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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
JUNE 1, 1999
Date of Report (Date of earliest event reported)
WHITE MOUNTAINS INSURANCE GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-8993 94-2708455
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) file number) Identification No.)
80 SOUTH MAIN STREET, HANOVER, NEW HAMPSHIRE 03755
(Address of principal executive offices)
(603) 643-1567
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
On June 7, 1999, White Mountains Insurance Group, Inc. announced that it had
signed a definitive agreement to purchase the Consolidated International Group,
Inc., a Delaware based insurance holding company for $85 million in cash. The
transaction is subject to regulatory approval.
Consolidated's principal operating subsidiaries are Peninsula Insurance Company,
American Centennial Insurance Company, and British Insurance Company of Cayman.
Peninsula Insurance Company, located in Salisbury, Maryland, writes small
commercial and personal lines through independent agents in the mid-Atlantic.
American Centennial Insurance Company and British Insurance Company of Cayman
are in runoff.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits. The following exhibits are filed herewith:
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Exhibit No. Description
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10 (a) Stock Purchase Agreement by and among White Mountains Insurance
Group, Inc., Consolidated International Group, Inc. and
The Sellers Named Therein
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WHITE MOUNTAINS INSURANCE GROUP, INC.
Dated: June 16, 1999 By: /s/
--------------------------------
Michael S. Paquette
Senior Vice President and
Controller
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EXHIBIT 10(A)
EXECUTION COPY
STOCK PURCHASE AGREEMENT
BY AND AMONG
WHITE MOUNTAINS INSURANCE GROUP, INC.,
CONSOLIDATED INTERNATIONAL GROUP, INC.
AND
THE SELLERS NAMED HEREIN
DATED AS OF JUNE 1, 1999
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TABLE OF CONTENTS
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Page
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ARTICLE I DEFINITIONS.....................................................................1
1.1 Definitions.................................................................1
ARTICLE II PURCHASE AND SALE OF THE SHARES................................................7
2.1 Purchase and Sale of the Shares.............................................7
2.2 The Closing.................................................................7
2.3 Deliveries at the Closing...................................................7
2.4 Purchase Price..............................................................8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE COMPANY................8
3.1 Authority, Validity and Enforceability as to the Sellers....................8
3.2 Organization of the Company.................................................9
3.3 Authorization, Validity and Enforceability as to the Company................9
3.4 No Conflicts................................................................9
3.5 Consents and Approvals.....................................................10
3.6 Subsidiaries...............................................................10
3.7 Capitalization.............................................................11
3.8 Title to Shares............................................................12
3.9 Corporate Minutes..........................................................12
3.10 Financial Statements.......................................................12
3.11 Liabilities................................................................13
3.12 Absence of Changes.........................................................13
3.13 Legal Proceedings..........................................................15
3.14 Compliance with Laws.......................................................16
3.15 Regulatory Matters.........................................................16
3.16 Reserves...................................................................16
3.17 Contracts..................................................................16
3.18 Property...................................................................18
3.19 Investments................................................................18
3.20 Employee Benefit Plans.....................................................19
3.21 Tax Matters................................................................20
3.22 No Brokers.................................................................20
3.23 Corporate Transactions.....................................................20
3.24 Disposition Transactions...................................................21
3.25 Disclosure.................................................................20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER...............................21
4.1 Organization of the Purchaser..............................................21
4.2 Authorization, Validity and Enforceability.................................21
4.3 No Conflicts...............................................................21
4.4 Consents and Approvals.....................................................21
4.5 Legal Proceedings..........................................................22
4.6 Investment Intent..........................................................22
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4.7 Financing..................................................................22
4.8 No Brokers.................................................................22
4.9 Consolidated Group.........................................................22
ARTICLE V COVENANTS......................................................................22
5.1 Conduct of Business........................................................22
5.2 Access to Information; Consultation; Confidentiality.......................23
5.3 Cooperation and Reasonable Best Efforts....................................23
5.4 Consents and Approvals.....................................................24
5.5 Notification of Certain Matters............................................24
5.6 Public Announcements.......................................................24
5.7 No Solicitation............................................................24
5.8 Interim Financial Statements and Investment Reports........................25
5.9 Tax Matters................................................................26
5.10 Employee Benefit Matters...................................................27
5.11 Insurance Coverage.........................................................27
5.12 Intercompany Accounts; Affiliate Agreements................................28
5.13 Corporate Records..........................................................28
5.14 Instruments................................................................28
5.15 Severance and Retention Bonuses for Certain Company Employees..............28
5.16 Excluded Assets............................................................29
5.17 Stockholder Action.........................................................29
5.18 Certain Transaction........................................................29
5.19 Name Change................................................................29
5.20 Director and Officer Indemnification.......................................29
ARTICLE VI CONDITIONS TO THE OBLIGATION OF THE PURCHASER TO CLOSE........................30
6.1 Representations, Warranties and Covenants..................................30
6.2 Consents...................................................................30
6.3 No Injunction or Illegality................................................30
6.4 HSR Act....................................................................30
6.5 Opinions of Counsel to the Sellers.........................................31
6.6 Certificates...............................................................31
6.7 Resignation of Directors...................................................31
6.8 Pre-Closing Transfers......................................................31
6.9 FIRPTA Certificate.........................................................31
6.10 Escrow Agreement...........................................................31
ARTICLE VII CONDITIONS TO THE OBLIGATIONS OF THE SELLERS TO CLOSE........................32
7.1 Representations, Warranties and Covenants..................................32
7.2 Consents...................................................................32
7.3 No Injunction or Illegality................................................32
7.4 HSR Act....................................................................32
7.5 Opinion of Counsel to the Purchaser........................................32
7.6 Certificates...............................................................32
7.7 Escrow Agreements..........................................................32
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ARTICLE VIII INDEMNIFICATION.............................................................33
8.1 Survival...................................................................33
8.2 Indemnification............................................................33
8.3 Indemnity Escrow...........................................................35
8.4 Miscellaneous..............................................................36
8.5 Sellers' Representative....................................................37
ARTICLE IX TERMINATION...................................................................38
9.1 Termination of Agreement...................................................38
9.2 Effect of Termination......................................................38
ARTICLE X MISCELLANEOUS..................................................................39
10.1 Notices....................................................................39
10.2 Fees and Expenses..........................................................40
10.3 Consent to Jurisdiction; Service of Process................................40
10.4 Entire Agreement; Waivers and Amendments...................................40
10.5 Assignment; Binding Effect.................................................40
10.6 Severability...............................................................40
10.7 No Third Party Beneficiaries...............................................41
10.8 Governing Law..............................................................41
10.9 Interpretation.............................................................41
10.10 Captions...................................................................41
10.11 Counterparts...............................................................41
10.12 Reasonable Best Efforts Standard...........................................41
EXHIBITS
A Form of Escrow Agreement
B Opinions of Counsel to the Sellers and their Affiliates
C Opinion of Counsel to the Purchaser
D Form of FIRPTA Certificate
E Forms of Transfer Documents
F Form of Bonus Agreement
SCHEDULES
Sellers Schedule
Company Disclosure Schedule
Purchaser Disclosure Schedule
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of June 1, 1999, by and among WHITE MOUNTAINS INSURANCE GROUP, INC., a
Delaware corporation (the "Purchaser"), CONSOLIDATED INTERNATIONAL GROUP, INC.,
a Delaware corporation (the "Company"), and the individuals set forth on the
Sellers Schedule attached hereto (each a "Seller" and, collectively, the
"Sellers").
R E C I T A L S
WHEREAS, the Sellers own all of the outstanding shares (the "Shares")
of common stock, par value $0.01 per share, of the Company, which Shares
constitute all of the issued and outstanding capital stock of the Company; and
WHEREAS, the Purchaser wishes to purchase or cause to be purchased from
the Sellers, and the Sellers wish to sell to the Purchaser or its assignee
hereunder, the Shares, upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. The following terms when used in this Agreement
(including the Schedules and Exhibits hereto) shall have the following
respective meanings:
"ACIC" means American Centennial Insurance Company, a Delaware stock
insurance company.
"ACIC Statutory Statements" means the Annual Statements and the
Quarterly Statements of ACIC as filed with the Delaware Department of Insurance
for the years ended December 31, 1995, 1996, 1997 and 1998, in each case
including all exhibits, interrogatories, notes and schedules thereto and any
actuarial opinion, affirmation or certification filed in connection therewith.
"Affiliate" of a Person means any other Person that directly or
indirectly through one or more intermediaries controls, is controlled by or is
under common control with such Person. For purposes of this definition and the
definition of "Subsidiary" below, "control" (or "controlled", as the context may
require) has the meaning set forth in Rule 12b-2 under the Securities Exchange
Act of 1934, as amended and as in effect on the date hereof.
"Affiliate Agreements" has the meaning set forth in Section
3.17(a)(xiii).
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"Alternative Transaction" and "Alternative Transaction Proposal" have
the respective meanings set forth in Section 5.7.
"Arbitrators" has the meaning set forth in Section 8.4(b).
"Basket Amount" has the meaning set forth in Section 8.2(a).
"Bonus" and "Bonus Agreements" have the respective meanings set forth
in Section 5.15.
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks in New York City are required or authorized by law to
be closed.
"Closing" has the meaning set forth in Section 2.2.
"Closing Date" has the meaning set forth in Section 2.2.
"COBRA Premiums" means applicable insurance premiums for continuation
coverage under any Plan pursuant to Section 4980B(f) of the Code.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
"Company" has the meaning set forth in the recitals to this Agreement.
"Company Auditor" has the meaning set forth in Section 3.10 (b).
"Company 401(k) Plan" means the Consolidated International Group, Inc.
Savings Incentive Plan.
"Company Group" has the meaning set forth in Section 3.21(a).
"Consents" has the meaning set forth in Section 3.5(a).
"Contracts" means all contracts, agreements, undertakings, indentures,
notes, debentures, bonds, loans, instruments, leases, mortgages, commitments or
other binding arrangements.
"Corporate Transactions" means any of the following transactions,
events or circumstances involving the Company, any current or former Subsidiary
thereof or any Affiliate of any of the foregoing, including, without limitation,
such transactions, events or circumstances involving, on the one hand, any of
the foregoing Persons and, on the other hand, any current or former shareholder
of, or other investor in, the Company: (i) any change in the composition of the
Company Group, (ii) forgiveness of any amounts of debt or other obligations
(other than forgiveness of loans to Employees where the amount forgiven is, for
any loan, not in excess of $100,000 and not including ordinary events or
transactions with respect to the investment portfolio of the Company and its
Subsidiaries), (iii) any dividend or distribution of any property of the Company
or any current or former Subsidiary thereof, including, without limitation, the
stock of any current or former Subsidiary or Affiliate, (iv) any merger,
consolidation,
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reorganization or similar transaction, (v) any liquidation, dissolution or
similar action or the adoption of any plan therefor, (vi) the purchase or sale
of any equity security issued by the Company or any Subsidiary thereof or the
right to acquire any such security, whether by conversion or otherwise, (vii)
any contribution to the capital of the Company or any Subsidiary thereof, (viii)
any spin off, split off or similar transaction or (ix) for U.S. federal income
Tax purposes, the declaration of any property of or equity interests in the
Company or any Subsidiary thereof as worthless, PROVIDED, HOWEVER, that
Corporate Transactions will not include any transaction, event or circumstance
solely involving any former Subsidiary or Affiliate of the Company following the
date upon which it ceased to be such and, further, shall not include any
transactions, events or circumstances involving only a current or former
shareholder of the Company without involving the Company or a current or former
Subsidiary thereof.
"Covered Disposition Transactions" means the Disposition Transactions
specified as Covered Disposition Transactions in Section 3.24 of the Company
Disclosure Schedule.
"Delaware Code" means the Delaware Insurance Code and the regulations
promulgated thereunder.
"Disposition Transactions" means the transactions relating to the
Amended and Restated Agreement and Plan of Merger between Consolidated
International Group, Inc. and CIG Acquisition Corporation dated as of August 1,
1994 and related agreements (including, without limitation, the Indemnification
Agreement, dated November 7, 1994, between the Company and Consolidated
International Group, Inc. (formerly Consolidated International Insurance Group,
Inc.)), and any and all other mergers, consolidations, reorganizations,
split-offs, spin-offs, stock sales, asset sales and similar transactions
effected after December 31, 1993 which, individually or in the aggregate,
resulted in or will result in either (i) at least a majority of the outstanding
stock of the Company or any of its current or former Subsidiaries or (ii)
material assets of any business conducted by the Company or any of its current
or former Subsidiaries prior to such transactions, being owned by a Person other
than the Company or any of its Subsidiaries.
"Employee" means each current full time or part time employee of the
Company or its Subsidiaries, including any such employee who is on disability or
leave of absence.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"Escrow Agent" and "Escrow Agreement" have the respective meanings set
forth in Section 8.4.
"Escrow Fund" has the meaning set forth in Section 8.5(a).
"Excluded Assets" and "Excluded Liabilities" have the meanings set
forth in Section 5.16.
"Excluded Subsidiaries" means Black Diamond Capital Corp., New Tampa
Capital, Inc., Richmond Properties, Inc., Richmond Realty Corporation,
Silverlake Development Corporation, Consolidated International Services, Inc.
and Consolidated International Services II, Inc.,
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taken together with any Subsidiary of the Company which is (i) described in
the last sentence of Section 5.16 and (ii) designated in writing as such by
the Purchaser and Rothman.
"Executive Officers" means, with respect to any corporation other than
the Company, the chief executive officer, the president, the chief financial
officer, any executive vice presidents, and the corporate secretary of such
corporation (and any other individuals performing comparable functions), and
with respect to the Company, shall mean: Robert Rothman, Thomas E. Gibbs, Kim B.
Buchanan, Andrew A. Stein, Luann M. Petrellis, Shaker Youssef, Charles L. Beale,
Deanna Voss, David Grubb and Eric Crouchley, regardless of whether they are
officers of the Company or any of its Subsidiaries.
"Financial Statements" means (i) the audited consolidated balance
sheets of the Company and its Subsidiaries at December 31, 1995, 1996, 1997 and
1998 and the related consolidated statements of income, changes in stockholder's
equity and cash flows of the Company and its Subsidiaries for the periods then
ended, including in each case the related notes and auditor's report thereon,
and (ii) to the extent prepared, the unaudited consolidated balance sheets of
the Company and its Subsidiaries at March 31, June 30 and September 30, 1998,
and the related consolidated statements of income, changes in stockholder's
equity and cash flows of the Company and its subsidiaries for the quarterly
periods then ended.
"GAAP" means United States generally accepted accounting principles.
"Governmental Entity" means any federal, state, local or foreign
government, political subdivision, legislature, court, agency, department,
bureau, commission or other governmental or regulatory authority, body or
instrumentality, including any insurance or securities regulatory authority and
any industry or other non-governmental self-regulatory organizations.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Indemnified Party" and "Indemnifying Party" have the respective
meanings set forth in Section 8.2.
