FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[FEE REQUIRED]
For the fiscal year ended .........................December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[NO FEE REQUIRED]
For the transition period from _________________________ to __________________
Commission File Number 0-16520
-------------------------------------------------------
ARISTA INVESTORS CORP.
------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-2957684
- ---------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
116 John Street, New York, New York 10038
- ---------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 964-2150
----------------------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, par value $0.01 per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes: X No: ______
-----
The aggregate market value of the voting stock (Class A Common Stock,
par value $ .01 per share) held by non-affiliates of the registrant, computed by
reference to the average of the closing bid and asked price, as of April 9, 1996
was $3,511,300.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Sec.229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate number of registrant's outstanding shares on April 9,
1996, was 1,930,600 shares of Class A Common Stock, $0.01 par value
(excluding 10,000 shares of treasury stock), and 47,400 shares of Class B
Common Stock, $0.01 par value.
DOCUMENTS INCORPORATED BY REFERENCE:
None.
<PAGE>
PART I
------
ITEM 1. BUSINESS
- ------ --------
General
- -------
Arista Investors Corp. (the "Registrant") through its wholly-owned
subsidiary, Arista Insurance Company ("Arista"), a New York corporation
(Registrant and Arista are sometimes hereinafter individually or collectively
referred to as the "Company"), has been engaged in the sale and underwriting of
statutory disability benefits insurance in the State of New York since 1979. The
Company's principal executive offices are located at 116 John Street, New York,
New York 10038. Its telephone number is (212) 964-2150.
Arista was licensed to write accident and health insurance by the New York
State Insurance Department in October 1979, and writes New York statutory
disability benefits insurance. During the year ended December 31, 1993, Arista
amended its charter and became licensed to write a line of property and casualty
insurance in New York as well.
The following table sets forth the gross and net premiums earned by Arista,
including ceded premiums and investment income and realized investment gains
(losses) for each of the three years of the period ended December 31, 1995.
1993 1994 1995
---- ---- ----
Gross premiums earned $24,218,510 $26,188,858 $26,091,714
Ceded premiums earned 2,889,594 13,094,429 13,045,857
----------- ----------- -----------
Net premiums earned $21,328,916 $13,094,429 $13,045,857
=========== =========== ===========
Investment income $ 188,200 $ 215,480 $ 252,134
=========== =========== ===========
Realized investment gains
(losses) $ 47,142 $ (2,603) $ (137)
=========== =========== ===========
Under New York State law, all eligible employees, including full-time and
part-time employees in New York State, are required to be provided with coverage
unless excluded by statute, e.g., government, railroad, maritime or farm
workers. Statutory disability benefits insurance presently provides for a
payment to totally disabled employees in the amount of 50% of weekly salary to a
maximum payment of $170 per week, for a maximum of 26 weeks beginning with the
eighth day of disability due to off-the-job accident or sickness. On-the-job
accident or sickness is covered by worker's compensation insurance, not
statutory disability benefits insurance. Arista charges a premium for statutory
disability benefits insurance coverage based upon a rate structure approved by
the New York State Insurance Department. In order for an
2
<PAGE>
insurer to alter its rate structure it must obtain prior approval from the New
York State Insurance Department. Under the law, an employer may require an
employee to contribute 1/2 of 1% of covered payroll up to a maximum of $.60 per
week towards the premium charge for statutory disability benefits insurance.
In addition to standard statutory disability benefits insurance coverage,
Arista offers certain augmented benefits which include the payment of the
disability benefit from the first day of disability as opposed to the eighth day
of disability, increased duration of benefits from 26 weeks up to 52 weeks,
benefits increased over the maximum of $170 weekly benefit and an additional
multiple if related to hospitalization (e.g., 150% of the benefit if an employee
is hospitalized). Arista also offers coverage for association groups on a
competitive basis. The underwriting of these augmented benefits currently does
not, and is not anticipated to, represent a significant percentage of Arista's
earned premiums for the foreseeable future.
Pursuant to agreements effective October 1, 1991, July 1, 1993, January 1,
1995, and April 1, 1995, Arista agreed to act as a third party administrator for
the statutory disability benefits books of business of The North Atlantic Life
Insurance Company of America ("NALIC"), The Guardian Life Insurance Company of
America, the United States Life Insurance Company in the City of New York and
America Bankers Insurance Company of Florida, respectively. Management believes
that such activity is profitable and will continue to seek opportunities to
expand its third party administration service revenue.
During the three year period ended December 31, 1995, Arista has entered
into the following arrangements to acquire books of New York State disability
insurance:
1. Effective July 1, 1993, Arista entered into an arrangement with American
Life Insurance Company ("American Life") which authorized Arista to assume all
of American Life's New York State statutory disability benefits insurance and
issue assumption certificates to the policyholders then currently insured under
American Life's disability policies.
2. Arista acquired the right, effective January 1, 1994, to offer New York
State statutory disability benefits coverage to policyholders previously insured
by NALIC. As described above, for the period October 1, 1991 through December
31, 1993, Arista had a third party administrative agreement with NALIC.
3. Pursuant to an agreement with Aetna Life Insurance Company ("Aetna"),
effective April 1, 1994, Arista acquired Aetna's entire book of New York State
statutory non-experience rated state cash sickness disability insurance through
an assumption reinsurance treaty, and issued assumption certificates to those
policyholders previously insured with Aetna.
4. Effective October 1, 1994, Arista entered into an Indemnity Reinsurance
Agreement with American Medical and Life Insurance Company ("American Med")
wherein Arista assumed a book of New York State statutory disability benefits
insurance that was ceded by American Med.
3
<PAGE>
5. Effective January 1, 1995, Arista, through an assumption reinsurance
treaty, acquired the book of New York State statutory disability benefits
insurance that had been previously ceded by American Med. Arista issued
assumption certificates to all such American Med policyholders.
In addition, effective April 1, 1996, Arista entered into assumption
reinsurance treaties with Greater New York Mutual Insurance company ("GNYMIC")
and with Insurance Company of Greater New York ("ICGNY") which authorized Arista
to assume all of GNYMIC's and ICGNY's New York State statutory disability
benefits insurance and issue assumption certificates to the policyholders then
currently insured with GNYMIC and ICGNY.
For the year ended December 31, 1995, no one group accounted for 10 percent
or more of Arista's consolidated revenue; however, Arista underwrites the
statutory disability benefits insurance for two large groups with combined
earned premiums of approximately $4,439,000 in 1993, $4,496,000 in 1994 and
$3,692,000 in 1995.
Effective December 29, 1995, Arista issued a $3,000,000 surplus note to
Cologne Life Underwriting Management Company ("CLUMCO"). The surplus note bears
interest at the rate of 10.5% per annum, and provides for the principal to be
repaid in eight equal installments in years three through ten, together with any
accrued interest. These repayments of principal and accrued interest shall only
be made out of the free and divisible surplus of Arista, and are subject to the
approval of the Superintendent of Insurance of the State of New York. If the
principal and interest are not repaid in full at the end of the ten years, the
surplus note renews annually for additional one-year terms until the balance is
repaid. In addition, the Registrant issued a ten year warrant to CLUMCO to
purchase up to 150,000 shares of the Company's Class A Common Stock, subject to
certain conditions, at an exercise price of $3.50 per share. "See Reinsurance
Ceded."
Arista submitted an application for admission as a reinsurer to the Office
of the Commissioner of Insurance of the Commonwealth of Puerto Rico during 1989.
In 1991, Arista requested that the Commissioner hold its application in abeyance
pending the conclusion of certain negotiations regarding a reinsurance
arrangement in the Commonwealth. Negotiations regarding this arrangement are
still ongoing.
In 1994, Arista submitted an application to the Commissioner of Insurance
in Hawaii (the "Commissioner") to become licensed in the State of Hawaii to
write Temporary Disability Insurance. In 1995, Arista completed all of the
license requirements and its submissions were in the process of being reviewed
by the Commissioner.
In February, 1996, Arista concluded that it would withdraw its application
in Hawaii, and would evaluate the status of the negotiations in Puerto Rico by
December, 1996.
4
<PAGE>
Marketing
- ---------
Arista believes that, particularly with respect to the small and
medium-sized businesses on which it focuses its marketing efforts, business
owners generally rely upon agents in selecting an insurance company.
Consequently, Arista considers the general agent to be its customer and stresses
prompt and personal service to its general agents in all phases of underwriting,
product delivery and claims processing functions.
Arista currently has under contract 390 general agents. These general
agents place statutory disability benefits insurance with other insurance
companies in addition to Arista. These general agents submit to Arista insurance
written through more than 6,900 insurance brokers and soliciting agents. Arista
enters into written contracts with general agents who in turn engage brokers and
soliciting agents. Arista's contract with each general agent may be cancelled by
either party on 30 days' prior written notice. The commissions paid by Arista
are competitive with the commissions paid by other insurers in the statutory
disability benefits insurance industry. Each general agent is responsible for
payment of any commissions due brokers or soliciting agents engaged by the
general agent.
In 1995, based upon results as of December 31, 1994, Arista received a
rating of B (good) from A.M. Best Company, Inc. ("Best"), the principal
organization rating insurance companies. Best's ratings are based upon factors
of concern to policyholders.
Claims
- ------
Gross claims incurred by Arista amounted to $15,892,986 in 1993,
$17,752,698 in 1994 and $16,588,801 in 1995.
The factors generally affecting gross claims incurred are a function of the
number of risks covered with either part-time or full-time workers, the wage
level of each covered employee to a maximum of $170 per week and the duration of
disability to a maximum of 26 weeks. The gross amount of claims incurred at any
point in time is also affected by the number of females covered since maternity
is treated statutorily as any other disability.
The Company's estimated-to-actual claims experience is as follows:
Calendar Year Estimated Loss Ratio Actual Loss Ratio
- ------------- -------------------- -----------------
1991 68.6% 68.5%
1992 65.7% 67.6%
1993 65.5% 64.9%
1994 66.5% 65.0%
1995 62.2%* **
5
<PAGE>
* Experience is based on estimated claim reserves including reinsurance assumed
at December 31, 1995.
** Fully developed loss information for 1995 will not be available until after
September 30, 1996.
The estimated loss ratio is calculated for each year based upon an
historical estimate of the claims development divided by the premiums earned for
a calendar year. It differs from the actual loss ratio which represents the
fully developed claims for a calendar year divided by the actual premiums earned
for that year.
Reinsurance Ceded
- -----------------
Arista utilizes reinsurance principally to reduce its net liability on
business in force through risk sharing. The ceding of insurance does not
discharge the original insurer from its primary liability to the policyholder.
The ceding company is required to pay losses to the extent the assuming company
fails to meet its obligations under the reinsurance agreement. The practice of
insurers, however, subject to certain statutory limitations and as permitted by
regulatory authorities, is to account for reinsured risks to the extent of
reinsurance ceded as though they are not risks for which the original insurer
remains liable.
From October 1, 1992 to September 30, 1993, Arista had a stop loss
reinsurance agreement with its reinsurer. The reinsurance agreement provided for
Arista to cede 50% of its disability policies written to the reinsurer when
Arista's loss ratio was equal to or greater than 75%, up to but not to exceed
100% of earned premiums. The reinsurer was paid a fee based on Arista's earned
premiums. The reinsurance agreement was subject to cancellation by either party
on 90 days' prior written notice.
From October 1, 1993 to September 30, 1995, Arista had a quota share
reinsurance agreement with its reinsurer, Harbourton Reinsurance, Inc.
(formerly, NRG America Reassurance Corporation). Under this agreement, Arista
ceded by way of reinsurance a 50% quota share of its liability with respect to
New York statutory disability benefits insurance issued to various
policyholders. This agreement was subject to cancellation by Cologne on 90
days' prior written notice, and may be cancelled by Arista, under certain
conditions, on 90 days prior written notice.
Effective October 1, 1995, Arista entered into an agreement with Cologne
Life Reinsurance Company ("Cologne") whereby Arista cedes by way of reinsurance
a 50% quota share participation in Arista's New York State statutory disability
benefits insurance, both for business in force as of October 1, 1995 and for new
business written or acquired after October 1, 1995. This agreement is subject to
cancellation by either party on 90 days' prior written notice.
Cologne had total assets of approximately $570,462,000 at December 31,
1995, and a Best's rating of A+ as of December 31, 1994. Unlike other segments
of the accident and health
6
<PAGE>
and property and casualty industries, there is no need to facilitate a spread of
risk pursuant to any one occurrence as the maximum liability for Arista on any
one life cannot exceed $4,420. The cost to Arista of obtaining reinsurance has
never exceeded approximately 1.2% of its gross premiums received. (See Note 10
of the Consolidated Financial Statements.)
Effective April 1, 1994 Arista entered into a reinsurance agreement with
Allianz Life Insurance Company of North America ("Allianz") wherein Arista
assumed Hawaii Temporary Disability Insurance business that was ceded by Allianz
since 1994. This agreement was terminated February 29, 1996.
Reserves
- --------
Insurance companies are required to maintain reserves for unpaid losses,
unpaid loss adjustment expenses and New York State Worker's Compensation Board
assessments for this line of business. These reserves are intended to cover the
probable ultimate cost of settling all losses incurred and unpaid, including
those incurred but not reported. Arista establishes these reserves based upon
its prior experience. Gross claims liabilities were $4,168,000, $4,912,446 and
$4,526,315 at December 31, 1993, 1994, and 1995, respectively.
Loss reserves are only estimates of what the insurer expects to pay on
claims, based on facts and circumstances then known. Although a degree of
variability is inherent in such estimates, management believes that the
liabilities for unpaid claims and related adjustment expenses are adequate. The
estimates are continually reviewed and adjusted as necessary, and such adjust-
ments are reflected in current operations.
Reserve
at the End
of the
Calendar Calendar Amounts Paid During the Year and Incurred Prior Thereto
-------------------------------------------------------
Year Year 1992 1993 1994 1995 1996
- -------- ---------- ---- ---- ---- ---- ----
1991 $4,970,000 $4,806,692
1992 $4,040,000 $4,578,312
1993 $3,870,000 $4,420,104
1994 $4,628,600 $4,667,005
1995 $4,280,000 (1)
(1) Development is not yet complete.
7
<PAGE>
Competition
- -----------
The writing of statutory disability benefits insurance is highly
competitive and many insurers write this line of insurance in New York. These
insurers vary in terms of size and generally have longer operating histories,
offer a broader range of insurance other than statutory disability benefits
insurance and generally have greater financial, marketing and management
resources, than Arista. In addition, the New York State Insurance Fund also
offers statutory disability benefits insurance. Competition is primarily based
upon service and, in certain classes of business, rate structure.
Employees
- ---------
As of December 31, 1995, the Company had 49 full-time and 2 part-time
employees. Nine of these employees are executive officers (2 of whom serve
part-time), 8 provide claims services as examiners, 1 provides general and
administrative services and 31 provide all other services. The Company believes
its relations with its employees are satisfactory.
Investment Policy
- -----------------
Arista must comply with the insurance laws of New York State with regard to
investments. These laws prescribe the kind, quality and concentration of
investments which may be made by insurance companies. The investment of Arista's
funds generally is subject to the direction and control of its Board of
Directors; investments are reviewed on a quarterly basis. Arista's funds
generally are invested in federal, state and municipal obligations, corporate
debt, preferred and common stocks and such other investments which are
specifically prescribed by the New York State Insurance Law.
The following table contains information concerning the Company's
investment portfolio as at December 31, 1995:
Amount at
which is
Cost or shown in
amortized Market the balance
Type of Investment cost value sheet
- ------------------ --------- ------- ----------
Investment Securities:
United States Treasuries $2,013,994 $2,049,991 $2,013,994
========== ========== ==========
The following table summarizes the Company's investment results before
income taxes for the five years ended December 31, 1995:
8
<PAGE>
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
Net investment income $254,350 $234,811 $188,200 $215,480 $252,134
Average annual yield on
total investments1 5.83% 5.29% 4.47% 5.54% 5.90%
Net realized investment
gains (losses) $ 0 ($107,530) $ 47,142 $(2,603) $ (137)
Regulation
- ----------
Arista and, under certain circumstances, the Registrant, are subject to
regulation by the New York State Insurance Department. Such regulation is
principally for the benefit and protection of policyholders and not
stockholders. Regulation extends to, among other things, the setting of rates to
be charged, the granting and revocation of licenses to transact business, the
licensing of general agents, the approval of policy forms and the form and
content of statutorily mandated financial statements.
The Company is also regulated under New York State Insurance Law, Article
15, the "Holding Companies" statute. The regulations promulgated under the
"Holding Companies" statute require prior regulatory agency approval of changes
in control of an insurer and of transactions within the holding company
structure. The State of New York has statutory authorization to enforce its laws
and regulations through various administrative orders and enforcement
proceedings. Arista was last examined during calendar years 1990-1991 for the
three year period ended December 31, 1989. In accordance with applicable
regulations promulgated by the New York State Insurance Department, a report for
the three-year period ended December 31, 1989 was issued. Arista's Board of
Directors reviewed and approved the recommendations contained therein, and the
report was filed by the New York State Insurance Department on December 17,
1992. In December, 1995, the New York State Insurance Department notified Arista
that it would commence an examination for the five-year period ended December
31, 1994.
The New York State Insurance Law provides that no corporation or other
person may acquire control of the Registrant and thus indirect control of
Arista, unless it has given notice to Arista and obtained prior written approval
of the Superintendent of Insurance for such acquisition. Under said law, any
purchaser of ten percent or more of the outstanding Common Stock of the
Registrant would be presumed to have acquired control of Arista, unless such
presumption is rebutted.
The declaration and payment of dividends by the Registrant is subject to
the discretion of its Board of Directors and is presently dependent upon any
dividends the Registrant may receive as the sole shareholder of Arista. Under
New York State Insurance Law, Arista may pay dividends only out of its
statutory earned surplus. Generally, the maximum amount of
- --------------------
1 Calculated on the mean of total investments on the first day and last day
of each quarter.
9
<PAGE>
dividends that Arista may pay without regulatory approval in any twelve-month
period is the lesser of adjusted net investment income or ten percent (10%) of
statutory surplus. In 1996, 1994 and 1993, Arista's Board of Directors
authorized the payment of a dividend to the Registrant in the amount of
$111,654, $224,799 and $198,000, respectively. The dividends were paid on April
11, 1996, May 21, 1994 and March 29, 1993.
Arista is not aware of any current proposed changes in either federal or
state regulations with respect to statutory disability benefits insurance.
The Collection Group
- --------------------
The Collection Group, Inc., a wholly-owned subsidiary of the
Registrant, commenced operations during July 1991. The
Collection Group, Inc., provides collection services to Arista.
American Accident and Health Insurance Company
- ----------------------------------------------
On December 20, 1995, Arista sold all of the outstanding shares of capital
stock of its wholly-owned subsidiary, American Accident and Health Insurance
Company ("American"), to American Travellers Life Insurance Company for
$764,675, resulting in a pretax gain of $320,191.
ITEM 2. PROPERTY
--------
The Registrant's, Arista's and The Collection Group, Inc.'s principal
executive offices are located at 116 John Street, New York, New York 10038. The
offices contain approximately 16,100 square feet. On January 9, 1995, effective
on or about June 1, 1995, the Company entered into a five year lease for its new
principal executive office space at an average rent over the term of the lease
of approximately $210,000 per year, exclusive of electricity.
The Company has the option to terminate the lease provided it notifies the
landlord ninety days prior to the termination date, and reimburses the landlord
for the unamortized portion of the landlord's contribution for leasehold
improvements approximating $200,000.
The Saltzman/Kooper Agency, Inc., a life and health insurance agency owned
by Louis H. Saltzman, a director and the Secretary of the Registrant and Arista,
and a director of The Collection Group, Inc., occupied adjacent premises
pursuant to a sublease with the Company whereby The Saltzman/Kooper Agency, Inc.
was responsible for 16.45% of all rental charges. The sublease between the
Company and The Saltzman/Kooper Agency, Inc. was on similar terms as the
Company's lease with its landlord. The arrangement terminated on May 31, 1995.
10
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
- ------ -----------------
Although the Company is involved in some routine litigation incidental to
the business of the Company, the Company is not a party to any litigation which
it considers will have a material adverse effect on its business or operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDER
- ------ --------------------------------------------------
Not applicable.
11
<PAGE>
PART II
-------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
- ------ STOCKHOLDER MATTERS.
------------------------------------------------------
(a) The Company's Class A Common Stock is traded in the over-the-counter
market. Since 1987, the Company's Class A Common Stock has been quoted on the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
under the symbol "ARINA". The following table sets forth the range of bid prices
for the Class A Common Stock during the periods indicated, and represents
inter-dealer prices, which do not include retail mark-ups and mark-downs, or any
commission to the broker-dealer, and may not necessarily represent actual
transactions.
For the Period Ended December 31, 1996
--------------------------------------
Class A
Quarter Range Common Stock
------- ----- ------------
First High 2 1/8
Low 2 1/8
For the Period Ended December 31, 1995
--------------------------------------
Class A
Quarter Range Common Stock
------- ----- ------------
First High $3 1/8
Low $3
Second High $3 1/8
Low $2 5/8
Third High $2 5/8
Low $2 1/4
Fourth High $2 3/8
Low $1 7/8
12
<PAGE>
For the Period Ended December 31, 1995
--------------------------------------
Class A
Quarter Range Common Stock
------- ----- ------------
First High $2 1/4
Low $2 1/8
Second High $2 5/8
Low $2
Third High $2 1/2
Low $2
Fourth High $3 1/4
Low $2 1/4
(b) Approximate Number of Equity Security Holders:
----------------------------------------------
The number of holders, including individual participants in security
position listings of registered clearing agencies, as of December 1995, was
approximately 360.
Approximate Number of
Title of Class Record Holders(1)
-------------- ----------------------
Class A Common Stock, $.01 par value 55
Class B Common Stock, $.01 par value 1
----------------------------
(1) Information is as of April 10, 1996.
(c) The Registrant has paid no dividends since its inception and does not
plan to pay dividends in the foreseeable future. See "Regulation".
ITEM 6. SELECTED FINANCIAL DATA
- ------ -----------------------
The following information should be read in conjunction with, and is
qualified in its entirety by reference to, the Consolidated Financial Statements
of the Company and the notes thereto appearing elsewhere in this Form 10-K.
13
<PAGE>
The financial statements of the Company have been prepared in accordance
with generally accepted accounting principles, which differ in certain respects
from those followed in financial statements prepared for regulatory authorities.
(See Note 12 to the accompanying Consolidated Financial Statements.)
14
<PAGE>
Item 6. CONSOLIDATED SELECTED FINANCIAL DATA
(In Thousands, Except Per Share Data)
-------------------------------------
<TABLE><CAPTION>
Years Ended December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Statement of operations data:
Revenue:
Gross premiums earned $ 26,092 $ 26,189 $ 24,219 $ 25,274 $ 20,505
========= ========= ========= ========= =========
Net premiums earned $ 13,046 $ 13,094 $ 21,329 $ 15,789 $ 10,253
Investment income 252 209 182 227 254
Realized investment gains (losses) - (3) 47 (108) -
Other income 333 280 130 204 111
Expenses:
Net underwriting expenses (8,464) (9,114) (16,979) (10,928) (7,174)
General and administrative expenses (5,016) (4,788) (3,728) (3,796) (2,963)
--------- --------- --------- --------- ---------
Income (loss) from continuing operations
before provision for income taxes 151 (322) 981 1,388 481
Provision (benefit) for income taxes
before tax benefit of net operating
loss carryforward 92 126 541 698 280
--------- --------- --------- --------- ---------
Net income (loss) from continuing
operations before tax benefit from
net operating loss carryforward 59 (448) 440 690 201
Tax benefit from net operating
loss carryforward - 207 - - -
--------- --------- --------- --------- ---------
Net income (loss) from continuing
operations 59 (241) 440 690 201
--------- --------- --------- --------- ---------
Discontinued operations:
Income from operations of disposed
segment (net of taxes of $4) 6 - 2 7 -
Gain on disposal of segment (net of
income taxes of $128) 192 - - - -
--------- --------- --------- --------- ---------
Net income from discontinued
operations 198 - 2 7 -
--------- --------- --------- --------- ---------
Net income (loss) $ 257 $ (241) $ 442 $ 697 $ 201
========= ========= ========= ========= =========
Per common share:
Primary:
Income (loss) from continuing operations $ 0.02 4 (0.11) $ 0.20 $ 0.31 $ 0.10
Income (loss) from discontinued operations $ 0.09 $ - $ - $ 0.01 $ -
Fully diluted:
Income (loss) from continuing operations $ 0.02 $ (0.11) $ 0.20 $ 0.31 $ 0.10
Income (loss) from discontinued operations $ 0.08 $ - $ - $ 0.01 $ -
Weighted average number of common shares:
Primary 2,251,400 2,229,900 2,254,147 2,221,900 1,978,000
========= ========= ========= ========= =========
Fully diluted 2,374,660 2,299,900 2,254,147 2,221,900 1,978,000
========= ========= ======== ========= =========
Balance sheet data:
Short-term investments $ - $ 208 $ 726 $ 492 $ 999
Cash and equivalents 6,777 2,725 2,355 2,870 2,253
Net premiums receivable 2,566 3,164 3,326 6,400 7,369
Total assets 15,074 11,919 10,457 13,495 14,207
Payable to reinsurer 161 80 62 97 3,880
Net claims liabilities 2,263 2,461 2,084 4,322 2,341
Net unearned premiums 664 679 480 937 497
Net commissions payable 1,304 1,319 440 1,219 1,344
Total stockholders' equity 6,436 6,011 6,268 5,709 4,957
</TABLE>
15
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------ CONDITION AND RESULTS OF OPERATIONS
--------------------------------------------------------
Results of Operations
- ---------------------
Year-ended December 31, 1995 vs. December 31, 1994
--------------------------------------------------
The Company's net income for the year 1995 was approximately $257,000,
compared with a net loss of approximately $241,000 for 1994. The Company's net
income of approximately $257,000 consisted of approximately $59,000 from
continuing operations and approximately $198,000 from discontinued operations.
Net income from discontinued operations represented the gain from Arista's sale
of its wholly-owned subsidiary, American, together with American's net income
from operations incurred prior to the sale. Income from continuing operations
before provision for income taxes for 1995 was approximately $151,000 as
compared with a loss, before provision for income taxes and tax benefit, of
approximately $321,000 for 1994.
Arista's gross premiums earned for the year 1995 were approximately $26.1
million as compared with approximately $26.2 million for 1994. This decrease
reflects a continuation of the net loss of covered lives and policyholders.
Arista's gross claims incurred for 1995 were approximately $16.6 million or
63.6% of gross premiums earned. For the year 1994, gross claims incurred were
$17.8 million or 67.8% of gross premiums earned. This reduction in claims
incurred and in the loss ratio emanated substantially from improved claims
management and underwriting techniques.
Consolidated investment income for 1995 was approximately $252,000,
representing an increase of $37,000 over 1994. The increase was due mainly to
slightly higher interest rates credited during 1995. In addition, Arista had
insignificant net realized and net unrealized investment losses for 1995 as
compared to a net realized investment loss for 1994 of approximately $3,000.
Other income, including income from TPA operations, was approximately
$333,000 as compared to approximately $279,000 for 1994. The principal reason
for this increase was the continuing income derived from Arista's agreement to
act as a TPA for another insurer's statutory disability benefits book of
business.
