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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
JUNE 29, 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 29, 1999 Folksamerica Holding Company, Inc., a wholly owned subsidiary
of the Registrant, announced that it had completed its previously announced
acquisition of USF Re Insurance Co. ("USF Re") from The Centris Group Inc.
("Centris") for total consideration of $92.5 million. The purchase consideration
included the issuance of a $20.8 million, five-year interest bearing note
(which may be reduced by certain adverse loss developments at USF Re post
acquisition) with the balance paid in cash.
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 dated March 31, 1999, by and
Between the Centris Group, Inc. and Folksamerica Holding
Company, Inc.
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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: July 7, 1999 By: /s/ Michael S. Paquette
----------------------------------
Michael S. Paquette
Senior Vice President and
Controller
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STOCK PURCHASE AGREEMENT
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DATED AS OF MARCH 31, 1999
BETWEEN
THE CENTRIS GROUP, INC.
AND
FOLKSAMERICA HOLDING COMPANY, INC.
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS................................................................................1
SECTION 1.01. Certain Defined Terms............................................................1
ARTICLE II PURCHASE AND SALE OF SHARES...............................................................8
SECTION 2.01. Purchase of Shares...............................................................8
SECTION 2.02. Purchase Price...................................................................9
SECTION 2.03. Closing.........................................................................13
SECTION 2.04. Payment of Principal and Interest on the Closing Note...........................13
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER............................................14
SECTION 3.01. Incorporation and Authority of the Seller.......................................14
SECTION 3.02. Incorporation and Qualification of the Company..................................15
SECTION 3.03. Capital Stock of the Company....................................................15
SECTION 3.04. Subsidiaries....................................................................16
SECTION 3.05. No Conflict.....................................................................17
SECTION 3.06. Consents and Approvals..........................................................17
SECTION 3.07. Financial Information...........................................................18
SECTION 3.08. Absence of Undisclosed Liabilities..............................................18
SECTION 3.09. Investments.....................................................................19
SECTION 3.10. Certain Events..................................................................20
SECTION 3.11. Insurance Reserve...............................................................22
SECTION 3.12. Judgments, Decrees and Orders...................................................22
SECTION 3.13. Litigation......................................................................23
SECTION 3.14. Compliance with Laws............................................................23
SECTION 3.15. Environmental, Health and Safety Compliance.....................................23
SECTION 3.16. Licenses and Permits............................................................24
SECTION 3.17. Intellectual Property Rights....................................................25
SECTION 3.18. Property........................................................................26
SECTION 3.19. Insurance.......................................................................27
SECTION 3.20. Relationships with Affiliates, Officers, Directors
and Interested Parties .........................................................27
SECTION 3.21. Assumed and Ceded Reinsurance Agreements........................................27
SECTION 3.22. Other Contracts.................................................................29
SECTION 3.23. Employee Benefit Matters........................................................31
SECTION 3.24. Labor Matters...................................................................34
SECTION 3.25. Taxes...........................................................................34
SECTION 3.26. Agents..........................................................................37
SECTION 3.27. Accounts with Financial Institutions............................................37
SECTION 3.28. Minute Books; Stock Books; Officers and Directors...............................38
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SECTION 3.29. Continuing Business Relationships...............................................38
SECTION 3.30. Year 2000.......................................................................38
SECTION 3.31. Brokers.........................................................................38
SECTION 3.32. Disclosure......................................................................38
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER..........................................39
SECTION 4.01. Incorporation and Authority of the Purchase.....................................39
SECTION 4.02. No Conflict.....................................................................39
SECTION 4.03. Absence of Litigation...........................................................40
SECTION 4.04. Consents and Approvals..........................................................40
SECTION 4.05. Investment Purpose..............................................................40
SECTION 4.06. Brokers.........................................................................40
ARTICLE V ADDITIONAL AGREEMENTS.....................................................................41
SECTION 5.01. Conduct of Business Prior to the Closing........................................41
SECTION 5.02. Access to Information...........................................................45
SECTION 5.03. Books and Records...............................................................45
SECTION 5.04. Confidentiality.................................................................46
SECTION 5.05. Regulatory and Other Authorizations; Consents...................................46
SECTION 5.06. No Solicitation of Employees....................................................48
SECTION 5.07. Use of Name.....................................................................48
SECTION 5.08. No Solicitation of Offers, Etc..................................................49
SECTION 5.09. Fees and Expenses...............................................................51
SECTION 5.10. Investment Portfolio............................................................51
SECTION 5.11. Notice of Certain Matters.......................................................51
SECTION 5.12. Interim Financial Statements....................................................52
SECTION 5.13. Affiliate Agreements; Intercompany Accounts.....................................53
SECTION 5.14. Divestment of Subsidiaries; Release of Pledge...................................54
SECTION 5.15. Seller Obligations..............................................................55
SECTION 5.16. Further Action..................................................................55
SECTION 5.17. Leases..........................................................................55
SECTION 5.18. Medical Aggregate Stop Loss Coverage............................................55
SECTION 5.19. Investment Portfolio............................................................56
SECTION 5.20. Certain Software Licenses.......................................................56
ARTICLE VI EMPLOYEE MATTERS.........................................................................56
SECTION 6.01. Purchaser.......................................................................56
SECTION 6.02. Seller..........................................................................57
SECTION 6.03. Administration of Payroll and Other Payments....................................57
SECTION 6.04. Indemnity.......................................................................58
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SECTION 6.05. Reimbursement For Bonuses and Severance Payments................................58
ARTICLE VII TAX MATTERS.............................................................................59
SECTION 7.01. Indemnity.......................................................................59
SECTION 7.02. Returns and Payments............................................................60
SECTION 7.03. Refunds.........................................................................61
SECTION 7.04. Contests........................................................................62
SECTION 7.05. Certain Audit Adjustments.......................................................63
SECTION 7.06. Cooperation and Exchange of Information.........................................64
SECTION 7.07. Conveyance Taxes................................................................65
SECTION 7.08. FIRPTA Certificate..............................................................65
SECTION 7.09. Tax Sharing Agreement...........................................................65
SECTION 7.10. Miscellaneous...................................................................65
ARTICLE VIII CONDITIONS TO CLOSING..................................................................66
SECTION 8.01. Conditions to Obligations of the Seller.........................................66
SECTION 8.02. Conditions to Obligations of the Purchaser......................................68
ARTICLE IX INDEMNIFICATION..........................................................................71
SECTION 9.01. Survival........................................................................71
SECTION 9.02. Indemnification by the Purchaser................................................71
SECTION 9.03. Indemnification by the Seller...................................................74
SECTION 9.04. Other Provisions Relating to Indemnification....................................76
ARTICLE X TERMINATION, AMENDMENT AND WAIVER.........................................................77
SECTION 10.01. Termination....................................................................77
SECTION 10.02. Effect of Termination..........................................................78
SECTION 10.03. Waiver.........................................................................78
ARTICLE XI GENERAL PROVISIONS.......................................................................78
SECTION 11.01. Notices........................................................................78
SECTION 11.02. Public Announcement............................................................79
SECTION 11.03. Headings.......................................................................79
SECTION 11.04. Severability...................................................................79
SECTION 11.05. Entire Agreement...............................................................80
SECTION 11.06. Assignment.....................................................................80
SECTION 11.07. No Third-Party Beneficiaries...................................................80
SECTION 11.08. Amendment; Waiver..............................................................80
SECTION 11.09. Governing Law..................................................................80
SECTION 11.10. Counterparts...................................................................80
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EXHIBITS
A Reference Financial Statement 7
B Terms of Medical Aggregate Stop Loss Treaty 55
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This STOCK PURCHASE AGREEMENT is made and effective, as of
March 31, 1999, by and between THE CENTRIS GROUP, INC., a Delaware corporation
(the "SELLER"), and FOLKSAMERICA HOLDING COMPANY, INC., a New York corporation
(the "PURCHASER").
W I T N E S S E T H:
WHEREAS, the Seller owns all of the 50,000 issued and
outstanding shares of common stock, par value $60 per share (the "SHARES"), of
USF RE Insurance Company, a stock insurance company organized under the laws of
the Commonwealth of Massachusetts (the "COMPANY"); and
WHEREAS, the Seller wishes to sell the Shares to the Purchaser
and the Purchaser wishes to purchase the Shares from the Seller, on the terms
and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements and covenants hereinafter set forth, the Purchaser and the
Seller hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this
Agreement, the following terms shall have the following meanings:
"ACQUISITION AGREEMENT" has the meaning specified in
Section 5.08(b).
"ACTUARY" has the meaning set forth in Section 2.02(b).
"ADJUSTED CLOSING NOTE PRINCIPAL" has the meaning specified in
Section 2.04(c).
"ADJUSTED PURCHASE PRICE" has the meaning specified in
Section 2.02(a).
"ADJUSTMENT" has the meaning specified in Section 7.05.
"AFFILIATE" with respect to any Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such Person. For purposes of this definition, "control" (or
"controlled", as the context may require) shall have the meaning specified in
Section 1501(a)(2) of the New York Insurance Law, as in effect on the date
hereof.
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"AFFILIATE AGREEMENTS" has the meaning specified in
Section 5.13(b).
"AFFILIATE PLAN" has the meaning specified in Section 3.23(e).
"ANNUAL ACTUARIAL REPORT" has the meaning specified in
Section 2.02(b)
"ANNUAL STATUTORY STATEMENTS" means the Annual Statement of
the Company, as filed with the Massachusetts Insurance Division, for the years
ended December 31, 1998 (including the amendment described in Section 3.07(a)
hereof when filed), 1997 and 1996, in each case including all exhibits,
interrogatories, notes and schedules thereto and any auditor's report, actuarial
opinion, affirmation or certification filed in connection therewith.
"ARBITER" has the meaning specified in Section 2.02(d).
"BUSINESS" means the business of the Company as it is
currently conducted by the Company as of the date hereof and, when applicable,
as of the Closing Date.
"BUSINESS DAY" means a day of the year on which banks are not
required or authorized to be closed in the City of New York.
"CLOSING" has the meaning specified in Section 2.03(a).
"CLOSING DATE" has the meaning specified in Section 2.03(a).
"CLOSING NOTE" has the meaning specified in
Section 2.03(c)(ii).
"CLOSING NOTE RATE" has the meaning specified in
Section 2.04(a).
"CLOSING PAYMENT" has the meaning specified in
Section 2.03(c)(i).
"COBRA" has the meaning specified in Section 3.23(h).
"COMPANY" means USF Re Insurance Company, a stock insurance
company organized under the laws of the Commonwealth of Massachusetts.
"COMPANY'S ACCOUNTANTS" has the meaning specified in
Section 3.07(a).
"CONFIDENTIALITY AGREEMENT" has the meaning specified in
Section 5.04.
"CONTESTS" has the meaning specified in Section 7.04(b).
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"CONTRACT" means all written mortgages, indentures,
debentures, notes, loans, bonds, agreements, contracts, leases, subleases,
licenses, franchises, obligations, instruments or other legally binding
commitments, arrangements or undertakings of any kind (including without
limitation all leases and other agreements referred to in Section 3.18 of the
Disclosure Schedule but excluding Reinsurance Agreements and insurance policies
written by the Company) to which the Company is a party or by which the Company
or any of its Properties may be bound or affected.
"COSTA MESA OCCUPANCY AGREEMENT" has the meaning specified in
Section 5.17.
"CREDIT AGREEMENT" means the reducing, revolving, variable
interest rate Credit Agreement, dated as of December 20, 1994, between the
Seller and Fleet National Bank, as amended and restated as of December 28, 1998.
"CURRENT EMPLOYEES" has the meaning specified in
Section 6.01(a).
"DISCLOSURE SCHEDULE" means the Disclosure Schedule, dated as
of the date hereof, delivered to the Purchaser by the Seller.
"DISPUTE" has the meaning specified in Section 2.02(d).
"DISPUTE NOTICE" has the meaning specified in Section 2.02(d).
"EMPLOYEES" has the meaning specified in Section 3.23(a) .
"ENCUMBRANCES" means any lien, pledge, mortgage, security
interest, assessment, claim, lease, charge, option, right of first refusal,
imperfection of title, easement, transfer restriction under any shareholder or
similar agreement, encumbrance or any other restriction or limitation of any
kind whatsoever.
"ENVIRONMENTAL AND SAFETY REQUIREMENTS" has the meaning
specified in Section 3.15(a).
"ENVIRONMENTAL LIEN" has the meaning specified in
Section 3.15(a).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations and interpretations thereunder.
"ERISA AFFILIATE" has the meaning specified in
Section 3.23(d).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FIRST CHICAGO" means First National Bank of Chicago.
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"FLORHAM PARK OCCUPANCY AGREEMENT" has the meaning specified
in Section 5.17.
"FORM A FILING" has the meaning specified in Section 5.05(a).
"GAAP" means United States generally accepted accounting
principles and practices as in effect from time to time consistently applied.
"GOVERNMENTAL AUTHORITY" 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.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations thereunder.
"INDEMNIFIED PARTY" has the meanings specified in Sections
9.02(a) and 9.03(a), as applicable.
"INITIAL CLOSING NOTE PRINCIPAL" has the meaning specified in
Section 2.03(c)(ii).
"INTELLECTUAL PROPERTY RIGHT" has the meaning specified in
Section 3.17.
"INTERCOMPANY POOLING AGREEMENT" means the Intercompany Quota
Share Reinsurance Pooling Agreement, dated January 1, 1993, by and between the
Company and USF Insurance Company.
"INTEREST PAYMENT DATE" has the meaning specified in
Section 2.04(a).
"INTERNAL REVENUE CODE" means the Internal Revenue Code of
1986, as amended.
"INVESTMENT PORTFOLIO" means a list provided by the Seller to
the Purchaser setting forth all investments, including, without limitation,
stocks, bonds and limited partnership interests, owned by the Company as of a
particular date, the issuer of the investments, the amount owned and the market
value of the investments as of such date.
"IRS" has the meaning specified in Section 3.23(a).
"MASSACHUSETTS INSURANCE CODE" means the insurance laws of the
Commonwealth of Massachusetts, including the rules, regulations, bulletins and
interpretations promulgated thereunder.
"MASSACHUSETTS INSURANCE DIVISION" means the Division of
Insurance of the Commonwealth of Massachusetts.
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"MATERIAL ADVERSE EFFECT" means:
(a) With respect to the Seller or the Company, any change in,
or effect on, the Company or the Business which is, or which is
reasonably likely to be, materially adverse to the Business,
operations, assets, liabilities, results of operations, condition
(financial or otherwise), prospects, insurance licenses or other
material permits of the Company, or which will, or is reasonably likely
to, prevent or materially delay the transactions contemplated by this
Agreement; PROVIDED, HOWEVER, that the following changes shall not
constitute a Material Adverse Effect:
(i) failure of any cedent to renew any medical stop loss
reinsurance or retrocessional agreements with the Company;
(ii) departures of Current Employees on or prior to the
Closing, PROVIDED such departures are not, in the Purchaser's
good faith judgment, material to the Company's operations or
prospects; and PROVIDED, FURTHER, that the resignation,
termination, departure (or delivery of notice of such
resignation, termination or departure) on or prior to the
Closing of fifty percent or more of the Current Employees at
either of the Company's Costa Mesa or Florham Park offices
shall be deemed material;
(iii) additions to the Company's reserves as of December 31,
1998, in an aggregate amount not exceeding $15,608,000; and
(iv) reserve changes or loss experience relating to the
January 1999 Columbian earthquake not to exceed $3,000,000.
(b) With respect to the Purchaser, any change in, or effect
on, the Purchaser which is reasonably likely to be materially adverse
to the Purchaser's operations, assets, liabilities, results of
operations, condition (financial or otherwise) or prospects, on a
consolidated basis, or which will prevent or materially delay the
transactions contemplated by this Agreement.
"MATURITY DATE" has the meaning specified in Section 2.04(b).
"MEDICAL AGGREGATE STOP LOSS TREATY" has the meaning specified
in Section 5.18.
"MULTIEMPLOYER PLAN" has the meaning specified in
Section 3.23(b) .
"MULTIPLE EMPLOYER PLAN" has the meaning specified in
Section 3.23(b).
"PERMITS" has the meaning specified in Section 3.16.
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"PERMITTED ENCUMBRANCE" has the meaning specified in
Section 3.18(a).
"PERSON" means any individual, corporation, partnership,
limited liability company, firm, joint venture, association, joint stock
company, trust, unincorporated organization, governmental or regulatory
authority or other entity.
"PLAN" and "PLANS" have the meanings specified in
Section 3.23(a) .
"POST-CLOSING PERIODS" means any taxable period thereof
beginning after the Closing Date. If a taxable period begins before the Closing
Date and ends after the Closing Date, then the portion of the taxable period
that begins on the day following the Closing Date shall constitute a
Post-Closing Period.
"PRE-CLOSING PERIOD" means any taxable period or portion
thereof that is not a Post-Closing Period.
"PROPERTY" means real, personal or mixed property, tangible or
intangible, including without limitation any leased real property.
"PROVISIONAL PURCHASE PRICE" has the meaning specified in
Section 2.02(a).
"PURCHASER" has the meaning specified in the Preamble.
"QUARTERLY STATUTORY STATEMENTS" means the Quarterly Statement
of the Condition and Affairs of the Company, as filed with the Massachusetts
Insurance Division, for the quarterly periods ended March 31, June 30 and
September 30, 1998.
"REDETERMINATION DATE" has the meaning specified in
Section 2.02(b).
"REFERENCE DATE" means December 31, 1998.
"REFERENCE FINANCIAL STATEMENT" means the special purpose
consolidating balance sheet for the Company as at the Reference Date prepared in
accordance with SAP (including with respect to the Subsidiaries, which are
included on the special purpose balance sheet at an agreed value of
$15,044,265), a copy of which is attached hereto as EXHIBIT A.
"REINSURANCE AGREEMENTS" has the meaning specified in
Section 3.21(a).
"RELEVANT GROUP" has the meaning specified in Section 3.25(a).
"RESERVES" means all unearned premium reserves and all
reserves for incurred losses including, without limitation, case reserves,
reserves for incurred but not reported losses and reserves for loss adjustment
expenses, both allocated and unallocated, and also any
6
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adjustments to such items on account of reinsurance receivables, salvage and
subrogation, reinsurance retrospective premiums and reinsurance profit
commissions.
"RETAINED NAMES AND MARKS" has the meaning specified in
Section 5.07.
"RETROCESSION ARRANGEMENT" has the meaning specified in
Section 3.21(c).
"SAP" means, with respect to a reinsurance or insurance
company, the statutory accounting procedures and practices prescribed or
permitted from time to time by the National Association of Insurance
Commissioners and the Massachusetts Insurance Division and applied in a
consistent manner throughout the periods involved.
"SELLER" has the meaning specified in the Preamble.
"SERVICE AGREEMENT" means the Service Agreement between
USBenefits and the Company executed in November, 1994.
"SHARES" has the meaning specified in the Recitals.
"ST. PAUL RESERVES" has the meaning specified in
Section 2.02(g).
"STRADDLE PERIOD" has the meaning specified in
Section 7.01(b).
"SUBJECT LOSS RESERVES" has the meaning specified in
Section 2.02(b).
"SUBSIDIARY" means any and all other corporations, limited
liability companies, partnerships, joint ventures, associations and other
entities of which the Company, directly or indirectly (through one or more
Subsidiaries or otherwise), owns or controls more than 10% of the voting
securities or other voting interests.
"SUPERIOR PROPOSAL" has the meaning specified in
Section 5.08(b).
"TAKEOVER PROPOSAL" has the meaning specified in
Section 5.08(a).
"TAX" or "TAXES" means (i) all taxes, fees, duties and other
assessments imposed by the United States or any state, local or foreign
government or political subdivision or taxing authority thereof or therein,
including, without limitation, any income, estimated, premium, profits, windfall
profits, environmental, alternative, minimum, license, import, transfer,
registration, stamp, franchise, sales, use, value added, gross receipts, excise,
utility, property (real or personal), severance, ad valorem, net proceeds, deed,
lease, service, capital, customs, occupation, payroll, wage, workman's
compensation, employment, withholding and social security taxes, including all
interest, penalties and additions to taxes imposed by any taxing authority with
respect thereto, whether disputed or not and (ii) any liability of the Company
for
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amounts described in (i) as a result of being a member of any affiliated,
consolidated, combined or unitary group on or prior to the Closing Date.
"TAX RETURN" means any return, report or statement (including
any information returns) required to be filed for purposes of a particular Tax.
"TAX SHARING AGREEMENT" means that certain Tax Payment
Allocation Agreement relating to the payment of Taxes relating to any
affiliated, consolidated, combined or unitary group to which the Company and the
Sellers are parties and dated as of January 1, 1994.
"TERMINATION FEE" has the meaning specified in
Section 5.09(b).
"USBENEFITS" means USBenefits Insurance Services, Inc., a
Subsidiary of the Seller.
"WARN ACT" has the meaning specified in Section 3.24(b).
ARTICLE II
PURCHASE AND SALE OF SHARES
SECTION 2.01. PURCHASE OF SHARES. Subject to the terms and
conditions contained in this Agreement, at the Closing the Seller shall sell,
assign, convey, transfer and deliver to the Purchaser, and the Purchaser shall
purchase from the Seller, the Shares for the consideration specified herein.
SECTION 2.02. PURCHASE PRICE.
(a) The purchase price for the Shares shall be equal to
$92,500,000 (the "PROVISIONAL PURCHASE PRICE"), which amount shall be
periodically redetermined and adjusted as provided herein (the "ADJUSTED
PURCHASE PRICE").
(b) The Provisional Purchase Price will be redetermined, as
described in Section 2.02(c), as of December 31, 2000 and each December 31
thereafter to and including December 31, 2003 (each such December 31 being a
"REDETERMINATION DATE"), based upon an annual actuarial review of the
development (net of collectible reinsurance purchased by the Company prior to
the Closing) of the case loss reserves, reserves for incurred but not reported
losses and reserves for allocated loss adjustment expenses reflected in the
Reference Financial Statement, including "reinsurance recoverable on loss and
loss adjustment expense payments"
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(as such term is used in the Company's 1998 Annual Statutory Statement) as of
the Reference Date ("the SUBJECT LOSS RESERVES"). The actuarial reviews shall be
performed by Tillinghast-Towers Perrin (the "ACTUARY") within sixty days of each
such Redetermination Date and the results shall be submitted to the Seller and
Purchaser upon completion in the form of a certified actuarial report (each an
"ANNUAL ACTUARIAL REPORT"). The fees and expenses of the Actuary shall be borne
equally by the Seller and the Purchaser. Each Annual Actuarial Report shall
consist of an actuarial redetermination, as of each Redetermination Date, of (i)
the Subject Loss Reserves for liabilities of the Company incurred on or before
the Reference Date, (ii) a determination of the amount of collectible
reinsurance with respect to such liabilities, and (iii) a determination of the
losses and loss adjustment expenses paid (net of proceeds collected from
reinsurance purchased by the Company prior to the Closing) by the Company during
the period between the Reference Date and the respective Redetermination Date
with respect to liabilities incurred prior to the Reference Date, which review
shall be conducted by the Actuary (x) using its independent judgment based on
prevailing facts, circumstances and trends, (y) in accordance with generally
accepted actuarial standards and principles, and (z) to the extent not
inconsistent with the foregoing, in a manner and applying a method consistent
with the determination of the Reserves recorded in the Reference Financial
Statement. Each Annual Actuarial Report shall be accompanied by:
(A) a schedule that shows the composition of the
Subject Loss Reserves, net of collectible
reinsurance purchased by the Company prior
to the Closing, in respect of losses
incurred by the Company on or before the
Reference Date and in respect of the
development of such losses after the
Reference Date, and
(B) a reconciliation of the amounts included in
such schedule to the Reserves included, or
to be included, in the annual statutory
statement of the Company (or its successor)
filed, or to be filed, with state regulatory
authorities after the Reference Date.
