SHARE PURCHASE AGREEMENT
THIS AGREEMENT is entered into as of the 30th day of August, 2002, by and
between PROGRESSIVE AGENCY HOLDINGS CORP., an Ohio corporation ("Seller"), and
BLAST ACQUISITION CORP., a Delaware corporation ("Buyer").
W I T N E S S E T H :
WHEREAS, Seller owns all of the issued and outstanding capital stock of
▇▇▇▇▇ ▇▇▇▇▇ Companies, Inc., a Delaware corporation ("Company"); and
WHEREAS, Buyer desires to acquire from Seller all of the issued and
outstanding capital stock of Company, and Seller desires to sell such stock to
Buyer, upon the terms and conditions set forth below; and
WHEREAS, the parties hereto have reached agreement as to the purchase and
sale of such stock and certain related matters;
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE 1. SALE AND PURCHASE; PURCHASE PRICE PAYMENTS; SECURITY.
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Section 1.1 Upon and subject to the terms and conditions of this Agreement,
Seller shall sell and assign to Buyer, and Buyer shall purchase from Seller, the
Shares (as defined in Subsection 3.1(e) hereof) for an aggregate purchase price
of Eight Hundred Fifty Thousand Dollars ($850,000.00) (the "Purchase Price").
The Shares to be sold to and acquired by Buyer hereunder constitute all of the
issued and outstanding capital stock of Company.
Section 1.2 The Purchase Price (together with interest as provided below)
shall be the total sum to be paid by Buyer to Seller, and to be accepted by
Seller from Buyer, in full payment and satisfaction for the Shares. The Purchase
Price shall be paid in the following installments (collectively, the
"Installments" or, individually, an "Installment"):
(a) The first Installment of the Purchase Price shall be paid to Seller at
the Closing (as defined below) by delivery to Seller of the sum of Three Hundred
Twenty-Five Thousand Dollars ($325,000.00).
(b) The second Installment of the Purchase Price shall be paid to Seller on
or before the second (2nd) anniversary of the Closing Date (as defined below),
by delivery to the Seller of the sum of One Hundred Twenty-Five Thousand Dollars
($125,000.00).
(c) The third Installment of the Purchase Price shall be paid to Seller on
or before the third (3rd) anniversary of the Closing Date, by delivery to Seller
of the sum of One Hundred Twenty-Five Thousand Dollars ($125,000.00).
(d) The fourth Installment of the Purchase Price shall be paid to Seller on
or before the fourth (4th) anniversary of the Closing Date by delivery to Seller
of the sum of Two Hundred Seventy-Five Thousand Dollars ($275,000.00), together
with accrued interest as provided below.
(e) The second, third and fourth installments of the Purchase Price are
herein referred to collectively as the "Deferred Installments" and individually
as a "Deferred Installment". Each date on which a Deferred Installment is due is
referred to herein as an "Installment Payment Date."
Section 1.3 Interest shall accrue on the unpaid balance of the Purchase
Price from and after the Closing Date at the rate of five percent (5%) per annum
(the "Base Rate"). Interest shall be paid by Buyer to Seller quarterly in
arrears on or before the tenth (10th) day of the month immediately following the
last day of each calendar quarter (i.e., on or before April 10, July 10, October
10 and January 10 for the immediately preceding three (3) month period or
portion thereof) following the Closing Date so long as any portion of the
Purchase Price remains outstanding, except that all accrued interest shall be
paid on the fourth Installment Payment Date or at such earlier time as the
Purchase Price is paid in full. In the event Buyer shall fail to pay any
Deferred Installment on or before the applicable Installment Payment Date or any
interest payment on or before the date such interest payment is due and such
failure shall continue for the Payment Default Cure Period (as defined below),
then interest shall immediately begin to accrue on the unpaid balance of the
Purchase Price at the rate of eighteen percent (18%) per annum or the highest
rate permitted by law, whichever is less (the "Default Rate") until such
delinquent amount is paid in full, together with all interest accrued through
the date that such delinquent payment is paid in full, in addition to any other
rights or remedies which Seller may have at law, in equity or under this
Agreement or the Security Agreement (defined below). Buyer shall be permitted to
make a prepayment with respect to the Deferred Installments at any time without
penalty, provided that each partial prepayment will be applied to reduce, in
equal amounts, each Deferred Installment that remains outstanding as of the date
of such prepayment until paid in full (e.g., one-third of any prepayments made
prior to the due date for the first Deferred Installment (i.e., the second
Installment) will be applied to reduce each of the first, second and third
Deferred Installments (i.e., the second, third and fourth Installments)). Any
amounts which the parties agree is due from the Seller to Buyer under this
Agreement, or which is determined by a court of competent jurisdiction to be due
from Seller to Buyer under this Agreement, shall be set off against amounts owed
by Buyer to Seller hereunder. If there is a dispute as to such a set off at the
time any payment is due from Buyer to Seller, Buyer shall have the right to
deposit the portion of such payment which is equal to the amount of the disputed
set off into escrow (such escrow to be at Buyer's sole cost and expense) in an
interest-bearing account with an unaffiliated third party reasonably acceptable
to Seller until the dispute is settled or resolved by a court order. Upon such
settlement or court order, the payment and the interest shall be disbursed
either as agreed or as the court determines. At Seller's option, Buyer shall
execute and deliver to Seller at Closing, or at any time thereafter, a
promissory note in form and substance reasonably acceptable to Seller and Buyer
setting forth Buyer's Deferred Installment payment obligations, interest
obligations and prepayment rights, and such other terms as the parties shall
reasonably agree.
Section 1.4 All Installments shall be paid by wire transfer of immediately
available funds (in U.S. dollars) to such account or accounts as Seller shall
designate for such purpose. All interest payments shall be paid, at Buyer's
option, by wire transfer in accordance with the immediately preceding sentence
or by certified or cashier's check (in U.S. Dollars) delivered on or before the
date such payment is due to Seller's notice address hereunder or such other
address as Seller may specify in writing. If any date scheduled for payment of a
Deferred Installment or interest hereunder shall be a Saturday, Sunday or legal
holiday, such Deferred Installment or interest shall be paid on the next
succeeding business day that is not a legal holiday.
Section 1.5 (a) In order to provide security for Buyer's obligations to pay
each of the Deferred Installments of the Purchase Price, and interest as
provided for hereunder, when and as the same shall become due and payable
pursuant to the terms of this Article 1, whether by acceleration under Section
1.6 or otherwise, and for the due observance and/or performance of all other
covenants and agreements made by Buyer hereunder, at the Closing, Buyer, Company
and the Subsidiaries (defined below), as appropriate, will deliver and pledge to
Seller and grant to Seller a first priority lien and security interest in all of
the issued and outstanding capital stock of the Company and each of the
Subsidiaries and in all of the properties and assets of the Company and the
Subsidiaries, including, without limitation, their respective accounts
receivable and books of business ("Security Interest"). At the Closing, Buyer
will execute and deliver, and will cause Company and the Subsidiaries to execute
and deliver, to Seller a security agreement, substantially in the form of
Exhibit "A" hereto (the "Security Agreement"), granting, giving effect to and
evidencing the Security Interest. At Closing, and thereafter as provided in the
Security Agreement, Buyer, Company and the Subsidiaries, at their own cost and
expense, will execute and/or deliver to Seller, promptly upon Seller's request,
any and all such share certificates, stock powers, financing statements,
continuation statements and other documents or instruments, and will do any and
all such other acts and things, as Seller may reasonably request from time to
time in order to evidence and/or perfect the Security Interest in accordance
with the requirements of applicable law. Seller agrees that upon Buyer's payment
in full of the Purchase Price and all interest accrued thereon, the Security
Interest shall thereupon terminate without any further action by either party,
and promptly after Buyer's written request therefor, Seller shall return any
collateral then being held by Seller and file terminations of any financing
statements then of record relating to the Security Interest.
(b) Seller acknowledges that, after Closing, Buyer, the Company and/or the
Subsidiaries may seek to sell and transfer individual locations operated by
Company or the Subsidiaries or its book of business to third parties (in each
case, a "Proposed Transferee"), and in so doing may desire to transfer to such
Proposed Transferee certain of the assets of the Company or the Subsidiaries
which are attributable to such location. Seller agrees that, upon Buyer's
written request ("Transfer Request"), and provided that an Event of Default
shall not have occurred hereunder (without taking into account any applicable
notice or cure period set forth in Section 1.6, provided that if Buyer cures any
such default, Buyer will no longer be deemed to be in default for the purposes
of this provision), Seller will consent to any such transfer and release its
lien and security interest in any such assets being transferred, but only if
contemporaneously with the effectiveness of Seller's consent and release, Buyer
pays to Seller in cash an amount equal to the product of:
(i) the then outstanding balance of the Purchase Price, times
(ii) the greater of
(A) a fraction, the numerator of which is the total commission
and fee income attributable to the location being sold for the most
recent 12 calendar months for which such information is available and
the denominator of which is the total commission and fee income
attributable to the Company and its Subsidiaries as a whole for such
12 month period (excluding any total commission and fee income
attributable to other locations that were previously sold or
transferred during such period), or
(B) a fraction, the numerator of which is the total commission
and fee income attributable to the location being sold for the then
year-to-date period and the denominator of which is the total
commission and fee income attributable to the Company and its
Subsidiaries as a whole for the then year-to-date period (excluding
the total commission and fee income attributable to other locations
that were previously sold or transferred during such period).
Provided that an Event of Default shall not have occurred hereunder (without
taking into account any applicable notice or cure period set forth in Section
1.6, provided that if Buyer cures any such default, Buyer will no longer be
deemed to be in default for the purposes of this provision), any such payment
shall be treated by the parties as a prepayment of Deferred Installments under
Subsection 1.3 above. The Transfer Request shall be delivered to Seller at least
thirty (30) days prior to the date of the proposed transfer to the Proposed
Transferee, and shall include the identity of the Proposed Transferee (and, if
the Proposed Transferee is a corporation or other entity, the identity of the
owner(s) thereof), the information necessary to perform the calculations
required by this Subsection 1.5(b) certified as true and correct by the Buyer's
chief financial officer, and all documents or instruments which Buyer is
requesting that Seller sign in connection therewith, which documents or
instrument shall be subject to the reasonable approval of Seller. Buyer agrees
to reimburse Seller for any reasonable costs or expenses incurred by Seller in
connection with the foregoing. Any requested release of Seller's collateral
which is not expressly covered by the provisions of this Subsection shall be
subject to Seller's prior written consent, which may be withheld in Seller's
sole and absolute discretion.
Section 1.6 It shall be an "Event of Default" under this Agreement if: (i)
Buyer fails for any reason to pay the full amount of any Installment of the
Purchase Price on the applicable Installment Payment Date or fails for any
reason to make any interest payment required hereunder on the date on which such
payment is due and, in either case, such failure to pay is not cured within five
(5) days after Buyer receives written notice of such failure from Seller
("Payment Default Cure Period"); or (ii) any representation or warranty of Buyer
made hereunder was untrue or incomplete in any material respect either when made
or as of the Closing Date; or (iii) any representation or warranty of Buyer, the
Company or any of the Subsidiaries under the Security Agreement was untrue or
incomplete in any material respect when made; or (iv) Buyer fails in any
material respect to perform any of its other covenants or obligations under this
Agreement, which failure under this clause (iv) is not cured within fifteen (15)
days after Seller shall have given Buyer written notice thereof; or (v) Buyer,
the Company and/or any of the Subsidiaries fails in any material respect to
perform any of its or their respective covenants or obligations under the
Security Agreement, which failure under this clause (v) is not cured within
fifteen (15) days after Seller shall have given Buyer written notice thereof.
Upon the occurrence of an Event of Default, in addition to any other rights and
remedies which Seller may have under this Agreement, under the Security
Agreement, at law or in equity, Seller shall have the right to do any one or
more of the following: (A) declare immediately due and payable all Deferred
Installments of the Purchase Price and interest accrued thereon, and upon such
declaration, all such sums shall be immediately due and payable to Seller; (B)
charge interest on the unpaid balance of the Purchase Price at the Default Rate;
(C) notwithstanding anything to the contrary contained herein, apply any
payments thereafter received from or on account of Buyer, first, to any damages,
liabilities, costs or expenses incurred by Seller as a result of such Event of
Default; second, to any interest accrued (at the Base Rate and/or the Default
Rate, as applicable) hereunder through the date of such payment; and third, to
the Deferred Installments in the inverse order of their maturities; (D) revoke
any one or more of the rights granted by Seller to Buyer, Company or any of the
Subsidiaries under Sections 5.3, 5.4 or 5.5 hereof; and/or (v) withhold, or
cause any one or more of its affiliates (Seller and its affiliates being
referred to herein collectively and individually as "Progressive") to withhold,
any amounts owed by Progressive to Buyer, the Company, the Subsidiaries, Buyer's
Guarantor and/or any other affiliates of Buyer or Buyer's Guarantor (hereinafter
defined), including, without limitation, any commissions payable, and set off
such amounts against the amounts owed by Buyer to Seller hereunder. Provided
that Buyer does not dispute Seller's entitlement to exercise its remedies
hereunder, Seller agrees that with respect to any Event of Default arising from
Buyer's monetary default hereunder, Seller will first exercise its right to set
off under clause (D) above against amounts then owed by Progressive to Buyer
prior to exercising its remedies under the Security Agreement (it being
understood that this provision applies only to setting off against those amounts
then owed by Progressive and shall not be interpreted to require Progressive to
delay other remedies because future set off rights may be available).