Arista's gross commissions incurred for 1995 were approximately $4.6
million or 17.7% of gross premiums earned. For the year 1994, gross commissions
incurred were approximately $4.2 million or 16.0% of gross premiums earned. This
increase was due in part to a larger portion of more recently issued policies
acquired from other insurers, requiring the payment of slightly higher average
commissions.
16
<PAGE>
The Consolidated general and administrative expenses increased from
approximately $4.8 million for the year 1994 to $5.0 million for the year 1995.
This change was mainly attributable to the amortization of the balance of the
intangible assets of American at the time of sale that had been incurred in
connection with the acquisition of American and to increases in salaries and
employee benefits, rent and reinsurance costs, offset by a reduction in
professional fees.
Year-ended December 31, 1994 vs. December 31, 1993
--------------------------------------------------
The Company's net loss for the year 1994 was approximately $241,000,
compared with net income of about $442,000 for 1993. For 1994 there was a tax
benefit from net operating loss carry forward of approximately $207,000. The
loss before provision for income taxes and net operating loss carryforward was
approximately $321,000 for the year 1994, as compared to income of approximately
$985,000 for 1993.
The principal reasons for the decrease in net income were a non-recurring
adjustment in the accrual for estimated due premiums, a strengthening of claim
reserves and significantly higher legal and administrative fees associated with
proposed transactions involving the acquisition of the Registrant's stock.
Arista's gross premiums earned for the year 1994 were approximately $26.2
million. This included a fourth quarter reduction due to adjustments in the
calculation of the estimated quarterly premiums receivable. Because premiums on
New York State statutory disability benefits insurance are principally collected
quarterly in arrears, there is lag time between the fiscal period and the actual
receipt of premiums. Therefore, Arista must estimate and then accrue the amount
of premiums earned during any fiscal period. During the first quarter of 1995,
it became increasingly apparent that Arista's estimate of premiums receivable,
especially associated with the acquisitions completed in 1994 including the
reinsurance assumed transaction entered into during the fourth quarter of 1994,
were initially overstated. Thus, an adjustment was required to properly reflect
actual premiums receivable.
Notwithstanding this adjustment, Arista's gross premiums increased from
approximately $24.2 million in 1993 to $26.2 million in 1994, an 8.1% change.
Arista's gross claims incurred for 1994 were $17.8 million or 67.8% of
gross premiums earned. For the year 1993, gross claims incurred were $15.9
million or 65.6% of gross premiums earned. The primary reason for the increase
in the loss ratio was the non-recurring adjustment in estimated premiums
receivable previously mentioned.
Consolidated investment income for 1994 was approximately $215,000,
representing an increase of $27,000 when compared with approximately $188,000
for 1993. This increase was due mainly to slightly higher interest rates
credited during 1994. In addition, Arista had realized investment losses for
1994 of approximately $3,000 as compared to realized investment gains of about
$47,000 for 1993.
17
<PAGE>
Other income, including income from TPA operations was approximately
$279,000 for 1994 as compared with approximately $130,000 for 1993. The
principal reason for the increase was attributable to an $88,000 additional
federal income tax net refund for the years 1987, 1990, 1991 and 1992, which was
in excess of the amount originally reserved, as well as approximately a $58,000
1993 federal income tax overpayment .
Arista's gross commissions incurred for each of 1994 and 1993 were 16.0% of
gross premiums earned. Arista's gross commissions for 1994 and 1993 were
approximately $4.2 million and $3.9 million, respectively.
Consolidated general and administrative expenses increased from
approximately $3.7 million in 1993 to approximately $4.8 million in 1994. The
reasons for this change were a substantial increase in legal fees above 1993
which were associated with proposed transactions involving the sale of the
Registrant as well as other increases in expenses for salaries, employee
benefits, allocated loss adjustment expenses, and other general and
administrative expenses, including additional acquisition costs.
LIQUIDITY AND CAPITAL RESOURCES
Retained earnings increased from $1,855,005 at December 31, 1994 to
$2,080,704 at December 31, 1995 as a result of the Company's operating income.
At present, management considers Arista's statutory capital and surplus of
approximately $6.4 million at December 31, 1995 sufficient to support its
current annual premium level, as well as providing capacity for additional
annual premiums of approximately $12.0 million pursuant to an infusion of $3.0
million through a surplus note transaction (See Note 4 to the accompanying
Consolidated Financial Statements).
Arista may pay dividends to the Registrant from its statutory earned
surplus pursuant to statutory restrictions imposed under the New York State
Insurance Law. The maximum amount of dividends that may be paid in any
twelve-month period without the prior approval of the New York State Insurance
Department is the lesser of adjusted net investment income or 10% of statutory
surplus as defined in the New York State Insurance Law. In 1996, 1994 and 1993,
Arista's Board of Directors authorized the payment of a dividend to the
Registrant in the amount of $111,654, $224,799 and $198,000, respectively. The
dividends were paid on April 11, 1996, May 16, 1994, and March 29, 1993. See
"Business-Regulation."
Management believes that neither Arista's premium rates nor claim costs
have materially changed due to inflation.
18
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ------ -------------------------------------------
The response to this item is submitted in a separate section of this Report
on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
- ------ ON ACCOUNTING AND FINANCIAL DISCLOSURE.
---------------------------------------------
Not applicable.
19
<PAGE>
PART III
--------
Information required to be included in Part III will be filed by amendment to
this Annual Report on Form 10-K within 120 days of the end of the Company's
fiscal year.
20
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- ------- ----------------------------------------------------------------
(a)(1) and (2) Financial Statements and Financial Statement
-----------------------------------------------------------
Schedules.
----------
Page
----
I. Financial Statements of the Registrant F-1
II. Financial Statement Schedules
A. Schedule I - Summary of Investments-
Other Than Investments in Related
Parties S-1
B. Schedule III - Condensed Financial
Information of Registrant S-2
Exhibit No.
- -----------
(a)(3) Exhibits.
----------------
3.1 -- Certificate of Incorporation of the Company (1)
3.2 -- By-Laws of the Company (1)
4.2 -- Form of Class A Common Stock Certificate (1)
4.5 -- Form of Class B Common Stock Certificate (1)
10.4 -- Incentive Stock Option Plan 1985, as supplemented (1)
10.5 -- Incentive Stock Option Plan 1986 (1)
10.6 -- Non-qualified Stock Option issued to Stanley S. Mandel (1)
10.7 -- Warrant issued to Bernard Kooper (1)
10.8 -- Lease between the Company and Hacienda Intercontinental Realty,
N.V. (1)
10.8.1 -- Lease dated November 29, 1990 between the Company and Hacienda
Intercontinental Realty, N.V. (2)
10.8.2 -- Letter dated December 7, 1992 from Williamson, Picket, Gross, Inc.
addressed to the Company, incorporated by reference to Exhibit
10.8.2 to the Company's Form 10-K for the year ended
December 31, 1992
10.9 -- Sublease between the Company and Arista (1)
21
<PAGE>
Exhibit No.
- -----------
10.9.1 -- Sublease dated January 1, 1991, between the Company and Arista (2)
10.11 -- Reinsurance Agreement with NRG Reinsurance Company, as amended (1)
10.11.1 -- Amendment to Reinsurance Agreement with NRG Reinsurance Company,
dated July 16, 1990 (2)
10.11.2 -- Reinsurance Agreement with NRG Reinsurance Company, dated
January 29, 1993, incorporated by reference to Exhibit 10.11.2 to
the Company's Form 10-K for the year ended December 31, 1992
10.11.3 -- Reinsurance Agreement with NRG America Life Reassurance Corporation,
effective October 1, 1993, incorporated by reference to Exhibit
10.11.3 to the Company's 10-K for the year ended December 31,
1993
10.12 -- Agreement for Statutory Disability Benefits General Agents (1)
10.12(a) -- Rider to Statutory Disability Benefits General Agents Agreement (1)
10.14 -- Lease of Additional Space (Room 1101) between the Company and
Hacienda Intercontinental Realty, N.V.(1)
10.15 -- Agreement between Arista Insurance Company and American
International Life Assurance Company of New York (1)
10.16 -- Sublease (Room 1101) between the Company and Arista (1)
10.17 -- Lease of Additional Space (Room 1201)between the Company and
Hacienda Intercontinental Realty, N.V. (1)
10.18 -- Sublease (Room 1201) between the Company and Arista, incorporated by
reference to Exhibit No. 1 to the Company's 10-K for the year
ended December 31, 1988
10.19 -- Agreement between Arista and First International Life Insurance
Company, incorporated by reference to Exhibit No. 2 to the
Company's 10-K for the year ended December 31, 1988.
10.21 -- Statutory Disability Benefits Administration Agreement Effective as
of October 1, 1991, between Arista and The North Atlantic Life
Insurance Company, incorporated by
22
<PAGE>
Exhibit No.
- -----------
reference to Exhibit 10.21 to the Company's Form 10-K for the
year ended December 31, 1992
10.22 -- Employment Agreement between the Company and Bernard Kooper
February 17, 1993, incorporated by reference to Exhibit 10.22
to the Company's 10-K for the year ended December 31, 1993
10.22.1 -- Amendment No. 1 to the Employment Agreement between the Company and
Bernard Kooper dated July 20, 1994 (3)
10.23 -- Employment Agreement between Arista and Stanley Mandel, dated
February 17, 1993, incorporated by reference to Ex- hibit 10.23
to the Company's 10-K for the year ended December 31, 1993
10.23.1 -- Amendment No. 1 to the Employment Agreement between Arista and
Stanley Mandel, dated July 20, 1994 (3)
10.24 -- Consulting Agreement between Arista and International Management
Consultants, dated May 1, 1993, incorpo rated by reference to
Exhibit 10.24 to the Company's 10-K for the year ended
December 31, 1993
10.25 -- Split-Dollar Insurance Agreement between Arista Investors Corp.,
Arlyne Kooper and Bernard Kooper, dated July 20, 1994 (3)
10.26 -- Split-Dollar Insurance Agreement between Arista, Stanley Mandel
and Joy Mandel, dated July 20, 1994 (3)
10.28 -- Collateral Assignment, dated July 20, 1994 (Joy Mandel)(3)
10.29 -- Collateral Assignment, dated July 20, 1994 (Bernard Kooper and
Arlyne Kooper) (3)
10.30 -- Lease Agreement, dated January 9, 1995 between the Company and
Hacienda Intercontinental Realty, N.V. (3)
10.30.1 -- Letter dated March 12, 1996 from the Company addressed to
Williamson, Picket, Gross, Inc. (4)
10.30.2 -- Letter dated March 13, 1996 from Williamson, Picket, Gross, Inc.
addressed to the Company (4)
23
<PAGE>
Exhibit No.
- -----------
10.31 -- Assumption Reinsurance Treaty, dated April 1, 1994 between the
Company and Aetna Life Insurance Company (3)
10.32 -- Reinsurance Treaty, dated October 1, 1995, between Arista and
Cologne Life Reinsurance Company (4)
10.32.1 -- Surplus Note Agreement, dated December 29, 1995, between Arista and
Cologne Life Underwriting Management Company (4)
10.32.2 -- Warrant issued to Cologne Life Underwriting Management Company (4)
10.33 -- Lease (Storage space #7) effective January 1, 1996 between the
Company and Hacienda Intercontinen- tal Realty, N.V. (4)
10.34 -- Sublease (Storage space #7) effective January 1, 1996 between the
Company and Arista (4)
10.35 -- Sublease effective June 1, 1995 between the Company and Arista (4)
10.36 -- Stock Purchase Agreement dated as of July 13, 1995 between Arista
and American Travellers Life Insurance Company (4)
21.1 -- List of Subsidiaries, incorporated by reference to Exhibit 21.1 to
the Company's 10-K for the year ended December 31, 1993
24.1 -- Powers of Attorney, incorporated by reference to Exhibit 25.1 to the
Company's Registration Statement on Form S-1 (File No. 33-20101),
dated February 11, 1988, as amended on May 6, 1988, declared
effective on May 16, 1988, and amended by Post-Effective
Amendment No. 1 dated April 27, 1989.
27 --Financial Data Schedule
_______________
(1) Filed as the same numbered Exhibit to the Company's
Registration Statement on Form S-1 (File No. 33-
20101) on February 11, 1988, as amended on May 6,
1988, declared effective on May 16, 1988, and amended
by Post-Effective Amendment No. 1 dated April 27,
1989, and incorporated herein by reference.
(2) Filed as same numbered Exhibit to the Company's Form
10-K for the year ended December 31, 1990, and incor-
porated herein by reference.
(3) Filed as same numbered Exhibits to the Company's Form
10-K for the year ended December 31, 1994, and incor-
porated herein by reference.
(4) Filed herewith.
24
<PAGE>
(b) Reports on Form 8-K
-------------------
None
25
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ARISTA INVESTORS CORP.
Dated: April 12, 1996 By:/s/ Bernard Kooper
-------------------------------------------
Bernard Kooper, President and
Chairman of the Board
(principal executive officer)
Dated: April 12, 1996 By:/s/ Susan J. Hall
-------------------------------------------
Susan J. Hall, Senior Vice President
and Treasurer (principal financial and
accounting officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Stanley S. Mandel
- ------------------------------ Executive Vice President April 12, 1996
Stanley S. Mandel and Director
/s/ Louis H. Saltzman
- ------------------------------ Secretary and Director April 12, 1996
Louis H. Saltzman
/s/ Richard P. Farkas
- ------------------------------ Director April 12, 1996
Richard P. Farkas
/s/ J. Martin Feinman
- ------------------------------ Director April 12, 1996
J. Martin Feinman
/s/ Noah Fischman
- ------------------------------ Director April 12, 1996
Noah Fischman
/s/ Daniel Glassman
- ------------------------------ Director April 12, 1996
Daniel Glassman
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SCHEDULES
- --------------------------------------------
INDEX TO FINANCIAL STATEMENTS
AND SCHEDULES
Page
----
Independent Auditors' Reports F-2
Financial Statements of the Registrant:
Consolidated Balance Sheets F-3-4
Consolidated Statements of Operations F-5-6
Consolidated Statements of Changes in
Stockholders' Equity F-7
Consolidated Statements of Cash Flows F-8-9
Notes to Consolidated Financial Statements F-10-31
Financial Statement Schedules of the Registrant:
Schedule I - Summary of Investments - Other
Than Investments in Related Parties S-1
Schedule III - Condensed Financial Information of Registrant S-2-4
Schedules VI, XVI XVIII and all other schedules are omitted since the required
information is not present or is not present in amounts sufficient to require
submission of the schedule, or because the information required is included in
the Consolidated Financial Statements and notes thereto.
F-1
<PAGE>
ROSEN SEYMOUR SHAPPS MARTIN & COMPANY
- --------------------------------------------------------------------------------
757 Third Avenue
New York, NY 10017-2049
(212) 303-1800
Fax: (212) 755-5600
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Arista Investors Corp.:
We have audited the accompanying consolidated balance sheets of Arista Investors
Corp. as of December 31, 1995 and 1994 and the related consolidated statements
of operations, changes in stockholders' equity, and cash flows for each of the
three years ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Arista Investors
Corp. at December 31, 1995 and 1994, and the consolidated results of its
operations and its cash flows for each of the three years ended December 31,
1995, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The financial statement schedules on
pages S-1 to S-4 of this Form 10-K are presented for purposes of complying with
the Securities and Exchange Commission's rules and are not a required part of
the basic financial statements. These schedules have been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly state in all material respects the financial data
required to be set forth therein.
ROSEN SEYMOUR SHAPSS MARTIN & COMPANY
New York, New York
March 20, 1996
F-2
<PAGE>
ARISTA INVESTORS CORP.
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
A S S E T S
-----------
1995 1994
------- ------
Investments (Notes 1 and 11):
Held-to-maturity securities:
Bonds and long-term U.S. Treasury obligations,
at amortized cost (market value $2,692,276
in 1995 and $2,398,728 in 1994) $2,654,939 $2,667,259
Short-term U.S. Treasury obligations at amortized
cost (market value $207,818 in 1994) - 207,818
Available-for-sale securities:
Redeemable preferred stocks, at market value
(amortized cost of $141,344 in 1995 and
$143,581 in 1994) 129,502 113,304
Trading securities, at market value (cost
of $1,279 in 1995 and 1994) 660 1,018
--------- ---------
Total investments 2,785,101 2,989,399
Cash and equivalents (Note 11) 6,777,328 2,724,864
Premiums receivable, net (Notes 1 and 10) 2,565,853 3,164,250
Deferred policy acquisition costs, net (Notes 1 and 6) 1,060,381 794,988
Intangible assets (Notes 1 and 13) - 385,053
Furniture and equipment, at cost, net of accumulated
depreciation of $661,552 in 1995 and $604,231 in
1994 (Note 1) 193,549 120,642
Prepaid and refundable income taxes 765,877 817,289
Other assets (Note 6) 926,114 922,550
--------- ---------
Total Assets $15,074,203 $11,919,035
========== ==========
(Continued)
F-3
<PAGE>
ARISTA INVESTORS CORP.
CONSOLIDATED BALANCE SHEETS
(Continued)
December 31, 1995 and 1994
<TABLE><CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
1995 1994
------- --------
<C> <C> <C>
Liabilities:
Payable to reinsurer (Note 10) $ 161,476 $ 80,393
Net claims liabilities (Notes 1 and 10) 2,263,158 2,460,723
Net unearned premiums (Notes 1 and 10) 664,105 679,183
Net commissions payable (Notes 3 and 10) 1,303,888 1,319,211
Accounts payable and accrued expenses 772,969 1,089,262
Deferred income taxes, net (Notes 1 and 9) 622,427 279,042
Surplus note payable, net (Note 4) 2,850,000 -
--------- ---------
Total liabilities 8,638,023 5,907,814
--------- ---------
Commitments and contingencies (Notes 3, 5 and 6)
Stockholders' equity (Notes 4, 7 and 8):
Class A common stock, $.01 par value; 9,950,000 shares
authorized, 1,940,600 shares issued 19,406 19,406
Class B common stock, $.01 par value; 50,000 shares
authorized, 47,400 shares issued and outstanding 474 474
Additional paid-in capital 4,193,354 4,193,354
Paid-in capital attributed to detachable warrant
(Note 4) 150,000 -
Retained earnings 2,111,528 1,855,005
Net unrealized loss on investment securities (11,842) (30,278)
--------- --------
6,462,920 6,037,961
Less 10,000 shares Class A common stock
held in treasury, at cost (26,740) (26,740)
-------- --------
Total stockholders' equity 6,436,180 6,011,221
--------- ---------
Total Liabilities w/ Stockholders equity $15,074,203 $11,919,035
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
ARISTA INVESTORS CORP.
<TABLE><CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Revenue (Notes 1, 3, and 14):
Gross premiums earned $26,091,714 $26,188,858 $24,218,510
Ceded premiums earned (Note 10) 13,045,857 13,094,429 2,889,594
---------- ----------- -----------
Net premiums earned 13,045,857 13,094,429 21,328,916
Net realized investment gains (losses) (Note 11) (137) (2,603) 47,142
Net unrealized investment loss (358) (269) -
Investment income (Note 11) 252,134 215,480 188,200
Other income 333,205 279,805 129,806
-------- --------- ----------
Total revenue 13,630,701 13,586,842 21,694,064
---------- ---------- ----------
Expenses:
Underwriting:
Gross claims incurred (Note 1) 16,588,801 17,752,700 15,892,986
Ceded claims incurred (Note 10) 8,294,400 8,876,350 2,084,000
--------- ---------- ----------
Net claims incurred 8,294,401 8,876,350 13,808,986
--------- --------- ----------
Gross commissions incurred (Note 3) 4,616,807 4,193,570 3,868,089
Ceded commissions incurred (Note 10) 4,447,545 3,956,192 698,344
--------- --------- ---------
Net commissions incurred 169,262 237,378 3,169,745
--------- --------- ---------
Total underwriting expenses 8,463,663 9,113,728 16,978,731
General and administrative expenses 5,015,558 4,794,201 3,730,621
--------- --------- ----------
Total expenses
13,479,221 13,907,929 20,709,352
---------- ---------- ----------
Net income (loss) from continuing
operations before provision for
income taxes 151,480 (321,087) 984,712
</TABLE>
(Continued)
F-5
<PAGE>
ARISTA INVESTORS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
------- ------- -------
Provision for income taxes before tax benefit
of net operating loss carryforward (Note 9) $ 92,900 $ 126,900 $ 543,200
--------- --------- ---------
Net income (loss) from continuing
operations before tax benefit from
net operating loss carryforward 58,850 (447,987) 441,512
Tax benefit from net operating loss
carryforward - 206,858 -
Net income (loss) from continuing
operations 58,580 (241,129) 441,512
------ --------- ---------
Discontinued operations:
Income from operations of disposed segment
(net of income taxes of $3,887) 5,643 - -
Gain on disposal of segment (Note 2)
(net of income taxes of $127,891) 192,300 - -
--------- --------- ---------
197,943 - -
--------- --------- ---------
Net income (loss) $ 256,523 $(241,129) $ 441,512
========= ========= =========
Net income (loss) per common share:
Primary:
Continuing operations $ 0.02 $ (0.11) $ 0.20
Discontinued operations 0.09 - -
--------- --------- ---------
$ 0.11 $ (0.11) $ 0.20
========= ========= =========
Fully diluted:
Continuing operations $ 0.02 $ (0.11) $ 0.20
Discontinued operations 0.08 - -
--------- --------- ---------
$ 0.10 $ (0.11) $ 0.20
========= ========= =========
Weighted average number of common shares:
Primary 2,251,400 2,229,900 2,254,147
========= ========= =========
Fully diluted 2,374,660 2,229,900 2,254,147
========= ========= =========
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
ARISTA INVESTORS CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1995, 1994 and 1993
Common Stock
--------------------------------------
Class A Class B
-------------------- ----------------
Number Par Number Par Additional
of value of value paid-in
shares $.01 shares $.01 capital
--------- ------- ------ ------ ----------
Balance - January 1, 1993 1,940,600 $19,406 47,400 $ 474 $4,193,354
Net income - - - - -
Net investment gains - - - - -
--------- ------- ------- ------- ---------
Balance - December 31, 1993 1,940,600 19,406 47,400 474 4,193,354
Net income - - - - -
Net investment gains - - - - -
--------- ------- ------- ------- ---------
Balance - December 31, 1994 1,940,600 19,406 47,400 474 4,193,354
Net income - - - - -
Net investment gains - - - - -
Issuance of surplus note
(Note 4) - - - - -
--------- ------- ------- ------- ---------
Balance - December 31, 1995 1,940,600 $19,406 47,400 $ 474 $4,193,354
========= ======= ======= ======= =========
<TABLE><CAPTION>
Paid-in
capital Class A
attributed Net common
to unrealized stock
Retained detachable loss on held in
earnings warrants investments treasury Total
---------- --------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
Balance - January 1, 1993 $1,654,622 $ - $(131,401) $(26,740) $5,709,715
Net income 441,512 - - - 441,512
Net investment gains - - 116,538 - 116,538
--------- --------- ---------- --------- ----------
Balance - December 31, 1993 2,096,134 - (14,863) (26,740) 6,267,765
Net income (241,129) - - - (241,129)
Net investment gains - - (15,415) - (15,415)
--------- --------- ---------- --------- ----------
Balance - December 31, 1994 1,855,005 - (30,278) (26,740) 6,011,221
Net income 256,523 - - - 256,523
Net investment gains - - 18,436 - 18,436
Issuance of surplus note
(Note 4) - 150,000 - - 150,000
--------- --------- ---------- --------- ----------
Balance - December 31, 1995 $2,111,528 $ 150,000 $ (11,842) $(26,740) $6,436,180
========== ========= ========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
<TABLE><CAPTION>
ARISTA INVESTORS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
------- ------ ------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 256,523 $(241,129) $ 441,512
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation 57,321 66,533 90,528
Amortization of deferred acquisition costs 323,202 266,833 128,742
Loss on sale of investments 137 - -
Amortization of intangible assets 248,957 189,865 141,600
Gain on sale of subsidiary (320,192) - -
Deferred income taxes 343,385 (206,858) 53,000
Unrealized loss on investments 358 - -
(Increase) decrease in operating assets
excluding effects of divestiture:
Premiums receivable, net 598,397 161,250 3,074,107
Prepaid and refundable income taxes 51,412 (554,442) (262,847)
Other assets 9,026 (194,243) (94,678)
Increase (decrease) in operating liabilities
excluding effects of divestiture:
Payable to reinsurer 81,083 18,122 (34,792)
Net claims liabilities (197,565) 376,723 (2,237,400)
Net unearned premiums (15,078) 198,798 (456,455)
Net commissions payable (15,323) 878,907 (778,297)
Accounts payable and accrued expenses (316,273) 453,072 (84,830)
Income taxes payable - - (57,957)
-------- -------- --------
Net cash provided by (used in)
operating activities 1,105,370 1,413,431 (77,767)
--------- --------- --------
Cash flows from investing activities:
Furniture and equipment acquired (130,228) (29,801) (74,830)
Proceeds from sales of investments 222,239 1,003,885 3,133,875
Purchases of investments - (1,189,774) (3,418,548)
Proceeds from sale of subsidiary 764,675 - -
Payments and costs associated with
acquired business (588,595) (827,774) (77,881)
Divestiture of subsidiary (320,997) - -
-------- -------- -------
Net cash used in investing activities (52,906) (1,043,464) (437,384)
------- ---------- --------
</TABLE>
(Continued)
F-8
<PAGE>
ARISTA INVESTORS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
------- ------ ------
Cash flows from financing activities:
Increase in surplus note payable (Note 4) $3,000,000 $ - $ -
Increase in note discount (Note 4) (150,000) - -
Proceeds attributed to stock warrants
(Note 4) 150,000 - -
--------- -------- --------
Net cash provided by financing
activities 3,000,000 - -
-------- -------- -------
Net increase (decrease) in cash
and equivalents 4,052,464 369,967 (515,151)
--------- ------- --------
Cash and equivalents:
Beginning of year 2,724,864 2,354,897 2,870,048
--------- -------- ---------
End of year $6,777,328 $2,724,864 $2,354,897
========== ========= =========
Supplemental cash flow disclosure:
Cash paid during the year for income taxes $ 327,231 $ 495,366 $ 959,550
========= ========= =========
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
1. ORGANIZATION, BASIS OF PRESENTATION AND
SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------
(a) Organization
------------
Arista Investors Corp. (the "Company") was incorporated in the State of New
York on September 28, 1978 and reincorporated in the State of Delaware in
October 1986. The Company is principally a holding company with respect to its
wholly-owned subsidiaries, Arista Insurance Company ("Arista"), The Collection
Group, Inc. ("Collection") and Arista Administrative Services, Inc.
("Administrative"). Arista was incorporated in the State of New York on May 21,
1979, was licensed on October 11, 1979 by the New York State Insurance
Department ("NYSID"). Arista's principal line of business is the writing of
disability insurance policies in New York State. Effective September 1, 1993
Arista amended its charter and license and now has the authority to write glass
insurance as well as disability insurance. Collection was incorporated in
August 1989 and commenced operations in July 1991. Collection's principal line
of business is to provide accounts receivable collection services to companies
including Arista. Effective December 31, 1991 Arista purchased all of the
outstanding shares of capital stock of American Accident and Health Insurance
Company ("American") (see Note 13). American was organized in April 1987 and
licensed by the NYSID on June 24, 1987 and is also authorized to write
disability insurance. Arista sold all of the outstanding shares of capital
stock of American in December 1995, which had been inactive since its
acquisition in 1991 (see Note 2). Administrative is an inactive company.