(c) As of each Redetermination Date, the Adjusted Purchase
Price shall be equal to the Provisional Purchase Price reduced (or increased, as
the case may be) dollar for dollar by the amount by which the following clause
(i) is less (or more, as the case may be) than the following clause (ii) where
clauses (i) and (ii) shall mean, respectively:
(i) the Subject Loss Reserves reflected on the Reference
Financial Statement; and
(ii) the sum, as determined by the Actuary in the respective
Annual Actuarial Report (or by the parties or the Arbiter as provided
in Section 2.02(d), as the case may be), of (x) the actual loss
payments and actual allocated loss adjustment expense payments made in
respect of losses incurred by the Company on or before the Reference
Date, net of reinsurance collected or collectible reinsurance, and made
subsequent to the
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Reference Date up to and including the respective Redetermination Date,
and (y) the Subject Loss Reserves, net of collectible reinsurance
purchased by the Company, calculated as of the respective
Redetermination Date;
PROVIDED, HOWEVER, that notwithstanding anything to the contrary contained in
this Article II, the Provisional Purchase Price shall also be reduced dollar for
dollar with respect to any adverse loss development on the Company's medical
stop loss or provider excess business assumed by the Company through December
31, 1998 but only to the extent any such amount is not reinsured and recoverable
under the Medical Aggregate Stop Loss Treaty, and PROVIDED FURTHER, in no event
shall the Adjusted Purchase Price, redetermined in accordance with this Section
2.02(c), be less than $71,750,000 or more than $92,500,000.
(d) If the Seller or the Purchaser objects to any Annual
Actuarial Report (a "DISPUTE"), the objecting party shall give the other party
written notice of such Dispute (a "DISPUTE NOTICE") within fifteen days after
the receipt by the objecting party of the respective Annual Actuarial Report
(the "DISPUTE PERIOD"), setting forth in reasonable detail the elements and
amounts therein to which it objects and the basis for such objection. If either
the Seller or the Purchaser gives a Dispute Notice, the Seller and the Purchaser
shall, within thirty (30) days after receipt by either party of such Dispute
Notice, attempt to resolve such Dispute and agree in writing upon the final
content of the respective Annual Actuarial Report and upon the Adjusted Purchase
Price. In the event that the Seller and the Purchaser are unable to resolve any
Dispute within such thirty (30) day period, then the Dispute shall immediately
be submitted to Ernst & Young LLP (the "ARBITER") for resolution. Within thirty
(30) days from the date that any such dispute is submitted to the Arbiter, the
Arbiter shall deliver to the Purchaser and the Seller a written report setting
forth (i) the Arbiter's redetermination of the Subject Loss Reserves as of the
Redetermination Date and (ii) the Arbiter's determination of the amount of the
fees and expenses of the Arbiter arising from such Dispute and the appropriate
apportionment thereof among the parties hereto. Such report shall be final and
binding on the parties hereto with respect to the Dispute (but not with respect
to any Subject Loss Reserves reflected in any subsequent Annual Actuarial
Report). If neither the Seller nor the Purchaser gives written notice of a
Dispute within the Dispute Period, such Annual Actuarial Report shall be deemed
to have been accepted in the form in which it was delivered and shall be final
and binding upon the parties with respect to the Dispute in the absence of fraud
or manifest error. The Adjusted Purchase Price and the Adjusted Closing Note
Principal (as defined in Section 2.04(c) hereof) shall be computed based upon
the Annual Actuarial Report or the Arbiter's redetermination of Subject Loss
Reserves as of the Redetermination Date, as the case may be.
(e) For purposes of the calculation set forth in Section 2.02
(c)(ii) only those payments and reserves that are attributable to losses
incurred on or before the Reference Date shall be considered. For this purpose,
any contracts that do not provide an adequate accounting of accident year
information will be allocated between losses incurred on or before the Reference
Date and losses incurred after the Reference Date on a reasonable and
appropriate basis consistent with the intent of this Agreement.
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(f) Notwithstanding anything to the contrary contained herein,
the Purchaser shall be permitted from time to time, in its sole discretion to
purchase stop-loss reinsurance. The purchase of such reinsurance shall in no way
affect or be considered in determining the adjusted Purchase Price as of any
Redetermination Date.
(g) If on the final Redetermination Date the St. Paul Reserves
as carried on the Company's Statutory Statement at December 31, 1998 totaling
$5,646,500 (the "ST. PAUL RESERVES") have developed adversely in an amount
greater than $2,000,000 above such carried reserves, Seller shall reimburse
Purchaser for 50% of such excess development above $2,000,000, provided that the
Adjusted Closing Note Principal has been reduced to zero. In the alternative,
Seller may procure reinsurance covering the St. Paul Reserves in excess of
$7,646,500 (on terms mutually acceptable to the Purchaser and the Seller) and
the cost thereof will be shared equally by the Seller and the Purchaser. In the
event that the Seller and the Purchaser agree to procure such reinsurance on the
St. Paul Reserves, then, in such event, the Closing Note will not be reduced for
any adverse loss development on the St. Paul Reserves to the extent of any such
reinsurance recovered. Notwithstanding the foregoing, it is the intent of this
provision that adverse developments on all Subject Loss Reserves other than the
St. Paul Reserves shall be applied first to adjust the Adjusted Closing Note
Principal and then the St. Paul Reserves shall be applied to such adjustment.
(h) Following the Closing, upon the delivery of reasonable
prior written notice, the Seller may review, once each calendar year, claims
payments, expenses, reinsurance and other matters directly relating to the
Subject Loss Reserves. In that regard, the Purchaser shall, and shall cause its
and the Company's officers, directors, employees, auditors and agents to:
(A) afford the officers, employees, agents,
accountants, actuaries and representatives
of the Seller reasonable access (for a
period not to exceed ten Business Days)
during normal business hours and upon
reasonable advance written notice, to the
relevant offices, employees, properties,
books and records of the Company and the
Purchaser; and
(B) during the review period provided for in
Clause (A) hereof, upon the reasonable
written request of the Seller, furnish to
the officers, employees, agents,
accountants, actuaries and representatives
of the Seller such additional financial and
operating data and other information
regarding claims payments, expenses,
reinsurance and other matters directly
relating to the Subject Loss Reserves as are
available to the Company or the Purchaser.
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(i) As long as the Adjusted Closing Note Principal is in
excess of $1,000,000, Purchaser agrees that it will not, with respect to the
Subject Loss Reserves:
(i) commute any assumed reinsurance contract
where the amount to be paid upon such
commutation exceeds by more than $500,000
the loss reserves reported by the ceding
company in its most recent periodic
statement sent to the Company in the
ordinary course of business prior to the
initiation of commutation discussions,
without the prior approval of Seller, such
approval not to be unreasonably withheld or
delayed; or
(ii) otherwise take any action which is other
than in the ordinary course of business with
respect to the Subject Loss Reserves.
Regardless of the Adjusted Closing Note Principal, Purchaser agrees to provide a
listing of all individual losses paid with respect to the Subject Loss Reserves
in excess of $250,000 while the Closing Note remains outstanding. Such listing
shall be submitted quarterly to the Seller not later than sixty (60) days after
the close of each such quarter.
SECTION 2.03. CLOSING.
(a) Subject to the terms and conditions of this Agreement, the
sale and purchase of the Shares contemplated hereby shall take place at a
closing (the "CLOSING") at 10:00 a.m., local time, on the fifth Business Day
after the satisfaction of the conditions to closing set forth in Article VIII,
at the offices of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, New
York 10178, or at such other time or on such other date or at such other place
as the Seller and the Purchaser may mutually agree upon in writing (the date on
which the Closing takes place being the "CLOSING DATE").
(b) At the Closing, the Seller shall deliver or cause to be
delivered to the Purchaser stock certificates evidencing the Shares duly
endorsed in blank or accompanied by stock powers duly executed in blank, in
proper form for transfer, with all required stock transfer tax stamps affixed or
provided for.
(c) The Provisional Purchase Price shall be payable by the
Purchaser to the Seller on the Closing Date as follows:
(i) $71,750,000 (the "CLOSING PAYMENT") by wire transfer (to
an account designated by the Seller in writing at least three (3)
Business Days prior to Closing), bank
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check, certified check or any other instrument agreed to by the
Purchaser and the Seller in advance; and
(ii) A promissory note of the Purchaser (the "CLOSING NOTE")
in the initial principal amount of $20,750,000 (the "INITIAL CLOSING
NOTE PRINCIPAL"), which shall be subject to adjustment as provided in
Section 2.04 hereof. The Closing Note shall have terms and provisions
consistent with Section 2.04 hereof and shall be subordinated to all
amounts due and owing under Purchaser's loan agreement with First
Chicago under subordination terms satisfactory to First Chicago. The
parties shall mutually agree to the form of the Closing Note within 20
Business Days after the date hereof and Purchaser shall promptly
thereafter submit the form of Closing Note to First Chicago for its
approval and will use all commercially reasonable efforts to obtain
such approval within 60 days after the date hereof.
(d) At the Closing, the Seller and the Purchaser shall deliver
to each other the opinions, certificates and other documents described in
Article VIII hereof.
SECTION 2.04. PAYMENT OF PRINCIPAL AND INTEREST ON THE CLOSING
NOTE.
(a) On March 15, 2001, March 15, 2002 and March 15, 2003,
respectively, or such later date when any Dispute shall have been resolved as
provided in Section 2.02(d) (each being an "INTEREST PAYMENT DATE"), the
Purchaser shall pay to the Seller interest on the Adjusted Closing Note
Principal (as redetermined as of the most recent Redetermination Date) at an
effective annual rate equal to the annual interest rate for five year United
States Treasury Notes prevailing on the Closing Date plus 50 basis points (the
"CLOSING NOTE RATE") for the period from the Closing Date up to the first
Redetermination Date, and, thereafter, for the period from the most recent
Redetermination Date in respect of which interest shall have been paid up to and
including the current Redetermination Date.
(b) On the fifth anniversary of the Closing Date or such later
date when any Dispute shall have been resolved as provided in Section 2.02(d)
(the "MATURITY DATE"), the Purchaser shall pay to the Seller the Adjusted
Closing Note Principal (as redetermined as of the most recent Redetermination
Date), together with interest on the Adjusted Closing Note Principal at the
Closing Note Rate for the period from the most recent Redetermination Date in
respect of which interest shall have been paid up to and including the Maturity
Date.
(c) For purposes of this Section 2.04, the "ADJUSTED CLOSING
NOTE PRINCIPAL" shall mean, as of each Redetermination Date and the Maturity
Date, an amount equal to the Initial Closing Note Principal reduced dollar for
dollar by the amount, if any, by which the Provisional Purchase Price exceeds
the Adjusted Purchase Price (as redetermined as of the most recent
Redetermination Date); PROVIDED, HOWEVER, that in no event shall the amount of
the Initial Closing Note Principal be reduced below zero.
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(d) In the event the shareholder's equity of the Purchaser as
at the end of any fiscal quarter or year end shall be less than $200,000,000,
based on the Purchaser's regularly prepared GAAP financial statements, the
Purchaser shall, within 60 days after the end of a fiscal quarter or within 105
days after the end of a year, as applicable, deposit with an escrow agent an
amount equal to the Adjusted Closing Note Principal, plus all accrued and unpaid
interest thereon. Such amount shall be deposited pursuant to an escrow agreement
mutually satisfactory to the Seller and the Purchaser, the form, terms and
provisions of which shall be agreed upon prior to the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
As an inducement to the Purchaser to enter into this
Agreement, the Seller hereby represents and warrants to the Purchaser as
follows:
SECTION 3.01. INCORPORATION AND AUTHORITY OF THE SELLER. The
Seller is a company duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all necessary corporate power and
authority to own, lease and operate its Properties (including the Shares), to
conduct its business as now being conducted, to enter into this Agreement and
each other agreement and instrument required to be executed and delivered by the
Seller pursuant hereto, to carry out its obligations hereunder and thereunder
and to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance by the Seller of this Agreement and each
other agreement and instrument required to be executed and delivered by the
Seller pursuant hereto, and the consummation by the Seller of the transactions
contemplated hereby and thereby, have been duly and validly authorized by all
requisite corporate action (including any stockholder action) and no other
corporate proceedings on the part of the Seller is necessary to authorize the
foregoing. This Agreement has been, and at the Closing the other agreements and
instruments required pursuant hereto and to which the Seller is a party will
have been, duly and validly executed and delivered by the Seller, and (assuming
due authorization, execution and delivery by the Purchaser of this Agreement and
by the Purchaser and each other party (other than Seller) to any other document
delivered hereunder), each of this Agreement and such other documents at the
Closing will constitute a legal, valid and binding obligation of the Seller,
enforceable against the Seller in accordance with its terms, subject to the
effect of any applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting creditors' rights generally and subject, as to
enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
SECTION 3.02. INCORPORATION AND QUALIFICATION OF THE COMPANY.
The Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts and has the
necessary corporate power and
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authority to own, operate or lease the properties and assets now owned, operated
or leased by the Company and to carry on the Business now being conducted by the
Company. The Seller has delivered to the Purchaser true and complete copies of
the Charter and By-laws of the Company as in effect on the date hereof. The
Company is duly qualified as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of its properties owned,
operated or leased or the nature of its activities makes such qualification
necessary, except for such failures which, individually or in the aggregate,
would not have a Material Adverse Effect. The Company is licensed or authorized
to write reinsurance or insurance in each of the jurisdictions listed in Section
3.02 of the Disclosure Schedule. True and correct copies of the licenses issued
by each such jurisdiction have been provided to the Purchaser.
SECTION 3.03. CAPITAL STOCK OF THE COMPANY. The Shares
constitute all the issued and outstanding shares of capital stock of the
Company. Except for 5,000 shares of common stock which are authorized but not
outstanding and the Shares, no other class of capital stock, equity security,
preferred stock, bonds, debentures, notes, debt instruments, evidence of
indebtedness or other securities of any kind in the Company are authorized or
outstanding. The Shares have been duly authorized and validly issued and are
fully paid and non-assessable and were not issued in violation of any preemptive
rights. As of the date hereof, except as set forth in Section 3.03 of the
Disclosure Schedule, there is no, and as of the Closing Date there will be no,
security, option, warrant, right, call, subscription, agreement, commitment or
understanding of any nature whatsoever, fixed or contingent, that directly or
indirectly, (i) except as contemplated by this Agreement, calls for the
issuance, sale, pledge or other disposition of any shares of capital stock of
the Company or any securities convertible into, or other rights to acquire, any
shares of capital stock of the Company, (ii) relates to the voting or control of
such capital stock, securities or rights, or (iii) obligates the Seller or the
Company to grant, offer or enter into any of the foregoing. As of the date
hereof, except as set forth in Section 3.03 of the Disclosure Schedule, the
Seller owns, and as of the Closing Date the Seller will own, the Shares, free
and clear of all Encumbrances, other than the obligation hereunder to sell the
Shares to the Purchaser. Upon the conveyance and transfer of the Shares to the
Purchaser as contemplated hereby, the Purchaser shall acquire good and
marketable title to the Shares, free and clear of all Encumbrances (except as
may result from any facts or circumstances relating solely to the Purchaser or
its Affiliates) and the Purchaser will be entitled to all rights of a holder of
the Shares.
SECTION 3.04. SUBSIDIARIES.
(a) Except as set forth in Section 3.04(a) of the Disclosure
Schedule, as of the date hereof, the Company has no Subsidiaries. As of the
Closing Date, the Company will have no Subsidiaries. With respect to the
Subsidiaries set forth in Section 3.04 of the Disclosure Schedule, (i) all
outstanding capital stock of such Subsidiaries has been duly authorized and
validly issued and is fully paid and non-assessable and, as of the date hereof,
is owned beneficially and of record by the Company free and clear of all
Encumbrances; and (ii) there are no outstanding options, warrants,
subscriptions, rights, convertible securities or other agreements
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or plans under which any Subsidiary may become obligated to issue, sell or
transfer shares of its capital stock or other securities.
(b) Except as set forth in Section 3.04(b) of the Disclosure
Schedule (and, with respect to clause (i), except as set forth in the Investment
Portfolio), there are no corporations, partnerships, limited liability
companies, joint ventures, associations or other entities (i) in which the
Company owns, of record or beneficially, any direct or indirect equity,
membership or other interest or any right (contingent or otherwise) to acquire
the same, or (ii) which the Company controls, directly or indirectly, by
contract or proxy or otherwise, alone or in combination with any other Person.
(c) Except as set forth in Section 3.04(c) of the Disclosure
Schedule, there are no assets or Properties owned by, or in the possession of,
the Seller, USF Insurance Company, US Holdings, Inc. (or any other Subsidiary of
the Company) which are used, or necessary, in connection with the Business of
the Company (excluding those portions of the Business transferred prior to
Closing pursuant to Section 5.14(a) hereof). Neither USF Insurance Company, US
Holdings, Inc. nor any other Subsidiary of the Company has any debts,
liabilities, obligations or other commitments (other than those which are to be
satisfied prior to Closing pursuant to Section 5.13 hereof) (i) which are
guaranteed or secured by the Company or (ii) for which the Company may be
liable.
SECTION 3.05. NO CONFLICT.
(a) Except as set forth in Section 3.05(a) of the Disclosure
Schedule, neither the Seller nor the Company is in violation or default in any
material respect (and is not in default in any respect regarding any
indebtedness, loan or credit agreement) under any indenture, agreement or
instrument to which it is a party or by which it or any of its assets or
properties may be bound. Neither the Seller nor the Company is in default under
any order, writ, injunction, judgment or decree of any Governmental Authority or
arbitrator(s).
(b) Assuming all consents, approvals, authorizations, orders
and other actions described in Section 3.06 have been obtained and/or taken, and
all filings and notifications described in Section 3.06 have been made, except
as may result from any facts or circumstances relating solely to the Purchaser
or its Affiliates, the execution, delivery and performance of this Agreement by
the Seller, the sale of the Shares pursuant to this Agreement and the
consummation by the Seller and the Company of the transactions contemplated
hereby do not and will not (a) violate or conflict with the respective charter
documents of either the Seller or the Company, (b) conflict with or violate any
material law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award applicable to the Seller, the Company or the Business, or
(c) result in any material breach of, or constitute a material default (or event
which with the giving of notice or lapse of time, or both, would become a
material default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of any material
Encumbrance on any of the material assets or properties of
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the Company pursuant to any Contract, Permit or other instrument relating to
such assets or properties to which the Seller or the Company is a party or by
which any of such assets or properties is bound or affected.
SECTION 3.06. CONSENTS AND APPROVALS. The (i) execution and
delivery by the Seller of this Agreement and each other agreement and instrument
required to be executed and delivered by the Seller in connection herewith, (ii)
sale of the Shares pursuant to this Agreement and (iii) consummation of the
transactions contemplated hereby (including without limitation, the transactions
contemplated by Section 5.14 hereof) do not, and the Seller's and the Company's
performance of this Agreement and each other agreement and instrument required
to be executed and delivered by the Seller or the Company in connection herewith
will not, require the Seller or the Company to obtain any consent, approval,
authorization, order or other action by, or require the Seller or the Company to
file with or notify any Governmental Authority, except pursuant to (a) the
notification requirements of the HSR Act, (b) the approval of the Massachusetts
Insurance Division and the Pennsylvania Insurance Department, (c) the filing
requirements under the Exchange Act and (d) the notification requirements
described in Section 3.06 of the Disclosure Schedule.
SECTION 3.07. FINANCIAL INFORMATION.
(a) The Company has heretofore delivered to the Purchaser true
and complete copies of the Annual Statutory Statements and the Quarterly
Statutory Statements. Each of the Annual Statutory Statements and Quarterly
Statutory Statements was prepared in accordance with SAP consistently applied
throughout the periods involved, was prepared in accordance with the books and
records of the Company, has been audited by KPMG LLP (the "COMPANY'S
ACCOUNTANTS"), and presents fairly the statutory financial position of the
Company at the respective date thereof and the statutory results of operations
and cash flows of the Company for the respective periods then ended, except (x)
that the audit report with respect to the 1998 Annual Statutory Statement has
not been completed and delivered to the Seller and (y) the Quarterly Statutory
Statements have not been audited and are subject to normal recurring year-end
audit adjustments. Each of the Annual Statutory Statements and Quarterly
Statutory Statements (i) complies in all material respects with the
Massachusetts Insurance Code, (ii) was complete and correct in all material
respects when filed, (iii) was filed with or submitted to the Massachusetts
Insurance Division in a timely manner on forms prescribed or permitted by the
Massachusetts Insurance Division, except that an amendment to the 1998 Annual
Statutory Statement will be filed in the next week with the Massachusetts
Insurance Division increasing the reserves reflected therein, a copy of which
has been provided to Purchaser, and (iv) was not prepared utilizing any material
accounting practices that are permitted rather than prescribed by the
Massachusetts Insurance Division. Except as set forth in Section 3.07 of the
Disclosure Schedules, no material deficiency has been asserted with respect to
any of the Annual Statutory Statements or Quarterly Statutory Statements by the
Massachusetts Insurance Division or any other Governmental Authority.
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(b) The Company has heretofore delivered to the Purchaser true
and complete copies of the Reference Financial Statement. The Reference
Financial Statement was prepared in accordance with the books and records of the
Company, and presents fairly the SAP financial position of the Company at the
respective dates thereof and the results of operations and cash flows of the
Company for the respective periods then ended, except, (i) the presentation of
the Subsidiaries, which are included on the Reference Financial Statement under
the equity method of accounting for investments in common stock at an agreed
value of $15,044,265, and (ii) the results of operation of the Subsidiaries,
which are excluded from the special purpose income statement.
SECTION 3.08. ABSENCE OF UNDISCLOSED LIABILITIES. Except as
disclosed in Section 3.08 of the Disclosure Schedule, there are no debts,
liabilities, obligations or commitments of the Company (including any debts,
liabilities, obligations or commitments relating to the Company's operation of
the Business under the name "Massachusetts Plate Glass Insurance Company") of
any kind whatsoever, whether accrued, fixed or unfixed, choate or inchoate,
liquidated or unliquidated, secured or unsecured, contingent, absolute, known or
unknown, determined, determinable or otherwise, and there is no existing
condition, situation or set of circumstances which could reasonably be expected
to result in such a debt, liability, obligation or commitment other than:
(a) as, and to the extent, reflected or reserved against in
the Reference Financial Statement; PROVIDED, HOWEVER, that in no event shall
this Section 3.08 or any other provision of this Agreement, other than Section
3.11, constitute a representation or warranty of any nature whatsoever regarding
the adequacy of the Reserves;
(b) as, and to the extent, specifically disclosed in any of
the subsections of this Article III or the Disclosure Schedule;
(c) with respect to the tax matters addressed in Section 3.25
and Article VII (which shall be governed solely by the terms of such Section
3.25 and Articles VII and IX);
(d) liabilities arising under any Reinsurance Agreements or
any insurance policies written by the Company; or
(e) liabilities incurred since the date of the Reference
Financial Statement in the ordinary course of business and consistent with past
practice, which, individually and in the aggregate, would not have a Material
Adverse Effect.
Notwithstanding any of the exceptions set forth in clauses (a) through (e)
above, the Company has no knowledge of any liabilities, contingent or otherwise,
for insurance policies underwritten in the name of "Massachusetts Plate Glass
Insurance Company".
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SECTION 3.09. INVESTMENTS. Except as set forth in Section 3.09
of the Disclosure Schedule, the Company has good and marketable title to all of
the investments listed in the most recent Investment Portfolio provided to the
Purchaser, free and clear of all Encumbrances. Section 3.09 of the Disclosure
Schedule sets forth the Investment Portfolio as of the Reference Date. Except as
set forth in Section 3.09 of the Disclosure Schedule, none of the investments
listed in the Investment Portfolio is in default in the payment of principal or
interest or dividends. All such investments comply with the investment
guidelines adopted by the Investment Committee of Seller's Board of Directors
applicable to the Company and substantially comply with any and all investment
restrictions under the Massachusetts Insurance Code.
SECTION 3.10. CERTAIN EVENTS.
(a) Except as set forth in Section 3.10 of the Disclosure
Schedule, since September 30, 1998 there has been no change in the Business,
operations, assets, Properties, condition (financial or otherwise), results of
operations, insurance licenses or Permits of the Company which, individually or
in the aggregate, has had or is reasonably likely to have a Material Adverse
Effect.