ARTICLE 2. CLOSING.
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Section 2.1 Closing. The "Closing" means the time at which Seller makes the
sale of the Shares against payment by Buyer of the first Installment of the
Purchase Price therefor. The Closing shall take place in the offices of
Certilman Balin ▇▇▇▇▇ & ▇▇▇▇▇, LLP, at ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
at 9:00 a.m., local time, on the Closing Date.
Section 2.2 Closing Date. The "Closing Date" shall be August 30, 2002, or
such other date as the parties may agree in writing.
Section 2.3 Events of Closing. At the Closing, the following events shall
occur:
(a) Seller shall deliver to Buyer the stock certificate(s) representing all
of the Shares, each such certificate to be duly issued in the name of Seller and
duly endorsed to Buyer, and which, in the aggregate, will represent the record
and beneficial ownership of all of the issued and outstanding capital stock of
Company. All such certificates shall: (i) have any required transfer tax stamps
or similar stamps attached at the cost and expense of Seller, (ii) be
accompanied by any certificates or permits required for transfer of same in
compliance with applicable corporate and securities laws, and (iii) be
accompanied by such additional and supporting documents as may, in the
reasonable opinion of Buyer's counsel, be necessary to pass to and vest in Buyer
title, beneficially and of record, to the Shares, free and clear of any and all
liens, encumbrances, claims, charges, agreements, voting trusts, options,
rights, pledges, mortgages, security interests, conditional sales agreements,
equities and/or restrictions of any kind whatsoever (individually and
collectively, "Liens"), other than the restrictions described in Subsection
4.1(e) and Section 7 of this Agreement and the Security Interest granted
hereunder and under the Security Agreement. Concurrently therewith, Buyer shall
pay to Seller, via wire transfer of immediate available funds, the first
Installment of the Purchase Price for the Shares.
(b) Seller shall deliver to Buyer copies of the resolutions duly adopted by
Seller's Board of Directors authorizing and approving the execution and delivery
of this Agreement and all of the transactions contemplated hereby, duly
certified by the Secretary or Assistant Secretary of Seller;
(c) Seller shall deliver to Buyer the original or a certified copy of the
Certificate of Incorporation, By-laws, stockholder records and minute books of
Company and each of the Subsidiaries;
(d) Seller shall deliver to Buyer certificates, dated as of a recent date,
issued by the Secretary of State or other appropriate official as to the good
standing of Company and each of the Subsidiaries in the respective jurisdictions
of their organization or incorporation;
(e) Seller shall deliver to Buyer the written resignations, dated the
Closing Date, of all of the directors and officers of Company and each of the
Subsidiaries;
(f) Seller shall deliver to Buyer the certificate required by Subsection
9.1(g) hereof, dated as of the Closing Date and duly executed on behalf of
Seller by an officer of Seller;
(g) Seller shall deliver to Buyer an original, fully executed counterpart
of the Security Agreement;
(h) Seller shall deliver to Buyer an opinion of Seller's in-house counsel
substantially in the form attached hereto as Exhibit "B";
(i) Seller shall deliver to Buyer a statement required by Section 5.1(b)
substantially in the form attached hereto as Exhibit "C";
(j) Seller shall deliver to Buyer the guaranty of The Progressive
Corporation, an Ohio corporation, substantially in the form attached hereto as
Exhibit "D";
(k) Buyer shall deliver to Seller copies of the resolutions duly adopted by
Buyer's Board of Directors authorizing and approving the execution and delivery
of this Agreement and all of the transactions contemplated hereby, duly
certified by the Secretary or Assistant Secretary of Buyer;
(l) Buyer shall deliver to Seller a certificate, dated as of a recent date,
issued by the Secretary of State or other appropriate official as to the good
standing of Buyer in its jurisdiction of organization or incorporation;
(m) Buyer shall deliver to Seller the certificate required by Subsection
10.1(f) hereof, dated as of the Closing Date and duly executed on behalf of
Buyer;
(n) Buyer shall deliver to Seller an opinion of Buyer's counsel
substantially in the form attached hereto as Exhibit "E";
(o) Buyer shall deliver to Seller the guaranty of DCAP Group, Inc., a
Delaware corporation ("Buyer's Guarantor") substantially in the form attached
hereto as Exhibit "F";
(p) Buyer shall deliver to Seller an original counterpart of the Security
Agreement duly executed on behalf of Buyer, the Company and each of the
Subsidiaries, original stock certificates representing all of the Shares and all
of the issued and outstanding capital stock in each of the Subsidiaries, and
original stock powers fully executed in blank with respect to the Shares and to
the issued and outstanding capital stock of each of the Subsidiaries, financing
statements covering the applicable collateral under the Security Agreement and
such other documents and instruments as Seller shall reasonably require in
connection therewith; and
(q) Buyer shall deliver to Seller copies of the resolutions duly adopted by
Board of Directors and Shareholders of the Company and each of the Subsidiaries,
authorizing and approving the execution and delivery of the Security Agreement
and all of the transactions contemplated thereby, duly certified by the
Secretary or Assistant Secretary of each such entity.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF SELLER.
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Section 3.1 Seller hereby represents and warrants to Buyer that, except as
otherwise expressly provided in this Agreement:
(a) Organization and Standing. (i) Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Company has all requisite corporate power and authority to own or lease and
operate its properties and to carry on its business as heretofore and presently
conducted. (ii) Company is only qualified to do business in Delaware. The nature
of the Company's properties and business do not require the Company to be
qualified to do business as a foreign corporation in any other jurisdiction.
(b) Subsidiaries.
(i) Company has no direct or indirect subsidiaries and does not own,
directly or indirectly, any shares of the capital stock of, or any
securities or instruments which are convertible into or exchangeable for
any shares of the capital stock of, or otherwise own an equity interest in,
any other corporation, entity or business, except: (A) ▇▇▇▇▇ ▇▇▇▇▇ Agency,
Inc. ("BSA"); (B) Baron Cycle, Inc. ("Baron"); (C) ▇▇▇▇▇ ▇▇▇▇▇ Acquisition
Corp. ("BSAC"); and (D) Aard Vark Agency, Ltd. ("Aard Vark") (which is a
wholly owned subsidiary of BSAC). BSA, Baron, BSAC and Aard Vark are
collectively referred to herein as the "Subsidiaries". Prior to November
12, 1999, the Company and the Subsidiaries were affiliated with (1)
American Nationwide Motor Club, Inc. ("Motor Club"); (2) ▇▇▇▇▇ ▇▇▇▇▇ Tax
Services, Inc. ("Tax Corp"); (3) Worldwide Agency, Inc. ("Worldwide"); (4)
Liberty Premium Acquisition Corporation ("LPAC"); and (5) Capitol Payment
Plan, Inc. ("CPP"). Worldwide, Motor Club, Tax Corp., LPAC and CPP are
collectively referred to herein as the "Former Affiliates." Company owns,
directly or indirectly, all of the issued and outstanding capital stock of
each of the Subsidiaries, free and clear of any and all Liens. All of the
issued and outstanding shares of capital stock of each of the Subsidiaries
has been validly authorized and duly issued and are fully paid and
non-assessable. Seller acquired the Company and the Subsidiaries on
November 12, 1999; the period beginning on that date and ending on the
Closing Date is referred to herein as the "Seller's Ownership Period."
(ii) Each of the Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York. The
nature of the properties and business of the Subsidiaries does not require
that any of the Subsidiaries be qualified or licensed as a foreign
corporation in any other jurisdiction. Each of the Subsidiaries has all
requisite corporate power and authority to own or lease and operate its
properties and to carry on its business as heretofore and presently
conducted.
(c) Organizational Documents. The Certificate of Incorporation and By-Laws
of Company and each of the Subsidiaries (copies of which have been delivered to
Buyer) are in effect on the date hereof and no amendment or modification thereof
will be made prior to the Closing without the prior written consent of Buyer.
(d) Powers and Compliance. Company and each of the Subsidiaries have full
corporate powers and all federal, state and local licenses, certificates,
authorizations, franchises and permits (collectively, "Permits") necessary to
enable them to conduct their respective businesses as presently conducted, other
than any Permits which, if not obtained, would not have a material adverse
effect on the business, operations, assets or financial condition of Company and
the Subsidiaries, taken as a whole ("Material Adverse Effect"), and neither
Company nor any of the Subsidiaries has received any notice of, nor does Seller,
Company or any of the Subsidiaries have knowledge of the imminence of, any
proceeding to suspend, revoke, revise, limit or restrict any such Permit. A true
and complete list of all Permits held by the Company and the Subsidiaries is
included in the disclosure schedule attached hereto as Exhibit "G" (the
"Disclosure Schedule"). All of the Permits are in full force and effect and, to
the knowledge of Seller, Company and each of the Subsidiaries, no suspension or
cancellation of any Permit is threatened. The Company and/or the Subsidiaries
hold, and as of the Closing Date will hold, valid unencumbered agent's and/or
broker's licenses to place various classes of insurance in the State of New
York. Each such license will be maintained in good standing and in full force
and effect through the Closing Date.
(e) Capitalization of Company. Company's entire authorized capital stock
consists solely of 11,000 shares of common stock, $.01 par value per share,
3,913 of which are issued and presently outstanding, and none of which are held
in treasury. The 3,913 outstanding shares of Company's common stock, $.01 par
value per share, are collectively referred to herein as the "Shares." Each of
the Shares has been validly authorized and duly issued and is fully paid and
nonassessable.
(f) Stock Ownership. Seller owns, beneficially and of record, all of the
Shares, free and clear of any and all Liens. By the deliveries to be made at
Closing, Seller shall have sold and conveyed to Buyer, and Buyer shall own,
beneficially and of record, (i) all of the Shares (which shall constitute all of
the issued and outstanding capital stock of Company), free and clear of any and
all Liens, except for the restrictions described in Subsection 4.1(e) and
Section 7 hereof and the Security Interest provided for hereunder and under the
Security Agreement, and (ii) indirectly through its ownership of Company, all of
the issued and outstanding capital stock of each of the Subsidiaries, free and
clear of any and all Liens, except for any restrictions or legends set forth on
the applicable share certificates and the Security Interest provided for
hereunder and under the Security Agreement..
(g) Options, etc. Other than as provided in this Agreement, there are no
outstanding debentures, options, warrants, privileges, agreements, rights or
commitments to subscribe for or to purchase, or which would require Seller or
Company to sell or Company or any of the Subsidiaries to issue, now or in the
future, any shares of capital stock or any other securities of Company or any of
the Subsidiaries. Except as specifically provided in this Agreement, prior to
the Closing, neither Seller, Company nor any of the Subsidiaries will issue,
transfer, sell, encumber, lease, assign, distribute, give or pledge, by
operation of law or otherwise, any of the Shares or certificates evidencing any
of the Shares or any other shares of capital stock or other securities of
Company or of any of the Subsidiaries, nor will Company, any of the Subsidiaries
or Seller enter into any agreement or commitment to do any of the foregoing.
(h) Financial Statements. Seller has delivered to Buyer the following
financial statements (collectively, the "Financial Statements"): (i) an
unaudited consolidated balance sheet of Company and the Subsidiaries as of May
31, 2002 ("Base Balance Sheet"); (ii) an audited consolidated balance sheet of
Company and its Subsidiaries as of December 31, 2001; (iii) unaudited
consolidated statements of income and cash flows of Company and the Subsidiaries
for the 5-month periods ended on May 31, 2002 and May 31, 2001; and (iv) audited
consolidated statements of income, retained earnings and cash flow of Company
and its Subsidiaries for the calendar years 2000 and 2001. True and complete
copies of the Financial Statements are attached hereto as Exhibit "H". The
Financial Statements have been prepared in all material respects in accordance
with generally accepted accounting principles consistently applied ("GAAP") (in
the case of unaudited financial statements, subject to normal year-end
adjustments which are not material in amount and the absence of footnotes),
fairly present the financial position of Company and the Subsidiaries as at the
end of, and the results of operations and cash flows of Company and the
Subsidiaries for, the periods covered thereby and are free of material errors,
misstatements or omissions. Since May 31, 2002, the Company has not: issued any
stock, bonds or other corporate security; incurred any obligation or liability,
encumbered any of its assets or sold any of its assets, except in the ordinary
course of business; declared or paid any dividend to shareholders; purchased or
redeemed any shares of common stock; or repaid to Progressive any indebtedness
or other amounts owed to Progressive except that the Company and the
Subsidiaries may have satisfied accounts payable or return commissions typically
incurred between an insurance company and its agents in the ordinary course of
business.
(i) Absence of Undisclosed Liabilities. Except to the extent reserved or
accrued in the Base Balance Sheet, as set forth in the Disclosure Schedule or as
set forth in this Agreement, Company and the Subsidiaries had no liabilities or
obligations of any nature, absolute or contingent, matured, unmatured or
otherwise ("Liabilities") as of May 31, 2002. Seller does not know, or have
reasonable grounds to know, of any basis for the assertion against Company or
any of the Subsidiaries of any Liability of any nature or in any amount not
fully reserved or accrued in the Base Balance Sheet, except for Liabilities
arising in the ordinary course of business subsequent to May 31, 2002.
