EXHIBIT 10.20
SHARE PURCHASE AGREEMENT
BY AND BETWEEN
CENTURY SURETY COMPANY
AND
EVERGREEN NATIONAL INDEMNITY COMPANY
TABLE OF CONTENTS
ARTICLE I Purchase and Sale of the Shares.................................................................................1
Section 1.1. Purchase of the Shares from Seller.................................................................1
Section 1.2. Purchase Price for the Shares......................................................................1
Section 1.3. Closing............................................................................................1
Section 1.4. Closing Deliveries.................................................................................1
Section 1.5. Post-Closing Adjustment............................................................................2
ARTICLE II Representations and Warranties of Purchaser....................................................................3
Section 2.1. Organization and Authority.........................................................................3
Section 2.2. Authorization......................................................................................3
Section 2.3. Litigation.........................................................................................4
Section 2.4. Brokers and Finders................................................................................4
Section 2.5. Accuracy of Representations, Warranties and Other Statements Made..................................4
ARTICLE III Representations of Seller Regarding Seller, the Shares and the Company........................................4
Section 3.1. Organization and Authority.........................................................................4
Section 3.2. Authorization and Enforceability...................................................................5
Section 3.3. Title and Power to Sell............................................................................5
Section 3.4. Capitalization of the Company......................................................................6
Section 3.5. Litigation and Other Proceedings...................................................................6
Section 3.6. Brokers and Finders................................................................................6
Section 3.7. Company Subsidiaries...............................................................................6
Section 3.8. Company Financial Statements.......................................................................6
Section 3.9. Absence of Undisclosed Liabilities.................................................................7
Section 3.10. Properties.........................................................................................7
Section 3.11. Taxes..............................................................................................7
Section 3.12. Employees..........................................................................................9
Section 3.13. Contracts..........................................................................................9
Section 3.14. Insurance Coverage................................................................................10
Section 3.15. Books and Records.................................................................................10
Section 3.16. Reserves..........................................................................................10
Section 3.17. Accuracy of Representations, Warranties and Other Statements Made.................................10
ARTICLE IV Additional Covenants and Agreements...........................................................................10
Section 4.1. Settlement of Intercompany Accounts...............................................................10
Section 4.2. Expenses..........................................................................................10
ARTICLE V Tax Matters ...................................................................................................10
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Section 5.1. Payments in Respect of Taxes and Tax Returns for Stub Period Prior to and Including the
Termination Date. ................................................................................10
Section 5.2. Disclosure of Tax Treatment.......................................................................12
Section 5.3. Mutual Cooperation................................................................................12
ARTICLE VI Indemnification...............................................................................................12
Section 6.1. Definitions.......................................................................................12
Section 6.2. Tax Indemnification...............................................................................13
Section 6.3. General Indemnification...........................................................................14
Section 6.4. Method of Asserting Claims........................................................................15
Section 6.5. Time Limitations..................................................................................18
ARTICLE VII General Provisions...........................................................................................18
Section 7.1. Certain Definitions...............................................................................18
Section 7.2. Further Assurances................................................................................19
Section 7.3. Notices...........................................................................................19
Section 7.4. No Third Party Beneficiaries......................................................................20
Section 7.5. Successors and Assigns............................................................................20
Section 7.6. Entire Agreement..................................................................................20
Section 7.7. Amendment.........................................................................................20
Section 7.8. Waiver............................................................................................20
Section 7.9. Severability......................................................................................21
Section 7.10. Article and Section Headings; Construction........................................................21
Section 7.11. Governing Law.....................................................................................21
Section 7.12. Counterparts......................................................................................21
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SCHEDULES
Schedule 3.5(B) Litigation
Schedule 3.11 Taxes
Schedule 3.13(A) Contracts
Schedule 3.13(B) Contract Defaults; Enforceability
Schedule 3.13(C) Contracts with Seller or Affiliates of Seller
Schedule 3.14 Insurance Coverage of Seller
EXHIBITS
Exhibit A Assignment and Assumption of Option Agreement
(and Addendum to Option Agreement)
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INDEX TO DEFINITIONS
Term Section Reference
---- -----------------
Accountants Section 1.5(A)
Affiliate Section 7.1(A)
Agreement Introductory Paragraph
Assignment Agreement Section 1.4(A)
Claim Notice Section 6.1(A)
Closing Section 1.1
Closing Book Value of the Shares Section 1.2
Closing Cash Payment Section 1.4(B)
Closing Date Section 1.3
Closing Financial Statements Section 1.5(A)
Company Recital A
Company Financial Statements Section 3.8
Compromise Notice Section 6.1(B)
Contract Section 3.13
control Section 7.1(A)
Damages Section 6.1(c)
ERISA Section 3.12(A)
Expenses Section 6.1(D)
GAAP Section 1.2
Indemnifiable Claim Section 6.1(E)
Indemnifiable Losses Section 6.1(F)
Indemnified Party Section 6.1(G)
Indemnifying Party Section 6.1(H)
Indemnity Notice Section 6.4(F)
Lease Section 3.10
Notice Period Section 6.4(B)
Option Agreement Section 1.4(A)
PC Section 3.11
Person Section 7.1(B)
Purchase Price Section 1.2
Purchaser Introductory Paragraph
SAP Section 1.5(A)
Seller Introductory Paragraph
September 30 Balance Sheet Section 3.8
Settlement Sum Section 6.1(I)
Shares Recital A
TAA Section 5.1(B)
Tax Claim Section 6.2(C)
Tax Returns Section 3.11(D)
Taxes Section 3.11(C)
Termination Date Section 5.1(B)
Third Party Claim Section 6.1(J)
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SHARE PURCHASE AGREEMENT
This Share Purchase Agreement (the "Agreement") is made to be effective as
of the 1st day of January, 2004, by and between Century Surety Company, an Ohio
corporation ("Seller"), and Evergreen National Indemnity Company, an Ohio
corporation ("Purchaser").
RECITALS
A. Seller owns all of the issued and outstanding shares (the "Shares")
of Continental Heritage Insurance Company, an Ohio domiciled
property and casualty insurance corporation (the "Company").
B. Purchaser desires to purchase, and Seller desires to sell, the
Shares for the consideration set forth below, subject to the terms
and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE SHARES
SECTION 1.1. PURCHASE OF THE SHARES FROM SELLER. Subject to and upon the
terms and conditions of this Agreement, at the closing of the transactions
contemplated by this Agreement (the "Closing"), Seller shall sell, transfer,
convey, assign and deliver to Purchaser, and Purchaser shall purchase, acquire
and accept from Seller, all of the Shares, free and clear of any claims, liens,
restrictions on transfer or encumbrances with respect thereto.