"Indemnity Claim" has the meaning set forth in Section 8.4(a).
"Insurance Permit" means any Permit in any jurisdiction to issue,
underwrite, assume, place, sell or otherwise transact insurance or reinsurance.
"Interim Financial Statements" has the meaning set forth in Section
5.8.
"Interim Statutory Statements" has the meaning set forth in Section
5.8.
"Knowledge" means (i) with respect to any natural Person, the actual
knowledge of such Person and (ii) with respect to the Company or any other
Person, the actual knowledge of the Executive Officers of such Person.
"Liability" and "Liabilities" have the meanings set forth in Section
3.11.
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"Lien or Encumbrance means any lien, pledge, mortgage, security
interest, claim, lease, charge, option, right, easement, servitude, transfer
limit, restriction or other encumbrance.
"Losses" has the meaning set forth in Section 8.2.
"Material" means material to the business, operations, assets,
Properties, financial condition, results of operations, material Permits of the
Company and its Subsidiaries (other than the Excluded Subsidiaries), taken as a
whole.
"Material Adverse Effect" means any material adverse effect on the
business, operations, assets, Properties, financial condition, results of
operations, or Material Permits of the Company and its Subsidiaries (other than
the Excluded Subsidiaries), taken as a whole.
"PBGC" means the Pension Benefits Guaranty Corporation.
"Peninsula" means the Peninsula Insurance Company, a Maryland stock
insurance company, and Peninsula Indemnity Company, a Maryland stock insurance
company, collectively.
"Peninsula Profit Sharing Plan" means the Peninsula Insurance Company
and Affiliated Companies Profit Sharing Plan.
"Peninsula Subsidiary Statutory Statements" means the Annual Statements
and the Quarterly Statements of Peninsula as filed with the Maryland Insurance
Administration for the years ended December 31, 1995, 1996, 1997 and 1998, in
each case including all exhibits, interrogatories, notes and schedules thereto
and any actuarial opinion, affirmation or certification filed in connection
therewith.
"Permits" means all licenses, certificates of authority, permits,
orders, consents, approvals, registrations, authorizations and qualifications
under any federal, state, local or foreign laws or with any Governmental
Entities.
"Person" means any individual, corporation, partnership, limited
liability company, firm, joint venture, association, joint stock company, trust,
unincorporated organization, Governmental Entity or other entity or
organization.
"Plan" means "any employee benefit plan" (as that term is defined in
Section 3(3) of ERISA), in which any current or former officers or employees of
the Company or any of its Subsidiaries participate, or to which the Company or
any of its Subsidiaries has any liability or under which the Company or any of
its Subsidiaries has any present or future obligations or liability on behalf of
their respective employees or former employees or their dependents or
beneficiaries that is or ever has been sponsored, maintained or contributed to
or required to be contributed to by the Company or any of its Subsidiaries for
the benefit of Employees or former Employees, including but not limited to, each
retirement, pension, profit-sharing, thrift, savings, target benefit, employee
stock ownership, cash or deferred, multiple employer, multiemployer or other
similar plan or program, each other deferred or incentive compensation, bonus,
stock option, employee stock purchase, "phantom stock" or stock appreciation
right plan, each other program providing payment or reimbursement for or of
medical, dental or visual care,
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psychiatric counseling, or vacation, sick, disability or severance pay and each
other "fringe benefit" plan or arrangement.
"Pre-Closing Transfers" has the meaning set forth in Section 5.16.
"Property" means any real, personal or mixed property, whether tangible
or intangible.
"Prior Bidders" has the meaning set forth in Section 5.7.
"Purchase Price" has the meaning set forth in Section 2.4.
"Purchaser" has the meaning set forth in the first paragraph of this
Agreement.
"Purchaser Disclosure Schedule" has the meaning set forth in Article
IV.
"Purchaser 401(k) Plan" means the Valley Group Employees 401(k) Savings
Plan.
"Representatives" has the meaning set forth in Section 5.2.
"Reserve Reports" has the meaning set forth in Section 3.16.
"Rothman" has the meaning set forth in Section 5.15.
"SAP" means, with respect to any company, the statutory accounting
practices prescribed or permitted by the insurance department or insurance
regulatory authority of the state or jurisdiction of domicile of such company.
"Section 8.2(c) Expenses" has the meaning set forth in Section 8.2(e).
"Sellers" has the meaning set forth in the first paragraph of this
Agreement.
"Seller-Specific Representation" has the meaning set forth in the
preamble of Article III.
"Shares" has the meaning set forth in the recitals to this Agreement.
"Sellers' Representative" has the meaning set forth in Section 8.5.
"Single Claim" has the meaning set forth in Section 8.2(a).
"Statutory Statements" means the ACIC Statutory Statements and the
Peninsula Subsidiary Statutory Statements, collectively.
"Subsidiary" means, with respect to any Person, any entity controlled
by such Person.
"Tax" and "Taxes" mean all income, profits, gains, gross receipts, net
worth, premium, value added, ad valorem, sales, use, excise, stamp, transfer,
franchise, estimated,
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withholding, payroll, employment, occupation, workers' compensation, disability,
severance, unemployment insurance, social security and property taxes, and all
other taxes of any kind whatsoever, together with any interest, penalties and
additions thereto imposed by any federal, state, local or foreign government or
any agency or political subdivision of any such government, including all
amounts imposed as a result of being a member of an affiliated or combined
group.
"Tax Return" means all returns, reports, elections, estimates,
declarations, information statements and other forms and documents (including
all schedules, exhibits, and other attachments thereto) relating to, and
required to be filed in connection with, any Taxes (including estimated Taxes).
"Tax Settlement Auditor" has the meaning set forth in Section 8.4(c).
"Taxable Period" means any taxable year or any other period that is
treated as a taxable year (including any taxable period ending on the Closing
Date or beginning on the day following the Closing Date) with respect to which
any Tax may be imposed under any statute, rule, or regulation.
"Third Party Claim" has the meaning set forth in Section 8.2(c).
"WARN" shall mean the Worker Adjustment and Retraining Notification Act
of 1988.
ARTICLE II
PURCHASE AND SALE OF THE SHARES
2.1 PURCHASE AND SALE OF THE SHARES. Upon the terms and subject to the
conditions set forth in this Agreement, the Purchaser agrees to purchase or
cause to be purchased from each of the Sellers, and each Seller agrees to sell,
assign, transfer and deliver to the Purchaser or its assignee hereunder, the
Shares beneficially owned by such Sellers, free and clear of all Liens or
Encumbrances.
2.2 THE CLOSING. Subject to the satisfaction or waiver of all of the
conditions to closing set forth in Articles VI and VII, the closing (the
"Closing") of the purchase and sale of the Shares hereunder shall take place in
Tampa, Florida at a location mutually agreed upon by the Purchaser and the
Company at 10:00 a.m., Eastern Time, on the second Business Day after the
satisfaction or waiver of the conditions set forth in Article VI and VII, or at
such other time as may be mutually agreed upon by the Purchaser and the Company.
The date on which the Closing occurs is referred to herein as the "Closing
Date."
2.3 DELIVERIES AT THE CLOSING. At the Closing:
(a) each of the Sellers shall deliver to the Purchaser or its assignee
hereunder certificates representing the Shares beneficially owned by such
Seller, duly endorsed in blank for transfer or accompanied by stock powers duly
endorsed in blank;
(b) The Company and each of the Sellers shall deliver to the Purchaser
or its assignee hereunder all other documents and instruments required hereunder
to be delivered by such person to the Purchaser at the Closing; and
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(c) the Purchaser shall or shall cause its assignee hereunder to (i)
subject to the escrow deposit described in Section 8.3, pay to each Seller the
total Purchase Price for the number of Shares sold and transferred by such
Seller to the Purchaser or its assignee hereunder, by wire transfer of
immediately available funds to an account or accounts designated by such Seller
in a written notice delivered to the Purchaser not later than two (2) Business
Days prior to the Closing Date, and (ii) deliver to the Sellers all other
documents and instruments required hereunder to be delivered by the Purchaser to
the Sellers at the Closing.
2.4 PURCHASE PRICE. The purchase price for each Share (the "Purchase
Price") shall be an amount in cash equal to the quotient obtained by dividing
(a)(i) $85,288,260 plus (ii) if the Closing occurs after August 15, 1999, simple
interest on the amount set forth in item (a)(i) of this Section 2.4 at an
interest rate of five percent (5%) per annum for the period beginning on August
16, 1999 and ending on the Closing Date (provided, however, that the Sellers'
Representative may waive on behalf of the Sellers the interest payment due
hereunder), by (b) the aggregate number of Shares outstanding on a fully-diluted
basis at the time of the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE SELLERS AND THE COMPANY
Notwithstanding anything herein to the contrary: (a) except to the
extent set forth in Sections 3.12(b)(v) and 3.21 hereof, no representation or
warranty is made or given herein as to any of the Excluded Assets, the Excluded
Liabilities or the Excluded Subsidiaries; (b) any representation or warranty
made in any of Sections 3.1, 3.4(b), 3.5(b), 3.7(b), 3.8, 3.13(b), 3.14 (second
sentence only) or 3.22 hereof insofar as it relates to a particular Seller or
the Shares owned by such Seller (each, a "Seller-Specific Representation"), is
made severally and not jointly by each Seller solely as to such Seller and any
breach thereof by such Seller shall not give rise to any liability hereunder on
the part of the Company or any other Seller; and (c) except to the extent
expressly set forth in Section 3.16, no representation or warranty is made
herein as to the adequacy of any of the reserves now held by any insurance
company Subsidiary of the Company in respect of insurance or reinsurance losses,
loss adjustment expenses or uncollectible reinsurance recoverables or as to
whether every insurance and reinsurance coverage heretofore written or assumed
(whether or not Material) by any insurance company Subsidiary has been taken
into consideration in calculating such reserves. Except as disclosed in that
section of the document of even date herewith delivered by the Sellers and the
Company to the Purchaser prior to the execution and delivery of this Agreement
(the "Company Disclosure Schedule") corresponding to the Section of this
Agreement to which any of the following representations and warranties
specifically relate or as disclosed in another section of the Company Disclosure
Schedule if it is reasonably apparent on the face of the disclosure that it is
applicable to another Section of this Agreement, the Sellers (severally but not
jointly) and the Company hereby represent and warrant to the Purchaser as
follows:
3.1 AUTHORITY, VALIDITY AND ENFORCEABILITY AS TO THE SELLERS. Each
Seller has full power, authority and legal capacity to execute and deliver this
Agreement, to perform such Seller's obligations hereunder and to consummate the
transactions contemplated hereby (including, without limitation, the sale of the
Shares to the Purchaser or its assignee hereunder hereunder). This Agreement has
been duly executed and delivered by each Seller and constitutes the legal, valid
and binding obligation of such Seller enforceable against such Seller in
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accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency or other similar laws affecting creditors'
rights generally and except as rights to specific enforcement may be limited by
the application of equitable principles (whether such equitable principles are
applied in a proceeding at law or in equity).
3.2 ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite power and authority to own, lease and operate
its assets and Properties and to conduct its business as currently being
conducted. The Company is duly qualified and in good standing as a foreign
corporation in all jurisdictions in which the nature of its business or the
ownership of its Properties makes such qualification necessary, except where the
failure to be so qualified or in good standing would not, individually or in the
aggregate, have a Material Adverse Effect. The Company has heretofore delivered
to the Purchaser true and complete copies of the certificate of incorporation,
including all amendments thereto, and bylaws, as currently in effect, and all
other charter or organization documents, of the Company.
3.3 AUTHORIZATION, VALIDITY AND ENFORCEABILITY AS TO THE COMPANY. The
Company has all requisite corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby, including, without limitation, the Pre-Closing
Transfers. The execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby by the
Company have been duly and validly authorized by all necessary corporate action
on the part of the Company and no other corporate proceedings on the part of the
Company (including any proceedings of stockholders) are necessary to authorize
the execution, delivery and performance of this Agreement or the consummation of
any of the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency or other similar laws affecting creditors, rights
generally and except as rights to specific enforcement may be limited by the
application of equitable principles (whether such equitable principles are
applied in a proceeding at law or in equity).
3.4 NO CONFLICTS.
(a) The execution and delivery by the Company of this Agreement, the
performance by the Company of its obligations hereunder and the consummation by
the Company of the transactions contemplated hereby do not and will not conflict
with, result in any breach or violation of, constitute a default under (or an
event which with the giving of notice or the lapse of time or both would
constitute a default under), give rise to any right of termination or
acceleration of any right or obligation of the Company or any Subsidiary of the
Company under (assuming for such purposes that the Consents required under the
HSR Act and the Consents set forth in Section 4.4 of the Purchaser Disclosure
Schedule are duly made, obtained or given, as the case may be), or result in the
creation or imposition of any Lien or Encumbrance upon any assets or Properties
of the Company or any of the Subsidiaries of the Company by reason of the terms
of, (i) the certificate or articles of incorporation, by-laws or other charter
or organization documents of any of the Sellers, the Company or the Subsidiaries
of the Company, (ii) any Contract to which the Company or the Subsidiaries of
the Company is a party or by or to which any of them or their assets or
Properties may be bound or subject, (iii) any applicable
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order, writ, judgment, injunction, award, decree, law, statute, ordinance, rule
or regulation or (iv) any or Material Permit of any of them, other than, in the
case of clauses (ii), (iii), and (iv) any conflict, breach, violation, default,
termination or acceleration which would not, individually or in the aggregate
together with all such other conflicts, breaches, violations, defaults,
terminations and accelerations, have a Material Adverse Effect or a material
adverse effect on the ability of any of the Sellers or the Company to execute
and deliver this Agreement, perform its or their obligations hereunder or
consummate the transactions contemplated hereby.
(b) The execution and delivery by the Sellers of this Agreement, the
performance by the Sellers of their respective obligations hereunder and the
consummation of the transactions contemplated hereby do not and will not
conflict with, result in any breach or violation of, constitute a default under
(or an event which with the giving of notice or the lapse of time or both would
constitute a default under), give rise to any right of termination or
acceleration of any right or obligation of any of the Sellers under, or result
in the creation or imposition of any Lien or Encumbrance upon any assets or
Properties of the Company or any of the Subsidiaries of the Company by reason of
the terms of (a) any Contract to which any of the Sellers is a party or by or to
which any of them or their assets or Properties (including, without limitation,
the Shares) may be bound or subject, or (b) any applicable order, writ,
judgment, injunction, award, decree, law, statute, ordinance, rule or regulation
other than any conflict, breach, violation, default, termination or acceleration
which would not, individually or in the aggregate together with all such other
conflicts, breaches, violations, defaults, terminations and accelerations, have
a Material Adverse Effect or a material adverse effect on the ability of any of
the Sellers to execute and deliver this Agreement, perform such Seller's
obligations hereunder or consummate the transactions contemplated hereby.