(b) Basis of Presentation
---------------------
The accompanying consolidated financial statements are prepared in
accordance with generally accepted accounting principles ("GAAP"). GAAP differs
from Statutory Accounting Principles ("SAP") used by insurance companies in
reporting to state regulatory and industry agencies as explained in Note 12.
(c) Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(d) Significant Accounting Policies
-------------------------------
Principles of Consolidation. The accompanying consolidated financial
---------------------------
statements include the accounts of the Company and its wholly-owned
subsidiaries, Arista, Collection, and Administrative. All significant
intercompany balances and transactions have been eliminated. Revenues and
expenses for the years ended December 31, 1994 and 1993 have been restated to
exclude American which was disposed of during 1995 (see Note 2).
(Continued)
F-10
<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
1. ORGANIZATION, BASIS OF PRESENTATION AND
SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------
(d) Significant Accounting Policies (Continued)
------------------------------------------
Revenue Recognition, Premiums Receivable and Claims Liabilities.
---------------------------------------------------------------
Premium revenue is recognized evenly over the term of the policy. Estimates of
premiums which have been earned but not reported are accrued since customers
generally report and pay such premiums after the earning period based on the
number of employees on their payroll during the period of coverage. Customer
payrolls are sensitive to the general business cycle, and sudden business
upturns or downturns do have significant impact upon the revenues the Company
receives. Such estimates are continually reviewed and updated by management,
and any resulting adjustments are reflected in current operating results.
Net unearned premiums represent that portion of premiums applicable to
the unexpired terms of policies in force.
Claims liabilities and claims adjustment expense accruals, which are
based on the estimated ultimate cost of settling claims, include estimates of
unreported claims and claims adjustment expenses based upon past experience,
modified for current trends. Such estimates are continually reviewed and
updated by management and any resulting adjustments are reflected in current
operating results.
Reinsurance. In the normal course of business, the Company seeks to
-----------
reduce the loss that may arise from events that cause unfavorable underwriting
results by reinsuring certain levels of risk with reinsurers. Amounts
recoverable from reinsurers are deducted from gross premiums earned in an amount
consistent with the Company's claims experience. Settlements are made quarterly
by net cash payments to reinsurer(s).
Furniture and Equipment. Furniture and equipment are carried at cost.
-----------------------
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. Depreciation expense for each of the years in the
three-year period ending December 31, 1995, was $57,321, $66,533 and $90,528,
respectively.
Investments. In 1993, the Company adopted SFAS 115, "Accounting for
-----------
Certain Investments in Debt and Equity Investments" (see Note 11). Pursuant to
the requirement of SFAS 115, the Company determines the appropriate
classification of its investments in debt and equity securities at the time of
purchase and reevaluates such determination at each balance sheet date. Debt
securities that the Company has the positive intent and ability to hold to
maturity are classified as "held-to-maturity securities" and reported at
amortized cost; debt and equity securities that are bought and held principally
(Continued)
F-11
<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
1. ORGANIZATION, BASIS OF PRESENTATION AND
SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------
(d) Significant Accounting Policies (Continued)
------------------------------------------
for the purpose of selling them in the near future are classified as "trading
securities," and reported at fair value, with unrealized gains and losses
included in earnings; debt and equity securities not classified as either
held-to-maturity securities or trading securities are classified as "available-
for-sale securities" and reported at fair value, with unrealized gains and
losses reported as a separate component of stockholders' equity.
Deferred Policy Acquisition Costs. Policy acquisition costs include
---------------------------------
fees paid and certain other costs in connection with acquiring new business.
These costs are deferred and charged to income over the future periods in which
the related premiums are earned.
Concentration of Credit Risk. Financial instruments that potentially
----------------------------
subject the Company to credit risk consist principally of premiums receivable
and reinsurance contracts. The Company grants credit terms to its customers in
the normal course of business. Credit risk with respect to these receivables is
considered minimal due to the Company's diverse customer base throughout the New
York area. As part of its ongoing control procedures, the Company monitors the
creditworthiness of its customers. Bad debts have been minimal.
Reinsurance contracts do not relieve the Company from its obligations
to policyholders. Failure of reinsurers to honor their obligations could result
in losses to the Company. The Company evaluates the financial condition of its
reinsurers and monitors concentrations of credit risk arising from activities to
minimize its exposure to significant losses from reinsurer default.
Fair Value of Financial Instruments. The carrying amounts and related
-----------------------------------
fair values of financial instruments at December 31, 1995 and 1994 are
summarized as follows:
<TABLE><CAPTION>
1995 1994
--------------------- --------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash and equivalents $6,777,328 $6,777,328 $2,724,864 $2,724,864
Investments:
Held-to-maturity securities 2,654,939 2,692,276 2,875,077 2,875,077
Available for sale securities 129,502 129,502 113,304 113,304
Trading securities 660 660 1,018 1,018
Premiums receivable 2,565,853 2,565,853 3,164,250 3,164,250
Payable to reinsurer (161,476) (161,476) ( 80,393) (80,393)
Net claims liabilities (2,263,158) (2,263,158) (2,460,723) (2,460,723)
Net unearned premiums (664,105) (664,105) (679,183) (679,183)
Surplus note payable (2,850,000) (2,850,000) - -
</TABLE>
(Continued)
F-12
<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
1. ORGANIZATION, BASIS OF PRESENTATION AND
SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------
(d) Significant Accounting Policies (Continued)
------------------------------------------
Income Taxes. The Company and its subsidiaries file a consolidated
------------
federal income tax return. Tax returns are prepared using Statutory Accounting
Principles ("SAP") (see Note 12). The Company adopted Statement of Financial
Accounting Standards ("SFAS") 109, "Accounting for Income Taxes" in 1993.
Deferred income taxes reflect the future tax consequences of differences between
the tax basis of assets and liabilities and their financial reporting amounts at
each year-end (see Note 9).
Net Income Per Share of Common Stock. Primary and fully diluted income
------------------------------------
per share of common stock (Class A and Class B) are computed on the weighted
average number of shares of common stock and common stock equivalents
outstanding during each year. However, common stock equivalents (incentive
stock options and stock warrants) are not included in the computation if their
inclusion would have an anti-dilutive effect on earnings per share.
Intangible Assets. Intangible assets consist of an insurance charter
-----------------
and a book of insurance. The cost of the book of insurance is being amortized
using the straight-line method over five years; the insurance charter is not
subject to amortization (see Note 13). The intangible assets were written-off
as a result of Arista's sale of its investment in American (Note 2).
Consolidated Statement of Cash Flows. For purposes of this statement,
------------------------------------
cash equivalents represents highly liquid financial instruments with a maturity
date of 3 months or less. At December 31, 1995 cash equivalents represent
certificates of deposits and money market accounts.
2. SALE OF SUBSIDIARY
------------------
In December 1995, Arista sold its investment in its wholly-owned
subsidiary, American, excluding its book of insurance, for $764,675 in cash.
The sale resulted in a pretax gain of $320,192. American was an inactive
company. Except for the effects of the gain, the sale did not have a
significant impact on the Company's operating results.
(Continued)
F-13
<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
3. TRANSACTIONS WITH RELATED PARTIES
---------------------------------
(a) Agents
------
Bernard Kooper ("Kooper"), Chairman of the Board of the Company and
Arista, and owner of 6.6% of the Company's outstanding Class A and 100% of the
Class B common stock, is one of the general agents under contract to Arista.
Kooper's agency, Bernard Kooper Life Agency, Inc. (the "Agency"), received
approximately $224,000, $244,000 and $258,000, in commissions from Arista during
1995, 1994 and 1993, respectively, for premiums on policies placed by the
Agency. Such premiums represented approximately 5.0%, 5.5% and 6.0% of the
consolidated gross premiums earned during the years ended December 31, 1995,
1994, and 1993, respectively. The Agency, in turn, paid approximately $143,000,
$177,000 and $185,000 during 1995, 1994 and 1993, respectively, to other
brokers, including approximately $23,000, $22,000 and $21,000, respectively, to
the Saltzman-Kooper Agency, the principal of which is a member of the Board of
Directors of Arista. Commissions payable to the related entities at December
31, 1995 and 1994 were $11,271 and $17,166, respectively.
(b) Employment Agreement
--------------------
The Company has an employment agreement with Kooper which expires in
February 2001 and calls for annual compensation of $150,000 (see Note 6a).
(c) Consulting Agreements
---------------------
Arista had a consulting agreement from May 1993 through September 1993
with a company principally owned by a director of both Arista and the Company
(see Note 6). Arista paid $5,000 under this agreement in 1993. In July 1993
Arista entered into an agreement with a consultant for specified services to be
performed for a fee of $500 per week. The consultant became a director of
Arista in October 1994 (see Note 6). Arista paid $26,000 under this agreement
in 1995 and 1994.
4. SURPLUS NOTE AND WARRANT
------------------------
On December 29, 1995 Arista issued a $3,000,000 surplus note (the "note") to
The Cologne Life Underwriting Management Company ("CLUMCO") in conjunction with
an assumption reinsurance agreement which became effective retroactive to
October 1, 1995 (see Note 10). The note bears interest at 10.5% per annum and
calls for interest only payable for the first and second year with the principal
to be repaid at one-eighth each year from the third to the tenth year, from the
date of closing. Repayments of principal and interest can only be made out of
any free and divisible surplus of Arista, and are subject to the approval of the
Superintendent of Insurance of the State of New York, if in his judgment, the
financial condition of Arista warrants such payments. If the principal and
interest are not repaid in full at the end of ten years, the note renews
annually for additional one-year terms until the principal and interest are
repaid.
(Continued)
F-14
<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
4. SURPLUS NOTE AND WARRANT (Continued)
-----------------------------------
In connection with the issuance of the note, and as an
inducement to enter into the transaction with Arista, the Company issued a
warrant certificate to purchase 150,000 shares of its Class A common stock to
CLUMCO. The certificate is exercisable after October 1996 at an exercise price
of $3.50 per share and expires in December 2005. The aggregate value of the
warrant which was independently valued at $1.00 per share, has been reflected
in stockholders' equity with the corresponding discount charged to surplus
note payable. The discount will be amortized to operations over the option
period of 10 years using the interest method.
In the event of liquidation of Arista, repayment of the balance of the
note and accrued interest thereon shall be paid out of any assets remaining
after the payment of all policy obligations and all other liabilities, but
before distribution of assets to stockholders. In the event of a sale of
Arista, the balance of the note and accrued interest thereon is to be paid on
demand prior to closing of such sale provided, however, that any such payment or
repayment shall be paid out of the free and divisible surplus of Arista and with
the prior approval of the Superintendent of Insurance of the State of New York,
if in his judgment, the financial condition of such insurer merits.
5. LEASE COMMITMENTS
-----------------
Pursuant to a sublease agreement between the Company and Arista, Arista
reimbursed the Company for 80.26% of the Company's lease obligations through May
31, 1995, and 97.90% thereafter. Under an agreement effective January 1, 1993
the Company paid monthly rent at an annual base rate of $141,696 until a new
lease was executed. On January 9, 1995, the Company entered into a five-year
lease for its new principal executive office space, effective June 1, 1995. The
Company rents additional office space on a month-to-month basis.
The minimum rental commitments under the operating leases for
office space for the five-year period ending May 31, 2000 are as follows:
1996 $199,005
1997 208,821
1998 218,635
1999 228,450
2000 96,892
--------
$951,803
========
The Company has the option to terminate the lease provided it
notifies the landlord ninety (90) days prior to termination date, and reimburses
the landlord for the unamortized portion of landlord's contribution for
leasehold improvements which amounted to approximately $200,000.
(Continued)
F-15
<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
5. LEASE COMMITMENTS (Continued)
----------------------------
Under a separate sublease, the Company was reimbursed by The Saltzman/
Kooper Agency, Inc., an affiliate controlled by a director of the Company, for
a percentage (16.45%) of the lease costs. The sublease arrangement expired May
31, 1995.
Aggregate rent expense, net of sublease income of approximately
$11,000, was $205,080 in 1995, $137,550 in 1994 and $137,638 in 1993.
In December 1990 American entered into a five-year noncancellable lease
agreement which called for an effective annual base rent of $44,866 plus
utilities and cost of living adjustments. In December 1991 American abandoned
this space and entered into an agreement which would release it from future
obligations under the lease, if certain conditions specified in the agreement
were met. Such conditions were never met.
6. COMMITMENTS AND CONTINGENCIES
-----------------------------
(a) Employment Agreements
---------------------
In July, 1994, Arista entered into a five-year employment agreement
with a vice president which calls for annual compensation of $125,000, annual
reimbursement of automobile expenses up to $6,000 and a nonaccountable expense
allowance of up to $3,600 per annum. In addition, Arista may, but is not
obligated to, pay a year-end bonus as may be determined by the Board of
Directors of Arista. The agreement provides that in event of termination of the
agreement by Arista, it would provide a severance pay in an amount ranging from
100% to 60% of annual compensation of the vice president. The agreement also
provides for a one-year covenant not to compete predicated upon the payment of
$75,000 by Arista.
Kooper and the Company have entered into an employment contract (the
"Kooper Agreement") which expires in February, 2001 and calls for an annual base
salary of $150,000.
Arista and Stanley Mandel have entered into an employment contract (the
"Mandel Agreement") which expires in February, 2001 and provides for an annual
base salary of $208,750 in each of the eight years plus annual reimbursement of
automobile expenses up to $9,000 and a nonaccountable expense allowance of up to
$5,000 per annum.
The Kooper and Mandel agreements provide that, in the event of a
consolidation, merger or sale of all or substantially all of the assets of the
Company or Arista, or the termination of either agreement, Kooper and/or Mandel,
respectively, would receive a lump sum payout, based upon a formula which will
range from one to two times annual compensation without triggering the
(Continued)
F-16
<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
6. COMMITMENTS AND CONTINGENCIES (Continued)
----------------------------------------
(a) Employment Agreements (Continued)
--------------------------------
excise tax payable in the event of an "excess parachute payment," as currently
defined in the Internal Revenue Code of 1986, as amended for the purpose of
calculating the maximum parachute payment. In addition, Arista and the Company
have also provided life insurance policies in which both Kooper and Mandel
participate. Under these agreements, the Company and Arista will pay the
premiums on these policies for a period of time specified in each agreement, on
behalf of Kooper and Mandel. The premium payments are treated as loans to both
Kooper and Mandel and are collateralized by the underlying policy cash values.
At December 31, 1995 and 1994 loans aggregating $129,060 and $78,915,
respectively, have been made and are included in other assets in the
accompanying balance sheet. Additionally, Kooper and Mandel have the right
to receive a lump sum retirement benefit equal to the amount of premium paid
by Arista and the Company attributable to the cumulative increase in cash
value of the policies during the specified period of the policies.
On December 31, 1991, Arista, in connection with a stock-purchase
agreement (see Note 13), entered into a consulting agreement with the past
president and former shareholder of American (the "consultant") whereby the
consultant would receive a monthly fee and a bonus if premiums earned by Arista
on American's former policies exceeded certain levels. During 1992 this
consulting agreement was terminated by Arista due to a breach of the stock-
purchase agreement and the consulting agreement by the consultant. In June
1992, Arista and American commenced litigation against the consultant seeking
declaratory and injunctive relief as well as damages. The consultant
counterclaimed against Arista and American alleging fraud and breach of the
consulting agreement. During 1993, a court granted in part Arista's motion for
declaratory and injunctive relief and recognized Arista as the sole shareholder
of American. The remainder of the litigation was settled in September 1993
under an agreement in which American, Arista and the consultant mutually
released and discharged each others affiliates and heirs. This agreement also
entitles the consultant or his estate to a fee determined by the financial
recovery of another action in which American is a plaintiff.
(b) Uninsured Risk
--------------
At December 31, 1995 and 1994 cash and equivalents on deposit with
financial institutions exceeded federal deposit insurance coverage by
approximately $2,551,107 and $2,085,500, respectively.
(c) Policy Acquisitions
-------------------
Arista incurred costs under various agreements it entered into while
acquiring the right to offer New York State statutory disability benefits
coverage to former policyholders of other disability carriers. The costs
included professional fees and finder's fees as well as fees paid directly
(Continued)
F-17
<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
6. COMMITMENTS AND CONTINGENCIES (Continued)
----------------------------------------
(c) Policy Acquisitions (Continued)
------------------------------
to these disability carriers for such right which have been capitalized and are
being amortized on the straight-line basis over five to seven years. Such costs
amounted to $588,595 and $827,774 for the years ended December 31, 1995 and
1994, respectively. Amortization of deferred acquisition costs charged to
operations for all acquisitions were $323,202, $266,833 and $128,742 for the
years ended December 31, 1995, 1994 and 1993, respectively. Accumulated
amortization was $1,205,751 and $882,549 at December 31, 1995 and 1994,
respectively.
American Life Insurance Company of New York. Effective July 1, 1993,
-------------------------------------------
Arista acquired the right to offer New York State statutory disability benefits
coverage to policyholders previously covered by The American Life Insurance
Company of New York under the terms of an assumption reinsurance treaty dated
August 30, 1993. In consideration for this right, Arista paid a fee based
on premiums earned and collected during the two-year period ended June 30, 1994.
During 1995 and 1994, Arista paid $14,383 and $48,054, respectively, and at
December 31, 1995 and 1994, $28 and $14,410 was accrued under this arrangement.
NALIC and Aetna. Effective January 1, 1994 Arista acquired the entire
---------------
book of New York State statutory disability benefit insurance previously written
by The North Atlantic Life Insurance Company of America ("NALIC") and on April
1, 1994, acquired under the terms of an assumption reinsurance treaty dated
February 10, 1994, the entire book of New York State statutory nonexperience-
rated state cash sickness disability insurance previously written by Aetna Life
Insurance Company ("Aetna"). NALIC, with whom Arista, through December 31,
1993, had a third party administrative agreement, received a fee based on
premiums paid and earned for the period January 1, 1994 through December 31,
1994. During 1995 and 1994 Arista paid $23,712 and $32,826, respectively, and
at December 31, 1995 and 1994, $30,637 was accrued under this arrangement.
Aetna received a fee based on annualized premiums in force at March 31, 1994 and
on premiums paid and earned for the period April 1, 1994 through March 31, 1995.
During 1995 and 1994 Arista paid $241,951 and $527,425, respectively, and at
December 31, 1995 and 1994, $7,102 and $212,422, respectively, was accrued under
this arrangement.
American Medical and Life. Effective October 1, 1994, Arista entered
-------------------------
into an indemnity reinsurance agreement with American Medical and Life Insurance
Company ("American Med") dated December 29, 1994 wherein Arista assumed the
book of New York State statutory disability insurance that was ceded by American
Med. In addition, effective January 1, 1995, Arista, through an assumption
reinsurance treaty, acquired the book of New York State statutory disability
insurance that had been previously ceded by American Med. American Med will
receive a fee based on premiums paid which were earned during the year ended
September 30, 1994 and on premiums paid which will be earned for the period
January 1, 1995 through June 30, 1996. During 1995 Arista paid acquisition
costs of $121,850 and at December 31, 1995 $124,492 was accrued under this
arrangement.
(Continued)
F-18
<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
6. COMMITMENTS AND CONTINGENCIES (Continued)
----------------------------------------
(c) Policy Acquisitions (Continued)
------------------------------
Effective October 1, 1995, in conjunction with a Surplus Note agreement
between Arista and CLUMCO (see Note 4), Arista and Cologne entered into a
quota-share assumption reinsurance agreement under which Arista will cede to
Cologne 50% of its New York State statutory disability insurance in force as of
October 1, 1995 as well as new business written or acquired after October 1,
1995.
(d) Other Matters
-------------
(1) Effective July 1, 1993, Arista entered into an agreement to perform
certain administrative services for The Guardian Life Insurance Company
of America. Fees for these services are determined in accordance with
a prescribed schedule based on the type of service provided. The
agreement will remain in effect until terminated by either party upon
180 days written notice.
(2) Effective January 1, 1995, Arista entered into an agreement to perform
certain administrative services for the United States Life Insurance
Company in the City of New York, a competitor in the business of
writing statutory disability benefits insurance. Fees for the services
are determined in accordance with a prescribed schedule based on the
type of service provided. The agreement will remain in effect until
terminated by either party upon 180 days written notice.
(3) Effective April 1, 1995, the Company entered into an agreement to
perform certain administrative services for the American Bankers
Insurance Company of Florida, a company in the business of writing
statutory disability benefits insurance. Fees for the services are
determined in accordance with a prescribed schedule based on the type
of service provided. The agreement will remain in effect until
terminated by either party upon 180 days written notice.
(e) Reinsurance
-----------
As discussed in Note 10, the Company is contingently liable with
respect to reinsurance ceded to Cologne which would become a liability to Arista
in the event of default of these companies under the reinsurance agreements.
Effective April 1, 1994 Arista entered into a reinsurance agreement
with Allianz Life Insurance Company of North America ("Allianz") wherein Arista
assumed Hawaii temporary disability insurance business that was ceded by
Allianz during 1994. This agreement was terminated on February 29, 1996.
Reinsurance transactions at December 31, 1995 and 1994 were as follows:
(Continued)
F-19
<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
6. COMMITMENTS AND CONTINGENCIES (Continued)
(e) Reinsurance (Continued)
-----------------------
Gross Ceded Net
Amount Amount Amount
------ ------ ------
1995
----
Premium receivable $ 345,000 $ 172,500 $ 172,500
Claims liabilities $ 160,000 $ 80,000 $ 80,000
Unearned premiums $ 27,360 $ 13,680 $ 13,680
1994
----
Premium receivable $ 324,000 $ 162,000 $ 162,000
Claims liabilities $ 111,200 $ 55,600 $ 55,600
Unearned premiums $ - $ - $ -
7. STOCK OPTIONS AND WARRANTS
--------------------------
Transactions involving stock options and warrants in each of the years
ended December 31, 1995, 1994 and 1993 are summarized below:
<TABLE><CAPTION>
Incentive Non-qualified
Stock Options Stock Options Warrants
-------------------- ------------------ --------------------
Aggregate Aggregate Aggregate
Shares amount(2) Shares amount(2) Shares(1) amount(2)
------ --------- ------ --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Options and warrants outstanding:
January 1, 1992 296,400 $ 467,098 17,600 $24,640 450,000 $919,000
1992 Expired - - - - (85,000) (408,000)
1992 Surrendered (1,000) (2,625) - - - -
------- ------- ------ ------- ------- -------
December 31, 1992, 1993
and 1994 295,400 464,473 17,600 24,640 365,000 511,000
1995 Issued (Note 4) - - - - 150,000 525,000
1995 Expired - - - - (10,000) (21,250)
------- ------ ------ ------- ------- -------
December 31, 1995 295,400 $464,473 17,600 $24,640 505,000 $1,014,750
======= ======= ====== ======= ======= =========
</TABLE>
(1) Warrants to purchase 365,000 shares of Class A Common Stock at an exercise
price of $1.40 per share were granted to Kooper in 1986. Warrants to
purchase 85,000 shares of Class A Common Stock at an exercise price of
$4.80 per share were granted to the underwriter in connection with the IPO.
Warrants to purchase 150,000 shares of Class A Common Stock at an exercise
price of $3.50 per share were granted to CLUMCO in December 1995, in
connection with the issuance of a Surplus Note (see (Note 4) and a new
reinsurance agreement with Arista (see Notes 6 and 10), effective
October 1995.
(Continued)
F-20
<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
7. STOCK OPTIONS AND WARRANTS (Continued)
-------------------------------------
(2) The product of the number of outstanding options and/or warrants
multiplied by the respective exercise prices.
There were no transactions during 1994 and 1993 with respect to
outstanding options and warrants.
1985 Plan
---------
The 1985 Incentive Stock Option Plan (the "1985 Plan") provides for the
grant of options, until May 14, 1995 (as amended), to purchase up to 200,000
shares of the Company's Class A common stock by key employees of the Company
upon terms and conditions determined by the Board of Directors of the Company
(the "Board"). Such options are exercisable over a five-year period, beginning
two years from the date of grant, subject to certain limited exceptions, at a
price not less than 100% of the fair market value at the time the option is
granted or, in the case of an incentive stock option granted to a stockholder
owning more than 10% of the shares of the Company's common stock at a price not
less than 110% of the fair market value at the date of grant. In June 1986, the
1985 Plan was amended to increase the exercise period to ten years in the case
of an incentive stock option granted to a stockholder owning less than 10% of
the Company's common stock, and to permit the exercise of options at the date of
grant.
1986 Plan
---------
The 1986 Incentive Stock Option Plan (the "1986 Plan") provides for the
grant of options, until June 15, 1996, to purchase up to 100,000 shares of the
Company's Class A common stock. The 1986 Plan is similar in all other respects
to the 1985 Plan, as amended.
Other
-----
During June 1986, the Board granted to Kooper a warrant to purchase
365,000 shares of Class A common stock at an exercise price of $1.40 per share,
exercisable over a ten-year period ending June 15, 1996. In connection
therewith, a non-qualified stock option previously granted to Kooper in 1978 was
surrendered. Also in June 1986, the Board granted to Mandel non-qualified
options to purchase 17,600 shares of Class A common stock at an exercise price
of $1.40 per share, exercisable within the ten-year period following the date of
grant. Such warrants expire in June 1996.
The Company granted CLUMCO a warrant exercisable commencing in October
1996, for the purchase of up to 150,000 shares of the Company's Class A common
stock at an exercise price of $3.50 per share, exercisable over a ten-year
period ending in December 2005, subject to certain conditions (see Note 4).
(Continued)
F-21
<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
8. STOCKHOLDERS' EQUITY
--------------------
All shares of Class A and Class B common stock issued have equal rights
and privileges except that the holder of Class B shares has the added right to
elect a majority of the Board. Additionally, the Class B common stock is
convertible at the option of the holder at any time, into an equal number of
shares of Class A common stock. All shares of Class B common stock automati-
cally convert into an equal number of shares of Class A common stock if Kooper
sells, transfers, or in any manner conveys, one or more shares of Class B common
stock, or upon his death, whichever is earlier.
In November 1987, the Company purchased 10,000 shares of Class A common
stock at a cost of $26,740, which are being held in treasury.
At December 31, 1995 and 1994, 865,400 and 678,000 shares,
respectively, of Class A common stock were reserved for conversion of Class B
common stock, and the exercise of the options and warrants.
In March 1993, Arista's Board authorized and paid a dividend to the
Company in the amount of $198,000. On March 9, 1994 Arista's Board authorized
the payment of a dividend to the Company in the amount of $215,945 and rescinded
such authorization in 1994. In May 1994, as authorized by Arista's Board,
Arista paid a dividend of $224,799 to the Company.
9. INCOME TAXES
------------
As discussed in Note 1, the Company adopted SFAS 109 in 1993 and
elected to apply the provisions retroactively to January 1, 1991. Accordingly,
beginning with the year ended December 31, 1993, all disclosures are in
accordance with SFAS 109. Under the provisions of SFAS 109, the Company elected
not to restate prior years' consolidated financial statements as the cumulative
effect of initial adoption in 1991 and all subsequent years was insignificant.
