets.
Section 3.3 Representations and Warranties of Purchaser. Purchaser
represents and warrants to the Sellers as follows:
(a) Organization and Good Standing. Purchaser is a Florida corporation,
validly existing and in good standing under the laws of the State of Florida.
(b) Power and Authority. Purchaser has all requisite power and authority to
execute, deliver and perform its obligations under this Agreement and any other
agreement required hereby to be executed by it. The execution, delivery and
performance of this Agreement and any other agreement required hereby to be
executed by Purchaser have been duly authorized by all requisite action on
behalf of Purchaser. This Agreement constitutes, and each of any other agreement
contemplated hereby to be executed by Purchaser will constitute when executed
and delivered, a valid and legally binding obligation of Purchaser enforceable
against it in accordance with their respective terms, except as enforceability
may be limited by principles of equity, bankruptcy, reorganization, insolvency,
moratorium or other laws affecting creditors rights generally.
(c) No Conflicts. The execution and delivery of this Agreement and any
other agreements required to be executed and delivered hereby by Purchaser and
the consummation of the transactions contemplated hereby by Purchaser in
accordance with the terms hereof and
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thereof, upon receipt of the consents and approvals contemplated by Section
3.3(d) hereof, will not violate any existing provision of the Articles of
Incorporation or other organizational documents of Purchaser or of any law or
violate any existing term or provision of any order, writ, judgment, injunction
or decree of any court or any other governmental department, commission, board,
bureau, agency or instrumentality applicable to Purchaser, other than to the
extent such violation would not have a Material Adverse Effect on or affecting
Purchaser, or conflict with or result in a breach of any of the terms,
conditions or provisions of any agreement to which Purchaser is a party, or by
which any of its properties are bound, or constitute an event that might permit
an early termination of or otherwise materially affect any such agreement, other
than to the extent such violation would not have a Material Adverse Effect on or
affecting Purchaser.
(d) Consents and Approvals. No consent, license, approval, order or
authorization of, or registration, declaration or filing with, any governmental
authority, agency, bureau or commission, or any third party is required to be
obtained or made by Purchaser, in connection with the execution, delivery,
performance, validity, and enforceability of this Agreement or the purchase of
the AFP Shares, except for (i) filings to be made with, and approvals to be
obtained from, the New York Department and the Department of Insurance of the
State of Florida, (ii) any filings that may be required under HSR, and (iii)
registrations, declarations or filings that may be required to be made
subsequent to the Closing Date with any governmental entity or third party not
entailing any requirement of consent, license, approval, order or authorization
on the part of such governmental entity or third party, and (iv) such consents,
the failure of which to obtain would not affect the validity of this Agreement
or any action taken or to be taken by any party
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pursuant hereto or in connection with the transactions contemplated hereby.
(e) Disclosure. Neither this Agreement nor any schedule or exhibit hereto,
or any certificate required to be furnished to the Sellers by or on behalf of
Purchaser pursuant to this Agreement contains or will contain when made or
delivered any untrue statement of a material fact, or fails to state or will
fail to state when made or delivered a material fact necessary to make the
statements contained herein and therein not misleading except to the extent such
misstatement or omission addresses a set of facts or circumstances that has not
had and cannot reasonably be expected to have a Material Adverse Effect on or
affecting Purchaser and has not and cannot reasonably be expected to affect the
validity of this Agreement or any action taken or to be taken by any party
pursuant hereto or in connection with the transactions contemplated hereby. The
representations contained in this Section 3.3(e) shall not apply to general
economic conditions or general competitive developments arising after the date
of this Agreement.
(f) Brokers. All activities of Purchaser relating to this Agreement and the
transactions contemplated hereunder have been carried on by Purchaser in such
manner so as not to give rise to any valid claim by any person for a finder's
fee, brokerage commission or other like payment.
(g) Purchaser's Examination. Purchaser acknowledges, represents, warrants
and agrees that:
(i) To Purchaser's knowledge, Purchaser and its representatives have
received or been given access to such information as requested by
Purchaser regarding AFP and PRI and their respective businesses
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in connection with Purchaser's determination to enter into this
Agreement and to consummate the transactions contemplated hereby;
(ii) Purchaser and its representatives have been afforded the
opportunity to ask questions of and receive answers from
management employees of AFP regarding AFP and PRI and their
respective businesses in connection with Purchaser's
determination to enter into this Agreement and consummate the
transactions contemplated hereby;
(iii)Purchaser is not relying on any forecasted operating results or
budgets prepared by AFP or the Sellers, rather upon its own plan
of operations and financial forecasts; and
(iv) No representation or warranties are being made by any Seller
except to the extent set forth in this Agreement or in the
exhibits, schedules and documents attached hereto or executed and
delivered in connection herewith. Except as set forth on a
certificate to be delivered by Purchaser at the Closing, to the
knowledge of Purchaser, as of the date of execution of this
Agreement, Purchaser is not aware of any facts or circumstances
that would serve as the basis for a claim by Purchaser against
any of the Sellers hereunder based upon a breach of any of their
respective representations and
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warranties contained in this Agreement.
ARTICLE IV
Conditions Precedent
Section 4.1 Purchaser. The obligation of Purchaser to consummate the
transactions contemplated herein and to purchase the AFP Shares shall be subject
to the fulfillment, on or prior to the Closing Date, of the following
conditions:
(a) Representations and Warranties. The representations and warranties of
the Sellers set forth in this Agreement shall (i) to the extent such
representations and warranties are not qualified by a materiality standard, be
true and correct in all material respects on the Closing Date as if made on and
as of such date, and (ii) to the extent such representations and warranties are
qualified by a materiality standard, be true and correct in all respects without
such qualification on the Closing Date as if made on and as of the Closing Date.
(b) Performance of Obligations. The Sellers, AFP and PRI shall have
performed in all material respects their respective obligations contained in
this Agreement to be performed on or prior to the Closing Date, and Purchaser
shall have received a certificate to such effect, executed by the Sellers and
dated as of the Closing Date.
(c) Threatened or Pending Proceedings. No proceedings shall have been
threatened or initiated by any person to enjoin or restrain the consummation of
the transactions contemplated hereby or seeking damages or other relief from any
party hereto or an Affiliate
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thereof as a result thereof, provided, that if any such suit were determined
adversely, it would have a Material Adverse Effect on the person or entity
against whom such damages or other relief is sought.