SECTION 1.2. PURCHASE PRICE FOR THE SHARES. The purchase price (the
"Purchase Price") to be paid by Purchaser to Seller for the Shares shall be an
amount equal to the aggregate book value of the Shares, determined in accordance
with generally accepted accounting principles consistently applied ("GAAP"), as
reflected on the Company's balance sheet prepared in accordance with GAAP as of
the close of business on December 31, 2003 (the "Closing Book Value of the
Shares").
SECTION 1.3. CLOSING. The Closing shall take place at the offices of
Vorys, ▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇ LLP, ▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇ at 10:00
a.m. on the date hereof, or at such other place, time or date as may be mutually
agreed upon in writing by the parties (the "Closing Date").
SECTION 1.4. CLOSING DELIVERIES. At the Closing:
(A) Seller shall deliver to Purchaser:
(1) certificates representing the Shares, duly endorsed in blank
or accompanied by stock powers duly executed in proper form
for transfer to Purchaser;
(2) an Assignment and Assumption of Option Agreement in
substantially the form attached hereto as Exhibit A (the
"Assignment Agreement"), relating to the Option Agreement
dated as of December 27, 2001, as amended by that certain
amendment dated December 31, 2003 (as amended, the "Option
Agreement"), by and among Seller, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (collectively, the "Optionees"),
duly executed by Seller and each Optionee;
(3) a certificate of the Secretary of Seller certifying, as
complete and accurate as of the Closing, attached copies of
the articles of incorporation and code of regulations of
Seller, certifying and attaching all requisite resolutions or
actions of the board of directors of Seller and of the sole
shareholder of the Company approving the execution and
delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement, and certifying to
the incumbency and signatures of the officers of Seller
executing this Agreement and any other document contemplated
hereby to be executed by Seller; and
(4) a certificate of the Secretary of the Company certifying, as
complete and accurate as of the Closing, attached copies of
the articles of incorporation and code of regulations of the
Company, and certifying to the incumbency of the officers and
directors of the Company as of the Closing.
(B) Purchaser shall deliver to Seller:
(1) Six Million Twenty-Eight Thousand Six Hundred Ninety Dollars
($6,028,690) (the "Closing Cash Payment") by wire transfer of
immediately available funds to an account designated in
writing by Seller or by the transfer of readily marketable
securities acceptable to Seller and Purchaser in such amount;
(2) the Assignment Agreement, duly executed by Purchaser; and
(3) a certificate of the Secretary of Purchaser certifying and
attaching all requisite resolutions or actions of the board of
directors of Purchaser, approving the execution and delivery
of this Agreement and the consummation of the transactions
contemplated by this Agreement, and certifying to the
incumbency and signatures of the officers of Purchaser
executing this Agreement and any other document contemplated
hereby to be executed by Purchaser.
SECTION 1.5. POST-CLOSING ADJUSTMENT.
(A) Not later than one hundred twenty (120) days after the Closing Date,
Seller shall cause to be prepared and delivered to Purchaser audited
financial statements (the "Closing Financial Statements") of the
Company as of the Closing Date, prepared in accordance with
statutory accounting principles consistently applied ("SAP"),
including the Seller's unaudited adjusted computation of the Closing
Book Value of the Shares determined in accordance with GAAP. If
within thirty (30) days following delivery of the Closing Financial
Statements, Purchaser has not given Seller written notice of its
objection to the Closing Financial Statements, then the Closing Book
Value
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of the Shares reflected in the Closing Financial Statements will be
used in determining the Purchase Price. If Purchaser gives such
notice of objection and the parties are unable to reach agreement on
the issues in dispute within thirty (30) days following delivery of
the notice of objection, then the issues in dispute shall be
submitted to an accounting firm mutually agreed upon by Seller and
Purchaser (the "Accountants"), for resolution. In the event any
issues are submitted to the Accountants for resolution, Seller and
Purchaser shall each bear 50% of the fees of the Accountants for the
resolution of such issues.
(B) Not later that ten (10) days following the final determination of
the Purchase Price pursuant to Section 1.4(A):
(1) if the Purchase Price is greater than the Closing Cash
Payment, Purchaser shall promptly pay the difference to Seller
in immediately available funds; or
(2) if the Purchase Price is less than the Closing Cash Payment,
Seller shall promptly pay the difference to Purchaser in
immediately available funds.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller that the representations and
warranties contained in this Article II are true and complete as of the Closing
Date (except that any representation or warranty that is given as of a
particular date and relates solely to a particular date or period is given as of
such date or period). Acknowledging that Seller will be relying upon such
representations and warranties in connection with the transactions contemplated
hereby, Purchaser hereby represents and warrants to Seller as follows:
SECTION 2.1. ORGANIZATION AND AUTHORITY. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio and has full corporate power, right and authority to own its properties and
assets and to carry on its business as it is now being conducted, to purchase
the Shares and to enter into and carry out the transactions contemplated by this
Agreement.
SECTION 2.2. AUTHORIZATION.
(A) This Agreement has been duly authorized, executed and delivered by
Purchaser, and no further corporate proceedings on the part of
Purchaser are or will be necessary to authorize this Agreement and
the transactions contemplated hereby. This Agreement is the legal,
valid and binding obligation of Purchaser, enforceable against
Purchaser in accordance with its terms.
(B) Other than the approval of the Superintendent of the Ohio Department
of Insurance, which approval previously has been obtained or waived,
no filing with,
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authorization of, exemption by, or consent or approval of, any
regulatory authority is necessary for the consummation by Purchaser
of the transactions contemplated by this Agreement.
SECTION 2.3. LITIGATION. There is no action, suit or proceeding pending
or, to the knowledge of Purchaser, threatened against or affecting Purchaser or
any of its properties before any court or arbitrator or any governmental
authority, agency or official which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay any of the transactions contemplated
hereby.
SECTION 2.4. BROKERS AND FINDERS. Neither Purchaser nor its officers,
agents or other representatives have incurred any obligation, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
SECTION 2.5. ACCURACY OF REPRESENTATIONS, WARRANTIES AND OTHER STATEMENTS
MADE. The representations and warranties of Purchaser set forth in this
Agreement, and in any certification delivered pursuant hereto, do not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements made, in light of the circumstances under which
they were made, not misleading.
ARTICLE III
REPRESENTATIONS OF SELLER REGARDING
SELLER, THE SHARES AND THE COMPANY
Seller represents and warrants to Purchaser that the representations and
warranties contained in this Article III are true and complete as of the Closing
Date (except that any representation or warranty that is given as of a
particular date and relates solely to a particular date or period is given as of
such date or period). Acknowledging that Purchaser will be relying upon such
representations and warranties in connection with the transactions contemplated
hereby, Seller hereby represents and warrants to Purchaser as follows:
SECTION 3.1. ORGANIZATION AND AUTHORITY.
(A) Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Ohio and has full corporate
power, right and authority to own its properties and assets,
including but not limited to the Shares, and to carry on its
business as it is now being conducted, and to enter into and carry
out its obligations under this Agreement. Seller has all necessary
governmental authorizations to own or lease its properties and
assets and to carry on its business as now being conducted in all
respects material to the financial condition or business of Seller.