At December 31, 1995 and 1994 total deferred tax asset aggregated
$1,025,739 and $11,474, respectively, and total deferred tax liability aggregat-
ed $1,648,166 and $290,516, respectively, as follows:
1995 1994
-------- --------
Deferred tax asset:
Deferred acquisition costs $ - $ 11,474
Net commissions payable 122,879 -
Investment in securities 59,933 -
Reinsurance 834,062 -
Other 8,865 -
-------- --------
Total deferred tax asset
1,025,739 11,474
--------- --------
(Continued)
F-22
<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
9. INCOME TAXES (Continued)
-----------------------
1995 1994
---------- --------
Deferred tax liability:
Investment in securities $ 4,026 $ 80,640
Deferred acquisition costs 360,529 -
Claims liabilities 155,023 125,230
Intangible assets - 84,646
Reinsurance due 1,111,962 -
Other 16,626 -
---------- ----------
Total deferred tax liability
1,648,166 290,516
---------- ----------
Net deferred tax liability $ 622,427 $ 279,042
========== ==========
The following is a reconciliation of the statutory U.S. Federal
income tax rate to the effective tax rate as reflected in the accompanying
consolidated statements of operations:
<TABLE><CAPTION>
1995 1994 1993
-------------------- -------------------- ---------------------
Percentage Percentage Percentage
of pretax of pretax of pretax
Amount income Amount income Amount income
------- ---------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Income (loss) before income taxes from
continuing operations $ 151,480 $ (321,087) $ 984,712
======= ======== =======
Tax provision (benefit) at statutory rates $ 51,503 34.0 $ (109,140) (34.0) $ 334,802 34.0
Increase (decrease) in income taxes
resulting from:
Discontinued operations 131,778 87.0 - - - -
NOL carryforward - - (206,858) (64.4) - -
State franchise and local taxes,
net of federal benefit 41,397 27.3 236,038 73.5 179,242 18.2
Other - - - - 29,156 3.0
-------- ---- -------- ---- -------- ----
Income tax provision (benefit) $ 224,678 148.3 $ (79,960) (24.9) $ 543,200 55.2
========== ===== =========== ===== ========== ====
</TABLE>
(Continued)
F-23
<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
9. INCOME TAXES (Continued)
-----------------------
The deferred tax provision for the years ended December 31,
1995, 1994 and 1993 arise from the following timing differences:
1995 1994 1993
------- -------- --------
Business acquisition costs deferred for
financial statement purposes and
expensed currently for tax purposes $(372,006) $ 514,813 $ (18,756)
Net claims liabilities for statutory or tax
purposes in excess of net claims liabilities
for financial statement purposes (29,793) 136,295 58,156
Change in recording premiums receivable,
net of offsetting expenses - (820,964) 7,356
Net realized investment losses which are
not currently deductible for tax purposes 136,548 45,915 62,919
Amortization of intangible assets for
financial statement purposes 84,646 (82,917) (56,675)
Net commissions payable for financial state-
ments purposes in excess of net commis-
sions payable for tax purposes 122,879 - -
Other amounts per financial statement
purposes in excess of amount for tax
purposes (7,761) - -
Reinsurance recoverable and related commis-
sions and allowances for statutory for tax
purposes, not currently recognized for
financial statement purposes 834,062 - -
Reinsurance payable for statutory or tax
purposes, not currently deductible for
financial statement purposes
(1,111,962) - -
---------- --------- ---------
$(343,387) $(206,858) $ 53,000
========= ========= =========
(Continued)
F-24
<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
9. INCOME TAXES (Continued)
-----------------------
The provision for income taxes consists of the following at December 31,
1995, 1994, and 1993:
1995 1994 1993
------- -------- --------
Currently payable (benefit):
Federal $(147,061) $ - $ 218,600
State and local 90,000 126,900 271,600
-------- -------- --------
(57,061) 126,900 490,200
--------- --------- --------
Deferred tax asset:
January 1, (11,476) (43,242) -
December 31,
(1,025,739) (11,476) (43,242)
---------- --------- ---------
(1,014,263) 31,766 (43,242)
---------- --------- ----------
Deferred tax liability:
January 1, 290,516 529,142 432,900
December 31, 1,648,166 290,516 529,142
-------- --------- ---------
1,357,650 (238,626) 96,242
--------- -------- ---------
Net provision (benefit) $ 224,678 $ (79,960) $ 543,200
========= ========= =========
10. REINSURANCE
-----------
Effective October 1, 1992 Arista entered into a stop-loss
reinsurance agreement ("Agreement # 2") with Harbourton which provided for
Arista to cede 50% of its disability policies when its loss ratio was equal to
or greater than 75% up to but not exceeding 100% of earned premiums. Harbourton
was paid a fee based on earned premiums. The effects of this agreement are
reflected in the statement of operations for the year ended 1993.
Effective October 1, 1993, Arista entered into a new agreement
("Agreement # 3") with Harbourton whereby Arista agreed to cede by way of
reinsurance, a 50% quota share of Arista's liability with respect to New York
State disability benefits issued to policyholders. In 1993, 1994 and 1995
Harbourton received a fee based on premiums ceded. The agreement was terminated
on September 30, 1995.
(Continued)
F-25
<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
10. REINSURANCE (Continued)
----------------------
Effective October 1, 1995, Arista entered into a reinsurance
agreement with Cologne Life Reinsurance Company ("Cologne") (see Notes 4
and 6) whereby Arista will cede by way of reinsurance, a 50% quota share
participation in Arista's New York State statutory disability insurance, both
for business in force as of October 1, 1995 and for new business written or
acquired after October 1, 1995. The agreement calls for Arista to pay Cologne
its proportionate share of the gross premium written less a ceding commission
of 25%, which includes premium tax, less Cologne proportionate share of the
gross losses applicable to this business. The provisional commission will be
adjusted quarterly. Cologne will allow Arista an annual profit commission of
2% of annual gross earned premiums ceded to Cologne if a certain loss ratio
is achieved. At December 31, 1995 $111,783 was accrued by Arista under this
agreement. The agreement shall remain in force for an indefinite period,
subject to cancellation by Cologne upon 90 days notice and subject to
cancellation by Arista five years after full repayment of the surplus note
(Note 4) and upon 90 days notice.
Ceded transactions for the years ended December 31, 1995, 1994
and 1993 were as follows:
Gross Ceded Net
Amount Amount Amount
----------- --------- -------
1995
----
Premium receivable $5,131,705 $2,565,852 $2,565,853
Claims liabilities $4,526,315 $2,263,157 $2,263,158
Unearned premiums $1,328,210 $ 664,105 $ 664,105
1994
----
Premium receivable $6,328,500 $3,164,250 $3,164,250
Claims liabilities $4,921,446 $2,460,723 $2,460,723
Unearned premiums $1,358,365 $ 679,182 $ 679,183
1993
----
Premium receivable $6,651,000 $3,325,500 $3,325,500
Claims liabilities $4,168,000 $2,084,000 $2,084,000
Unearned premiums $ 960,770 $ 480,385 $ 480,385
A contingent liability exists with respect to reinsurance ceded
which would become a liability of Arista and the Company in the event that
Cologne is unable to meet the obligations assumed under the reinsurance
agreement.
(Continued)
F-26
<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
11. NET INVESTMENT INCOME
---------------------
Net unrealized gain on investments for the years ended 1995,
1994 and 1993 were as follows:
Source 1995 1994 1993
------------------------------ ------ ------ ------
Amount currently recognized as unrealized
gain (loss):
Equity securities $ - $ - $ -
Redeemable preferred stocks 18,436 (15,415) 16,805
------- ------- -------
18,436 (15,415) 16,805
------- ------- -------
Amount previously recognized as unrealized
loss now recognized as realized loss:
Redeemable preferred stocks - - 54,733
Bonds and long-term investments - - 45,000
------ ------ ------
- - 99,733
------ ------ ------
Net unrealized gain $18,436 $(15,415) $116,538
======= ======= =======
Arista maintains a custodial investment account pursuant to the
requirements of the NYSID. These investments have been included with bonds and
long-term U.S. Treasury obligations. At December 31, 1995 and 1994 the total
amortized cost and market value of the investments in this account were as
follows:
1995 1994
------------------------- ---------------------
Amortized Market Amortized Market
Cost Value Cost Value
----------- -------- ---------- ---------
Type of Security:
U.S. Treasuries $2,013,994 $2,049,991 $341,736 $313,399
========= ========== ======== ========
The following schedule reflects the respective maturity dates,
as at December 31, 1995:
Amortized Market
Cost Value
---------- ----------
Maturity Dates:
1997-2001 $534,887 $537,597
2002-2006 815,840 836,748
Subsequent to 2006 663,267 675,646
---------- ----------
$2,013,994 $2,049,991
=========== ==========
(Continued)
F-27
<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
11. NET INVESTMENT INCOME (Continued)
---------------------------------
Net investment income of the Company for the years ended 1995, 1994
and 1993 consists of the following:
Source 1995 1994 1993
--------------------------------- ---- ---- ----
Interest and dividends:
Bonds and long-term investments $ 174,156 $ 174,707 $ 147,538
Short-term investments 77,978 40,773 40,662
--------- --------- ---------
Total interest and dividends 252,134 215,480 188,200
Net realized investment gains (losses) (137) (2,603) 47,142
--------- --------- ---------
$ 251,997 $ 212,877 $ 235,342
========= ========= =========
The following schedule reflects the respective amortized costs, market
values, gross unrealized gains or losses and maturity dates of investment
securities, as applicable, as at December 31, 1995:
Amortized Market Unrealized
Cost Value Gain (Loss)
--------- ------ -----------
Type of security:
Equity security $ 1,279 $ 660 $ (619)
U.S. Treasuries 2,654,939 2,692,276 37,337
Other debt 141,344 129,502 (11,842)
----------- ----------- -----------
$ 2,797,562 $ 2,822,438 $ 24,876
=========== =========== ===========
Maturity dates:
1997-2001 $ 1,175,832 $ 1,179,882
2002-2006 815,840 836,748
Subsequent to 2006 805,890 805,808
----------- -----------
$ 2,797,562 $ 2,822,438
=========== ===========
(Continued)
F-28
<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
12. STATUTORY MATTERS
-----------------
The following summaries reconcile net stockholder's equity and
net income (loss) of Arista on the statutory basis of accounting ("SAP") with
the amount of such equity and net income included in the financial statements of
Arista prepared on the basis of generally accepted accounting principles for
each of the years ended December 31, 1995, 1994, and 1993:
<TABLE><CAPTION>
1995 1994 1993
------- -------- --------
<S> <C> <C> <C>
Capital and surplus reported for SAP purposes $6,432,629 $3,651,842 $4,139,450
Add (deduct):
Inclusion of nonadmitted assets 1,872,086 1,430,554 1,008,979
Surplus notes payable (2,850,000) - -
Deferred costs, net of tax 441,221 194,776 149,340
Claims reserves, net of tax 559,193 433,848 421,819
Intangible assets, net - 616,168 631,593
Unrealized depreciation on marketable
securities (16,038) (30,278) (14,863)
Other 79,361 209,094 190,319
Adjustment to fair value of net assets acquired - - (119,631)
Adjustment to premiums receivable, net of tax 533,443 (110,841) (46,492)
Prior period tax over accrual (360,883) (279,000) (279,000)
Asset valuation reserve - - -
Realized gain on investments, net of tax (33,853) (24,998) (29,054)
---------- ---------- ----------
Stockholder's equity reported in
Arista's financial statements $6,357,159 $6,091,165 $6,052,460
========== ========== ==========
Net income reported for SAP purposes $ 231,349 $ 159,502 $ 917,718
Add (deduct):
Deferred costs, net of tax 131,036 45,436 (28,105)
Other (48,427) (8,098) (174,325)
Claims reserves, net of tax (20,922) 12,029 87,144
Adjustment to premiums receivable,
net of tax 504,752 (64,349) 11,022
Realized loss on investments, net of tax - 4,055 840
Amortization of intangible asset,
net of tax (122,705) (7,318) (84,924)
Gain on sale of subsidiary, net of tax (76,404) - -
Income tax expense differences (210,152) 137,660 -
---------- ---------- ----------
Net income reported in Arista's
financial statements $ 388,527 $ 278,917 $ 729,370
========== ========== ==========
</TABLE>
(Continued)
F-29
<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
12. STATUTORY MATTERS (Continued)
----------------------------
Arista was in compliance with the NYSID minimum statutory capital and
surplus requirement of $300,000 at December 31, 1995, 1994 and 1993.
Under the New York State Insurance Law, Arista may pay dividends to the
Company only out of its statutory earned surplus. In addition, the maximum
amount of dividends that may be paid in any twelve-month period without
regulatory approval is the lesser of the adjusted net investment income or 10%
of its surplus. At December 31, 1995 Arista's statutory financial condition
allowed for the payment of dividends not exceeding $111,684. During 1994
Arista paid a dividend to the Company of $224,799. During 1993 Arista paid a
dividend to the Company of $198,000. At December 31, 1993 and 1992 the dividend
American could pay to Arista was de minimis.
13. BUSINESS ACQUISITION
--------------------
Stock Purchase Agreement
------------------------
On December 31, 1991, Arista entered into an agreement to acquire all
the outstanding shares of American Accident and Health Insurance Company. In
December 1991 the NYSID approved the assumption of American's disability
business by Arista and approved the acquisition of American in April 1992. The
acquisition has been accounted for as a purchase. The purchase price was
originally to consist of: (1) a $175,000 cash payment; (2) a credit against the
purchase price of $898,973, which represents American's statutory negative
capital and surplus balance as of December 31, 1991; and (3) an amount equal to
7-1/2% of earned premiums, as defined, on American policies renewed or rewritten
during the period commencing January 1, 1992 and ending December 31, 1993.
Arista had the right to make certain adjustments to the purchase price
for various income and expense items as mutually agreed upon. All payments due
under the agreement were to be held in escrow until the final purchase price was
determined, prior to October 15, 1994. Due to a shortfall in earned premiums
and certain agreed-upon adjustments to the purchase price no payments are due to
American. Expenses incurred by the Company in connection therewith have been
capitalized as part of the purchase price, and were written off in connection
with the sale of American as discussed in Note 2.
(Continued)
F-30
<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
13. BUSINESS ACQUISITION (Continued)
-------------------------------
Intangible Assets
-----------------
Under the purchase method of accounting, the allocation of the purchase
price to the fair value of American's assets and liabilities is required. Such
allocation was finalized in 1994 when the purchase price was finally determined.
The excess of fair value of net assets acquired over the purchase price of
$216,740 was allocated to reduce intangible assets. The intangible asset was
written off in connection with the sale of American (see Note 2). Amortization
expense was $248,957, $189,865, and $141,600, respectively, for the years ended
December 31, 1995, 1994 and 1993.
14. MAJOR CUSTOMERS
---------------
Premiums earned from a major customer accounted for approximately 10% of
total gross premiums earned for the year ended December 31, 1993.
15. SUBSEQUENT EVENTS
-----------------
In April 1996 Arista entered into an agreement with Insurance Company of
Greater New York and Greater New York Mutual Insurance Company (the "sellers")
to acquire the books of New York State statutory disability insurance. The
agreement provides that effective April 1, 1996, Arista will assume the sellers'
New York State statutory disability business and will issue assumption
certificates to the policyholders of the sellers. The agreement calls for
Arista to pay a fee based on premiums received which were earned during the year
ended March 31, 1997. The acquisition will be accounted for under the purchase
method of accounting.
F-31
<PAGE>
ARISTA INVESTORS CORP.
SCHEDULE I
SUMMARY OF INVESTMENTS - OTHER THAN
INVESTMENTS IN RELATED PARTIES
December 31, 1995
<TABLE><CAPTION>
Amount
Cost or shown in
amortized Market the balance
Type of Investment cost value sheet
- ------------------------------------------- -------- -------- -----------
Held-to-maturity securities:
- ---------------------------
<S> <C> <C> <C>
United States Government and government
agencies and authorities $2,654,939 $2,692,276 $2,654,939
Available for sale:
- ------------------
Redeemable preferred stocks 141,344 129,502 129,502
Trading security:
- ----------------
Common stock 1,279 660 660
--------- ---------- ----------
$2,797,562 $2,822,438 $2,785,101
========== ========== ==========
</TABLE>
S-1
<PAGE>
ARISTA INVESTORS CORP.
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(Parent Company Only)
BALANCE SHEETS
<TABLE><CAPTION>
December 31,
----------------------
1995 1994
---- ----
Assets
------
<S> <C> <C> <C>
Investment in subsidiaries $ 7,051,662 $ 6,092,271
Investments - 207,818
Cash and equivalents 305,657 260,745
Prepaid expenses and other assets 128,015 344,892
------------- --------------
Total assets $ 7,485,334 $ 6,905,726
============= ==============
Liabilities and Stockholders' Equity
------------------------------------
Liabilities:
Accounts payable and accrued expenses $ 156,789 $ 315,206
Due to subsidiaries, net 1,045,386 563,884
------------- --------------
Total liabilities 1,202,175 879,090
Stockholders' equity 6,283,159 6,026,636
------------- --------------
Total liabilities and stockholders' equity $ 7,485,334 $ 6,905,726
============= ==============
STATEMENTS OF OPERATIONS
Years Ended December 31,
------------------------------------------
1995 1994 1993
---- ---- ----
Investment income $ 17,883 $ 12,814 $ 11,629
Corporate and administrative expenses 464,340 737,580 406,979
------------- -------------- --------------
Loss from operations before income tax
benefits and equity in net income of
subsidiaries (446,457) (724,766) (395,350)
Income tax expense (benefits) (256,411) (204,720) (127,202)
------------- -------------- --------------
Loss from operations before equity in
net income of subsidiaries (702,868) (520,046) (268,148)
Equity in net income of subsidiaries 959,391 278,917 709,660
------------- -------------- --------------
Net income (loss) $ 256,523 $ (241,129) $ 441,512
============= ============== ==============
</TABLE>
The accompanying condensed financial information should be read in conjunction
with the consoli- dated financial statements and notes thereto of Arista
Investors Corp. at December 31, 1995 and 1994 and for each of the three years in
the period ended December 31, 1995.
S-2
<PAGE>
ARISTA INVESTORS CORP.
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(Parent Company Only)
(Continued)
STATEMENTS OF CASH FLOWS
<TABLE><CAPTION>
Years Ended December 31,
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $256,523 $(241,129) $441,512
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation 1,039 450 -
Equity in net income of subsidiaries (959,391) (278,917) (709,660)
Increase (decrease) in assets and liabilities:
Due to subsidiaries 481,502 293,547 13,892
Prepaid expenses and other assets 215,838 (185,845) (21,340)
Accounts payable and accrued expenses (158,417) 284,578 21,834
-------- --------- ---------
Net cash used in operating activities (162,906) (127,316) (253,762)
-------- --------- ---------
Cash flows from investing activities:
Purchases of investments, net - (207,818) -
Proceeds from sale of investments 207,818 12,604 -
Dividend from subsidiary - 224,799 198,000
-------- --------- ---------
Net cash provided by investing activities 207,818 29,585 198,000
-------- --------- ---------
Increase (decrease) in cash and equivalents 44,912 (97,731) (55,762)
Cash and equivalents:
Beginning of year 260,745 358,476 414,238
-------- --------- ---------
End of year $305,657 $260,745 $358,476
======== ========= ========
</TABLE>
The accompanying condensed financial information should be read in conjunction
with the consoli- dated financial statements and notes thereto of Arista
Investors Corp. at December 31, 1995 and 1994 and for each of the three years in
the period ended December 31, 1995.
S-3
<PAGE>
ARISTA INVESTORS CORP.
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(Parent Company Only)
(Continued)
NOTES TO CONDENSED FINANCIAL INFORMATION
December 31, 1995 and 1994
1. Basis of Presentation
Pursuant to the rules and regulations of the Securities and Exchange
Commission, the Condensed Financial Information of the Registrant does not
include all of the information and notes normally included with financial
statements prepared in accordance with generally accepted accounting
principles. It is therefore suggested that these condensed financial
statements be read in conjunction with the consolidated financial statements
and notes thereto included in the Company's Annual Report as referenced in
Form 10-K, Part II, Item 8, pages F-1 - F-31.
2. Cash Dividends from Subsidiary
The following dividends were paid to the Company by its subsidiary, Arista
Insurance
Company:
May 1994 $224,799
========
March 1993 $198,000
========
October 1992 $150,000
========
S-4
Exhibit 10.30.1
[LOGO]
Arista Investors Corp.
116 John Street
New York, N.Y. 10038
N.Y. (212) 964-2150
FAX: (212) 608-6473
UPSTATE: (800) 522-3114
March 12 1996
Mr. Edwin T. Broderick
Vice-President/General Counsel
Williamson, Picket, Gross, Inc.
85 John Street
New York, New York 10038
Dear Mr. Broderick:
This letter is to clarify your correspondence dated February 15, 1996.
The five (5) year lease term is for rental of Suites 1710-20 and the 18th floor.
--
It is understood that the term of the lease should be amended to read commencing
on the first day of June 1995 and ending on the thirty-first day of May 2000.
The amended term of the lease will affect paragraph 52 (Cancellation Option) as
well as paragraph 57 (Term of Existing Lease). In addition, the yearly
anniversary increase included in paragraph 51 (Rent) should be changed to
reflect the new dates of this lease. Therefore, the annual rates in paragraph
51 will increase commencing on June 1st of each applicable year.
Please confirm the terms of this agreement in writing.
Sincerely,
/s/ Susan J. Hall
Susan J. Hall, CLU
Treasurer
Exhibit 10.30.2
[WILLIAMSON, PICKET, GROSS, INC. LETTERHEAD]
March 13, 1996
Ms. Susan J. Hall, CLU
Treasurer
Arista Investors Corp.
116 John Street
New York, New York 10038
RE: Lease at 116 John Street
Dear Ms. Hall:
The purpose of this correspondence is to confirm in writing the terms of
this agreement as detailed in your letter of March 12, 1996.
We enjoy your continued tenancy.
Very truly yours,
/s/ Edwin T. Broderick
Edwin T. Broderick
General Counsel
ETB/cmm
Exhibit 10.32
The Cologne Life Re
REINSURANCE AGREEMENT # A018-1
between
ARISTA INSURANCE COMPANY
New York, New York
(hereinafter referred to as the "Company")
and
COLOGNE LIFE REINSURANCE COMPANY
Stamford, Connecticut
(hereinafter referred to as "The Cologne")
QUOTA SHARE
<PAGE>
The Cologne Life Re
CONTENTS
--------
PREAMBLE
ARTICLE I BASIS OF REINSURANCE
ARTICLE II TERM AND CANCELLATION
ARTICLE III REINSURER'S LIABILITY
ARTICLE IV SPECIAL ACCEPTANCES
ARTICLE V LOSSES
ARTICLE VI OFFSET
ARTICLE VII PREMIUMS AND ACCOUNTS
ARTICLE VIII PROFIT COMMISSION
ARTICLE IX KEY MAN INSURANCE
ARTICLE X TAXES
ARTICLE XI ACCESS TO COMPANY'S RECORDS
ARTICLE XII ARBITRATION
ARTICLE XIII INSOLVENCY
ARTICLE XIV CONTROL
ARTICLE XV MISCELLANEOUS
ARTICLE XVI EXECUTION
SCHEDULE A SURPLUS NOTE AGREEMENT
<PAGE>
The Cologne Life Re
PREAMBLE
--------
The Company and The Cologne mutually agree to reinsure New York State
Statutory Disability benefits insurance on the terms and conditions set out
below. The Agreement is solely between the Company and The Cologne, and
performance of the obligations of each party under this Agreement shall be
rendered solely to the other party. In no instance shall anyone other than
the Company or The Cologne have any rights under this Agreement. Any change
or modification to this Agreement shall be null and void unless made by
amendment to this Agreement and signed by both parties.
<PAGE>
The Cologne Life Re
ARTICLE I
BASIS OF REINSURANCE
--------------------
The Company agrees to cede and The Cologne agrees to accept by way of
reinsurance, on the terms and conditions hereinafter appearing, a 50% quota
share participation in the Company's New York Statutory Disability benefits
insurance, both for business in force as of the effective date of this
Agreement as well as for new business issued and or acquired after the
effective date of this Agreement.
<PAGE>
The Cologne Life Re
ARTICLE II
TERM AND CANCELLATION
---------------------
This Agreement shall take effect at 12:01 A.M. Eastern Standard Time on
October 1, 1995 and shall remain in force and effect for an indefinite
period but may be canceled, for in force business as well as new business,
at any time by The Cologne giving to the Company ninety (90) days prior
written notice. Five (5) years after the full repayment by the Company
under the Surplus Note Agreement (Schedule A), this Agreement may be
canceled, for in force business as well as new business, by the Company
giving to The Cologne ninety (90) days prior written notice. In the event
that the Company is sold and the surplus note is repaid, the Company will
exert its best effort to ensure that the reinsurance relationship with The
Cologne continues. Notwithstanding the foregoing, cancellation of this
Agreement may be as of an agreed date on any basis mutually acceptable to
the parties hereto.
Unless otherwise agreed to by the parties hereto, The Cologne shall
continue to participate in all reinsurance coming within the terms of this
Agreement with respect to policies of the Company having an inception date
prior to the date of cancellation of this Agreement.
It is agreed, however, that the reinsurance with respect to all policies in
force on the date of cancellation of this Agreement shall terminate as to
each such policy as of the stated anniversary date of each such policy next
subsequent to the date of cancellation of this Agreement, but in no event
shall coverage under any policy continue more than twelve (12) months
following such date of cancellation. The Cologne shall remain liable for
its share of losses which commenced prior to the termination of reinsurance
on such policies.
<PAGE>
The Cologne Life Re
ARTICLE III
REINSURER'S LIABILITY
---------------------
All reinsurance provided hereunder shall be subject to the same clauses,
rates, terms, conditions and endorsements as the Company's original
policies insofar as they relate to the business covered hereunder. This
Agreement and the reinsurance coverage provided hereunder is subject to the
Company's maintaining its existing underwriting and pricing criteria.
Changes or revisions in the Company's policies or rates shall not be made
without the approval of The Cologne.
The maximum issue limit per person under each policy shall be as mandated
by New York State, unless the Company has issued superstatutory coverage
under its regular rate manual underwriting guidelines.
<PAGE>
The Cologne Life Re
ARTICLE IV
SPECIAL ACCEPTANCES
-------------------
Any reinsurance that is specially accepted by The Cologne from the Company
shall be covered under this Agreement and subject to the terms hereof,
except as such terms shall be modified by such acceptance.
<PAGE>
The Cologne Life Re
ARTICLE V
LOSSES
------
Prompt notice shall be given to The Cologne of all losses which, in the
opinion of the Company, will result in a claim hereunder.
The Company agrees that it will investigate and settle, or defend all
losses arising under policies reinsured hereunder, provided they are within
the terms of this Agreement.
The Company's original policies shall be binding on The Cologne, who
agrees to pay all amounts for which it may be liable upon being furnished
by the Company with reasonable evidence of the amount due, including its
proportionate share of legal expenses directly allocated according to the
usual practice of the Company and paid in connection with the losses within
the scope of this Agreement. with the exclusion of loss adjustment expenses
and office expenses of the Company and salaries of its employees.
If The Cologne so chooses, it will discharge its liability by payment of
the full amount of reinsurance to the Company. In no event shall The
Cologne be liable for punitive damages, statutory penalties or compensatory
damages which are awarded against the Company as a result of an act,
omission or course of conduct committed by or on behalf of the Company in
connection with the insurance reinsured under this Agreement.
For purposes of this provision, the following definitions shall apply:
1. "Punitive damages" are those damages awarded as a penalty, the
amount of which is not governed, nor fixed by statute.