(b) Except as set forth in Section 3.10 of the Disclosure
Schedule or as specifically disclosed in the Company's 1998 Annual Statutory
Statement, since September 30, 1998 the Business of the Company has been
conducted only in the ordinary course of business consistent with past practice
and there has not been:
(i) any material change in the underwriting, reinsurance,
marketing, accounting, establishment of reserves, investment or claims
adjustment policies and practices of the Company, including, without
limitation, any change which has had the effect of accelerating the
recording and billing of premiums or accounts receivable or retarding
the payment of expenses or establishing Reserves in connection with any
accounts or Business of the Company, or has had the effect of
materially altering, modifying or changing the historic operating,
financial or accounting practices or policies of the Company, including
accruals of and reserves for Tax liabilities;
(ii) any damage, destruction or casualty loss with respect to
the Property of the Company (whether or not covered by insurance) which
has had or is reasonably likely to have a Material Adverse Effect;
(iii) any payment pursuant to the Tax Sharing Agreement other
than a payment permitted under Section 5.01(g)(iii) hereof.
(iv) any direct or indirect repurchase, redemption or other
acquisition by the Company of any shares of capital stock or other
securities of the Company, or any
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declaration, setting aside or payment of any dividend or other
distribution in respect of shares of capital stock of the Company;
(v) any employment, bonus, incentive or deferred compensation,
severance or termination agreement or arrangement entered into between
the Company and a director, officer or other employee or consultant of
the Company;
(vi) any indebtedness incurred by the Company for borrowed
money, including, without limitation, obligations in respect of
capitalized leases, or any guarantee by the Company of indebtedness for
borrowed money or any other obligation of any other Person;
(vii) any sale, lease, abandonment or other disposition by the
Company of any interest in Property, other than for fair value in the
ordinary course of business and consistent with past practice;
(viii) any increase in the rate or terms of the compensation
payable or to become payable by the Company to any of its directors,
officers or employees, except salary increases to non-management
employees in the ordinary course of business and consistent with past
practice;
(ix) the creation of any Encumbrance on all or any portion of
any material assets, Properties or rights of the Company, except
Permitted Encumbrances;
(x) any capital expenditure made by the Company, except
capital expenditures not exceeding an aggregate of $50,000;
(xi) any amendment, modification, alteration, failure to renew
or termination of any Contract or Reinsurance Agreement which,
individually or in the aggregate with such other amendments,
modifications, alterations, failure to renew or terminations, has had
or could reasonably be expected to have a Material Adverse Effect;
(xii) any amendment, modification or termination of any Plan;
(xiii) any waiver of any rights of material value or any
cancellation or forgiveness of any claims, debts or accounts receivable
owing to the Company other than in the ordinary course of business and
consistent with past practice;
(xiv) any making of any loan, advance or capital contribution
to or investment by the Company in any Person, except in the ordinary
course of business and consistent with past practice;
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(xv) any transaction or commitment made, or any contract or
agreement entered into, between the Company on the one hand, and the
Seller or any of its Affiliates on the other hand;
(xvi) any adoption of a plan of complete or partial
liquidation, dissolution, rehabilitation, restructuring,
recapitalization, re-domestication or other reorganization with respect
to the Company;
(xvii) any entry into any joint venture, partnership, managing
general agency or similar arrangement with any Person;
(xviii) any incurrence by the Company of any material
liability for rate roll-backs or premium refunds, or failure by the
Company to pay in full all guaranty fund assessments of which written
notice has been received from any Governmental Authority;
(xix) any authorization, approval, agreement or commitment to
do any of the foregoing; or
(xx) any other event or occurrence which has had or is
reasonably likely to have a Material Adverse Effect.
SECTION 3.11. INSURANCE RESERVE.
(a) The Reserves as of the Reference Date and any subsequent
date on which such Reserves may have been redetermined (i) were determined in
accordance with SAP, (ii) were computed in accordance with generally accepted
loss reserving standards and principles; (iii) met the requirements of the
Massachusetts Insurance Code; and (iv) made reasonable provision, in the
aggregate, for all unpaid loss and loss expense obligations, including
obligations for incurred but not reported loss and loss adjustment expenses, and
unearned premiums as of the Reference Date. The Company owns assets that qualify
as admitted assets under the Massachusetts Insurance Code in an amount at least
equal to the Reserves plus its minimum statutory capital and surplus as required
under the Massachusetts Insurance Code.
(b) The Seller has delivered or made available to the
Purchaser true and complete copies of all actuarial reports, actuarial
certificates and loss and loss adjustment expense reserve reports prepared by
Dale Ogden & Associates and any other report prepared by any third party
actuarial consultant on behalf of or made available to the Seller or any of its
Affiliates, including the Company, in each case relating to the adequacy of the
Reserves for any period ended on or after December 31, 1995.
SECTION 3.12. JUDGMENTS, DECREES AND ORDERS. Neither the
Company nor any of its directors, officers or employees (in their capacity as
such) is a party to or subject to any judgment, decree, order, writ, award, or
injunction of any Governmental Authority or arbitrator which, individually or in
the aggregate with all such other judgments, decrees, orders, writs,
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awards and injunctions, has had or is reasonably likely to have a Material
Adverse Effect. There is no default in any material respect on the part of the
Company with respect to any judgment, order, writ, arbitration award,
injunction, decree or award of any Governmental Authority or arbitrator to which
it is subject.
SECTION 3.13. LITIGATION. Except as set forth in Section 3.13
of the Disclosure Schedule, there are no claims, actions, suits, investigations,
arbitrations or legal, administrative or other proceedings pending and, to the
knowledge of the Seller and the Company, none are threatened, against or
affecting the Company or any of its Properties, at law or in equity, or before
or by any Governmental Authority or arbitrator. Since January 1, 1997, except
with respect to payments made in the ordinary course in connection with
Reinsurance Agreements or insurance policies written by the Company, there have
been no payments made by or on behalf of the Company (other than pursuant to
Reinsurance Agreements) with respect to any threatened or previously outstanding
litigation.
SECTION 3.14. COMPLIANCE WITH LAWS. The Company is in
compliance with (a) the terms of its certificate or articles of incorporation,
its by-laws and any other charter or organization documents, (b) all laws,
statutes, ordinances, rules, regulations or other legal requirements, whether
federal, state, local or foreign, applicable to the Company or by which any of
its Properties may be bound, (c) all applicable licenses, authorizations,
orders, writs, judgements, injunctions, awards and decrees of any court, the
Massachusetts Insurance Division or other Governmental Authority, or any
arbitrator and (d) 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.
SECTION 3.15. ENVIRONMENTAL, HEALTH AND SAFETY COMPLIANCE.
(a) For purposes of this Agreement, the term "ENVIRONMENTAL
AND SAFETY REQUIREMENTS" shall mean all federal, state and local statutes,
regulations, ordinances, decrees and other provisions having the force or effect
of law, all judicial and administrative orders and determinations to which the
Company, the Seller or any Subsidiary of the Company or the Seller is subject,
and all common law, in each case concerning public health and safety, worker
health and safety and pollution or protection of the environment; and
"ENVIRONMENTAL LIEN" shall mean any Encumbrance, whether recorded or unrecorded,
in favor of any Governmental Authority relating to any liability of the Company
arising under any Environmental and Safety Requirements.
(b) Except as set forth in Section 3.15 of the Disclosure
Schedule and other than liabilities in connection with any Reinsurance
Agreements or insurance policies written by the Company:
(i) The Company has complied with and is currently in
compliance with all Environmental and Safety Requirements, and the
Seller and the Company have not
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received any oral or written notice, report or information regarding
any liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise) or any corrective, investigatory or remedial obligations
arising under Environmental and Safety Requirements which relate to the
Company or any of its Properties or facilities, except for any such
noncompliance, liability or obligation which has not had and is not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect.
(ii) Without limiting the generality of the foregoing, the
Company has obtained and complied with, and is currently in compliance
with, all Permits, licenses and other authorizations that may be
required pursuant to any Environmental and Safety Requirements for the
occupancy of its Properties or facilities or the operation of the
Business. A list of all such Permits, licenses and other authorizations
is set forth in Section 3.15 of the Disclosure Schedule.
(iii) Neither this Agreement nor the consummation of the
transactions contemplated by this Agreement shall impose any
obligations on the Company or otherwise for site investigation or
cleanup, or notification to or consent of any Government Authorities or
third parties under any Environmental and Safety Requirements
(including, without limitation, any so-called "transaction-triggered"
or "responsible property transfer" laws and regulations).
(iv) The Company has not, either expressly or by operation of
law, assumed or undertaken any liability or corrective, investigatory
or remedial obligation of any other Person relating to any
Environmental and Safety Requirements, which liability or obligation is
or will be outstanding as of the date of this Agreement or as of the
Closing Date.
(v) No Environmental Lien has attached to any Property owned,
leased or operated by the Company, which attachment is or will be
outstanding as of the date of this Agreement or as of the Closing Date.
(vi) There is no existing practice, action or plan of the
Company and no existing condition of the assets of the Company which
could reasonably be expected to give rise to any civil or criminal
liability under, or prevent compliance with, any Environmental and
Safety Requirements, other than those the existence of which,
individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect.
SECTION 3.16. LICENSES AND PERMITS. Except as set forth in
Section 3.16 of the Disclosure Schedule, the Company has all governmental
licenses, permits and authorizations (other than those relating to the writing
of insurance which are covered by the next sentence) necessary to carry on the
Business now being conducted by the Company (collectively, the "PERMITS"), all
of which are valid and in full force and effect, except for such Permits the
absence
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of which, individually or in the aggregate, would not have a Material Adverse
Effect. Section 3.02 of the Disclosure Schedule lists all jurisdictions in which
the Company is licensed, authorized or permitted to write insurance or
reinsurance. The Company has been duly authorized by the relevant state, foreign
and other insurance regulatory authorities to write the lines of insurance or
reinsurance that it is currently writing in the respective jurisdictions in
which it does business. Except as set forth in Section 3.16 of the Disclosure
Schedule, the Company does not conduct any business or underwrite reinsurance in
any foreign jurisdiction which requires any license or approval for the Company
to conduct its Business as currently conducted. No insurance regulator in any
state has notified the Company, orally or in writing, that the Company is
commercially domiciled in any jurisdiction, and neither the Seller nor the
Company is aware of any facts that would result in the Company being
commercially domiciled in any state. The insurance licenses attached to Section
3.02 of the Disclosure Schedule are the licenses necessary for the Company to
conduct the Business in the manner and in the areas in which such Business is
currently being conducted except where the failure to be so licensed would not,
individually or in the aggregate, have a Material Adverse Effect, and all of the
insurance licenses are valid and in full force and effect. The Company has not
received any notice, oral or written, that it has, and to its knowledge it has
not, engaged in any activity which would cause modification, limitation,
non-renewal, revocation or suspension of any insurance license or Permit, and no
action, inquiry, investigation or proceeding looking to or contemplating the
revocation, modification, limitation, non-renewal or suspension of any thereof
is pending or threatened. Except as set forth in Section 3.16 of the Disclosure
Schedule, (i) all reports, statements, documents, registrations, filings and
submissions to state insurance regulatory authorities complied in all respects
with applicable law in effect when filed and (ii) no deficiencies have been
asserted by any such regulatory authority with respect to such reports,
statements, documents, registrations, filings or submissions that have not been
satisfied except to the extent that any failure to file such items or such
deficiencies would not, individually or in the aggregate, result in a Material
Adverse Effect.
SECTION 3.17. INTELLECTUAL PROPERTY RIGHTS. Section 3.17 of
the Disclosure Schedule sets forth a list of each trade name, service mark,
trademark, logo, copyright, patent and other intangible property used by the
Company which is material to the conduct of its Business, other than computer
software generally available in the market (collectively, "INTELLECTUAL PROPERTY
RIGHTS"), which are all the material intellectual property rights that are
required to conduct the Business. Except as set forth in Section 3.17 of the
Disclosure Schedule, the Company owns and has good and marketable title or has
valid and enforceable licenses relating to all of the Intellectual Property
Rights and such computer software, and has the right to use the Intellectual
Property Rights and such computer software, free and clear of any royalty or
other payment obligation (except as provided in any license) or claims of
infringement or other Encumbrance. Neither the Seller nor the Company has
received any notice of any conflict with or violation or infringement of, any
rights of any other Person with respect to any Intellectual Property Right or
such computer software. The Intellectual Property Rights have been registered to
the extent required with the appropriate Governmental Authority and such
registrations have been continuously maintained and are in full force and
effect. To the best of the knowledge of
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the Seller and the Company, the rights of the Company to the Intellectual
Property Rights are not being infringed by others. No licenses have been granted
by the Company, and there is no obligation requiring the Company to grant any
license, with respect to any of the Intellectual Property Rights.
SECTION 3.18. PROPERTY.
(a) The Company owns no real property. The Company leases no
real property other than the real property located at 100 Campus Drive, Suite
310, Florham Park, New Jersey. A true and correct copy of the lease with respect
to such real property has been provided to the Purchaser. The Company's
leasehold interest in the Florham Park, New Jersey real property is free and
clear of all Encumbrances, except: (i) liens for Taxes and assessments not yet
payable; (ii) liens, imperfections of title and easements which do not, either
individually or in the aggregate, materially detract from the value of, or
interfere with the present use of, the Properties subject thereto or affected
thereby; and (iii) inchoate mechanic and materialmen liens for construction in
progress and workmen's, repairmen's, warehousemen's and carrier's liens arising
in the ordinary course of the Business, provided that the liabilities secured by
such liens are not due or delinquent (the exceptions in clauses (i), (ii) and
(iii) being herein called "PERMITTED ENCUMBRANCES").
(b) Neither the Company nor, to the best knowledge of the
Seller and the Company, any other party thereto, is in or is claimed to be in
material breach of or in material default under any material lease of real
property to which the Company is a party, and no event has occurred which (after
notice or lapse of time or both) would become a material breach or material
default under, or would permit modification, cancellation, acceleration or
termination of, any such material lease or result in the creation of any
material Encumbrance upon, or any Person obtaining any right to acquire, any
Properties, assets or rights of the Company. There are no unresolved disputes
under any such lease.
(c) The Company has good and marketable title to, or a valid
leasehold interest in, all its material personal Property free and clear of all
Encumbrances except Permitted Encumbrances.
(d) All equipment, fixtures and other Properties owned, leased
or used by the Company (all of which are listed in Section 3.18(d) of the
Disclosure Schedule) are (i) in good operating condition and repair, reasonable
wear and tear excepted, and (ii) adequate for the Business currently conducted
by the Company and suitable in all respects for the purposes for which they are
now being used, except for such failures to be in such good operating condition
or adequacy or suitability which, individually and in the aggregate, do not have
a Material Adverse Effect.
SECTION 3.19. INSURANCE.
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(a) Section 3.19 of the Disclosure Schedule contains a true
and correct list of all property and casualty, liability, workers compensation,
directors and officers liability, surety bonds, key-man and life insurance and
other similar insurance contracts (including the expiration dates thereof, the
limits of liability, deductible amounts, and the annual premiums thereof) that
insure the business, operations or affairs of the Company that (i) have been
issued to the Company or (ii) are held by the Seller or by any Affiliate of the
Seller for the benefit of the Company and that will not continue to be
applicable to the Company following the Closing. All such insurance is in full
force and effect and, to the best of the knowledge of the Seller and the
Company, is with financially sound and reputable insurers in accordance with
normal industry practice.
(b) Since January 1, 1995, the Company has not failed to give
any material notice or to present any material claim under any insurance policy
or surety bond in due and timely fashion. The Seller has given the Purchaser the
most recently available reports for the Company on: (i) accidents, casualties or
damages occurring on or to the Properties or assets of the Company; and (ii)
claims by the Company for damages, reimbursement of losses, contribution or
indemnification under any insurance policy and settlements or negotiations of
settlements relating thereto, except with respect to claims pursuant to
Retrocession Arrangements.
SECTION 3.20. RELATIONSHIPS WITH AFFILIATES, OFFICERS,
DIRECTORS AND INTERESTED PARTIES. Except as set forth in Section 3.20 of the
Disclosure Schedule and other than intercompany payables and receivables arising
from the payment of expenses or provision of services by the Company on behalf
of the Seller, or by the Seller on behalf of the Company, as the case may be
(which shall be reduced to zero by a cash payment by the Seller to the Company
on or before the Closing Date), the Company is not a party to any contract,
agreement or arrangement with the Seller or any of its Affiliates, or any
officer, director or employee of such Persons.
SECTION 3.21. ASSUMED AND CEDED REINSURANCE AGREEMENTS.
(a) As used in this Agreement, the term "REINSURANCE
AGREEMENTS" shall mean all assumed and ceded reinsurance and retrocession
agreements, contracts, treaties, obligations, instruments or other reinsurance
or retrocession commitments, arrangements or undertakings of any kind to which
the Company is a party or by which the Company or any of its respective
Properties may be bound or affected.
(b) Set forth in Section 3.21(b) of the Disclosure Schedule is
a complete and accurate list of each Reinsurance Agreement pursuant to which the
Company has assumed business and which was in force at any time after December
31, 1987 and prior to January 1, 1999, including a description of certain of the
terms thereof (including the name of the ceding company, the name of the broker,
type of contract, inception date, estimated premium and limit). The Seller will
deliver to the Purchaser at the Closing a complete and accurate list of each
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assumed Reinsurance Agreement in force five Business Days prior to the Closing
Date, including information similar to Section 3.21(b) of the Disclosure
Schedule.
(c) Set forth in Section 3.21(c) of the Disclosure Schedule is
a complete and accurate list of each Reinsurance Agreement pursuant to which the
Company has ceded or transferred any portion of its obligations or liabilities
under any reinsurance or insurance agreement (a "RETROCESSION ARRANGEMENT") and
which was in force at the Reference Date, including a description of certain of
the terms thereof (including the name of the retrocessionaire, type of contract,
inception date, estimated premium and limit). Except as set forth in Section
3.21(c) of the Disclosure Schedule, (i) to the best knowledge of the Seller and
the Company, none of such retrocessionaires is insolvent or the subject of a
rehabilitation, liquidation, conservatorship, receivership, bankruptcy or
similar proceeding; (ii) the financial condition of any such retrocessionaire is
not impaired to the extent that a default thereunder is reasonably anticipated,
(iii) no notice of intended cancellation has been received by the Company from
any of such retrocessionaires; and (iv) the Company is entitled under the
Massachusetts Insurance Code to take full credit in its Annual Statutory
Statements for all amounts recoverable by it pursuant to any Retrocession
Arrangement, and all such amounts recoverable have been properly recorded in the
books and records of account of the Company and are properly reflected in the
Annual Statutory Statements. The Seller will deliver to the Purchaser at the
Closing a complete and accurate list of each Retrocession Arrangement in force
five Business Days prior to the Closing Date including information similar to
Section 3.21(c) of the Disclosure Schedule. No such Retrocession Arrangement
contains any provision providing that any such party thereto may terminate,
cancel, or commute the same by reason of the transactions contemplated by this
Agreement.
(d) All of the Reinsurance Agreements are valid, binding and
enforceable against the Company and, to the best of the knowledge of the Seller,
against the other parties thereto in accordance with their terms and are in full
force and effect. The Company is not, and to the best of the knowledge of the
Seller and the Company, no other party thereto is, in or claimed to be in
material breach or material default under any Reinsurance Agreement, and no
event has occurred which (after notice or lapse of time or both) would become a
material breach or material default under, or would permit modification,
cancellation, acceleration or termination of, any Reinsurance Agreement or
result in the creation of any material Encumbrance upon, or result in any Person
obtaining any right to acquire, any Properties, assets or rights of the Company.
There are no unresolved disputes under any Reinsurance Agreement.
SECTION 3.22. OTHER CONTRACTS.
(a) Set forth on Section 3.22 of the Disclosure Schedule is a
complete and accurate list of (x) each Contract which is material to the
Business, Properties, operations, assets, liabilities or financial condition of
the Company and (y) without regard to materiality, each of the following
Contracts relating to the Company (access to correct and complete copies or, if
none
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exist, written descriptions, of all Contracts called for by clauses (x) and (y)
having been provided to the Purchaser):
(i) All Contracts out of the ordinary course of business
representing, individually or in the aggregate, non-terminable future
liabilities in excess of $50,000;
(ii) Each employment, severance, termination, agency,
brokerage, consultation or representation Contract or similarly binding
arrangement of any type (including, without limitation, loans or
advances) with any current or former executive, employee, consultant,
representative, officer or director of the Company, or any managing
general agent, agent, reinsurance intermediary, claims adjuster or
administrator or broker of the Company who receives compensation or
commissions of $25,000 or more per year or to whom any underwriting or
claims settlement authority is delegated, and the name, position and
rate of compensation of each such Person and the expiration date of
each such Contract;
(iii) All Contracts or similarly binding arrangements with any
Person containing any provision or covenant limiting the ability of the
Company to engage in any line of business in any geographical area or
compete with any Person;
(iv) All partnership, joint venture or profit-sharing
Contracts with any Person (other than participation in reinsurance
arrangements and underwriting agreements entered into in the ordinary
course of business and consistent with past practice);
(v) All Contracts relating to the borrowing of money or the
deferred purchase price of Property (other than repurchase agreements
and reverse repurchase agreements entered into in the ordinary course
of managing the Company's investments and consistent with past
practice), or the direct or indirect guarantee of any obligation for,
or Contracts to service the repayment of, borrowed money or any other
liability in respect of indebtedness for borrowed money of any other
Person;
(vi) Each lease, sublease, license (excluding computer
software) or rental or use Contract to which the Company is a party
with respect to personal Property used by the Company in the conduct of
its Business, operations or affairs and providing for annual rental
payments to be paid by or on behalf of the Company in excess of
$10,000;
(vii) All Contracts relating to the future disposition or
acquisition of any investment in any Person or of any interest in any
business enterprise (other than the disposition or acquisition of
investments in the ordinary course of business consistent with past
practice), and all Contracts requiring the Company to purchase any
security (other than such purchases in the ordinary course of business
consistent with past practice);
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(viii) All reinsurance pools pursuant to which the Company has
assumed reinsurance risks currently in force and all assigned pools in
which the Company is participating, other than state FAIR plans,
assigned risk plans, joint underwriting associations and similar
associations arising from the requirements of state insurance rules and
regulations;
(ix) Each Contract relating to computer software licensing or
data processing services representing non-terminable future liabilities
in excess of $10,000;
(x) Each Contract (other than Contracts cancelable at will or
with 30 days' notice, in each case without penalty) involving payments
of more than $10,000 during its term for the purchase of materials,
supplies or services;
(xi) Each Contract (other than Contracts cancelable at will or
with 30 days' notice, in each case without penalty) which obligates the
Company to provide services to a third party; and
(xii) Any power of attorney which is currently effective and
outstanding, other than powers of attorney which are required by law or
which have been granted pursuant to requirements of applicable state
insurance or securities rules and regulations.
(b) All of the material Contracts are valid, binding and
enforceable against the parties thereto in accordance with their terms and are
in full force and effect, subject to the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors'
rights generally and subject, as to enforceability, to the effect of general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). The Company is not, and to the best of the
knowledge of the Seller and the Company, no other party thereto is, in or
claimed to be in material breach or material default under any material
Contract, and no event has occurred which (after notice or lapse of time or
both) would become a material breach or material default under or would permit
modification, cancellation, acceleration or termination of, any material
Contract or result in the creation of any material Encumbrance (other than
Permitted Encumbrances) upon, or any Person obtaining any right to acquire, any
Properties, assets or rights of the Company. There are no unresolved disputes
under any material Contract. No material Contract contains any provision
providing that any other party thereto may terminate or cancel the same by
reason of the transactions contemplated by this Agreement.
SECTION 3.23. EMPLOYEE BENEFIT MATTERS.