(j) Absence of Certain Changes. Except as expressly provided in this
Agreement or as set forth in the Disclosure Schedule, since May 31, 2002, there
has not been: (i) any occurrence, circumstance, event or development that has
resulted in a Material Adverse Effect, other than changes in the ordinary course
of business or changes in general economic, social or political conditions or in
the insurance marketplace which are not unique to Company and the Subsidiaries;
(ii) any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the properties or businesses of Company and
the Subsidiaries, taken as a whole; (iii) any declaration, setting aside or
payment of any dividend or other distribution in respect of the capital stock or
other securities of Company; (iv) any direct or indirect redemption, purchase or
other acquisition of any of the capital stock or other securities of Company;
(v) any issue, sale or other disposition of any capital stock or other
securities of Company or of any of the Subsidiaries or the grant or sale of any
options, warrants or rights to acquire any such capital stock or other
securities or any agreement or promise to issue, grant or sell any of the
foregoing; (vi) any Liabilities incurred by the Company or any of the
Subsidiaries not in the usual and ordinary course of business consistent with
past practice; or (vii) other than this Agreement and the transactions
contemplated hereby, any transactions entered into by the Company or any of the
Subsidiaries not in the usual and ordinary course of business consistent with
past practice. In addition, except as expressly provided in this Agreement, or
as set forth in the Disclosure Schedule, since May 31, 2002, neither Company nor
any of the Subsidiaries has (i) sold, assigned or transferred any of its assets,
except in the ordinary and usual course of business consistent with past
practice; (ii) cancelled any material indebtedness or waived or released any
material right or claim; (iii) made any capital expenditure, entered into any
lease or incurred any obligation to make any capital expenditure, other than in
the ordinary course of business; or (iv) failed to pay or satisfy when due any
material Liability.
(k) Taxes.
(i) All federal, state and local taxes applicable to the business or
operations of Company and the Subsidiaries, or in respect of any of their
respective assets, through May 31, 2002, and all interest and penalties
thereon, have been paid or reserved or accrued in the Base Balance Sheet.
All taxes and all interest and penalties thereon attributable to the
business or operations of Company and the Subsidiaries, or in respect of
any of their respective assets, through the Closing Date, will have been
paid at that time or reserved or accrued in the financial books and records
of Company or the Subsidiaries, as appropriate, and shall be the
responsibility of Seller.
(ii) Company and the Subsidiaries have filed with the appropriate
federal, state and local governmental agencies all material tax returns
required to be filed with such agencies on or before the date hereof. All
such returns reflect, in all material respects, the tax Liability of
Company and/or the Subsidiaries in respect of the period(s) covered
thereby, and all taxes, assessments, fees and other governmental charges
shown thereon or otherwise due from Company or the Subsidiaries to any
federal, state and local governmental or other taxing authorities with
respect to period(s) ending on or before the Closing Date have been paid.
(iii) Seller, at its own cost and expense, will effect the timely
preparation and filing of all tax returns for Company and the Subsidiaries
pertaining to any period or periods ending prior to the Closing Date.
Buyer, at its own cost and expense, will be responsible for preparing and
filing with the appropriate taxing authority or authorities all tax returns
for Company and the Subsidiaries relating to any period or periods from and
after the Closing Date. Each of the parties will provide the other party
with access to all pertinent records and data and will otherwise cooperate
with the other party to facilitate the preparation and filing of such
returns.
(iv) To the best knowledge of Seller, the federal, state and/or local
tax returns of Company and/or the Subsidiaries were not examined by the
Internal Revenue Service ("IRS") for 1991 or any subsequent years prior to
Seller's Ownership Period. To the best knowledge of Seller, there are no
outstanding agreements which extend the statutory period of limitations
applicable to any federal, state or local tax return of Company or any of
the Subsidiaries for any period ending prior to Seller's Ownership Period.
During Seller's Ownership Period, tax returns for the Company and its
Subsidiaries have been consolidated with the tax returns of The Progressive
Corporation and its subsidiaries and affiliates (the "Progressive Tax
Returns"). The IRS has recently begun its examination of the Progressive
Tax Returns for 1999 and 2000. Upon notice from Company or any of the
Subsidiaries, any tax deficiencies and/or interest and penalties paid or
payable by Company and/or any of the Subsidiaries after the Closing Date
relating to any periods ending on or before the Closing Date, will be
promptly reimbursed by Seller or at Buyer's request, paid directly, subject
to Seller's right to contest or file an action to recover same in
accordance with this paragraph. Seller shall have the right to contest any
tax deficiency or assessment relating to any period or periods prior to the
Closing Date or to file an action to claim a refund of any taxes (including
interest and penalties) previously paid or payable by Company or any of the
Subsidiaries, provided that , (A) as to taxes paid after the Closing Date
for pre-Closing period(s) as provided above only, Seller promptly
reimbursed Company and/or the Subsidiaries (or Seller paid such taxes
directly), (B) Seller pays for the cost of any such contest or refund claim
action, and (C) Seller shall not allow a tax Lien to be filed against the
assets of Company or any of the Subsidiaries in connection with taxes that
are Seller's obligation hereunder. Buyer will, and will cause Company and
the Subsidiaries to, cooperate with Seller in any such contest or other
action and will promptly provide Seller with access to and the opportunity
to make copies of any and all records and documents that Seller may
reasonably request in connection with any such contest or action. Buyer,
Company and the Subsidiaries will promptly advise Seller in writing of any
audit or other proceeding commenced or threatened, and of any assessment or
deficiency threatened or claimed, by the United States Internal Revenue
Service or any other taxing authority in writing with respect to Company or
any of the Subsidiaries for or with respect to any period prior to the
Closing Date. The foregoing is subject to the provisions of Section 13.3
hereof.
(v) No power of attorney has been granted by or on behalf of Company
or any of the Subsidiaries which will be or remain in effect with respect
to tax periods after the Closing Date.
(l) Title to Properties; Indebtedness.
(i) Company and the Subsidiaries have good and marketable title to or
a valid leasehold interest in all of their respective properties and
assets, and, except as set forth in the Disclosure Schedule, said
properties and assets which are owned by Company and the Subsidiaries are
in each case free and clear of any and all Liens, other than liens for
taxes not yet due and payable and statutory liens which arose in the
ordinary course of business and which secure obligations which are not
overdue or that are being contested in good faith, and the Security
Interest granted hereunder and under the Security Agreement. None of the
owned assets of Company or any of the Subsidiaries are subject to any
restriction with regard to transferability, except as provided hereunder
and under the Security Agreement. Except as set forth in the Disclosure
Schedule, there are no contracts, agreements, leases, licenses,
commitments, arrangements or other understandings, oral or written
("Contracts"), with any person or entity with respect to the acquisition of
any of the assets of Company or any Subsidiary (other than Contracts
entered in the ordinary course of business or otherwise disclosed on the
Disclosure Schedule requiring payment of cash to third parties in
accordance with their respective terms) or any rights or interests therein.
Neither Seller nor Progressive, directly or indirectly, owns any property
or rights, tangible or intangible, used in or related to, directly or
indirectly, the business of Company and its Subsidiaries, excluding:
Seller's ownership interest in Company and the Subsidiaries; indebtedness
owed by Progressive to Company or the Subsidiaries and indebtedness owed by
Company or the Subsidiaries to Progressive; and Progressive's proprietary
software, business practices and systems and other proprietary rights used
in connection with the Company and the Subsidiaries placing insurance
policies with Progressive.
(ii) Company and the Subsidiaries have duly paid all sums which have
become due and owing to their respective lenders or other creditors, except
for those being disputed or contested in good faith by Company or the
Subsidiaries and set forth in the Disclosure Schedule and for which
appropriate reserves have been established in the financial books and
records of Company or the appropriate Subsidiary. Neither Company nor any
of the Subsidiaries is now, or about to be, in default in any material
respect with respect to any such indebtedness or obligation, and there do
not now exist any facts or circumstances which, with the mere giving of
notice or passage of time or both, would constitute a material default on
the part of Company or any of the Subsidiaries, or to the best knowledge
and belief of Seller, Company and each Subsidiary, would constitute a
material default on the part of any other party, under any Contract between
Company or any of the Subsidiaries and any of its lenders or other
creditors. Neither Company nor any of the Subsidiaries has any indebtedness
for borrowed money or for the deferred purchase price of property, or has
guaranteed the indebtedness of any other person or entity, other than as
described in this Agreement, the Disclosure Schedule or set forth in the
Base Balance Sheet.
(m) Litigation. Except as set forth in the Disclosure Schedule, there is no
litigation, proceeding, investigation or other action by any private party or
any federal, state or local governmental or regulatory agency or authority or
others pending or, to the knowledge of Seller, Company and each Subsidiary,
threatened against or relating to Company, any of the Subsidiaries or any of
their respective properties, licenses, authorities or businesses; nor does
Seller, Company or any Subsidiary know or have reasonable grounds to know of any
basis for any such action or investigation or of any other litigation or
proceeding pending or threatened against Company, any of the Subsidiaries or
Seller, which, directly or indirectly, is reasonably likely to have a Material
Adverse Effect or to adversely affect title to the Shares, the right and ability
of Seller to sell and transfer any of the Shares to Buyer, as herein provided,
or to otherwise consummate any of the transactions provided for herein.
(n) Contracts.
(i) Neither Company nor any of the Subsidiaries is a party or subject
to or bound by any Contract involving or requiring any payment in excess of
$15,000.00, or the transfer or delivery of any assets (excluding Contracts
entered into in the ordinary course of business or otherwise disclosed on
the Disclosure Schedule requiring payment of cash to third parties in
accordance with their respective terms), by Company or any of the
Subsidiaries, except for those Contracts which have been identified in the
Disclosure Schedule.
(ii) Except for the Contracts listed in the Disclosure Schedule,
neither Company nor any of the Subsidiaries is a party to or bound by any
Contract or sales order, the terms of which require the performance of
services or the transfer or license of technology, software or any rights
in any intellectual or other property by Company or any of the
Subsidiaries.
(iii) Except as set forth in the Disclosure Schedule, neither Company
nor any of the Subsidiaries (A) is a party to or bound by any employment
Contract, severance Contract or arrangement, consulting Contract,
collective bargaining Contract and/or similar Contract for or with any
present or past employee, officer, director or any other party, or (B) is a
party to or a participant in, or contributes to or is obligated to
participate in or contribute to, or has offered or agreed to offer or
provide, or is otherwise bound by, any deferred compensation Contract, life
insurance policy, disability insurance policy, or any bonus, incentive,
savings, stock, health and/or welfare benefit plan or Contract and/or any
other Contract, program, plan, arrangement or benefit for or with respect
to any present or past employee, officer or director, or (C) is a party to
or bound by any (I) Contract of any kind with Progressive, any officer or
director of Progressive, or any officer or director of Company or the
Subsidiaries; (II) Contract which, by its terms, requires the consent of
any party thereto to the consummation of the transactions contemplated
hereby; (III) Contract containing covenants limiting the freedom of the
Company or any Subsidiary or officer or employee thereof to engage or
compete in any line of business or with any person or entity in any
geographical area; (IV) Contract that grants any person any right of first
refusal or similar right; or (V) Contract that was entered into other than
in the ordinary course of business. A true and correct copy of each of the
written Contracts and other documents described in (A), (B) and (C) above
has been delivered to Buyer.
(iv) All of the Contracts described or referred to in this Subsection
3.1(n) and/or in the Disclosure Schedule are valid, existing and in full
force and effect; Company or the appropriate Subsidiary and, to the best
knowledge of Seller, Company and the Subsidiaries, all other contracting
parties, are in compliance with all of the provisions of each Contract to
which they are a party or by which they are bound, except where the failure
to comply would not have a Material Adverse Effect. Seller does not believe
(or have reasonable grounds to believe) that any material default under or
breach of any such Contract has been committed, or is about to be
committed, by Company, any of the Subsidiaries or any other contracting
party; and neither Company, any of the Subsidiaries nor Seller has received
notice from any other contracting party of any alleged breach of or default
under any such Contract by Company or any of the Subsidiaries which has not
been cured or remedied. Without limiting the generality of the foregoing,
Seller represents and warrants that Company and the Subsidiaries are in
material compliance with the provisions of Subsection 5(b) of that certain
Share Purchase Agreement, dated October 27, 1999, between Seller, Company
and ▇▇▇▇▇ ▇▇▇▇▇ LLC.
(o) Receivables; Payables. The Base Balance Sheet sets forth, in all
material respects, the accounts receivable (net of any reserves) and accounts
payable of Company and each of the Subsidiaries as of May 31, 2002, each
computed in a manner consistent with GAAP. From May 31, 2002 until the Closing,
all accounts payable of Company and the Subsidiaries have been and will be duly
paid and satisfied when and as the same became or shall become due in the
ordinary course, except to the extent that any of such accounts payable are
being disputed or contested in good faith and for which appropriate reserves
have been established in the financial books and records of Company or the
appropriate Subsidiary.
(p) Employee Benefits.
(i) Neither Company nor any of the Subsidiaries maintains,
participates in or contributes to, or is required to maintain, participate
in or contribute to, any of the following:
(A) any "employee welfare benefit plan", as defined in Section
3(1) of the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder ("ERISA"), including any
multi-employer welfare benefit plan, except for The ▇▇▇▇▇ ▇▇▇▇▇
Companies, Inc. Benefits Program (the "Benefits Program");
(B) any "employee pension benefit plan", as defined in Section
3(2) of ERISA, including any multi employer pension plan, except for
▇▇▇▇▇ ▇▇▇▇▇ Companies, Inc. Retirement Plan (the "Retirement Plan");
and/or
(C) any other pension, profit-sharing, retirement, deferred
compensation, stock ownership, stock bonus, stock option, bonus,
incentive, compensation deferral, commission, health, life,
disability, severance pay, fringe benefit or other employee benefit
plan, program, agreement or arrangement, except as set forth on the
Disclosure Schedule (such matters set forth in the Disclosure
Schedule, together with the Benefits Program and the Retirement Plan
being referred to herein as the "Employee Benefits Plans").