2. "Statutory penalties" are those amounts which are awarded to as
a penalty but fixed in amount by statute.
3. "Compensatory damages" are those amounts awarded to compensate
for the actual damages sustained, and are not awarded as a
penalty nor fixed in amount by statute.
<PAGE>
The Cologne Life Re
ARTICLE VI
OFFSET
------
The Company or The Cologne may offset any balance(s), from premiums,
commissions, losses or any other amount(s) due from one party to the other
under this Agreement or under any other Agreement heretofore or hereafter
entered into between the Company and The Cologne, whether acting as
assuming reinsurer or as ceding Company.
<PAGE>
The Cologne Life Re
ARTICLE VII
PREMIUMS AND ACCOUNTS
---------------------
The Company shall pay to The Cologne its proportionate share of the gross
premiums applying to the business ceded hereunder, less a provisional
commission equal to 25 % of the gross premiums ceded to The Cologne.
At the end of each calendar quarter the provisional ceding commission shall
be adjusted as follows:
a) During the first two years of the treaty, the adjusted
commission percentage to be calculated each quarter will be
equal to the percentage obtained by subtracting from 95% (94.75%
if there is an outstanding surplus note with The Cologne or one
of its affiliated companies) the loss ratio of the period from
the inception date of the Agreement until the end of such
calendar quarter.
i) This adjusted commission will not be less than the
provisional commission already allowed.
ii) The adjusted commission for any period reduced by
provisional commissions and adjusted commissions previously
allowed for the same period, will be an additional credit to
the Company.
b) After the second anniversary of the treaty, the adjusted
commission percentage to be calculated each quarter will be equal
to the percentage obtained by subtracting from 95% (94.75% if
there is an outstanding surplus note with The Cologne or one of
its affiliated companies) the loss ratio of the period covering
the most recent eight (8) calendar quarters.
i) This adjusted commission will not be less than the
provisional commission already allowed.
<PAGE>
The Cologne Life Re
ii) This adjusted commission will be applied to the earned
premium for the period covering the most recent eight (8)
calendar quarters. The adjusted commission for any period
reduced by provisional commission and adjusted commissions
previously allowed for the same period, will be an
additional credit to the Company.
c) The balance due either The Cologne or the Company shall be
payable promptly within 15 days of the report due date.
Within forty-five (45) days after each calendar quarter, the Company shall
submit the following:
a) The Cologne's earned premium.
b) The Cologne's Commission (provisional and adjusted).
c) The Cologne's Losses Incurred.
d) Net Amount due the Company/the Cologne.
Within ninety (90) days after each calendar year, the Company shall submit
the following:
a) Audited statutory and GAAP financial statements.
b) Certified Actuarial Opinion.
<PAGE>
The Cologne Life Re
ARTICLE VIII
PROFIT COMMISSION
-----------------
1. If there is not an outstanding surplus note with The Cologne or one of
its affiliated companies, The Cologne shall allow the Company an annual
profit commission of 2 % of the annual gross earned premium ceded to The
Cologne if the annual loss ratio is less than 70%. If the annual loss
ratio is more than 72 %, then no annual profit commission shall be
allowed the Company. If the annual loss ratio is less than 72% but more
than 70%, then a pro rata annual profit commission shall be allowed the
Company as follows:
(72% - annual loss ratio) x (annual gross premium ceded to The
Cologne)
2. If there is an outstanding surplus note with The Cologne or one of its
affiliated companies, The Cologne shall allow the Company an annual
profit commission of 2 % of the annual gross earned premium ceded to The
Cologne if the annual loss ratio is less than 69.75%. If the annual loss
ratio is more than 71.75 %, then no annual profit commission shall be
allowed the Company. If the annual loss ratio is less than 71.75% but
more than 69.75% then a pro rata annual profit commission shall be
allowed the Company, as follows:
-(71.75% - annual loss ratio) x (annual gross premium ceded to The
Cologne)
3. The annual loss ratio will be the annual incurred losses divided by
annual gross earned premium, where each agreement year begins on October
1 and ends on September 30 of the next calendar year. The Company shall
prepare and send to The Cologne a profit commission statement for each
agreement year as of the March 31 valuation date following the end of
each agreement year. This profit commission statement shall demonstrate
the calculation of the annual loss ratio and the related annual profit
commission, if any, for the prior agreement year, based on the losses
developed through March 31 (18 months from the inception of the prior
agreement year). Payment of the annual profit commission, if any, will
be made by The Cologne to the Company within thirty (30) days of receipt
of the profit commission statement. For example, the first agreement
year will run from October 1, 1995 through September 30, 1996. As of the
March 31, 1997 valuation date, the Company shall prepare a profit
commission statement and send it to
<PAGE>
The Cologne Life Re
The Cologne. The Cologne will then pay the Company the annual profit
commission, if any, within thirty (30) days of receipt of the profit
commission statement.
<PAGE>
The Cologne Life Re
ARTICLE IX
KEY MAN INSURANCE
-----------------
The Company shall maintain at its sole expense key man insurance on the
life of Stanley S. Mandel assigned to The Cologne and naming The Cologne as
beneficiary, in an amount not less than the current total amount due under
the Surplus Note Agreement (Schedule A), including principal and accrued
interest.
<PAGE>
The Cologne Life Re
ARTICLE X
TAXES
-----
In consideration of the terms under which this Agreement is issued, the
Company agrees to make no deduction in respect of the premium hereon when
making tax returns to the appropriate authorities, other than Income or
Profits tax returns. Should any taxes by levied on the Company in respect
of the premium hereon, the Company agrees to make no claim upon The Cologne
for reimbursement in respect of such taxes.
<PAGE>
The Cologne Life Re
ARTICLE XI
ACCESS TO COMPANY'S RECORDS
---------------------------
The Company shall place at the disposal of The Cologne, and The Cologne or
its authorized representative, shall have the right to inspect, at all
reasonable times during the term of this Agreement and thereafter, all
books, records, and papers of the Company pertaining to the reinsurance
provided hereunder.
<PAGE>
The Cologne Life Re
ARTICLE XII
ARBITRATION
-----------
All disputes and differences between the two Contracting parties on which
an amicable understanding cannot be reached shall be decided by arbitration
at the Home Office of the Company. The following procedure shall apply:
Upon written request of either party, each party shall choose an arbitrator
and the two chosen shall select a third arbitrator. If either party refuses
or neglects to appoint an arbitrator within thirty (30) days after receipt
of the written request for arbitration, the requesting party may appoint a
second arbitrator. Such notice of arbitration shall be sent certified or
registered mail. If the two arbitrators fail to agree on the selection of
the third arbitrator within thirty (30) days of their appointment, each of
them shall name three individuals, of whom the other shall decline two,
and the decision as to the third arbitrator shall be determined by drawing
lots.
All arbitrators shall be active or retired officers of life or reinsurance
companies and disinterested in the outcome of the arbitration. Each party
shall submit its case to the arbitrators within thirty (30) days of the
appointment of the third arbitrator.
The parties hereby waive all objections to the method of choosing the
arbitrators, it being the intention of both parties that all the
arbitrators be chosen from those submitted by the parties.
The arbitrators shall have the power to determine all procedural rules for
the holding of the arbitration including, but not limited to inspecting
documents, examination of witnesses and any other matter relating to the
conduct of the arbitration.
The arbitrators shall interpret this Agreement as an honorable engagement
and not merely as a legal obligation: they are relieved of all judicial
formalities and may abstain from following the strict rules of law. The
cost of the arbitration shall be borne by the losing party unless the
arbitrators decide otherwise.
<PAGE>
The Cologne Life Re
This Agreement shall be construed in accordance with the laws of the State
of Connecticut. The decision, in writing, of the majority of the
arbitrators, shall be final and binding upon both parties. Judgment may be
entered upon the final decision of the arbitrators in any court having
jurisdiction.
<PAGE>
The Cologne Life Re
ARTICLE XIII
INSOLVENCY
----------
All reinsurance under this agreement will be paid by The Cologne directly
to the Company, its liquidator, receiver or statutory successor, on the
basis of the liability of the Company under the policy or policies
reinsured without diminution because of the insolvency of the Company.
In the event of the insolvency of the Company, the liquidator, receiver or
statutory successor of the Company will give The Cologne written notice of
a pending claim against the Company on any reinsured policy within a
reasonable time after the claim is filed in the insolvency proceedings.
While the claim is pending The Cologne may investigate the claim and
interpose, at its own expense, in the proceedings where the claim is to be
adjudicated, any defense which it may deem available to the Company or its
liquidator, receiver or statutory successor. The expense incurred by The
Cologne will be charged, subject to court approval, against the Company as
an expense of liquidation to the extent of a proportionate share of the
benefit that accrues to the Company as a result of the defenses by The
Cologne. Where two or more reinsurers are involved and majority in interest
elect to defend the claim, the expense will be apportioned in accordance
with the terms of the reinsurance agreement as if the expense had been
incurred by the Company.
<PAGE>
The Cologne Life Re
ARTICLE XIV
CONTROL
-------
It is understood and agreed that if at any time during the continuance of
this Agreement, the Company shall be acquired or controlled by, or merged
with any other company, then acting upon actual or constructive notice
thereof, either party shall have the right forthwith to terminate this
Agreement by giving written notice by certified or registered mail, fixing
the date and time of termination thereof.
In the event of such termination, this Agreement shall remain in full force
and effect only with respect to all cessions made hereunder prior to this
Agreement's effective date and time of termination and covering the
Company's liability under policies enforce as of such termination date.
However, liability of The Cologne shall continue for not more than twelve
(12) months, at which time The Cologne shall be relieved of further
liability on inforce business and shall return to the Company the unearned
premium on such business, calculated on a pro rata basis less the
commission previously allowed.
<PAGE>
The Cologne Life Re
ARTICLE XV
MISCELLANEOUS
-------------
Assignment. Neither the Company nor the Cologne may assign this
- ----------
Agreement to another entity without the written consent of the other party.
Applicable Law. This Agreement shall be deemed to have been made and
- ---------------
shall be interpreted and construed pursuant to the laws of the State of
Connecticut. The parties agree to submit to the jurisdiction of any court
of competent jurisdiction in the State of Connecticut, to comply with all
requirements necessary to give such court jurisdiction, and to abide by the
final decision of such court or any Appellate Court in the event of appeal.
The parties hereby designate the State of Connecticut Department of
Insurance as its true and lawful attorney upon whom may be served any
lawful process and any action, suit, or proceeding instituted by or on
behalf of either party. This provision, however, is not intended to
conflict with or override the obligation of the parties to arbitrate in
accordance with Article XII.
Notices. All notices required or permitted to be given by any
- --------
party to this Agreement shall be in writing and sent to the other party
addressed as follows (or to such other addresses as the parties may
hereafter designate by notices given):
If to the Company: Arista Insurance Company
116 John Street
New York, New York 10038
Attention: Stanley S. Mandel
If to the Reinsurer: Cologne Life Reinsurance Company
P.O. Box 300
Stamford, Connecticut 06904-300
Attention: John P. Clark
<PAGE>
The Cologne Life Re
Multiple Counterparts. This Agreement may be executed in multiple
- ----------------------
counterparts.
Drafting. The terms of this Agreement shall not be construed in
- ---------
favor of or against any party on account of that party's participation or
lack of participation in the drafting of this Agreement.
Entire Agreement. This Agreement constitutes the entire agreement and
- -----------------
supersedes prior agreements, understandings and negotiations, oral and
written, between the parties with respect to the contents of this
Agreement. No waiver, amendment, or modification hereof shall be of any
force or effect unless it is in writing and signed by the parties and
making specific reference to this Agreement.
Separability of Provisions. If any provision of this Agreement is held to
- ---------------------------
be unenforceable by a tribunal having jurisdiction in the matter, then such
provision shall be enforced to the maximum extent possible and the
remaining provisions shall remain in full force and effect. Furthermore, in
lieu of such unenforceable provision, there shall be added automatically as
part of this Agreement a provision as similar in terms as may be possible
and enforceable.
<PAGE>
The Cologne Life Re
ARTICLE XVI
EXECUTION
---------
In witness of the above, this Agreement # A018-1 is signed in duplicate on
the dates and at the places indicated below with an effective date of
October 1, 1995.
Date: March 27, 1996 ARISTA INSURANCE COMPANY
----------------------------
Place: New York, New York By: /s/ Stanley S. Mandel
--------------------------- -----------------------
Witness: /s/ Madeline Toback Title: President
------------------------- --------------------
Date: February 7, 1996 THE COLOGNE LIFE REINSURANCE COMPANY
------------------------
Place: Stamford, Connecticut By: /s/ John P. Clark
----------------------- -------------------
Witness: /s/ Kathleen Goldbach Title: Senior Vice President-Group Operations
----------------------- ---------------------------------------
<PAGE>
The Cologne Life Re
SCHEDULE A
SEE ATTACHED SURPLUS NOTE AGREEMENT
-----------------------------------
<PAGE>
Exhibit 10.32.1
SURPLUS NOTE AGREEMENT
----------------------
THIS AGREEMENT, made and entered into this 29th day of December, 1995
by and between Cologne Life Underwriting Management Company ("CLUMCO"),
with its home office located at 30 Oak Street, Stamford, Connecticut 06905,
and Arista Insurance Company ("Arista"), with its home office located at
116 John Street, New York, New York 10038.
WITNESSETH:
WHEREAS, the Insurance Law of the State of New York, Section 1307
(Contingent liability for borrowings) provides that a domestic insurer may,
without pledging any of its assets, borrow funds pursuant to such Section
1307 upon the approval of the Superintendent of Insurance of the State of
New York.
NOW THEREFORE, in consideration of the promises and for other good and
valuable consideration, and intending to be legally bound hereby, CLUMCO
and Arista agree as follows:
1. Upon approval by the Superintendent of Insurance of the State of
New York, pursuant to Section 1307 of the New York Insurance Law, CLUMCO
agrees to advance to Arista, and Arista agrees to accept from CLUMCO, the
sum of $3.0 million.
<PAGE>
2. The rate of interest on this advance shall be 10.50 percent per
annum, compounded annually. Such rate of interest shall accrue on the
principal amount outstanding on this advance for the benefit of CLUMCO and
shall be repaid in cash to CLUMCO, subject to regulatory approval as
provided under Paragraph 3 hereof.
3. The advance made by CLUMCO to Arista under the terms of this
Agreement shall be repaid by Arista at one-eighth each year from the third
year to the tenth year, inclusive, from the date of closing; provided,
however, such repayment, and any accrued interest payable on the advance,
shall only be made out of free and divisible surplus of Arista and all such
amounts to be paid or repaid shall be subject to the prior approval of the
Superintendent of Insurance of the State of New York, if in his
(Superintendent) judgment, the financial condition of such insurer
warrants. If the principal and interest on the advance are not repaid in
full at the end of ten years, this Agreement shall continue to renew
annually for additional one-year terms until the principal and interest are
repaid in full.
4. The funds advanced, pursuant to this Agreement, shall not form a
part of Arista's legal liabilities and shall not be a basis of any setoff.
However, until repaid, all statements published or filed by Arista with the
Superintendent of Insurance of the State of New York shall show, as a
footnote, thereto, the amount of the advance and accrued interest thereon
then remaining unpaid.
<PAGE>
5. In the event of liquidation of Arista, repayment of the balance
of the advance and accrued interest then due and owing shall be paid to
CLUMCO out of any assets remaining after the payment of all policy
obligations and all other liabilities but before distribution of assets to
stockholders.
6. In the event of a sale of Arista, the balance of the advance and
accrued interest then due and payable shall be paid to CLUMCO on demand
prior to closing of such sale provided, however, that any such payment or
repayment shall be paid out of the free and divisible surplus of Arista and
with the prior approval of the Superintendent of Insurance of the State of
New York, if in his (Superintendent) judgment, the financial condition of
such insurer warrants.
7. This agreement, and all of its covenants and conditions, shall
be binding upon and insure to the benefit of CLUMCO and Arista and their
respective successors or assigns, and on request of CLUMCO, Arista shall
furnish to CLUMCO such note, loan, certificate or other evidence of this
indebtedness as CLUMCO may request.
8. The rights and obligations of the parties under this Agreement
only shall terminate upon repayment in full of the principal and accrued
interest on the advance made under the provisions of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused these presents to
be executed in their corporate names by their respective corporate officers
thereunto duly authorized and their corporate seals to be hereto affixed,
duly attested, as of the day and year first above written.
Attest: Cologne Life Underwriting Management Company
Lender
/s/ Kathleen L. Goldbach By: /s/ John P. Clark
- -------------------------- ------------------------------------------
Witness Vice President
Attest: Arista Insurance Company,
Borrower
/s/ Bernard Kooper By: /s/ Stanley Mandel
- ------------------------- ------------------------------------------
Witness President
Exhibit 10.32.2
NEITHER THE WARRANT REPRESENTED BY THIS WARRANT CERTIFICATE NOR THE SHARES OF
CLASS A COMMON STOCK ISSUABLE UPON THE EXERCISE OF SUCH WARRANT HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER APPLICABLE
STATE SECURITIES LAWS. THE WARRANT REPRESENTED BY THIS WARRANT CERTIFICATE HAS
BEEN ACQUIRED FOR INVESTMENT AND SHALL NOT BE SOLD, TRANSFERRED, ASSIGNED, OR
OTHERWISE DISPOSED OF, PLEDGED, HYPOTHECATED OR OTHERWISE ALIENATED IN ANY
MANNER EXCEPT AS PROVIDED IN SECTION 4.1 OF THIS WARRANT CERTIFICATE.
ARISTA INVESTORS CORP.
CLASS A COMMON STOCK WARRANT CERTIFICATE
VOID AFTER 5:00 P.M., New York, New York, on December 29, 2005
Representing a Warrant to Purchase
150,000 Shares of Class A Common
Stock
No. 96-1 April 12, 1996
This certifies that, FOR VALUE RECEIVED, The Cologne Life Underwriting
Management Company (the "Holder") is the owner of one common stock purchase
warrant (the "Warrant"). Subject to the terms and conditions set forth herein,
the Warrant entitles the Holder to purchase from Arista Investors Corp., a
Delaware corporation (the "Company"), 150,000 fully-paid, nonassessable shares
(the "Warrant Shares") of the Company's Class A common stock, $0.01 par value
per share (the "Class A Common Stock"), at any time during the period (the
"Exercise Period") commencing on October 12, 1996 (the "Commencement Date") and
ending on the Expiration Date (as defined below), except as provided herein, at
which time the Warrant shall expire and become void. The Exercise Price (as
defined below) and the number of Warrant Shares to be received upon the exercise
of the Warrant shall be adjusted, from time
<PAGE>
to time, as set forth below. As used herein, the term "Expiration Date" shall
mean 5:00 P.M., Eastern Daylight Savings Time, on December 29, 2005 unless the
Warrant terminates on such earlier date as provided for herein; provided,
however, if such day is a day on which Federal or State chartered banking
institutions located in the State of New York are authorized by law to close,
then the term "Expiration Date" shall mean 5:00 P.M., Eastern Daylight Savings
Time, on the next succeeding day which is not a day on which Federal or State
chartered banking institutions located in the State of New York are authorized
by law to close.
This warrant certificate (and any other warrant certificate(s) which may be
issued as provided for herein, each a "Warrant Certificate") and the Warrant
represented hereby are subject to the following additional terms and conditions:
1. Exercise of Warrant.
-------------------
1.1 Subject to the terms and conditions hereof, part or all of the Warrant
may be exercised for a minimum of 10,000 Warrant Shares, at any time and from
time to time, during the Exercise Period by presenting and surrendering the
Warrant Certificate representing the Warrant being exercised, with the
Subscription Form attached hereto duly executed, at the principal office of the
Company located at 116 John Street, New York, New York 10038, accompanied by
payment of $3.50 for each Warrant Share being purchased pursuant to the exercise
of the Warrant (the "Exercise Price"), in lawful money of the United States of
America, in cash or by certified or official bank check made payable to the
order of the Company.
1.2 Notwithstanding anything contained herein to the contrary, if at any
time during the Exercise Period, the Surplus Note, dated December 29, 1995, made
by the Company in
2
<PAGE>
favor of the Holder, shall be paid in full, including any accrued interest, then
the Holder shall, during the remainder of the Exercise Period, be entitled to
exercise the Warrant only to the extent of the percentage of the Warrant Shares
for which the Warrant is then exercisable as set forth in the schedule below:
Time of Full Payment Percentage of Warrant
of Surplus Note Shares Acquirable
- -------------------- -----------------
12/29/95 - 12/29/96 10%
12/29/96 - 12/29/97 20%
12/29/97 - 12/29/98 30%
12/29/98 - 12/29/99 40%
12/29/99 - 12/29/00 50%
12/29/00 - 12/29/01 60%
12/29/01 - 12/29/02 70%
12/29/02 - 12/29/03 80%
12/29/03 - 12/29/04 90%
12/29/04 - 12/29/05 100%
1.3 If less than all of the Warrant is exercised, then upon presentation
and surrender to the Company of the Warrant Certificate representing the Warrant
being exercised, the Company shall cancel such Warrant Certificate and shall
execute and deliver a new Warrant Certificate of like tenor, dated the date
hereof, evidencing the right of the Holder thereof to purchase the balance of
the Warrant Shares purchasable hereunder.
1.4 The Holder shall be deemed to be the holder of record of the Warrant
Shares at the time such shares are issued. Assuming that the Company's transfer
agent complies with the Company's instructions, (i) the Warrant Shares shall be
deemed to have been issued to the Holder upon the exercise of the Warrant and
(ii) certificates representing such Warrant Shares shall be delivered to the
Holder within ten (10) business days of the exercise date.
3
<PAGE>
2. Reservation of Shares.
---------------------
The Company, at all times until the expiration or termination of the
Warrant, shall reserve for issuance and/or delivery upon exercise of the Warrant
such number of Warrant Shares as shall be required for issuance or delivery upon
exercise of the Warrant.
3. Fractional Shares.
-----------------
No fractional Warrant Shares or scrip representing fractional Warrant
Shares shall be issued upon the exercise of the Warrant.
4. Exchange, Assignment, or Loss of Warrant.
----------------------------------------
4.1 Upon the assignee or transferee assuming and agreeing to timely pay,
perform and discharge all of the liabilities and obligations hereunder, the
Holder may, in its discretion, assign or transfer this Warrant and all rights
hereunder, in whole or in part, to its parent, Cologne Life Reinsurance Company,
or to any of Cologne Life Reinsurance Company's wholly-owned subsidiaries.
Such transfer shall be registered on the books of the Company to be maintained
for such purpose, upon surrender of this Warrant at the principal office of the
Company referred to in Section 1.1 together with a written assignment and
assumption of this Warrant, substantially in the form of Exhibit A hereto, duly
---------
executed by Holder or its agent or attorney, and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Except as set forth
herein, the Warrant shall not be sold, transferred, assigned or otherwise
disposed of, pledged, hypothecated or otherwise alienated in any manner.
4
<PAGE>
4.2 Upon receipt by the Board of Directors of the Company (the "Board of
Directors") of evidence satisfactory to it, in its reasonable discretion, of the
loss, theft, destruction, or mutilation of a Warrant Certificate, and (if
mutilated) upon surrender and cancellation of such Warrant Certificate, the
Board of Directors shall authorize the execution and delivery of a new Warrant
Certificate of like tenor and date, and any such lost, stolen, or destroyed
Warrant Certificate thereupon shall become void; provided, however, when
authorizing the issuance of a new Warrant Certificate, the Board of Directors
may, in its reasonable discretion and as a condition precedent to the issuance
of the new Warrant Certificate, require the Holder to give the Company a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Company with respect to the Warrant Certificate alleged to have been
lost, stolen or destroyed.
5. Rights of Holder; Limitations.
-----------------------------
Neither the Warrant nor the Warrant Certificate representing such Warrant
shall entitle the Holder to any rights of a stockholder of the Company, either
at law or in equity. With respect to any Warrant, the rights of the Holder is
limited to those expressed in the Warrant Certificate representing such Warrant
and are not enforceable against the Company, except to the extent set forth
herein.
6. Adjustments; Early Exercise.
---------------------------
6.1 The Warrant entitles the Holder to purchase 150,000 Warrant Shares,
subject to adjustment as follows:
5
<PAGE>
(a) If the outstanding Class A Common Stock shall at any time
following the date hereof be changed or exchanged by declaration of a stock
dividend or stock split, the number of Warrant Shares for which the Warrant is
then exercisable and the Exercise Price shall be appropriately and equitably
adjusted by the Company as follows:
The number of Warrant Shares for which this Warrant is
exercisable immediately after the occurrence of any such event shall
be adjusted to equal the number of shares of Common Stock which a
record holder of the same number of shares of Common Stock for which
this Warrant is exercisable immediately prior to the occurrence of
such event would own or be entitled to receive after the happening of
such event.
The Exercise Price shall be adjusted to equal the Exercise Price
hereunder immediately prior to any such adjustment multiplied by a
fraction, the numerator of which shall be the number of shares issued
and outstanding (including shares issuable upon the exercise of all
outstanding options and warrants) ("Fully Diluted Outstanding basis")
immediately prior to such adjustment and the denominator of which
shall be the number of shares issued and outstanding on a Fully
Diluted Outstanding basis immediately after such event.
(b) Except as provided for in Section 6.1 herein, there shall be no
adjustment in the number of Warrant Shares or the Exercise Price under any
circumstances, including, but
6
<PAGE>
not limited to: (i) the sale or issuance of any class of debt or equity
securities of the Company or debt or equity securities convertible into Class A
Common Stock, or (ii) the offering of rights, however characterized, to the
stockholders of the Company entitling them to subscribe for additional Class A
Common Stock or for debt or equity securities convertible into Class A Common
Stock.
6.2 In the event of any consolidation or merger of the Company with
another entity, or any sale, lease, or conveyance of all or substantially all of
the property, assets, business, and goodwill of the Company as an entity
(individually and collectively, the "Transaction"), the Holder shall continue to
have the right, but not the obligation, to exercise any or all of the Warrant as
provided in this Section 6.2. The Board of Directors shall deliver to the
Holder a notice of the Transaction (the "Transaction Notice") in such reports,
proxy statements or other communications that are sent to security holders by
the Company in regard to the Transaction no later than the time it is sent to
security holders. Upon receipt of the Transaction Notice, the Holder may, in
its sole discretion, exercise the Warrant, in whole or in part. The Warrant
Shares issued upon such exercise shall be subject to the terms and conditions of
the Transaction. On the third business day prior to the date on which the
security holders of the Company vote on the Transaction, the Board of Directors
may, in its sole discretion, terminate the Warrant.
7. Legend and Holder Representations Regarding The Securities Act of 1933.
----------------------------------------------------------------------
7.1 Each Warrant Share certificate shall contain the following legend on
the face thereof:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THE SHARES
7
<PAGE>
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THESE SHARES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN
OPINION OF THE COMPANY'S COUNSEL THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT. IN ADDITION, THE SHARES ARE SUBJECT TO THE TERMS AND
CONDITIONS OF THE WARRANT CERTIFICATE, DATED APRIL 12, 1996."
7.2 The Holder represents that the Warrant and the Warrant Shares are and
will be acquired for investment and not with a view to distribution or resale,
and shall indemnify and hold harmless the Company, its directors and officers,
and each other person, if any, who controls the Company, against any losses,
claims, damages, or liabilities, joint or several, to which the Company or any
such director, officer, or any such person may become subject under the
Securities Act of 1933, as amended ("Securities Act"), any state securities
laws, or any other statute or at common law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon the disposition of the Warrant and/or the Warrant Shares by such
Holder in violation of the above representation.