(B) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Ohio. The Company has
the full corporate power, right and authority to own its properties
and assets and to carry on its business as it is now being conducted
in all respects material to the financial condition or business of
the Company. The Company has all necessary governmental
authorizations to own or lease its properties and assets and to
carry
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on its business as now being conducted in all respects material to
the financial condition or business of the Company. The Company is
not required to qualify to do business in any state or foreign
jurisdiction where not already so qualified except where a failure
to so qualify would not have a material adverse effect on the
financial condition or business of the Company. The Company has all
necessary governmental authorizations to own or lease its properties
and assets, to underwrite insurance and to otherwise carry on its
business as now being conducted.
SECTION 3.2. AUTHORIZATION AND ENFORCEABILITY.
(A) This Agreement has been duly authorized, executed and delivered by
Seller, and no further corporate proceedings on the part of Seller
are or will be necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement is the legal, valid
and binding obligation of Seller, enforceable against Seller in
accordance with its terms.
(B) Neither the execution, delivery and performance of this Agreement by
Seller, nor the consummation of the transactions contemplated
hereby, will violate, conflict with, or result in a breach of any
provisions of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance
required by, or result in a right of termination or acceleration
under, or the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Seller or the
Company under any of the terms, conditions or provisions of (1) the
articles of incorporation and code of regulations of Seller or the
Company; (2) any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which
Seller or the Company is a party or may be bound or to which the
properties or assets of Seller or the Company may be subject; or (3)
any judgment, ruling, order, writ, injunction, decree, statute, rule
or regulation applicable to Seller or the Company, or to the
properties or assets of Seller or the Company.
(C) Other than the approval of the Superintendent of the Ohio Department
of Insurance, which approval previously has been obtained or waived,
no filing with, authorization of, exemption by, or consent or
approval of, any regulatory authority is necessary for the
consummation by Seller of the transactions contemplated by this
Agreement.
SECTION 3.3. TITLE AND POWER TO SELL. At the Closing, Seller will have
good title to the Shares which are to be transferred to Purchaser by Seller
pursuant hereto, free and clear of any adverse claims, liens, proxies, voting
trusts, restrictions on transfer or encumbrances with respect thereto. The
Shares are validly issued, fully paid and nonassessable. Seller has the full
corporate power, right and authority to transfer, convey and sell the Shares to
Purchaser at the Closing. The certificates representing the Shares do not
contain any restrictive legend or reference to any agreement.
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SECTION 3.4. CAPITALIZATION OF THE COMPANY. The authorized capital stock
of the Company consists of 1,000,000 common shares, each with a par value of
$7.00 per share, of which 221,786 shares are issued and outstanding and owned by
Seller and constitute the Shares. The Company holds no shares of common stock in
its treasury. There are no other shares of capital stock or other equity
securities of the Company outstanding and, except for the Option Agreement,
there are no outstanding options, warrants, scrips, rights to subscribe to,
proxies, voting trusts, puts, calls, commitments or agreements of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, shares of capital stock of the Company. All of the Shares are validly
issued, fully paid and nonassessable and owned by Seller free and clear of any
adverse claim, lien, proxies, voting trusts, restrictions on transfer or
encumbrance thereto, and neither Seller nor the Company has any liability to any
former holder of any shares of capital stock of the Company or to any other
Person or governmental authority relating to the purchase, sale, redemption,
retirement or cancellation thereof.
SECTION 3.5. LITIGATION AND OTHER PROCEEDINGS.
(A) There is no action, suit or proceeding pending or, to the knowledge
of Seller, threatened against or affecting Seller or any Affiliate
of Seller or any of their respective properties before any court or
arbitrator or any governmental authority, agency or official which
in any manner challenges or seeks to prevent, enjoin, alter or
materially delay any of the transactions contemplated hereby.
(B) Except as set forth on Schedule 3.5(B), there is no pending claim,
action, suit, investigation or proceeding (1) that has been
commenced by or against the Company or that otherwise relates to or
may affect the business of, or any of the assets owned or used by,
the Company, other than policyholder claims brought in the ordinary
course of business made under insurance policies issued by the
Company; or (2) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with,
any of the transactions contemplated hereby. To the knowledge of
Seller, no such claim, action, suit, investigation or proceeding has
been threatened. To the knowledge of Seller, no event has occurred
or circumstance exists which is material to the financial condition
or business of the Company that may give rise to or serve as a basis
for the commencement of any such claim, action, suit, investigation
or proceeding.
SECTION 3.6. BROKERS AND FINDERS. None of Seller or the Company, nor any
of their respective officers, agents or other representatives, have incurred any
obligation, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
SECTION 3.7. COMPANY SUBSIDIARIES. The Company has no subsidiaries and
does not own, directly or indirectly, any capital stock or other equity interest
in any corporation or other entity.
SECTION 3.8. COMPANY FINANCIAL STATEMENTS. The consolidated balance sheet
of the Company as of December 31, 2002, the related consolidated income
statement, statement of shareholders' equity and statement of cash flow for the
year ended December 31, 2002, and the
6
consolidated balance sheet of the Company as of September 30, 2003 (the
"September 30 Balance Sheet") and the related consolidated income statement,
statement of shareholders' equity and statement of cash flow for the nine-month
period then ended (collectively, the "Company Financial Statements") have been
prepared on a basis consistent with SAP and fairly present the financial
position and results of operations of the Company as of the dates thereof and
for the periods covered thereby. The Closing Financial Statements will be
prepared on a basis consistent with SAP and will fairly present the financial
position and results of operations of the Company as of the date thereof and for
the periods covered thereby.
SECTION 3.9. ABSENCE OF UNDISCLOSED LIABILITIES. The Company has no
material obligations or liabilities of any nature (whether known or unknown,
asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated
or unliquidated, and due or to become due), other than (A) those set forth or
adequately provided for in the September 30, 2003 Balance Sheet or in the
footnotes thereto that are of a nature required by SAP to be set forth therein;
(B) those incurred in the ordinary course of business since the date of the
September 30, 2003 Balance Sheet and consistent with past practice (only if such
obligations or liabilities do not arise out of, result from or relate to any
breach of contract, breach of warranty, tort, infringement or violation of law);
and (C) those incurred in connection with the execution of this Agreement.
SECTION 3.10. PROPERTIES. The Company does not own any material personal
property or any real property. The Company does not lease any real property.
SECTION 3.11. TAXES.
(A) Since January 1, 2000, the Company has been included in consolidated
federal income Tax Returns filed by ProCentury Corporation, an Ohio
corporation ("PC").
(B) Except as set forth on Schedule 3.11:
(1) All Tax Returns required to be filed by the Company and all
Tax Returns of any consolidated, combined or unitary group
which includes the Company are complete and accurate in all
respects material to the financial condition or the business
of the Company and have been timely filed, and the Taxes shown
thereon as due to be paid or withheld have been paid or
withheld.