3.5 CONSENTS AND APPROVALS.
(a) Except as required under the HSR Act, no consent, approval,
authorization, license or order of, registration or filing with, or notice to,
any federal, state, local, foreign or other Governmental Entity or any other
Person (collectively, "Consents") is necessary to be obtained, made or given
generally by the Company or the Subsidiaries of the Company in connection with
the execution and delivery generally by the Sellers or the Company of this
Agreement, the performance generally by the Sellers or the Company of their
obligations hereunder and the consummation of the transactions contemplated
hereby.
(b) Except as required under the HSR Act, no Consents are necessary to
be obtained, made or given by any of the Sellers in connection with the
execution and delivery by the Sellers or the Company of this Agreement, the
performance by the Sellers or the Company of their obligations hereunder and the
consummation of the transactions contemplated hereby.
3.6 SUBSIDIARIES.
(a) Section 3.6 of the Company Disclosure Schedule sets forth a
complete and accurate list of all of the Subsidiaries of the Company, and the
jurisdiction of incorporation or formation of each Subsidiary of the Company and
each jurisdiction in which such Subsidiary is qualified or otherwise authorized
to conduct insurance business or is deemed commercially domiciled. Each such
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and has all
requisite power and
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authority to own, lease and operate its assets and Properties and to conduct its
business as currently being conducted. Each of the Company's Subsidiaries is
duly qualified and in good standing as a foreign corporation in all
jurisdictions in which the nature of its business or the ownership of its
Properties makes such qualification necessary, except where the failure to be so
qualified or in good standing would not, individually or in the aggregate, have
a Material Adverse Effect. Except as set forth in Section 3.6 and Section 3.19
of the Company Disclosure Schedule, the Company does not directly or indirectly
own any interest in any other Person. The Company has heretofore delivered or
made available to the Purchaser true and complete copies of the certificate or
articles of incorporation, including all amendments thereto, and by-laws, as
currently in effect, and all other charter or organization documents, of each
Subsidiary of the Company.
(b) Section 3.6 of the Company Disclosure Schedule sets forth the
designation, par value and the number of authorized, issued and outstanding
shares of each class or series of capital stock of each subsidiary of the
Company. No preferred stock, bonds, debentures, notes, debt instruments,
evidences of indebtedness or other securities of any kind, of any Subsidiary of
the Company are authorized, issued or outstanding. All of the outstanding
capital stock of each Subsidiary of the Company is duly authorized, validly
issued, fully paid and non-assessable. All of the outstanding capital stock of
each such Subsidiary is owned of record and beneficially by the Company or by
another Subsidiary of the Company, in each case free and clear of any Lien or
Encumbrance.
(c) No Subsidiary of the Company has issued any securities in violation
of any preemptive or similar rights, and there are no subscriptions, options,
warrants, calls, commitments, preemptive rights or other rights of any kind
(absolute, contingent or otherwise) to purchase or otherwise receive, nor any
securities or instruments of any kind convertible into or exchangeable for, any
capital stock (including, without limitation, outstanding, authorized but
unissued, unauthorized, treasury or other shares thereof) or other equity
interest or any debt security or instrument of any Subsidiary of the Company.
There are no agreements or other instruments pursuant to which the Company or
any of its Subsidiaries is obligated or required, under any circumstance, to
make contributions to the capital of any Subsidiary of the Company. Except as
set forth in Section 3.6 of the Company Disclosure Schedule or as provided in
federal or state securities laws, the HSR Act, the Delaware Code, the Delaware
General Corporation Law, the Maryland Insurance Code and the general corporate
laws of the Cayman Islands, there are no restrictions upon the voting or
transfer of, or the declaration or payment of any dividend or distribution on,
any shares of capital stock of any Subsidiary of the Company.
3.7 CAPITALIZATION.
(a) The authorized, capital stock of the Company consists solely of
5,000,000 shares of Common Stock, par value $0.01 per share, of which 2,960,370
Shares are issued and outstanding. No preferred stock, bonds, debentures, notes,
debt instruments, evidences of indebtedness or other securities of any kind of
the Company (except for the Shares) are authorized, issued or outstanding. All
of the Shares are duly authorized, validly issued, fully paid and
non-assessable.
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(b) Each of the Sellers owns of record and beneficially the number of
shares set forth opposite such Seller's name on the Seller Schedules attached
hereto, free and clear of any Lien or Encumbrance.
(c) The Company has not issued any securities in violation of any
preemptive or similar rights and, except for this Agreement, there are no
subscriptions, options, warrants, calls, commitments, preemptive rights or other
rights of any kind (absolute, contingent or otherwise) to purchase or otherwise
receive, nor any securities or instruments of any kind convertible into or
exchangeable for, any capital stock (including, without limitation, outstanding,
authorized but unissued, unauthorized, treasury or other shares thereof) or
other equity interest or any debt security or instrument of the Company. Except
as provided in the Restated Certificate of Incorporation of the Company, the HSR
Act, the Delaware General Corporation Law, the Delaware Code and federal and
state securities laws, there are no restrictions upon the voting or transfer of,
or the declaration or payment of any dividend or distribution on, any shares of
capital stock of the Company.
3.8 TITLE TO SHARES. The sale and delivery of the Shares as
contemplated by this Agreement are not subject to any preemptive right, right of
first refusal or other right or restriction (other than restrictions on
transferability of the Shares provided in the Restated Certificate of
Incorporation of the Company, the HSR Act, the Delaware Code and federal and
state securities laws). Upon the delivery of the Shares as provided in Section
2.3, the Purchaser will acquire good and marketable title to each of the Shares,
free and clear of any Lien or Encumbrance (other than any Liens or Encumbrances
created by the Purchaser and any restrictions on transferability of the Shares
provided in the Delaware Code and federal and state securities laws) and will be
entitled to all the rights of a holder of such Shares.
3.9 CORPORATE MINUTES. The Company has heretofore made available to the
Purchaser true and complete copies, or the complete original, minute books of
the Company and each of its Subsidiaries. The minute books of the Company and
each of its Subsidiaries accurately reflect all Material actions taken at
meetings, or by written consent in lieu of meetings, of the stockholders, boards
of directors and all committees of such boards of directors of the Company and
its Subsidiaries, respectively, since January 1, 1993.
3.10 FINANCIAL STATEMENTS.
(a) The Company has heretofore delivered to the Purchaser true and
complete copies of the Financial Statements and the Statutory Statements.
(b) The Financial Statements were prepared in accordance with GAAP
consistently applied throughout the periods involved, were prepared in
accordance with the books and records of the Company and its Subsidiaries, and
have been audited by Deloitte & Touche LLP, certified public accountants (the
"Company Auditor"). As of the date hereof, the Company has no Knowledge of any
reason that the Financial Statements do not present fairly the financial
position of the Company and its Subsidiaries at the respective dates thereof and
the results of operations of the Company and its Subsidiaries for the respective
periods then ended (except that the quarterly Financial Statements have not been
audited and do not contain full footnote disclosures in accordance with GAAP and
are subject to normal recurring year-end audit adjustments).
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3.11 LIABILITIES. Since December 31, 1998, to the Knowledge of the
Company and the Sellers, neither the Company nor any of its Subsidiaries has
incurred any direct or indirect debt, obligation, loss, damages, deficiency or
other liability of any nature, whether absolute, accrued, contingent or
otherwise ("Liability" or "Liabilities", as the context may require), required
by GAAP to be set forth in a financial statement other than Liabilities incurred
by the Company and its Subsidiaries in the ordinary course of business
consistent with past practice.
3.12 ABSENCE OF CHANGES.
(a) Since December 31, 1998, there has been no Material Adverse Effect.
(b) Except for the transactions contemplated hereby (including, without
limitation, the transactions contemplated by Section 5.18), since December 31,
1998, the Company and each of its Subsidiaries have operated their businesses
only in the ordinary course of business consistent with past practice and
neither the Company nor any such Subsidiary has:
(i) amended its certificate or articles of incorporation, by-laws
or other charter or organization document, or merged with or into or
consolidated with any other Person, subdivided or in any way reclassified any
shares of its capital stock or changed or agreed to change in any manner the
rights of its outstanding capital stock;
(ii) issued or sold, or issued or sold any options, warrants,
calls or other rights of any kind to purchase or otherwise receive, or issued or
sold any securities or instruments convertible into or exchangeable for, or
entered into any contract or commitment to issue or sell, any capital stock or
other equity interest or any bonds, debentures, notes, debt instruments,
evidences of indebtedness or other securities of any kind, including, without
limitation, any stock options or stock appreciation rights;
(iii) declared, paid or set aside any sum for any dividends or
declared or made any other distributions of any kind (whether in cash, stock,
Property, any combination thereof or otherwise) to its stockholders, or made any
direct or indirect redemption, retirement, purchase or other acquisition of any
shares of its capital stock or other equity interests or any bonds, debentures,
notes, debt instruments, evidences of indebtedness or other securities of the
Company or any of its Subsidiaries of any kind;
(iv) incurred any indebtedness for borrowed money or entered into
any commitment to borrow money or guarantee any Liability for borrowed money;
(v) in each case with respect only to the Excluded Assets and the
Excluded Liabilities, made any change in its accounting or reserving methods or
practices made any revaluation of any assets or Properties, or write-down or
write-off of the value of any assets or Properties (including, without
limitation, any receivables), or made any change in depreciation or amortization
policies or rates adopted by it;
(vi) made any or permitted any Subsidiary to make any (A) entry
into or modification of any reinsurance, coinsurance or retrocession agreement
by the Company or any of its Subsidiaries other than in the ordinary course of
business consistent with past practice, or (B) termination or commutation or any
reinsurance, coinsurance of retrocession agreement
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legally carried on the books of the Subsidiaries at the time of such termination
or commutation involving payments of $1,000,000 or more;
(vii) allowed the creation of any Lien or Encumbrance on any
tangible or intangible asset or Property, or any sale, transfer, assignment,
lease or abandonment of any interest in any tangible or intangible asset or
Property, other than sales, transfers, assignments and leases in the ordinary
course of business consistent with past practice of assets of Property having an
aggregate fair market value below $250,000;
(viii) entered into any Contract, commitment or transaction
(including, without limitation, any capital expenditure, capital contribution,
capital financing, or purchase, lease, acquisition, sale or disposition of
assets or Properties) which requires or could require payments in excess of
$250,000 with respect to any individual Contract, commitment or transaction or
series of related Contracts, commitments and transactions;
(ix) terminated, failed to renew, received any written notice
(that was not subsequently withdrawn) to terminate or fail to renew, amended,
altered, modified, suffered the occurrence of any material default under, failed
to perform any Material Liabilities or obligations under, or waived or released
any Material rights under, any Contract which is Material;
(x) forgiven or permitted any cancellation of any claim, debt or
account receivable, other than cancellations in the ordinary course of business
consistent with past practice of any claim, debt or account receivable in an
amount below $250,000;
(xi) made any loan or advance to any Person, other than loans or
advances made in the ordinary course of business consistent with past practice
in an amount below $100,000;
(xii) made any acquisition of all or any substantial part of the
assets, Properties, securities or business of any other Person;
(xiii) except as provided in Section 5.15 and in the ordinary
course of business involving obligations not to exceed $250,000 in the
aggregate, hired any new employees, consultants, agents or other representatives
or entered into any employment or consulting agreements other than those
terminable without severance, without penalty and without cause on not more than
thirty (30) days notice, or terminated, or made any change in the employment
terms or conditions of, any officers, directors, employees, consultants, agents
or other representatives;
(xiv) except as provided in Section 5.15 and in the ordinary
course of business, increased or agreed to increase any salary, wages, bonus,
severance, compensation, pension or other benefits payable or to become payable,
or granted any severance or termination payments or benefits, to any of its
current or former officers, directors, employees, consultants, agents or other
representatives;
(xv) adopted a plan of complete or partial liquidation,
dissolution, rehabilitation, restructuring, recapitalization, redomestication or
other reorganization; or
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(xvi) entered into any agreement providing for the acceleration of
payment or performance or other consequence as a result of a change in control
of the Company.
(xvii) entered into any Contract, commitment or transaction to do
any of the foregoing.
3.13 LEGAL PROCEEDINGS.
(a) There is no action, suit, claim, proceeding or investigation
pending or, to the Knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries, or any of the directors, officers,
employees, assets or Properties of any of them, by or before any court, other
Governmental Entity or arbitrator which, if adversely determined, individually
or in the aggregate, would have a Material Adverse Effect or a material adverse
effect on the Company's ability to execute and deliver this Agreement, perform
its obligations hereunder or consummate the transactions contemplated hereby.
There is no outstanding order, writ, judgment, injunction, award or decree of
any court, other Governmental Entity or arbitrator against or affecting the
Company or any of its Subsidiaries, or any of the directors, officers,
employees, assets or Properties of any of them, which, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect or a material
adverse effect on the ability of or the Company to execute and deliver this
Agreement perform its obligations hereunder or consummate the transactions
contemplated hereby.
(b) There is no action, suit, claim, proceeding or investigation
pending or, to the Knowledge of the Sellers or the Company, threatened against
or affecting any of the Sellers or the assets or Properties of any of them, by
or before any court, other Governmental Entity or arbitrator which, if adversely
determined, individually or in the aggregate, would have a Material Adverse
Effect or a material adverse effect on the ability of any of the Sellers to
execute and deliver this Agreement, perform its or their obligations hereunder
or consummate the transactions contemplated hereby. There is no outstanding
order, writ, judgment, injunction, award or decree of any court, other
Governmental Entity or arbitrator against or affecting any of the Sellers or the
assets or Properties of any of them, which, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect or a material adverse effect
on the ability of any of the Sellers to execute and deliver this Agreement
perform its or their obligations hereunder or consummate the transactions
contemplated hereby.
3.14 COMPLIANCE WITH LAWS. Each of the Company and its Subsidiaries is
in compliance with (a) the terms of its certificate or articles of
incorporation, by-laws or other charter or organization documents, (b) all
applicable laws, statutes, ordinances, rules, regulations or other legal
requirements, whether federal, state, local or foreign, (c) all applicable
orders, writs, judgments, injunctions, awards and decrees of any court, other
Governmental Entity or arbitrator and (d) to the Company's Knowledge, its
Permits, except in the case of clauses (b), (c) and (d) where the failure to
comply would not, individually or in the aggregate, have a Material Adverse
Effect. None of the Sellers, the Company or any such Subsidiary has received
notice of any violation by the Company or any such Subsidiary of, or default by
the Company or any such Subsidiary under, its certificate or articles of
incorporation, by-laws or other charter or organization document, any law,
statute, ordinance, rule, regulation or other legal requirement, any order,
writ, injunction, award or decree of any court, other Governmental Entity or
arbitrator,
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or any of its Permits, except for such violations or defaults which would not,
individually or in the aggregate, have a Material Adverse Effect.