(d) Approvals and Consents. The waiting period, if any, pursuant to HSR
shall have expired or been terminated without objection, any required approvals
or authorizations from the New York Department, any necessary approval of the
Florida Department of Insurance, and all other approvals or consents of any
regulatory authority or body or other person required to permit the Closing to
occur and the consummation of the transactions contemplated by this Agreement,
the PRI Agreements, and the AFP Agreements without any violation by Purchaser,
AFP, or PRI of any law or obligation shall have been obtained.
(e) Corporate and Other Approvals and Consents. AFP's board of directors
shall have approved the execution, delivery, and performance of the AFP
Agreements and the consummation of the transactions contemplated hereby or
thereby to be consummated by AFP. PRI's Board of Governors shall have approved,
and if necessary, the Subscribers shall have approved, the execution, delivery,
and performance of the PRI Agreements and the consummation of the transactions
contemplated hereby and thereby to be consummated by PRI.
(f) Legal Opinions. Purchaser shall have received the opinion of Kaye,
Scholer, Fierman, Hays & Handler, LLP in the form attached hereto as Exhibit
4.1(f)-1, the opinion of Bennett, Ayervais and Bertrand, P.C. in the form
attached hereto as Exhibit 4.1(f)-2, the opinions of counsel for each of the DDG
Estate and the Slater Estate, in a form reasonably acceptable to Purchaser, and
the opinion of Morton Povman, P.C., counsel for PRI, substantially in the form
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attached hereto as Exhibit 4.1(f)-3.
(g) No Adverse Change. Since December 31, 1997, there shall not have been
any Material Adverse Effect on or affecting or Material Adverse Change with
respect to AFP or PRI.
(h) Amended and Restated Management Agreement. The New York Department
shall have approved the Amended and Restated Management Agreement and the
execution, delivery, and performance thereof by AFP and PRI, and PRI and AFP
shall have executed and delivered the Amended and Restated Management Agreement.
(i) Reinsurance Agreement. The New York Department shall have approved the
New Reinsurance Agreement and the execution, delivery, and performance thereof
by PRI and FPIC. The New Reinsurance Agreement shall have been executed and
delivered by PRI and FPIC as of December 31, 1998 and no event shall have
occurred that constitutes, or would constitute with the giving of notice or the
passage of time, a default by PRI thereunder. The Current Reinsurance Agreement
shall have been terminated effective as of December 31, 1998.
(j) Bonomo Employment Agreement. The Bonomo Employment Agreement shall be
and remain in full force and effect, Bonomo shall not have died or become
permanently disabled, and no event shall have occurred that constitutes, or
would constitute, with the giving of notice or the passage of time, a rejection
or repudiation by Bonomo of or a default by Bonomo under the Bonomo Employment
Agreement.
(k) Board of Governors. Three persons designated by Purchaser shall have
been elected or shall remain as members of the PRI Board of Governors and any
resignations of members of the PRI Board of Governors who are Sellers or
representatives or designees of AFP
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necessitated thereby shall have occurred.
(l) BG Agreement. Bruce Goldberg shall have terminated all of his positions
with AFP and PRI (other than pursuant to the BG Agreement) at no cost or
liability to AFP or PRI and Bruce Goldberg and AFP shall have executed and
delivered the BG Agreement.
(m) SIG Agreement. SIG shall have terminated all of his positions with AFP
(other than pursuant to the SIG Agreement) and PRI at no cost or liability to
AFP or PRI and SIG shall have executed and delivered the SIG Agreement.
(n) Noncompetition Agreements. GTG shall have executed and delivered a
Noncompetition Agreement with AFP in the form attached hereto as Exhibit 2.2(a)
and the DDG Estate shall have executed and delivered a Noncompetition Agreement
with AFP in the form attached hereto as Exhibit 2.2(b).
(o) Resignations. All of the directors of AFP and the officers of AFP
designated by Purchaser shall have resigned and the trustees of the Benefit
Plans designated by Purchaser shall have resigned as of the date requested by
Purchaser.
(p) 338(h)(10) Election. The Sellers shall have executed an effective,
irrevocable election under Section 338(h)(10) of the Code in form and substance
satisfactory to Purchaser, and the Sellers shall have delivered all documents in
connection therewith as Purchaser shall request.
(q) Sublease. EPG Research Foundation (the "Foundation") and AFP shall have
entered into a new sublease with respect to the space currently subleased by EPG
Research Foundation at AFP's Manhasset, New York office premises, which sublease
shall replace the current sublease and shall contain terms reasonably acceptable
to Purchaser and SIG, including,
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but not limited to (A) a rental rate equal to that paid by AFP for such space,
(B) indemnification of AFP for any liabilities arising from such sublease and
the activities conducted in such space, including environmental liabilities, (C)
maintenance of full coverage insurance in an amount not less than currently held
covering such space and the activities conducted therein and naming AFP and its
Affiliates as additional named insureds, and (D) an option exercisable by the
Foundation to extend or renew the sublease on substantially the same terms and
conditions as the initial term thereof in the event and to the extent AFP renews
or extends the underlying lease.
(r) Secretary's Certificates. Purchaser shall have received from AFP (i) a
certificate dated the Closing Date from AFP's Secretary attaching (A) a true and
complete copy of AFP's Articles of Incorporation certified by the Secretary of
State of New York, which certification shall be dated not more than ten days
prior to the Closing Date, (B) a true and complete copy of AFP's Bylaws, (C) a
Good Standing Certificate for AFP from the Secretary of State of New York, which
Certificate shall be dated no more than ten days prior to the Closing Date, and
(D) resolutions duly adopted by the board of directors of AFP and approving the
execution, delivery, and performance of the AFP Agreements and the other
transactions contemplated herein. Purchaser shall have received from PRI (i) a
certificate dated the Closing Date from PRI's Secretary attaching (A) a true and
complete copy of PRI's Declaration pursuant to Section 411(2), New York
Insurance Law certified by the Superintendent of the New York Department, which
certification shall be dated not more than ten days prior to the Closing Date,
(B) a true and complete copy of PRI's Subscribers Agreement, and (C) a Good
Standing Certificate for PRI from the Secretary of State of New York, which
Certificate shall be dated no
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more than ten days prior to the Closing Date, and (D) resolutions duly adopted
by the Board of Governors of PRI and approving the execution, delivery, and
performance of the PRI Agreements and the other transactions contemplated
herein.