8. Representations and Warranties of the Company.
---------------------------------------------
The Company hereby represents and warrants to the Holder that as of the
date hereof:
8.1 Organization and Capitalization of the Company. The Company is a
----------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The authorized capital stock of the Company is Ten
Million (10,000,000) shares of common stock, consisting of Nine Million Nine
Hundred Fifty Thousand (9,950,000) shares of $0.01 par value, Class A Common
Stock, and Fifty Thousand (50,000) shares of $0.01 par value, Class
8
<PAGE>
B Common Stock. On the date hereof, 1,930,600 shares of Class A Common Stock
are issued and outstanding (not including 10,000 shares held in treasury) and
47,400 shares of Class B Common Stock are issued and outstanding.
8.2 Authority. The Company has full corporate power and authority to
---------
execute and deliver this Warrant Certificate and to perform all of its
obligations hereunder, and the execution, delivery and performance hereof have
been duly authorized by all necessary corporate action on its part. This
Warrant Certificate has been duly executed on behalf of the Company and
constitutes the legal, valid and binding obligation of the Company enforceable
in accordance with its terms.
8.3 No Legal Bar. The execution and delivery of this Warrant Certificate
------------
will not conflict with or result in a violation of the articles or certificate
of incorporation or By-Laws of the Company.
8.4 Validity of Shares. When issued upon the exercise of this Warrant in
------------------
accordance with the terms of this Warrant Certificate, the Warrant Shares will
have been validly issued, fully paid and nonassessable.
9. Bona Fide Offers for Warrant Shares.
-----------------------------------
9.1 If the Holder receives a bona fide offer from a third party ("Bona
Fide Offer"), (a third party does not include the Holder's parent, Cologne Life
Reinsurance Company, or any of Cologne Life Reinsurance Company's wholly-owned
subsidiaries), for the purchase of any or all of the Warrant Shares previously
issued to the Holder upon the exercise of the Warrant, the Holder shall promptly
give written notice ("Written Notification") to the Company of the
9
<PAGE>
Bona Fide Offer, which Written Notification shall fully set forth (i) all the
terms and conditions of the Bona Fide Offer, (ii) the name and address of the
proposed purchaser (the "Proposed Purchaser") and (iii) if the Proposed
Purchaser is other than an individual, the names and addresses and the amount of
shares of the Company beneficially owned by any entity or individual that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Proposed Purchaser.
9.2 Upon delivery of the Written Notification, the Company shall have
thirty (30) days (the "Election Period") to determine, in its sole discretion,
whether to purchase any or all of the Warrant Shares subject to the Bona Fide
Offer at the price and pursuant to all terms and conditions set forth in the
Written Notification. If the Company elects to purchase the Warrant Shares, it
shall give written notice to the Holder within the Election Period. If the
Company fails to give such notice, it shall be deemed to have elected not to
exercise its rights hereunder with respect to the Warrant Shares subject to the
Bona Fide Offer. Any failure or refusal of the Company to purchase Warrant
Shares subject to the Bona Fide Offer shall not terminate its right to purchase
Warrant Shares which are subject to any other Bona Fide Offer at a later time.
9.3 If the Company elects not to exercise its rights hereunder with
respect to the Warrant Shares subject to the Bona Fide Offer, then the Holder
may accept the Bona Fide Offer only on the terms set forth in the Written
Notification and must close such sale or disposition within forty-five (45) days
from the end of the Election Period; provided, however, the Holder shall not
make a sale or other disposition of the Warrant Shares at any price other than,
or on any terms other than, nor to any Proposed Purchaser other than those
specified in the Written Notification given by the Holder to the Company. If it
is proposed to consummate any such sale
10
<PAGE>
or other disposition at any price or on any other terms or to any person other
than specified in the Written Notification, than the provisions of this Section
9 shall be applicable thereto as if the Holder had received a new Bona Fide
Offer, for which the Holder must provide a new Written Notification and for
which the Company shall have a new Election Period.
9.4 The respective rights and obligations of the Holder and the Company
under this Section 9 shall survive the Expiration Date of the Warrant and shall
continue in full force and effect, as to the Holder and the Company.
10. Governing Law.
-------------
The Warrant is being issued in the State of New York, and shall be
construed in accordance with the laws of the State of New York applicable to
contracts executed and to be performed wholly within the State of New York.
11. Notice.
------
Notices and other communications to be given to a Holder shall be deemed to
have been sufficiently given if delivered by courier service guaranteeing
overnight delivery, charges prepaid, or by registered or certified mail, postage
prepaid, addressed to the Holder at 30 Oak Street, Stamford, Connecticut 06905,
Attention: Chief Financial Officer. Notices or other communications to the
Company shall be deemed to have been sufficiently given if delivered by courier
service guaranteeing overnight delivery, charges prepaid, or by registered or
certified mail, postage prepaid, to the Company at 116 John Street, New York,
New York 10038, Attention: Stanley Mandel, with a copy to Michael R. Reiner,
Esq., Morrison Cohen Singer &
11
<PAGE>
Weinstein, LLP, 750 Lexington Avenue, New York, New York 10022, or at such other
address as the Company shall designate by written notice to the Holder as herein
provided. Notice by registered or certified mail shall be deemed given two days
after being deposited in the United States mail, as hereinabove provided.
12. Notices to Holder of Corporate Action/Adjustments.
-------------------------------------------------
12.1 The Company shall furnish to the Holder a copy of all reports, proxy
statements and other communications sent to the Company's security holders no
later than the time it is sent to security holders.
12.2 Whenever the number of Warrant Shares for which the Warrant is
exercisable and the Exercise Price are adjusted pursuant to Section 6 of this
Warrant Certificate, the Company shall deliver, in a reasonable time after such
adjustment, a certificate executed by its chief financial officer that sets
forth in reasonable detail the event requiring the adjustment and the method by
which such adjustment was calculated.
13. No Impairment.
-------------
The Company shall take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant.
12
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Warrant Certificate as of
the 12 day of April, 1996.
ARISTA INVESTORS CORP.
By: /s/ Stanley S. Mandel
------------------------------------
Stanley S. Mandel
Executive Vice President
[SEAL]
ATTEST:
/s/ Madeline Toback
----------------------
13
<PAGE>
EXHIBIT A
---------
ASSIGNMENT AND ASSUMPTION
To Be Executed by the Holder and
Assignee in Order to Assign Warrant
FOR VALUE RECEIVED, __________________________hereby assigns and transfers unto:
("Assignee"),
- -----------------------------------------------------------
(Please insert name and Social Security or other Identifying Number)
,
- ------------------------------------------------------------------
(Please print or type address, including zip code)
of the Warrant represented by this Warrant Certificate,
- ---------------------
and hereby irrevocably constitutes and appoints Attorney to
----------------------
transfer this Warrant Certificate on the books of the Company, with full power
of substitution in the premises. Assignee hereby accepts such assignment and
transfer, and assumes and agrees to timely pay, perform and discharge all of the
obligations and liabilities under the Warrant of the Holder with respect to the
Warrant assigned and transferred by this instrument.
Dated:
------------------------------------------
X
------------------------------------------------
(Signature of Assignor)
- -------------------------------------------------
(Address)
- -------------------------------------------------
- -------------------------------------------------
(Taxpayer Identification Number)
X
------------------------------------------------
(Signature of Assignee)
- -------------------------------------------------
(Address)
- -------------------------------------------------
- -------------------------------------------------
(Taxpayer Identification Number)
14
<PAGE>
SUBSCRIPTION FORM
To Be Executed by the Holder
in Order to Exercise the Warrant
The undersigned Holder, The Cologne Life Underwriting Management Company,
hereby irrevocably elects to exercise the Warrant, exercisable to purchase up to
an aggregate of 150,000 shares of Class A Common Stock (the "Warrant Shares")
and represented by the Warrant Certificate, to purchase
-------------------
Warrant Shares, and requests that certificates for such securities shall be
issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
and be delivered to
- -----------------------------------------
- -----------------------------------------
- -----------------------------------------
[please print or type name and address]
and if such number of Warrant Shares shall not be all the Warrant Shares
evidence by this Warrant Certificate, that a new Warrant Certificate for the
balance of the Warrant Shares be issued in the name of, and delivered to, the
Holder at the address stated below.
Dated:
---------------------------
X
--------------------------------
- ---------------------------------
- ---------------------------------
Address
- ---------------------------------
Taxpayer Identification Number
15
Exhibit 10.33
WILLIAMSON, PICKET, GROSS, INC.
[LOGO] 85 JOHN STREET, NEW YORK, N.Y. 10038-2823
Real Estate TEL. (212) 233-6810 FAX: (212) 233-9193
UPTOWN OFFICE
555 FIFTH AVENUE
NEW YORK, N.Y. 10017
(212) 687-5353
Storage Space #7 Lease
Hacienda Intercontinental Realty, N.V., as Landlord (hereinafter
called "Landlord") of the Building known as 116 John Street New York, New
York 10038 (herein called the "Buildings") and Arista Investors Corp., as
Tenant (hereinafter called "Tenant") in the Building desire to enter into a
lease agreement for storage space in the Building according to the
following terms and conditions;
1) Tenant agrees to lease Storage Room #7 consisting of 1044 rentable
square feet in the 13th floor storage facility in the Building from the
Landlord on a month-to-month basis commencing January 1, 1996.
2) Tenant agrees to pay Landlord an annual rate of $10,440.00 or $870.00
per month during the term of this lease.
3) The parties agree that this agreement may be cancelled by either party
serving a thirty (30) days written Cancellation notice upon the other
party.
4) This agreement constitutes the entire agreement between the parties
concerning this storage space and cannot be amended or changed orally. Any
amendment or change to this agreement must be in writing and executed by
both parties:
Approved and Agreed to:
BY: Hacienda Intercontinental Realty, N.V.
(Landlord)
/s/ Date: 1/15/96
- ----------------------------------- ----------
Approved and Agreed to:
BY: Arista Investors Corp.
(Tenant)
/s/ Date: 12/8/95
- ----------------------------------- ----------
Exhibit 10.34
THIS SUBLEASE effective this 1st day of January 1996, between
ARISTA INVESTORS CORP., a New York corporation, having an office at 116
John Street, New York, New York (hereinafter called the "Sublessor"), and
ARISTA INSURANCE COMPANY, a New York corporation, having an office at 116
John Street, New York, New York (hereinafter called the "Subtenant");
W I T N E S S E T H:
- - - - - - - - - -
1. Premises. Sublessor hereby leases to Subtenant and
--------
Subtenant hereby hires from Sublessor, for a term commencing on January 1,
1996, on a month-to-month basis, storage room # 7 on the 13th floor in the
building known as 116 John Street, located in the City and State of New
York (hereinafter called the "Subleased Premises").
2. Underlying Lease. Sublessor and Subtenant agree that this
----------------
Sublease shall be subject (except as hereinafter expressly provided) to all
of the terms, covenants and conditions of the lease between HACIENDA
INTERCONTINENTAL REALTY, N.V., as landlord, and Sublessor, as tenant, dated
January 1, 1996 being hereinafter called the "Underlying Lease." A copy of
the Underlying Lease has been examined by and delivered to Subtenant. The
terms, covenants and conditions contained in the Underlying lease shall, as
between Sublessor and Subtenant constitute the terms, covenants and
conditions of this Sublease except to the extent that they are inapplicable
hereto or inconsistent herewith. Subtenant agrees to observe and perform
the terms, covenants and conditions on its Part to be observed and
performed hereunder as well as those applicable terms, covenants and
<PAGE>
conditions to be observed and performed by the tenant under the Underlying
Lease; and Subtenant agrees to be bound by the provisions of the Underlying
Lease; and the remedies of the parties as Sublessor and Subtenant hereunder
shall be the same as the respective remedies of the landlord and tenant
under the Underlying Lease. Nothing in this Sublease contained shall be
construed to create privity of estate or of contract between Subtenant and
Sublessor's landlord. Subtenant shall not do or permit to be done any act
or thing which will constitute a breach or violation of any of the terms,
covenants or conditions of the Underlying Lease. Subtenant will indemnify
and hold harmless Sublessor from and against all loss, costs, damages,
expenses and liability including reasonable attorney's fees, which the
Sublessor may incur or pay out by reason of any injuries to person or
property occurring in, on or about the Subleased Premises or by reason of
any breach or default hereunder on Subtenant's part, or by reason of any
work done in or to the Subleased Premises, or by reason of any breach or
default hereunder on Subtenant's part, or any act of negligence on the part
of the Subtenant; with regard, however, to any risk or happening not
covered by the insurance hereinafter provided for, Subtenant shall not be
liable to Sublessor for any loss arising out of Sublessor's own negligence
or willful misconduct. Subtenant shall in no case have any rights with respect
to the Subleased Premises greater than the Sublessor's rights under the
Underlying Lease, and Sublessor shall have no liability arising
- 2 -
<PAGE>
out of this Sublease for any matter whatsoever for which Sublessor does not
have coextensive rights, as tenant, against the landlord under the
Underlying Lease.
3. Rent. Notwithstanding anything to the contrary contained
----
herein or in the Underlying Lease, the parties agree as follows: Subtenant
shall pay to Sublessor 100.0% of the "fixed rent" and "additional rent"
paid by Sublessor to the Landlord as provided in the Underlying Lease,
throughout the term of this Sublease. "Fixed rent" and "additional rent"
shall be payable in accordance with the terms of the Underlying Lease one
(1) day before same is payable by the Sublessor to the Landlord. Said rent
shall be paid at the office of Sublessor or at such other place as
Sublessor may designate, without any offset or deduction whatsoever.
4. Use. Subtenant may use and occupy the Subleased Premises
---
for executive offices and for no other purpose.
5. No Representation. Subtenant represents that Subtenant is
-----------------
leasing the Subleased Premises "as is." In making and executing this
Sublease, Subtenant has not relied upon or been induced by any statements
or representations of any persons other than those, if any, set forth
expressly in this Sublease in respect of the physical condition of the
Subleased Premises or this transaction which might be pertinent in
considering the leasing of the Subleased Premises or the execution of this
Sublease. Subtenant has, on the contrary, relied solely on such
representations, if any, as are expressly made herein and on such
- 3 -
<PAGE>
investigations, examinations and inspections as Subtenant has chosen to
make or has made. Subtenant acknowledges than Sublessor has afforded
Subtenant the opportunity for full and complete investigation, examination
and inspection.
6. Sublessor's Reasonable Approval. Sublessor's refusal to
-------------------------------
consent or to approve any matter, whenever Sublessor's consent or approval
is required under this Sublease or under the Underlying Lease, shall be
deemed reasonable if, inter alia, Sublessor's landlord has refused to give
----- ----
such consent or approval.
7. Notices. Notices and other communications hereunder shall
-------
be in writing and shall be given or made by certified mail addressed to the
parties at their addresses set forth above, or at any other address which
either party may designate for such purpose by a written notice. Sublessor
shall attempt to give prompt notice of any default hereunder by telephone.
8. Time Limits. The time limits provided in Section 17 of the
-----------
Underlying Lease are changed for the purposes of this Sublease as follows:
3 days for a First Notice of non-payment of rent or any other default; 3
days to cure such default; and 1 day for a Second Notice (cancellation).
9. Termination of Underlying Lease.
-------------------------------
The parties agree that this agreement may be cancelled by either party
serving a thirty (30) days written cancellation notice upon the other party
to Subtenant by reason thereof.
- 4-
<PAGE>
10. Lease Valid. Sublessor represents that the Underlying Lease is
-----------
valid and in effect and that, except as provided therein, there are no
limitations or restrictions of any kind upon Sublessor's power and right to
make this Sublease.
11. Assignment and Subletting. Subtenant shall not assign
-------------------------
(whether by operation of law or otherwise}, mortgage, encumber this
Sublease or sublet the Subleased Premises without Sublessor's written
consent which may be unreasonably withheld, and, in any event, subject to
the provision of Sections 11 and 39 of the Underlying Lease. A transfer of
50% or more equity or voting control of Subtenant or any merger,
consolidation or reorganization of Subtenant shall be considered an
assignment.
12. Insurance. Subtenant shall maintain with respect to the
---------
Subleased Premises comprehensive general public liability insurance with
the minimum limits prescribed in the Underlying Lease, insuring Landlord
and Sublessor as well as Subtenant against bodily injury or death to
persons, and against damage to property as therein provided, and rent or
rental value insurance against loss of rent or rental value due to fire,
including extended coverage endorsement. Subtenant shall deliver a
certificate of such insurance to Sublessor simultaneously with the
execution of this Sublease. Such insurance policy shall be placed with a
company qualified to do business in the State of New York and approved by
Sublessor, and shall provide that it cannot be cancelled without at least
ten days' prior notice to
- 5 -
<PAGE>
Sublessor. Subtenant shall also maintain fire and extended coverage
insurance covering Subtenant's leasehold improvements, fixtures and
equipment in an amount equal to at least 80% of the full insurable value
thereof.
13. Security Deposit. Upon signing this Sublease, Subtenant
----------------
shall deposit with Sublessor the sum of $ 0.00 as security for the
performance by the Subtenant of all of the terms, covenants and conditions
of this Sublease on Subtenant's part to be performed. Sublessor shall have
the right, without notice to Subtenant and regardless of the exercise of
any other remedy Sublessor may have by reason of a default to apply any
part of said deposit to cure any default of Subtenant, and, if Sublessor
does so, Subtenant shall upon demand, deposit with Sublessor the amount so
applied so that Sublessor shall have the full deposit on hand at all times
during the term of this Sublease. The security deposited under this
Sublease shall not be assigned or encumbered by Subtenant without the prior
written consent of Sublessor, and any such assignment or encumbrance shall
be void.
14. Captions. The paragraph captions in this Sublease are used
--------
for convenience in finding the subject matters, and are not to be taken as
part of this instrument, or to be used in determining the intent of the
parties, or otherwise interpreting this instrument.
15. Successors and Assigns. This Sublease shall apply to and
----------------------
bind the respective successors and assigns of the parties
- 6 -
<PAGE>
hereto but this paragraph shall not be construed as a consent to any
assignment or subletting by the Subtenant.
16. No Broker. Subtenant represents to Sublessor that this
---------
Sublease was not brought about by any broker and that no negotiations
respect to the terms of this Sublease were conducted by or through any
broker. Subtenant agrees that should any claim be made for commissions, by
any other broker, by, through or on account of any acts of Subtenant or its
representative, Subtenant will hold Sublessor free and harmless from any
and all labilities and expenses in connection therewith.
IN WITNESS WHEREOF, this sublease has been duly executed on the
1st, day of February, 1996.
- --- --------
ARISTA INVESTORS CORP.
By: /s/ BERNARD KOOPER
--------------------------------
BERNARD KOOPER, PRESIDENT
ARISTA INSURANCE COMPANY
By: /s/ STANLEY MANDEL
--------------------------------
STANLEY MANDEL, PRESIDENT
Exhibit 10.35
THIS SUBLEASE effective this 1st day of June, 1995, between
ARISTA INVESTORS CORP., a New York corporation, having an office at 116
John Street, New York, New York (hereinafter called the "Sublessor"), and
ARISTA INSURANCE COMPANY, a New York corporation, having an office at 116
John Street, New York, New York (hereinafter called the "Subtenant");
W I T N E S S E T H:
- - - - - - - - - -
1. Premises. Sublessor hereby leases to Subtenant
--------
and Subtenant hereby hires from Sublessor, for a term commencing on June 1,
1995, and ending at the close of business on December 31, 1999, the entire
18th floor and Rooms 1710-20 in the building known as 116 John Street,
located in the City and State of New York (hereinafter called the
"Subleased Premises").
2. Underlying Lease. Sublessor and Subtenant agree that this
----------------
Sublease shall be subject (except as hereinafter expressly provided) to all
of the terms, covenants and conditions of the lease between HACIENDA
INTERCONTINENTAL REALTY, N.V., as landlord, and Sublessor, as tenant, dated
January 9, 1995, being hereinafter called the "Underlying Lease." A copy of
the Underlying Lease has been examined by and delivered to Subtenant. The
terms, covenants and conditions contained in the Underlying lease shall, as
between Sublessor and Subtenant constitute the terms, covenants and
conditions of this Sublease except to the extent that they are inapplicable
hereto or inconsistent herewith. Subtenant agrees to observe and perform
the terms, covenants and conditions on its part to be observed and
performed hereunder as well as those applicable terms, covenants and
<PAGE>
conditions to be observed and performed by the tenant under the
Underlying Lease; and Subtenant agrees to be bound by the provisions of
the Underlying Lease; and the remedies of the parties as Sublessor and
Subtenant hereunder shall be the same as the respective remedies of the
landlord and tenant under the Underlying Lease. Nothing in this Sublease
contained shall be construed to create privity of estate or of contract
between Subtenant and Sublessor's landlord. Subtenant shall not do or
permit to be done any act or thing which will constitute a breach or
violation of any of the terms, covenants or conditions of the Underlying
Lease. Subtenant will indemnify and hold harmless Sublessor from and
against all loss, costs, damages, expenses and liability including
reasonable attorney's fees, which the Sublessor may incur or pay out by
reason of any injuries to person or property occurring in, on or about
the Subleased Premises or by reason of any breach or default hereunder
on Subtenant's part, or by reason of any work done in or to the
Subleased Premises, or by reason of any breach or default hereunder on
Subtenant's part, or any act of negligence on the part of the Subtenant;
with regard, however, to any risk or happening not covered by the
insurance hereinafter provided for, Subtenant shall not be liable to
Sublessor for any loss arising out of Sublessor's own negligence or
willful misconduct. Subtenant shall in no case have any rights with
respect to the Subleased Premises greater than the Sublessor's rights
under the Underlying Lease, and Sublessor shall have no liability
arising
- 2 -
<PAGE>
out of this Sublease for any matter whatsoever for which Sublessor does
not have coextensive rights, as tenant, against the landlord under the
Underlying Lease.
3. Rent. Notwithstanding anything to the contrary contained
----
herein or in the Underlying Lease, the parties agree as follows:
Subtenant shall pay to Sublessor 97.9% of the "fixed rent" and
"additional rent" paid by Sublessor to the Landlord as provided in the
Underlying Lease, throughout the term of this Sublease. "Fixed rent" and
"additional rent" shall be payable in accordance with the terms of the
Underlying Lease one (1) day before same is payable by the Sublessor to
the Landlord. Said rent shall be paid at the office of Sublessor or at
such other place as Sublessor may designate, without any offset or
deduction whatsoever.
4. Use. Subtenant may use and occupy the Subleased Premises
---
for executive offices and for no other purpose.
5. No Representation. Subtenant represents that Subtenant
-----------------
is leasing the Subleased Premises "as is." In making and executing this
Sublease, Subtenant has not relied upon or been induced by any
statements or representations of any persons other than those, if any,
set forth expressly in this Sublease in respect of the physical
condition of the Subleased Premises or this transaction which might be
pertinent in considering the leasing of the Subleased Premises or the
execution of this Sublease. Subtenant has, on the contrary, relied
solely on such representations, if any, as are expressly made herein and
on such
- 3 -
<PAGE>
investigations, examinations and inspections as Subtenant has chosen to
make or has made. Subtenant acknowledges that Sublessor has afforded
Subtenant the opportunity for full and complete investigation,
examination and inspection.
6. Sublessor's Reasonable Approval. Sublessor's refusal to
-------------------------------
consent or to approve any matter, whenever Sublessor's consent or
approval is required under this Sublease or under the Underlying Lease,
shall be deemed reasonable if, inter alia, Sublessor's landlord has
----- ----
refused to give such consent or approval.
7. Notices. Notices and other communications hereunder
-------
shall be in writing and shall be given or made by certified mail
addressed to the parties at their addresses set forth above, or at any
other address which either party may designate for such purpose by a
written notice. Sublessor shall attempt to give prompt notice of any
default hereunder by telephone.
8. Time Limits. The time limits provided in Section 17 of
-----------
the Underlying Lease are changed for the purposes of this Sublease as
follows: 3 days for a First Notice of non-payment of rent or any other
default; 3 days to cure such default; and 1 day for a Second Notice
(cancellation).
9. Termination of Underlying Lease. If for any reason the
-------------------------------
term of the Underlying Lease shall be terminated prior to the expiration
date of this Sublease, this Sublease shall thereupon be terminated and
Sublessor shall not be liable to
- 4 -
<PAGE>
Subtenant by reason thereof.
10. Lease Valid. Sublessor represents that the Underlying
-----------
Lease is valid and in effect and that, except as provided therein, there
are no limitations or restrictions of any kind upon Sublessor's power
and right to make this Sublease.
11. Assignment and Subletting. Subtenant shall not assign
-------------------------
(whether by operation of law or otherwise), mortgage, encumber this
Sublease or sublet the Subleased Premises without Sublessor's written
consent which may be unreasonably withheld, and, in any event, subject
to the provision of Sections 11 and 39 of the Underlying Lease. A
transfer of 50% or more equity or voting control of Subtenant or any
merger, consolidation or reorganization of Subtenant shall be considered
an assignment.
12. Insurance. Subtenant shall maintain with respect to the
---------
Subleased Premises comprehensive general public liability insurance with
the minimum limits prescribed in the Underlying Lease, insuring Landlord
and Sublessor as well as Subtenant against bodily injury or death to
persons, and against damage to property as therein provided, and rent or
rental value insurance against loss of rent or rental value due to fire,
including extended coverage endorsement. Subtenant shall deliver a
certificate of such insurance to Sublessor simultaneously with the
execution of this Sublease. Such insurance policy shall be placed with a
company qualified to do business in the State of New York and approved
by Sublessor, and shall provide that it cannot be cancelled without at
least ten days' prior notice to
- 5 -
<PAGE>
Sublessor. Subtenant shall also maintain fire and extended coverage
insurance covering Subtenant's leasehold improvements, fixtures and
equipment in an amount equal to at least 80% of the full insurable value
thereof.
13. Security Deposit. Upon signing this Sublease, Subtenant
----------------
shall deposit with Sublessor the sum of $18,128.38 as security for the
performance by the Subtenant of all of the terms, covenants and
conditions of this Sublease on Subtenant's part to be performed.
Sublessor shall have the right, without notice to Subtenant and
regardless of the exercise of any other remedy Sublessor may have by
reason of a default to apply any part of said deposit to cure any
default of Subtenant, and, if Sublessor does so, Subtenant shall upon
demand, deposit with Sublessor the amount so applied so that Sublessor
shall have the full deposit on hand at all times during the term of this
Sublease. The security deposited under this Sublease shall not be
assigned or encumbered by Subtenant without the prior written consent of
Sublessor, and any such assignment or encumbrance shall be void.
14. Captions. The paragraph captions in this Sublease are
--------
used for convenience in finding the subject matters, and are not to be
taken as part of this instrument, or to be used in determining the
intent of the parties, or otherwise interpreting this instrument.
15. Successors and Assigns. This Sublease shall apply to and
----------------------
bind the respective successors and assigns or the parties
- 6 -
<PAGE>
hereto but this paragraph shall not he construed as a consent to any
assignment or subletting by the Subtenant.
16. No Broker. Subtenant represents to Sublessor that this
---------
Sublease was not brought about by any broker and that no negotiations
with respect to the terms of this Sublease were conducted by or through
any broker. Subtenant agrees that should any claim be made for
commissions, by any other broker, by, through or on account of any acts
of Subtenant or its representatives, Subtenant will hold Sublessor free
and harmless from any and all liabilities and expenses in connection
therewith.