(a) Set forth in Section 3.23(a) of the Disclosure Schedule is
a complete and correct list of all retirement, pension, savings, profit-sharing,
bonus, incentive compensation, deferred compensation, stock option or stock
compensation, welfare benefit, severance or termination, retiree medical, dental
or life insurance, supplemental retirement, employment or
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consulting agreements and other material contracts and arrangements (including
automobile rental or usage arrangements) maintained or contributed to by the
Company, or covering employees, former employees or independent contractors of
the Company ("EMPLOYEES") with respect to their employment with the Company,
including, but not limited to, "employee benefit plans" within the meaning of
Section 3(3) of ERISA (each, a "PLAN", and collectively, the "PLANS"). Each Plan
is in writing and true and complete copies of the following items relating to
each Plan, where applicable, have heretofore been made available to the
Purchaser: (i) the Plan and any trust, custodial or other funding agreement,
including all amendments thereto; (ii) the three most recent actuarial reports
and annual reports (Forms 5500) filed with the Internal Revenue Service ("IRS");
(iii) the most recent determination letters issued by the IRS; (iv) the most
recent summary plan descriptions, summary of material modifications to such
summary plan descriptions and all material Employee communications relating to
such Plans distributed within the last 12 months; and (v) the three most recent
custodial or trustee reports or other financial statement for funded Plans.
(b) None of the Plans is a multiemployer plan, within the
meaning of Section 3(37) or 4001(a)(3) of ERISA (a "MULTIEMPLOYER PLAN") or a
single employer plan, within the meaning of Section 4001(a)(15) of ERISA, for
which the Company could incur liability under Section 4063 or 4064 of ERISA (a
"MULTIPLE EMPLOYER PLAN").
(c) Each of the Plans is and has been maintained and
administered in compliance with the applicable provisions of ERISA, the Internal
Revenue Code, and all other applicable Federal or state laws and regulations.
Each Plan intended to be qualified under Section 401(a) of the Internal Revenue
Code is so qualified and has either received a favorable determination letter
from the IRS, or is in the process of applying for such a determination letter,
with respect to the Plan and all amendments, and the Seller and the Company are
not aware of any circumstances likely to result in revocation of any such
favorable determination letter or, if applicable, denial of such favorable
determination letter. There is no pending, anticipated or threatened litigation,
claim, action or proceeding relating to the Plans, other than claims for
benefits in the ordinary course. Neither the Seller nor the Company nor any
fiduciary of any Plan has engaged in a transaction with respect to any Plan
which could subject the Company to any (i) Tax or penalty imposed by either
Section 4975 or 4976 of the Internal Revenue Code or Section 502 of ERISA, or
(ii) liability under Section 409 of ERISA.
(d) No liability under Subtitle C or D of Title IV of ERISA
has been incurred and not satisfied and no condition exists which presents a
material risk that liability would be incurred by the Company, in each case with
respect to any ongoing, frozen or terminated plan currently or formerly
maintained or contributed to by the Company or any Person which would be now or
at the applicable time considered a member of the Company's "controlled group"
within the meaning of Section 400(a)(14) of ERISA (an "ERISA AFFILIATE"), and
(ii) no withdrawal liability has been incurred and not satisfied under Subtitle
E of Title IV of ERISA or is anticipated (regardless of whether based on
contributions of an ERISA Affiliate or the Company) which could result in a
liability to the Company. No Notice of Reportable Event
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(within the meaning of Section 4043 of ERISA) has been required to be filed for
any Plan within the three years preceding the Closing Date. No distribution has
been made from a Plan that does not comply with Treasury Regulation Section
1.401(a)(4)-5(b).
(e) All contributions required to be made on or prior to the
Closing Date under the terms of any Plan or required by applicable law have been
or will be timely made. All such contributions to the Plans, and all payments
under the Plans, except those to be made from a trust qualified under Section
401(a) of the Internal Revenue Code, for any period ending before the Closing
Date that are not yet, but will be, required to be made, are properly accrued
and reflected on the Reference Financial Statement. No Plan or any "employee
benefit plan' (within the meaning of Section 3(3) of ERISA) of an ERISA
Affiliate (an "AFFILIATE PLAN") has an "accumulated funding deficiency" (whether
or not waived) within the meaning of Section 302 of ERISA or Section 412 of the
Internal Revenue Code and neither the Company nor any ERISA Affiliate has an
outstanding funding waiver.
(f) Under each Plan which is a "single employer plan," within
the meaning of Section 4001(a)(15) of ERISA, as of the last day of the Plan year
ending in December 1997, the "current liability", within the meaning of Section
412(l)(7) of the Internal Revenue Code (as determined on the basis of the
actuarial assumptions contained in the Plan's most recent actuarial valuation),
did not exceed the then current fair market value of the assets of such Plan and
there has been no material change in the financial condition of such Plan since
the last day of such Plan year. The information provided to the actuaries for
use in preparing any Plan's actuarial valuation was complete and accurate in all
respects and neither the Seller nor the Company have any reason to believe that
the conclusions expressed in those valuations are incorrect or incomplete. Each
Plan that is a "defined benefit plan" (as defined by Section 3(35) of ERISA)
could be terminated at the Closing Date in a standard termination under Section
4041(b) of ERISA without making any additional contributions to such Plan.
(g) No written or oral representations have been made to any
Employee of the Company, promising or guaranteeing any payment or funding for
the continuation of medical, dental, life or disability coverage for any period
of time beyond the end of the current Plan year or beyond the termination of an
Employee's employment, except to the extent of coverage required under COBRA.
(h) Each of the Plans which is a "group health plan" within
the meaning of Section 4980B of the Internal Revenue Code has been administered
in material compliance with Title 1, Subtitle B, Part 6 of ERISA and Section
4980B of the Internal Revenue Code and the regulations thereunder ("COBRA"), and
there has been no failure to provide continuation coverage under any Plan or
Affiliate Plan which is a group health plan, as required by the foregoing
provisions of the Internal Revenue Code and ERISA.
(i) Except as set forth in Section 3.23(i) of the Disclosure
Schedule, the Company does not have any formal plan or express or implied
commitment to create any
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additional plan, policy, agreement or arrangement that would affect any
Employee, or modify, change or terminate any existing Plan, other than with
respect to a modification or change required by ERISA or the Internal Revenue
Code or applicable law.
(j) All benefits earned as of the Reference Date that will be
payable after the Closing Date under any Plan providing for deferred
compensation, including, but not limited to, benefits payable under any Plan
providing supplemental executive benefits to a select group of highly
compensated employees or any "top hat" plan, program or arrangement, and any
Employee service and/or bonus awards (including without limitation, awards under
any incentive compensation plan), are properly accrued and reflected on the
Reference Financial Statement.
(k) Except as set forth in Section 3.23(k) of the Disclosure
Schedule, no Plan is a severance or parachute pay plan, policy, arrangement or
agreement, and no Plan provides benefits similar to those provided under a
severance or parachute pay plan, policy or arrangement.
(l) Except as set forth in Section 3.23(l) of the Disclosure
Schedule, no Plan is a stay-bonus agreement or arrangement, retention agreement
or similar "pay-to-stay" plan, program, arrangement or agreement; there are no
obligations pursuant to any Plan with respect to a stay-bonus agreement or
arrangement, retention agreement or similar "pay-to-stay" plan, program,
arrangement or agreement; and no Plan provides benefits as a result of or in
connection with the consummation of the transactions contemplated in this
Agreement.
(m) No benefit under any Plan or agreement between the Company
or the Seller and an Employee will be triggered or become accelerated, vested or
payable by reason of this Agreement or any transaction contemplated hereby.
(n) Other than the Plans under which there are accrued but
unpaid benefits, which are listed on Section 3.23(n) of the Disclosure Schedule,
but only to the extent of such accruals, all of the Plans are terminable by the
Purchaser after the Closing without any payment or penalty.
(o) Section 3.23(o) of the Disclosure Schedule sets forth all
payments or benefits (whether or not in cash) which will be earned by the
Employees through the Closing Date by reason of the Plans listed on Section
3.23(n) of the Disclosure Schedule, assuming that all such Employees are
employed by the Company on the Closing Date.
SECTION 3.24. LABOR MATTERS.
(a) Except as set forth in Section 3.24 of the Disclosure
Schedule, (i) there are no controversies pending or, to the best knowledge of
the Seller and the Company, threatened, between the Company and any of its
employees, which controversies have had or are reasonably likely to have a
Material Adverse Effect; (ii) the Company is not a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by the
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Company and no application for certification of a collective bargaining agent is
pending or, to the best of the knowledge of the Seller and the Company,
threatened; (iii) there are no grievances outstanding against the Company under
any such agreement or contract; (iv) there are no unfair labor practice
complaints pending against the Company before the National Labor Relations
Board; and (v) the Seller and the Company have no knowledge of any pending or
threatened strikes, slowdowns, work stoppages, lockouts, or threats thereof, by
or with respect to any Employees.
(b) The Company has, in the ordinary course consistent with
past practice, paid or made provisions for the payment of all salaries and
accrued wages to be made with respect to the Employees and has complied in all
material respects with all laws relating to the employment and safety of labor,
including provisions relating to wages, hours, benefits, collective bargaining,
the payment of social security and similar Taxes, and all applicable
occupational safety and health acts, laws and regulations. The Company has not
had a "plant closing" or "mass layoff" within the meaning of the Worker
Adjustment and Retraining Notification Act, 29 U.S.C. Sections 2101 ET SEQ. (the
"WARN ACT"). No employees (within the contemplation of the WARN Act) of the
Company have suffered, may be deemed to have suffered or will have suffered an
"employment loss" as defined in the WARN Act within the 90 days prior to the
date of this Agreement or prior to the Closing Date. The Company is not liable
for any arrears in withholding or any Taxes or penalties for any material
failure to comply with any of the foregoing.
SECTION 3.25. TAXES. Except as set forth in Section 3.25 of
the Disclosure Schedule:
(a) All Tax Returns required to be filed in respect of the
Company or any affiliated, combined, consolidated, unitary or similar group of
which the Company was or is a member ("RELEVANT GROUP") that are due, taking
into account timely extensions of the filing period, on or prior to the Closing
Date have been duly and timely filed (or will have been duly and timely filed by
the Closing Date) in accordance with all applicable laws and each such Tax
Return is correct, accurate and complete in all material respects. The Company
or the member of the Relevant Group has (or will have by the Closing Date) paid,
or has (or will have by the Closing Date) made provision for Taxes (as opposed
to any reserve for deferred Taxes to reflect timing differences between book and
Tax income) on its books in accordance with GAAP for the payment of, all Taxes,
whether or not yet due and payable and whether or not disputed, in respect of
the periods covered by Tax Returns which are due on or before the Closing Date,
and has (or will have by the Closing Date) accrued or otherwise adequately
reserved prorated liabilities on its books in accordance with GAAP for the
payment of all Taxes for periods beginning before and ending after the Closing
Date for which Tax Returns have not yet been filed.
(b) The Company has made all withholdings of Taxes that it
reasonably determined were required to be made under all applicable federal,
state, local and foreign Tax laws and regulations on or before the Closing Date
in connection with payments made to any employee, former employee, creditor,
shareholder, affiliate, customer or supplier, and to the
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extent required to be paid, such withholdings have been paid to the respective
governmental agencies.
(c) There have been made available to the Purchaser true and
complete copies of all material Tax Returns, as may be relevant to the Company
since January 1, 1993.
(d) No deficiencies, adjustments, or changes in assessments
for any Taxes have been proposed, asserted or assessed against the Company. All
liabilities in respect of federal income Taxes of the Company have been finally
determined for all taxable years prior to and including the years set forth in
Section 3.25(d) of the Disclosure Schedule. There is no action, suit,
proceeding, audit, investigation or claim pending or, to the best knowledge of
the Seller and the Company, threatened, in respect of any Taxes for which the
Company may become liable, including as a transferee of the assets of, or
successor to, any entity. All deficiencies proposed as a result of any audits
have been paid or finally settled and no deficiencies have been proposed in the
course of any pending audit. No issue has been raised during the past five years
by the IRS in any audit of the Company or its predecessor which, by application
of similar principles, could be expected to result in a material proposed
deficiency for any period not yet audited or for periods under audit.
(e) Except as set forth in Section 3.25(e) of the Disclosure
Schedule, the Company has not executed or filed with the IRS or any other taxing
authority any agreement or other document extending, or having the effect of
extending, the period of assessment or collection of any Taxes for which the
Company may be liable.
(f) The Company qualifies as an insurance company under the
Internal Revenue Code and neither the Seller nor the Company has received any
notice or other communication relating to or affecting such qualification of the
Company as an insurance company.
(g) Except as set forth in Section 3.25(g) of the Disclosure
Schedule, from and after the Company's formation no entity has joined in filing
a consolidated, combined, affiliated, unitary or similar return with the Company
and the Company has not filed or consented to the filing of any foreign, federal
or state consolidated, combined, affiliated, unitary or similar return with any
entity.
(h) The Company is not a partner in any partnership, joint
venture or other arrangement that is treated as a partnership for Tax purposes
other than certain mandatory state insurance associations and mandatory state
reinsurance pools.
(i) There are no material Encumbrances for Taxes upon the
assets of the Company except Encumbrances for Taxes not yet due and payable.
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(j) Neither the Seller nor the Company has filed a consent
pursuant to Section 341(f) of the Internal Revenue Code, or agreed to have
Section 341(f)(2) of the Internal Revenue Code apply to any disposition of a
subsection (f) asset (as defined in Section 341(f)(4) of the Internal Revenue
Code) owned by the Seller or the Company.
(k) The Company has made all payments of estimated Taxes that
are required to be made prior to the Closing Date.
(l) The Company has not made any payments, nor is it obligated
to make any payments, nor is it a party to any agreement that under certain
circumstances could require it to make any payments, that are not deductible
under Section 280G of the Internal Revenue Code.
(m) None of the assets of the Company constitutes tax-exempt
bond financed property or tax-exempt use property, within the meaning of Section
168 of the Internal Revenue Code. The Company is not a party to any "safe harbor
lease" that is subject to the provisions of Section 168(f)(8) of the Internal
Revenue Code as in effect prior to the Tax Reform Act of 1986, or to any
"long-term contract" within the meaning of Section 4.60 of the Internal Revenue
Code.
(n) There are no accounting method changes, and, to the best
knowledge of the Seller and the Company, there are no proposed or threatened
accounting method changes of the Company that could reasonably be expected to
give rise to an adjustment under Section 481 of the Internal Revenue Code for
periods after the Closing Date.
(o) The Company has not received any written ruling of a
taxing authority related to Taxes or, since its formation, entered into any
material written and legally binding agreement with a taxing authority relating
to Taxes except as regards the extension of any statute of limitations.
(p) The Company has no liability for Taxes of any Person (i)
under Section 1.1502-6 of the Treasury Regulations (or any similar provision of
state, local or foreign Law), (ii) as a transferee or successor by operation of
law, or (iii) by contract. The Company is not a party to any Tax allocation or
sharing agreement, other than the Tax Sharing Agreement.
(q) The Company has not participated in or cooperated with an
international boycott within the meaning of Section 999 of the Internal Revenue
Code.
(r) Section 3.25(r) of the Disclosure Schedule contains a list
of all states, territories and jurisdictions (foreign or domestic) to which any
tax is properly payable by the Company. No claim has ever been made by any
taxing authority in a jurisdiction in which the Company does not file tax
returns that it is or may be subject to Tax in that jurisdiction.
SECTION 3.26. AGENTS. To the best of Seller's knowledge, all
Persons through whom the Company has placed or sold reinsurance and insurance
are duly licensed (to
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the extent such licensing is required) to sell or place reinsurance and
insurance in the jurisdictions where they do so on behalf of the Company. Except
as set forth in Section 3.26 of the Disclosure Schedule, no single agent,
broker, intermediary or producer generated more than $500,000 of the aggregate
gross written premium of the Company during the years ended December 31, 1997 or
December 31, 1998. Except as otherwise set forth in Section 3.26 of the
Disclosure Schedule, no Person listed on Section 3.26 of the Disclosure Schedule
has given or been given written notice of termination or, to the knowledge of
the Seller or the Company, threatened or been threatened with termination, or
threatened or been threatened with a substantial reduction in the amount of
premiums to be written by such Person on behalf of the Company. Except as set
forth Section 3.26 of the Disclosure Schedule, the Company is not a party to any
managing general agency contracts or other similar arrangements. The Company is
not a party to any fronting or similar agreement to place or sell reinsurance or
insurance for any other Person.
SECTION 3.27. ACCOUNTS WITH FINANCIAL INSTITUTIONS. Section
3.27 of the Disclosure Schedule sets forth a list of all safe deposit boxes,
active bank accounts and other time or demand deposits of the Company, together
with the names and addresses of the applicable financial institution or other
depository, the account number and the names of all persons authorized to draw
thereon or who have access thereto.
SECTION 3.28. MINUTE BOOKS; STOCK BOOKS; OFFICERS AND
DIRECTORS. The minute books of the Company which have been made available to the
Purchaser for its inspection contain true and complete records of all meetings
and consents in lieu of meetings of the Board of Directors (and any committee
thereof) of the Company and its shareholders since incorporation and accurately
reflect all transactions referred to in such minutes and consents in lieu of
meetings. The stock books of the Company which have been made available to the
Purchaser for its inspection are true and complete. Attached as Section 3.28 of
the Disclosure Schedule is a true and correct list of the officers and directors
of the Company as of the date of this Agreement.
SECTION 3.29. CONTINUING BUSINESS RELATIONSHIPS. Except as set
forth in Section 3.29 of the Disclosure Schedule, to the best of the knowledge
of the Seller and the Company, no insured, reinsured, retrocedent or
retrocessionaire of the Company will cease to do business or materially
adversely change its volume of business with the Company after the consummation
of the transactions contemplated hereby.
SECTION 3.30. YEAR 2000.
(a) Section 3.30 of the Disclosure Schedule sets forth a
description of the Seller's plans to evaluate and implement solutions to Year
2000 issues confronting the Seller and its operations, including those of the
Company, and the remediation costs for hardware and software problems.
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(b) Based on its review and study of Year 2000 issues as
reflected in Schedule 3.30, the Seller believes that neither Year 2000 problems
nor commercially reasonable and foreseeable remediation costs have had, or will
have, a Material Adverse Effect with respect to either the Company or the
Seller.
SECTION 3.31. BROKERS. Except for Advest, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Seller. The Seller is solely
responsible for the fees and expenses of Advest.
SECTION 3.32. DISCLOSURE. No representation or warranty or
other statement made by the Seller in this Agreement or in the Disclosure
Schedule contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As an inducement to the Seller to enter into this Agreement,
the Purchaser hereby represents and warrants to the Seller as follows:
SECTION 4.01. INCORPORATION AND AUTHORITY OF THE PURCHASE. The
Purchaser is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of New York and has all necessary corporate
power and authority to own, lease and operate its properties, to conduct its
business as now being conducted, to enter into this Agreement and each other
agreement and instrument required to be executed and delivered by the Purchaser
pursuant hereto, to carry out its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by the Purchaser of this Agreement and each other
agreement and instrument required to be executed and delivered by the Purchaser
pursuant hereto, and the consummation by the Purchaser of the transactions
contemplated hereby and thereby, have been duly and validly authorized by all
requisite corporate action, and no other corporate proceedings on the part of
the Purchaser are necessary to authorize the foregoing. This Agreement has been,
and at the Closing the other agreements and instruments required pursuant hereto
and to which the Purchaser is a party will have been, duly and validly executed
and delivered by the Purchaser, and (assuming the authorization, execution and
delivery by the Seller, to the extent it is a party thereto), each of this
Agreement and such other documents at the Closing will constitute a legal, valid
and binding obligation of the Purchaser enforceable against the Purchaser in
accordance with its terms, subject to the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors'
rights generally and subject, as to enforceability, to the effect of
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general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
SECTION 4.02. NO CONFLICT. Assuming all consents, approvals,
authorizations, orders and other actions described in Section 4.04 have been
obtained and/or taken, all filings and other notifications described in Section
4.04 have been made, and except as may result from any facts or circumstances
relating solely to the Seller, the execution, delivery and performance of this
Agreement by the Purchaser, the purchase of the Shares pursuant to this
Agreement and the consummation by the Purchaser of the transactions contemplated
hereby do not and will not (a) violate or conflict with the Certificate of
Incorporation or By-laws (or other similar applicable documents) of the
Purchaser, (b) conflict with or violate any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award applicable to the
Purchaser, or (c) result in any breach of, or constitute a default (or event
which with the giving of notice or lapse of time, or both, would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of any Encumbrance on
any of the assets or properties of the Purchaser pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument relating to such assets or properties to which the Purchaser is
a party or by which any of such assets or properties is bound or affected, which
conflict, violation, breach or default in the case of clauses (a), (b) and (c)
would have, or is reasonably likely to have, a material adverse effect on the
ability of the Purchaser to consummate the transactions contemplated by this
Agreement.
SECTION 4.03. ABSENCE OF LITIGATION. No claim, action,
proceeding or investigation is pending against the Purchaser or any of its
Affiliates which seeks to materially delay or prevent the consummation of the
transactions contemplated hereby or which would be reasonably likely to
adversely affect or restrict the Purchaser's ability to consummate the
transactions contemplated hereby.
SECTION 4.04. CONSENTS AND APPROVALS. The execution and
delivery of this Agreement and each other agreement and instrument required to
be executed by the Purchaser, the purchase of the Shares pursuant to this
Agreement and the consummation by the Purchaser of the transactions contemplated
hereby do not, and the performance of this Agreement and each other agreement
and instrument required to be executed by the Purchaser will not, require any
consent, approval, authorization, order or other action by, or filing with or
notification to, any Governmental Authority, except (a) as described in a
writing delivered to the Seller by the Purchaser on the date hereof, (b) the
notification requirements of the HSR Act, (c) the approval of the Massachusetts
Insurance Division, and (d) filings under the Exchange Act.
SECTION 4.05. INVESTMENT PURPOSE. The Purchaser is acquiring
the Shares solely for its own account and not with a view to, or for offer or
sale in connection with, any distribution thereof in any transaction which would
be in violation of the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
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SECTION 4.06. BROKERS. Except for Gill and Roeser, Inc., no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Purchaser. The
Purchaser is solely responsible for the fees and expenses of Gill and Roeser,
Inc.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. CONDUCT OF BUSINESS PRIOR TO THE CLOSING.
(a) Seller covenants and agrees that, between the date hereof
and the Closing Date, it shall cause the Company to conduct its Business in the
ordinary course and consistent with its prior practice except as described in
Section 5.01(a) of the Disclosure Schedule or except as otherwise specifically
provided in this Agreement.
(b) Except as otherwise specifically provided in this
Agreement, the Seller covenants and agrees that, prior to the Closing and
without making any commitment on Purchaser's behalf, it will cause the Company
(i) to use all commercially reasonable efforts to preserve substantially intact
its business organization, goodwill, Permits and insurance licenses, (ii) to
keep available to the Purchaser the services of Current Employees, (iii) to
comply in all material respects with all laws, statutes, ordinances, rules and
regulations applicable to the Company, (iv) to take all commercially reasonable
steps to preserve the current relationships of the Company with its brokers,
reinsurance intermediaries, ceding companies, reinsurers, agents, managing
general agents, suppliers and other persons with which the Company has
significant business relationships, and (v) to perform its obligations under all
Reinsurance Agreements, Contracts and commitments to which it is a party or by
or to which it is bound or subject.
(c) The Seller covenants and agrees that prior to the Closing
Date, it will cause the Company to maintain its books and records in the usual,
regular and ordinary manner consistent with past practices; to use commercially
reasonable efforts to continue in full force and effect the policies of
insurance listed in Section 3.19 of the Disclosure Schedule or comparable
substitute policies and will promptly notify Purchaser of any cancellation or
non-renewal of such insurance; and to use commercially reasonable efforts to
maintain all of its assets and Properties in good repair, working order and
operating condition (subject only to ordinary wear and tear).
(d) The Seller covenants and agrees that it will not allow the
Company to amend, commute, terminate or waive any of its rights under any
Reinsurance Agreement
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pursuant to which the Company has ceded or transferred any portion of its
obligations or liabilities, except as otherwise contemplated by Section 5.13.