(ii) The Retirement Plan has received a favorable determination letter
as to its qualification under section 401(a) of the Internal Revenue Code
of 1986, as amended (the "Code") (including, but not limited to, amendments
made by ERISA), nothing has occurred with respect to the Retirement Plan
which would cause the loss of such qualification, and Seller has delivered
to Buyer true and correct copies of such determination letter.
(iii) All contributions required by law or required under the
Retirement Plan with respect to the most recent two (2) plan years ended
prior to the Closing Date have been made by Company and each Subsidiary.
(iv) Neither the Retirement Plan nor its related trust has terminated,
and no "reportable event" (within the meaning of section 4043(b) of ERISA)
has occurred with respect to the Retirement Plan, other than the
transactions contemplated by this Agreement since the date that the
Retirement Plan was adopted.
(v) There are no actions pending or, to the knowledge of Seller,
Company and each Subsidiary, threatened, and none of them has any knowledge
of any facts which are likely to give rise to any material actions, against
any of the Employee Benefit Plans, or against Company or any Subsidiary
with respect thereto.
(vi) Seller has delivered to Buyer true and complete copies of the
most recently filed and disclosed Forms 5500 and 5500-C (with exhibits) and
summary plan description for the Employee Benefit Plans.
(vii) None of the Employee Benefit Plans or any of their related
trusts, or Company or any Subsidiary, or any trustee, administrator or
other "party in interest" or "disqualified person" (within the meaning of
section 3(14) of ERISA or section 4975(e)(2) of the Code, respectively)
with respect to the Employee Benefit Plans, has engaged in any "prohibited
transaction" (within the meaning of section 408 of ERISA or section
4975(c)(23) or (d) of the Code), with respect to the participation of
Company or any Subsidiary therein for which there is not an applicable
exemption and which could subject any of the Employee Benefit Plans or
related trusts, or any trustee, administrator or other fiduciary of any
Plan, or Company or any Subsidiary, or any other party dealing with the
Employee Benefit Plans, to the penalties or excise tax imposed on
prohibited transactions by section 502(i) of ERISA or section 4975 of the
Code.
(viii) The Trustee of the Retirement Plan has completed annual
accountings for the two (2) most recent plan years. Copies of the annual
accountings have been requested from the Trustee, and Seller will forward
such copies to Buyer promptly upon their receipt.
(ix) There are not any vested and unfunded benefits under any Employee
Benefits Plans.
(x) All employer matching contributions that are required to be made
by the Company or any of the Subsidiaries under the Retirement Plan have
been paid to date.
(q) Reports; Compliance. Company and each of the Subsidiaries have filed
all necessary reports, maintained and retained all necessary records and data
and otherwise complied in all material respects with all laws, rules,
regulations, ordinances, executive orders and directives (federal, state,
municipal and otherwise) applicable to their respective businesses and
operations (except where the failure to file such reports, maintain or retain
such records and data or otherwise comply has not and is not reasonably expected
to have a Material Adverse Effect).
(r) Employee and Labor Relations. Company and the Subsidiaries have
complied in all material respects with all applicable federal, state and local
laws relating to employment, including without limitation, the provisions
thereof relating to wages, tax withholding obligations, collective bargaining
and payment of Social Security and Unemployment Compensation taxes or similar
taxes, and neither Company nor any of the Subsidiaries is liable for any arrears
of wages or subject to any Liabilities or penalties for failure to comply with
any of the foregoing laws. Except as set forth in the Disclosure Schedule, there
are no outstanding charge(s) or claim(s) against Company, any of the
Subsidiaries or any of their respective officers, directors, agents or employees
involving any alleged or actual violation by Company, or any of the Subsidiaries
or by any such other persons, of any provision(s) of the National Labor
Relations Act, the Age Discrimination in Employment Act, the Equal Employment
Opportunity Act of 1964, the Americans with Disabilities Act, or any federal,
state or municipal law concerning equal employment opportunities, sexual
harassment, equal pay legislation, wage and hour obligations contained in the
Fair Labor Standards Act or otherwise pertaining to employment; nor, to the
knowledge of Seller, Company and each Subsidiary, has there been any threat of
any such claim or charge. Neither Company nor any of the Subsidiaries has any
obligation or commitment to make severance or termination payments to any
individual, except as set forth in the Disclosure Schedule. Neither Seller nor
Company nor any Subsidiary is aware of any union organization effort respecting
the employees of Company or any Subsidiary. Neither Company nor any Subsidiary
has experienced any material labor difficulties during the last two (2) years.
None of the four (4) senior managers of the Company has informed ▇▇▇▇▇ ▇▇▇▇▇▇ of
his or her intention to terminate his or her employment with the Company and the
Subsidiaries as a result of or promptly following the transactions contemplated
by this Agreement. In the event that prior to Closing any of such four (4)
senior managers informs ▇▇▇▇▇ ▇▇▇▇▇▇ of his or her intention to terminate his or
her employment with the Company as a result of or promptly following the
transactions contemplated by this Agreement, Seller agrees to notify Buyer
thereof, but the parties agree that the receipt of such information shall not be
grounds for Buyer to refuse to close the transactions contemplated by this
Agreement. Buyer shall have the right, after execution and delivery of this
Agreement, to seek written statements or estoppel certificates from employees of
the Company and its Subsidiaries with written employment Contracts (it being
acknowledged by Seller that Seller has previously given Buyer permission to seek
such written statements or estoppel certificates from the four (4) senior
managers of the Company), provided that the execution and delivery of such
written statements or estoppel certificates by the applicable employees,
including, without limitation, the four (4) senior managers, shall not be a
condition to Buyer's obligation to close the transactions contemplated by this
Agreement.
(s) Leasehold Interests. Company has delivered to Buyer true and complete
copies of all written leases and subleases of real and personal property to
which Company or any of the Subsidiaries is a party ("Leases"). A list of all
such Leases is set forth in the Disclosure Schedule, which includes the name of
the lessor, the rental rate and other charges, expiration date and available
renewal options. Each of such Leases is valid, existing, properly executed and
in full force and effect. Except as set forth in the Disclosure Schedule, all
rentals due under the Leases have been paid currently and neither Company nor
any of the Subsidiaries is now, or about to be, in material default under the
terms of any of the Leases, nor, to the knowledge of Seller, Company and each
Subsidiary, is any other party to any of the Leases presently in material breach
of or in default thereunder, or about to be in material breach of or default
thereunder. Except as set forth in the Disclosure Schedule, neither Seller, nor
Company, nor any of the Subsidiaries has received any notice of any dispute,
default or alleged default under or with respect to any of the Leases.
(t) Insurance. All policies of insurance currently maintained by or for the
benefit of Company and the Subsidiaries, and the types and amounts of coverage
provided by each, are listed on the Disclosure Schedule. Such policies are
valid, outstanding and enforceable policies, as to which premiums have been paid
currently. Such policies, or others providing equivalent coverage, will be
maintained in full force and effect through the Closing Date. Neither Seller,
Company nor any of the Subsidiaries has received written notice from any insurer
under any such insurance policy that an increase in premiums charged for such
policies will be imposed by such insurer upon renewal of such policy (excluding
general rate increases taken by such insurers in the market). Company and the
Subsidiaries have received a notice from National Union Fire Insurance Company
that it does not intend to renew the Agents and Brokers Professional Liability
(Errors and Omissions) Policy currently in place (expiring March 15, 2003).
(u) Authorization; Binding Effect. This Agreement, and all of the
transactions contemplated hereby, have been duly authorized on behalf of Seller
by all necessary corporate and other action; Seller has full corporate power and
authority to execute and deliver this Agreement and to perform all of its
obligations hereunder; this Agreement constitutes a legal, valid and binding
obligation of Seller and is enforceable against Seller in accordance with its
terms.
(v) Validity. Neither the execution and delivery of this Agreement by
Seller, nor the performance by Seller of any of its obligations hereunder, nor
any action taken or to be taken by Seller as contemplated under this Agreement
(i) conflicts with or results in the violation of any articles, by-law,
judgment, decree, order, statute, rule or regulation applicable to Seller,
Company or any of the Subsidiaries, or (ii) conflicts with, constitutes a
default under, is a breach of or will cause the acceleration of performance
required under, the terms of any indenture, instrument or Contract to which
Seller, Company or any of the Subsidiaries is now a party or by which Seller,
Company or any of the Subsidiaries, or any of their respective assets or
properties is bound or requires the consent or approval of any other party or
entity (except as disclosed in the Disclosure Schedule), or (iii) results in the
creation of any Lien on or against the Shares, or any of the properties or
assets of Company or any of the Subsidiaries, except as expressly provided
herein.
(w) Seller's Purchase Obligations. Seller represents and warrants that
Seller alone shall be responsible for any and all purchase price payments and
all other amounts required to be paid by Seller to the party(ies) from whom
Seller purchased the Company and its Subsidiaries, and Seller will hold Buyer,
the Company and the Subsidiaries harmless in connection with such purchase price
payments and other amounts in accordance with Article 13 hereof.
(x) Occupational Heath and Safety and Environmental Matters. Seller,
Company and the Subsidiaries have received no notice of any litigation,
investigation or other proceeding pending against Company or any of the
Subsidiaries in respect of or relating to their business or their owned assets
with respect to occupational health and safety or environmental matters, and to
the knowledge of Seller, Company and each Subsidiary, no such proceedings have
been threatened.
(y) Intellectual Property. Company and the Subsidiaries own no copyrights,
patents, trademarks, other technology rights and licenses, domain names, world
wide web addresses and other intellectual property rights used or under
development which are material to the Company's or the Subsidiaries' business
operations. Company and its Subsidiaries own and operate an agency management
software system that was developed and implemented prior to Seller's Ownership
Period. To the best of Seller's knowledge, Company and each Subsidiary owns all
right, title and interest in and to such system, free and clear of all Liens.
During Seller's Ownership Period, Company and the Subsidiaries have not licensed
such system to any third party and have received no claims from third parties
that such system infringes on any proprietary rights of any third party, and
Seller, Company and the Subsidiaries are not aware of any basis for any third
party to make such a claim of infringement.
(z) Brokers. Neither Seller nor Company nor any Subsidiary has engaged,
consented to, or authorized any broker, finder, investment banker or other third
party to act on its behalf, directly or indirectly, as a broker or finder in
connection with the transactions contemplated by this Agreement.
Section 3.2 Renewal and Scope of Representations. All of the
representations, warranties, covenants and agreements of Seller set forth in
this Agreement shall be deemed renewed by Seller at and as of Closing and shall
survive the Closing and the consummation of all of the transactions contemplated
hereby notwithstanding any investigation heretofore or hereafter made by or on
behalf of Buyer (subject to Section 13.4 hereof). To the extent that any of the
representations or warranties of Seller set forth in this Agreement relate to
any period or periods, or to any act, practice, circumstance or event that
occurred or was in existence, prior to Seller's Ownership Period, such
representation or warranty is given or made, and is therefore limited, to the
best knowledge of Seller.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF BUYER.
----------------------------------------------------
Section 4.1 Buyer hereby represents and warrants to Seller that:
(a) Organization and Standing. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
(b) Authorization. This Agreement, and the consummation of all of the
transactions contemplated hereby, have been duly authorized on behalf of Buyer
by all necessary corporate and other action, and Buyer has full power and
authority to execute and deliver this Agreement and to perform all of its
obligations hereunder.
(c) Binding Effect. This Agreement constitutes a legal, valid and binding
obligation of Buyer and is enforceable against Buyer in accordance with its
terms.
(d) Validity. Neither the execution and delivery of this Agreement by
Buyer, nor the performance by Buyer of any of its obligations hereunder, nor any
action taken or to be taken by Buyer as contemplated under this Agreement (i)
conflicts with or results in the violation of Buyer's Articles of Incorporation
or Bylaws, any judgment, decree, order, statute, rule or regulation applicable
to Buyer, or (ii) conflicts with, constitutes a default under, is a breach of or
will cause the acceleration of performance required under, the terms of any
indenture, instrument or agreement to which Buyer is now a party or by which
Buyer or any of its assets or properties is bound or requires the consent or
approval of any other party or entity.
(e) Investment Representations.
(i) Buyer is purchasing the Shares for its own account for investment
purposes and not with a view to the resale or distribution thereof. Buyer
has no present intention of selling, conveying, transferring, granting any
participation in or otherwise distributing the Shares. Buyer further
represents that Buyer does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant to such person or to
any other party any participation in or with respect to any of the Shares.
(ii) Buyer understands that the Shares are not registered under the
Securities Act of 1933, as amended (the "Securities Act") on the ground
that the sale provided for in this Agreement is exempt from registration
under the Securities Act pursuant to the private offering exemption or
other available exemption(s) thereunder, and that the Seller's reliance on
such exemption is predicated on the Buyer's representations set forth
herein.
(iii) Buyer has the experience, knowledge and sophistication in
financial and business matters necessary to evaluate an investment in and
the acquisition of the Shares. Buyer has or has received all the
information that it considers necessary or appropriate for deciding whether
to purchase the Shares. Buyer further represents that it has had an
opportunity to ask questions and receive answers from the Company, the
Subsidiaries and the Seller regarding the terms and conditions of the sale
of the Shares and the business, operations, properties, prospects,
financial condition and performance of the Company and the Subsidiaries and
to obtain additional information necessary to verify the accuracy of any
information furnished to Buyer or to which the Buyer had access.