3.15 REGULATORY MATTERS. The Company has made available to the
Purchaser true and complete copies of all annual and quarterly statements filed
with or submitted to any state insurance regulatory authority and all reports of
examinations (whether financial, market conduct or other) issued by any state
insurance regulatory authorities in respect of the insurance company
Subsidiaries of the Company covering, in whole or in part, any period on or
after January 1, 1993, together with true and complete copies of all written
responses submitted by or on behalf of the Company or any of its Affiliates in
respect of any such report of examination. In addition, the Company has made
available to the Purchaser all files of the Company and each of its Subsidiaries
relating to correspondence with insurance regulatory authorities and other
Governmental Entities.
3.16 RESERVES. The Company has delivered to the Purchaser true and
complete copies of all reports and analyses of the loss, loss adjustment expense
and reinsurance recoverable reserves of the Company or any of its Subsidiaries
as of December 31, 1997 or any subsequent date prepared (i) by any accounting or
actuarial Persons retained or engaged by the Company or its Subsidiaries or (ii)
by or on behalf of any insurance regulatory authority or Governmental Entity
(collectively, "Reserve Reports") to the extent in either case copies of such
reports or analyses were provided to the Company or any of its Subsidiaries.
Subject to the first paragraph of Article III, the sole provision of this
Agreement with respect to the adequacy or sufficiency of the reserves held by
the Company and its Subsidiaries with respect to insurance and reinsurance
losses, loss adjustment expenses and uncollectible reinsurance reserves are set
forth in this Section 3.16.
3.17 CONTRACTS.
(a) Section 3.17 of the Company Disclosure Schedule contains a true and
complete list of all of the following Contracts (excluding insurance and
reinsurance policies and Contracts, other than the Binder of Reinsurance between
ACIC and Gerling Global International Insurance Company, Ltd. (as amended and
restated), issued or entered into by any of the insurance company Subsidiaries
of the Company in the ordinary course of business consistent with past practice)
to which any of the Company or its Subsidiaries is a party or by or to which any
of them or their assets or Properties are or may be bound or subject, which are
currently in force and effect, as each such Contract may have been amended,
modified or supplemented:
(i) other than with respect to Peninsula, all agency, brokerage,
reinsurance intermediary or other similar insurance sales or marketing Contracts
which accounted for $250,000 or more of the aggregate gross written premiums of
the insurance company Subsidiaries of the Company for the year ended December
31, 1998;
(ii) all Material underwriting management, third party
administration, managing general agency, profit-sharing or similar Contracts
(pursuant to which any underwriting, claims settlement or distribution authority
is delegated) in effect with respect to premiums written or business conducted
following January 1, 1998;
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(iii) Material partnership or joint venture Contracts of which the
Company has Knowledge;
(iv) Contracts containing any covenant or provision limiting the
freedom or ability of Peninsula to engage in any line of business, engage in
business in any geographical area or compete with any other Person;
(v) Contracts relating to the borrowing of money, or the direct or
indirect guaranty of any obligation for, or Contract to service the repayment
of, borrowed money or any other Liability in respect of indebtedness for
borrowed money of any other Person, including, without limitation, any Contract
relating to any obligation to keep-well, make-whole or maintain working capital
or earnings or perform similar requirements;
(vi) all lease, sublease, rental or other Contracts under which
any of the Company or its Subsidiaries is a lessor or lessee of any real
Property providing for annual rental payments in excess of $250,000;
(vii) lease, sublease, rental, licensing, use or similar Contracts
with respect to personal Property used by any of the Company or its Subsidiaries
in the conduct of its business, operations or affairs and providing for annual
rental or use payments in excess of $250,000;
(viii) Contracts for the purchase, acquisition, sale or
disposition of any assets or Properties outside the ordinary course of business
or for the grant to any Person (including the Company or its Subsidiaries) of
any option or preferential rights to purchase any assets or Properties;
(ix) Contracts relating to the future disposition or acquisition
of any investment or any interest in any Person, and all Contracts for the
purchase of any security outside the ordinary course of business;
(x) Contracts relating to licenses of trademarks, trade names,
service marks or other similar Property rights;
(xi) employment and other Contracts with any officer, director,
employee, consultant, agent or other representative providing for compensation
or other payments of $250,000 or more per annum (the name, position or capacity
and rate of compensation of each such Person and the expiration date of each
such Contract being accurately set forth in Section 3.17 of the Company
Disclosure Schedule);
(xii) collective bargaining agreements and any other Contracts
with any labor union or association representing any employee;
(xiii) Contracts between or among (A) the Company or any of its
Subsidiaries, on the one hand, and (B) any of the Sellers or their other
Affiliates, or any of the officers or directors of any of the Sellers or such
other Affiliates, on the other hand ("Affiliate Agreements");
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(xiv) Contracts under which the Company or any of its Subsidiaries
agrees to indemnify any Person, which indemnities remain in force or effect;
(xv) any powers of attorney granted by the Company or any of its
Subsidiaries to any Person which are in force or effect;
(xvi) Contracts pursuant to which there is either a current or
future obligation or right of any of the Company or any of its Subsidiaries to
make payments in excess of $250,000 in any twelve-month period (other than
Contracts relating to investments of such Persons in the ordinary course of
business); or
(xvii) any other Contracts which are Material and involve payments
or amounts totaling at least $1,000,000.
(b) The Company has heretofore delivered or made available to the
Purchaser true and complete copies of all of the written Contracts required to
be set forth in Section 3.17 of the Company Disclosure Schedule or in any other
Section of the Company Disclosure Schedule. Each such Contract is valid and
binding in accordance with its terms, and is in full force and effect. None of
the Company or any of its Subsidiaries is in default in any Material respect
with respect to any such Contract, nor does any condition exist that with notice
or lapse of time or both would constitute such a Material default thereunder. To
the Company's Knowledge, no other party to any such Contract is in default in
any Material respect with respect to any such Contract. No such Contract
contains any provision providing that any such other party thereto may terminate
or cancel the same by reason of the transactions contemplated by this Agreement
or any other provision which would be altered or otherwise become applicable by
reason of such transactions, and no party has given notice of termination or
cancellation of any such Contract or that it intends to terminate or cancel any
such Contract as a result of the transactions contemplated hereby.
3.18 PROPERTY. Section 3.18 of the Company Disclosure Schedule contains
a true and complete list (designating the relevant owners, lessors and lessees)
of (a) all real Property owned or leased by the Company or any of its
Subsidiaries and all buildings and other structures located on such real
Property, and (b) all personal Property owned or leased by any such Person
which, in the case of clause (b) only, is material to any of the Company or its
Subsidiaries. Each of the Company and its Subsidiaries has good and marketable
title to all of its respective assets and Properties, in each case free and
clear of any Lien or Encumbrance except (i) for assets and Properties which have
been disposed of in the ordinary course of business since December 31, 1998, and
(iii) Liens or Encumbrances which in the aggregate do not materially detract
from the value of the assets or Properties subject thereto (as carried on the
most recent applicable Financial Statements and financial statements included in
the Statutory Statements) or materially interfere with the present use of such
assets or Properties.
3.19 INVESTMENTS. Section 3.19 of the Company Disclosure Schedule
contains a true and complete list of all securities and other investments owned
by each of the Company and its Subsidiaries as of the end of the most recent
calendar month, including the date of purchase, book value or amortized cost,
market value and carrying value thereof on the books and records of account of
such Persons as of such date. To the Knowledge of the Company, none of the
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securities and other investments owned by such Persons is in default in the
payment of principal or interest or dividends.
3.20 EMPLOYEE BENEFIT PLANS.
(a) Section 3.20 of the Company Disclosure Schedule contains a true and
complete list of all Plans. The Company has delivered or made available to the
Purchaser, or will deliver or make available to the Purchaser prior to Closing,
true and complete copies of the following documents, as they may have been
amended to the date hereof, embodying or relating to the Plans: (i) each of the
Plans, including all amendments thereto, any related trust agreements, group
annuity contracts, insurance policies or other funding agreements or
arrangements; (ii) the most recent determination letter, if any, as to
qualification under section 401(a) or 403(a) of the Code received from the IRS
with respect to each of the Plans; (iii) the actuarial valuation, if any,
prepared with respect to each of the Plans for the three most recent plan years;
(iv) the current summary plan description, if any, for each of the Plans; and
(v) the annual return/report on Form 5500, 5500-C or 5500-R, if any, for each of
the Plans for the three most recent plan years.
(b) Except as set forth in Section 3.20 of the Company Disclosure
Schedule: (i) the Company 401(k) Plan and the Peninsula Profit Sharing Plan have
been operated and administered in accordance with their terms and applicable
laws, including but not limited to ERISA and the Code except for any failure to
comply that would not have a Material Adverse Effect, and (ii) each of the Plans
constituting a group health plan (within the meaning of section 5000(b)(1) of
the Code) has been administered in compliance with the provisions of section
4980B(f) of the Code except for any failure to comply that would not have a
Material Adverse Effect.
3.21 TAX MATTERS.
(a) All Material Tax Returns required to be filed with respect to the
Company and its Subsidiaries (the "Company Group") for all Taxable Periods
ending on or before the date hereof have been timely filed (taking into account
extensions of time to file). All such Tax Returns: (i) were prepared in the
manner required by applicable law; (ii) as respects all Tax Returns other than
those which relate to U.S. federal income Taxes, are true, correct, and complete
in all material respects; and (iii) reflect the liability for Taxes of the
Company and any of its Subsidiaries for the Taxable Periods comprised in such
Tax Returns. All Taxes shown to be payable on such Tax Returns, and all
assessments of Tax made with respect to such Tax Returns, have been paid when
due. Neither the Company nor any of its Subsidiaries is or has ever filed or
been required to file or join in the filing of a consolidated, combined, unitary
or group income, franchise, or premium Tax Return except the consolidated
federal income Tax Return of the Company Group.
(b) All Taxes of the Company and its Subsidiaries for all Taxable
Periods or portions thereof ending on or before the date of each Financial
Statement and Interim Financial Statement have been paid or adequately provided
for in each such respective statement. Such Taxes paid or provided for include
those Taxes for which the Company or any of its Subsidiaries may be liable in
its own right or as the transferee of the assets of, or as successor to, any
other corporation, association, partnership, joint venture or other entity.
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(c) There is no Contract or agreement under which the Company or any of
its Subsidiaries has, or may at any time in the future have, an obligation to
assume, share, or contribute to the payment of any portion of a Tax (or any
amount calculated with reference to any portion of a Tax) determined on a
consolidated, combined, group, or unitary basis with respect to an affiliated
group or other group of corporations of which the Company or any of its
Subsidiaries is or was a member.
(d) To the Knowledge of the Company, no issue has arisen in any
examination of the Company or any of its Subsidiaries by any taxing authority
that, if raised with respect to the same or substantially similar facts arising
in any other period not so examined, would result in a deficiency for such other
period, if upheld.
(e) None of the Company or any of its Subsidiaries has filed a consent
under section 341(f)(1) of the Code or any comparable provision of state revenue
statutes, or agreed under section 341(f)(3) of the Code to have the provisions
of section 341(f)(2) of the Code applied to the sale of its capital stock.
(f) Neither the Company nor any of its Subsidiaries is liable under
Treasury Regulations section 1.1502-6 for the federal income Tax of any
corporation other than the members of the Company Group or the members of a
consolidated return group for which the Company was the common parent.
(g) There are no outstanding material "deferred intercompany
transactions" (as defined in Section 1.1502-13 of the treasury regulations
promulgated under the Code) of the Company or its current or former Subsidiaries
or Affiliates.
3.22 NO BROKERS. No broker, finder or investment banker has been
retained or engaged on behalf of any of the Sellers, the Company or their
Affiliates or is entitled to any brokerage, finder's or other fee, compensation
or commission from any such Person in connection with the transactions
contemplated by this Agreement.
3.23 CORPORATE TRANSACTIONS. Section 3.23 of the Company Disclosure
Schedule contains a true and correct list of any and all Corporate Transactions
effected by the Company or any of its current or former Subsidiaries or
Affiliates after December 31, 1996.
3.24 DISPOSITION TRANSACTIONS. Section 3.24 of the Company Disclosure
Schedule contains a true and correct list of any and all Disposition
Transactions, and all Contracts relating to Disposition Transactions.
3.25 DISCLOSURE. The Company and the Subsidiaries of the Company have
complied in good faith with all written requests of the Purchaser and its
representatives for documents, papers and information relating to the Company
and its Subsidiaries in connection with the transactions contemplated hereby,
and have not knowingly failed to provide any document, paper or other
information requested by the Purchaser or any of its representatives in
connection therewith.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Except as disclosed in that section of the document of even date
herewith delivered by the Purchaser to the Company prior to the execution and
delivery of this Agreement (the "Purchaser Disclosure Schedule") corresponding
to the Section of this Agreement to which any of the following representations
and warranties specifically relate or as disclosed in another section of the
Purchaser Disclosure Schedule if it is reasonably apparent on the face of the
disclosure that it is applicable to another Section of this Agreement, the
Purchaser hereby represents and warrants to the Sellers as follows:
4.1 ORGANIZATION OF THE PURCHASER. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby.
4.2 AUTHORIZATION, VALIDITY AND ENFORCEABILITY. The execution, delivery
and performance of this Agreement by the Purchaser and the consummation of the
transactions contemplated hereby by the Purchaser have been duly and validly
authorized by all necessary corporate action on the part of the Purchaser and no
other corporate proceeding on the part of the Purchaser is necessary to
authorize the execution, delivery and performance of this Agreement or the
consummation of any of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by the Purchaser and constitutes the legal,
valid and binding obligation of the Purchaser, enforceable against the Purchaser
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency or other similar laws affecting creditors,
rights generally and except as rights to specific enforcement may be limited by
the application of equitable principles (whether such equitable principles are
applied in a proceeding at law or in equity).
4.3 NO CONFLICTS. Assuming the Consents contemplated by clauses (a)
through (c) of Section 4.4 are duly made, obtained or given (as the case may
be), the execution and delivery by the Purchaser of this Agreement, the
performance by the Purchaser of its obligations hereunder and the consummation
of the transactions contemplated hereby do not and will not conflict with,
result in any breach or violation of, constitute a default under (or an event
which with the giving of notice or the lapse of time or both would constitute a
default under), (a) the certificate of incorporation, by-laws or other charter
or organization documents of the Purchaser, (b) any Contract to which the
Purchaser is a party or by or to which it or its assets or Properties may be
bound or subject, (c) any applicable order, writ, judgment, injunction, award,
decree, law, statute, ordinance, rule or regulation or (d) to the Knowledge of
the Purchaser, any material Permit of the Purchaser, other than, in the case of
clauses (b) and (c), any conflict, breach, violation or default which would not,
individually or in the aggregate together with all such other conflicts,
breaches, violations or defaults, have a material adverse effect on the ability
of the Purchaser to execute and deliver this Agreement, perform its obligations
hereunder or consummate the transactions contemplated hereby.