(e) The Seller covenants and agrees to cause the Company to
commence preparation of and, consistent with past practice and on a timely
basis, if required prior to the Closing Date, file with or submit to the
Massachusetts Insurance Division and any other insurance department or other
regulatory authority with which the Company is required to make such filings or
submissions, and, if filed prior to the Closing Date, deliver to the Purchaser
true and complete copies of, the quarterly statutory statement for each quarter
of 1999 ended prior to the Closing Date, together with all related notes,
exhibits and schedules thereto. All such quarterly statements filed with or
submitted to the Massachusetts Insurance Division and any other insurance
department, or regulatory authority (i) shall be prepared from the books of
account and other financial records of the Company, (ii) shall be filed with or
submitted to the Massachusetts Insurance Division, and such other insurance
departments and regulatory authorities, on forms prescribed or permitted
thereby, (iii) shall be prepared in accordance with SAP applied on a basis
consistent with the past practices of the Company (except as set forth in the
notes, exhibits or schedules thereto), and shall comply on their respective
dates of filing or submission with the Massachusetts Insurance Code and the laws
of such other jurisdictions, (iv) shall present fairly the statutory assets,
liabilities, capital and surplus, results of operations and cash flows of the
Company as of the dates thereof or for the periods covered thereby (subject to
normal estimation of accruals and reserves and normal year-end audit
adjustments), and (v) shall not use any accounting practices that are permitted
than prescribed by the Massachusetts Insurance Division.
(f) The Seller covenants and agrees that, prior to the
Closing, it will not permit the Company to amend its Charter or By-laws or merge
or consolidate or sell all or substantially all of its assets (other than
ordinary course trading of its investment portfolio consistent with its
investment guidelines and past practice), or obligate itself to do so, with or
into or to any other entity, without the prior written consent of the Purchaser.
(g) Except as otherwise specifically permitted by this
Agreement, the Seller covenants and agrees that, without the prior written
consent of the Purchaser, it will not permit the Company or any Subsidiary
thereof prior to the divestiture thereof pursuant to Section 5.14(a) hereof),
prior to the Closing, to:
(i) change in any material respect its accounting methods,
principles or practices except as required by SAP or GAAP or change in
any material respect its underwriting, reinsurance, marketing,
establishment of reserves, investment or claims adjustment policies or
practices;
(ii) declare, set aside or pay any dividend or other
distribution (whether in cash, stock, property or any combination
thereof) in respect of the Shares or any other securities or redeem,
repurchase or otherwise acquire any equity securities;
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(iii) make any payment pursuant to the Tax Sharing Agreement,
other than a payment consistent with past practice that is related to
the Tax liability of the Company and (i) with respect to payments for
periods (or portions thereof) beginning after the Reference Date which
has been consented to by Purchaser, which consent may not be
unreasonably delayed or withheld and (ii) with respect to payments for
the periods (or portions thereof) that end on or before the Reference
Date, that are reflected in the Tax Reserve;
(iv) revalue any of its assets, including, without limitation,
writing off notes or accounts receivable, other than in the ordinary
course of business consistent with past practice;
(v) establish or increase any bonus, insurance, severance,
termination, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of
stock options, stock appreciation rights, performance awards, or
restricted stock awards), stock purchase or other employee benefit
plans, or otherwise increase the compensation payable or to become
payable to any of the Employees or any directors, officers or employees
of the Company, except salary increases as may be required by law, and
salary increases to non-officers, in the ordinary course of business
consistent with past practice and not in excess of five percent (5%)
per annum in the aggregate;
(vi) enter into any employment, bonus, incentive or defined
compensation, severance or termination agreement with any of the
Employees or any directors, officers, other employees or consultants or
establish, adopt or enter into any collective bargaining agreement or
adopt or amend any Plan;
(vii) create, incur, assume, maintain or permit to exist any
Encumbrances on any Property of the Company other than Permitted
Encumbrances;
(viii) create, incur or assume any indebtedness for borrowed
money, including obligations in respect of capital leases, or guarantee
any indebtedness for borrowed money or any other obligation of any
other Person;
(ix) subject to Section 5.14(b), pay or discharge any material
claim, liability or Encumbrance (whether absolute, accrued, contingent
or otherwise), or waive any right, other than in the ordinary course of
business consistent with past practice or pursuant to binding
contractual obligations of the Company in existence on the date hereof;
(x) hire any new employees, agents or consultants, except for
those earning less than $30,000 per annum who are hired in the ordinary
course of business consistent with past practice to replace departed
employees;
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(xi) authorize or make any capital expenditure in excess of an
aggregate of $30,000;
(xii) issue or agree to issue any shares of its capital stock
or securities exchangeable for or convertible into such capital stock;
(xiii) become a party to any agreement (other than Reinsurance
Agreements in the ordinary course of business consistent with past
practice) which, if it existed on the date hereof, would be required to
be listed in the Disclosure Schedule, or, other than in the ordinary
course of business and consistent with past practice, amend or
terminate any existing Reinsurance Agreement or, other than in the
ordinary course of business and consistent with past practice, amend or
terminate any other Contract;
(xiv) subject to Section 5.14(a), dispose of or acquire any
assets other than in the ordinary course of business for fair value and
consistent with past practice;
(xv) make any investments in noninvestment grade securities;
(xvi) abandon, modify, waive, terminate or otherwise change
any of the insurance licenses described in Section 3.02 of the
Disclosure Schedule or Permits of the Company, except as may be
required by law or by any applicable insurance or other regulatory
authority;
(xvii) enter into any commutation of any ceded Reinsurance
Agreement;
(xviii) make any loan, advance or capital contribution to or
investment by the Company in any Person, except in the ordinary course
of business and consistent with past practice;
(xix) enter into any transaction or commitment made, or any
contract or agreement between the Company on the one hand, and the
Seller or any of its Affiliates on the other hand;
(xx) consider or adopt a plan of complete or partial
liquidation, dissolution, rehabilitation, restructuring,
recapitalization, re-domestication or other reorganization;
(xxi) enter into any joint venture, partnership, managing
general agency or similar arrangement with any Person;
(xxii) settle or compromise any material claims against the
Company (other than the payment of claims on insurance policies or
under Reinsurance Agreements, in each case in the ordinary course of
business consistent with past practice);
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(xxiii) take any action or course of action inconsistent with
its compliance with the covenants and agreements contained in this
Agreement;
(xxiv) take or agree to commit to take any action that would
make any representation or warranty of the Seller contained herein
inaccurate in any material respect at the Closing or omit to take any
action necessary to prevent any such representation or warranty from
being inaccurate in any material respect at such time; and
(xxv) transfer to or from the Seller or any Subsidiary of the
Company any Property or asset relating to the Business, SUBJECT,
HOWEVER, to the second sentence of Section 5.14(a) hereof.
SECTION 5.02. ACCESS TO INFORMATION. From the date hereof
until the Closing, upon reasonable notice, the Seller shall and shall cause its
and the Company's officers, directors, employees, auditors and agents to, (i)
afford the officers, employees and authorized agents and representatives of the
Purchaser reasonable access, during normal business hours and upon reasonable
advance notice, to the offices, properties, books and records of the Company and
to its and the Company's respective officers, employees, agents, accountants and
actuaries and (ii) furnish to the officers, employees and authorized agents and
representatives of the Purchaser such additional financial and operating data
and other information regarding the assets, properties, goodwill and Business of
the Company as are available to the Seller or as may be prepared or compiled by
the Seller or the Company without undue burden or expense as the Purchaser may
from time to time reasonably request. No investigation or access to information
pursuant to this Section 5.02 shall affect any representation or warranty made
by the Seller to the Purchaser hereunder or otherwise affect the rights and
remedies available to the Purchaser hereunder. The Confidentiality Agreement
shall apply to all information, materials and documents provided or made
available to the Purchaser or its officers, employees or authorized agents or
representatives under this Section 5.02.
SECTION 5.03. BOOKS AND RECORDS.
(a) The Purchaser agrees that it shall preserve and keep all
material books and records of the Company for the period up to and including the
Closing Date in the possession of the Purchaser or the Company for a period of
at least seven years from the Closing Date. After such seven-year period, before
the Purchaser or the Company shall dispose of any of such books and records, at
least 90 calendar days' prior written notice to such effect shall be given by
the Purchaser to the Seller, and the Seller shall be given an opportunity, at
its cost and expense, to remove and retain all or any part of such books and
records as the Seller may select. During such seven-year period, duly authorized
representatives of the Seller shall, upon reasonable notice, have access thereto
during normal business hours to examine, inspect and copy such books and
records, with any out-of-pocket costs being borne by the Seller, upon providing
to the Purchaser in reasonable detail the basis upon which such requested books
and records are relevant to the inquiry, and such access shall be limited to
such relevant books and records.
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(b) If, in order properly to prepare documents required to be
filed with Governmental Authorities or their financial statements, it is
necessary that any party hereto or any successors be furnished with additional
information relating to the Company or the Business, and such information is in
the possession of the other party hereto, such party agrees to use all
reasonable efforts to furnish such information to such other party, at the cost
and expense of the party being furnished such information upon the furnishing by
the requesting party the reason such information is necessary, and excluding
from the Purchaser's and from the Seller's obligations any information which is
subject to a confidentiality agreement with any third Person.
SECTION 5.04. CONFIDENTIALITY. The terms of the letter
agreement, agreed and consented to by the Purchaser on September 11, 1998,
between the Seller and the Purchaser (the "CONFIDENTIALITY AGREEMENT") are
hereby incorporated by reference and shall continue in full force and effect
until the Closing, at which time such Confidentiality Agreement and the
obligations of the Purchaser under this Section 5.04 shall terminate; PROVIDED,
HOWEVER, that the Confidentiality Agreement shall not terminate in respect of
that portion of such confidential information relating exclusively to matters
not related to the transactions contemplated by this Agreement. If this
Agreement is, for any reason, terminated prior to the Closing, the
Confidentiality Agreement shall continue in full force and effect in respect of
such confidential information. After the Closing Date, the Seller shall keep all
non-public information relating to the Company confidential on the same terms as
set forth for the Purchaser in the Confidentiality Agreement.
SECTION 5.05. REGULATORY AND OTHER AUTHORIZATIONS; CONSENTS.
(a) Each party hereto will use all reasonable efforts to
obtain all authorizations, consents, orders and approvals of all Governmental
Authorities that may be or become necessary for its execution and delivery of,
and the performance of its obligations pursuant to, this Agreement, (including,
without limitation, any required approvals of the Massachusetts Insurance
Division or the Pennsylvania Insurance Department), and will cooperate fully
with the other parties in promptly seeking to obtain all such authorizations,
consents, orders and approvals, subject to the proviso in Section 5.05(b). Each
party hereto agrees to make an appropriate filing of a Notification and Report
Form pursuant to the HSR Act with respect to the transactions contemplated
hereby as soon as reasonably practicable after the date hereof and to supply
promptly any additional information and documentary material that may be
requested pursuant to the HSR Act. The Purchaser agrees to promptly make its
initial filing pursuant to Massachusetts Insurance Code Section 206 and
Regulation 211 CMR 7 under the Massachusetts Insurance Code (the "FORM A
FILING") upon the execution of this Agreement and to supply promptly any
additional information and documentary material that may be requested by the
Massachusetts Insurance Division in connection therewith. The Purchaser agrees
to provide a draft of the Form A Filing to the Seller for its review and to
consult with the Seller relating to any issues arising as a result of the
Seller's review, prior to the submission of the Form A Filing
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by the Purchaser to the Massachusetts Insurance Division; provided that such
consultation does not delay the timely filing of the Form A Filing or any
amendments or supplements thereto and it being agreed that the final
determination as to the content of the Form A Filing or any amendments or
supplements thereto shall remain with the Purchaser. The Purchaser agrees to
provide the Seller with a copy of the Form A Filing and each amendment or
supplement thereto in final form upon the submission thereof to the
Massachusetts Insurance Division. The Seller and the Purchaser each agree to
make all other appropriate filings with the Massachusetts Insurance Division and
such other filings as may be required under the insurance laws of any other
state or jurisdiction in which the Company does business. The parties hereto
will not knowingly take any action that will have the effect of materially
delaying, impairing or impeding the receipt of any required approvals.
(b) The Seller agrees to promptly make, or cause the Company
to make, any filing required pursuant to Pennsylvania insurance law (the
"PENNSYLVANIA FILING") upon the execution of this Agreement and to supply
promptly any additional information and documentary material that may be
requested by the Pennsylvania Insurance Department in connection therewith. The
Seller agrees to provide a draft of the Pennsylvania Filing to the Purchaser for
its review and to consult with the Purchaser relating to any issues arising as a
result of the Purchaser's review, prior to the submission of the Pennsylvania
Filing by the Seller to the Pennsylvania Insurance Department; provided that
such consultation does not delay the timely filing of the Pennsylvania Filing or
any amendments or supplements thereto and it being agreed that the final
determination as to the content of the Pennsylvania Filing or any amendments or
supplements thereto shall remain with the Seller. The Seller agrees to provide
the Purchaser with a copy of the Pennsylvania Filing and each amendment or
supplement thereto in final form upon the submission thereof to the Pennsylvania
Insurance Department.
(c) The Purchaser and the Seller will use all their respective
reasonable efforts to assist one another in obtaining the consents referred to
in Sections 8.01(d), 8.02(d) and, if any, the consents referred to in Sections
8.01(e) and 8.02(e), including, without limitation, providing to such parties
such financial statements and other financial information with respect to the
Purchaser as such parties may reasonably request, if and to the extent such
information may reasonably be required; PROVIDED, HOWEVER, that neither the
Purchaser nor the Seller shall be obligated with respect to such assistance (i)
to expend any funds except the payment of the fees and expenses of any
applicable attorneys, consultants or other advisors retained by it and
applicable filing fees or (ii) to take any actions with respect to their
respective businesses or the Business of the Company which, in its reasonable
judgement, is materially adverse.
SECTION 5.06. NO SOLICITATION OF EMPLOYEES. For a period of
three years following the Closing and other than through ordinary help-wanted
advertising, (a) the Seller shall not, directly or indirectly, actively solicit
or induce any employee of the Purchaser or any of its subsidiaries or the
Company (including any Current Employee employed by the Seller, the Company or
any other Subsidiary of the Company following the Closing) to leave such
employment and become an employee of the Seller or any of its Affiliates and (b)
the Purchaser
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and the Company shall not, directly or indirectly, actively solicit or induce
any employee of the Seller or any Affiliate of the Seller to leave such
employment and become an employee of the Purchaser or any of its Affiliates;
PROVIDED, HOWEVER, that nothing in this Section 5.06 shall prohibit the Seller
or any of its Affiliates or the Purchaser or any of its Affiliates from
employing any person who contacts them on his or her own initiative and without
any direct or indirect solicitation by the Seller or any of its Affiliates or
the Purchaser or any of its Affiliates, as the case may be.
SECTION 5.07. USE OF NAME. Anything herein to the contrary
notwithstanding, no interest in or right (except as permitted below) to use the
name "USF Re" or any derivation thereof or any logo, trademark or trade name
including such name (collectively, the "RETAINED NAMES AND MARKS") shall be
retained by the Company following the Closing. The Purchaser shall cause the
Company to promptly file such documents as are necessary and appropriate to
change its corporate name so as not to contain "USF", including, without
limitation, amendments to the Charter of the Company, and amendments to all
filings made by the Company to qualify to do business as a foreign corporation
and amendments to all filings made by the Company with insurance regulatory
authorities in order to be licensed or authorized to write reinsurance or
insurance. Notwithstanding the foregoing, the Company shall be entitled, without
any payment therefor, (x) for a period of one hundred eighty days following the
Closing to use any materials existing on the Closing Date that bear any Retained
Name or Mark or any name, mark or logo similar thereto, in each case when the
removal of any Retained Name or Mark or any such similar name, mark or logo
would be impractical or to allow time for the ordering and delivery of any new
materials, which orders the Purchaser agrees to place as promptly as
practicable, and (y) for a period of eighteen months following the Closing to
use the name "USF Re Insurance Company" in connection with its efforts to renew
existing Reinsurance Agreements, including the use of such name on such renewal
contracts. The Purchaser agrees that the Seller shall have no responsibility for
claims by third parties arising out of or relating to the use by the Company or
the Purchaser of any Retained Name or Mark after the Closing, and the Purchaser
agrees to defend, indemnify and hold harmless the Seller from any and all claims
that may arise out of the use thereof by the Company or the Purchaser whether or
not in accordance with this Agreement (other than claims of any third party
relating to the Company's right to use any Retained Name or Mark, unless such
use shall be materially different from the use of the Retained Names and Marks
by the Company prior to the Closing).
SECTION 5.08. NO SOLICITATION OF OFFERS, ETC.
(a) The Seller shall not, nor shall it permit any of its
subsidiaries to, nor shall it authorize or permit any of its directors, officers
or employees or any investment banker, financial advisor, attorney, accountant
or other representative retained by it or any of its subsidiaries to, and it
shall use all commercially reasonable efforts to ensure that such persons do
not, directly or indirectly, (i) solicit, initiate or encourage (including by
way of furnishing information), or take any other action designed to facilitate,
any inquiries or the making of any
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proposal which constitutes or is likely to lead to any Takeover Proposal (as
defined below) or (ii) participate in any discussions or negotiations regarding
any Takeover Proposal; PROVIDED, HOWEVER, that if, at any time the Board of
Directors of the Seller determines in good faith, based on the advice of outside
counsel, that it is necessary to do so in order to comply with its fiduciary
duties to the Seller's stockholders under applicable law, the Seller may, in
response to a Superior Proposal (as defined in Section 5.08(b)) which was not
solicited by it or which did not otherwise result from a breach of this Section
5.08(a), and subject to providing prior written notice of its decision to take
such action to the Purchaser and compliance with Section 5.08(c), (x) furnish
information with respect to the Seller and its subsidiaries to any person making
a Superior Proposal pursuant to a customary confidentiality agreement and (y)
participate in discussions or negotiations regarding such Superior Proposal.
Without limiting the foregoing it is understood that any violation of the
restrictions set forth in the preceding sentence by any director or officer of
the Seller, the Company or any of the Seller's Affiliates, or any investment
banker, financial advisor, attorney, accountant or other representative of the
Seller, the Company or any of the Seller's Affiliates, whether or not acting on
behalf of the Seller, the Company or any of the Seller's Affiliates, shall be
deemed a breach of this Section 5.08 by the Seller. For purposes of this
Agreement, "TAKEOVER PROPOSAL" means any inquiry, proposal or offer from any
person relating to any direct or indirect acquisition or purchase of a business
that constitutes 15% or more of the net revenues, net income or assets of the
Company, or 15% or more of any class of equity securities of the Company, or any
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company, other than the
transactions contemplated by this Agreement, and PROVIDED FURTHER, that a
"Takeover Proposal" shall include any inquiry, proposal or offer from any Person
relating to any direct or indirect acquisition or purchase of a business that
constitutes 15% or more of the net revenues, net income or assets of the Seller,
or 15% or more of any class of equity securities of the Seller or any merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving the Seller but only if such inquiry, proposal
or offer contemplates that this Agreement shall be terminated or otherwise
requires that the Company be included in such transaction.
(b) Except as expressly permitted by this Section 5.08,
neither the Board of Directors of the Seller nor any committee thereof shall (i)
withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to the Purchaser, the approval or recommendation by such Board of
Directors or such committee of this Agreement and the transactions contemplated
hereby, (ii) approve or recommend, or propose publicly to approve or recommend,
any Takeover Proposal, or (iii) cause the Seller to enter into any letter of
intent, agreement in principle, acquisition agreement or other similar agreement
(each, an "ACQUISITION AGREEMENT") relating to any Takeover Proposal.
Notwithstanding the foregoing, in the event of any Superior Proposal, the Board
of Directors of the Seller may terminate this Agreement and, concurrently with
or after such termination, if it so chooses, cause the Seller to enter into any
Acquisition Agreement with respect to any Superior Proposal, and withdraw its
approval and recommendation of the transactions contemplated hereby and approve
and recommend to its stockholders a Superior Proposal, but only at a time that
is after the fifth business day following
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the Purchaser's receipt of written notice advising the Purchaser that the Board
of Directors of the Seller is prepared to accept a Superior Proposal, specifying
the material terms and conditions of such Superior Proposal and identifying the
person making such Superior Proposal. For purposes of this Agreement, a
"SUPERIOR PROPOSAL" means any proposal made by a third party and approved by its
respective Board of Directors to acquire, directly or indirectly, including
pursuant to a tender offer, exchange offer, merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction,
for consideration consisting of cash and/or securities, (i) more than 50% of the
combined voting power of the shares of common stock of the Seller or all or
substantially all of the assets of the Seller, or (ii) all of the Shares of the
Company or all or substantially all the assets of the Company, and, with respect
to (i) and (ii), otherwise on terms which the Board of Directors of the Seller
determines in its good faith judgment (based on the written advice of a
financial advisor of nationally recognized reputation) to be more favorable to
the Seller's stockholders than this Agreement and the transactions contemplated
hereby, pursuant to a definitive unconditional agreement and for which
financing, to the extent required, is then committed.
(c) In addition to the obligations of the Seller set forth in
paragraphs (a) and (b) of this Section 5.08, the Seller shall immediately advise
the Purchaser orally and in writing of any request for information or of any
Takeover Proposal, the material terms and conditions of such request or Takeover
Proposal and the identity of the person making such request or Takeover
Proposal. The Seller will keep the Purchaser reasonably informed of the status
and details (including amendments or proposed amendments) of any such request or
Takeover Proposal.
(d) Nothing contained in this Section 5.08 shall prohibit the
Seller from taking and disclosing to its stockholders a position contemplated by
Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure
to the Seller's stockholders if, in the good faith judgment of the Board of
Directors of the Seller, after consultation with outside counsel, failure so to
disclose would be inconsistent with its obligations under applicable law.
SECTION 5.09. FEES AND EXPENSES.
(a) Except as otherwise provided in Section 7.07 (Conveyance
Taxes) and in this Section 5.09, all costs and expenses, including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses, whether or not the Closing shall have occurred.
(b) In the event that (i) a Takeover Proposal shall have been
made known to the Seller or any of its subsidiaries or has been made directly to
its stockholders generally or any person shall have publicly announced an
intention (whether or not conditional) to make a Takeover Proposal and
thereafter this Agreement is terminated by either the Purchaser or the
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Seller pursuant to Section 10.01(b) or (ii) this Agreement is terminated (x) by
the Seller pursuant to Section 10.01(f) or (y) by the Purchaser pursuant to
Section 10.01(d), then the Seller shall promptly, but in no event later than two
days after the date of such termination, pay the Purchaser a fee equal to
$3,500,000 (the "TERMINATION FEE"), payable by wire transfer of same day funds;
PROVIDED, HOWEVER, that no Termination Fee shall be payable to the Purchaser
pursuant to clause (i) of this paragraph (b) or pursuant to a termination by the
Purchaser pursuant to Section 10.01(d) unless and until within 18 months of such
termination the Seller or any of its subsidiaries enters into any Acquisition
Agreement or consummates any Takeover Proposal (for the purposes of the
foregoing proviso the terms "Acquisition Agreement" and "Takeover Proposal"
shall have the meanings assigned to such terms in Section 5.08). The Seller
acknowledges that the agreements contained in this Section 5.09(b) are an
integral part of the transactions contemplated by this Agreement and constitute
liquidated damages and not a penalty, and that, without these agreements, the
Purchaser would not enter into this Agreement; accordingly, if the Seller fails
promptly to pay the amount due pursuant to this Section 5.09(b), and, in order
to obtain such payment, the Purchaser commences a suit which results in a
judgment against the Seller for the fee set forth in this Section 5.09(b), the
Seller shall pay to Purchaser its costs and expenses (including attorneys' fees
and expenses) in connection with such suit, together with interest on the amount
of the fee at the prime rate as reported in the WALL STREET JOURNAL on the date
such payment was required to be made.
SECTION 5.10. INVESTMENT PORTFOLIO. Prior to the Closing Date,
the Seller shall update the Investment Portfolio as of the end of each month and
shall deliver the updated Investment Portfolio to the Purchaser within ten
Business Days of the end of such month.