(iv) Buyer understands that the Shares may not be sold, transferred or
otherwise disposed of without registration under the Securities Act or an
exemption therefrom, and that in the absence of an effective registration
statement covering the Shares or an available exemption from registration
under the Securities Act, the Shares must be held indefinitely. Buyer has
the financial resources to hold the Shares for an indefinite period of time
and to bear the economic risk of an investment in the Shares.
(f) Brokers. Buyer has not engaged, consented to, or authorized any
broker, finder, investment banker or other third party to act on its
behalf, directly or indirectly, as a broker or finder in connection with
the transactions contemplated by this Agreement.
Section 4.2 Renewal and Scope of Representations. All of the
representations, warranties, covenants and agreements of Buyer set forth in this
Agreement shall be deemed renewed by Buyer at and as of Closing and shall
survive the Closing and the consummation of the transactions contemplated
hereby, notwithstanding any investigation heretofore or hereafter made by or on
behalf of Seller. Nothing in this Article 4 shall be deemed to limit any of the
representations and warranties made by Seller in this Agreement.
ARTICLE 5. ADDITIONAL COVENANTS.
---------------------------------
Section 5.1 After the Closing, Company and the Subsidiaries will retain,
and thus as between the Seller and the Buyer, the Buyer will thus be responsible
for, all Liabilities of Company and the Subsidiaries, subject to the provisions
of this Section 5.1. In the event that Buyer, Company or the Subsidiaries incur
liability in connection with any matter for which this Section 5.1 requires that
Seller shall be responsible, Seller will indemnify Buyer in accordance with
Article 13 hereof. In the event that Seller incurs liability in connection with
any matter for which this Section 5.1 requires that Buyer, Company or the
Subsidiaries will be responsible, Buyer will indemnify Seller in accordance with
Article 13 hereof.
(a) Buyer will not be responsible for the obligation to make deferred
purchase price payments on the Aard-Vark acquisition. Seller will be responsible
for making such deferred purchase price payments, including without limitation,
the costs and expenses incurred in any litigation concerning these payments and
any judgment or agreed settlement entered in connection with that litigation.
Seller will have the exclusive right to defend, prosecute, settle and/or resolve
any litigation or other disputes concerning the Aard-Vark payments or the
amounts thereof. Upon request, Buyer will, and will cause the Company and its
Subsidiaries to, reasonably cooperate with Seller in Seller's efforts to defend,
prosecute, settle or resolve such disputes, including any related litigation.
Seller represents and warrants that any payments made by the Company or the
Subsidiaries on account of the deferred purchase price payments for the
Aard-Vark acquisition have been reimbursed by Seller to Company. Seller further
agrees to indemnify and defend Buyer from any other claims or liabilities
arising in connection with the transaction by which Aard-Vark was acquired,
including reasonable attorneys fees incurred by Buyer, subject to the provisions
of Article 13 hereof, except that the Indemnity Threshold (as defined in Section
13.4(d)) shall not apply to such claims or liabilities.
(b) Buyer will not be responsible for the indebtedness shown as "Due to
Progressive" or "Due to Parent Company" on the Base Balance Sheet. Seller will
cause the indebtedness "Due to Progressive" or "Due to Parent Company" to be
removed from the balance sheet of the Company and its Subsidiaries at or prior
to Closing. Seller may accomplish this result by (i) contributing an appropriate
amount of capital to the Company and causing the Company to pay off the "Due to
Progressive" or "Due to Parent Company" indebtedness, or (ii) such other lawful
manner as Seller may determine in its sole discretion. At Closing, Seller shall
execute and deliver to Company and the Subsidiaries a statement that the "Due to
Progressive" or "Due to Parent Company" indebtedness is no longer due and owing
by the Company and its Subsidiaries, substantially in the form attached hereto
as Exhibit "C".
(c) Buyer will not be responsible for any federal, state or local tax
liabilities of Company and/or the Subsidiaries, and Buyer shall not receive the
benefit of any federal, state or local tax assets of Company and/or the
Subsidiaries, which are attributable to time periods preceding the Closing Date.
(d) Buyer will not be responsible for return commissions payable by the
Company or its Subsidiaries in respect of any policies (other than policies
written for Progressive or any NYAIP carrier) which are terminated prior to the
Closing Date but are not recorded on the books of the Company or its
Subsidiaries as of the Closing Date (due to the Company and the Subsidiaries not
having received a ▇▇▇▇ for payment thereof) ("Unrecorded Return Commissions").
The Company shall pay such Unrecorded Return Commissions in the ordinary course
of its business, and within sixty (60) days after the Closing Date, the Company
shall send to Seller an invoice detailing the amount of Unrecorded Return
Commissions paid after the Closing Date in respect of terminations that occurred
prior to the Closing Date, with reasonable supporting documentation, and Seller
shall pay or satisfy such invoice within ten (10) days after receipt thereof.
Notwithstanding anything to the contrary contained herein, the total obligation
of Seller under this Subsection 5.1(d) will not exceed Ten Thousand Dollars
($10,000.00). Notwithstanding the foregoing, Buyer will cause all return
commissions payable by the Company or its Subsidiaries to Progressive or any
NYAIP carrier at or after the Closing Date to be paid in the ordinary course of
business, and Buyer will not be entitled to reimbursement therefor.
(e) Buyer will be responsible for all deferred purchase price payments for
the acquisition of Baron. Seller represents and warrants to Buyer that the
current month's liability for the Baron acquisition, if any, is shown on the
Base Balance Sheet as "Purchase Liability - Blue Star", and is calculated and
paid monthly based on the lesser of $16,667.00 or 50% of the commissions and
fees earned at the Brooklyn location for that monthly period, as further set
forth in the applicable purchase agreement. Buyer shall be responsible for the
amount actually owed as of the Closing Date, and for all such payments after the
Closing Date. In connection with the foregoing, Seller represents and warrants
to Buyer that (i) the first twelve (12) deferred purchase price payments after
the closing of the acquisition of Baron did not exceed Two Hundred Thousand
Dollars ($200,000.00) in the aggregate; and (ii) the final monthly installment
payment in connection therewith will be due on or about February 14, 2004 for
the month of December, 2003.
Section 5.2 Seller agrees to reimburse to Buyer an amount equal to the net
loss (if any) of the Company and the Subsidiaries on a consolidated basis for
the period commencing on June 1, 2002 and ending on the Closing Date, excluding
any adjustments entered on the Company's books on or after June 1, 2002, to the
extent relating to prior accounting periods. The amount of such net loss (if
any) shall be determined from the Closing Income Statement prepared in
accordance with Article 14 hereof. If the Company and the Subsidiaries on a
consolidated basis do not incur a net loss for the specified period, Buyer shall
be entitled to no reimbursement under this Section.
Section 5.3 (a) For a period beginning on the Closing Date and ending on
November 12, 2003 ("Covered Term"), Company and the Subsidiaries are obligated
to and will refer each of their customers who wish to pay their premiums via
monthly (25-35 days) installments exclusively to CPP. As consideration for these
financing rights and as compensation for Company's and the Subsidiaries'
responsibilities in executing and delivering such premium finance agreements,
Seller represents and warrants that during the Covered Term, CPP has agreed to
pay to BSA $10 per premium finance contract written by CPP for any customer of
BSA or BSA's subsidiaries. Buyer will accordingly cause the Company and its
Subsidiaries and their respective successors and assigns, including, without
limitation, each Franchisee (as defined below) (whether such successors and
assigns acquire an interest in the Company, one or more of its Subsidiaries
and/or any of their respective assets or locations by merger, consolidation,
reorganization, liquidation, enforcement of security interest, purchase of
stock, purchase of assets or any other means) to comply with the provisions of
this Subsection 5.3(a) during the Covered Term. Seller shall use reasonable
efforts to obtain and deliver to Buyer at Closing a written confirmation from
CPP as to whether, after November 12, 1999, ▇▇▇▇▇ ▇▇▇▇▇, LLC, its shareholders,
members or any of their respective affiliates sold a majority interest in CPP to
an unrelated third party and, if so, on what date such sale(s) occurred.
(b) Subject to the requirements of the immediately preceding Subsection
5.3(a), Seller agrees that, through December 1, 2003, Progressive will accept
outside premium financing on automobile insurance policies placed with
Progressive by the Company and the Subsidiaries. After December 1, 2003, outside
premium financing for Progressive automobile insurance policies shall not be
permitted; provided, however, that if after such date, Progressive permits any
other independent agent in the State of New York to use outside (i.e.,
non-Progressive) premium financing, then (i) the Company and the Subsidiaries
shall be permitted to use outside premium financing during the same period that,
and subject to the same terms and conditions on which, such other independent
agent is so permitted to use outside premium financing, and (ii) the rights of
the Company and the Subsidiaries to use outside premium financing under this
sentence shall, in any event, be subject to Section 5.5(b) below.
Section 5.4 (a) Subject to the provisions of Subsection 5.4(b) below,
Progressive shall offer automobile insurance products for sale by the Company
and its Subsidiaries in the State of New York, but only so long as:
(i) The Company and/or the particular Subsidiary is properly licensed
to sell automobile insurance products in the State of New York;
(ii) Progressive is still selling such insurance products in the State
of New York;
(iii) the loss experience of the Company and its Subsidiaries, taken
as a whole, for any twelve (12) consecutive calendar month period
(commencing with the first calendar month after the Closing Date) is not
materially worse than (i.e., not more than 15 basis points higher than)
Progressive's New York average agency loss ratio for the same twelve (12)
consecutive calendar months;
(iv) if underwriting or other issues arise, Buyer, the Company and its
Subsidiaries cooperate fully with Progressive in addressing such issues;
and
(v) Buyer, the Company and its Subsidiaries remain in compliance in
all material respects with the applicable Producer Agreement, this
Agreement and with the Security Agreement.
(b) Notwithstanding the foregoing, the rights and obligations of the
parties under Subsection 5.4(a) shall:
(i) only apply to the Company and the Subsidiaries, and to no other
persons or entities which may hereafter own or be owned by or affiliated
with Buyer, the Company or any of the Subsidiaries;
(ii) not be assignable by the Company and/or the Subsidiaries, by
operation of law or otherwise; and
(iii) expire automatically upon the earliest to occur of: (A) the last
day of the five (5) year period immediately following the Closing Date; (B)
with respect to the Company, the date that the Company is no longer wholly
owned by Buyer, and with respect to each of the Subsidiaries, the date that
such Subsidiary is no longer wholly owned, directly or indirectly, by both
the Company and the Buyer; or (C) with respect to the Company or any of the
Subsidiaries, the date upon which such entity is merged or consolidated
with, or acquires the equity in or assets of, any other entity or business
(the entity resulting from such merger, consolidation or acquisition being
referred to herein as the "Combined Entity"), whether or not engaged in
automobile insurance agency operations, unless Buyer can establish to
Seller's reasonable satisfaction that the then existing operations and the
results of operations of Company and the Subsidiaries are and will be
maintained separate and distinct from the remainder of the Combined Entity,
in which event the rights and obligations under this Section 5.4 shall
remain in effect with respect to those separate and distinct operations
only as long as such operations remain separate and distinct or until
otherwise terminated or expiring in accordance herewith.
Section 5.5 (a) Subject to the provisions of Subsection 5.5(b) below:
(i) Commissions payable by Progressive to the Company and the
Subsidiaries for personal automobile insurance policies initially placed
with Progressive by the Company or its Subsidiaries on or after the first
day of Progressive's first fiscal month after the Closing Date shall be
equal to the greater of (A) 12.5% for all new policies and 10% for any
renewal of such policies or (B) the then generally prevailing commission
rates being paid by Progressive in the State of New York, provided that:
(I) Buyer and Seller agree that such commission schedule will remain in
effect until December 31, 2004, at which time the commission schedule shall
change to the prevailing commission rates that Progressive is then paying
to agencies in State of New York, as the same may be adjusted from time to
time thereafter; and (II) the commission schedule that is currently in
effect as of the Closing Date will remain applicable to all policies
originally placed with Progressive prior to the first day of Progressive's
first fiscal month following the Closing Date, and to all renewals of such
policies.
(ii) If Progressive offers programs to any independent agent in the
State of New York pursuant to which such agent may sell Progressive
automobile insurance policies on an annual basis, the Company and its
Subsidiaries will be offered the right to participate in such programs on
terms substantially similar to those then offered to such other agent, as
long as such programs are made available to such other agent;
(iii) If Progressive offers any broadly distributed marketing or
compensation programs, including, without limitation, base commission rates
and contingencies, to agencies in the State of New York, the Company and
its Subsidiaries will be offered the right to participate in such programs
on terms substantially similar to those then offered to other agencies, as
long as such programs are made available to such other agencies; provided,
however, that this Subsection (iii) will not apply to any programs
targeting standard and/or preferred business, as such terms are defined by
Progressive from time to time;
(iv) In consideration of the foregoing, the Company and its
Subsidiaries will give first preference to Progressive on all programs
specifically marketed by Progressive to minimize Progressive's assigned
risk liability (e.g., youthful male insureds, take-out credits, etc.) as
long as the compensation paid to Company and/or a Subsidiary is
substantially the same as that offered to the Company and/or the applicable
Subsidiary by another insurer with which the Company and/or such Subsidiary
has a Producer Agreement (defined below). In accordance with the foregoing,
the Company and its Subsidiaries will offer risks meeting such criteria to
Progressive before offering these same risks to other carriers. If for any
reason Progressive rejects one or more such risks, or Progressive's premium
is materially higher, the Company and its Subsidiaries will be free to
offer such risks to other carriers.