(2) The statute of limitations for the assessment of federal
income taxes of the Company has expired for each period
through December 31, 1999.
(3) No deficiency or adjustment for any Taxes of the Company not
yet paid has been proposed in writing to Seller or PC or, to
the knowledge of Seller or PC, assessed.
(4) All Taxes of the Company required to be paid by the Company on
all Tax Returns required to be filed have been paid and all
such Taxes for the periods since the last Tax Returns were
filed through the Closing Date for which Tax Returns are
required to be filed in the future, and all other
7
Taxes for periods through the Closing Date for which Tax
Returns are not required to be filed, and all interest and
penalties thereon, whether disputed or not, have been duly
paid or reserved for in accordance with SAP on the Company
Financial Statements through the dates thereof and thereafter
reserved for on the books and records of the Company, and the
Company does not have any liability for Taxes in excess of the
amounts so paid or reserved for in accordance with SAP on the
Company Financial Statements through the dates thereof and
thereafter reserved for on the books and records of the
Company.
(5) All Taxes of the Company for that portion of the current Tax
year occurring prior to and including the Closing Date,
whether or not they have become payable, have been (or at or
prior to the Closing Date shall be) paid in full or adequately
reserved for in accordance with SAP, and to the extent
liabilities for Taxes have been accrued but not become
payable, they are adequately reflected in accordance with SAP
on the Company Financial Statements through the dates thereof
and thereafter on the books and records of the Company.
(6) There are no federal, state or local Tax liens upon any
property or assets of the Company other than liens for Taxes
not yet due and payable.
(7) Neither the Company, nor any member of any consolidated,
combined or unitary group which includes the Company, has any
current or pending request for any extension of time within
which to file any Tax Returns for which Tax Returns have not
yet been filed with the taxing authority.
(8) Neither the Company nor any consolidated, combined or unitary
group which includes the Company, has any pending or, to the
knowledge of Seller or PC, proposed audit of any Tax Returns
with respect to which the Company has or would have any
liability. No deficiencies for Taxes have been claimed,
assessed or, to the knowledge of Seller or PC, proposed by any
taxing authority against either the Company or any member of
any consolidated, combined or unitary group which includes the
Company with respect to which the Company would have any
liability, and, to the knowledge of Seller or PC, there is no
basis for any such deficiency or claim for which adequate
reserves in accordance with SAP have not been established on
the Company Financial Statements through the date thereof and
thereafter on the books and records of the Company.
(C) For purposes of this Agreement, "Taxes" shall mean all material
taxes, charges, fees, levies or other assessments of whatever kind
or nature, including without limitation, all net income, gross
income, gross receipts, premium, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment,
excise, estimated, severance, stamp, occupancy or property taxes,
custom duties, fees, assessments or charges of any kind whatsoever
(together with any interest, penalty, or addition to tax), including
any obligation to contribute to the payment
8
of a Tax determined upon a consolidated, combined or unitary basis
with respect to a group of corporations that includes or included
the Company, pursuant to Treasury Department Regulation Section
1.1502-6 or otherwise.
(D) For purposes of this Agreement, "Tax Returns" shall mean all
returns, amended returns, declarations, reports, estimates,
information returns and statements required to be filed under
federal, state or local law relating to Taxes by, or including, the
Company.
SECTION 3.12. EMPLOYEES.
(A) The Company currently has no employees. The Company does not
maintain any pension plans, as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), welfare plans, as defined in Section 3(1) of ERISA, or
other incentive, fringe benefit, vacation, or leave plans, policies
or arrangements. Since January 1, 1997, (i) neither the Company nor
the Seller has maintained or contributed to, or been required to
contribute to, any "multiemployer plan" as that term is defined in
Section 4001(a)(3) of ERISA, and (ii) neither the Company nor the
Seller has incurred, or will incur with respect to any event
occurring prior to the Closing Date, any liability under Sections
4062, 4063 or 4201 of ERISA.
(B) To the knowledge of Seller, there are no employment, incentive,
bonus or other employee merit agreements or arrangements between the
Company, on the one hand, and any current or former employee
thereof, on the other.
SECTION 3.13. CONTRACTS. Schedule 3.13(A) contains a complete and accurate
list of all contracts, agreements, options, instruments, commitments and
understandings to which the Company is a party or to which it is subject (each,
a "Contract"), other than Contracts that are not material (either individually
or in the aggregate) to the Company or the business or operations of the
Company. Except as set forth on Schedule 3.13(B): (1) neither the Company, nor
(to the knowledge of Seller) any other party to a Contract, is in default
thereunder, except for such defaults as have been cured or waived in writing by
an appropriate party (provided that the Company has not waived any material
default under any provision of any Contract which has not been terminated prior
to the Closing Date) or such defaults which are not material to the financial
condition or business of the Company; (2) all such Contracts, to the extent the
same give rights to the Company, are enforceable by the Company in accordance
with their terms, subject to applicable bankruptcy, insolvency, reorganization
or other laws of general applicability affecting creditor's rights generally,
and the effect of laws governing specific performance, injunctive relief and
other equitable remedies on the enforceability of such documents, and neither
Seller nor the Company has received written notice of any claim to the contrary;
and (3) each Contract is in full force and effect and constitutes a legal, valid
and binding obligation of the respective parties thereto. Except as provided on
Schedule 3.13(B), no consent or other authorization from any Person (other than
the Company) who is a party to any such Contract is required to consummate the
transactions contemplated by this Agreement. Except as set forth on Schedule
3.13(C), the Company is not a party to or bound by any Contract with Seller or
any Affiliate of Seller, and no Contract with Seller or any Affiliate of Seller
which was previously in
9
force has been terminated by the Company since December 31, 2002, except as
expressly contemplated by this Agreement.
SECTION 3.14. INSURANCE COVERAGE. Schedule 3.14 contains a complete and
correct list of all insurance policies maintained by Seller or any Affiliate
thereof which provide coverage for the Company, or its officers and directors.
The Company does not maintain any insurance policies.
SECTION 3.15. BOOKS AND RECORDS. The books of account of the Company
reflect all material items of income and expense and all material assets,
liabilities and accruals, and are prepared and maintained in form and substance
adequate for preparing audited financial statements in accordance with SAP.
SECTION 3.16. RESERVES. Seller has provided to Purchaser the Company's
independent actuary's opinion and analysis of the loss reserves of the Company
as of December 31, 2002.
SECTION 3.17. ACCURACY OF REPRESENTATIONS, WARRANTIES AND OTHER STATEMENTS
MADE. The representations and warranties of Seller set forth in this Agreement,
and in any certification delivered pursuant hereto, do not contain any untrue
statement of a material fact. Except as expressly set forth in this Article III,
Seller makes no representation or warranty, express or implied, at law or in
equity, in respect of the Company or any of its assets, liabilities or
operations, and any such other representations or warranties are hereby
expressly disclaimed.