SECTION 5.11. NOTICE OF CERTAIN MATTERS.
(a) The Seller covenants and agrees to give prompt notice in
writing to the Purchaser of: (i) any information that indicates that any
representation or warranty of the Seller contained herein was not true and
correct as of the date hereof or will not be true and correct as of the Closing
Date, (ii) the occurrence of any event which will result, or has a reasonable
prospect of resulting, in the failure to satisfy a condition specified in
Article VIII hereof, (iii) any notice or other communication from any third
party alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement, (iv) any notice
of, or other communication relating to, any default or event which, with notice
or lapse of time or both, would become a default under any Reinsurance Agreement
or material Contract, (v) any change in the officers or directors of the Company
and (vi) any fact, condition or change that, individually or in the aggregate,
has resulted or is reasonably likely to result in a Material Adverse Effect,
with respect to the Seller or the Company.
(b) The Seller covenants and agrees to (i) promptly advise the
Purchaser of any fact, condition or change that, individually or in the
aggregate, has resulted or is reasonably likely to result in a Material Adverse
Effect on the Seller or the Company and (ii) notify the Purchaser of any
emergency or any governmental complaints, investigations or hearings (or
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communications indicating that the same may be contemplated) or adjudicatory
proceedings involving any Property of the Company, and will keep the Purchaser
fully informed of such events and permit the Purchaser's representatives
reasonable access to all materials prepared in connection therewith.
(c) The Purchaser covenants and agrees to give prompt notice
in writing to the Seller of: (i) any information that indicates that any
representation or warranty of the Purchaser contained herein was not true and
correct in any material respect as of the date hereof or will not be true and
correct in any material respect as of the Closing Date, (ii) the occurrence of
any event which will result, or has a reasonable prospect of resulting, in the
failure to satisfy a condition specified in Article VIII hereof, (iii) any
notice or other written communication from any third party alleging that the
consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement and (iv) any fact, condition or
change that, individually or in the aggregate, has resulted or is reasonably
likely to result in a Material Adverse Effect with respect to the Purchaser.
(d) The giving of any such notice under this Section 5.11 or
the providing of the financial statements contemplated by Section 5.12 shall in
no way change or modify the Seller's or the Purchaser's representations and
warranties or the conditions to either party's obligations contained herein or
otherwise affect the remedies available to the Purchaser or Seller hereunder.
SECTION 5.12. INTERIM FINANCIAL STATEMENTS.
(a) The Seller shall, as soon as available, but no later than
60 days after the end of the relevant month or quarter, as the case may be,
deliver promptly to the Purchaser any and all final monthly and quarterly
financial statements for the Company, audited or unaudited, prepared for the
management of the Company after the date of this Agreement and prior to the
Closing Date. In addition, Seller will deliver to Purchaser copies of the
audited 1998 Annual Statutory Statement as soon as they have been delivered by
KPMG LLP.
(b) For so long as the Closing Note is outstanding, the
Purchaser shall from time to time provide, upon the reasonable request of the
Seller's chief financial officer, written confirmation to the Seller that the
shareholder's equity of the Purchaser is equal to, or in excess of,
$225,000,000. In the event that the Purchaser's shareholder's equity is less
than $225,000,000, the Purchaser shall from time to time provide to the Seller,
upon the reasonable request by the Seller's chief financial officer, the
Purchaser's most recently prepared quarterly or annual, as the case may be,
consolidated GAAP financial statements.
SECTION 5.13. AFFILIATE AGREEMENTS; INTERCOMPANY ACCOUNTS.
(a) Except as set forth in Schedule 5.13(a) hereto, the Seller
shall cause all intercompany accounts receivable or payable (whether or not
currently due or payable) between
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(a) the Company, on the one hand, and (b) the Seller or any of its Affiliates
(other than the Company), or any of the officers or directors of any of the
Seller and any of its Affiliates (other than the Company), on the other hand, to
be settled in full (without any premium or penalty) at or prior to the Closing;
PROVIDED, HOWEVER, that from January 1, 1999 and through the Closing Date, the
Company shall reimburse to the Seller, based on the Seller's actual or allocated
cost on a basis consistent with past practice: (i) the direct and indirect costs
of the Current Employees' compensation, benefits, payroll taxes and the like,
paid or accrued by the Seller on behalf of the Company, (ii) all office and
occupancy costs of the Company's operations, and (iii) corporate overhead cost
allocation shall be calculated in a manner consistent with past practices.
Within fifteen Business Days prior to the Closing, the Seller shall prepare and
deliver to the Purchaser a preliminary statement setting out in reasonable
detail the calculation of all such intercompany account balances as of the
Closing based upon the latest available financial information as of such date.
The Seller shall provide the Purchaser with supporting documentation verifying
the underlying intercompany charges and transactions. If the Purchaser disagrees
with the calculation of such intercompany balances, the Purchaser may, within
ten Business Days prior to the Closing Date, deliver a notice to the Seller
disagreeing with such calculation and setting forth the Purchaser's calculation
of such amount. If the Purchaser and the Seller are unable to resolve such
disagreement within five Business Days thereafter, such disagreement shall be
resolved by independent accountants of nationally recognized standing reasonably
satisfactory to the Purchaser and the Seller.
(b) Section 5.13(b) of the Disclosure Schedule sets forth all
agreements between the Company and the Seller or any of its Affiliates
("AFFILIATE AGREEMENTS"). All Affiliate Agreements shall be terminated and
discharged without any further liability or obligation thereunder effective at
December 31, 1998, upon terms and pursuant to instruments reasonably
satisfactory to the Purchaser unless otherwise noted on Section 5.13(b) of the
Disclosure Schedule; PROVIDED, FURTHER, that (i) the Intercompany Pooling
Agreement shall be terminated, effective December 31, 1998, upon terms
reasonably satisfactory to the Purchaser and in accordance with the accounting
principles implemented in preparing the column identified as "Remove Pooling
Balances" in the Reference Financial Statement, and (ii) notwithstanding the
termination of the Service Agreement, effective December 31, 1998, the Seller
shall pay to the Purchaser service fees equal to 6.2% of the medical stop loss
and provider excess premium earned by the Company on or after January 1, 1999.
Purchaser shall have the rights set forth in Section 5.18(b) with respect to the
medical stop loss and provider excess business. The Seller hereby agrees to hold
harmless and indemnify the Purchaser and the Company, dollar for dollar, from
and against any and all liabilities under or related to the Affiliate
Agreements.
SECTION 5.14. DIVESTMENT OF SUBSIDIARIES; RELEASE OF PLEDGE.
(a) Prior to the Closing Date, the Seller will cause the
Company to transfer (without cost, liability or obligation to the Company or the
Purchaser) to the Seller all of the issued and outstanding capital stock of USF
Insurance Company, US Holdings, Inc. and any other Subsidiary of the Company.
Prior to such transfer, any Property or assets owned by, or in
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the possession of, USF Insurance Company, US Holdings, Inc. or any other
Subsidiary of the Company (including any rights or benefits under insurance
policies with respect to such Property or assets) which are used principally, or
are necessary, in connection with the business of the Company shall be
transferred to the Company (without cost, liability or obligation to the Company
or the Purchaser).
(b) On or prior to the Closing Date, the Seller shall cause
Fleet National Bank ("FLEET") to release the pledge of the Shares as security
for such Credit Agreement, such release to be in form and substance satisfactory
to the Purchaser. The Seller shall use its best efforts to cause Fleet to
deliver to the Purchaser, within fifteen Business Days following the date
hereof, a letter (the "Lender Commitment") to the effect that, notwithstanding
covenant defaults under the Credit Agreement existing as of the date of this
Agreement, Fleet intends to release such pledge of the Shares concurrently with
the Closing of the transactions contemplated by this Agreement, upon and subject
to Fleet's receipt of the June 30, 1999 principal payment due under the Credit
Agreement even though the Closing may occur after June 30, 1999.
(c) Within twenty days after the date hereof, Seller shall
furnish Purchaser with a revised Schedule 3.09 updated to March 31, 1999. Such
revised Schedule shall also provide a detailed breakdown of the asset comprising
the $14,129,601 pooling balances as of December 31, 1998 referred to in the
Reference Financial Statement.
(d) The Seller hereby agrees to hold harmless and indemnify
the Purchaser and the Company, dollar for dollar, from and against all
liabilities related to (i) USF Insurance Company, US Holdings, Inc. and any
other Subsidiary of the Company (and the transfer thereof pursuant to Section
5.14(a) hereof), and (ii) the Credit Agreement and the release of the pledge on
the Share pursuant to Section 5.14(b) hereof.
SECTION 5.15. SELLER OBLIGATIONS. The Seller agrees that in
each instance in this Agreement where the Company is obligated to act or refrain
from acting under this Agreement during the period prior to the Closing, the
Seller shall cause the Company to fulfill such obligations.
SECTION 5.16. FURTHER ACTION. Each of the parties hereto shall
execute and deliver such documents and other papers and take such further
actions as may be reasonably required to carry out the provisions hereof and
give effect to the transactions contemplated hereby.
SECTION 5.17. LEASES. The Seller shall, and shall cause the
Company to, use its best efforts to obtain the consent of the lessor, if
necessary under the lease relating to 100 Campus Drive, Suite 300, Florham Park,
New Jersey with respect to the change of control of the Company. The Purchaser
and the Company shall have the option to use the real property located in Costa
Mesa, California and leased by the Seller for a period of up to sixty (60) days
after the Closing Date pursuant to an Occupancy Agreement mutually acceptable,
in form and substance,
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to the Seller and the Purchaser (the "COSTA MESA OCCUPANCY AGREEMENT"). The
Seller shall have the option to use the real property leased by the Company in
Florham Park, New Jersey for a period of up to sixty (60) days after the Closing
Date pursuant to an Occupancy Agreement mutually acceptable, in form and
substance, to the Seller and the Purchaser (the "FLORHAM PARK OCCUPANCY
AGREEMENT").
SECTION 5.18. MEDICAL AGGREGATE STOP LOSS COVERAGE.
(a) Prior to the Closing the Seller shall cause the Company to
purchase an Aggregate Stop Loss/Adverse Development reinsurance treaty
protecting the medical stop-loss and provider excess reserves retained by the
Company (the "MEDICAL AGGREGATE STOP LOSS TREATY"). The terms of the Medical
Aggregate Stop Loss Treaty shall be as set forth in the Placement Slip attached
hereto as EXHIBIT B. The premium under the Medical Aggregate Stop Loss Treaty as
set forth in EXHIBIT B shall be borne by the Company.
(b) Following the Closing, upon the delivery of reasonable
prior written notice, the Purchaser may review once each calendar year claims
payments, expenses, reinsurance and other matters directly relating to medical
stop loss or provider excess business. In that regard, the Seller shall, and
shall cause (or use its commercially reasonable efforts with respect to
non-employees) its and USBenefits (or their successors or assigns) officers,
directors, employees, auditors and agents to:
(A) afford the officers, employees, agents,
accountants, actuaries and representatives
of the Purchaser reasonable access (for a
period not to exceed ten Business Days)
during normal business hours and upon
reasonable advance written notice, to the
relevant offices, employees, properties,
books and records of the Seller or
USBenefits (or their successors or assigns);
and
(B) during the review period provided for in
Clause (A) hereof, upon the reasonable
written request of the Purchaser, furnish to
the officers, employees, agents,
accountants, actuaries and representatives
of the Purchaser such additional financial
and operating data and other information
regarding claims payments, expenses,
reinsurance and other matters directly
relating to the medical stop loss or
provider excess business as are available to
the Seller or USBenefits (or their
successors or assigns).
SECTION 5.19. INVESTMENT PORTFOLIO. Prior to the Closing Date,
the Seller shall update the Investment Portfolio as of the end of each month and
shall deliver to the Purchaser the updated Investment Portfolio within ten
Business Days of the end of such month.
SECTION 5.20. CERTAIN SOFTWARE LICENSES. Seller shall take all
action necessary (including, without limitation, making any required payments
notwithstanding the
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limitation described in Section 5.05(c) hereof) to assure that the software
licenses described in Disclosure Schedule 3.17B (i), (ii), (iii), (iv), and (v)
(the "SOFTWARE LICENSES") are in full force and effect and usable by the Company
on the Closing Date. Anything in this Agreement to the contrary notwithstanding,
the Seller hereby agrees to indemnify the Purchaser and the Company against and
hold the Purchaser and the Company harmless, dollar for dollar, from and shall
pay any and all claims, losses, damages, expenses, obligations and liabilities
(including costs of investigation, reasonable attorney's fees and expenses and
other costs of defense) arising out of or otherwise in respect of any suit or
claim of violation or infringement of the Software Licenses or the software
subject thereto brought by the owners of the Software Licenses against the
Purchaser or the Company.
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.01. PURCHASER. Subject to the fifth sentence of this
Section 6.01, the Purchaser shall offer employment to all individuals listed on
Section 6.01 of the Disclosure Schedule (the "CURRENT EMPLOYEES"), on such terms
and conditions as are set forth below. Seller shall use its best efforts to
assist Purchaser in hiring the Current Employees, and shall not offer employment
(or arrange to have another Person or firm offer employment) to any such Current
Employee without the prior written consent of Purchaser. The Current Employees
shall be deemed to have accrued no prior service credit in respect of their
period of service with Seller (or any predecessor thereto). The Purchaser agrees
to provide, or to cause the Company to provide, the Current Employees who accept
employment with the Purchaser with employee benefits which are, in the
aggregate, substantially equivalent to the employee benefits that the Purchaser
generally provides to its employees, while the Current Employees are employed by
the Company following the Closing, other than with respect to the Purchaser's
severance policy. Nothing herein express or implied shall be construed to
prevent the Purchaser, at any time after the Closing Date, from terminating or
modifying to any extent or in any respect at any time or from time to time (i)
the Company's employment relationship with any employee, including any Current
Employee, (ii) the terms and conditions of the employment of any employee,
including the Current Employees, including but not limited to wages and/or
salaries, hours and employee benefits, or (iii) any of the Purchaser's or the
Company's "employee benefit plans" as defined under ERISA or similar or other
plans, programs, arrangements or agreements.
SECTION 6.02. SELLER. Effective as of the Closing, the Seller
shall take all such actions as may be necessary to cause (i) all Current
Employees to cease active participation in all Plans (including but not limited
to all employee benefit plans, programs or arrangements which such Current
Employees participated in, or which were maintained for the benefit of Current
Employees prior to the Closing by either the Company or the Seller), and (ii)
the Company to cease to be a participating and contributing employer in the
Plans in a manner that the Company has no obligation, responsibility or
liability under such Plans, or to the Current
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Employees or any other Employees with respect to such Plans. The Seller shall
cause all Current Employees to be fully vested in their account balances and
accrued benefits under the Plans effective as of the Closing, whether or not
such cessation of participation results in a partial termination of any such
Plan. The Purchaser shall neither adopt, become a sponsoring employer of, and
the Company and the Purchaser shall have no obligations, responsibility or
liabilities under, the Plans (including but not limited to any funding or
payment obligation), or to the Current Employees or other employees with respect
to the Plans.
SECTION 6.03. ADMINISTRATION OF PAYROLL AND OTHER PAYMENTS.
During the period commencing on, and ending sixty (60) days after, the Closing
Date, the Seller agrees to retain the Current Employees on the Seller's payroll
system, and to retain responsibility for the administration (including all
reporting responsibilities) and payment of all salaries and other wages
(including all taxes and withholdings thereon) to the Current Employees during
such period (it being agreed that the payment of severance or other or similar
benefits to any Current Employee during such period shall be the responsibility
of the Seller under this Section 6.03). The Company shall reimburse the Seller
for all salaries and other wages paid by the Seller (including all taxes paid by
Seller thereon) to the Current Employees during such period. The Purchaser
agrees that from and after the Closing Date, the Current Employees who agree to
be employed by the Purchaser shall be the Purchaser's employees for all
purposes, and such Current Employees shall be covered by Purchaser's health and
medical program. The Purchaser shall be responsible for any obligations under
the Consolidated Omnibus Budget Reconciliation Act of 1986, as amended ("COBRA")
with respect to the Current Employees who agree to be employed by the Purchaser
in the event of any terminations of employment of such Employees which are
effectuated by the Purchaser and occur after the Closing Date, and the Purchaser
agrees to fully indemnify Seller from any and all liabilities arising out of the
failure of the Purchaser to so provide COBRA under such circumstances.
SECTION 6.04. INDEMNITY. Anything in this Agreement to the
contrary notwithstanding, the Seller hereby agrees to indemnify the Purchaser
and the Company against and hold the Purchaser and the Company harmless, dollar
for dollar, from and shall pay any and all claims, losses, damages, expenses,
obligations and liabilities (including costs of investigation, reasonable
attorney's fees and expenses and other costs of defense) arising out of or
otherwise in respect of (i) any suit or claim of violation brought against the
Purchaser or the Company for any actions taken or inaction by the Seller or the
Company before the Closing Date with respect to any Current Employee or other
Employees, or any facility, site of employment, or operating unit, (ii) any
failure of the Seller to discharge its obligations under Sections 6.02 and 6.03,
(iii) the termination of, or cessation of participation of any Current Employee
or the Company (as a participating employer) in the Plans (including, but not
limited to, income or excise tax assessments, liabilities relating to
participant benefit claims or fiduciary conduct, or liabilities otherwise
arising under ERISA or the Code), (iv) any severance stock options, other equity
or non-equity based compensation, or similar or other payments or benefits which
are triggered by or will be established or become accelerated, vested or payable
by reason of this Agreement or
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any transaction contemplated under this Agreement, and (v) any liabilities or
obligations with respect to, or in any manner arising out of, the Plans.
SECTION 6.05. REIMBURSEMENT FOR BONUSES AND SEVERANCE
PAYMENTS.
(a) Within thirty days after the Closing, the Purchaser shall
make the stay bonus payments set forth in Section 3.23(1) of the Disclosure
Schedule (the "STAY BONUSES"); PROVIDED, HOWEVER, that the Purchaser shall not
be required to make payments to any of the individuals listed on such Disclosure
Schedule who have voluntarily left the employ of the Seller, the Purchaser or
the Company prior to the date which is thirty days after the Closing Date, but
shall make such payments to any employee who has died, is disabled or is
involuntarily terminated. Purchaser shall deliver a written notice to the Seller
within five Business Days after paying the Stay Bonuses and Seller shall deliver
to the Purchaser, by wire transfer, certified check or any other instrument
agreed to by the Purchaser and the Seller an amount representing reimbursement
for fifty percent (50%) of the aggregate Stay Bonuses paid pursuant to this
Section 6.05(a).
(b) Notwithstanding anything to the contrary contained in this
Agreement, the Seller agrees to pay fifty percent (50%) of the severance
payments listed in Section 6.05 of the Disclosure Schedule. Other than as
provided in the immediately preceding sentence (with respect to the severance
obligations set forth in Section 6.05 of the Disclosure Schedule), no payments
or benefits of any kind shall be paid or provided to or on behalf of, or made
with respect to, John Grush, by the Company and/or by the Purchaser (for
purposes of clarity, it being agreed by the parties hereto that any and all
obligations and liabilities to or with respect to Mr. Grush shall remain with
the Seller). The Seller shall deliver such amounts by wire transfer or certified
check as directed in a written notice delivered by the Purchaser at least three
(3) Business Days prior to the date on which such severance payments become due.
ARTICLE VII
TAX MATTERS
SECTION 7.01. INDEMNITY. (a) The Seller agrees to indemnify
and hold harmless the Purchaser and the Company against (i) all Taxes of the
Company with respect to any period or portion thereof that ends on or before the
Reference Date, in excess of the amount reserved for Taxes in the Reference
Financial Statement (as shown on Schedule A to the Reference Financial
Statement) and not previously taken into account or paid under the provisions of
Section 5.01(g)(iii) or Article VII or Article IX (the "TAX RESERVE"), (ii) all
Taxes with respect to any period or portion thereof that begins after the
Reference Date and ends on or before the Closing Date which relate to a Tax
Return which is filed on a combined, consolidated, unitary or similar group
basis where the Company is or was a member, (iii) all Taxes imposed on the
Seller or any subsidiary or Affiliate of the Seller (other than the Company),
(iv) amounts in respect of Taxes for Pre-Closing Periods for which the Company
may be liable under Section
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1.1502-6 of the Treasury Regulations or any comparable provision of State, local
or foreign law; or as a transferee or successor, by operation of law or by
contract, pursuant to Section 381 of the Internal Revenue Code; or pursuant to a
Tax allocation or sharing agreement, (v) all Taxes imposed as a result of the
Company or any Subsidiary ceasing to be a member of a combined, consolidated,
unitary or similar group and all Taxes imposed as a result of any transfer of
any Subsidiary after the Reference Date and on or before the Closing Date, and
(vi) reasonable liabilities or costs (including legal expenses) resulting from
the foregoing (except as otherwise provided in Section 7.04(b)). The Purchaser
shall be responsible for Taxes in respect of the Company for which the Purchaser
is not eligible for indemnification pursuant to the first sentence hereof.
Nothing in this Section 7.01 (a) shall be interpreted as requiring the Purchaser
to make payments of any Taxes to any taxing authority before the Closing Date.
(b) In the case of Taxes that are payable with respect to a
taxable period (a "STRADDLE PERIOD") that begins before the Reference Date or
the Closing Date and ends after the Reference Date or the Closing Date, as the
case may be, (excluding any such Taxes that are taken into account in allocating
liabilities under Section 7.07), the portion of any such Tax that is allocable
to the relevant portion of the period shall be: (i) in the case of Taxes that
are either (x) based upon or related to income or receipts or (y) imposed in
connection with any sale or other transfer or assignment of property (real or
personal, tangible or intangible) (other than conveyances pursuant to this
Agreement, as provided under Section 7.07), deemed equal to the amount which
would be payable if the taxable period began or ended on the Reference Date or
Closing Date, as the case may be, and (ii) in the case of Taxes imposed on a
periodic basis with respect to the assets of the Company or otherwise measured
by the level of any item, deemed to be the amount of such Taxes for the entire
period (or, in the case of such Taxes determined on an arrears basis, the amount
of such Taxes for the immediately preceding period) multiplied by a fraction the
numerator of which is the number of calendar days in the portion of such period
ending on the Reference Date or Closing Date, as the case may be, and the
denominator of which is the number of calendar days in the entire period.
SECTION 7.02. RETURNS AND PAYMENTS.
(a) From the date of this Agreement through the Closing Date,
the Seller shall cause the Company to prepare and file or otherwise furnish to
the appropriate party (or cause to be prepared and filed or so furnished) in a
timely manner all Tax Returns with respect to the Company that are due (taking
into account all available extensions) on or before the Closing Date and all Tax
Returns with respect to the Company which are required to be filed on a
combined, consolidated, unitary or similar group basis for any tax period of the
Company that ends on or before the Closing Date, which returns shall be prepared
in a manner consistent with past practice employed by the Company. The Purchaser
shall prepare (or cause the Company to prepare) all Tax Returns in respect of
the Company that are not required to be, or caused to be, prepared and filed by
the Seller hereunder including all other Tax Returns required to be filed by the
Company for taxable periods ending on or before December 31, 1998, it being
understood and agreed that the Purchaser shall not be responsible for the
accuracy or completeness of any of
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the information contained therein. Tax Returns prepared by the Purchaser for any
Straddle Period or for any taxable period that ends on or prior to the Reference
Date shall be prepared in a manner consistent with past practices employed by
the Seller (except to the extent counsel for the Purchaser determines there is
no reasonable basis in law therefor). With respect to any Tax Return required to
be prepared by the Purchaser hereunder and as to which an amount of Tax is
allocable to the Seller under Section 7.01, the Purchaser shall provide the
Seller and its authorized representatives with a copy of such completed Tax
Return (with which the Purchaser will make available supporting schedules and
information), and a statement and supporting schedules certifying the amount of
Tax shown on such Tax Return that is allocable to the Seller pursuant to Section
7.01(b), at least 20 days prior to the due date (including any extension
thereof) for the filing of such Tax Return, and the Seller and its authorized
representatives shall have the right to review such Tax Return and statement
prior to the filing of such Tax Return. The Seller and the Purchaser agree to
consult and to attempt in good faith to resolve any issues arising as a result
of the review of such Tax Return and statement by the Seller or its authorized
representatives; provided that such consultation does not delay the timely
filing of the Tax Return. In the event of a dispute, the party that is
responsible hereunder for the greater amount of Taxes, taking into account on a
net present value basis all open taxable periods affected by the issue
(including future periods in the case of recurring issues), shall have the right
to make the final determination as to any such disputed issue.