(b) Notwithstanding the foregoing, the rights and obligations of the
parties under Subsection 5.5(a) (and under the second sentence of Section
5.3(b), if applicable) shall:
(i) only apply to the Company and the Subsidiaries, and to no other
persons or entities which may hereafter own or be owned by or affiliated
with Buyer, the Company or any of the Subsidiaries;
(ii) not be assignable by the Company and/or the Subsidiaries, by
operation of law or otherwise, except as provided in Section 5.7 below;
(iii) only apply as long as Progressive is still selling such
insurance products in the State of New York and Buyer, the Company and the
Subsidiaries are in compliance in all material respects with the
requirements of this Agreement, including, without limitation, Subsections
5.4(a)(i) and (a)(v) above and the Security Agreement; and
(iv) unless a separate time period is set forth in Subsection 5.5(a)
for a specific provision thereof, expire automatically upon the earliest to
occur of: (A) the date on which Progressive discontinues doing business
with the Company and/or the Subsidiaries, subject to Subsection 5.4 hereof;
(B) with respect to the Company, the date that the Company is no longer
wholly owned by Buyer, and with respect to each of the Subsidiaries, the
date that such Subsidiary is no longer wholly owned, directly or
indirectly, by both the Company and the Buyer; or (C) with respect to the
Company or any of the Subsidiaries, the date upon which such entity is
merged or consolidated with, or acquires the equity in or assets of, any
other entity or business (the entity resulting from such merger,
consolidation or acquisition being referred to herein as the "Combined
Entity"), whether or not engaged in automobile insurance agency operations,
unless Buyer can establish to Seller's reasonable satisfaction that the
then existing operations and the results of operations of Company and the
Subsidiaries are and will be maintained separate and distinct from the
remainder of the Combined Entity, in which event the rights and obligations
under this Section 5.4 shall remain in effect with respect to those
separate and distinct operations only as long as they remain separate and
distinct or until otherwise terminated or expiring in accordance herewith.
Section 5.6 Prior to Closing, Seller shall, or shall cause Company and the
Subsidiaries to, comply with any and all notice and other requirements contained
in any agency, broker or other agreement(s) between Company or any of the
Subsidiaries and any insurance carrier(s) ("Producer Agreements") relating to
the sale and transfer of ownership of Company and the Subsidiaries to Buyer, as
herein provided, which are required to be complied with prior to Closing. The
termination of any such Producer Agreement(s) by any insurance carrier(s), and
the resulting consequences thereof, based upon the giving of such notice or the
proposed change in the ownership of the Company or the Subsidiaries shall not be
deemed to result in a Material Adverse Effect or be sufficient cause for Buyer
to terminate, renegotiate or adjust this Agreement. Notwithstanding the
foregoing, Seller shall use reasonable efforts to obtain the consent or approval
of each such insurance carrier if required under the applicable Producer
Agreement.
Section 5.7 Notwithstanding anything to the contrary contained herein, in
the event Seller releases its lien and security interest in any assets of the
Company and the Subsidiaries pursuant to a transfer of collateral under Section
1.5(b) above to a party that will, after such transfer, be a franchisee of Buyer
or an affiliate of Buyer (in each case, a "Franchisee"), and provided that Buyer
satisfies the requirements of Section 1.5(b) with respect thereto and an Event
of Default shall not have occurred hereunder (without taking into account any
applicable notice or cure period set forth in Section 1.6, provided that upon
Buyer's cure of any such default, Buyer will no longer be deemed to be in
default for the purposes of this provision), then:
(a) Unless the Franchisee (or, if applicable the owner thereof) is not in
good standing with Progressive at the time of such transfer (it being understood
that all current employees of the Company and the Subsidiaries are in good
standing with Progressive), Progressive agrees to appoint such Franchisee as an
independent agent representing Progressive in the State of New York, subject to
the terms of the standard agent agreements then being used by Progressive.
(b) The rights of Buyer, the Company and the Subsidiaries under Sections
5.3(b) and 5.5 above shall be assignable to such Franchisee, provided that such
Franchisee agrees in writing to assume the obligations of Buyer, the Company and
the Subsidiaries under Sections 5.3 and 5.5 and agrees to be bound by the
limitations and restrictions in Section 5.5(b) in a written agreement reasonably
acceptable to Seller. The form of such written agreement shall be submitted to
Seller for approval at the same time as other information and documents
respecting the transfer are required to be delivered to Seller under Section
1.5(b) hereof, and the execution and delivery of such written agreement shall be
a further condition to the effectiveness of Seller's release of its rights in
the applicable collateral. The rights assignable under this Section 5.7 shall
terminate automatically if such Franchisee shall at any time cease to be a
franchisee of Buyer or an affiliate of Buyer. In addition, the right granted by
this Section 5.7 shall be personal to the Franchisee to which such rights are
initially assigned by Buyer, the Company or any Subsidiary, shall apply only to
insurance policies placed by the Franchisee from the location so transferred and
shall not apply to any other location operated by the Franchisee or any owners
or affiliates of the Franchisee, and such Franchisee shall have no right to
assign or transfer such rights to any party by operation of law or otherwise.
(c) The right granted by this Section 5.7 is a one-time right given to
Buyer, Company and the Subsidiaries with respect to each transfer of a location
to a Franchisee, as further described in Section 1.5(b), and will not apply to
any Proposed Transferee which will not be a Franchisee after such transfer.
Nothing in this Section 5.7 shall be interpreted to limit the provisions of
Section 5.3(a) regarding CPP obligations being binding on successors and
assigns.
ARTICLE 6. NON-SOLICITATION; NON-DISCLOSURE.
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Section 6.1 (a) The parties recognize that Company and the Subsidiaries
conduct operations throughout the State of New York; that customer relationships
are important assets of Company and the Subsidiaries for which Buyer is making
the substantial investment provided for herein; and that, without the retention
of such customer relationships, ownership of Company and the Subsidiaries will
have diminished value to Buyer. Accordingly, in consideration of the mutual
promises herein set forth and other good and valuable consideration had and
received, Seller hereby covenants and agrees as follows:
(i) For a period of five (5) years beginning on the Closing Date (the
"Non-Solicitation Period"), except as provide in Subsections 6.1(b) and (c)
below, Progressive will not, directly or indirectly (on its own behalf or
on behalf of any other person, firm or entity other than Company and the
Subsidiaries), market, sell, solicit, write, place or accept any
homeowner's, personal lines auto, special lines or commercial vehicle
insurance ("Covered Lines") to, from or for any person or entity who is or
was a policyholder or an insured under any Policy included in the Company's
or any Subsidiary's book of business as of the Closing Date or at any time
within the six (6) month period immediately prior to the Closing Date
(collectively, the "Covered Customers"), anywhere within any county in the
State of New York within which Company or any of the Subsidiaries conducts
business as of the Closing Date ("Covered Territory").
(ii) For a period of five (5) years beginning on the Closing Date,
Seller agrees that Progressive shall not purchase or otherwise acquire an
existing independent agency or establish a store-front agency (which shall
explicitly exclude any operations of Progressive's direct insurance group)
within a twenty-five (25) mile radius of any insurance office operated as
of the Closing Date by Company or any of the Subsidiaries, as set forth in
the Disclosure Schedule.
(b) The parties recognize that Seller and its affiliates are part of the
Progressive group of insurance companies and related entities and that
Progressive is actively involved in selling, marketing, soliciting and writing
automobile and specialty property-casualty insurance products throughout the
United States, including New York, directly or through its network of 30,000
independent agents ("Independent Agents"). Nothing herein contained shall or
shall be construed to limit the insurance operations or practices of Progressive
or the Independent Agents, or to restrict their respective sales, marketing,
underwriting or other insurance operations or practices in New York or
elsewhere, provided that, during the Non-Solicitation Period, Progressive will
not directly contact or directly solicit any of the Covered Customers anywhere
in the Covered Territory (except as provided in the following sentence) or
provide any list that includes Covered Customers ("Covered Customer List") to
any of its Independent Agents. It shall not be deemed to be a violation of
Subsection 6.1(a) hereof or this Subsection 6.1(b) if (i) Seller or any of its
affiliates solicit Covered Customers as part of a general advertising or
marketing campaign conducted through television, radio, newspapers, internet,
mass mailing or other media of general circulation or indirectly through its
Independent Agents or if any of the Independent Agents solicits or places
insurance for any Covered Customers with Progressive (provided such Independent
Agents are not given copies of Company's or the Subsidiaries' Covered Customer
List by Seller or any of its affiliates) ("Permitted Activities") or (ii) Seller
or any of its affiliates write or place any auto or other insurance policy or
policies for any one or more of the Covered Customers as a result of such
Permitted Activities. Further, Subsection 6.1(a) shall not prevent an investment
in a security listed on a national securities exchange or traded in the
over-the-counter market as long as such investment is limited to not more than
two percent (2%) of the outstanding issue of such security.
(c) In addition, Seller shall not be deemed to be in violation of the
provisions of this Section 6.1 if it writes or places insurance for not more
than 5.0% of the Covered Customers within the Non-Solicitation Period.
Notwithstanding the foregoing, in accordance with Progressive's current policy,
if Progressive writes insurance through Progressive's direct insurance operation
for a Covered Customer within sixty (60) days after the expiration or
cancellation of such Covered Customer's policy that was placed with Progressive
by Company or any Subsidiary, then the Company or the applicable Subsidiary
shall be entitled to receive a commission on such policy, and any such policy
shall not be included in the 5.0% safe harbor provision contained in the
immediately preceding sentence; provided, however, that the foregoing policy may
be changed by Progressive at any time as long as the change(s) are applicable
generally to Independent Agents in the State of New York.
(d) Progressive shall not, without the prior written consent of Company,
appoint as an independent agent, or approve as a broker of any independent
agent, (i) any of the four (4) current senior managers of the Company for a
period of one (1) year after the Closing Date, or (ii) any of the current office
managers of the Company or any of the Subsidiaries for a period of ninety (90)
days after the Closing Date (excluding, in either case, any such person who is
involuntarily terminated by Company or any Subsidiary). Promptly after the
Closing, Seller and Buyer agree to communicate this restriction in writing to
the affected employees by a letter which shall be subject to each party's
reasonable approval.
Section 6.2 Subject to the following sentence, Progressive will not,
directly or indirectly, divulge, disclose or communicate to any Independent
Agent or other person, firm or entity in any manner whatsoever, or use for its
own benefit or for the benefit of any other person or entity (other than Company
and the Subsidiaries), any information concerning the Covered Customers,
including the names and addresses of Covered Customers, policy expiration or
renewal dates, policy limits and the identity of insured property, or any other
information concerning the Covered Customers . The restriction and covenant
contained in the preceding sentence shall not apply to Covered Customer
information generated through Permitted Activities or to the disclosure of
information required by legal process, court order or regulatory requirements,
provided, however that prior to disclosure pursuant to legal process, court
order or regulatory requirements, Seller shall use reasonable efforts to give
notice thereof to Buyer.
Section 6.3 The parties hereto recognize and agree that it is
impossible to measure in monetary terms the damages which Company, the
Subsidiaries or Buyer may incur by reason of Progressive, or any member thereof,
acting in violation of this Article 6. Therefore, Seller, for itself and on
behalf of each member of the Progressive, hereby agrees that equitable remedies,
including temporary or permanent injunctive relief, will be available for any
breach of this Article 6 in addition to any additional remedies available at
law, subject to the limitations of this Agreement.
Section 6.4 The covenants contained in this Article 6 are intended to be
separate and divisible covenants. If any person shall institute any action or
proceeding to enforce this Article 6 or any part thereof, and if this Article 6
or any part hereof is deemed invalid or otherwise unenforceable by the court or
other tribunal having jurisdiction over such action or proceeding, the parties
hereto agree that (a) this Article or such part, as the case may be, shall be
deemed restricted or modified to the extent necessary to render the same valid
and enforceable by such court or other tribunal, and, to that end, such court or
tribunal is hereby authorized to "rewrite" this Article to carry out the
intention herein expressed, or (b) if such court or other tribunal will not
"rewrite" this Article under such circumstances, as herein authorized, then the
parties hereto shall modify this Article to the extent necessary to render it
valid and enforceable under the laws of the jurisdiction in which it is sought
to be enforced.
ARTICLE 7. SHARE LEGEND.
------------------------
The parties hereto agree that the stock certificate(s) issued to evidence
the Shares will bear conspicuously the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES OR BLUE SKY LAWS AND MAY NOT BE TRANSFERRED, SOLD OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE ACT AND SUCH STATE SECURITIES OR BLUE SKY LAWS."