ARTICLE IV
ADDITIONAL COVENANTS AND AGREEMENTS
SECTION 4.1. SETTLEMENT OF INTERCOMPANY ACCOUNTS. All intercompany
accounts between the Company, on the one hand, and Seller or any of its
Affiliates, on the other, shall be finally settled, compromised or paid in full
on or prior to the Closing Date, unless such relationship will continue after
the Closing.
SECTION 4.2. EXPENSES. Each party hereto shall pay its own expenses
incident to preparing for, entering into and carrying out this Agreement. The
Company shall not bear any expenses incident to the transactions contemplated
hereby, it being understood and agreed that all such expenses of the Company
shall be borne by Seller.
ARTICLE V
TAX MATTERS
SECTION 5.1. PAYMENTS IN RESPECT OF TAXES AND TAX RETURNS FOR STUB PERIOD
PRIOR TO AND INCLUDING THE TERMINATION DATE.
(A) Purchaser acknowledges that PC has included the Company as a member
of its affiliated group in its consolidated federal income Tax
Return for the calendar years 2000 though 2002 and will include the
Company in its consolidated federal income Tax Return for the
calendar year 2003. The Company files its own state and local tax
returns.
10
(B) Any Tax allocation or sharing agreement or arrangement, whether or
not written, that may have been entered into by the Company and
Seller or any Affiliate of Seller, including without limitation that
certain Tax Allocation Agreement dated as of January 1, 2003 by and
among PC and certain of its Affiliates (the "TAA"), shall be
terminated as to the Company as of the close of business on December
31, 2003 (the "Termination Date"), and no payments which are owed by
or to the Company pursuant thereto shall be made thereunder;
provided, however, that immediately prior to such termination, any
intercompany accounts arising from the operation of Section 5 of the
TAA shall be paid and settled effective as of the Termination Date.
(C) All Taxes attributable to the Company for the Tax period ending on
or prior to the Closing Date shall be accrued and paid by Seller and
PC. Seller shall be liable for and shall pay all transfer taxes
arising from the sale of the Shares. Whenever it is necessary to
determine the liability for Taxes of the Company for a portion of a
taxable year or period that begins before and ends after the Closing
Date, the determination of the Taxes of the Company for the portion
of the year or period ending on, and the portion of the year or
period beginning after, the Closing Date shall be determined by
assuming that the Company had a taxable year or period which ended
at the close of the Closing Date, except the exemptions, allowances
or deductions that are calculated on an annual basis, such as the
deduction for depreciation, shall be apportioned on a time basis.
Seller agrees, with respect to Tax attributes of the Company, not to
take any actions inconsistent with the Company's Tax accounting
methods applied on a consistent basis which have the effect of
accelerating a deduction otherwise attributable to the period on or
after the Closing Date to the period before such date or the effect
of deferring a Tax liability otherwise attributable to the period
before or on the Closing Date to the period after such date.
(D) PC and Seller shall file or cause to be filed when due all Tax
Returns with respect to Taxes that are required to be filed by or
with respect to the Company for taxable years or periods ending on
or before the Closing Date; provided, however, that (1) any such Tax
Return relating to a taxable year or period that begins before and
ends after the Closing Date shall be prepared in accordance with the
Company's past practices applied on a consistent basis; (2)
Purchaser shall have a reasonable opportunity to review and comment
upon each such Tax Return; and (3) PC and Seller shall make, or
cause to be made, such revisions to such Tax Returns as are
reasonably requested by Purchaser. Purchaser shall file or cause to
be filed when due all Tax Returns with respect to Taxes that are
required to be filed by or with respect to the Company for taxable
years or periods ending after the Closing Date; provided, however,
that (1) any such Tax Return relating to a taxable year or period
that begins before and ends after the Closing Date shall be prepared
in accordance with the Company's past practices applied on a
consistent basis; (2) Seller shall have a reasonable opportunity to
review and comment upon each such Tax Return; and (3) Purchaser
shall make, or cause to be made, such revisions to such Tax Returns
as are reasonably requested by Seller. Seller shall pay Purchaser
the Taxes for which PC and Seller are liable pursuant to Section
11
5.1(C) but which are payable with Tax Returns to be filed by
Purchaser pursuant to the previous sentence within ten (10) days
prior to the date for the filing of such Tax Returns. Purchaser
shall pay to Seller within ten (10) days after receipt by Purchaser
any refund or credit of Taxes for which Seller is liable, which
refund or credit is received by Purchaser with respect to Tax
Returns to be filed by Purchaser pursuant to this Section 5.1(D).
SECTION 5.2. DISCLOSURE OF TAX TREATMENT. Notwithstanding anything to the
contrary contained in this Agreement or any other express or implied agreement,
arrangement or understanding, the parties hereto hereby agree that each such
party (and each employee, representative or other agent of each such party) may
disclose to any and all persons, without limitation of any kind, (A) the tax
treatment and tax structure of the transactions contemplated by this Agreement
and the tax treatment and tax structure of all related transactions, and (B) all
materials of any kind (including opinions or other tax analyses) that are
provided to such party relating to such tax treatment and tax structure.
SECTION 5.3. MUTUAL COOPERATION. Purchaser, on the one hand, and Seller,
on the other, shall provide each other with such assistance as may reasonably be
requested by either of them in connection with the preparation and execution of
any Tax Return, any audit or other examination by any taxing authority, or any
judicial or administrative proceedings relating to liability for Taxes, and each
will retain and, upon the request of the other, provide the other with any
records or information which may be relevant to such return, audit or
examination or proceedings. Such assistance shall include making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder and shall include providing
copies of any relevant Tax Returns (or portions thereof) and supporting work
schedules. The party requesting such assistance hereunder shall reimburse the
other for out-of-pocket expenses (but not including any salary or other
compensation, or any other overhead or administrative expenses) actually and
reasonably incurred by the other in providing such assistance.