4.4 CONSENTS AND APPROVALS. Except (a) as required under the HSR Act,
(b) as required under the insurance regulatory laws of the State of Delaware and
(c) as set forth in Section 4.4 of the Purchaser Disclosure Schedule, no Consent
of any Governmental Entity or
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other Person is necessary to be obtained, made or given by the Purchaser in
connection with the execution and delivery by the Purchaser of this Agreement,
the performance by the Purchaser of its obligations hereunder and the
consummation of the transactions contemplated hereby.
4.5 LEGAL PROCEEDINGS. There is no action, suit, claim, proceeding or
investigation pending or, to the Knowledge of the Purchaser, threatened against
or affecting the Purchaser by or before any court, other Governmental Entity or
arbitrator which, individually or in the aggregate, is reasonably likely to have
a material adverse effect on the ability of the Purchaser to execute and deliver
this Agreement, perform its obligations hereunder or consummate the transactions
contemplated hereby. There is no outstanding order, writ, judgment, injunction,
award or decree of any court, other Governmental Entity or arbitrator against or
affecting the Purchaser which, individually or in the aggregate, is reasonably
likely to have a material adverse effect on the ability of the Purchaser to
execute and deliver this Agreement, perform its obligations hereunder or
consummate the transactions contemplated hereby.
4.6 INVESTMENT INTENT. The Shares will be acquired by the Purchaser for
its own account without a view to a distribution or resale thereof, it being
understood that the Purchaser shall have the right to sell or otherwise dispose
of any of the Shares pursuant to a registration or an exemption therefrom under
the Securities Act of 1933, as amended, and any applicable state securities
laws.
4.7 FINANCING. The Purchaser has, and at the Closing will have,
sufficient cash to consummate the transactions contemplate hereby and to pay all
related fees and expenses.
4.8 NO BROKERS. No broker, finder or investment banker has been
retained or engaged on behalf of the Purchaser or is entitled to any brokerage,
finder's or other fee, compensation or commission from the Purchaser in
connection with the transactions contemplated by this Agreement.
4.9 CONSOLIDATED GROUP. The Person which will acquire the Shares
hereunder, whether the Purchaser or its assignee hereunder, is, and will be at
the Closing, a member of a group of affiliated corporations, as defined in
Section 1504 of the Code and the Treasury Regulations issued under Section 1502
of the Code, having the Purchaser as its common parent. The Company Group will
join the consolidated group of the Purchaser immediately upon acquisition.
ARTICLE V
COVENANTS
5.1 CONDUCT OF BUSINESS. From the date hereof to and including the
Closing Date, except as otherwise contemplated hereby or as set forth in Section
5.1 of the Company Disclosure Schedule, the Company will (and will cause its
Subsidiaries to), and the Sellers will cause the Company and its Subsidiaries
to, (i) conduct their operations in the ordinary course of business consistent
with past practice, (ii) maintain insurance coverages and their books, records
and accounts in the usual manner consistent with prior practice, and (iii) not,
without the prior written consent of the Purchaser, take any of the other
actions described in Section 3.12(b) hereof or take any action, or omit to do
any act, that individually or in the aggregate would, or would be reasonably
likely to, result in (A) any of the representations and warranties set forth in
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Article III of this Agreement not being true in all material respects (or, in
the case of any such representations or warranties which are qualified as to
materiality, true in all respects) or (B) any of the conditions set forth in
Articles VI and VII not being satisfied or (C) any breach of any covenant or
obligation hereunder or (D) a Material Adverse Effect.
5.2 ACCESS TO INFORMATION; CONSULTATION; CONFIDENTIALITY.
(a) From the date hereof until the Closing, the Company will, and the
Sellers will cause the Company and each of its Subsidiaries to, (i) allow the
Purchaser and its officers, employees, counsel, accountants, consultants and
other authorized representatives ("Representatives") to have reasonable access
to the books, records, Contracts, facilities, management and personnel of the
Company and its Subsidiaries, (ii) furnish promptly to the Purchaser and its
Representatives all information and documents concerning the Company and its
Subsidiaries as the Company Group has in its possession or control and the
Purchaser or its Representatives may reasonably request, and (iii) cause the
respective officers, employees and Representatives of the Company and the
Company's Subsidiaries to cooperate in good faith with the Purchaser and its
Representatives in connection with all such access. No investigation or review
by the Purchaser or any of its Representatives shall affect or be deemed to
modify any of the representations, warranties, covenants or agreements of the
Sellers or the Company under this Agreement or otherwise; it being understood
that, notwithstanding any right of the Purchaser fully to investigate the
affairs of the Company and its Subsidiaries, and notwithstanding any knowledge
of facts determined or determinable by the Purchaser pursuant to any such
investigation or right of investigation, the Purchaser has the right to rely
fully upon the representations, warranties, covenants and agreements of the
Sellers and the Company contained in this Agreement.
(b) All information and documents provided under this Section 5.2 shall
be kept confidential by the Purchaser and its Representatives, unless any such
information or documents (i) is or becomes generally available to the public
(other than as a result of a disclosure by the Purchaser or any of its
Representatives), (ii) was already known by or available on a non-confidential
basis to the Purchaser prior to being furnished by or on behalf of the Sellers,
the Company or the Company's Subsidiaries hereunder, or (iii) is or becomes
available to the Purchaser from a third party not bound by any contractual
obligation to the Sellers, the Company or the Company's Subsidiaries to keep
such information confidential. In the event of the termination of this Agreement
pursuant to Section 9.1, the Purchaser will, upon the request of the Company,
promptly deliver to the Company all written information and documents provided
under Section 5.2(a) in the possession of the Purchaser or any of its personnel,
including all copies, reproductions, summaries, analyses and extracts thereof or
based thereon.
5.3 COOPERATION AND REASONABLE BEST EFFORTS. Subject to the terms and
conditions hereof, (a) each of the parties hereto shall cooperate with each
other, and the Sellers will cause the Company and its Subsidiaries (including
the Excluded Subsidiaries) to cooperate with the Purchaser, in connection with
consummating the transactions contemplated by this Agreement and the Exhibits
hereto, and (b) each of the parties hereto agrees to, and the Sellers will cause
the Company and each of its Subsidiaries (including the Excluded Subsidiaries)
to, use its reasonable best efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement.
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5.4 CONSENTS AND APPROVALS. As soon as practicable after the execution
of this Agreement, each of the parties hereto shall, and the Sellers shall cause
the Company and its Subsidiaries (including the Excluded Subsidiaries) to, use
its reasonable best efforts to obtain any necessary Consents of, and make any
filing with or give any notice to, any Governmental Entities and other Persons
(including, without limitation, (i) the Delaware Department of Insurance and the
Maryland Insurance Administration, (ii) other applicable insurance regulatory
authorities and (iii) pursuant to the HSR Act, the Federal Trade Commission and
the United States Department of Justice) as are required to be obtained, made or
given by such party to consummate the transactions contemplated by this
Agreement. The parties hereto shall cooperate with one another in exchanging
such information and reasonable assistance as may be required by any such
Governmental Entity or as any other party may request in connection with the
foregoing.
5.5 NOTIFICATION OF CERTAIN MATTERS. From and after the date hereof
through the Closing Date, each of the Sellers and the Company, on the one hand,
and the Purchaser, on the other hand, shall give prompt notice to the other of
(a) Knowledge of the occurrence or nonoccurrence of any event, the occurrence or
nonoccurrence of which would be likely to cause any representation or warranty
of the Sellers and/or the Company or the Purchaser, respectively, contained in
this Agreement to be untrue or inaccurate in any material respect (or, in the
case of any representation or warranty which is qualified as to materiality,
untrue or inaccurate in any respect) at or prior to the Closing and (b) any
material failure of any of the Sellers, the Company or the Purchaser,
respectively, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder; PROVIDED, HOWEVER, that the
delivery of any notice pursuant to this Section 5.5 shall not cure such failure
or limit or otherwise affect the remedies available hereunder to the parties
receiving such notice, except to the extent any such event or material failure
occurs between the date hereof and the Closing Date and is disclosed by notice
to the other party as aforesaid (in which case such other party shall not be
indemnified hereunder following the Closing for Losses arising from such event
or material failure). Without limiting the generality of the foregoing, from the
date hereof through the Closing Date, each of the Sellers, on the one hand, and
the Purchaser, on the other hand, shall promptly notify the other of any action,
suit, claim, proceeding or investigation of the type required to be described in
Section 3.13 or Section 4.5 of the Company Disclosure Schedule that is commenced
or, to its Knowledge, threatened, and of any request for additional information
or documentary materials by any Governmental Entity in connection with the
transactions contemplated hereby.
5.6 PUBLIC ANNOUNCEMENTS. Each party hereto shall notify the other
parties hereto prior to issuing any press release or making any public statement
pertaining to this Agreement or the transactions contemplated hereby, and shall
not issue any such press release or make any such public statement without
obtaining the reasonable approval of the other parties prior thereto, except
that each party will in any event have the right to issue any such release or
statement upon advice of its counsel that such issuance is required in order to
comply with applicable law or stock exchange rules.
5.7 NO SOLICITATION. The Sellers, the Company, their Affiliates and
their respective officers, directors, employees, Representatives and agents
shall immediately cease, and not resume without the Purchaser's prior written
consent, any existing discussions, communications or negotiations, if any, with
any Persons ("Prior Bidders"), other than the Purchaser and its Representatives,
conducted heretofore with respect to any direct or indirect
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acquisition of all or any material portion of the assets, Properties or
liabilities of, or any capital stock (including, without limitation, the Shares)
or other equity interest in, the Company and its Subsidiaries or any business
combination with the Company or any of its Subsidiaries (whether by merger,
consolidation, aggregate excess, bulk or assumption reinsurance, or otherwise)
or any other transaction inconsistent with consummation of, or similar in whole
or in part to, the transactions contemplated herein (any of the foregoing, an
"Alternative Transaction"), and will not, without the Purchaser's prior written
consent, directly or indirectly, solicit, encourage, participate in or initiate
discussions or negotiations with, or provide any information or documents to, or
otherwise cooperate in any way with, any Person (other than the Purchaser and
its Representatives) concerning any Alternative Transaction. The Company and
each Seller shall notify the Purchaser orally and in writing if any proposal
relating to an Alternative Transaction (an "Alternative Transaction Proposal")
is received by it or its Affiliates, or if any inquiry is received by, any
information is requested from, or any discussions or negotiations are sought to
be initiated or continued with, any of the foregoing Persons in connection with
an Alternative Transaction or Alternative Transaction Proposal, promptly after
receipt of such Alternative Transaction Proposal, inquiry, request or other
communication. Such written notification shall include (i) the identity (unless
such party is bound by a pre-existing confidentiality agreement not to disclose
the identity of such Person) of the Person making such Alternative Transaction
Proposal, inquiry, request or other communication and such other information
with respect thereto as is reasonably necessary to apprise the Purchaser of the
precise nature of such inquiry, request or other communication, (ii) the
material terms of such Alternative Transaction Proposal, and (iii) all other
material information relating thereto. Notwithstanding anything to the contrary
contained in this Section 5.7, the Company or the Sellers and their respective
Affiliates and Representatives shall be permitted to solicit, encourage and
participate in discussions and negotiations with third parties regarding, and
provide information to third parties with respect to, the Pre-Closing Transfers,
the matters set forth in Section 5.7 of the Company Disclosure Schedule and,
subject to Purchaser's approval rights as therein set forth, the matters
described in Section 5.18 hereof.
5.8 INTERIM FINANCIAL STATEMENTS AND INVESTMENT REPORTS.
(a) From the date hereof until the Closing Date, as soon as practicable
after they become available (and in any event within ninety (90) days after the
end of each annual period or forty-five (45) days after the end of each calendar
quarter and each calendar month, as the case may be), the Company shall deliver
to the Purchaser true and complete copies of:
(i) (A) to the extent prepared, the consolidated balance sheet of
the Company and its Subsidiaries as at the end of each quarterly or annual
period ending on or after the date hereof, and the related consolidated
statements of income, changes in stockholder's equity and cash flows of the
Company and its subsidiaries for such quarterly or annual period and the portion
of the fiscal year through the end of such period, and (B) all monthly
consolidated financial statements and financial and investment reporting
packages of the Company (collectively, the "Interim Financial Statements"); and
(ii) (A) the statutory quarterly or annual statement of each of
the Company's Subsidiaries as filed with the Delaware Department of Insurance or
the Maryland Insurance Administration for each quarterly or annual period ending
on or after the date hereof, including in each case all exhibits,
interrogatories, notes and schedules thereto and any actuarial
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opinion, affirmation or certification filed in connection therewith and (B) to
the extent prepared, all monthly statutory-basis financial statements of the
Company's Subsidiaries (collectively, the "Interim Statutory Statements").
(b) The Interim Financial Statements shall be accompanied by a
certificate of the Company, duly executed by the Chief Financial Officer of the
Company, to the effect that such statements have been prepared in accordance
with the books and records of the Company and its Subsidiaries and have been
prepared in accordance with GAAP consistently applied throughout the periods
involved (and on a basis consistent with the Financial Statements), and that the
Company has no Knowledge of any reason that the Interim Financial Statements do
not present fairly the financial position of the Company and its Subsidiaries as
at the respective dates thereof and the results of operations of the Company and
its Subsidiaries for the respective periods then ended, except that quarterly
and monthly Interim Financial Statements will not be required to contain full
footnote disclosures in accordance with GAAP and may be subject to normal
recurring year-end audit adjustments; PROVIDED, HOWEVER, that the foregoing
certification may provide that no such statement shall represent any assurance
as to the adequacy of any reserve for insurance or reinsurance losses, loss
adjustment expenses or uncollectible reinsurance held by the Company or any of
its Subsidiaries nor any assurance that every insurance and reinsurance coverage
heretofore written or assumed (whether or not Material) has been taken into
consideration in calculating such reserves.
5.9 TAX MATTERS.
(a) The Company shall, and the Sellers shall cause the Company and/or
its Subsidiaries to, prepare and file all Tax Returns of or including the
Company and/or its Subsidiaries that are required to be filed (with extensions)
on or before the Closing Date. All such Tax Returns: (i) will be prepared in the
manner required by applicable law; (ii) will be true, correct, and complete in
all materials respects; and (iii) will reflect the liability for Taxes of the
Company and any of its Subsidiaries for the Taxable Periods comprised in such
Tax Returns. All such Tax Returns will be made and filed by the Sellers, the
Company, and its Subsidiaries in a manner consistent with the prior practice of
the Sellers, the Company and its Subsidiaries. The Company shall not make, and
the Sellers shall prevent the Company and its Subsidiaries from making, any new
tax elections after the execution of this Agreement and through the Closing Date
without obtaining the prior written consent of the Purchaser.