ARTICLE 8. CONDUCT OF BUSINESS: ACCESS AND INFORMATION. From and after the date
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of this Agreement through the Closing Date, Seller shall:
(a) except as otherwise expressly provided herein or consented to in
writing by Buyer, (i) cause Company and the Subsidiaries to conduct their
businesses in substantially the same manner as currently conducted and shall not
permit Company or any of the Subsidiaries to do anything other than in the
normal, usual and ordinary course of business and in accordance with past
practice, and (ii) take all reasonable measures necessary or appropriate to
preserve intact the business organizations of Company and the Subsidiaries and
to keep in full force and effect all Permits held by Company and the
Subsidiaries;
(b) cause Company and the Subsidiaries to give Buyer and its authorized
representatives reasonable access during normal business hours to all of
Company's and the Subsidiaries' employees, properties, facilities, assets,
books, records, financial statements and contracts, and shall furnish Buyer with
all such financial and other information concerning the business, affairs,
operations, properties and financial condition of Company and the Subsidiaries
as Buyer may reasonably request;
(c) cause the Company and the Subsidiaries to comply in all material
respects with all laws, rules, regulations and orders of any governmental or
regulatory authorities applicable to them, or their respective businesses,
operations or properties, and to comply in all material respects with the terms
of each Contract to which they, or any of them, are a party or by which they, or
any of them, are bound;
(d) not permit Company or any of the Subsidiaries to (i) merge or
consolidate with, sell substantially all of its assets to, or otherwise engage
in a business combination transaction with any other entity, or enter into or
continue any negotiations or discussions, or enter into a Contract, with regard
thereto, or (ii) pay or declare any dividend or other distribution in respect of
its capital stock or other securities, or reacquire or repurchase any of its
capital stock or other securities, except as otherwise expressly provided
herein, or (iii) repay any indebtedness owed to Progressive, or (iv) incur any
Liabilities other than in the usual and ordinary course of business, or (v)
enter into any Contract or other transaction other than in the usual and
ordinary course of business; and
(e) not enter into or continue any negotiations or discussions, or enter
into a Contract, with regard to the sale of any of the Shares; and
(f) not permit Company or any of the Subsidiaries to amend or modify its
certificate of incorporation or by-laws.
ARTICLE 9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.
-------------------------------------------------------
Section 9.1 Unless all of the following conditions are satisfied in full at
the Closing or shall have been waived by Buyer, Buyer shall not be obligated to
purchase the Shares, or any of them, and shall not otherwise be obligated to
effect any of the transactions contemplated by this Agreement:
(a) Each of the representations and warranties made by Seller in this
Agreement shall be true and correct in all material respects (except where the
representation and warranty is already qualified as to materiality, in which
case the representation and warranty as so qualified shall be true and correct
in all respects) as of the date of this Agreement and as of the Closing Date, as
if each were again made at such time;
(b) Seller has performed or observed in all material respects each of the
agreements and covenants contained herein to be performed or observed by it
prior to the Closing (except where the agreement or covenant is already
qualified as to materiality, in which case the agreement or covenant as so
qualified shall be observed or performed in all respects);
(c) There shall not have been any surrender, revocation, restriction,
modification, suspension or cancellation of any of the Permits held by the
Company or any of the Subsidiaries as of the date of this Agreement which is
material to the business or operations of Company and the Subsidiaries, taken as
a whole, or the commencement or existence of any proceeding to suspend, revoke,
restrict, modify or cancel any such Permit;
(d) In each instance in which such consent is required under any material
Contract (excluding the Producer Agreements) to which Seller, Company or any of
the Subsidiaries is subject or bound, Seller, Company or such Subsidiary (as
applicable) shall have secured the written consent of the other contracting
party to the sale, and the transfer of title and ownership of, the Shares to
Buyer, as herein provided;
(e) No claim, investigation, proceeding or litigation, either
administrative or judicial, shall be commenced or pending against Seller, Buyer,
Company or any of the Subsidiaries (i) for the purpose of enjoining, delaying or
preventing the consummation of the transactions contemplated by this Agreement,
(ii) which alleges that this Agreement, or the consummation of the transactions
contemplated hereby, is improper or illegal, or (iii) which, if decided
adversely, might affect the right of Buyer to purchase or retain the Shares, or
to continue to conduct the businesses of the Subsidiaries as currently conducted
or might otherwise have a Material Adverse Effect;
(f) Seller shall have made all of the deliveries required to be made by it
at Closing;
(g) There shall have been furnished to Buyer a Certificate, dated as of the
Closing Date, signed by Seller to the effect that all of the conditions set
forth in Subsections 9.1(a), (b), (c), (d) and (f) hereof and, to the best
knowledge and belief of Seller, the conditions set forth at Subsection 9.1(e)
hereof, has been satisfied or waived by Buyer.
Section 9.2 Seller hereby covenants and agrees to use all reasonable effort
to cause each of the conditions precedent set forth at Section 9.1 hereof to be
satisfied as of the date scheduled for Closing.
ARTICLE 10. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS.
---------------------------------------------------------
Section 10.1 Unless all of the following conditions are satisfied in full
at the Closing or shall have been waived by Seller, Seller shall not be
obligated to sell the Shares, or any of them to Buyer, and Seller shall not
otherwise be obligated to effect any of the transactions contemplated by this
Agreement:
(a) All representations and warranties made by Buyer in this Agreement
shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date, as if each were again made at such time;
(b) Buyer shall have performed or observed in all material respects each of
the agreements and covenants contained herein to be performed or observed by
Buyer prior to Closing;
(c) Seller, Company and/or the Subsidiaries shall have obtained all of the
consents referred to in Subsection 9.1(d) hereof (excluding the Producer
Agreements);
(d) None of the events described in Subsection 9.1(e) shall have occurred;
(e) Buyer shall have made all of the deliveries required to be made by it
at Closing; and
(f) There shall have been furnished to Seller a certificate, dated as of
the Closing Date, signed by Buyer to the effect that all of the conditions set
forth in Subsections 10.1(a), (b) and (e), to the best knowledge and belief of
Buyer, the conditions set forth in Subsections 10.1 (c) and (d) hereof, have
been satisfied or waived by Seller.
Section 10.2 Buyer covenants and agrees to use all reasonable effort to
cause each of the conditions precedent set forth at Sections 10.1 hereof to be
satisfied as of the date scheduled for Closing.
ARTICLE 11. TERMINATION.
------------------------
Section 11.1 This Agreement may be terminated at any time prior to Closing
under any of the following circumstances:
(a) This Agreement may be terminated by written instrument duly executed by
or on behalf of Buyer and Seller.
(b) Provided that Buyer is not then in default in any material respect
hereunder, this Agreement may be terminated by Buyer if Seller shall fail to
observe or perform in any material respect any of its covenants or obligations
hereunder (except where the agreement or covenant is already qualified as to
materiality, in which case the agreement or covenant as so qualified shall be
observed or performed in all respects), or if Seller shall breach, in any
material respect, any of its representations or warranties hereunder (except
where the representation and warranty is already qualified as to materiality, in
which case the representation and warranty as so qualified shall be true and
correct in all respects), and such failure or breach shall continue for ten (10)
or more days after Seller has received written notice thereof.
(c) Provided that Seller is not then in default in any material respect
hereunder, this Agreement may be terminated by Seller if Buyer shall fail to
observe or perform in any material respect any of its covenants or obligations
hereunder(except where the agreement or covenant is already qualified as to
materiality, in which case the agreement or covenant as so qualified shall be
observed or performed in all respects), or if Buyer shall breach, in any
material respect, any of its representations or warranties hereunder (except
where the representation and warranty is already qualified as to materiality, in
which case the representation and warranty as so qualified shall be true and
correct in all respects), and such failure or breach shall continue for ten (10)
or more days after Buyer has received written notice thereof.
(d) If, in the absence of a material default by either party, the Closing
shall not have occurred prior to September 30, 2002, then either party shall
have the right to terminate this Agreement prior to the Closing by giving
written notice to the other party.
Section 11.2 If for any reason this Agreement shall have been terminated
under Section 11.1 hereof, then (a) this Agreement shall thenceforth be null and
void, and neither of the parties hereto shall have any further obligation to the
others hereunder for any action taken in good faith as contemplated in this
Agreement, except in the case of a termination pursuant to Subsection 11.1(b) or
(c) hereof, in which case the non-breaching party shall retain and may pursue
all available rights and remedies for such breach; (b) Buyer, its corporate
affiliates and all of their respective officers, agents, and employees, (i)
will, for a period of four (4) years commencing on the effective date of such
termination, treat as confidential all documents and other information furnished
by Company, Seller or the Subsidiaries in connection herewith (including,
without limitation, any policyholder list or information and except for
information which is or becomes in the public domain without any breach of this
covenant) and, unless required to do so by law, will not divulge any of same to
third parties, (ii) will not solicit any policyholders or consumers named in the
policyholder list, or otherwise use the policyholder information to compete with
or otherwise to the detriment of Company, Seller or the Subsidiaries (provided
that the foregoing shall not prohibit solicitations as part of a general
advertising or marketing campaign through television, radio, newspapers,
internet, mass mailing or other media of general circulation so long as not
based on any policyholder list) and (iii) will not solicit or hire any of the
four (4) senior managers of the Company for a period of one (1) year after the
date of such termination, or any of the office managers of the Company or any of
the Subsidiaries for a period of ninety (90) days after such date of
termination, or induce any such person to terminate his or her employment with
Company or any of the Subsidiaries, without Seller's prior written consent
(excluding, in either case, any person who is involuntarily terminated by
Company or any of the Subsidiaries); (c) Buyer will promptly return all written
materials furnished to Buyer, its corporate affiliates, or any of their
respective officers, agents, representatives or employees, by Company, Seller or
Subsidiaries and will not retain any copies, extracts or summaries thereof; and
(d) Seller, its corporate affiliates and all of their respective officers,
agents, and employees, will, for a period of four (4) years commencing on the
effective date of such termination, treat as confidential all documents and
other information furnished by Buyer in connection herewith (except for
information which is or becomes in the public domain without any breach of this
covenant) and, unless required to do so by law, will not divulge any of same to
third parties.
ARTICLE 12. FURTHER ASSURANCES.
-------------------------------
From time to time after the Closing, Seller, at its own expense, will do
all such further acts and things, and will promptly execute and deliver to Buyer
all such further deeds, bills of sale, conveyances, assignments, assurances or
other documents of transfer, as Buyer may reasonably request in order to vest
and confirm the Shares in Buyer and carry out the transactions contemplated by
this Agreement.
ARTICLE 13. INDEMNIFICATION.
----------------------------
Section 13.1 Indemnification by Seller. Subject to Sections 13.3 and 13.4
hereof, Seller hereby agrees to indemnify, defend and hold harmless Buyer,
Company, the Subsidiaries and their respective successors and permitted assigns
from and against any and all claims, actions, causes of actions, obligations,
losses, liabilities, damages, deficiencies, costs and/or expenses (including,
without limitation, interest, penalties, reasonable costs of investigation and
defense, and reasonable attorneys', accountants' and experts' fees and
disbursements) (collectively, "Claims and Losses") which Buyer, Company or any
of the Subsidiaries shall incur or suffer arising out of, or resulting from any
inaccuracy in or any breach of any representation, warranty, covenant or
agreement of Seller contained in this Agreement or in any Exhibit hereto,
certificate or other document delivered by or on behalf of Seller pursuant to
this Agreement.
Section 13.2 Indemnification by Buyer. Subject to Sections 13.3 and 13.4
hereof, Buyer hereby agrees to indemnify, defend and hold harmless Seller, its
successors and assigns, from and against any and all Claims and Losses which
Seller shall incur or suffer arising out of or resulting from any inaccuracy in
or any breach of any representation, warranty, covenant or agreement of Buyer
contained in this Agreement or in any Exhibit hereto, certificate or other
document delivered by or on behalf of Buyer pursuant to this Agreement.
Section 13.3 Notice and Opportunity to Defend.
(a) Notice of Asserted Liability. Promptly after receipt by either party
hereto (the "Indemnified Party") of notice of any demand or claim or the
commencement of any action, proceeding or investigation or any other matter that
may result in a claim for indemnification under Section 13.1 or 13.2 (an
"Asserted Liability"), the Indemnified Party shall give written notice thereof
(the "Claim Notice") to the party obligated to provide indemnification pursuant
to Section 13.1 or 13.2 (the "Indemnifying Party"). The Claims Notice shall
describe the Asserted Liability in reasonable detail, and shall indicate, among
other matters, the party or parties asserting the claim, the facts and
circumstances surrounding the claim and the amount (estimated, if necessary) of
the loss or damage that has been or may be suffered by the Indemnified Party.
Subject to Section 13.4 hereof, any failure on the part of the Indemnified Party
to provide such Claims Notice, or any delay in providing such Notice, shall not
adversely affect the Indemnified Party's right to indemnification hereunder, or
release the Indemnifying Party from the obligation to provide such
indemnification, except to the extent that the ability of the Indemnifying Party
to effectively defend against the Asserted Liability has actually been
prejudiced thereby.