Section 4.2 Conditions to the Obligations of the Sellers. The obligation of
the Sellers to consummate the transactions contemplated herein and to sell the
AFP Shares shall be subject to the fulfillment, on or prior to the Closing Date,
of the following conditions:
(a) Representations and Warranties. The representations and warranties of
Purchaser set forth in this Agreement shall be true and correct in all material
respects on the Closing Date as if made on and as of such date, and the Sellers
shall have received a certificate to such effect, executed by Purchaser and
dated as of the Closing Date.
(b) Performance of Obligations. Purchaser shall have performed in all
material respects its obligations contained in this Agreement to be performed on
or prior to the Closing Date, and the Sellers shall have received a certificate
to such effect, executed by Purchaser and dated as of the Closing Date.
(c) Threatened or Pending Proceedings. No proceedings shall have been
threatened or initiated by any person to enjoin or restrain the consummation of
the transactions contemplated hereby or seeking damages or other relief from any
party thereto as a result thereof; provided, that if any such suit were
determined adversely, it would have a Material Adverse Effect on the person or
entity against whom such damages or other relief is sought.
(d) Approvals and Consents. The waiting period, if any, pursuant to HSR
shall have expired or been terminated without objection and any necessary
approval of the New York
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Department and the Florida Department of Insurance shall have been obtained to
permit the Closing to occur and the consummation of the transactions
contemplated by this Agreement without any violation by the Sellers or any of
them of any applicable law.
(e) Legal Opinion. The Sellers shall have received the opinion of LeBoeuf,
Lamb, Greene & MacRae, L.L.P., in the form attached hereto as Exhibit 4.2(e).
(f) Sublease. EPG Research Foundation (the "Foundation") and AFP shall have
entered into a new sublease with respect to the space currently subleased by EPG
Research Foundation at AFP's Manhasset, New York office premises, which sublease
shall replace the current sublease and shall contain terms reasonably acceptable
to Purchaser and SIG, including, but not limited to (A) a rental rate equal to
that paid by AFP for such space, (B) indemnification of AFP for any liabilities
arising from such sublease and the activities conducted in such space, including
environmental liabilities, (C) maintenance of full coverage insurance in an
amount not less than currently held covering such space and the activities
conducted therein and naming AFP and its Affiliates as additional named
insureds, and (D) an option exercisable by the Foundation to extend or renew the
sublease on substantially the same terms and conditions as the initial term
thereof in the event and to the extent AFP renews or extends the underlying
lease.
ARTICLE V
Indemnification
Section 5.1 Survival of Representations and Warranties. All representations
and warranties
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in the Sections listed on Schedule 5.1, and the right to make claims for the
breach thereof, shall survive the execution and delivery of this Agreement and
the Closing until the expiration of all applicable statutes of limitation
(including without limitation all periods of extension, whether automatic or
permissive) affecting such representations or warranties. All other
representations and warranties contained in this Agreement or in the exhibits,
schedules, and documents attached hereto or executed and delivered in connection
herewith, and the right to make claims for the breach or inaccuracy thereof,
shall survive for eighteen months from the Closing Date. Any claim for
indemnification for a breach or inaccuracy of a representation or warranty for
which notice has been given within the prescribed period may be prosecuted to
conclusion notwithstanding the subsequent expiration of the period. Any
furnishing of information to Purchaser by the Sellers or any of them or by AFP
or PRI pursuant to, or otherwise in connection with, this Agreement, including,
without limitation, any information contained in any document, contract, book or
record of AFP or PRI to which Purchaser shall have access or any information
obtained by, or made available to, Purchaser as a result of any investigation
made by or on behalf of Purchaser prior to or after the date of this Agreement,
shall not affect or be deemed a waiver of Purchaser's right to rely on any
written statement, representation, warranty, covenant or agreement made or
deemed made by the Sellers or any of them.
Section 5.2 Indemnification.
(a) Subject to paragraph (c) of this Section 5.2, the Goldberg Sellers
hereby jointly and severally agree to indemnify Purchaser, AFP, PRI, and their
Affiliates, and hold Purchaser, AFP, PRI, and their Affiliates harmless from and
against and in respect of, all
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liabilities, losses, claims, costs or damages (including reasonable attorneys'
fees and disbursements) (collectively, "Losses") incurred by Purchaser, AFP,
PRI, or their Affiliates and resulting from or arising out of (i) any breach or
inaccuracy of any representations or warranties by the Goldberg Sellers or any
of them contained either in this Agreement or in any exhibit, schedule, or
document attached hereto or executed and delivered in connection herewith or in
any certificate delivered pursuant hereto, including any certificates delivered
on the Closing Date, (ii) any failure by the Goldberg Sellers or any of them to
perform any of their obligations contained in this Agreement.
(b) Subject to paragraph (c) of this Section 5.2, each Non-Goldberg Seller
hereby agrees to indemnify Purchaser, AFP, PRI, and their Affiliates, and hold
Purchaser, AFP, PRI, and their Affiliates harmless from and against and in
respect of, all Losses incurred by Purchaser, AFP, PRI, or their Affiliates and
resulting from or arising out of (i) any breach or inaccuracy of any
representations or warranties by such Non-Goldberg Seller contained either in
this Agreement or in any exhibit, schedule or document attached hereto or
executed and delivered in connection herewith or in any certificate delivered
pursuant hereto, including any certificates delivered on the Closing Date, or
(ii) any failure by such Non-Goldberg Seller to perform any of such Non-
Goldberg Seller's obligations contained in this Agreement.
(c) The Goldberg Sellers shall not have any liability pursuant to this
Section 5.2 until the aggregate amount of all Losses with respect to matters set
forth herein exceeds $300,000, but shall then be liable from the first dollar of
such Losses. The aggregate indemnification obligations of the Sellers pursuant
to this Section 5.2 shall not exceed $45,000,000; provided, that
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the limitation of liability contained in this sentence shall not apply with
respect to indemnification for a knowing breach or inaccuracy of a
representation or warranty. The maximum indemnification obligation of any Seller
pursuant to this Section 5.2 shall not exceed an amount equal to the portion of
the Purchase Consideration allocated to such Seller in Schedule 1.3.