(b) The Seller shall pay or cause to be paid to the
appropriate Tax authority when due and payable all Taxes that are required to be
reported on Tax Returns which are required to be filed by the Seller pursuant to
subsection (a) to the extent such Taxes exceed the Tax Reserve (but subject to
the right of the Seller to be paid amounts in respect of Taxes and to be
indemnified by the Purchaser pursuant to Section 7.01(a)). From and after the
Closing Date, the Purchaser shall pay or cause to be paid to the appropriate Tax
authority when due and payable all Taxes which accrue with respect to the
Company for any other taxable period (subject to its right of indemnification
from the Seller for the pre-Reference Date portion or Pre-Closing Date portion
of any Tax period that includes the Reference Date or Closing Date pursuant to
Sections 7.01(a) and (b)).
SECTION 7.03. REFUNDS. Any refunds received by the Purchaser
or the Company (or any successor to any of the foregoing) with respect to Taxes
of the type for which the Seller is required to indemnify the Purchaser or the
Company pursuant to Section 7.01(a)(i) through (v) shall be for the account of
the Seller, and the Purchaser shall pay over or cause to be paid over to the
Seller any such refund or the amount of any such benefit within ten Business
Days of the receipt thereof (in the case of such a refund) or entitlement
thereto (in the case of such an entitlement). The Purchaser shall, if the Seller
reasonably so requests, cause the relevant entity to file for any refunds, or
equivalent amounts to which the Seller is entitled under this Section 7.03. The
Purchaser shall permit the Seller to control the prosecution of any such refund
claim, and shall cause the relevant entity to authorize by appropriate power of
attorney such persons as the Seller shall designate to represent such entity
with respect to such refund claim and the Seller shall reimburse the Purchaser
for all its reasonable out-of-pocket expenses in
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connection therewith, PROVIDED that to the extent there is any disputed issue
with respect to the prosecution of any such refund claim, control of that issue
shall be determined as if the refund claim were a Tax Return for the purposes of
the last sentence of Section 7.02(a). The Seller shall pay over to the Purchaser
any refunds of Taxes for which the Purchaser is responsible under Section
7.01(a) that may be received by the Seller or any Affiliate thereof (other than
the Company). Notwithstanding anything herein to the contrary, to the extent any
refund is attributable to the carryback of losses or credits arising in a
taxable period beginning after the Reference Date (the claim for which refund
shall be prepared and pursued at the Purchaser's expense), such refund shall be
for the account of and belong to the Purchaser.
SECTION 7.04. CONTESTS.
(a) After the Closing, the Purchaser shall reasonably promptly
after becoming aware notify the Seller in writing of the commencement of any Tax
audit or administrative or judicial proceeding and shall also separately notify
the Seller in writing of any demand or claim on the Purchaser or the Company
which, if determined adversely to the taxpayer or after the lapse of time would
be grounds for indemnification by the Seller under this Article VII. Such notice
shall contain factual information (to the extent known to the Purchaser or the
Company) describing the asserted Tax liability in reasonable detail and shall
include copies of any notice or other document received from any taxing
authority in respect of any such asserted Tax liability. If the Purchaser fails
to give the Seller reasonably prompt notice of an asserted Tax liability as
required by this Section 7.04, then (i) if the Seller is precluded by the
failure to give reasonably prompt notice from contesting the asserted Tax
liability in both the administrative and judicial forums, then the Seller shall
not have any obligation to indemnify for any loss or damage arising out of such
asserted Tax liability, and (ii) if the Seller is not so precluded from
contesting but such failure to give reasonably prompt notice results in an
actual detriment to the Seller, then any amount which the Seller is otherwise
required to pay the Purchaser pursuant to this Article VII with respect to such
liability shall be reduced by the amount of such detriment.
(b) The Seller, promptly after receiving notice, may elect to
direct, through counsel of its own choosing and at its own expense, any audit,
claim for refund and administrative or judicial proceeding involving any
asserted liability with respect to which indemnity may be sought against the
Seller under this Article VII (any such audit, claim for refund or proceeding
relating to an asserted Tax liability are referred to herein collectively as a
"CONTEST"). If the Seller elects to direct the Contest of an asserted Tax
liability, the Purchaser shall cooperate in all reasonable respects and shall
cause the Company or its successor to cooperate in all reasonable respects, at
the Seller's expense, in each phase of such Contest. If the Seller does not
either reasonably promptly give notice to direct the Contest or commence the
direction of the Contest or if it contests its obligation to indemnify under
Section 7.01, the Purchaser or the Company may pay, compromise or contest, at
its own expense, such asserted liability without waiving any of its rights to
indemnification hereunder. However, in such case, neither the Purchaser nor the
Company may settle or compromise any asserted liability over the objection of
the Seller; PROVIDED, HOWEVER, that the Seller's consent to settlement or
compromise
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shall not be unreasonably withheld or delayed. In any event, each of the
Purchaser (or the Company) and the Seller may participate, at their own expense,
in the Contest. If the Seller chooses to direct the Contest, the Purchaser shall
promptly empower and shall cause the Company or its successor promptly to
empower (by power of attorney and such other documentation as may be
appropriate) such representatives of the Seller as it may designate to represent
the Purchaser or the Company or its successor in the Contest insofar as the
Contest involves an asserted Tax liability for which the Seller would be liable
under this Article VII, PROVIDED that the Seller shall not, without the
Purchaser's consent, which shall not be unreasonably withheld or delayed, (x)
agree to any settlement with respect to any Tax if such settlement would likely
materially adversely affect the future Tax liability of the Purchaser or the
Company for any periods ending after the Reference Date other than through the
use of losses or credits arising in periods or portions thereof ending on or
prior to the Reference Date or (y) agree to any settlement of such claim or
cease to defend against such claim if, pursuant to or as a result of such
settlement or cessation, injunctive or other equitable relief would be imposed
against the Purchaser or the Company. If, with respect to any proposed
settlement referred to in clause (x) of the previous sentence, the Seller
proposes in good faith to settle a claim, suit, action or proceeding with
respect to any Tax, which settlement offer is accepted by the relevant taxing
authority, the Purchaser may elect to continue to contest such claim, suit,
action or proceeding; PROVIDED that notwithstanding how such matter is
ultimately settled or decided, the liability of the Seller with respect to such
claim, suit, action or proceeding shall be no greater than the amount which
would have been payable if the Purchaser had consented to the settlement
proposed by the Seller.
(c) The Purchaser shall have the sole obligation and right to
direct, at its own expense, a Contest regarding any Tax Return relating to the
Company for any taxable period commencing after the Reference Date (or the
Closing Date in the case of a Tax Return which is filed on a combined,
consolidated, unitary or similar basis); PROVIDED, HOWEVER, that the Purchaser
shall advise and consult with the Seller regarding the status of any such
Contest that involves the Company and provided further that, without the prior
written consent of the Seller (which shall not be unreasonably withheld or
delayed), and except as provided in Section 7.04(b), the Purchaser shall not (i)
make any election, change any annual accounting period or adopt or change any
accounting method if any such election, adoption or change would have the effect
of increasing the tax liability of the Seller in any tax period or portion
thereof ending on or before the Reference Date, or (ii) file any amended return,
enter into any closing agreement, settle any tax claim or assessment relating to
the Company, surrender any right to claim a refund of Taxes, consent to any
extension or waiver of the limitation period applicable to any tax claim or
assessment relating to the Company or take any action, if any such amendment,
agreement, settlement, surrender, consent or other action would have the effect
of increasing the tax liability of the Seller in any tax period or portion
thereof ending on or before the Reference Date (or the Closing Date in the case
of a Tax Return which is filed on a combined, consolidated, unitary or similar
basis), except to the extent the Seller is to be fully indemnified by the
Purchaser against any such increase under Section 7.05 or otherwise.
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SECTION 7.05. CERTAIN AUDIT ADJUSTMENTS. If an audit
adjustment, claim for refund or amended return ("ADJUSTMENT"), after the date
hereof shall both increase a Tax liability which is allocated to the Seller
under Section 7.01 (or reduce losses or credits otherwise available to the
Seller) for a period or portion thereof ending on or before the Reference Date
(or the Closing Date in the case of a Tax Return which is filed on a combined,
consolidated, unitary or similar basis) and decrease a Tax liability which is
allocable to the Purchaser for a period or portion thereof ending after the
Reference Date (or the Closing Date in the case of a Tax Return which is filed
on a combined, consolidated, unitary or similar basis), then, when and to the
extent that the Purchaser (or the Company) derives a benefit from such decrease
(through a reduction of Taxes, refund of Taxes paid or credit against Taxes
due), the Purchaser shall promptly pay to the Seller an amount equal to the
amount of such refund, reduction or credit (unless the Seller has previously
been compensated for such benefit under this Article VII). Similarly, if an
Adjustment shall both decrease a Tax liability which is allocated to the Seller
under Section 7.01 for a period or portion thereof ending on or before the
Reference Date (or the Closing Date in the case of a Tax Return which is filed
on a combined, consolidated, unitary or similar basis) and increase the Tax
liability which is allocable to the Purchaser (or reduce losses or credits
otherwise available to the Purchaser) for a period or portion thereof ending
after the Reference Date (or the Closing Date in the case of a Tax Return which
is filed on a combined, consolidated, unitary or similar basis), then, when and
to the extent that the Seller derives a benefit from such decrease (through a
refund or reduction of Taxes paid or credit against Taxes due), the Seller shall
promptly pay to the Purchaser an amount equal to the amount of such refund,
reduction or credit. In the event that a benefit derived from an increase in a
Tax liability allocable to either the Purchaser or the Seller pursuant to an
Adjustment is negated due to a subsequent Adjustment or net operating loss
carryback after either the Purchaser or Seller has paid such benefit to the
other party, as the case may be, such benefit shall be repaid to the original
payor, subject to return to such other party if and when the benefit again
becomes available.
SECTION 7.06. COOPERATION AND EXCHANGE OF INFORMATION. The
Seller and the Purchaser will provide each other with such cooperation and
information as either of them reasonably may request of the other in filing any
Tax Return, amended return or claim for refund, determining a liability for
Taxes or a right to a refund of Taxes or participating in or conducting any
audit or other proceeding in respect of Taxes. Such cooperation and information
shall include providing copies of relevant Tax Returns or portions thereof,
together with accompanying schedules and related work papers and documents
relating to rulings or other determinations by taxing authorities, but in no
event shall either party be required to disclose to the other party any
information relating to its operations other than the Company. The Seller and
the Purchaser shall make their employees available on a mutually convenient
basis to provide explanations of any documents or information provided
hereunder. The Seller and the Purchaser will retain all Tax Returns, schedules
and work papers and all material records or other documents relating to Tax
matters of the Company for its taxable period first ending after the Closing
Date and for all prior taxable periods until the later of: (i) the expiration of
the statute of limitations of the taxable periods to which such returns and
other documents relate, without regard to extensions except to the extent
notified by the other party in writing of such extensions
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for the respective Tax periods; or (ii) six years following the due date
(without extension) for such returns. After such time, before either the Seller
or the Purchaser shall dispose of any of such books and records, at least ninety
calendar days prior written notice to such effect shall be given to the other
party, and such other party shall be given an opportunity, at its cost and
expense, to remove and retain all or any part of such books and records as such
party may select; PROVIDED, HOWEVER, that in no event shall either party be
required to disclose to the other party any information relating to its
operations other than the Company. Any information obtained under this Section
7.06 shall be kept confidential, except as may be otherwise necessary in
connection with the filing of returns or claims for refund or in conducting an
audit or other proceeding.
SECTION 7.07. CONVEYANCE TAXES. The Seller agrees to assume
liability for and to hold the Purchaser harmless against any sales, use,
transfer, stamp, stock transfer, real property transfer or gains, and value
added taxes, any transfer, registration, recording or other fees, and any
similar Taxes incurred as a result of the transactions contemplated hereby, and
shall file such applications and documents as shall permit any such Tax to be
assessed and paid on or prior to the Closing Date in accordance with any
available pre-sale filing procedure.
SECTION 7.08. FIRPTA CERTIFICATE. Seller shall deliver or
cause to be delivered to the Purchaser on the Closing Date a FIRPTA Certificate
duly executed by the Company and in form and substance reasonably satifactory to
the Purchaser.
SECTION 7.09. TAX SHARING AGREEMENT. The Tax Sharing Agreement
shall terminate with respect to the Company on the Closing Date, with the
Company having no further payment obligation or rights under such agreement on
or after the Closing Date.
SECTION 7.10. MISCELLANEOUS.
(a) The Seller and the Purchaser agree to treat all payments
made by either to or for the benefit of the other (including any payments to the
Company) under this Article VII and under other indemnity provisions of this
Agreement, as adjustments to the purchase price or as capital contributions for
Tax purposes and that such agreed treatment shall govern for Tax purposes
hereof.
(b) Regardless of whether a Contest is commenced, if the
Seller becomes aware of the commencement of any Tax audit or administrative or
judicial proceeding which could result in any liability for which the Seller has
agreed to indemnify the Purchaser or the Company pursuant to the provisions of
Section 7.01(a), the Seller shall reasonably promptly so inform the Purchaser in
writing (if it has not previously done so).
(c) All indemnities under this Article VII shall be paid
dollar-for-dollar, in accordance with their terms, without regard to any caps,
floors, baskets or other similar limitations.
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ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.01. CONDITIONS TO OBLIGATIONS OF THE SELLER. The
obligation of the Seller to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment or prior written waiver, at or
prior to the Closing, of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS. The
representations and warranties of the Purchaser contained in this Agreement
shall be true and correct in all material respects as of the Closing (except
where the failure to be so true and correct would not have the effect of making
the transactions contemplated by this Agreement illegal or prevent or materially
delay the consummation of such transactions), with the same force and effect as
if made as of the Closing, other than such representations and warranties as are
made as of another date, which shall be true and correct as of such date;
PROVIDED, HOWEVER, that if any such portion of any representation or warranty is
already qualified by materiality, for purposes of determining whether this
Section 8.01(a) has been satisfied with respect to such portion of such
representation or warranty, such portion of such representation or warranty as
so qualified must be true and correct in all respects, and all the covenants
contained in this Agreement to be complied with by the Purchaser on or before
the Closing shall have been complied with (except where the failure to so comply
would not have the effect of making the transactions contemplated by this
Agreement illegal or prevent or materially delay the consummation of such
transactions or involve the breach of any material covenant by Purchaser), and
the Seller shall have received a certificate of the Purchaser to such effect
signed by a duly authorized officer thereof;
(b) HSR ACT. Any waiting period (and any extension thereof)
under the HSR Act applicable to the purchase of the Shares contemplated hereby
shall have expired or shall have been terminated without any material adverse
action by the Federal Trade Commission or Department of Justice;
(c) NO ORDER. No United States or state governmental authority
or other agency or commission or United States or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and has the effect of making the
transactions contemplated by this Agreement illegal or otherwise restraining or
prohibiting consummation of such transactions or which would have a Material
Adverse Effect with respect to the Purchaser; PROVIDED, HOWEVER, that the
parties hereto shall use their best efforts to have any such order or injunction
vacated;
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(d) GOVERNMENTAL FILINGS AND CONSENTS. All governmental
orders, approvals and consents to the transactions contemplated by this
Agreement shall have been obtained and be in effect on the Closing Date
(including, but not limited to, the approval of the Massachusetts Insurance
Division and any approvals which may be required under the insurance laws of any
jurisdiction in which the Company does business), except to the extent that the
failure to obtain any such consent would not have the effect of making the
transactions contemplated by this Agreement illegal or otherwise restrain or
prohibit consummation of such transactions or result in a material liability to
the Seller;
(e) THIRD PARTY CONSENTS. The Seller shall have received the
third party consents, approvals, authorizations or actions to the transactions
contemplated by this Agreement, if any, in form and substance reasonably
satisfactory to the Seller from the parties listed in Section 8.01(e) of the
Disclosure Schedule, except to the extent that failure to obtain any such
consents would not have the effect of making the transactions contemplated by
this Agreement illegal or otherwise restrain or prohibit consummation of such
transactions or result in a material liability to the Seller;
(f) LEGAL OPINION. The Seller shall have received from Morgan,
Lewis & Bockius LLP, counsel to the Purchaser, a legal opinion, addressed to the
Seller and dated the Closing Date, reasonably satisfactory to the Seller;
(g) INCUMBENCY CERTIFICATE. The Seller shall have received a
certificate of the Secretary or an Assistant Secretary of the Purchaser
certifying (i) the names and signatures of the officers of the Purchaser
authorized to sign this Agreement) and any other document required to be
delivered hereunder and (ii) as to the resolutions of the Purchaser's board of
directors approving the execution and delivery of this Agreement and the
performance of the transactions contemplated hereby and thereby;
(h) PROCEEDING. All proceedings, corporate or otherwise, taken
by the Purchaser in connection with the transactions contemplated hereby and all
instruments and documents incident thereto shall be reasonably satisfactory in
form and substance to the Seller and its counsel;
(i) FLORHAM PARK OCCUPANCY AGREEMENT. If requested by the
Seller not less than 10 days prior to the Closing, the Company shall have
executed and delivered to the Seller the Florham Park Occupancy Agreement;
(j) CONSENT OF FIRST CHICAGO. First Chicago shall have
approved (i) the form and substance of, and the execution and delivery of, the
Closing Note and (ii) the delivery of security with respect to the Closing Note
as contemplated by Section 2.04(d); and
(k) ESCROW AGREEMENT. The Purchaser and the Seller shall have
agreed upon the form, terms, and provisions of the escrow agreement as required
by Section 2.04(d) hereof.
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SECTION 8.02. CONDITIONS TO OBLIGATIONS OF THE PURCHASER. The
obligations of the Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment, at or prior to the Closing, of
each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS. The
representations and warranties of the Seller contained in this Agreement shall
be true and correct in all material respects as of the Closing with the same
force and effect as if made as of the Closing, other than such representations
and warranties as are made as of another date, which shall be true and correct
as of such date; PROVIDED, HOWEVER, that if any portion of any representation or
warranty is already qualified by materiality, for purposes of determining
whether this Section 8.02(a) has been satisfied with respect to such portion of
such representation or warranty, such portion of such representation or warranty
as so qualified must be true and correct in all respects, and all the covenants
contained in this Agreement to be complied with by the Seller on or before the
Closing shall have been complied with in all material respects, and the
Purchaser shall have received a certificate of the Seller to such effect signed
by a duly authorized officer thereof;
(b) HSR ACT. Any waiting period (and any extension thereof)
under the HSR Act applicable to the purchase of the Shares contemplated hereby
shall have expired or shall have been terminated without any adverse action by
the Federal Trade Commission or the Department of Justice and neither shall
impose any conditions upon the Purchaser or the Company which would cause either
thereof any material additional cost, materially interfere with the continued
operation of the business of the Purchaser or the Company as currently
conducted;
(c) NO ORDER OR SUIT. No United States or state governmental
authority or other agency or commission shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and has the
effect of making the transactions contemplated by this Agreement illegal or
otherwise restraining or prohibiting consummation of such transactions or which
would have a Material Adverse Effect; in addition, no action, suit or proceeding
before any Governmental Entity shall be pending or threatened and no
investigation by any Governmental Authority shall have commenced seeking to
restrain or prohibit (or questioning the validity or legality of) the
transactions contemplated by this Agreement or seeking to restrict in any
material respect the effective operation of the Business of the Company after
the Closing or seeking material damages in connection therewith, which
Purchaser, in good faith and with the advice of counsel, believes makes it
undesirable to proceed with the consummation of the transactions contemplated
hereby; PROVIDED, HOWEVER, that the parties hereto shall use their best efforts
to have any such order or injunction vacated; and PROVIDED FURTHER, HOWEVER,
that, in the case of a threatened action, suit or proceeding, it shall be
reasonably likely that such action, suit or proceeding will have a Material
Adverse Effect;
(d) GOVERNMENTAL FILINGS AND CONSENTS. All governmental
orders, approvals and consents to the transactions contemplated by this
Agreement shall have been obtained and be in effect on the Closing Date
(including, but not limited to, the approval of the Massachusetts
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Insurance Division and any approvals which may be required under the insurance
laws of any jurisdiction in which the Company does business), except to the
extent that the failure to obtain any such consent, individually and in the
aggregate, would not have a Material Adverse Effect, and such approvals as shall
have been obtained shall not impose upon the Purchaser or the Company any
conditions or other requirements which would cause either thereof any material
additional costs or materially interfere with the continued operations of the
business of the Purchaser or the Company as currently conducted;
(e) THIRD PARTY CONSENT. The Purchaser shall have received the
third party consents, approvals, authorizations or actions to the transactions
contemplated by this Agreement, if any, in form and substance reasonably
satisfactory to the Purchaser from the parties listed in Section 8.02(e) of the
Disclosure Schedule, except to the extent that the failure, individually and in
the aggregate, to obtain any such consents would not have a Material Adverse
Effect; PROVIDED, HOWEVER, that such exception shall not in any event apply to
those consents identified with an asterisk on such Schedule 8.02(e);
(f) LEGAL OPINION. The Purchaser shall have received from
Baker & Daniels, counsel to the Seller, a legal opinion, addressed to the
Purchaser and dated the Closing Date, reasonably satisfactory to the Purchaser;
(g) DELAWARE LEGAL OPINION. The Purchaser shall have received
from Richards, Layton & Finger, special Delaware counsel to the Seller, a legal
opinion addressed to the Purchaser and dated the Closing Date, confirming, as of
the Closing Date, in form and substance reasonably satisfactory to the Purchaser
and its Delaware counsel, to the effect that no stockholder approval is
necessary in connection with the execution and delivery of this Agreement, the
performance of Seller's obligations hereunder and the consummation of the
transactions contemplated hereby and thereby.
(h) RESIGNATION OF DIRECTORS AND CERTAIN OFFICERS OF THE
COMPANY. The Purchaser shall have received the resignations, effective as of the
Closing, of all the directors of the Company, the Chairman of the Board of the
Company, the Secretary and Senior Vice President of the Company, and the
Treasurer and Senior Vice President of the Company.