(b) Opportunity to Defend. The Indemnifying Party shall satisfy or defend,
at its own expense and by its own counsel (provided such counsel is reasonably
satisfactory to the Indemnified Party), any Asserted Liability for which it is
obligated to provide indemnification hereunder. The Indemnifying Party shall
within fourteen (14) days after receiving a Claim Notice (or sooner, if the
nature of the Asserted Liability, or the requirements of any related litigation
or proceeding, so requires) notify the Indemnified Party of its election to
either satisfy or defend against the Asserted Liability, and the Indemnified
Party shall reasonably cooperate in any compromise of, or defense against, such
Asserted Liability. If the Indemnifying Party elects to defend the Asserted
Liability, it may settle or compromise the claim but only in accordance with the
provisions hereof. If the Indemnifying Party fails to satisfy or defend the
Asserted Liability as herein required, fails to notify the Indemnified Party of
its election as herein provided, abandons its efforts to compromise or defend
against the Asserted Liability or contests its obligation under this Agreement
to provide indemnity for such Asserted Liability, the Indemnified Party may pay,
compromise or defend such Asserted Liability, without prejudice to or compromise
of its rights to indemnification. Notwithstanding the foregoing, neither the
Indemnifying Party nor the Indemnified Party may settle or compromise any claim
over the reasonable objection of the other, provided, however, that consent to
settlement or compromise shall not be unreasonably withheld or delayed; provided
further that it shall be reasonable for the Indemnified Party to require, as an
unconditional term of the settlement or compromise (i.e., there being no
requirement that the Indemnified Party pay any amount of money or give any other
consideration), that the claimant or plaintiff give to the Indemnified Party a
release, in form and substance reasonably satisfactory to the Indemnified Party,
from all liability in respect of the Asserted Liability. In any event, the
Indemnified Party may participate, at its own expense, in the defense of any
such Asserted Liability; provided, however, that, notwithstanding the foregoing,
the Indemnifying Party shall bear the reasonable fees, costs and expenses of
such separate counsel of the Indemnified Party if (i) the use of counsel chosen
by the Indemnifying Party would present such counsel with a conflict of interest
(provided such conflict was communicated to the Indemnifying Party by the
Indemnified Party when the Indemnified Party's consent to such counsel was
requested), or (ii) the actual or potential defendants in, or targets of, any
such action include both the Indemnified Party and the Indemnifying Party, and
the Indemnified Party shall have reasonably concluded that there may be legal
defenses available to it which are different from or in addition to those
available to the Indemnifying Party and the Indemnifying Party's counsel refuses
to assert such defenses on the Indemnified Party's behalf. If the Indemnifying
Party chooses to defend against any claim, the Indemnified Party shall make
reasonably available to the Indemnifying Party any books, records or other
documents, and any available witnesses and/or testimony, within its control that
are necessary or appropriate for and shall otherwise reasonably cooperate with
such defense. If the Indemnified Party defends against any claim in accordance
with this Subsection, the Indemnifying Party shall make reasonably available to
the Indemnified Party any books, records or other documents, and any available
witnesses and/or testimony, within its control that are necessary or appropriate
for and shall otherwise reasonably cooperate with such defense.
Section 13.4 Limitations on Indemnification. Rights to indemnification
under this Agreement are subject to the following limitations:
(a) The obligation to provide indemnification ("Indemnity Obligation") with
respect to the representations and warranties set forth in Subsections
3.1(a)(i), (b)(i), (c), (e), (f), (g), (u), (v) and (w), and in Subsections
4.1(b), (c), (d) and (e), have no expiration or termination date.
(b) Except as otherwise provided in Subsection 13.4(a), the Indemnity
Obligation relating to any of the representations, warranties, covenants or
agreements contained in this Agreement shall terminate on the date (the
"Termination Date") which is the third (3rd) anniversary of the Closing Date,
but the Indemnity Obligation for any claim relating to any such representation,
warranty, covenant or agreement shall continue after the Termination Date until
such claim is resolved and satisfied if the party entitled to such
indemnification has provided to the party required to provide such
indemnification prior to the Termination date a Claims Notice which satisfies
the requirements of Subsection 13.3(a) hereof.
(c) Except with respect to third-party claims being defended in good faith
and claims for indemnification with respect to which there exist a good faith
dispute, the Indemnifying Party shall satisfy its obligations with respect to
any Claims and Losses under this Article 13 within thirty (30) days after
receipt of the related Claim Notice.
(d) Each party shall be entitled to indemnification hereunder with respect
to any Claims and Losses (or if more than one claim for indemnification is
asserted, with respect to all such Claims and Losses), only to the extent that
the cumulative aggregate amount of all Claims and Losses incurred by such party
with respect to any claim or claims for which indemnification may be sought
hereunder exceeds $25,000.00 (the "Indemnity Threshold") (except as provided in
Section 5.1(a)). The aggregate liability of either Buyer or the Seller, as
applicable, under this Article 13, shall not exceed $500,000.00; provided that
nothing in this Article 13 shall limit Buyer's obligation to pay the Purchase
Price in accordance herewith. For purposes of this section only, in determining
whether there was any failure to disclose, breach or failure of observance or
performance or any untruth or incorrect statement with regard to any
representation, warranty, covenant or agreement, the terms "material" and
"materially," as used in such representation, warranty, covenant and agreement,
shall be deemed to mean a cost or liability to the Indemnified Party in amount
equal to or greater than $2,500.00.
(e) All Claims and Losses shall be computed net of any tax benefit actually
received or to be received by the Indemnified Party with respect thereto;
provided, however, that in all cases, the timing of the realization of such tax
benefit by the Indemnified Party shall be taken into account in determining the
amount of such reduction of Claims and Losses.
(f) The indemnification provisions of this Article 13 shall be the sole
monetary remedy available to each of Buyer and Seller for the breach of any
representation, warranty, covenant or agreement in this Agreement or otherwise
relating to or arising out of the purchase or sale of the Shares, Company and/or
the Subsidiaries. Equitable remedies shall remain available to each of Buyer and
Seller, provided that no unjust enrichment results from the enforcement of such
remedies.
ARTICLE 14. CLOSING INCOME STATEMENT.
-------------------------------------
Section 14.1 As soon as practicable, but no later than sixty (60) days
after the Closing Date, Buyer shall prepare and deliver to Seller a consolidated
income statement for the Company and its Subsidiaries which will fairly present
the consolidated net income or loss of Company and the Subsidiaries for the
period commencing on June 1, 2002 and ending on the Closing Date, determined in
accordance with Section 14.3 below ("Preliminary Income Statement").
Section 14.2 Seller shall have a period of up to thirty (30) days ("Review
Period") after receipt thereof within which to review and examine the
Preliminary Income Statement, including all related books and records of the
Company and the Subsidiaries. If Seller disputes any portion of the Preliminary
Income Statement, Seller shall provide written notice thereof to Buyer within
five (5) days after the expiration of the Review Period, explaining in
reasonable detail the nature and amount of such dispute. The amount of net loss
(if any) which is not then disputed by Seller will be promptly paid by Seller to
Buyer. Any issues or disagreements relating to the Preliminary Income Statement,
which are not resolved to the mutual satisfaction of the parties hereto within
twenty (20) days after expiration of the Review Period will be submitted for
determination to an independent public accounting firm to be selected by mutual
agreement of Seller and Buyer. The determination of that accounting firm on any
such matter will be final and binding upon the parties. The cost of such firm's
involvement will be shared equally by Buyer and Seller. The resulting income
statement, including any adjustments made pursuant to this Section 14.2, is
referred to as the "Closing Income Statement."
Section 14.3 Seller represents and warrants to Buyer that the books and
records of the Company will fairly and accurately present the information
necessary to compute the Preliminary Income Statement in accordance herewith.
Buyer hereby covenants to Seller that the Closing Income Statement will fairly
and accurately present the consolidated net income or loss of Company and the
Subsidiaries for the specified period, determined in accordance with GAAP
consistently applied, in accordance with the Company's books and records. Seller
agrees that in preparing Progressive's consolidated tax returns which include
the period prior to the Closing Date, the starting point of book income (or
loss) of the Company and its Subsidiaries will be consistent with the Closing
Income Statement.
ARTICLE 15. EXPENSES.
---------------------
Except as expressly provided herein, each party hereto shall be responsible
for all costs and expenses (including, without limitation, all legal, accounting
and consultant fees and all tax Liabilities) incurred at its initiative or to
which it may be or become subject, in connection with this Agreement and/or in
preparation for or as a result of the transactions contemplated hereunder.
ARTICLE 16. NOTICE.
-------------------
Any notice or other communication required or permitted to be given
hereunder shall be hand-delivered, or sent by courier or overnight delivery
service, transmitted by facsimile or mailed by certified or registered mail,
return receipt requested, postage prepaid, addressed as follows:
(a) If to Seller:
Progressive Agency Holdings Corp.
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇, President
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Chief Legal Officer
The Progressive Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: 440/▇▇▇-▇▇▇▇
(b) If to Buyer:
Blast Acquisition Corp.
c/o DCAP Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chief Executive Officer
Fax: (516) 295-295
With a copy to:
Certilman Balin ▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other addresses as the parties may from time to time designate in
writing in the manner provided in this Article 16. All notices given hereunder
shall be effective when received.
ARTICLE 17. MISCELLANEOUS PROVISIONS.
-------------------------------------
Section 17.1 Entire Agreement. This Agreement, together with the Disclosure
Statement and other Exhibits attached hereto, constitute and include the
complete understanding and agreement between the parties hereto with respect to
the subject matter hereof. Except as expressly provided herein, all prior or
contemporaneous representations, covenants, undertakings and agreements between
the parties with respect to the subject matter hereof are superseded hereby and
are of no further force or effect.
Section 17.2 Successors and Assigns; No Third Party Rights. This Agreement
shall inure to the benefit of and be binding upon the parties hereto, and their
respective legal representatives, successors and permitted assigns, as the case
may be; provided, however, that neither of the parties hereto may assign this
Agreement, or any rights or obligations hereunder, without the prior written
approval of the other party, and that upon any such approved assignment, the
assigning party will not be relieved of or released from any obligations under
this Agreement unless the non-assigning party specifically agrees to such a
release in writing. Nothing expressed or referred to in this Agreement will be
construed to give any person or entity other than the parties to this Agreement
any legal or equitable right, remedy or claim under or with respect to this
Agreement or any provision of this Agreement, except such rights as shall inure
to a successor or permitted assign pursuant to this Section 17.2.
Section 17.3 Rights and Remedies. Except as otherwise provided herein, no
right or remedy conferred upon or reserved to either party by this Agreement
shall exclude any other right or remedy, but each such right or remedy shall be
cumulative and shall be in addition to every other right or remedy hereunder or
available at law or in equity. Neither party hereto shall be deemed to have
waived any right or remedy unless such waiver shall be in writing, nor shall the
waiver of any right or remedy be deemed or construed to be a waiver of any other
right or remedy or as a waiver of the same right or remedy on a different
occasion.
Section 17.4 Public Announcements. No public announcement of the execution
of this Agreement or the consummation of any of the transactions contemplated
hereby shall be made by Seller unless the time, place, content and method of
distribution thereof shall have been approved in writing by Buyer. No public
announcement of the execution of this Agreement or the consummation of any of
the transactions contemplated hereby shall be made by Buyer, Company or any of
the Subsidiaries, unless the time, place, content and method of distribution
thereof shall have been approved in writing by Seller. Notwithstanding the
foregoing, after the Closing, Buyer is permitted to make any disclosures or
public announcements of the transactions contemplated herebyif Buyer shall
reasonably determine that such disclosure is required in order for Buyer or its
affiliates to comply with applicable securities laws and regulations, provided
that Buyer agrees to provide Seller with copies of such proposed disclosures or
announcements in advance of publication with a reasonable opportunity to comment
thereon.
Section 17.5 Amendment. Once executed by the parties hereto, this Agreement
may not be amended or terminated orally, but only by an instrument in writing
duly executed by both of the parties hereto.
Section 17.6 Interpretation and Construction.
-------------------------------
(a) This Agreement shall in all respects be interpreted, construed and
governed by and in accordance with the laws of the State of New York, excluding
principles regarding choice of laws. Subject to Section 6.4 hereof, in the event
that any provision of this Agreement shall finally be determined to be unlawful,
such provision shall be deemed to be severed from this Agreement, but every
other provision of this Agreement shall remain in full force and effect.
Whenever any representation or warranty is made "to the knowledge of Seller," or
words of similar import, the phrase encompasses the knowledge, after reasonable
investigation, of any of the individuals who are executive officers of Seller as
of the date of this Agreement.
(b) For the purposes hereof, (i) words in the singular shall be held to
include the plural and vice versa and words of one gender shall be held to
include the other gender as the context requires, (ii) the terms "hereof,"
"herein," and "herewith" and words of similar import shall, unless otherwise
stated, be construed to refer to this Agreement as a whole (including all of the
Schedules and Exhibits hereto) and not to any particular provision of this
Agreement, and Article, Section, paragraph, Exhibit and Schedule references are
to the Articles, Sections, paragraphs, Exhibits and Schedules to this Agreement
unless otherwise specified, (iii) the word "including" and words of similar
import when used in this Agreement shall mean "including, without limitation,"
unless otherwise specified, and (iv) the word "or" shall not be exclusive, but
shall be interpreted as "and/or."
(c) This Agreement will be construed without regard to any presumption or
rule requiring construction or interpretation against the party drafting or
causing any instrument to be drafted.
Section 17.7 Time of the Essence. Time is of the essence in each party's
performance of its respective obligations under this Agreement, including,
without limitation, Buyer's obligations to pay Deferred Installments and/or
interest as required under, but subject to the provisions of, Section 1 hereof.
[SIGNATURES ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties hereunder have executed and delivered this
Agreement, as of the date first written above, in any number of counterparts,
each of which fully executed counterparts shall be deemed an original for all
purposes.
SELLER:
PROGRESSIVE AGENCY HOLDINGS CORP.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
BUYER:
BLAST ACQUISITION CORP.
By:______________________________
Name:___________________________
Title:____________________________
SCHEDULE
OF
EXHIBITS
Exhibit Description Exhibit
Form of Security Agreement A
Form of Opinion of Seller's In-House Counsel B
Form of Statement by Seller C
Form of Seller's Guaranty D
Form of Opinion of Buyer's Counsel E
Form of Buyer's Guaranty F
Disclosure Schedule G
Financial Statements H