17. Termination of Prior Subleases. Upon the execution of
------------------------------
this Sublease, the sublease between Sublessor and Subtenant for Room
1101, 1106/20 and Room 1201, dated January 1, 1991
shall be terminated.
IN WITNESS WHEREOF, this sublease has been duly executed on
the 29th day of June, 1995.
---- ----
ARISTA INVESTORS CORP.
By: /s/ BERNARD KOOPER
-------------------------------
BERNARD KOOPER, PRESIDENT
ARISTA INSURANCE COMPANY
By: /s/ STANLEY MANDEL
-------------------------------
STANLEY MANDEL, PRESIDENT
<PAGE>
Exhibit 10.36
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
DATED AS OF JULY 13, 1995
Between
AMERICAN TRAVELLERS LIFE INSURANCE COMPANY and
ARISTA INSURANCE COMPANY
With Respect to all of the
Outstanding Capital Shares of Stock of
AMERICAN ACCIDENT AND HEALTH INSURANCE COMPANY
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page
ARTICLE I
SALE OF SHARES AND CLOSING
--------------------------
1.1 Purchase and Sale of Shares . . . . . . . . . . . . . . . . 1
1.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
2.1 Organization of Seller . . . . . . . . . . . . . . . . . . 2
2.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Organization of the Company . . . . . . . . . . . . . . . . 3
2.4 Minute Books . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 Capital Stock; Title . . . . . . . . . . . . . . . . . . . 3
2.6 No Conflicts or Violations . . . . . . . . . . . . . . . . 4
2.7 SAP Statements . . . . . . . . . . . . . . . . . . . . . . 4
2.8 Securities and Assets . . . . . . . . . . . . . . . . . . . 5
2.9 Absence of Changes . . . . . . . . . . . . . . . . . . . . 5
2.10 No Undisclosed Liabilities . . . . . . . . . . . . . . . . 5
2.11 No Benefit Plans . . . . . . . . . . . . . . . . . . . . . 6
2.12 No Intercompany Liabilities . . . . . . . . . . . . . . . . 6
2.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.14 Litigation . . . . . . . . . . . . . . . . . . . . . . . . 7
2.15 Compliance With Laws . . . . . . . . . . . . . . . . . . . 7
2.16 Licenses and Permits . . . . . . . . . . . . . . . . . . . 7
2.17 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
3.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 No Conflicts or Violations . . . . . . . . . . . . . . . . 8
3.4 Purchase for Investment . . . . . . . . . . . . . . . . . . 9
ARTICLE IV
COVENANTS OF SELLER
-------------------
4.1 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . 9
4.2 Investigation by Purchaser . . . . . . . . . . . . . . . . . 9
(i)
<PAGE>
4.3 No Negotiations . . . . . . . . . . . . . . . . . . . . . . 10
4.4 Conduct of Business . . . . . . . . . . . . . . . . . . . . 10
4.5 Financial Statements and Reports . . . . . . . . . . . . . 10
4.6 Investments . . . . . . . . . . . . . . . . . . . . . . . . 11
4.7 No Charter Amendments . . . . . . . . . . . . . . . . . . . 11
4.8 No Issuance of Securities . . . . . . . . . . . . . . . . . 11
4.9 No Dividends . . . . . . . . . . . . . . . . . . . . . . . 11
4.10 No Disposal of Property . . . . . . . . . . . . . . . . . . 11
4.11 No Breach or Default . . . . . . . . . . . . . . . . . . . 12
4.12 No Indebtedness . . . . . . . . . . . . . . . . . . . . . . 12
4.13 No Acquisitions . . . . . . . . . . . . . . . . . . . . . . 12
4.14 Resignations of Directors and Officers . . . . . . . . . . 12
4.15 Books and Records . . . . . . . . . . . . . . . . . . . . . 12
4.16 Notice and Cure . . . . . . . . . . . . . . . . . . . . . . 13
4.17 New Business . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE V
COVENANTS OF PURCHASER
----------------------
5.1 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . 13
5.2 Notice and Cure . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PURCHASER
--------------------------------------
6.1 Representations and Warranties . . . . . . . . . . . . . . . 14
6.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.3 Officer's Certificates . . . . . . . . . . . . . . . . . . . 14
6.4 No Injunction . . . . . . . . . . . . . . . . . . . . . . . . 15
6.5 Consents and Authorizations . . . . . . . . . . . . . . . . . 15
6.6 No Adverse Change . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF SELLER
-----------------------------------
7.1 Representations and Warranties . . . . . . . . . . . . . . 15
7.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . 15
7 3 Officer's Certificates . . . . . . . . . . . . . . . . . . . 15
7.4 No Injunction . . . . . . . . . . . . . . . . . . . . . . . 16
7.5 Consents and Authorizations . . . . . . . . . . . . . . . . 16
(ii)
<PAGE>
ARTICLE VIII
SURVIVAL OF PROVISIONS
----------------------
8.1 Survival of Representations and Warranties . . . . . . . . 16
8.2 Pursuit of Claims . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE IX
INDEMNIFICATION
---------------
9.1 Indemnification by Seller . . . . . . . . . . . . . . . . . 17
9.2 Indemnification by Purchaser . . . . . . . . . . . . . . . 17
9.3 Indemnification Procedures . . . . . . . . . . . . . . . . 17
9.4 Tax Effect of Indemnification Payments . . . . . . . . . . 19
ARTICLE X
TERMINATION
-----------
10.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . 19
10.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . 19
ARTICLE XI
MISCELLANEOUS
-------------
11.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
11.2 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 20
11.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 21
11.4 Public Announcements . . . . . . . . . . . . . . . . . . . . 21
11.5 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 21
11.6 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
11.7 Further Assurances . . . . . . . . . . . . . . . . . . . . . 23
11.8 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
11.9 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 23
11.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 23
11.11 No Third Party Beneficiary . . . . . . . . . . . . . . . . . 24
11.12 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 24
11.13 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . 24
11.14 No Assignment . . . . . . . . . . . . . . . . . . . . . . . . 24
11.15 Invalid Provisions . . . . . . . . . . . . . . . . . . . . . 24
11.16 Interpretation . . . . . . . . . . . . . . . . . . . . . . . 24
SCHEDULES
Schedule 2.6 - Consents
Schedule 2.8 - Leases
(iii)
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (together with the exhibits attached
hereto, the "Agreement") is made and entered into this 13th day of July,
1995 by and between American Travellers Life Insurance Company, a
Pennsylvania corporation ("Purchaser"), and Arista Insurance Company, a
New York corporation ("Seller").
WHEREAS, Seller owns 100 shares (the "Shares") of the common stock,
par value $3,000 per share ("Common Stock"), of American Accident and
Health Insurance Company, a New York insurance corporation (the
"Company"), and the Shares constitute all the issued and outstanding
shares of capital stock of the Company; and
WHEREAS, Seller desires to sell the Shares to Purchaser, and
Purchaser desires to purchase the Shares from Seller, on the terms and
subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I
SALE OF SHARES AND CLOSING
--------------------------
1.1 Purchase and Sale of Shares. Subject to the terms and
---------------------------
conditions, and in reliance upon the representations and warranties, set
forth in this Agreement, Seller agrees to sell the Shares to Purchaser
and Purchaser agrees to purchase the Shares from Seller.
1.2 Purchase Price. The aggregate purchase price for the Shares
--------------
(the "Purchase Price"), payable to Seller by Purchaser by wire transfer
of immediately available funds at the Closing (as hereinafter defined),
will equal the sum of the following:
(a) the capital and surplus of the Company determined as of the
last day of the month immediately preceding the Closing in accordance
with the accounting practices required or permitted by the New York
insurance laws, consistently applied throughout the specified period and
in the immediately preceding year ("SAP"), except that in determining
the capital and surplus of the Company as of such date, each Asset (as
hereinafter defined) of the Company will be reflected at its market
value as of such date; plus
----
<PAGE>
(b) $450,000.
1.3 Closing.
-------
(a) The closing of the transactions contemplated by this Agreement
(the "Closing") will take place at the offices of Weil, Gotshal &
Manges, 767 Fifth Avenue, New York, New York 10153, at 10:00 a.m., local
time on the later of (a) the third business day following the date upon
which the last of the conditions set forth in ARTICLES VI and VII hereof
----------- ---
has been satisfied or waived, or (b) such other date as Purchaser and
Seller may agree upon in writing (the "Closing Date").
(b) At the Closing, Purchaser will (i) pay the Purchase Price to
Seller by wire transfer of immediately available funds to such account
as Seller shall specify in writing to Purchaser no less than two
business days prior to the Closing Date and (ii) deliver to Seller such
documents and instruments required to be delivered by Purchaser under
the terms of this Agreement.
(c) At the Closing, Seller will deliver to Purchaser (i) a
certificate or certificates representing all the Shares, accompanied by
duly executed blank stock powers, and (ii) such other documents and
instruments required to be delivered by Seller under the terms of this
Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller hereby represents and warrants to Purchaser as follows:
2.1 Organization of Seller. Seller is a corporation duly
----------------------
organized, validly existing, and in good standing under the laws of the
State of New York and has full corporate power and authority to enter
into this Agreement and to perform its obligations under this Agreement.
2.2 Authority. The execution and delivery of this Agreement by
---------
Seller and the performance by Seller of its obligations under this
Agreement have been duly and validly authorized by all necessary
corporate action on the part of Seller. This Agreement has been duly
executed and delivered by Seller and constitutes a legal, valid, and
binding obligation of Seller and is enforceable against Seller in
accordance with its terms, except to the extent that (a) enforcement may
be limited by or subject to any bankruptcy, insolvency, reorganization,
moratorium, or similar laws now or hereafter in effect relating
2
<PAGE>
to or limiting creditors' rights generally and (b) the remedy of
specific performance and injunctive and other forms of equitable relief
are subject to certain equitable defenses and to the discretion of the
court or other similar person or entity before which any proceeding
therefor may be brought.
2.3 Organization of the Company. The Company is a corporation
---------------------------
duly organized, validly existing, and in good standing under the laws of
the State of New York. The Company does not transact business or own,
use, or lease any material assets or material properties of any kind,
nature, character, or description (collectively, "Assets") in any State
other than the State of New York. Seller has heretofore made available
to Purchaser true and complete copies of the articles or certificate of
incorporation and bylaws of the Company, in each case as in effect on
the date hereof. The Company does not own 10% or more of the voting
securities of any entity.
2.4 Minute Books. The minute books of the Company accurately
------------
reflect in all material respects all formal actions taken at all
meetings and all consents in lieu of meetings of the shareholders of the
Company since January 1, 1992 and all formal actions taken at all
meetings and all consents in lieu of meetings of the Board of Directors
of the Company and all committees thereof since January 1, 1992. All of
such minute books have previously been make available for inspection by
Purchaser.
2.5 Capital Stock; Title. The authorized capital stock of the
--------------------
Company consists solely of the Shares, all of which are issued and
outstanding. The Shares are duly authorized, validly issued, fully paid,
and nonassessable, and constitute all of the issued and outstanding
capital stock of the Company. Seller owns the Shares beneficially and of
record, free and clear of any mortgage, pledge, assessment, security
interest, lien, adverse claim, charge, or other encumbrance of any kind
(collectively, "Liens"). At the Closing, Purchaser will acquire good and
marketable title thereto, free and clear of any Lien, and will own all
of the issued and outstanding shares of capital stock of the Company.
There are no outstanding securities, rights (preemptive or other),
subscriptions, calls, warrants, options, or other agreements (except for
this Agreement) that give any person or entity the right to (i) purchase
or otherwise receive or be issued any shares of capital stock of the
Company or any security convertible into or exchangeable for any shares
of capital stock of the Company or (ii) receive any benefits or rights
similar to any rights enjoyed by or accruing to a holder of Shares, or
any rights to participate in the equity, income, or election of
directors or officers of the Company.
3
<PAGE>
2.6 No Conflicts or Violations. The execution and delivery of
--------------------------
this Agreement by Seller do not, and the performance of Seller's
obligations under this Agreement will not:
(a) subject to obtaining the approvals contemplated by
Section 4.1 and 5.1 hereof, violate any term or provision of any
----------- ---
law or any writ, judgment, decree, or injunction applicable to
Seller or the Company;
(b) conflict with or result in a violation or breach of any
of the provisions of the articles or certificate of incorporation
or bylaws of Seller or the Company;
(c) result in the creation or imposition of any Lien upon
Seller or the Company or any of their respective Assets that
individually or in the aggregate with any other Liens has or may
reasonably be expected to have a material adverse effect on the
organization, existence, authority, business, licenses, or
condition (financial or otherwise) ("Business or Condition") of the
Company or on the validity or enforceability of this Agreement or
on the ability of Seller to perform its obligations under this
Agreement;
(d) conflict with or result in a violation or breach of any
written agreement, lease, sublease, license, sublicense, promissory
note, evidence of indebtedness, or other contract (collectively, a
"Contract") to which Seller or the Company is a party or by which
any Asset of Seller or the Company may be bound, except such
conflicts, violations, or breaches that do not have and may not
reasonably be expected to have a material adverse effect on the
Business or Condition of the Company, on the validity or
enforceability of this Agreement, or on the ability of Seller to
perform its obligations under this Agreement; or
(e) require Seller or the Company to obtain any consent,
approval, or action of, or make any filing with or give any notice
to, any person or entity, except as contemplated in Section 4.1
-----------
hereof or in connection with the Bank of New York credit facility
as disclosed on Schedule 2.6 hereto.
------------
2.7 SAP Statements. Seller has previously delivered to Purchaser
--------------
true and complete copies of the following:
(a) the SAP annual statements of the Company filed with or
submitted to the New York Department of Insurance ("Annual
Statements") for each of the years ended December 31, 1993 and 1994
on forms prescribed or permitted by such authority; and
4
<PAGE>
(b) the SAP quarterly statement of the Company filed with or
submitted to the New York Department of Insurance for the Company
for the quarter ended March 31, 1995 on forms prescribed or
permitted by such authority ("Quarterly Statement").
Each such Annual Statement and Quarterly Statement (i) complied in all
material respects with all applicable laws when so filed, (ii) was
prepared in all material respects in accordance with SAP, (iii) is true
and complete in all material respects, and (iv) presents fairly in all
material respects the financial position of the Company as of the
respective dates thereof and the related summary of operations and
changes in capital and surplus and in cash flows of the Company for and
during the respective periods covered thereby.
2.8 Securities and Assets. Seller has furnished to Purchaser a
---------------------
true and complete list and description of all debentures, notes, stocks,
and other securities and all material assets (whether admitted or non-
admitted) owned, leased, or held by the Company on the date of this
Agreement. The Company has good and marketable title (free and clear of
all Liens) to all such debentures, notes, stocks, other securities, and
other assets. The Company does not own any real property. Schedule 2.8
------------
hereto contains a true and complete list and description of all real
property leased or subleased by the Company.
2.9 Absence Of Changes. Since December 31, 1994, (i) there has
------------------
not been, occurred, or arisen any change, event, condition, or effect
that has or may reasonably be expected to have a material adverse effect
on the Business or Condition of the Company and (ii) the Company has
operated in the ordinary course of business and consistent with its
practice after January 1, 1992.
2.10 No Undisclosed Liabilities. Except to the extent
--------------------------
specifically reflected in the balance sheet included in the Annual
Statement as of December 31, 1994 (or in the notes relating thereto),
there were no liabilities against, relating to, or affecting the Company
as of December 31, 1994, except liabilities that do not have and may not
reasonably be expected to have a material adverse effect on the Business
or Condition of the Company. Since December 31, 1994, the Company has
not incurred any liabilities, except (i) policyholder benefits payable,
or other liabilities incurred, in the ordinary course of business and
(ii) as disclosed on the Quarterly Statement.
5
<PAGE>
2.11 No Benefit Plans. The Company has no liability under, and
----------------
since January 1, 1992 (the "Initial Acquisition Date"), has not adopted,
maintained, or sponsored, any pension, welfare, bonus, deferred
compensation, incentive compensation, profit sharing, stock, retirement,
or other benefit plan or arrangement for any of its officers, directors,
employees, agents, consultants, or other similar representatives.
2.12 No Intercompany Liabilities. Except for salaries paid in the
---------------------------
ordinary course of business and consistent with past practice, the
Company has not made any payment or distribution since December 31, 1994
to Seller or any other affiliate of the Company, and there are no
outstanding liabilities or contracts between or among the Company and
Seller or any other affiliate of the Company except pursuant to the
Company's existing tax sharing arrangement.
2.13 Taxes. The Company is taxable as an insurance company under
-----
the Internal Revenue Code of 1986, as amended (the "Code"). All tax
returns required to be filed with respect to the Company have been duly
and timely filed with all jurisdictions (including the Internal Revenue
Service and the State of New York) for which returns with respect to the
Company are or have been required, and all such tax returns are true and
complete in all material respects. The Company (i) has duly and timely
paid all taxes, penalties, interest, additions to tax, and assessments
(collectively, "Taxes") that are due, or claimed or asserted by any
taxing authority to be due, from the Company for the periods covered by
such returns or (ii) has duly and fully provided for such Taxes, in
accordance with SAP, in the books and records of the Company, including,
without limitation, in each of the Annual Statements and the Quarterly
Statement. The Company is not, and will not become, liable (because of
inclusion of the Company in consolidated returns or combined reports or
for any other reason) for any unpaid Taxes, payable to any jurisdiction,
of the Seller or of any other person with respect to the existence,
ownership or operation of the Company with respect to periods prior to
or through the closing Date or with respect to the sale of Shares
pursuant to this Agreement. There are no Liens with respect to Taxes
upon any of the Assets of the Company except with respect to Taxes not
yet due and payable. There are no pending audits or administrative or
judicial proceedings with respect to Taxes for which the Company is or
may be liable.
6
<PAGE>
2.14 Litigation. There is no action, suit, or proceeding pending,
----------
or (to the knowledge of Seller or the Company) threatened, against the
Company or any of their respective Assets, at law or in equity, in,
before, or by any person or entity. There is no writ, judgment, decree,
injunction, or similar order of any person or entity outstanding against
the Company. There is no action, suit, or proceeding pending, or (to the
knowledge of Seller) threatened against Seller or any of its Assets, at
law or in equity, on, before, or by any person or entity which could
reasonably be expected to have a material adverse effect on the validity
or enforceability of this Agreement or on the ability of Seller to
perform its obligations under this Agreement.
2.15 Compliance With Laws. The Company is not and, since the
--------------------
Initial Acquisition Date, has not been in violation (or with or without
notice or lapse of time or both, would be in violation) of any term or
provision of any law or any writ, judgment, decree, injunction, or
similar order applicable to the Company or any of its Assets, other than
violations that do not have, and may not reasonably be expected to have,
a material adverse effect on the Business or Condition of the Company or
on the validity or enforceability of this Agreement or on the ability of
Seller to perform its obligations under this Agreement.
2.16 Licenses and permits. The Company owns or validly holds all
--------------------
licenses, franchises, permits, approvals, and other authorizations that
are required for its business, operations, and affairs and that the
failure to so own or hold has or may reasonably be expected to have a
material adverse effect on the Business or Condition of the Company. The
Company has complied with the terms and conditions of each such license,
franchise, permit, approval, and other authorizations, and each is
valid, binding, and in full force and effect.
2.17 Disclosure. No representation or warranty made by Seller in
----------
this Agreement or in any certificate furnished by Seller to Purchaser in
connection with this Agreement or the transactions contemplated hereby
contains any untrue statement of material fact or omits to state a
material fact necessary to make the statements herein or therein not
misleading in light of the circumstances in which they were made.
7
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser hereby represents and warrants to Seller as follows:
3.1 Organization. Purchaser is a corporation duly organized,
------------
validly existing, and in good standing under the laws of Pennsylvania
and has full corporate power and authority to enter into this Agreement
and to perform its obligations under this Agreement.
3.2 Authority. The execution and delivery of this Agreement by
---------
Purchaser and the performance by Purchaser of its obligations under this
Agreement have been duly and validly authorized by all necessary
corporate action on the part of Purchaser. This Agreement has been duly
executed and delivered by Purchaser and constitutes a legal, valid, and
binding obligation of Purchaser and is enforceable against Purchaser in
accordance with its terms, except to the extent that
(a) enforcement may be limited by or subject to any bankruptcy,
insolvency, reorganization, moratorium, or similar laws now or hereafter
in effect relating to or limiting creditors' rights generally and (b)
the remedy of specific performance and injunctive and other forms of
equitable relief are subject to certain equitable defenses and to the
discretion of the court or other similar person or entity before which
any proceeding therefor may be brought.
3.3 No Conflicts or Violations. The execution and delivery of
--------------------------
this Agreement by Purchaser do not, and the performance by Purchaser of
its obligations under this Agreement will not:
(a) subject to obtaining the approvals contemplated by Section
-------
5.1 hereof, violate any term or provision of any law or any writ,
---
judgment, decree, or injunction applicable to Purchaser;
(b) conflict with or result in a violation or breach of any of
the provisions of the articles or certificate of incorporation or
bylaws of Purchaser; or
(c) result in the creation or imposition of any Lien upon
Purchaser or any of its Assets that individually or in the
aggregate with any other Liens has or may reasonably be expected to
have a material adverse effect on the validity or enforceability of
this Agreement or on the ability of Purchaser to perform its
obligations under this Agreement;
8
<PAGE>
(d) conflict with or result in a violation or breach of any
Contract to which Purchaser is a party or by which any of its
Assets may be bound, except such conflicts, violations, or breaches
that do not have and may not reasonably be expected to have a
material adverse effect on the validity or enforceability of this
Agreement or on the ability of Purchaser to perform its obligations
under this Agreement; or
(e) require Purchaser to obtain any consent, approval, or
action of, or make any filing with or give any notice to, any
person or entity, except as contemplated in Section 4.1 hereof.
-----------
3.4 Purchase for Investment. The Shares will be acquired by
-----------------------
Purchaser for its own account for the purpose of investment. Purchaser
will refrain from transferring or otherwise disposing of any of the
Shares, or any interest therein, in such manner as to violate any
registration provision of the federal securities or state blue sky laws.
ARTICLE IV
COVENANTS OF SELLER
-------------------
Seller covenants and agrees with Purchaser that, at all times
before the Closing (or, with respect to the covenants and provisions of
Section 4.15 hereof, for the period after the Closing therein
------------
specified), Seller will comply with all covenants and provisions of this
ARTICLE IV, except to the extent Purchaser may otherwise consent in
----------
writing or to the extent otherwise required or permitted by this
Agreement.
4.1 Regulatory Approvals. Seller will (a) take commercially
--------------------
reasonable steps necessary or desirable, and proceed diligently and in
good faith and use commercially reasonable efforts, to obtain all
approvals, authorizations, and clearances of governmental and regulatory
authorities, if any, required of Seller to consummate the transactions
contemplated hereby, (b) provide such information and communications to
such governmental and regulatory authorities as such authorities may
reasonably request, and (c) cooperate with Purchaser in obtaining all
approvals, authorizations, and clearances of governmental or regulatory
authorities and other persons or entities required of Purchaser to
consummate the transactions contemplated hereby.
4.2 Investigation by Purchaser. Seller will provide, and will
--------------------------
cause the Company to provide, Purchaser and its employees,
representatives, and agents with reasonable access, upon prior
9
<PAGE>
notice and during normal business hours, to all of the Company's
facilities, officers, key employees, agents, Assets, and books and
records of the Company and will furnish Purchaser and such other persons
or entities with all such information and data concerning the business,
operations, and affairs of the Company as Purchaser or such other
persons or entities may reasonably request.
4.3 No Negotiations. Seller will not take, and will not permit
---------------
the Company (or permit any other person or entity acting for or on
behalf of Seller, the Company, or any other affiliate of Seller) to
take, directly or indirectly, any action (a) to seek, entertain,
negotiate, encourage, or accept any offer or inquiry from any person or
entity to acquire any shares of capital stock or any other securities of
the Company or any interests therein, (b) to merge, consolidate, or
combine with the Company, (c) to reorganize the Company in any manner,
(d) to acquire any assets or properties of the Company or any interests
therein, (e) to reach any agreement or understanding (whether or not
such agreement or understanding is absolute, revocable, contingent, or
conditional) for, or otherwise to attempt to consummate, any
acquisition, merger, consolidation, combination, or reorganization
involving the Company, or (f) to furnish or cause to be furnished any
information with respect to the Company to any person or entity (other
than Purchaser or its representatives, agents, or employees) that
Seller, the Company, or any affiliate of Seller (or any person or entity
acting for or on behalf of Seller, the Company, or any other affiliate
of Seller) knows or has reason to believe is in the process of
attempting or considering any acquisition, merger, consolidation,
combination, or reorganization involving the Company. If either of
Seller, the Company, or any other affiliate of Seller receives from any
person or entity (other than Purchaser) any offer, inquiry, or
informational request that is subject to this Section 4.3, Seller will
-----------
promptly advise such person or entity, by written notice, of the terms
of this Section 4.3 and will promptly deliver a copy of such notice to
-----------
Purchaser. Notwithstanding the foregoing, nothing contained herein shall
prohibit Seller from taking the actions described above provided that
such actions do not involve or relate to the Company.
4.4 Conduct of Business. Seller will cause the Company to conduct
-------------------
its business only in the ordinary course and consistent with past
practice.
4.5 Financial Statements and Reports. As promptly as practicable,
--------------------------------
Seller will deliver to Purchaser true and complete copies of such
material financial statements of the Company, reports, or analyses as
may be prepared or received by Seller, the Company, or any affiliate of
the Company and as relate to the
10
<PAGE>
Company's business, operations, or affairs, including without limitation
quarterly SAP statements, normal internal reports (such as those
reflecting monthly premiums, claims, and cash flow), and special reports
(such as those of consultants).
4.6 Investments. The Company will invest its future cash flow,
-----------
any cash from matured and maturing investments, any cash proceeds from
the sale of the Company's assets or properties, and any cash funds
currently held by the Company, exclusively in cash, in cash equivalent
assets, or in short-term investments (consisting of securities issued or
fully guaranteed, as to principal and interest, by the United States or
certificates of deposit fully insured by the Federal Deposit Insurance
Corporation), except as otherwise required by law or except as required
to provide cash (in the ordinary course of business and consistent with
past practice) to meet the Company's reasonably anticipated current
obligations.
4.7 No Charter Amendments. Seller will cause the Company to
---------------------
refrain from amending its articles or certificate of incorporation or
bylaws and from taking any action with respect to any such amendment;
provided, however, that nothing contained in this Section 4.7 shall
-------- ------- -----------
prohibit the Company from finalizing the amendment to its articles of
incorporation and bylaws as most recently filed with the governmental
authorities in New York on or about May 8, 1995.
4.8 No Issuance of Securities. Seller will cause the Company to
-------------------------
refrain from authorizing or issuing any shares of the Company's capital
stock or other equity securities or entering into any Contract or
granting any option, warrant, or right calling for the authorization or
issuance of any such shares or other equity securities, or creating or
issuing any securities directly or indirectly convertible into or
exchangeable for any such shares or other equity securities, or issuing
any option, warrant, or right to purchase any such convertible
securities.
4.9 No Dividends. Seller will cause the Company to refrain from
------------
declaring, setting aside, or paying any dividend or other distribution
in respect of the capital stock of the Company and from directly or
indirectly redeeming, purchasing, or otherwise acquiring any capital
stock of the Company or any interest in or right to acquire any such
stock.