(b) All Tax Returns of or including the Company and its Subsidiaries
that are required to be filed after the Closing Date shall be prepared and filed
by the Purchaser, the Company or the Company's Subsidiaries, as the case may.
(c) All transfer, sales, use, recordation, stamp or similar Taxes
required to be paid in connection with the transactions contemplated herein,
including the sale and delivery to the Purchaser of the Shares, shall be paid by
the party upon whom such Taxes are imposed by any law or regulation.
(d) To the extent available in the records of the Company or its
Subsidiaries, true and complete copies of all Tax Returns and all schedules
thereto (or relevant portions thereof) filed by, on behalf of, or with respect
to the Company and its Subsidiaries with any taxing authority for all Taxable
Periods ending on or before the Closing Date, and all written
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communications relating to all such Tax Returns (including revenue agent's
reports, settlement agreements, compromise agreements, and the like), will be
made available to the Purchaser by the Company for inspection upon its request.
After the Closing Date, the Purchaser, on the one hand, and the Sellers, on the
other hand, each shall make available (or cause their respective Affiliates to
make available) to the other, as reasonably requested, and to any taxing
authority, all information, records or documents relating to Taxes of the
Company and its Subsidiaries for all periods ending on or before the Closing
Date, and shall preserve (or shall cause the Company and its Subsidiaries to
preserve) all such information, records and documents in accordance with their
generally applicable record retention policy.
(e) From the date hereof to and including the Closing Date, neither the
Company nor any of its Subsidiaries shall file any Material Tax Return or make
any Material Tax election without the prior written consent of Purchaser, which
consent will not be unreasonably withheld. The Company will provide Purchaser
with at least seventy-two (72) hours in which to consider any such Tax Return or
Tax election.
(f) From the date hereof to and including the Closing Date, neither the
Company nor any of its Subsidiaries will take any action, other than the sale of
insurance company investments in the ordinary course of business, which might
reasonably be expected to result in a material change in the net operating loss
carryover or the excess loss account attributes of the Company, the Company
Group or any Subsidiary of the Company.
5.10 EMPLOYEE BENEFIT MATTERS.
(a) WELFARE BENEFITS. The Purchaser shall provide for the waiver under
the Purchaser's welfare benefit plans covering Employees on and after the
Closing Date of any conditions to coverage with respect to preexisting medical
conditions and shall credit Employees with any amounts paid prior to the Closing
Date in order to satisfy applicable deductible amounts and co-payment minimums
under the corresponding welfare benefit plans of the Purchaser.
(b) CREDIT. The Purchaser shall credit for all purposes under any
benefit plans covering the Employees the service credited through the Closing
Date under the Plans as if such service had been rendered to the Purchaser.
(c) WARN. The Purchaser shall cause the Company and its Subsidiaries to
comply with the requirements of WARN and any similar state notification laws
with respect to any loss of employment concerning the Employees that takes place
on or after the Closing Date.
(d) THIRD-PARTY RIGHTS. No provision of this Section 5.10 shall create
any third-party beneficiary rights in any employee or former employee (including
any beneficiary or dependent thereof) of the Sellers, any of their Affiliates,
or the Company or its Subsidiaries, in respect of continued employment (or
resumed employment) for any specified period of any nature or kind whatsoever,
and no provision of this Section 5.10 shall create such third-party beneficiary
rights in any such persons in respect of any benefits that may be provided,
directly or indirectly, under any employee benefit plan or arrangement,
including the current Plans.
5.11 INSURANCE COVERAGE. The Sellers will cooperate with the Purchaser
in obtaining, at the expense of the Purchaser or (after the Closing) the
Company, continued or
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replacement insurance coverage, effective as of the Closing Date, providing
coverage to the Company and its Subsidiaries comparable to that provided by the
policies and Contracts currently insuring the business, operations, Properties,
directors, officers and employees of the Company and its Subsidiaries. Without
limiting the generality of the foregoing, the Company will provide such
information, and cause the Company and its Subsidiaries to complete and execute
such applications, as may be reasonably necessary to arrange for such
continuation or replacement insurance coverage.
5.12 INTERCOMPANY ACCOUNTS; AFFILIATE AGREEMENTS. Except as set forth
in Section 5.12 of the Company Disclosure Schedule and as otherwise provided
herein, each Seller (severally and not jointly) and the Company shall cause all
intercompany accounts receivable or payable (whether or not currently due or
payable) between (a) the Company and its Subsidiaries (other than the Excluded
Subsidiaries), on the one hand, and (b) any of the Sellers or their other
Affiliates, or any of the officers or directors of any of the Sellers or their
Affiliates, on the other hand, to be settled in full (without any premium or
penalty, and at values mutually agreed upon by the parties hereto) at or prior
to the Closing. Except as set forth in Section 5.12 of the Company Disclosure
Schedule and as otherwise provided herein, all Affiliate Agreements shall be
terminated and discharged without any further Liability or obligation thereunder
effective at or prior to the Closing, upon terms and pursuant to instruments
reasonably satisfactory to the Purchaser.
5.13 CORPORATE RECORDS. At or prior to the Closing, each Seller shall
deliver to the Company all minute books, stock ledgers, stock books, cancelled
or unused stock certificates, corporate seals, books, records, files, policy
forms, stationery, software, data, documents and Properties of the Company and
any of its Subsidiaries that are in the possession of such Seller or its other
Affiliates. The Company will, and will cause its Subsidiaries to, maintain the
foregoing books, records and other items intact at all times prior to the
Closing.
5.14 INSTRUMENTS. Each Seller agrees, severally and not jointly, that
any monies, checks, drafts, money orders, postal notes and other instruments
received after the Closing by such Seller or its Affiliates (other than the
Company and its Subsidiaries) in payment of any amounts due the Company or any
of its Subsidiaries shall be forthwith after receipt by such Seller or such
Affiliates thereof be transferred and delivered by such Sellers and such
Affiliates to the Company or such Subsidiary, as appropriate, and any such
instruments made payable to such Seller or such Affiliates when so delivered
shall bear all endorsements required to effectuate the transfer of the same to
the Company or such Subsidiary, as the case may be.
5.15 SEVERANCE AND RETENTION BONUSES FOR CERTAIN COMPANY EMPLOYEES. The
Company shall use reasonable best efforts to enter into agreements in the form
attached hereto as EXHIBIT F ("Bonus Agreements") with the Employees set forth
on Section 5.15 of the Company Disclosure Schedule (the "Participating
Employees") providing for (i) the payment to each Participating Employee of a
cash bonus (a "Bonus") at the Closing Date, and (ii) a release and waiver in
favor of the Company and its Subsidiaries with respect to all claims related to
such Participating Employee's employment with the Company and
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its Subsidiaries. Any such Participating Employee will forfeit his or her Bonus
if (i) in the reasonable judgment of each of Robert Rothman or his successor
("Rothman") and Purchaser, such Participating Employee has failed to reasonably
cooperate in good faith with the Purchaser and its Representatives prior to the
Closing Date or (ii) such Participating Employee is no longer employed by the
Company and its Subsidiaries on the Closing Date by reason of such Participating
Employee's voluntary termination or termination for cause. The aggregate amount
of the Bonuses paid by the Company hereunder will not exceed two million one
hundred thousand dollars ($2,100,000). No Participating Employee shall receive a
Bonus unless and until such Participating Employee executes a Bonus Agreement
and has no right to revoke the Bonus Agreement pursuant to Section 4 thereof.
The Company may amend its 401(k) plan prior to the Closing to provide that
additional amounts, which in the aggregate total no more than ten thousand
dollars ($10,000), will be vested upon the Closing, in the accounts of the
Participating Employees.
5.16 EXCLUDED ASSETS. At or prior to the Closing, upon the terms and
conditions set forth in the documents attached hereto as EXHIBITS E-1 through
E-5 and otherwise upon terms and conditions reasonably satisfactory to the
Purchaser and Rothman, Rothman shall (a) acquire, or cause a third party to
acquire, from the Company and/or its Subsidiaries, the assets of the Company
and/or its Subsidiaries set forth on Section 5.16 of the Company Disclosure
Schedule and all outstanding capital stock of the Excluded Subsidiaries (the
"Excluded Assets") at a cash purchase price equal to the GAAP carrying value of
the Excluded Assets determined as of the Closing Date (in a manner reasonably
consistent with that employed in preparing the balance sheet contained in the
Financial Statements of the Company dated December 31, 1998) less one million
dollars ($1,000,000), and net of payables and accrued expenses related thereto
as of the Closing Date, and (b) assume, or cause a third party to assume, from
the Company and/or its Subsidiaries the foregoing payables and accrued expenses,
together with all contractual or legal obligations of the Company and/or its
Subsidiaries related thereto to the extent described in Section 5.16 of the
Company Disclosure Schedule or related to the assets of the Excluded
Subsidiaries (the "Excluded Liabilities") (such acquisitions and assumptions,
collectively, the "Pre-Closing Transfers"). The Excluded Assets and Excluded
Liabilities may be transferred to a corporate or other legal entity (which may
be formed by the Company), beneficial ownership of which in turn is transferred
to Rothman or his designee in a deemed asset sale under Section 338(h)(10) of
the Code, in order to effect the Pre-Closing Transfers.
5.17 STOCKHOLDER ACTION. The Sellers and the Company shall exercise any
and all rights under the Company's charter documents, Contracts or otherwise to
cause all shares of capital stock of the Company to be sold to the Purchaser at
the Closing.
5.18 CERTAIN TRANSACTION. Prior to the Closing Date, the Company shall,
and the Sellers shall cause the Company to, use its reasonable best efforts to
cause the subleasing of the Company's office space located at 1 Landmark Square,
Stamford, Connecticut for a rental amount not less than the prevailing market
rental amount for comparable office space in Stamford, Connecticut.
5.19 NAME CHANGE. Upon the Closing, the Purchaser shall cause the
Company to change its name to a name not including "Consolidated International"
or similar thereto, and to assign all of its right, title and interest in such
name to Rothman, as soon as practicable following the Closing.
5.20 DIRECTOR AND OFFICER INDEMNIFICATION. After the Closing Date, the
Purchaser will cause the Company or any successor thereto to indemnify and hold
harmless the present and former officers and directors of the Company in respect
of acts or omissions occurring at or prior to the Closing Date to the same
extent provided on the date of this
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Agreement under the Company's Certificate of Incorporation and Bylaws in effect
on the date hereof.
ARTICLE VI
CONDITIONS TO THE OBLIGATION
OF THE PURCHASER TO CLOSE
The obligation of the Purchaser to purchase the Shares at the Closing
shall be subject to the satisfaction of the following conditions at or prior to
the Closing:
6.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations and
warranties of the Sellers and the Company contained in this Agreement which are
qualified as to materiality shall be true and correct in all respects, and those
not so qualified shall be true and correct in all material respects, as of the
date of this Agreement and, except for any such representations and warranties
which are made as of and relate solely to a particular date other than the date
hereof, as of the Closing Date with the same force and effect as though made on
and as of the Closing Date. Each of the Sellers and the Company shall have
performed and complied in all material respects with all covenants and
agreements required to be performed or complied with by such parties hereunder
on or prior to the Closing Date.
6.2 CONSENTS. All Consents required in connection with the purchase and
sale of the Shares and the consummation of the Closing (other than non-material
Consents from third parties which are not Governmental Entities) shall have been
duly obtained, made or given and shall be in full force and effect, without the
imposition upon the Purchaser, the Company or any of the Company's Subsidiaries
of any material condition, restriction or required undertaking (other than
conditions, restrictions or undertakings customarily required by insurance
regulatory authorities in transactions such as the Purchaser's acquisition of
the Shares) not expressly set forth in applicable statutes and regulations.
Without limiting the generality of the foregoing, the Purchaser shall have
obtained the approvals of the Delaware Department of Insurance, the California
Department of Insurance and the Maryland Insurance Administration for the
consummation of the transactions contemplated hereby (including the purchase of
the Shares and the other transactions and arrangements described in Section 4.4
of the Purchaser Disclosure Schedule) under all applicable laws and regulations,
and such approvals shall be valid and in full force and effect, and no such
approval shall impose upon the Purchaser or the Company or any of the Company's
Subsidiaries any conditions or restrictions which adversely impair the ability
of any of them to conduct their business in substantially the same manner as
such business is now being conducted.
6.3 NO INJUNCTION OR ILLEGALITY. No injunction, order, decree or
judgment shall have been issued by any Governmental Entity of competent
jurisdiction and be in effect, and no statute, rule or regulation shall have
been enacted or promulgated by any Governmental Entity and be in effect, which
in each case restrains or prohibits the consummation of the purchase and sale of
the Shares or any of the transactions or arrangements described in Section 4.4
of the Company Disclosure Schedule.
6.4 HSR ACT. The required waiting period applicable to the purchase and
sale of the Shares under the HSR Act shall have expired or been earlier
terminated.
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6.5 OPINIONS OF COUNSEL TO THE SELLERS. The Purchaser shall have
received opinions, each dated the Closing Date, of (a) LeBoeuf, Lamb, Greene &
MacRae, special counsel to certain of the Sellers and the Company, substantially
in the form of EXHIBIT B-1 hereto and (b) the Bayard Firm, special counsel to
the Sellers and the Company, substantially in the form of EXHIBIT B-2 hereto.
6.6 CERTIFICATES. The Company shall have delivered to the Purchaser a
certificate dated the Closing Date, signed by an executive officer thereof,
certifying as to the fulfillment of the conditions set forth in Sections 6.1 and
6.2. In addition, the Sellers and the Company shall have furnished the Purchaser
with such other certificates and closing documents as the Purchaser may
reasonably request and as are customary for transactions such as those
contemplated hereby.
6.7 RESIGNATION OF DIRECTORS. Any directors of the Company and the
Company's Subsidiaries who are designated by the Purchaser for replacement,
shall have delivered to the Purchaser their written resignations as directors of
such companies, effective upon the Closing.
6.8 PRE-CLOSING TRANSFERS. Rothman shall have acquired and assumed, or
have caused a third party to acquire and assume, the Excluded Assets and
Excluded Liabilities, as the case may be, in accordance with the terms set forth
in Section 5.16 substantially in the form of EXHIBIT E attached hereto (and
provided that such agreements and instruments may not be amended, terminated or
modified without the prior written consent of the Purchaser) or, if Rothman
shall have failed to so effect the Pre-Closing Transfers, the Purchaser may, in
its sole discretion, deliver to Rothman possession of the Excluded Assets along
with appropriate documents evidencing transfer of title to the Excluded Assets
and deduct from the aggregate consideration otherwise payable to the Sellers
pursuant to Section 2.3 an amount equal to (i) the aggregate GAAP carrying value
of such assets determined as of the Closing Date in a manner consistent with
that employed in preparing the Financial Statements dated as of December 31,
1998 plus (ii) a reasonable estimate of the potential Liability arising from the
Excluded Liabilities.