Notwithstanding any other provisions of this Agreement, the Goldberg Sellers
shall not be obligated to indemnify, and shall not otherwise be liable to,
Purchaser for (i) any Losses to the extent such Losses arise from a breach or
inaccuracy of a representation or warranty contained in Section 3.2(h) (the
representations and warranties contained in Section 3.2(h) being hereinafter
referred to as the "Reserve Representations and Warranties") or (ii) any Losses
arising from a breach or inaccuracy of a representation or warranty contained in
another subsection of Section 3.2 of this Agreement to the extent the underlying
basis of such breach or inaccuracy is the inaccuracy of a representation or
warranty contained in the Reserve Representations and Warranties; it being
understood that the limitation of liability contained in this sentence shall not
apply to, limit or otherwise affect the right of Purchaser, AFP, PRI or their
Affiliates to be indemnified for Losses arising from or relating to a breach or
inaccuracy of a representation or warranty contained in Section 3.2 of this
Agreement to the extent such breach or inaccuracy, or the underlying basis
thereof, is predicated on a matter other than, or in addition to, the inaccuracy
of a representation or warranty contained in the Reserve Representations and
Warranties.
(d) Subject to paragraph (e) of this Section 5.2, Purchaser hereby agrees
to indemnify the Sellers and hold the Sellers harmless from and against and in
respect of, all Losses incurred by the Sellers and resulting from or arising out
of (i) any breach or inaccuracy of any
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representations or warranties by Purchaser to the Sellers contained in this
Agreement or in any exhibit, schedule, or document attached hereto or executed
and delivered in connection herewith or in any certificate delivered pursuant
hereto, including any certificates delivered by Purchaser to the Sellers on the
Closing Date or (ii) any failure by Purchaser to perform any of its obligations
to the Sellers contained in this Agreement.
(e) Purchaser shall have no liability pursuant to this Section 5.2 until
the aggregate amount of all Losses with respect to matters set forth herein
exceeds $300,000, but shall then be liable from the first dollar of such Losses.
(f) Promptly after a party's receipt of notice from a third party of the
commencement of any action or proceeding in respect of which indemnification may
be sought against the other party pursuant to this Section (but in no event
later than ten days prior to the time any response thereto is required), the
party seeking indemnification shall notify the other party of the commencement
thereof and such other party shall assume the defense of such action (including
the employment of counsel). Thereafter, the party against whom indemnification
is sought shall have the right to control the defense of such action (including
through appeal); provided, however, that the party seeking indemnification shall
have the right to participate in such defense at its own expense. In addition,
the party against whom indemnification is sought shall be required to post any
bond or provisionally pay any amount that may be required in order to conduct
such a defense. The party against whom indemnification is sought shall not
compromise or settle the claim without the prior written consent of the party
seeking indemnification, which consent shall not unreasonably be withheld. If a
party against whom
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indemnification is sought fails to undertake such defense after notification (in
accordance with the provisions above) from the party seeking indemnification,
the party seeking indemnification may conduct such defense itself or settle any
such claim without relieving the party against whom indemnification is sought
from any of its obligations to make indemnification payments under this Section.
ARTICLE VI
Confidentiality
Section 6.1 Confidentiality. From and after the date hereof, unless
otherwise agreed to by the parties, each of the parties shall keep, and shall
use its, his or her best efforts to ensure that its directors, executive
officers, contractors, consultants and agents keep, confidential all information
acquired from the other parties pursuant to this Agreement or otherwise,
including the contents of this Agreement and any document delivered pursuant
thereto or in connection therewith, except that the foregoing restriction shall
not apply to any information that: (i) is or hereafter becomes generally
available to the public other than by reason of any default with respect to a
confidentiality obligation under this Agreement, (ii) was already known to the
recipient as evidenced by prior written documents in its possession, (iii) is
disclosed to the recipient by a third party who is not in default of any
confidentiality obligation to the disclosing party hereunder, (iv) is developed
by or on behalf of the receiving party, without reliance on confidential
information received hereunder, (v) is submitted by the recipient to
governmental authorities or regulatory
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bodies to facilitate the issuance of approvals necessary or appropriate for the
operation of their businesses, provided that reasonable measures shall be taken
to assure confidential treatment of such information, or (vi) is otherwise
required to be disclosed in compliance with applicable laws, including, without
limitation, securities laws, or order by a court or other government authority
or regulatory body having competent jurisdiction. Without limiting the
generality of the foregoing, no press release or similar public announcement or
disclosure concerning this Agreement or the transactions contemplated herein
shall be made by a party hereto without the prior written consent of the other
parties, except that Purchaser shall be entitled to file, as, when, and in the
form required by applicable securities laws, a Form 8-K relating to the
transactions contemplated by this Agreement. Each party shall be entitled, in
addition to any other right or remedy it may have, at law or in equity, to an
injunction, without the posting of any bond or other security, enjoining or
restraining the other party from any violation or threatened violation of this
Section.
ARTICLE VII
Miscellaneous
Section 7.1 Tax Matters.
(a) Liability for Taxes.
(i) Except as provided in Section 7.1(a)(ii) hereof or except to the extent
reserved on the books of AFP, the Sellers shall be solely responsible for and
shall indemnify and hold harmless Purchaser and AFP with respect to all Taxes
upon AFP for or with respect to all
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taxable periods or portions thereof ending on or before the Closing Date. For
purposes of this Agreement, including, without limitation, Section 7.1(a) and
(b) hereof, the Closing Date shall be treated as the last day of a taxable
period regardless of whether a taxable period in fact ends on the Closing Date.
The indemnification obligations contained in this Section shall be in addition
to and not limited by any other indemnification obligations of the Sellers
contained elsewhere in this Agreement, except that there shall be no duplication
of indemnify.
(ii) All excise, sales, use, value added, registration, stamp, recording,
documentary, franchise, conveyancing, property transfer, gains and similar
Taxes, levies, charges and fees, including any deficiencies, interest,
penalties, additions to tax or additional amounts (collectively, "Transfer
Taxes") incurred in connection with the transactions contemplated by this
Agreement shall be borne equally by (x) Purchaser and (y) the Sellers. The party
that is required by applicable law to make the filings, reports, or returns and
to handle any audits or controversies with respect to any applicable Transfer
Taxes shall do so, and the other party shall cooperate with respect thereto as
necessary.