4.10 No Disposal of Property. Seller will cause the Company to
-----------------------
refrain from disposing of any of its Assets and from permitting any of
its Assets to be subjected to any Liens except to the extent any such
disposition or any such Lien (a) is made or incurred in the ordinary
course of business and consistent with past practice and (b) does not
have and may not reasonably
11
<PAGE>
be expected to have, individually or in the aggregate, any material
adverse effect on the Business or Condition of the Company.
4.11 No Breach or Default. Seller will cause the Company to
--------------------
refrain from violating, breaching, or defaulting, and from taking or
failing to take any action that (with or without notice or lapse of time
or both) would constitute a violation, breach, or default, in any way
under any term of any Contract to which the Company is a party or by
which any of the Assets of the Company is or may be bound and which
violation, breach, or default individually or in the aggregate has or
may reasonably be expected to have a material adverse effect on the
Business or Condition of the Company.
4.12 No Indebtedness. Seller will cause the Company to refrain
---------------
from creating, incurring, assuming, guaranteeing, or otherwise becoming
liable for, and from canceling, paying, agreeing to cancel or pay, or
otherwise providing for a complete or partial discharge in advance of a
scheduled payment date with respect to, any liability of the Company,
and from waiving any right of the Company to receive any direct or
indirect payment or other benefit under any liability owing to the
Company.
4.13 No Acquisitions. Seller will cause the Company to refrain
---------------
from (a) merging, consolidating, or otherwise combining or agreeing to
merge, consolidate, or otherwise combine with any other person or
entity, (b) acquiring or agreeing to acquire blocks of business or all
or substantially all the assets or properties or capital stock or other
equity securities of any other person or entity, or (c) otherwise
acquiring or agreeing to acquire control or ownership of any other
person or entity.
4.14 Resignations of Directors and Officers. Seller will cause
--------------------------------------
such members of the Board of Directors and officers of the Company as
are designated by Purchaser to tender, effective at the Closing, their
resignations from the Board of Directors or as officers of the Company
and, if requested by Purchaser, will cause the election of Purchaser's
nominees to the Board of Directors.
4.15 Books and Records. On the Closing Date, Seller will deliver
-----------------
to Purchaser or will make available to Purchaser at the offices of the
Company all books and records of the Company and, if (at any time after
the Closing) Seller discovers in its possession or under its control any
other books and records of the Company, will forthwith deliver such
books and records to Purchaser.
12
<PAGE>
4.16 Notice and Cure. Seller will notify purchaser promptly in
---------------
writing of, and contemporaneously will provide Purchaser with true and
complete copies of any and all information or documents relating to, and
will use all commercially reasonable efforts to cure before the Closing,
any event, transaction, or circumstance occurring after the date of this
Agreement that causes or will cause any covenant or agreement of Seller
under this Agreement to be breached, or that renders or will render
untrue any representation or warranty of Seller contained in this
Agreement as if the same were made on or as of the date of such event,
transaction, or circumstance.
4.17 New Business. Seller will cause the Company to cooperate
------------
with Purchaser before the Closing Date in filing, at Purchaser's cost,
with the insurance regulatory authorities such policy forms as Purchaser
may reasonably request; provided, however, that (a) Purchaser shall be
-------- -------
responsible for preparing such policy forms and other filing materials;
and (b) nothing contained in this Section 4.17 shall require the Company
------------
to commence writing insurance business on such policy forms.
ARTICLE V
COVENANTS OF PURCHASER
----------------------
Purchaser covenants and agrees with Seller that, at all times
before the Closing, Purchaser will comply with all covenants and
provisions of this ARTICLE V, except to the extent Seller may otherwise
---------
consent in writing or to the extent otherwise required or permitted by
this Agreement.
5.1 Regulatory Approvals. Purchaser will (a) take commercially
--------------------
reasonable steps necessary or desirable, and proceed diligently and in
good faith and use commercially reasonable efforts, to obtain all
approvals, authorizations, and clearances of governmental and regulatory
authorities required of Purchaser to consummate the transactions
contemplated hereby, (b) provide such information and communications to
such governmental and regulatory authorities as such authorities may
reasonably request, and (c) cooperate with Seller in obtaining all
approvals, authorizations, and clearances of governmental or regulatory
authorities and other persons or entities required of Seller to
consummate the transactions contemplated hereby.
13
<PAGE>
5.2 Notice and Cure. Purchaser will notify Seller promptly in
---------------
writing of, and contemporaneously will provide Seller with true and
complete copies of any and all information or documents relating to, and
will use all commercially reasonable efforts to cure before the Closing,
any event, transaction, or circumstance occurring after the date of this
Agreement that causes or will cause any covenant or agreement of
Purchaser under this Agreement to be breached, or that renders or will
render untrue any representation or warranty of Purchaser contained in
this Agreement as if the same were made on or as of the date of such
event, transaction, or circumstance.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PURCHASER
--------------------------------------
The obligations of Purchaser hereunder are subject to the
fulfillment, at or before the Closing, of each of the following
conditions (all or any of which may be waived in whole or in part by
Purchaser).
6.1 Representations and Warranties. The representations and
------------------------------
warranties made by Seller in this Agreement shall be true in all
material respects as of the date hereof and shall be true in all
material respects on and as of the Closing Date as though such
representations and warranties were made on and as of the Closing Date.
6.2 Performance. Seller shall have performed and complied in all
-----------
material respects with all agreements, covenants, obligations, and
conditions required by this Agreement to be so performed or complied
with by Seller at or before the Closing.
6.3 Officer's Certificates. Seller shall have delivered to
----------------------
Purchaser a certificate, dated the Closing Date and executed by an
executive officer of Seller, certifying as to the fulfillment of the
conditions set forth in Sections 6.1, 6.2, 6.4, 6.5, and 6.6 hereof. In
------------ --- --- --- ---
addition, Seller shall have delivered to Purchaser a certificate, dated
the Closing Date and executed by the secretary or any assistant
secretary of Seller, certifying that Seller has duly and validly taken
all corporate action necessary to authorize its execution and delivery
of this Agreement and the performance of its obligations under this
Agreement.
14
<PAGE>
6.4 No Injunction. There shall not be in effect on the Closing
-------------
Date any writ, judgment, injunction, decree, or similar order of any
court or governmental authority restraining, enjoining, or otherwise
preventing consummation of any of the transactions contemplated by this
Agreement.
6.5 Consents and Authorizations. All orders, consents, permits,
---------------------------
waivers, approvals, authorizations, and clearances contemplated by
Sections 4.1 and 5.1 hereof and necessary to permit the parties to
------------ ---
perform their obligations under this Agreement and to consummate the
transactions contemplated hereby (including, without limitation,
requisite action of the New York Department of Insurance) shall have
been obtained and shall be in full force and effect.
6.6 No Adverse Change. Since December 31, 1994, there shall not
-----------------
have been, occurred, or arisen any change in, or any event, condition,
or state of facts of any character that individually or in the aggregate
has or may reasonably be expected to have a material adverse effect on
the Business or Condition of the Company.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF SELLER
-----------------------------------
The obligations of Seller hereunder are subject to the fulfillment,
at or before the Closing, of each of the following conditions (all or
any of which may be waived in whole or in part by Seller).
7.1 Representations and Warranties. The representations and
------------------------------
warranties made by Purchaser in this Agreement shall be true in all
material respects as of the date hereof and shall be true in all
material respects on and as of the Closing Date as though such
representations and warranties were made on and as of the Closing Date.
7.2 Performance. Purchaser shall have performed and complied in
-----------
all material respects with all agreements, covenants, obligations, and
conditions required by this Agreement to be so performed or complied
with by Purchaser at or before the Closing.
7.3 Officer's Certificates. Purchaser shall have delivered to
----------------------
Seller a certificate, dated the Closing Date and executed by an
executive officer of Purchaser, certifying as to the fulfillment of the
conditions set forth in Sections 7.1, 7.2, 7.4, and 7.5 hereof. In
-------- --- --- ---- ---
addition, Purchaser shall have delivered to Seller a certificate, dated
the Closing Date and executed by
15
<PAGE>
the secretary or any assistant secretary of Purchaser, certifying that
Purchaser has duly and validly taken all corporate action necessary to
authorize its execution and delivery of this Agreement and the
performance of its obligations under this Agreement.
7.4 No Injunction. There shall not be in effect on the Closing
-------------
Date any writ, judgment, injunction, decree, or similar order of any
court or governmental authority restraining, enjoining, or otherwise
preventing consummation of any of the transactions contemplated by this
Agreement.
7.5 Consents and Authorizations. All orders, consents, permits,
---------------------------
waivers, approvals, authorizations, and clearances contemplated by
Sections 4.1 and 5.1 hereof and necessary to permit the parties to
------------ ---
perform their obligations under this Agreement and to consummate the
transactions contemplated hereby (including, without limitation,
requisite action of the New York Department of Insurance) shall have
been obtained and shall be in full force and effect.
ARTICLE VIII
SURVIVAL OF PROVISIONS
----------------------
8.1 Survival of Representations and Warranties. Subject to
------------------------------------------
Section 8.2 and ARTICLE IX hereof, the representations, warranties,
----------- ----------
covenants, and agreements respectively made by Seller and Purchaser in
this Agreement or in any certificate respectively delivered by Seller or
Purchaser pursuant to Section 6.3 or Section 7.3 hereof will survive the
----------- -----------
Closing (i) until 60 calendar days after the expiration of all
applicable statutes of limitations (including all periods of extension,
whether automatic or permissive) in the case of (A) the representations
and warranties of Seller set forth in Sections 2.5, 2.11, 2.13, and 2.15
------------ ---- ---- ----
hereof and in the first two sentences of Section 2.8 hereof, and (B) the
-----------
indemnification agreements set forth in ARTICLE IX hereof, and (ii)
----------
until the date 18 months after the Closing Date in the case of all other
representations, warranties, covenants, and agreements, except that
covenants and agreements to be performed after the Closing will survive
the Closing in accordance with their terms.
8.2 Pursuit of Claims. Any breach of any representation,
-----------------
warranty, covenant, or agreement as to which a bona-fide claim for
indemnification has been asserted in accordance with ARTICLE IX hereof
----------
during the applicable survival period set forth in Section 8.1 hereof
-----------
may be pursued beyond such survival period
16
<PAGE>
until such claim is resolved by final, non-appealable judgment or by
settlement.
ARTICLE IX
INDEMNIFICATION
---------------
9.1 Indemnification by Seller. Subject to the provisions of
-------------------------
Sections 9.3 and 9.4 hereof and ARTICLE VIII hereof, Seller will
------------ --- ------------
indemnify and hold harmless Purchaser for any and all monetary damages,
liabilities, fines, fees, penalties, interest obligations, deficiencies,
losses, and expenses (including without limitation fees and expenses of
attorneys, accountants, actuaries, and other experts) (collectively,
"Damages") resulting from or relating to any breach by Seller of any
representation, warranty, covenant, or agreement made by Seller in this
Agreement; provided, however, that in no event shall the obligations of
-------- -------
Seller under this Section 9.1 (other than as a result of one or more
-----------
breaches of Section 2.5, 2.8, 2.11, or 2.13) exceed the Purchase Price.
----------- --- ---- -----
9.2 Indemnification by Purchaser. Subject to the provisions of
----------------------------
Sections 9.3 and 9.4 hereof and ARTICLE VIII hereof, Purchaser will
------------ --- ------------
indemnify and hold harmless Seller in respect of any and all Damages
resulting from or relating to any breach by Purchaser of any
representation, warranty, covenant, or agreement made by Purchaser in
this Agreement; provided, however, that in no event shall the
-------- -------
obligations of the Purchaser under this Section 9.2 exceed the Purchase
-----------
Price.
9.3 Indemnification Procedures.
---------------------------
(a) If a person or entity claiming indemnification under this
ARTICLE IX (an "Indemnitee") becomes aware of any matter that it
----------
believes is indemnifiable pursuant to Section 9.1 or 9.2 hereof and such
----------- ---
matter involves (i) any claim made against the Indemnitee by any person
or entity other than Purchaser or Seller or (ii) the commencement of any
action, suit, investigation, arbitration, or similar proceeding against
the Indemnitee by any person or entity other than Purchaser or Seller,
the Indemnitee will give the person or entity against whom claims of
indemnification are being asserted under this ARTICLE IX (an
----------
"Indemnifying Party") prompt written notice of such claim or the
commencement of such action, suit, investigation, arbitration, or
similar proceeding, which notice must (A) provide (with reasonable
specificity) the basis on which indemnification is being asserted, (B)
set forth the actual or good-faith estimated amount of Damages for which
indemnification is being asserted, if
17
<PAGE>
known, and (C) be accompanied by copies of all relevant pleadings,
demands, and other papers served on the Indemnitee.
(b) The Indemnifying Party will have a period of 20 days after the
delivery of each notice required by Section 9.3(a) hereof during which
--------------
to respond to such notice. If the Indemnifying Party elects to defend
the claim described in such notice, the Indemnifying Party will be
obligated to compromise or defend (and will control the defense of) such
claim, at its own expense and by counsel chosen by the Indemnifying
Party and reasonably satisfactory to Indemnitee. The Indemnitee will
cooperate fully with the Indemnifying Party and counsel for the
Indemnifying Party in the defense against any such claim, and the
Indemnitee will have the right to participate at its own expense in the
defense of any such claim. If the Indemnifying Party (i) responds within
such 20-day period that it elects not to defend such claim, (ii) does
not respond within such 20-day period, or (iii) responds within such 20-
day period that it elects to defend such claim but does not, in fact,
take actions reasonably necessary to defend such claim, the Indemnitee
will be free to compromise or defend (and control the defense of) such
claim and to pursue such remedies as may be available to the Indemnitee
under applicable law.
(c) Any compromise or settlement of any claim (whether defended by
the Indemnitee or by the Indemnifying Party) will require the prior
written consent of the Indemnitee and the Indemnifying Party, which
consent will not be unreasonably be withheld.
(d) If an Indemnitee becomes aware of any matter that it believes
is indemnifiable pursuant to Section 9.1 or 9.2 hereof and such matter
----------- ---
involves a claim made by Purchaser or Seller, the Indemnitee will give
the Indemnifying Party prompt written notice of such claim, which notice
must provide (with reasonable specificity) the bases for which
indemnification is being asserted. The Indemnifying Party will have a
period of 20 days after the delivery of each notice required by this
Section 9.3(d) during which to respond to such notice. If the
--------------
Indemnifying Party accepts (in writing) full responsibility for the
claim described in such notice, the Indemnifying Party will pay upon
demand to the Indemnitee the amount of Damages relating to such claim as
the parties hereto agree. If the Indemnifying Party has disputed such
claim or does not respond within such 20-day period, the Indemnifying
Party and the Indemnitee agree to proceed in good faith to negotiate a
resolution of such dispute. If all such disputes are not resolved
through negotiations within 30 days after such negotiations begin,
either the Indemnifying Party or the Indemnitee may initiate litigation
to resolve such disputes.
18
<PAGE>
9.4 Tax Effect of Indemnification Payments. Seller and Purchaser
--------------------------------------
agree that any payment made under ARTICLE IX hereof will be treated by
----------
the parties on their tax returns as an adjustment to the Purchase Price.
ARTICLE X
TERMINATION
-----------
10.1 Termination. This Agreement may be terminated, and the
-----------
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing by written agreement of
Seller and Purchaser; or
(b) at any time after December 31, 1995 by Seller or Purchaser
if the transactions contemplated by this Agreement have not been
consummated on or before such date and such failure to consummate
is not caused by a material breach of this Agreement by the party
electing to terminate pursuant to this Section 10.1(b).
---------------
10.2 Effect of Termination. If this Agreement is validly
---------------------
terminated pursuant to Section 10.1 hereof, (a) the obligations of the
------------
parties to effect the transactions hereby will terminate, (b) the
provisions of this Section 10.2 and ARTICLE XI hereof will continue to
------------ ----------
apply following any such termination, and (c) no party hereto will be
relieved of liability for Damages incurred by the other party hereto by
reason of a material breach of any representation, warranty, or
covenant made by such party in this Agreement.
ARTICLE XI
MISCELLANEOUS
-------------
11.1 Notices. Any notice or other communication given pursuant to
-------
this Agreement must be in writing and (a) delivered personally, (b) sent
by telefacsimile or other similar facsimile transmission, (c) delivered
by overnight express, or (d) sent by registered or certified mail,
postage prepaid, as follows:
19
<PAGE>
(i) If to Seller:
Arista Insurance Company
116 John Street
New York, New York 10038
Attention: Stanley Mandel
Facsimile number: (212) 608-6473
with a copy to:
Morrison, Cohen, Singer & Weinstein
750 Lexington Avenue
New York, New York 10022
Attention: Michael Reiner
Facsimile number: (212) 735-8708
(ii) If to Purchaser:
American Travellers Life Insurance Company
3220 Tillman Drive
Bensalem, Pennsylvania 19020-8506
Attention: John A. Powell, Chairman,
President, and CEO
Facsimile number: (215) 244-7711
with a copy to:
Weil, Gotshal & Manges
100 Crescent Court, Suite 1300
Dallas, Texas 75201-6950
Attention: David A. Spuria
Facsimile number: (214) 746-7777
All notices and other communications required or permitted under this
Agreement that are addressed as provided in this
Section 11.1 will (A) if delivered personally or by overnight express,
------------
be deemed given upon delivery; (B) if delivered by telefacsimile or
similar facsimile transmission, be deemed given when electronically
confirmed; and (C) if sent by registered or certified mail, be deemed
given when received. Any party from time to time may change its address
for the purpose of notices to that party by giving a similar notice
specifying a new address, but no such notice will be deemed to have been
given until it is actually received by the party sought to be charged
with the contents thereof.
11.2 Entire Agreement. Except for documents executed by Seller
----------------
and Purchaser pursuant hereto, this Agreement supersedes all prior
discussions and agreements between the parties with respect to the
subject matter of this Agreement, and this
20
<PAGE>
Agreement contains the sole and entire agreement between the parties
hereto with respect to the subject matter hereof.
11.3 Expenses. Except as otherwise expressly provided in this
--------
Agreement (including without limitation as provided in ARTICLE IX
----------
hereof), each of Seller and Purchaser will pay its own costs and
expenses in connection with this Agreement and the transactions
contemplated hereby.
11.4 Public Announcements. At all times at or before the Closing,
--------------------
Seller and Purchaser will each consult with the other before issuing or
making any reports, statements, or releases to the public with respect
to this Agreement or the transactions contemplated hereby and will use
good faith efforts to agree on the text of a joint public report,
statement, or release or will use good faith efforts to obtain the other
party's approval of the text of any public report, statement, release to
be made solely on behalf of a party. If Seller and Purchaser are unable
to agree on or approve any such public report, statement, or release,
then such party may make or issue the legally required or appropriate
report, statement, or release. Any such report, statement, or release
approved or permitted to be made pursuant to this Section 11.4 may be
------------
disclosed or otherwise provided by Seller or Purchaser to any person or
entity, including without limitation to any employee or customer of
either party hereto and to any governmental or regulatory authority.
11.5 Confidentiality.
---------------
(a) Each of Purchaser and Seller will refrain, and will cause its
respective officers, directors, employees, agents, and other
representatives to refrain, from disclosing to any other person or
entity any confidential documents or confidential information concerning
the other party hereto acquired by it in connection with this Agreement
or the transactions contemplated hereby unless (i) such disclosure is
compelled by judicial or administrative process or by other requirements
of law and notice of such disclosure is furnished to such other party
hereto; (ii) either party hereto deems it advisable (upon advice of such
party's legal counsel) to disclose any such confidential documents or
information in connection with the requirements of any federal
securities or state blue sky law; or (iii) such confidential documents
or information can be shown to have been (A) previously known by the
party hereto receiving such documents or information, (B) in the public
domain through no fault of such receiving party, or (C) later acquired
by such receiving party from other public sources.
(b) If this Agreement is terminated pursuant to
Section 10.1 hereof, Purchaser will refrain, and will cause its
------------
21
<PAGE>
respective officers, directors, employees, agents, and other
representatives to refrain, from disclosing to any other person or
entity any documents or information concerning the Company acquired by
Purchaser in connection with this Agreement or the transactions
contemplated hereby unless (i) such disclosure is compelled by judicial
or administrative process or by other requirements of law and notice of
such disclosure is furnished to Seller; (ii) Purchaser deems it
advisable (upon advice of legal counsel to Purchaser) to disclose any
such confidential documents or information in connection with the
requirements of any securities law; or (iii) such confidential documents
or information can be shown to have been (A) previously known by
Purchaser, (B) in the public domain through no fault of Purchaser, or
(C) later acquired by Purchaser from other public sources.
(c) Seller agrees that, on and after the Closing Date, Seller will
refrain, and will cause its respective officers, directors, employees,
agents, and other representatives to refrain, from disclosing to any
other person or entity any documents or information concerning the
Company unless (i) such disclosure is compelled by judicial or
administrative process or by other requirements of law and notice of
such disclosure is furnished to Purchaser or (ii) such confidential
documents or information can be shown to have been in the public domain
through no fault of Seller or later acquired by Seller from other public
sources.
(d) The parties hereto acknowledge and agree that (i) a breach of
any of the terms or provisions of this Section 11.5 would cause
------------
irreparable Damages to the non-breaching party for which adequate remedy
at law is not available; and (ii) the non-breaching party will be
entitled as a.matter of right to obtain, without posting any bond
whatsoever, an injunction, restraining order, or other equitable relief
to restrain any threatened or further breach of this Section 11.5, which
------------
right will not be exclusive but will be cumulative and in addition to
any other rights and remedies available at law or in equity.
11.6 Brokers. (a) Seller will indemnify and hold harmless
-------
Purchaser in respect of any and all claims or demands for commission,
compensation, or other Damages by any broker, finder, or other agent
(whether or not a present or former employee or agent of Seller or the
Company) claiming to have been engaged by Seller or the Company in
connection with the transactions contemplated by this Agreement, and
Seller will bear the cost of the reasonable out-of-pocket expenses
incurred by Purchaser in investigating, defending against, or appealing
any such claim or demand.
22
<PAGE>
(b) Purchaser will indemnify and hold harmless Seller in respect
of any and all claims or demands for commission, compensation, or other
Damages by any broker, finder, or other agent (whether or not a present
or former employee or agent of Purchaser) claiming to have been engaged
by Purchaser in connection with the transactions contemplated by this
Agreement, and Purchaser will bear the cost of the reasonable out-of-
pocket expenses incurred by Seller in investigating, defending against,
or appealing any such claim or demand.
11.7 Further Assurances. Seller and Purchaser agree that, from
------------------
time to time after the Closing, upon the reasonable request of the
other, they will cooperate and will cause their respective Affiliates to
cooperate with each other to effect the orderly transition of the
business, operations, and affairs of the Company. Without limiting the
generality of the foregoing, (a) Seller will provide, and will cause its
Affiliates to provide, representatives of Purchaser reasonable access to
all pre-Closing books and records of Seller and its Affiliates
reasonably requested by Purchaser in the preparation of any post-Closing
financial statements, reports, tax returns, or Tax filings of the
Company; (b) Purchaser will provide representatives of Seller reasonable
access to all pre-Closing books and records of the Company reasonably
requested by Seller in the preparation of any post-Closing financial
statements, reports, tax returns, or Tax filings of Seller; and (c) each
party hereto will execute such documents and instruments as the other
party hereto may reasonably request containing terms and conditions
mutually satisfactory to each party hereto to further effectuate the
terms hereof.
11.8 Waiver. Any term or condition of this Agreement may be
------
waived at any time by the party that is entitled to the benefit thereof.
Such waiver must be in writing and must be executed by an executive
officer of such party. A waiver on one occasion will not be deemed to be
a waiver of the same or any other breach or nonfulfillment on a future
occasion. All remedies, either under this Agreement, or by law or
otherwise afforded, will be cumulative and not alternative.
11.9 Amendment. This Agreement may be modified or amended only by
---------
a writing duly executed by or on behalf of Seller and Purchaser.
11.10 Counterparts. This Agreement may be executed simultaneously
------------
in any number of counterparts, each of which will be deemed an original,
but all of which will constitute one and the same instrument.
23
<PAGE>
11.11 No Third Party Beneficiary. The terms and provisions of this
--------------------------
Agreement are intended solely for the benefit of Seller, Purchaser, and
their respective successors and permitted assigns, and it is not the
intention of the parties to confer third-party beneficiary rights upon
any other person or entity.
11.12 Governing Law. This Agreement will be governed by and
-------------
construed and enforced in accordance with the laws of the State of New
York (without regard to the principles of conflict of laws) applicable
to a Contract executed and performable in such state.
11.13 Binding Effect. This Agreement is binding upon and will
--------------
inure to the benefit of the parties and their respective successors and
permitted assigns.
11.14 No Assignment. Neither this Agreement nor any right or
-------------
obligation hereunder or part hereof may be assigned by any party hereto
without the prior written consent of the other party hereto (and any
attempt to do so will be void), except as otherwise specifically
provided herein.
11.15 Invalid Provisions. If any provision of this Agreement is
------------------
held to be illegal, invalid, or unenforceable under any present or
future law, and if the rights or obligations under this Agreement of
Seller and Purchaser will not be materially and adversely affected
thereby, (a) such provision will be fully severable; (b) this Agreement
will be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part hereof; and (c) the
remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement.
11.16 Interpretation. Unless the context of this Agreement
--------------
otherwise requires, (a) words of any gender are deemed to include each
other gender; (b) words using the singular or plural number also include
the plural or singular number, respectively; (c) the terms "hereof,"
"herein," "hereby," "hereto," and derivative or similar words refer to
this entire Agreement; (d) the terms "ARTICLE" or "Section" refer to the
specified ARTICLE or Section of this Agreement; (e) the term "party"
means, on the one hand, Purchaser, and on the other hand, Seller; and
(f) all references to "dollars" or "$" refer to currency of the United
States of America.
24
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered this 13th day of July, 1995 by the duly authorized officers of
Seller and Purchaser.
AMERICAN TRAVELLERS LIFE INSURANCE
COMPANY
By: /s/
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
ARISTA INSURANCE COMPANY
By: /s/Stanley S. Mandel
-------------------------------------------
Name: Stanley S. Mandel
-----------------------------------------
Title: President
----------------------------------------
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
ARISTA INVESTORS CORP.
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
Year ended December 31, 1995
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<DEBT-HELD-FOR-SALE> 0
<DEBT-CARRYING-VALUE> 2,654,939
<DEBT-MARKET-VALUE> 2,692,276
<EQUITIES> 130,162
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 2,785,101
<CASH> 3,777,328
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 1,060,381
<TOTAL-ASSETS> 15,074,203
<POLICY-LOSSES> 2,263,158
<UNEARNED-PREMIUMS> 664,105
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 3,000,000
0
0
<COMMON> 19,880
<OTHER-SE> 6,416,300
<TOTAL-LIABILITY-AND-EQUITY> 15,074,203
13,045,857
<INVESTMENT-INCOME> 252,134
<INVESTMENT-GAINS> (137)
<OTHER-INCOME> 333,205
<BENEFITS> 8,294,401
<UNDERWRITING-AMORTIZATION> 323,202
<UNDERWRITING-OTHER> 9,309,163
<INCOME-PRETAX> 151,480
<INCOME-TAX> 92,900
<INCOME-CONTINUING> 58,850
<DISCONTINUED> 197,943
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 256,793
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.10
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