6.9 FIRPTA CERTIFICATE. The Company shall, prior to the Closing Date,
provide Purchaser with a properly executed FIRPTA Certificate, substantially in
the form of EXHIBIT D attached hereto, which states that shares of capital stock
of the Company do not constitute "United States real property interests" under
Section 897(c) of the Code, for purposes of satisfying Purchaser's obligations
under Treasury Regulation Section 1.1445-2(c)(3). In addition, simultaneously
with delivery of such Certificate, the Company shall have provided to Purchaser,
as agent for the Company, a form of notice to the Internal Revenue Service in
accordance with the requirements of Treasury Regulation Section 1.897-2(h)(2)
and substantially in the form of EXHIBIT D attached hereto along with written
authorization for Purchaser to deliver such notice form to the Internal Revenue
Service on behalf of the Company upon the Closing.
6.10 ESCROW AGREEMENT. The Sellers' Representative and the Escrow Agent
shall have executed and delivered to the Purchaser the Escrow Agreement.
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ARTICLE VII
CONDITIONS TO THE OBLIGATIONS
OF THE SELLERS TO CLOSE
The obligations of the Sellers to sell the Shares at the Closing shall
be subject to the satisfaction of the following conditions at or prior to the
Closing:
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations and
warranties of the Purchaser contained in this Agreement which are qualified as
to materiality shall be true and correct in all respects, and those not so
qualified shall be true and correct in all material respects, as of the date of
this Agreement and, except for any such representations and warranties which are
made as of and relate solely to a particular date other than the date hereof, as
of the Closing Date with the same force and effect as though made on and as of
the Closing Date. The Purchaser shall have performed and complied in all
material respects with all covenants and agreements required to be performed or
complied with by the Purchaser hereunder on or prior to the Closing Date.
7.2 CONSENTS. All Consents required in connection with the purchase and
sale of the Shares and the consummation of the Closing (other than non-material
Consents from third parties which are not Governmental Entities) shall have been
duly obtained, made or given and shall be in full force and effect, without the
imposition upon the Sellers of any material condition, restriction or required
undertaking (other than conditions, restrictions or undertakings customarily
required by insurance regulatory authorities in transactions such as the
Purchaser's acquisition of the Shares) not expressly set forth in applicable
statutes and regulations.
7.3 NO INJUNCTION OR ILLEGALITY. No injunction, order, decree or
judgment shall have been issued by any Governmental Entity of competent
jurisdiction and be in effect, and no statute, rule or regulation shall have
been enacted or promulgated by any Governmental Entity and be in effect, which
in each case restrains or prohibits the consummation of the purchase and sale of
the Shares.
7.4 HSR ACT. The required waiting period applicable to the purchase and
sale of the Shares under the HSR Act shall have expired or been earlier
terminated.
7.5 OPINION OF COUNSEL TO THE PURCHASER. The Sellers shall have
received the opinion of Brobeck, Phleger & Harrison LLP, special counsel to the
Purchaser, dated the Closing Date, substantially in the form attached hereto as
EXHIBIT C.
7.6 CERTIFICATES. The Purchaser shall have delivered to the Sellers a
certificate dated the Closing Date, signed by an executive officer thereof,
certifying as to the fulfillment of the conditions set forth in Section 7.1.
7.7 ESCROW AGREEMENTS. The Purchaser shall have executed and delivered
to the Sellers the Escrow Agreement.
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ARTICLE VIII
INDEMNIFICATION
8.1 SURVIVAL. The representations and warranties of the parties
contained in this Agreement, or in any Schedule or Exhibit hereto or any
certificate delivered pursuant hereto, shall survive until December 31, 2000;
provided, however, that the representations and warranties set forth in Sections
3.20 (Employee Benefit Plans) and 3.21 (Tax Matters) with respect to any Tax
shall survive the Closing and shall terminate and expire on the later to occur
of (i) the lapse of the statute of limitations with respect to the assessment of
such Tax (including any extensions thereof) and (ii) sixty (60) days after the
final administrative or judicial determination thereof. All other
indemnification obligations pursuant to Section 8.2 shall survive until December
31, 2000; provided, however that (i) the indemnification obligations of the
Sellers pursuant to Section 8.2(a) with respect to Section 5.6 (Public
Announcements) and 5.11 (Instruments) and with respect to the last sentence of
Section 5.9(d) (Tax Matters), (ii) the indemnification obligations of the
Purchaser pursuant to Section 8.2(b) with respect to Sections 5.6 (Public
Announcements), 5.10 (Employee Benefits) and 5.20 (Director and Officer
Indemnification) and with respect to the last sentence of Section 5.9(d) (Tax
Matters), and (iii) the provisions of this Article VIII and of Article X, shall
survive indefinitely.
8.2 INDEMNIFICATION.
(a) The Sellers hereby severally and not jointly agree to indemnify,
defend and hold harmless the Purchaser (and its directors, officers, Affiliates,
successors and assigns) from and against any losses, Liabilities, damages, costs
or expenses, including, without limitation, interest, penalties and reasonable
fees and expenses of counsel (collectively, "Losses"), asserted in the manner
prescribed in Section 8.4(a) during the survival periods referred to in Section
8.1, based upon, arising out of or otherwise resulting from (i) any inaccuracy
in any representation or breach of any warranty of any of the Sellers or the
Company (without regard to any qualification as to materiality or Material
Adverse Effect) contained in this Agreement or in any Schedule hereto or
certificate delivered pursuant hereto or (ii) the breach or non-fulfillment of
any covenant, agreement, or other obligation of any of the Sellers or the
Company under this Agreement or (iii) the Excluded Liabilities and the
Pre-Closing Transfers or (iv) the Covered Disposition Transactions (regardless
of any information contained in the Company Disclosure Schedule except for those
transactions identified as "Not Covered Disposition Transactions" in Section
3.24 thereof); PROVIDED, HOWEVER, that the Sellers shall have no obligation to
indemnify the Purchaser for any Tax obligations arising out of actions the
Purchaser shall take or cause to be taken after the Closing on the Closing Date
or to indemnify the Purchaser for reductions in loss carryovers of the Company
Group for federal income Tax purposes that do not result in any actual Tax
Liability for periods through the Closing Date; and PROVIDED, FURTHER, that,
except with respect to any breach of any representation or warranty set forth in
Sections 3.6(b) (Subsidiaries) (last two sentences only), 3.7(a)
(Capitalization), and 3.8 (Title to Shares), (A) the Purchaser (and its
directors, officers, Affiliates, successors and assigns) shall be entitled to
indemnification under this Section 8.2 only if (i) the aggregate amount of
Losses arising out of any single breach or inaccuracy of any representation or
breach of any warranty, any single breach or non-fulfillment of any covenant,
agreement or other obligation, or any single claim with respect to the Excluded
Liabilities, Pre-Closing Transfers and Covered Disposition Transactions, as the
case may be (in each case, a "Single Claim"), exceeds $250,000 (the "Basket
Amount"), and (ii) the aggregate amount of all such Losses (determined without
regard to the Basket Amount)
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exceeds $1,000,000 (the "Threshold Amount"), in which event the Purchaser (and
its directors, officers, Affiliates, successors and assigns) shall be entitled
to indemnification for all such Losses for each Single Claim which are in excess
of the Basket Amount for such Single Claim and are in excess of the Threshold
Amount for all claims under this paragraph, and (B) the Purchaser (and its
directors, officers, Affiliates, successors and assigns) shall only be entitled
to indemnification to the extent provided in this Section 8.2 for fees and
expenses of one counsel and any appropriate local counsel (determined by the
Purchaser) arising from each Third Party Claim. The Sellers shall in no event be
liable under this Section 8.2 for Losses in excess of five million dollars
($5,000,000); and PROVIDED FURTHER, that the liability of each Seller under this
Section 8.2 for any Losses shall be limited to a pro rata portion of such Losses
determined in proportion to such Seller's percentage beneficial ownership
interest in the Shares, except in respect of the breach of any Seller Specific
Representation as it relates to a specific Seller as to which (y) such specific
Seller shall be the only Seller liable for such breach and (z) such Seller shall
be liable to the extent provided herein (without regard, however, to the
Threshold Amount) for all related Losses arising from such breach.
(b) The Purchaser hereby agrees to indemnify, defend and hold harmless
the Sellers (and their directors, officers, Affiliates, successors and assigns)
from and against any Losses asserted during the survival periods referred to in
Section 8.1, based upon, arising out of or otherwise resulting from (i) any
inaccuracy in any representation or breach of any warranty of the Purchaser
(without regard to any qualification as to materiality) contained in this
Agreement or in any Schedule hereto or certificate delivered pursuant hereto or
(ii) the breach or non-fulfillment of any covenant, agreement or other
obligation of the Purchaser under this Agreement; PROVIDED, HOWEVER, that (A)
the Sellers (and their directors, officers, Affiliates, successors and assigns)
shall be entitled to indemnification under this Section 8.2 only if (i) the
aggregate amount of Losses arising out of any Single Claim exceeds the Basket
Amount and (ii) the aggregate amount of all such Losses (determined without
regard to the Basket Amount) exceeds the Threshold Amount, in which event the
Sellers shall be entitled to indemnification for all such Losses for each Single
Claim which are in excess of the Basket Amount for such Single Claim and are in
excess of the Threshold Amount for all claims under this paragraph, and (B) the
Sellers (and their directors, officers, Affiliates, successors and assigns)
shall only be entitled to indemnification to the extent provided in this Section
8.2 for fees and expenses of one counsel and appropriate local counsel
(determined by the Sellers) arising from each Third Party Claim. The Purchaser
shall not in any event be liable under this Section 8.2 for Losses in excess of
five million dollars ($5,000,000).
(c) Promptly after the receipt by any party hereto of notice of any
third party claim or the commencement of any third party action, suit or
proceeding subject to indemnification hereunder (a "Third Party Claim"), such
party (the "Indemnified Party") will, if a claim in respect thereto is to be
made against any party obligated to provide indemnification hereunder (the
"Indemnifying Party"), give such Indemnifying Party reasonable written notice of
such Third Party Claim; provided, however, that the failure to provide such
notice will not relieve the Indemnifying Party of any of its obligations, or
impair the right of the Indemnified Party to indemnification, pursuant to this
Section 8.2 unless, and only to the extent that, such failure materially
prejudices the Indemnifying Party's opportunity to defend or compromise the
Third Party Claim. Such Indemnifying Party shall have the right, at its option,
to defend at its own expense (unless otherwise agreed to in writing by the
Indemnified Party and subject to the conditions of such agreement) and by its
own counsel any Third Party Claim, provided that (i)
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the Indemnifying Party acknowledges in writing (at the time it elects to assume
such defense) its obligation under this Section 8.2 to indemnify the Indemnified
Party with respect to such Third Party Claim, (ii) such counsel is reasonably
satisfactory to the Indemnified Party, (iii) the Indemnified Party is kept fully
informed of all developments, and is furnished with copies of all documents and
papers, related thereto and is given the right to participate in the defense and
investigation thereof as provided below, and (iv) such counsel proceeds with
diligence and in good faith with respect thereto. If any Indemnifying Party
shall undertake to defend any Third Party Claim, it shall notify the Indemnified
Party of its intention to do so promptly (and in any event no later than thirty
(30) days) after receipt of notice of the Third Party Claim, and the Indemnified
Party agrees to cooperate in good faith with the Indemnifying Party and its
counsel in the defense of such Third Party Claim. Notwithstanding the foregoing,
the Indemnified Party shall have the right to participate in the defense and
investigation of any Third Party Claim with its own counsel at its own expense,
except that the Indemnifying Party shall bear the reasonable expense of such
separate counsel if (A) in the written opinion of counsel to the Indemnified
Party reasonably acceptable to the Indemnifying Party, use of counsel of the
Indemnifying Party's choice would be expected to give rise to a conflict of
interest, (B) there are or may be legal defenses available to the Indemnified
Party that are different from or additional to those available to the
Indemnifying Party, (C) the Indemnifying Party shall not have employed counsel
to represent the Indemnified Party within a reasonable time after notice of the
Third Party Claim is given to the Indemnifying Party or notice that the
Indemnifying Party intends to assume the defense of the Third Party Claim is
given to the Indemnified Party or (D) the Indemnifying Party shall authorize the
Indemnified Party to employ separate counsel at the expense of the Indemnifying
Party. The Indemnifying Party shall not settle any Third Party Claim without the
prior written consent of the Indemnified Party, which shall not be unreasonably
withheld; provided, however, that an Indemnified Party shall not be required to
consent to any settlement involving the imposition of equitable remedies.
(d) Nothing contained in this Agreement shall limit any party's
remedies for fraud.
(e) Notwithstanding anything to the contrary contained in this
Agreement, the Sellers, acting through the Sellers' Representative, shall have
the right to cause (i) the payment of funds from the Escrow Fund to the
Purchaser to provide for the satisfaction of claims for indemnification by the
Purchaser, and (ii) the payment of funds to the Indemnifying Party from the
Escrow Fund in an aggregate amount in respect of expenses incurred by the
Indemnifying Party pursuant to Section 8.2(c) ("Section 8.2(c) Expenses") to the
extent agreed to in writing by the Indemnified Party. The Purchaser agrees to
join with the Sellers' Representative from time to time to provide appropriate
written instructions to the Escrow Agent for payment of Section 8.2(c) Expenses
in accordance with any such written agreement under the preceding sentence upon
the Purchaser being satisfied that such expenses were appropriately incurred in
accordance with such written agreement.
8.3 INDEMNITY ESCROW. To provide one method of payment of its indemnity
obligations under this Article VIII, at the Closing the Sellers shall enter into
an escrow agreement substantially in the form attached hereto as Exhibit A (the
"Escrow Agreement") with the Purchaser and Wilmington Trust Company (the "Escrow
Agent") pursuant to which a portion of the total Purchase Price for the Shares
in an aggregate amount equal to five million dollars ($5,000,000) will be set
aside from the Purchase Price on a pro rata basis and deposited into a
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separate account at Closing and be held by the Escrow Agent pursuant to the
terms of the Escrow Agreement. As more fully set forth in the Escrow Agreement,
the funds (and any and all interest and income thereon not previously
distributed to the Sellers) held pursuant to the Escrow Agreement shall be
released to the Sellers, on a pro rata basis, on December 31, 2000, except to
the extent a claim has been made by the Purchaser pursuant to Section 8.2 or
Section 8.3 prior to such date and has not been resolved. Any and all interest
and other income earned on the funds held pursuant to the Escrow Agreement
during any calendar quarter ending after the Closing Date and ending prior to
the final release of such funds shall be distributed to the Sellers within
thirty (30) days after the end of such calendar quarter.