ARTICLE VI
INDEMNIFICATION
SECTION 6.1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
(A) The term "Claim Notice" shall mean the written notification by an
Indemnified Party to an Indemnifying Party pursuant to Section 6.4
hereof, which notification shall include a copy of all papers
served, if any;
(B) The term "Compromise Notice" shall mean a written notice given by
each party to an Indemnifiable Claim stating that such party desires
to accept a proposed compromise or settlement with respect to such
Indemnifiable Claim;
(C) The term "Damages" shall mean all losses, damages, obligations,
liabilities, judgments and settlements, including, without
limitation, costs (including court
12
costs and costs of any third party arbitrator) and Expenses, as well
as any resulting fines, penalties, assessments or Taxes;
(D) The term "Expenses" shall mean all out-of-pocket expenses reasonably
incurred under the circumstances or for the purposes in question or
to enforce rights or obligations hereunder, including, without
limitation, costs of investigation, court costs, costs of
arbitration or mediation and reasonable attorneys', accountants' and
expert witnesses' fees and out-of-pocket expenses;
(E) The term "Indemnifiable Claim" shall mean a claim for which an
Indemnified Party is making a claim under this Article VI for
Indemnifiable Losses;
(F) The term "Indemnifiable Losses" shall mean any and all Damages for
which an Indemnified Person is entitled to indemnification;
(G) The term "Indemnified Party" shall mean any Person entitled to
receive indemnification under this Agreement;
(H) The term "Indemnifying Party" shall mean any Person required to
provide indemnification under this Agreement;
(I) The term "Settlement Sum" shall mean the sum of: (1) the amount of a
proposed compromise or settlement of an Indemnifiable Claim agreed
to by all parties to such Indemnifiable Claim (other than the
Indemnified Party); and (2) the amount of all other Indemnified
Losses to which the Indemnified Party is entitled with respect to
such Indemnifiable Claims outstanding at the expiration of the
thirty day calendar period beginning on the date on which the last
Compromise Notice relating to such indemnified claim has been
received by the Indemnified Party;
(J) The term "Third Party Claim" shall mean a claim or demand asserted
against or sought to be collected from an Indemnified Party by a
Person other than Seller, the Company, Purchaser or any Affiliates
of Seller or Purchaser.
SECTION 6.2. TAX INDEMNIFICATION.
(A) Seller shall be liable for, shall pay, and shall defend, indemnify
and hold Purchaser and its Affiliates (and their respective
officers, directors, employees, agents and representatives) harmless
from and against any and all Taxes due from the Company for any
taxable period (or portion thereof) ending on or before the Closing
Date, together with all Expenses related thereto; provided, however,
that Seller shall not be liable for such Expenses or to indemnify
Purchaser or its Affiliates on account thereof to the extent Section
6.2(E) expressly states that an action by Purchaser shall be at its
Expense. Seller shall be entitled to all refunds of Taxes payable
with respect to the Company for taxable periods (or portions
thereof) ending on or before the Closing Date.
(B) Purchaser shall be liable for, shall pay, and shall defend,
indemnify and hold Seller and its Affiliates (and its officers,
directors, employees, agents and
13
representatives) harmless from and against any and all Taxes due
from the Company for any taxable period (or portion thereof)
beginning after the Closing Date, together with all Expenses related
thereto; provided, however, that Purchaser shall not be liable for
such Expenses to the extent Section 6.2(E) expressly states that any
action by Seller shall be at its Expense. Purchaser shall be
entitled to all refunds of Taxes payable with respect to the Company
for such taxable periods (or portions thereof).
(C) The Indemnified Party shall notify the Indemnifying Party promptly
of the commencement of any claim, action, suit or proceeding or
other proposed charge or adjustment by any taxing authority
concerning Taxes or other Damages for which the Indemnifying Party
is liable pursuant to Section 6.2(A) or 6.2(B) hereof ("Tax Claim").
(D) The Indemnified Party shall furnish the Indemnifying Party in a
timely manner with copies of all correspondence (including, without
limitation, notices, requests, explanations, determinations,
schedules, charts and lists) received from any taxing authority in
connection with any Tax Claim for which the Indemnified Party is
seeking indemnification hereunder.
(E) At its option (following reasonable notice and consultation with the
Indemnified Party), the Indemnifying Party may, at its Expense,
contest any Tax Claim in any legally permissible manner until such
time as any payment for Taxes or such other Damages with respect to
such Tax Claim is due or, upon the Indemnifying Party's payment of
such Taxes and other Damages, may ▇▇▇ for a refund thereof where
permitted by applicable law. Except as provided in the last sentence
of this subsection, the Indemnifying Party shall control all
actions, suits and proceedings taken in connection with any such
contest or refund suit, and may pursue or forego any and all
administrative appeals, actions, suits and proceedings and
conferences with the taxing authority in respect to such Tax Claim.
Notwithstanding the foregoing, if such contest or refund suit has or
would reasonably be expected to have a material adverse effect on
the Indemnified Party or on the liability of the Indemnified Party
for Taxes, if the Indemnified Party is Purchaser or an Affiliate
thereof, with respect to any period (or portion thereof) ending
after the Closing Date, and, if the Indemnified Party is Seller,
with respect to any period (or portion thereof) ending on or prior
to the Closing Date, then the Indemnified Party may, at its Expense,
participate in any such contest or refund suit and no party shall
compromise or settle such contest or refund suit without the consent
of the other parties, which consent shall not be unreasonably
withheld.
SECTION 6.3. GENERAL INDEMNIFICATION. The indemnification required under
any subsection of this Section 6.3 is in addition to the indemnification
required under any other subsection of this Section 6.3 and to any rights to
indemnification elsewhere provided for in this Agreement.
(A) Seller hereby agrees to indemnify, defend and hold Purchaser and its
Affiliates (and their respective officers, directors, employees,
agents and representatives)
14
harmless from and against and in respect of, and shall on demand pay
or reimburse Purchaser and its Affiliates (and their respective
officers, directors, employees, agents and representatives) for any
and all Damages, whether or not involving a Third Party Claim:
(1) based upon or arising out of the breach of any representation
or warranty or the non-performance, partial or total, of any
covenant or agreement of Seller contained in this Agreement;
(2) based upon or arising out of the items of litigation (and the
facts underlying such litigation) which are identified on
Schedule 3.5(B); and
(3) based upon or arising with respect to the compensation and
employee benefits due, prior to the Closing Date, to any
employee of the Seller who provided services to the Company,
including, without limitation, any amounts for salary, wages
and incentive compensation, and any liabilities arising
directly or indirectly from any employee benefit plan (as
defined in Section 3(3) of ERISA) maintained, or contributed
to, by the Seller.
(B) Purchaser hereby agrees to indemnify, defend and hold Seller and its
Affiliates (and its officers, directors, employees, agents and
representatives of each) harmless from and against and in respect
of, and shall on demand pay or reimburse Seller and its Affiliates
(and its officers, directors, employees, agents and other
representatives) for any and all Damages whether or not involving a
Third Party Claim, based upon or arising out of the breach of any
representation or warranty or the non-performance, partial or total,
of any covenant or agreement of Purchaser contained in this
Agreement.