(b) Purchaser shall cause AFP to be solely responsible for and to indemnify
and hold harmless the Sellers with respect to Taxes upon or with respect to AFP,
or its operations or activities, for or with respect to all periods after the
Closing Date. The indemnification obligations contained in this Section shall be
in addition to and not limited by other indemnification obligations of the
Purchaser contained elsewhere in this Agreement, except that there shall be no
duplication of indemnity.
(c) Cooperation on Tax Matters. The Sellers and Purchaser agree to furnish
or
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cause to be furnished to each other, upon request, as promptly as practicable,
such information (including access to books and records and to computations for
Closing Tax reserves with supporting documentation) and assistance relating to
AFP as is reasonably necessary for the filing of any tax return, for the
preparation for any audit, and for the prosecution or defense of any claim, suit
or proceeding relating to any proposed adjustment. Each of the Sellers and
Purchaser agree to retain or cause to be retained all books and records
pertinent to AFP until the applicable period for assessment under applicable law
(giving effect to any and all extensions or waivers) has expired, and to abide
by or cause the abidance with all record retention agreements entered into with
any taxing authority. Each of the Sellers and Purchaser shall cooperate with
each other in the conduct of any audit or other proceedings involving AFP and
each shall execute and deliver such powers of attorney and other documents as
are necessary to carry out the intent of this Section 7.1.
(d) 338(h)(10) Election. The Sellers agree, at Purchaser's request, to join
Purchaser in making a timely, effective and irrevocable election under Section
338(h)(10) of the Code and under any comparable statutes in any other
jurisdictions with respect to AFP (the "Section 338(h)(10) Election") and file
such election in accordance with applicable regulations. The Section 338(h)(10)
Election shall properly reflect the price allocation (as hereinafter described).
Within 30 days after the Closing Date, Purchaser shall allocate the modified
ADSP (as such term is defined in Treasury Regulation Section 1.338(h)(10)-1) to
the assets of AFP and deliver the allocation to the Goldberg Sellers. The
Goldberg Sellers shall have 30 days from such date to object in writing to the
allocation, specifying the basis of such objection. The Sellers shall
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be deemed to have agreed with the Purchaser's allocation, except as specifically
objected to in such notice. If the Goldberg Sellers do object, the Goldberg
Sellers and the Purchaser shall cooperate with each other to reach a mutual
agreement thereon. Notwithstanding any other provision herein to the contrary,
in the event that more than $2,000,000 is allocated to the aggregate fixed and
tangible assets of AFP as shown on the financial statements of AFP, Purchaser
shall indemnify, and hold each of the Sellers harmless from, any net additional
tax liability that is imposed on the Sellers as the result of such excess
allocation. Sellers shall calculate gain or loss, if any, resulting from the
Section 338(h)(10) Election and the Purchaser shall cause AFP to determine its
tax basis in its assets in a manner consistent with the allocation and neither
Sellers nor Purchaser shall take a position inconsistent therewith.
Section 7.2 Plan Action. As soon as practicable following the Closing,
Purchaser shall establish or shall cause AFP to establish a qualified defined
benefit pension plan (the "Mirror Plan") intended to qualify under Section
401(a) of the Code, which Mirror Plan will accept a transfer of liabilities from
the North American Treaty Corporation Defined Benefit Pension Plan ("NATC Plan")
for employees of AFP who are active as of the Closing Date and who retired from
AFP prior to the Closing Date (the "Mirror Participants").
Section 7.3 Plan Amendment. Effective as of the Closing, the Sellers shall
cause the NATC Plan to be amended to remove AFP as an "Employer" (as that term
is defined in Section 1.26 of the NATC Plan) so as to cause AFP to discontinue
participation in the NATC Plan, and to cease benefit accruals under the NATC
Plan for all employees of AFP as of such date.
Section 7.4 Plan Matters. Except to the extent that Purchaser and the
Sellers otherwise
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mutually agree following the date hereof and prior to the transfer date
described below:
(a) The Mirror Plan shall provide that all service credited to the
employees of AFP under the NATC Plan will be recognized for all purposes
thereunder and the Sellers agree to provide Purchaser with data reflecting the
months and years of service credited to such employees under the NATC Plan as of
the Closing Date; and
(b) upon the transfer of assets referred to below, the accrued benefits of
employees of AFP who participated in the NATC Plan, shall in no event be less
than the accrued benefit of such employees under the NATC Plan as of the date of
transfer;
(c) as soon as reasonably practicable following the Closing Date, the
Sellers shall cause to be transferred from the NATC Plan to the trust under the
Mirror Plan an amount in cash or other property held under such plan equal to
the accrued benefits of the Mirror Participants, determined on an ongoing basis,
determined as of the transfer date (provided that the amount transferred shall
be at least equal to the amount required by Section 414(l) of the Code), as
calculated by an actuary appointed by the Sellers and agreed to by an actuary
appointed by Purchaser and shall be reduced by the amount of any benefit
payments made with respect to employees of AFP after the Closing but prior to
the date of transfer. Prior to any such transfer, the Sellers' actuary shall
provide a copy of his calculations to an actuary selected by Purchaser who shall
promptly review such calculations and promptly indicate any disagreement
therewith. In the event such difference is significant, they shall jointly agree
on a third actuarial firm (the cost of which shall be borne evenly by Purchaser
and the Goldberg Sellers), which shall review the transfer
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calculations and the determination of which shall be final and binding on
Purchaser and the Sellers.
(d) Purchaser shall make a pro rata share of the maximum tax deductible
contribution (as set forth in Section 404(a)(1)(A)(iii) of the Internal Revenue
Code of 1986, as amended) that can be made to the NATC Plan for the plan year
beginning January 1, 1998 for the employees of AFP. Purchaser's share of the
contribution shall be based on the allocation method used in determining each
Employer's contribution to the NATC Plan for the 1997 plan year.
Section 7.5 Expenses. Purchaser and each Seller shall, except as otherwise
specifically provided herein, bear their respective legal and other costs and
expenses incurred in connection with the preparation, execution, delivery and
performance of this Agreement and the transactions contemplated hereby without
right of reimbursement from the other or from AFP.