8.4 MISCELLANEOUS.
(a) Unless otherwise provided herein, any party seeking an indemnity
payment pursuant to Section 8.2 from another party, shall deliver to the other
party (or to the Sellers' Representative in the case of the Sellers) written
notice of claim for such indemnity payment, which notice shall include a
detailed description of the basis for the claim and a detailed calculation of
the amount of the requested indemnity payment (the "Indemnity Claim"). To the
extent that the notified party objects to the computation of the indemnity
payment requested or to the validity of the claim, the notified party shall
provide a written objection to the party seeking an indemnity payment within
twenty (20) Business Days after receipt of the Indemnity Claim from the party
seeking an indemnity payment, which notice shall include any objection to the
computation of the indemnity amount or the validity of the claim. Both parties
shall negotiate in good faith to resolve any matters in dispute. If the Sellers
and the Purchaser are unable to resolve any matters in dispute within twenty
(20) Business Days after the receipt by the party seeking an indemnity payment
of the other party's objection to the calculation of the indemnity amount or the
validity of the claim, such disputes shall be submitted to the Arbitrators or,
in the case of a claim relating to Taxes, the Tax Settlement Auditor, for
resolution. Any amount owing under Section 8.2 shall be paid before the earlier
of (x) in the absence of a dispute with respect to the calculation of the
payment due, twenty (20) Business Days after a party receives an Indemnity
Claim, or (y) in the case of a dispute, within ten (10) Business Days after the
parties settle any such dispute or receive the determination of the Arbitrators
or Tax Settlement Auditors, as the case may be, with respect to any dispute
submitted to the Arbitrators or the Tax Settlement Auditor. The parties shall
cooperate with each other and promptly make available to each other all data and
other information as may be reasonably requested by each party to substantiate
any Indemnity Claim.
(b) For purposes of this Agreement, the "Arbitrators" shall mean the
arbitrators selected in the following manner: the Purchaser and the Seller's
Representative shall each select one arbitrator, and the two arbitrators so
selected shall select a third arbitrator. The decision of the arbitrators as to
the validity and amount of any claim in such Officer's Certificate shall be
binding and conclusive upon the parties to this Agreement, and notwithstanding
anything in this Article VIII hereof, the Escrow Agent shall be entitled to act
in accordance with such decision and make or withhold payments out of the Escrow
Fund in accordance therewith. The Purchaser and the Sellers' Representative
shall each pay one-half of the fees and expenses of the Arbitrators. The
Purchaser and the Sellers' Representative will fully cooperate with the
Arbitrators to resolve any disputed matters. Any arbitration conducted hereunder
shall be so conducted in accordance with the rules and procedures of the
American Arbitration Association as then in effect.
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(c) For purposes of this Agreement, "Tax Settlement Auditor" shall mean
a nationally recognized accounting firm or a law firm mutually acceptable to the
Purchaser and the Sellers; provided, that, if the Purchaser and the Sellers'
Representative are unable to agree as to a Tax Settlement Auditor within five
(5) Business Days then the Sellers' Representatives and the Purchaser shall
select their own nationally recognized accounting firm or law firm within an
additional three (3) Business Days, which two firms shall within an additional
five (5) Business Days select a third nationally recognized accounting firm or
law firm to act as Tax Settlement Auditor. Unless otherwise indicated, the Tax
Settlement Auditor's resolution of any disputed item under this Agreement shall
in each case be reflected in a written report which will be delivered to the
Purchaser and the Sellers (on the same day) as soon as reasonably practicable
after the dispute was submitted to the Tax Settlement Auditor. The Tax
Settlement Auditor's resolution of any dispute will be final and binding upon
the Sellers and the Purchaser and the Sellers' Representative and the Purchaser
will each pay one-half of the fees and expenses of the Tax Settlement Auditor.
The Sellers, the Sellers' Representative and the Purchaser will fully cooperate
with the Tax Settlement Auditor to resolve any disputed matters.
(d) Notwithstanding anything to the contrary contained in this
Agreement, after the Closing, neither the Company nor any of its Subsidiaries
shall have any liability to any party hereto based upon any inaccuracy of its
representations and warranties contained in this Agreement or in any schedule or
exhibit hereto or any certificate delivered pursuant hereto, or any breach or
non-fulfillment of any covenant, agreement or other obligation of the Company
and/or its Subsidiaries pursuant to this Agreement that occurred prior to the
Closing, and no party shall have any right to contribution or indemnity from the
Company or any of its Subsidiaries with respect thereto.
8.5 SELLERS' REPRESENTATIVE.
(a) The Sellers hereby constitute and appoint Rothman as representative
("Sellers' Representative) for and on behalf of the Sellers to execute the
Escrow Agreement, to give and receive notices and communications, to authorize
payment to the Purchaser of cash or other property from the funds held in Escrow
pursuant to Section 8.3 (the "Escrow Fund") in satisfaction of claims for
indemnification by the Purchaser, to object to such payments, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of Arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of the
Sellers' Representative for the accomplishment of the foregoing. Such agency may
be changed by the holders of a majority in interest of the Escrow Fund from time
to time upon not less than ten (10) days' prior written notice to the Purchaser.
No bond shall be required of the Sellers' Representative. Notices or
communications to or from the Sellers' Representative shall constitute notice to
or from each of the Sellers.
(b) The Sellers' Representative shall not be liable for any act done or
omitted hereunder as Sellers' Representative while acting in good faith and in
the exercise of reasonable judgment, and any act done or omitted pursuant to the
advice of counsel shall be conclusive evidence of such good faith. The Sellers
shall severally indemnify the Sellers' Representative and hold him harmless
against any loss, liability or expense incurred without gross negligence or bad
faith on the part of the Sellers' Representative and arising out of or in
connection with the acceptance or administration of his duties hereunder.
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(c) The Sellers' Representative shall have reasonable access to
information about the Company and its subsidiaries and the reasonable assistance
of the Company's officers and employees for purposes of performing its duties
and exercising its rights hereunder, provided that the Sellers' Representative
shall treat confidentially and not disclose any non-public information from or
about the Company to anyone (except on a need to know basis to individuals who
agree to treat such information confidentially).
(d) A decision, act, consent or instruction of the Sellers'
Representative shall constitute a decision of all Sellers for whom cash
otherwise payable to them is deposited in the Escrow fund and shall be final,
binding and conclusive upon each such Seller, and the Escrow Agent and the
Purchaser may rely upon any decision, act, consent or instruction of the
Sellers' Representative as being the decision, act, consent or instruction of
each and every such Seller. The Escrow Agent and the Purchaser are hereby
relieved from any liability to any person for any acts done by them in
accordance with such decision, act, consent or instruction of the Sellers'
Representative.
ARTICLE IX
TERMINATION
9.1 TERMINATION OF AGREEMENT. This Agreement may be terminated prior to
the Closing:
(a) by either the Purchaser, on the one hand, or by a majority in
interest of the Sellers, on the other hand, upon written notice to the other if,
without fault of the terminating party, the Closing shall not have occurred on
or before August 31, 1999; PROVIDED, HOWEVER, that if the Closing is unable to
be consummated at such time because requisite Consents of insurance regulatory
authorities for the transactions contemplated by this Agreement have not then
been obtained and the Purchaser is diligently seeking to obtain such insurance
regulatory Consents, then the right to terminate this Agreement pursuant to this
clause (a) shall not be available to any party hereto, and the obligations
hereunder of the parties hereto shall be extended, until September 30, 1999; or
(b) at any time by mutual agreement in writing of the parties hereto.
9.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 9.1, this Agreement shall thereafter become void
and have no effect, and no party hereto shall have any liability or obligation
to any other party hereto in respect of this Agreement, except that the
provisions of Section 5.2(b) (Confidentiality), Section 5.6 (Public
Announcements), Article X (Miscellaneous), this Section 9.2 and, solely for
purposes of the next sentence, Section 8.2 (Indemnification) shall survive any
such termination. Nothing herein shall relieve any party from liability for any
breach of any of its representations, warranties, covenants or agreements
contained in this Agreement prior to termination of this Agreement or any
obligations hereunder.
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ARTICLE X
MISCELLANEOUS
10.1 NOTICES. Any notices and other communications required to be given
pursuant to this Agreement shall be in writing and shall be effective upon
delivery by hand or upon receipt if sent by certified or registered mail
(postage prepaid and return receipt requested) or by a nationally recognized
overnight courier service (appropriately marked for overnight delivery) or upon
transmission if sent by telex or facsimile (with request for immediate
confirmation of receipt in a manner customary for communications of such
respective type and with physical delivery of the communication being made by
one of the other means specified in this Section 10.1 as promptly as practicable
thereafter). Notices are to be addressed as follows:
(a) If to any of the Sellers:
Robert Rothman (as Sellers' Representative)
100 North Tampa Street
Suite 3675
Tampa, FL 33602
Telecopier No.: (813) 277-0546
with a copy to
LeBoeuf, Lamb, Greene & MacRae
50 North Laura Street
Suite 2800
Jacksonville, FL 32202
Attention: Thomas Gibbs, Esq.
Telecopy No.: (904) 353-1673
(b) If to the Purchaser to:
White Mountains Insurance Group, Inc.
80 South Main Street
Hanover, NH 03755-2053
Attention: Ray Barrette
Telecopy No.: (603) 643-4562
with a copy to:
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, CA 94303
Attention: Curtis L. Mo, Esq.
Telecopy No.: (650) 496-2715
or to such other respective addresses as any of the parties hereto shall
designate to the others by like notice, provided that notice of a change of
address shall be effective only upon receipt thereof.
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10.2 FEES AND EXPENSES. Except as provided herein, each of the parties
hereto shall pay its own respective fees and expenses (including, without
limitation, the fees of any attorneys, accountants, investment bankers or other
Representatives) incurred in connection with this Agreement and the transactions
contemplated hereby, whether or not such transactions are consummated.
Notwithstanding the foregoing, (a) the Purchaser shall be solely responsible for
the reasonable fees and out-of-pocket expenses of any legal counsel, accountants
or actuaries of the Company and its Subsidiaries to the extent incurred in
connection with the Purchaser's due diligence review of the Company and its
Subsidiaries and (b) if the Closing occurs, the Sellers shall be solely
responsible for any out-of-pocket fees and expenses payable to third party
advisors and incurred by the Company or any of its Subsidiaries in connection
with this Agreement and the transactions contemplated hereby in excess of
$400,000 in the aggregate.
10.3 CONSENT TO JURISDICTION; SERVICE OF PROCESS. Any action, suit or
proceeding arising out of or relating to this Agreement may be instituted in any
United States Federal court or any state court located in the State of Delaware
and each party agrees not to assert, by way of motion, as a defense or
otherwise, in any such action, suit or proceeding, any claim it may now or
hereafter have that it is not subject personally to the jurisdiction of such
court, that the action, suit or proceeding is brought in an inconvenient forum,
that the venue of the action, suit or proceeding is improper or that this
Agreement or the subject matter hereof may not be enforced in or by such court.
Each party further irrevocably submits to the jurisdiction of such court in any
such action, suit or proceeding, and irrevocably agrees to be bound by any final
judgment rendered thereby in connection with this Agreement from which no appeal
has been taken or is available. Any and all service of process and any other
notice in any such action, suit or proceeding shall be effective against any
party if given personally or by registered or certified mail, postage prepaid
and return receipt requested, or by personal service on such party. Nothing
contained herein shall be deemed to affect the right of any party to serve
process in any manner permitted by law or to commence legal proceedings or
otherwise proceed against any other party in any other jurisdiction.
10.4 ENTIRE AGREEMENT; WAIVERS AND AMENDMENTS. This Agreement
(including the Exhibits and Schedules hereto and the documents and instruments
referred to herein) contains the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes all prior
written or oral agreements and understandings with respect thereto. This
Agreement may only be amended or modified, and the terms hereof may only be
waived, by a writing signed by all parties hereto or, in the case of a waiver,
by the party entitled to the benefit of the terms being waived.
10.5 ASSIGNMENT; BINDING EFFECT. This Agreement may not be assigned or
delegated, in whole or in part, by any party hereto without the prior written
consent of all other parties hereto, except that the Purchaser shall have the
right at any time, without such consent, to assign its right hereunder to
purchase any or all of the Shares to any majority owned Subsidiary of the
Purchaser. Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
10.6 SEVERABILITY. In the event that any provision of this Agreement
shall be declared invalid or unenforceable by a court of competent jurisdiction
in any jurisdiction, such provision shall, as to such jurisdiction, be
ineffective to the extent declared invalid or unenforceable without affecting
the validity or enforceability of the other provisions of this
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Agreement, and the remainder of this Agreement shall remain binding on the
parties hereto. However, in the event that any such provision shall be declared
unenforceable due to its scope, breadth or duration, then it shall be modified
to the scope, breadth or duration permitted by law or Governmental Entities and
shall continue to be fully enforceable as so modified.
10.7 NO THIRD PARTY BENEFICIARIES. This Agreement is for the benefit of
the parties hereto and is not intended to confer upon any other Person any
rights or remedies hereunder.
10.8 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.
10.9 INTERPRETATION. This Agreement is the result of arms-length
negotiations between the parties hereto and has been prepared jointly by the
parties. In applying and interpreting the provisions of this Agreement, there
shall be no presumption that the Agreement was prepared by any one party or that
the Agreement shall be construed in favor of or against any one party.
10.10 CAPTIONS. The Article and Section Headings in this Agreement are
inserted for convenience of reference only, and shall not affect the
interpretation of this Agreement.
10.11 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
10.12 REASONABLE BEST EFFORTS STANDARD. Any covenant of a party to use
its "reasonable best efforts" shall not require such party to (i) incur any
unreasonable expenses, (ii) agree to materially limit or change the conduct of
its business or (iii) divest itself of any material assets or Properties, in
each case except as otherwise contemplated hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the date first written above.
WHITE MOUNTAINS INSURANCE GROUP,
INC.
By:
--------------------------------------
Name:
Title:
CONSOLIDATED INTERNATIONAL
GROUP, INC.
By:
--------------------------------------
Name:
Title:
SELLERS:
-----------------------------------------
Robert Rothman
-----------------------------------------
Joseph G. Rothman
-----------------------------------------
Nicholas G. Cooper
-----------------------------------------
Kim P. Buchanan
-----------------------------------------
Thomas E. Gibbs
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
<PAGE>
-----------------------------------------
Jay Novik
-----------------------------------------
Peter A. Scarpato
-----------------------------------------
Andrew R. Stein
-----------------------------------------
Richard C. Ryan
Youssef Family Partnership, L.P.
By:
--------------------------------------
Name:
Title:
-----------------------------------------
Mark B. Dornstauder
-----------------------------------------
John R. Garthwaite
-----------------------------------------
Raouf Girgis
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
<PAGE>
-----------------------------------------
Edward J. Holland
-----------------------------------------
Luann M. Petrellis
-----------------------------------------
Deanna Voss
-----------------------------------------
Charles L. Beale
-----------------------------------------
Michael C. Auger
-----------------------------------------
Leonard Scaglione
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