SECTION 6.4. METHOD OF ASSERTING CLAIMS. All claims for indemnification by
any Indemnified Party under Section 6.3 shall be asserted and resolved as
follows:
(A) In the event any claim or demand for which an Indemnifying Party
would be liable for Damages to an Indemnified Party under Section
6.3 hereof is a Third Party Claim, the Indemnified Party shall
deliver a Claim Notice with reasonable promptness to the
Indemnifying Party. If the Indemnified Party fails to provide the
Indemnifying Party with the Claim Notice required by the preceding
sentence at least ten (10) calendar days before the date on which
the Indemnifying Party's ability to defend against the Third Party
Claim is materially prejudiced by the Indemnified Party's failure to
provide such Claim Notice, the Indemnifying Party will not be
obligated to indemnify the Indemnified Party with respect to such
portion of the Third Party Claim as to which the Indemnifying
Party's ability to defend has been prejudiced by such failure of the
Indemnified Party, except where the Indemnified Party itself did not
receive the Claim Notice in time to meet the ten (10) day prior
notice requirement.
(B) Upon receipt of a Claim Notice, the Indemnifying Party shall notify
the Indemnified Party with reasonable promptness, but in all events
within fifteen
15
(15) calendar days after receipt thereof ("Notice Period"), of
whether the Indemnifying Party disputes its liability to the
Indemnified Party hereunder with respect to such Third Party Claim
and whether the Indemnifying Party desires, at the sole cost and
Expense of the Indemnifying Party, to defend the Indemnified Party
against such Third Party Claim.
(C) If the Indemnifying Party notifies the Indemnified Party within the
Notice Period or at any time thereafter that the Indemnifying Party
does not dispute its liability to the Indemnified Party and that the
Indemnifying Party desires to defend the Indemnified Party with
respect to the Third Party Claim pursuant to this Article VI, then
the Indemnifying Party shall have the right to defend, at its sole
cost and Expense, such Third Party Claim by all appropriate actions,
suits and proceedings. Such actions, suits and proceedings shall be
diligently prosecuted by the Indemnifying Party to a final
conclusion or will be settled at the discretion of the Indemnifying
Party (with the prior written consent of the Indemnified Party,
which consent will not be unreasonably withheld or delayed). From
the date of such notice, the Indemnifying Party shall have full
control of such defense and actions, suits and proceedings,
including any compromise or settlement thereof; provided, however,
that the Indemnified Party may, at any time prior to its receipt of
such notice from the Indemnifying Party, file any motion, answer, or
other pleadings that the Indemnified Party may deem necessary or
appropriate to protect its interests or those of the Indemnifying
Party and not materially prejudicial to the Indemnifying Party (it
being understood and agreed that, except as provided in Section
6.4(D) hereof, if an Indemnified Party takes any such action that is
materially prejudicial and conclusively causes a final adjudication
that is materially adverse to the Indemnifying Party, the
Indemnifying Party will be relieved of its obligations hereunder
with respect to the portion of such Third Party Claim prejudiced by
the Indemnified Party's action); and provided further, that if
requested by the Indemnifying Party, the Indemnified Party agrees,
at the sole cost and Expense of the Indemnifying Party (except that
the Indemnifying Party shall not be responsible for any attorneys
fees of the Indemnified Party unless the retention of such attorneys
is requested by the Indemnifying Party), to cooperate with the
Indemnifying Party and its counsel in contesting any Third Party
Claim that the Indemnifying Party elects to contest, or if
appropriate and related to the Third Party Claim in question, in
making any counterclaim against the Person asserting the Third Party
Claim, or any cross-complaint against any Person (other than the
Indemnified Party or any of its Affiliates). The Indemnified Party
may participate in, but not control, any defense or settlement of
any Third Party Claim controlled by the Indemnifying Party pursuant
to this Subsection (C), and except as provided in the preceding
sentence, the Indemnified Party shall bear its own Expenses with
respect to such participation.
(D) If the Indemnifying Party fails to notify the Indemnified Party that
the Indemnifying Party does not dispute its liability to the
Indemnified Party and that the Indemnifying Party desires to defend
the Indemnified Party with respect to the Third Party Claim pursuant
to this Article VI, or if the Indemnifying Party gives such notice
but fails diligently and promptly to prosecute or settle the Third
Party
16
Claim, then the Indemnified Party shall have the right to defend, at
the sole Expense of the Indemnifying Party, the Third Party Claim by
all appropriate actions, suits and proceedings. Such actions, suits
and proceedings shall be promptly and vigorously prosecuted by the
Indemnified Party to a final conclusion or will be settled at the
discretion of the Indemnified Party (with the prior consent of the
Indemnifying Party, which consent shall not be unreasonably withheld
or delayed). The Indemnified Party shall have full control of such
defense and actions, suits and proceedings, including any compromise
or settlement thereof; provided, however, that if requested by the
Indemnified Party, the Indemnifying Party agrees, at the sole
Expense of the Indemnifying Party, to cooperate with the Indemnified
Party and its counsel in contesting any Third Party Claim which the
Indemnified Party is contesting, or, if appropriate and related to
the Third Party Claim in question, in making any counterclaim
against the Person asserting the Third Party Claim, or any
cross-complaint against any Person (other than the Indemnifying
Party or any of its Affiliates). The Indemnifying Party may
participate in, but not control, any defense or settlement
controlled by the Indemnified Party pursuant to this Section 6.4(D),
and the Indemnifying Party shall bear its own Expenses with respect
to such participation.
(E) Notwithstanding the foregoing provisions of this Section 6.4, if the
Indemnifying Party has notified the Indemnified Party within the
Notice Period that the Indemnifying Party disputes its liability to
the Indemnified Party and if such dispute is resolved in favor of
the Indemnifying Party by a final, non-appealable order, ruling,
judgment or decree of a court of competent jurisdiction, the
Indemnifying Party shall not be required to provide any
indemnification hereunder and shall not be required to bear any
Expenses of the Indemnified Party's defense pursuant to Section
6.4(D) or of the Indemnifying Party's participation therein at the
Indemnified Party's request, and the Indemnified Party shall
reimburse the Indemnifying Party in full for all Expenses incurred
by the Indemnifying Party in connection with such claim.
(F) In the event any Indemnified Party has a claim against any
Indemnifying Party hereunder that does not involve a Third Party
Claim being asserted against or sought to be collected from the
Indemnified Party, the Indemnified Party shall notify the
Indemnifying Party with reasonable promptness of such claim by the
Indemnified Party, specifying the nature of and specific basis for
such claim and the amount or the estimated amount of such claim (the
"Indemnity Notice"). If, within sixty (60) days after the date of
the Indemnity Notice, the Indemnifying Party does not notify the
Indemnified Party that the Indemnifying Party disputes the claim,
the amount of such claim specified by the Indemnified Party will be
conclusively deemed a liability of the Indemnifying Party hereunder.
If the Indemnifying Party timely disputes such claim, the
Indemnifying Party and the Indemnified Party shall proceed in good
faith to attempt to negotiate a resolution of such dispute, and if
not resolved through negotiations, either party may pursue whatever
remedies it may have under applicable law.