Section 7.6 Guaranty. If not performed on or before the Closing, then as
soon as practicable following the Closing, the Sellers will correct in a manner
reasonably acceptable to Purchaser any possible violation of applicable law
arising in connection with the Guaranty and Indemnification Agreement dated
October 13, 1993 (the "Guaranty") by AFP in favor of the Administrators for the
Professions Defined Benefit Pension Plan; provided that, subject to the
foregoing, the Seller's options shall not be limited with respect to any such
liability, including but not limited to, seeking retroactive relief of any
violation from the U.S. Department of Labor. The Sellers shall be liable for the
payment of any amounts payable to the NATC Plan (as defined herein) or otherwise
in connection with the Guaranty and shall indemnify Purchaser and AFP from
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any Losses, as hereinafter defined, that either of them actually incur as a
result of, or in connection with, the failure of the Sellers to make all or any
part of such payment. If any payments made under the Guaranty have been deducted
by AFP on any applicable tax return and any such deduction is disallowed, then
the Sellers will indemnify Purchaser and AFP and hold Purchaser and AFP harmless
to the extent of the value of any such disallowed deduction and from any
penalties, interest, or other payments and costs that are assessed as a result
of such disallowance. Notwithstanding anything to the contrary in this
Agreement, the Sellers' payment and indemnification obligations under this
Section 7.5 shall survive the Closing and the Sellers' indemnification
obligations under this Section 7.5 shall be in addition to and not limited by
any other indemnification provisions in this Agreement, but shall not exceed
$200,000 in any event.
Section 7.7 Litigation Defense. The control of the defense of the
litigation described in Schedule 3.1(l) shall remain with AFP after the Closing
Date; provided, however that the Sellers shall have the right to participate in
such defense at their own expense.
Section 7.8 Notices. All notices and other communications hereunder shall
be in writing and shall be delivered personally, telegraphed, telexed (with
appropriate answerback received), sent by facsimile transmission (with immediate
confirmation by telephone conference with the recipient party thereafter), or
sent by registered, certified or express mail, postage prepaid, return receipt
requested, or sent by a nationally recognized overnight courier service, marked
for overnight delivery. Any such notice shall be deemed given when so delivered
personally, telegraphed, telexed (provided the correct answerback is received),
or sent by facsimile transmission (provided confirmation is received immediately
thereafter); or if mailed, three (3)
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business days after the date of deposit in the mails; or if sent by overnight
courier, one (1) business day after the date of delivery to the courier service
marked for overnight delivery; in each case addressed as follows:
(a) If to Purchaser, to:
FPIC Insurance Group, Inc.
1000 Riverside Avenue, Suite 800
Jacksonville, FL 32204
Attention: William R. Russell
Telephone: 904/350-1020
Facsimile: 904/350-1049
and to:
FPIC Insurance Group, Inc.
1000 Riverside Avenue, Suite 800
Jacksonville, FL 32204
Attention: Robert B. Finch
Telephone: 904/350-1016
Facsimile: 904/350-1049
(b) If to the Sellers, to the addresses set forth on Schedule
7.7
with a copy to:
Emanuel S. Cherney, Esq.
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, NY 10022-3598
Telephone: 212/836-8000
Facsimile: 212/836-8689
or to such other address as the parties hereto may specify from time to time by
notice given as provided herein.
Section 7.9 Termination.
This Agreement (other than the obligations contained in Article 7) may be
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terminated as to the parties hereto and the transactions contemplated herein
abandoned at any time prior to the Closing by:
(a) the mutual consent of all parties hereto;
(b) Purchaser at any time after February 15, 1999, if at such time the
conditions set forth in Section 4.1 hereof have not been satisfied through no
fault of Purchaser and Purchaser gives the Sellers notice of such fact;
(c) the Sellers at any time after February 15, 1999, if at such time the
conditions set forth in Section 4.2 hereof have not been satisfied through no
fault of the Sellers and the Sellers give Purchaser notice of such fact; or
(d) either Purchaser or the Sellers at any time after March 15, 1999, if at
such time the conditions set forth in Article IV have not been satisfied.
Termination of this Agreement as provided in this Section shall not effect any
other rights or remedies any party may have at law, in equity or otherwise.
Section 7.10 Amendment. This Agreement may be amended only by an instrument
in writing executed by all of the parties hereto.
Section 7.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 7.12 Governing Law. This Agreement shall, in accordance with the
General Obligations Laws of the State of New York, be governed by and construed
in accordance with the laws of the State of New York, without regard to any
conflicts of interest laws that would call for
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the application of the laws of any other jurisdiction.
Section 7.13 Entire Agreement. This Agreement sets forth the entire
agreement and understanding among the parties hereto with respect to the subject
matter hereof and supersedes any prior negotiations, agreements, understandings
or arrangements among the parties hereto with respect to the subject matter
hereof.
Section 7.14 Waivers. The provisions of this Agreement may only be waived
by an instrument in writing executed by the party granting the waiver. The
failure of a party at any time or times to require performance of any provision
hereof shall in no manner affect the right of such party at a later time to
enforce the same or any other provision of this Agreement. No waiver of any
condition or of the breach of any term contained in this Agreement in one or
more instances shall be deemed to be or construed as a further or continuing
waiver of such condition or breach or a waiver of any other condition or of the
breach of any other term of this Agreement. Without limiting the generality of
the foregoing, no action taken pursuant to this Agreement, including proceeding
with Closing, shall be deemed to constitute a waiver by the party taking such
action or of compliance with any representations, warranties, covenants or
agreements contained in this Agreement.
Section 7.15 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation
hereof.
Section 7.16 Assignment. Purchaser may not assign its rights under this
Agreement without the prior written consent of the Sellers, which consent shall
not unreasonably be withheld, conditioned, or delayed. This Agreement shall
inure to the benefit of, and be binding upon, the
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successors and assigns of Purchaser. Neither the Sellers, nor any of them, may
assign any of their rights or obligations under this Agreement.
Section 7.17 Further Assurances. From and after the Closing, each party
shall execute and deliver such documents and take such other actions as the
other parties may reasonably request to further effect or evidence the purposes
and intent of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
Purchaser:
FPIC INSURANCE GROUP, INC.