(i) ORGANIZATIONAL DOCUMENTS. The Purchaser shall have
received a copy of (i) the Charter of the Company, certified by the Commissioner
of Insurance or other appropriate official of the Commonwealth of Massachusetts,
as of a date not earlier than ten Business Days prior to the Closing Date and
accompanied by a certificate of the Secretary or Assistant Secretary of the
Company, dated as of the Closing Date, stating that no amendments have been made
to such Charter since such date, and (ii) the By-laws of the Company, certified
by the Secretary or Assistant Secretary of the Company;
(j) GOOD STANDING. The Purchaser shall have received a good
standing certificate for the Company from the Commissioner of Insurance or other
appropriate official of
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the Commonwealth of Massachusetts, dated as of a date not earlier than fifteen
Business Days prior to the Closing Date;
(k) NO MATERIAL ADVERSE EFFECT. Since the date of this
Agreement, no event or events shall have occurred which, individually or in the
aggregate, have, or are reasonably likely to have, a Material Adverse Effect;
(l) INCUMBENCY CERTIFICATE. The Purchaser shall have received
a certificate of the Secretary of the Seller certifying the names and signatures
of the officers of the Seller authorized to sign this Agreement and any other
document required to be delivered hereunder;
(m) MINUTE AND STOCK BOOKS. The Purchaser shall have received
evidence reasonably satisfactory to it that the complete and correct minute
books and stock certificate and transfer books (with all canceled and unused
stock certificates attached) and the corporate seals of the Company are in the
possession of the Person designated by the Purchaser to the Seller in writing at
least two Business Days prior to the Closing;
(n) SUBSIDIARIES. All of the capital stock of USF Insurance
Company, US Holdings, Inc. and any other Subsidiary of the Company shall have
been transferred from the Company to the Seller in accordance with Section
5.14(a) hereof;
(o) RELEASE OF PLEDGE. The Pledge of the Shares pursuant to
the Credit Agreement shall have been released in accordance with Section 5.14(b)
hereof and the Purchaser shall have received evidence reasonably satisfactory to
it that such pledge has been released (such evidence to include, without
limitation, a release and termination agreement duly executed by Fleet National
Bank);
(p) PROCEEDING. All proceedings, corporate or otherwise, taken
by the Seller in connection with the transactions contemplated hereby and all
instruments and documents incident thereto shall be reasonably satisfactory in
form and substance to the Purchaser and its counsel;
(q) COSTA MESA OCCUPANCY AGREEMENT. The Seller shall have
executed and delivered to the Purchaser or the Company, as the case may be, the
Costa Mesa Occupancy Agreement;
(r) CONSENT OF FIRST CHICAGO. First Chicago shall have
approved (i) the form and substance of, and the execution and delivery of, the
Closing Note and (ii) the delivery of security with respect to the Closing Note
as contemplated by Section 2.04(d); and
(s) ESCROW AGREEMENT. The Purchaser and the Seller shall have
agreed upon the form, terms and provisions of the escrow agreement as required
by Section 2.04(d) hereof.
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(t) SOFTWARE LICENSES. Seller shall have fulfilled its
obligations under Section 5.20 respecting the Software Licenses.
ARTICLE IX
INDEMNIFICATION
SECTION 9.01. SURVIVAL. The representations, warranties,
covenants and agreements of the parties hereto contained herein shall survive
the Closing and shall remain in full force and effect, regardless of any
investigation made by or on behalf of the Seller or the Purchaser, for the
period from the Closing to and including the date two years after the Closing;
PROVIDED, HOWEVER, that the agreements and covenants which by their terms
require performance after the Closing Date shall remain in full force and effect
until the applicable period under the statute of limitations therefor has
expired; and provided further that the survival of (x) the representations and
warranties contained in the first sentence of Section 3.02, Section 3.03,
Section 3.04, 3.08 and Section 3.15 and the representations and warranties
contained in the first sentence of Section 4.01 and the first sentence of
Section 4.02 shall be unlimited in time; (y) the representations and warranties
in Section 3.25 respecting the liability of the Company for Taxes shall continue
to survive until all taxable periods of the Company to and including the Closing
Date shall be closed to any further assessment of Taxes and to any assessment of
any penalties or interest charges in respect of any such Taxes, by receipt of a
final assessment, in form and substance reasonably satisfactory to the
Purchaser, from the appropriate tax authorities, or by the expiration of the
applicable statute of limitations or any extension thereof by waiver or
otherwise; and (z) the representations and warranties contained in Section 3.23
shall survive until the applicable period under the statute of limitation
therefor has expired.
SECTION 9.02. INDEMNIFICATION BY THE PURCHASER.
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(a) The Purchaser agrees, subject to the other terms and
conditions of this Agreement, to indemnify the Seller and its Affiliates, and
their respective officers, directors, employees, agents, heirs, successors and
assigns (as used in this Section 9.02, each an "INDEMNIFIED PARTY") against and
hold them harmless from, and shall pay, all liabilities of and costs and damages
(including any costs of investigation, reasonable attorneys' fees and expenses
and other costs of defense) arising out of (i) the breach of any representation,
warranty, covenant or agreement of the Purchaser herein (other than Article VI,
it being understood that the sole remedy for breach thereof shall be pursuant to
Article VI) and (ii) the conduct of the Business by the Purchaser following the
Closing. Anything in Section 9.01 to the contrary notwithstanding, no claim may
be asserted nor may any action be commenced against the Purchaser under this
Section 9.02 for breach of any representation, warranty, covenant or agreement
contained herein, unless written notice of such claim or action is received by
the Purchaser describing in reasonable detail the facts and circumstances known
to the Seller with respect to the subject matter of such claim or action on or
prior to the date on which the representation, warranty, covenant or agreement
on which such claim or action is based ceases to survive as set forth in Section
9.01, irrespective of whether the subject matter of such claim or action shall
have occurred before or after such date and any claim made by the Seller under
this Article IX within the aforesaid time periods shall be considered timely
made even if such claim is not resolved until after the expiration of the
aforesaid periods; PROVIDED, HOWEVER, that a claim may be asserted and an action
may be commenced against the Purchaser for breach of the agreements and
covenants which by their terms are to be performed after the Closing Date
(including, without limitation, the indemnities contained herein) until the
applicable period under the statute of limitations therefor has expired.
(b) No claim may be made against the Purchaser for
indemnification pursuant to this Section 9.02 with respect to any item of
liability or damage relating to the breach of a representation or warranty
unless the aggregate of all such liabilities and damages of the Indemnified
Parties with respect to this Section 9.02 shall exceed $500,000 and the
Purchaser shall not be required to pay or be liable for the first $500,000 in
aggregate amount of such liabilities and damages. No Indemnified Party shall be
indemnified pursuant to this Section 9.02 with respect to any item of liability
or damage if the aggregate of all liabilities and damages of the Indemnified
Parties for which the Indemnified Parties have received indemnification pursuant
to this Section 9.02 shall have exceeded an amount equal to the Adjusted
Purchase Price.
(c) Payments by the Purchaser pursuant to Section 9.02(a)
shall be limited to the amount of any liability or damage that remains after
deducting therefrom any insurance proceeds and any indemnity, contribution or
other similar payment recoverable by the Indemnified Party from any third party
with respect thereto; PROVIDED, HOWEVER, that the reduction for insurance
proceeds shall itself be reduced by the present value of the Seller's reasonably
estimated increase in insurance costs directly attributable to the claim in
respect of which such insurance proceeds shall have been received for the five
years following the receipt of such proceeds using a discount rate of six
percent.
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(d) An Indemnified Party shall give the Purchaser prompt
written notice of any claim, assertion, event or proceeding by or in respect of
a third party of which an Indemnified Party has knowledge concerning any
liability or damage as to which an Indemnified Party may request indemnification
hereunder. Failure to give such notice shall not waive any right to
indemnification on the part of the Indemnified Party or Parties who fail to give
such notice, except only to the extent of any damage or loss actually suffered
by the Purchaser by reason of the delay in receiving such notice. The Purchaser
shall have the right to direct, through counsel of its own choosing, provided
such counsel is reasonably satisfactory to the Indemnified Party, the defense or
settlement of any such claim or proceeding at its own expense, provided that the
Purchaser vigorously and diligently pursues such defense in good faith and keeps
the Indemnified Party and its attorneys reasonably informed as to the progress
of the defense and any proposed settlement. If the Purchaser elects to assume
the defense of any such claim or proceeding, the Indemnified Party may
participate in such defense, but in such case the expenses of the Indemnified
Party shall be paid by the Indemnified Party. The Indemnified Party shall
provide the Purchaser with access to such Indemnified Party's records and
personnel relating to any such claim, assertion, event or proceeding during
normal business hours and shall otherwise cooperate with the Purchaser in the
defense or settlement thereof, and the Purchaser shall reimburse the Indemnified
Party for all the reasonable out-of-pocket expenses of such Indemnified Party in
connection therewith. If the Purchaser elects to direct the defense of any such
claim or proceeding, the Indemnified Party shall not pay, or permit to be paid,
any part of any claim or demand arising from such asserted liability, (i) unless
the Purchaser consents in writing to such payment which consent shall not be
unreasonably withheld, but if such consent is not given in the case of a
settlement proposal, the Purchaser will post a letter of credit from a bank
reasonably satisfactory to the Seller in the amount of such proposed settlement,
or (ii) unless the Purchaser, subject to the last sentence of this Section
9.02(d), withdraws from the defense of such asserted liability, or (iii) unless
a final judgment from which no appeal may be taken by or on behalf of the
Purchaser is entered against the Indemnified Party for such liability, or (iv)
unless there is a material risk if such asserted liability is not paid then an
injunction or other equitable relief will be granted which will materially
adversely effect the business of the Seller or there is a material risk of the
seizure of any material assets of the Seller or a material risk that a lien or
liens will be imposed on any such material asset. If the Purchaser shall fail to
defend, or if, after commencing or undertaking any such defense, the Purchaser
fails to diligently prosecute and defend or withdraws from such defense, the
Indemnified Party shall have the right to undertake the defense or settlement
thereof, at the Purchaser's expense. If the Indemnified Party assumes the
defense of any such claim or proceeding pursuant to this Section 9.02(d) and
proposes to settle such claim or proceeding prior to a final judgment thereon or
to forego appeal with respect thereto, then the Indemnified Party shall give the
Purchaser prompt written notice thereof and the Purchaser shall have the right
to participate in the settlement or assume or reassume the defense of such claim
or proceeding subject to the conditions set forth above; provided that if the
Purchaser does not assume or reassume the defense within ten Business Days or
any earlier time that such offer to settle expires and post a letter of credit
reasonably
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satisfactory to the Seller in the amount of the proposed settlement, then the
Indemnified Party can settle such claim in good faith without the consent of the
Purchaser.
(e) Except as set forth in this Agreement, the Closing Note
and the Escrow Agreement, the Purchaser is not making any representation,
warranty, covenant or agreement with respect to the matters contained herein or
therein. Anything herein to the contrary notwithstanding, no breach of any
representation, warranty, covenant or agreement contained herein or therein
shall give rise to any right on the part of the Indemnified Party, after the
consummation of the purchase and sale of the Shares contemplated by this
Agreement, to rescind this Agreement or any of the transactions contemplated
hereby.
SECTION 9.03. INDEMNIFICATION BY THE SELLER.
(a) The Seller agrees, subject to the other terms and
conditions of this Agreement, to indemnify the Purchaser and its Affiliates and
their respective officers, directors, employees, agents, heirs, successors and
assigns (as used in this Section 9.03, each an "INDEMNIFIED PARTY") against and
hold them harmless from, and shall pay, all liabilities of and costs and damages
(including any costs of investigation, reasonable attorneys' fees and expenses
and other costs of defense) arising out of the breach of any representation,
warranty, covenant or agreement of the Seller herein. Anything in Section 9.01
to the contrary notwithstanding, no claim may be asserted nor any action
commenced against the Seller under this Section 9.03 for breach of any
representation, warranty, covenant or agreement contained herein, unless written
notice of such claim or action is received by the Seller describing in
reasonable detail the facts and circumstances known to the Purchaser with
respect to the subject matter of such claim or action on or prior to the date on
which the representation, warranty, covenant or agreement on which such claim or
action is based ceases to survive as set forth in Section 9.01, irrespective of
whether the subject matter of such claim or action shall have occurred before or
after such date; and any claim made by Purchaser under the provisions of this
Article IX within the aforesaid time periods shall be considered timely made
even if such claim is not resolved until after the expiration of the aforesaid
periods; PROVIDED, HOWEVER, that a claim may be asserted and an action may be
commenced against the Seller for breach of the agreements and covenants which by
their terms are to be performed after the Closing Date (including, without
limitation, the indemnities contained herein) until the applicable period under
the statute of limitations therefor has expired and a claim may be asserted and
an action may be separately commenced under Articles VI and VII.
(b) No claim may be made against the Seller for
indemnification pursuant to this Section 9.03 with respect to any item of
liability or damage with respect to a breach of a representation or warranty or
a covenant the compliance with which is outside the control of Seller, unless
the aggregate of all such liabilities and damages of the Indemnified Parties
with respect to this Section 9.03 shall exceed $500,000, and the Seller shall
not be required to pay or be liable for the first $500,000 in aggregate amount
of any such liabilities and damages, but shall pay for liabilities and damages
in excess of such amount subject to the following sentence; PROVIDED, HOWEVER,
that the Seller agrees that such $500,000 exclusion shall not apply to any loss
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or damage suffered by the Purchaser or other Indemnified Party arising out of,
based upon or resulting from any breach of any covenant which is not outside the
control of the Sellers or any breach of the representations and warranties
contained in the first sentence of Section 3.01, the first sentence of Section
3.02, and Sections 3.03, 3.15, 3.23 and 3.25 (collectively, the "EXCLUDED
CLAIMS"), all of which shall be indemnified on a dollar-for-dollar basis. No
Indemnified Party shall be indemnified pursuant to this Section 9.03 (other than
the Excluded Claims) with respect to any item of liability or damage if the
aggregate of all liabilities and damages of the Indemnified Parties for which
the Indemnified Parties have received indemnification pursuant to this Section
9.03 shall have exceeded an amount equal to the Adjusted Purchase Price.
(c) Payments by the Seller pursuant to Section 9.03(a) shall
be limited to the amount of any liability or damage that remains after deducting
therefrom any insurance proceeds and any indemnity, contribution or other
similar payment recoverable by the Indemnified Party from any third party with
respect thereto; PROVIDED, HOWEVER, that the reduction for insurance proceeds
shall itself be reduced by the present value of the Purchaser's reasonably
estimated increase in insurance costs directly attributable to the claim in
respect of which such insurance proceeds shall have been received for the five
years following the receipt of such proceeds using a discount rate of six
percent.
(d) An Indemnified Party shall give the Seller reasonably
prompt written notice of any claim, assertion, event or proceeding by or in
respect of a third party of which such Indemnified Party has knowledge
concerning any liability or damage as to which such Indemnified Party may
request indemnification hereunder. Failure to give such notice shall not waive
any right to indemnification on the part of the Indemnified Party or Parties who
fail to give such notice, except only to the extent of any damage or loss
actually suffered by the Seller by reason of the delay in receiving such notice.
The Seller shall have the right to direct, through counsel of its own choosing,
provided such counsel is reasonably satisfactory to the Indemnified Party, the
defense or settlement of any such claim or proceeding at its own expense,
provided that the Seller vigorously and diligently pursues such defense in good
faith and keeps the Indemnified Party and its attorneys reasonably informed as
to the progress of the defense and any proposed settlement. If the Seller elects
to assume the defense of any such claim or proceeding, the Indemnified Party may
participate in such defense, but in such case the expenses of the Indemnified
Party shall be paid by the Indemnified Party. The Indemnified Party shall
provide the Seller with access to such Indemnified Party's records and personnel
relating to any such claim, assertion, event or proceeding during normal
business hours and shall otherwise cooperate with the Seller in the defense or
settlement thereof, and the Seller shall reimburse the Indemnified Party for all
the reasonable out-of-pocket expenses of such Indemnified Party in connection
therewith. If the Seller elects to direct the defense of any such claim or
proceeding, the Indemnified Party shall not pay, or permit to be paid, any part
of any claim or demand arising from such asserted liability (i) unless the
Seller consents in writing to such payment, which consent will not be
unreasonably withheld, but if such consent is not given in the case of a
settlement proposal, the Seller will post a letter of credit from a bank
reasonably satisfactory to
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the Purchaser in the amount of such proposed settlement, or (ii) unless the
Seller, subject to the last sentence of this Section 9.03(d), withdraws from the
defense of such asserted liability, or (iii) unless a final judgment from which
no appeal may be taken by or on behalf of the Seller is entered against the
Indemnified Party for such liability or (iv) unless there is a material risk if
such asserted liability is not paid that an injunction or other equitable relief
will be granted which will materially adversely affect the business of the
Purchaser or the Company or there is a material risk of the seizure of any
material asset of the Purchaser or the Company or a material risk that a lien or
liens will be imposed on any such material asset. The Seller shall have the
right, in its discretion exercised in good faith and with the advice of counsel,
to settle any such claim with the prior written consent of the Indemnified
Party, which consent shall not be unreasonably withheld; provided that the
Indemnified Party may withhold its consent to any settlement if, in its
reasonable judgment, such settlement would adversely affect the conduct of the
business of the Purchaser or the Company or does not include a general release
to all Indemnified Parties. If the Seller shall fail to defend, or if after
commencing or undertaking any such defense, fail to diligently prosecute and
defend or withdraws from such defense, the Indemnified Party shall have the
right to undertake the defense or settlement thereof, at the Seller's expense.
If the Indemnified Party assumes the defense of any such claim or proceeding
pursuant to this Section 9.03(d) and proposes to settle such claim or proceeding
prior to a final judgment thereon or to forego any appeal with respect thereto,
then the Indemnified Party shall give the Seller prompt written notice thereof
and the Seller shall have the right to participate in the settlement or assume
or reassume the defense of such claim or proceeding subject to the conditions
set forth above; provided that if the Seller does not assume or reassume the
defense within ten Business Days or any earlier time that such offer to settle
expires and post a letter of credit from a bank reasonably satisfactory to the
Purchaser in the amount of the proposed settlement, then the Indemnified Party
can settle such claim in good faith without the consent of the Seller.
(e) Except as set forth in this Agreement, the Disclosure
Schedule, the Escrow Agreement, the certificates delivered pursuant to Article
VII or any agreement delivered pursuant to the provisions hereof, the Seller is
not making any representation, warranty, covenant or agreement with respect to
the matters contained herein.
SECTION 9.04. OTHER PROVISIONS RELATING TO INDEMNIFICATION.
(a) Each of the parties hereby acknowledges and agrees that its sole and
exclusive remedy with respect to any and all claims relating to the subject
matter of this Agreement, except any claim for fraud or arising from the
obligation of such party to close the transactions contemplated by this
Agreement in accordance with its terms, shall be pursuant to the indemnification
provisions set forth in this Agreement. In furtherance of the foregoing, each of
the parties hereby waives, to the fullest extent permitted under applicable law,
any and all rights, claims and causes of action it may have against the other
party arising under or based upon any federal, state or local statute, law,
ordinance, rule or regulation (including, without limitation, any such rights,
claims or causes of action arising under or based upon common law or otherwise
but excluding fraud) other than
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such rights, claims or causes of action arising under the indemnification
provisions of this Agreement.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.01. TERMINATION. This Agreement may be terminated
at any time prior to the Closing:
(a) by the mutual written consent of the Seller and the
Purchaser;
(b) by written notice by either the Seller or the Purchaser if
the Closing shall not have occurred prior to September 30, 1999; PROVIDED,
HOWEVER, that the right to terminate this Agreement under this Section 10.01(b)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement shall have been the cause of, or shall have resulted in,
the failure of the Closing to occur prior to such date;
(c) by the Purchaser, if the Seller shall have breached or
failed in any material respect to perform or comply with any of its
representations, warranties, covenants or other agreements contained in this
Agreement, which breach or failure to perform or comply (A) would give rise to
the failure of a condition set forth in Section 8.02, and (B) is incapable of
being cured by the Seller;
(d) by the Purchaser, if the Seller or any of its directors or
officers shall take any action in breach of Section 5.08;
(e) by the Seller, if the Purchaser shall have breached or
failed in any material respect to perform or comply with any of its
representations, warranties, covenants or other agreements contained in this
Agreement, which breach or failure to perform or comply (A) would give rise to
the failure of a condition set forth in Section 8.01, and (B) is incapable of
being cured by the Purchaser; or
(f) by the Seller in accordance with Section 5.08(b); PROVIDED
that, in order for the termination of this Agreement pursuant to this paragraph
(f) to be deemed effective, the Seller shall have complied with all provisions
contained in Section 5.08, including the notice provisions therein, and with
applicable requirements of Section 5.09, including the payment of the
Termination Fee.
(g) by the Purchaser, if Fleet National Bank shall not have
delivered the Lender Commitment within the time prescribed by Section 5.14(b)
hereof.
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(h) by the Seller if First Chicago has not approved the
Closing Note on or before the sixtieth day after the date hereof.
SECTION 10.02. EFFECT OF TERMINATION. In the event of
termination of this Agreement as provided in Section 10.01, this Agreement shall
forthwith become void and there shall be no liability on the part of any party
hereto, except (a) as set forth in Sections 5.04 and 5.09 and (b) nothing herein
shall relieve either party from liability for any breach hereof.
SECTION 10.03. WAIVER. At any time prior to the Closing,
either party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto or (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid only if
set forth in an instrument in writing signed by the party to be bound thereby.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. NOTICES. All notices and other communications
given or made pursuant hereto shall be in writing and shall be deemed to have
been duly given or made as of (i) the date delivered if delivered personally
against written receipt or (ii) five days after mailing if mailed by registered
or certified mail (postage prepaid, return receipt requested) or (iii) the date
telecopied to the parties (if the appropriate answerback or telephonic
confirmation) shall have been received; PROVIDED THAT notices after the giving
of which there is a designated period within which to perform an act and notices
of changes of address shall be effective only upon receipt. All such notices and
communications shall be delivered to the following addresses or numbers (or at
such other address or number for a party as shall be specified by like notice):
(a) if to the Seller:
The Centris Group, Inc.
650 Town Center Drive
Suite 1600
Costa Mesa, CA 92626
Attention: General Counsel
Telecopier: (714) 434-0750
with a copy under separate cover to:
Baker & Daniels
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300 N. Meridian Street
Suite 2700
Indianapolis, IN 46204
Attention: Tibor D. Klopfer
Telecopier: (317) 237-1000
(b) if to the Purchaser:
Folksamerica Group
One Liberty Plaza
Nineteenth Floor
New York, N.Y. 10006
Attention: President
Telecopier: (212) 385-3678
with a copy under separate cover to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, N.Y. 10178-0060
Attention: F. Sedgwick Browne
Telecopier: (212) 309-6273
SECTION 11.02. PUBLIC ANNOUNCEMENT. No party to this Agreement
shall make any public announcements in respect of this Agreement or the
transactions contemplated herein or otherwise communicate with any news media
without prior notification to the other party, and the parties, subject to the
requirements of applicable law, shall cooperate as to the timing and content of
any such announcement. The parties agree that, except as required by applicable
law, in the event this Agreement is terminated in accordance with Article X
hereof, each party will keep confidential the reasons for such termination and
any public announcement issued by either party following any such termination
shall be limited to a statement that the parties were unable to agree on the
principal terms of the transaction.
SECTION 11.03. HEADINGS. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 11.04. SEVERABILITY. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as
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possible in a mutually acceptable manner in order that the transactions
contemplated hereby be consummated as originally contemplated to the greatest
extent possible.
SECTION 11.05. ENTIRE AGREEMENT. This Agreement (including the
Exhibits and Disclosure Schedule) constitutes the entire agreement of the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and undertakings, both written and oral, except as otherwise
expressly provided herein.
SECTION 11.06. ASSIGNMENT. This Agreement shall not be
assigned by operation of law or otherwise; PROVIDED, HOWEVER, that this
Agreement may be assigned, in whole or in part, by the Purchaser to its
subsidiary, Folksamerica Reinsurance Company, so that Folksamerica Reinsurance
Company may buy a portion or all of the Shares, without releasing the Purchaser
from any of its other obligations or liabilities hereunder.
SECTION 11.07. NO THIRD-PARTY BENEFICIARIES. Except for the
provisions of this Agreement relating to Indemnified Parties, this Agreement is
for the sole benefit of and is binding upon the parties hereto and their
permitted successors and assigns and nothing herein, express or implied, is
intended to or shall confer upon any other person or entity any legal or
equitable right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
SECTION 11.08. AMENDMENT; WAIVER. This Agreement may not be
amended or modified except by an instrument in writing signed by the Seller and
the Purchaser. Waiver of any term or condition of this Agreement shall only be
effective if in writing and shall not be construed as a waiver of any subsequent
breach or waiver of the same term or condition, or a waiver of any other term or
condition of this Agreement. Any failure or delay on the part of any party in
exercising any power or right hereunder shall not operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power preclude any
other or further exercise thereof or the exercise of any other right or power
hereunder.
SECTION 11.09. GOVERNING LAW. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York, other
than any conflict of law rules which might result in the application of the laws
of any other jurisdiction.
SECTION 11.10. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
THE CENTRIS GROUP, INC.
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By
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Name: David L. Cargile
Title: Chairman, President and CEO
FOLKSAMERICA HOLDING COMPANY, INC.
By
------------------------------------
Name: Steven E. Fass
Title: President & CEO
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