17
(G) An Indemnified Party shall not compromise or settle a claim for
which an Indemnified Party is making an Indemnifiable Claim under
this Section 6.4 without the prior written consent of the
Indemnifying Party (which consent shall not be unreasonably withheld
or delayed). The Indemnifying Party shall not compromise or settle
an Indemnifiable Claim without the prior written consent of the
Indemnified Party, but in the event: (1) a firm offer is made to
compromise or settle an Indemnifiable Claim in a manner that will
not subject the Indemnified Party to liability and will not
otherwise adversely affect the rights of the Indemnified Party, and
(2) all parties to the Indemnifiable Claim (other than the
Indemnified Party) deliver a Compromise Notice to the Indemnified
Party, but (3) the Indemnified Party does not elect (within thirty
(30) calendar days after its receipt of the last Compromise Notice
from the other parties to the Indemnifiable Claim) to accept or
agree to such compromise or settlement, then the indemnity
obligation of the Indemnifying Party arising from or relating to the
Indemnifiable Claim shall be limited to the Settlement Sum, and
thereafter the Indemnified Party shall either pay directly or
reimburse the Indemnifying Party promptly following the final,
non-appealable conclusion of the action, suit or proceeding with
respect to the Indemnifiable Claim for the amount by which the
liability and Expenses incurred by the Indemnifying Party after the
date of the Indemnified Party's election exceeds the Settlement Sum.
SECTION 6.5. TIME LIMITATIONS. If the Closing occurs, Seller shall have no
liability (for indemnification or otherwise) with respect to any representation
or warranty, or covenant or obligation to be performed and complied with prior
to the Closing Date, unless Purchaser shall provide notice to Seller pursuant to
Section 6.4 on or before the date which is eighteen (18) months after the
Closing Date; provided, however, that (i) Seller's liability (for
indemnification or otherwise) with respect to Taxes shall survive until (A) for
a Tax for which the Company is primarily liable, the later to occur of (1) the
lapse of the statute of limitations for the assessment of such Tax against the
Company or (2) sixty (60) days after the administrative or judicial
determination of such Tax; and (B) for a Tax for which the Company is not
primarily liable, the later to occur of (1) the lapse of the statute of
limitations for the collection of such Tax against the Company or (2) sixty (60)
days after the final administrative or judicial determination of the
collectibility of such Tax against the Company, and (ii) Seller's liability for
indemnification under Section 6.3(A)(3) shall survive until the third
anniversary of the Closing Date. If the Closing occurs, Purchaser shall have no
liability (for indemnification or otherwise) with respect to any representation
or warranty or covenant or obligation to be performed and complied with prior to
the Closing Date, unless Seller shall provide notice to Purchaser pursuant to
Section 6.4 on or before the date which is eighteen (18) months after the
Closing Date.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.1. CERTAIN DEFINITIONS. As used in this Agreement, the following
terms have the following meanings:
(A) The term "Affiliate" shall mean a Person that directly, or
indirectly through one or more intermediaries, controls, is
controlled by or is under common control with
18
any Person or beneficially owns or has the power to vote or direct
the vote of ten percent (10%) or more of any class of voting stock
(or of any form of voting equity interest in the case of a Person
that is not a corporation) of such other Person. For purposes of
this definition, "control" shall mean the power to direct or cause
the direction of the management and policies of a Person, directly
or indirectly, whether through the ownership of securities or
partnership or other ownership interests, by contract or otherwise.
The Company shall be deemed to be an Affiliate of Seller prior to
the Closing and an Affiliate of Purchaser at and after the Closing.
(B) The term "Person" means any individual, corporation, general or
limited partnership, limited liability company, joint venture,
estate, trust, association, organization, or other entity or
governmental authority.
SECTION 7.2. FURTHER ASSURANCES. The parties agree, both before and after
the Closing: (A) to furnish upon request to each other such further information;
(B) to execute and deliver to each other such other documents; and (C) to do
such other acts and things, all as the other party may reasonably request for
the purpose of carrying out the intent of this Agreement and the transactions
contemplated hereby.
SECTION 7.3. NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly received (A) on the date
given if delivered personally or by cable, telegram, telex or telecopy
(confirmation requested) or (B) on the date received if mailed by registered or
certified mail (return receipt requested), to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(A) if to Seller:
Century Surety Company
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Executive Vice- President and Secretary
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇, Muething & ▇▇▇▇▇▇▇ PLL
1400 Provident Tower
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
19
(B) if to Purchaser:
Evergreen National Indemnity Company
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: Roswell ▇. ▇▇▇▇▇, Chairman
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Vorys, ▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇ LLP
▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 7.4. NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement is
intended nor shall it be construed to give any Person, other than the parties
hereto and their respective successors and permitted assigns, any right, remedy
or claim under or in respect of this Agreement or any provisions hereof.
SECTION 7.5. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Neither Seller nor Purchaser may assign any of
their respective rights and obligations under this Agreement. Except as provided
in the immediately preceding sentence, permitted assigns shall mean only those
Persons who become assignees by operation of law as a result of a merger or
other reorganization.
SECTION 7.6. ENTIRE AGREEMENT. This Agreement (together with all Schedules
hereto) represents the entire understanding and agreement between the parties
hereto with respect to the subject matter hereof, both written and oral, and
supersedes all prior agreements related to such subject matter.
SECTION 7.7. AMENDMENT. This Agreement may be amended, supplemented or
changed only by a written instrument making specific reference to this Agreement
and signed by the all of the parties hereto.
SECTION 7.8. WAIVER. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any party in exercising any right, power or privilege under this Agreement or
the documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such right,
power or privilege will preclude any other or further exercise of such right,
power or privilege. To the maximum extent permitted by applicable law: (A) no
claim or right arising out of this Agreement or the documents referred to in
this Agreement can be discharged by one party, in whole or in part, by a waiver
or renunciation of the claim or right unless in writing
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signed by the other party; (B) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (C) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement or the
Schedules hereto.
SECTION 7.9. SEVERABILITY. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any provision
of this Agreement held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.
SECTION 7.10. ARTICLE AND SECTION HEADINGS; CONSTRUCTION. The headings of
Articles and Sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require.
SECTION 7.11.GOVERNING LAW. This Agreement shall be governed by the laws
of the State of Ohio without regard to conflicts of laws principles.
SECTION 7.12.COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, taken together, will be deemed to constitute one and
the same agreement.
[Remainder of Page Intentionally Blank]
[Signature Page Follows]
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SIGNATURES
IN WITNESS WHEREOF, Purchaser and Seller have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all to be
effective as of the date first written above.
CENTURY SURETY COMPANY EVERGREEN NATIONAL
INDEMNITY COMPANY
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------
Printed Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ By: /s/ Roswell ▇. ▇▇▇▇▇
------------------------- -------------------------------
Title: President and COO Printed Name: Roswell ▇. ▇▇▇▇▇
-------------------------------- ---------------------
Title: Chairman, President and CEO
----------------------------
[SIGNATURE PAGE FOR SHARE PURCHASE AGREEMENT]
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