By: /s/ Robert B. Finch
----------------------------
Its: Executive Vice President and
Chief Financial Officer
The Sellers:
The Estate of Donald D. Goldberg
By: /s/ Seth I. Goldberg
---------------------------
/s/ Seth I. Goldberg
--------------------------------
Seth I. Goldberg, M.D.
/s/ Glenn T. Goldberg
--------------------------------
Glenn T. Goldberg, M.D.
/s/ Peter Demetriou
--------------------------------
Peter Demetriou
/s/ Elias Halvatzis
--------------------------------
Elias Halvatzis
/s/ Seymour Sadkin
--------------------------------
Seymour Sadkin
The Estate of Philip Slater
By: /s/ Cecile Slater
---------------------------
/s/ Susan Barbiero
--------------------------------
Susan Barbiero
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<PAGE>
Schedule 1.3
Purchase Consideration
The Purchase Consideration shall be divided and allocated among the Sellers
as follows:
DDG Estate $20,500,000.00 reduced by the stock
consideration
received*
SIG $13,500,000.00 reduced by the stock
consideration
received*
GTG $13,500,000.00 reduced by the stock
consideration
received*
Demetriou $500,000.00
Halvatzis $500,000.00
Sadkin $500,000.00
Slater Estate $500,000.00
Barbiero $500,000.00
* The Goldberg Sellers will receive an aggregate of 214,286 unregistered
shares of Purchaser's common stock, par value $.10 per share, allocated
among the Goldberg Sellers as the Goldberg Sellers shall notify Purchaser
at least five business days prior to the Closing. The cash consideration
received by each Goldberg Seller shall be reduced by $28 per each share of
Purchaser's stock received. For purposes of Section 2.8, Section 2.9,
Section 5.2(c) or any other Section of this Agreement requiring an
allocation of the Purchase Consideration, the Sellers shall be deemed to
have received the following percentages of the Purchase Consideration: the
DDG Estate shall be deemed to have received 41%, SIG shall be deemed to
have received 27%, GTG shall be deemed to have received 27%, and each other
Seller shall be deemed to have received 1%.
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<PAGE>
Schedule 5.1
Sections Containing Representations and Warranties Surviving for the Statute of
Limitations Period
Sections 3.1(a), (b), (c), (d), (e), (f), (g), (p), (s), (x), and (y)
Sections 3.1(ff), (gg), (hh), (ii), (jj), (kk)
Sections 3.1(mm), (nn), (oo), (pp), (qq), (rr)
Sections 3.2(a), (b), (c), (d), (e), (f), (g), (p), (s), (x), and (y)
Sections 3.3(a), (b), (c), and (d)
-v-
<PAGE>
EXHIBITS
2.2(a) Noncompetition, Confidentiality and Protection of Trade Secrets
Agreement between FPIC Insurance Group, Inc., Administrators for the
Professions, Inc. and Glenn T. Goldberg
2.2(b) Noncompetition, Confidentiality and Protection of Trade Secrets
Agreement between FPIC Insurance Group, Inc., Administrators for the
Professions, Inc. and the Estate of Donald D. Goldberg
2.3 Noncompete Agreement between Administrators for the Professions, Inc.
and Bruce Goldberg
2.4 Consulting and Noncompete Agreement between Administrators for the
Professions, Inc. and Seth I. Goldberg
2.10 New Reinsurance Agreement
2.11 Amended and Restated Management Agreement between Administrators for
the Professions, Inc. and Physicians Reciprocal Insurers
4.1(f)1 Opinion of Kaye, Scholer, Fierman, Hays & Handler, LLP
4.1(f)2 Opinion of Bennett, Ayervais and Bertrand, P.C.
4.1(f)3 Opinion of Morton Povman, P.C.
4.2(e) Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P.
SCHEDULES
1.3 Purchase Consideration Allocation
2.7 Reserve Adjustment
2.10 Current Reinsurance Agreement
3.1(f) Schedule of AFP Stock Certificates Issued
3.1(i) Exceptions to GAAP Accounting with respect to Interim Statements
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<PAGE>
3.1(j) Intercompany Accounts
3.1(k) Undisclosed Liabilities
3.1(l) Litigation
3.1(m) Real and Personal Property
3.1(n) Leases and Contracts
3.1(o) Contracts
3.1(r) Absence of Certain Changes
3.1(s) Tax Information
3.1(t) Insurance Policies
3.1(u) Transactions with Interested Persons
3.1(v) Bank and Brokerage Accounts
3.1(x) Employee Benefit Plans
3.1(y) Employees, Agents and Consultants
3.1(z) Patents, Trademarks, etc.
3.1(bb) Computer Software
3.1(kk) Certain Intercompany Accounts
3.1(rr) Certain Intercompany Accounts
3.2(j) Certain Intercompany Accounts
3.2(k) Undisclosed Liabilities
3.2(l) Litigation
3.2(m) Real and Personal Property
-vii-
<PAGE>
3.2(n) Leases, Contracts, Encumbrances
3.2(o) Contracts
3.2(r) Taxes
3.2(s) Insurance Policies
3.2(u) Bank and Brokerage Accounts
3.2(w) Employees/Retirement, Benefits or Compensation Arrangements
3.2(y) Insurance Issued by PRI
3.2(z) Patents, Trademarks, etc.
3.2(ee) Investment Portfolio
5.1 Representations and Warranties Surviving for Statute of Limitations
Period
7.7 Addresses of Sellers
FPIC Insurance Group, Inc. agrees to supplementally furnish copies of the
foregoing exhibits and schedules to the Securities and Exchange Commission upon
request.
FPIC INSURANCE GROUP, INC.
By: /s/ Robert B. Finch
-------------------------------------
Name: Robert B. Finch
-----------------------------------
Title: Executive Vice President/Treasurer
----------------------------------
-viii-
<PAGE>
FIRST AMENDMENT TO
STOCK PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT ("First Amendment") is
dated as of December 23, 1998, among The Estate of Donald D. Goldberg, Seth I.
Goldberg, M.D., Glenn T. Goldberg, M.D., Peter Demetriou, Elias Halvatzis,
Seymour Sadkin, The Estate of Philip Slater, and Susan Barbiero (collectively,
the "Sellers"), and FPIC Insurance Group, Inc., a Florida corporation (the
"Purchaser"):
W I T N E S S E T H
WHEREAS, the Sellers and the Purchaser are parties to the Stock
Purchase Agreement dated as of November 25, 1998 (the "Stock Purchase
Agreement"), pursuant to which the Purchaser agreed to purchase the outstanding
capital stock of Administrators for the Professions, Inc., a New York
corporation ("AFP"). Capitalized terms used herein and not otherwise defined
shall have the respective meanings given to such terms in the Stock Purchase
Agreement; and
WHEREAS, Section 2.8 of the Stock Purchase Agreement provides the terms
upon which AFP may pay dividends, and provides a final payment to be made either
to Sellers or to Purchaser based upon the net worth of AFP as of the Closing;
WHEREAS, the parties hereto desire to clarify their agreement with
respect to the terms contained in Section 2.8 of the Stock Purchase Agreement.
NOW, THEREFORE, in consideration of ten dollars and other valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
the parties, the parties hereby agree as follows:
1. Amendment of Stock Purchase Agreement.
Section 2.8 of the Stock Purchase Agreement is hereby deleted in its
entirety and the following is substituted in its stead:
Section 2.8 Dividends. Prior to the Closing, AFP shall be
permitted to continue to pay cash dividends to the Sellers in
respect of thier capital stock of AFP; provided, that (i) such
payments are consistent with past practices, (ii) such payments
do not violate any other covenants contained in this Agreement,
(iii) the Sellers shall cause AFP to retain a net worth,
consisting of cash and cash equivalents, of at least $200,000 as
of December 31, 1998 (the "Measurement Date") and as of the
Closing; and (iv) no dividends shall be paid after the
Measurement Date if the effect of such
-1-
<PAGE>
dividends, had such dividends been paid on the Measurement Date,
would have been to reduce AFP's net worth on the Measurement
Date below $200,000. The Sellers shall not permit AFP to pay any
other dividends. Within forty five (45) days following the
Closing, Purchaser shall cause AFP's independent autitors to
make a final calculation of the net worth of AFP as of the
Measurement Date and shall pay to the Sellers the positive net
worth of AFP as of the Measurement Date, which amount shall be
allocated among the Sellers consistent with the proportions set
forth in Schedule 1.3. In the event that it is determined that
AFP has a negative net worth as of the Measurement Date, the
Sellers shall promptly pay to Purchaser an amount equal to the
difference between $0 and AFP's net worth as of the Measurement
Date. The payment obligations under this Section 2.8 shall be in
addition to and not limited by any other payment or
indemnification provisions in this Agreement. For purposes of
this Section 2.8, "net worth" shall mean AFP's assets minus its
liabilities determined in accordance with GAAP, as defined
herein.
3. Effect on the Stock Purchase Agreement.
This First Amendment is adopted pursuant to Section 7.10 of the Stock
Purchase Agreement and except as specifically amended hereby or otherwise
provided herein, nothing herein shall amend or modify the terms and provisions
of the Stock Purchase Agreement.
4. Miscellaneous.
(a) This First Amendment shall be binding upon and inure to the
benefit of, and be enforceable by, the parties hereto and their respective
successors and assigns. No other person or entity shall be entitled to claim any
right or benefit hereunder, including, without limitation, the status of a
third-party beneficiary of this First Amendment.
(b) This First Amendment constitutes the entire agreement and
understanding among the parties relating to the subject matter hereof, and
supersedes all prior proposals, negotiations, agreements and understandings
relating to such subject matter.
(c) This First Amendment may be executed in counterparts each of
which when so executed and delivered shall be deemed to be an original and all
of which taken together shall constitute one and the same instrument.
(d) No purported amendment, modification, rescission, waiver or
release of any provision of this First Amendment shall be effective unless the
same
-2-
<PAGE>
shall be in writing and signed by each of the parties hereto, and any such
waiver shall be effective only in the specific instance and for the specific
purpose for which given.
IN WITNESS WHEREOF, the parties hereto have executed, or caused their
duly authorized representatives to execute, this First Amendment as of the day
and year first above written.
Purchaser:
FPIC INSURANCE GROUP, INC.
By: /s/ Robert B. Finch
----------------------------
Its: Executive Vice President and
Chief Financial Officer
The Sellers:
The Estate of Donald D. Goldberg
By: /s/ Seth I. Goldberg
---------------------------
/s/ Seth I. Goldberg
--------------------------------
Seth I. Goldberg, M.D.
/s/ Glenn T. Goldberg
--------------------------------
Glenn T. Goldberg, M.D.
/s/ Peter Demetriou
--------------------------------
Peter Demetriou
/s/ Elias Halvatzis
--------------------------------
Elias Halvatzis
/s/ Seymour Sadkin
--------------------------------
Seymour Sadkin
The Estate of Philip Slater
By: /s/ Cecile Slater
---------------------------
/s/ Susan Barbiero
--------------------------------
Susan Barbiero
-3-
FPIC Insurance Group, Inc. Completes Acquisition of
Administrators for the Professions, Inc.
JACKSONVILLE, Fla., Jan. 6/PRNewswire/ -- FPIC Insurance Group, Inc. (Nasdaq:
FPIC - news) announced that it today completed the acquisition of Administrators
for the Professions, Inc. (AFP). AFP is the manager and attorney in fact for
Physicians' Reciprocal Insurers (PRI), the second largest medical professional
liability (MPL) company for physicians in New York state. PRI insures over 7,000
physicians with direct written premiums of approximately $125 million and total
assets at approximately $900 million.
William R. Russell, President and CEO of FPIC Insurance Group, Inc., stated "We
wish to welcome all of the PRI policyholders and AFP employees to the FPIC
family. We look forward to the opportunities created by this combination of
companies. FPIC will over the next 24 months continue to seek additional
strategic MPL partners in the Northern Midwest, Northwest and Southwest United
States."
About FPIC Insurance Group, Inc.
FPIC Insurance Group, Inc. (http://www.fpic.com) and its affiliates have
developed a variety of insurance products for participants in the health care
industry. These products include: medical professional liability insurance;
managed care liability insurance; professional and comprehensive general
liability insurance for health care facilities; Medicare and Medicaid fraud and
abuse defense coverage; AHCA/OSHA insurance coverage; provider stop loss
insurance and third-party administration services.
