EXHIBIT 10.2
SETTLEMENT AGREEMENT
This SETTLEMENT AGREEMENT, dated as of July 7, 1999, is entered into by
and among Zenith Insurance Company, a California Corporation ("Zenith"),
RISCORP, Inc., a Florida corporation ("RISCORP, Inc."), RISCORP Management
Services, Inc., a Florida corporation ("RMS"), ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Services, Inc.,
a Florida corporation ("1390 Main Street"), RISCORP of Illinois, Inc., an
Illinois corporation ("RI"), Independent Association Administrators
Incorporated, an Alabama corporation ("IAA"), RISCORP Insurance Services, Inc.,
a Florida corporation ("RIS"), RISCORP Managed Care Services, Inc. ("RMCS"), a
Florida corporation, CompSource, Inc., a North Carolina corporation
("CompSource"), RISCORP Real Estate Holdings, Inc., a Florida corporation
("RRE"), RISCORP Acquisition, Inc., a Florida corporation ("RA"), RISCORP West,
Inc., an Oklahoma corporation ("RW"), RISCORP of Florida, Inc., a Florida
corporation ("RF"), RISCORP Insurance Company, a Florida corporation ("RIC"),
RISCORP Property & Casualty Insurance Company, a Florida corporation ("RP&C"),
RISCORP National Insurance Company, a Missouri corporation ("RNIC"), RISCORP
Services, Inc., a Florida corporation ("RS"), RISCORP Staffing Solutions Holding
Company, a Florida corporation ("RSS Holding"), RISCORP Staffing Solutions, Inc.
I, a Florida corporation ("RSSI") and RISCORP Staffing Solutions, Inc. II, a
Florida corporation ("RSSII"). RISCORP, Inc., RMS, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇, IAA,
RIS, RMCS, CompSource, RRE, RA, RW, RF, RIC, RP&C, RNIC, RS, RSS Holding, RSSI
and RSSII are from time to time hereinafter referred to collectively as
"RISCORP" or the "RISCORP Companies."
WITNESSETH:
WHEREAS:
A. Zenith and RISCORP are parties to (a) an Asset Purchase Agreement,
dated as of June 17, 1997, as subsequently amended on June 26, 1997, July 11,
1997, and March 30, 1998 (the "Asset Purchase Agreement"); (b) an Escrow
Agreement with First Union National Bank as Escrow Agent dated April 1, 1998
(the "Escrow Agreement"); (c) a letter agreement dated April 1, 1998 (the
"Letter Agreement"); and (d) those documents and instruments listed on Exhibit A
hereto (together with the Escrow Agreement and the Letter Agreement, the
"Transaction Documents"). Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed to them in the Asset Purchase
Agreement;
B. Pursuant to the Asset Purchase Agreement, on April 1, ▇▇▇▇, ▇▇▇▇▇▇
acquired substantially all of RISCORP's assets and assumed certain of RISCORP's
liabilities (the "Asset Sale") for a purchase price equal to the amount by which
the book value of the Transferred Assets exceeded the book value of the
Transferred Liabilities as set forth on a Final Business Balance Sheet to be
determined in accordance with the procedures set forth in the Asset Purchase
Agreement;
C. On April 1, 1998, in connection with the closing of the Asset Sale,
Zenith paid RISCORP $35 million to be applied toward the final Purchase Price
payable pursuant to the Asset Purchase Agreement, $10 million of which was
deposited with the Escrow Agent to be distributed pursuant to the terms of the
Asset Purchase Agreement and the Escrow Agreement;
D. The Letter Agreement contained certain provisions pursuant to which
certain of RISCORP's Assets would be deemed not to be Transferred Assets for
purposes of determining the Final Business Balance Sheet and the Purchase Price
payable pursuant to the Asset Purchase Agreement.
E. On October 16, 1998, RISCORP commenced an action against Zenith in
the United States District Court for the Middle District of Florida, Tampa
Division, captioned RISCORP, Inc., et al. v. Zenith Insurance Co., Case No.
98-2122-CIV-T-25E (the "Florida Action"), in which RISCORP alleged various
claims against Zenith, including claims relating to Zenith's alleged breaches of
the Asset Purchase Agreement and the Letter Agreement;
F. On January 8, 1999, Zenith commenced an action in the United States
District Court for the Southern District of New York, captioned Zenith Insurance
Co. v. RISCORP, Inc., et al., Case ▇▇. ▇▇ ▇▇▇. ▇▇▇▇ (▇▇▇) (the "New York
Action"), in which Zenith asserted various claims against RISCORP, including
claims relating to RISCORP's alleged breaches of the Asset Purchase Agreement;
G. On March 19, 1999, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP ("▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇"), acting
as Neutral Auditor and Neutral Actuary pursuant to the Asset Purchase Agreement,
issued (i) a report containing its determinations of certain issues that ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ found to be in dispute between the parties regarding the manner in
which certain items should be treated in the preparation of the Final Business
Balance Sheet; and (ii) its determination of the Final Business Balance Sheet;
H. As a result of the issuance of the Final Business Balance
Sheet, (i) on or about ▇▇▇▇▇ ▇▇, ▇▇▇▇, ▇▇▇▇▇▇ wire transferred to RISCORP, Inc.
the sum of $50,853,182, and wire
transferred to the Escrow Agent the sum of $2,835,723; and (ii) on April 14,
▇▇▇▇, ▇▇▇▇▇▇ wire transferred to RISCORP, Inc. the sum of $619,173.32;
I. The parties agree that in determining the final Purchase Price to be
paid by Zenith in connection with the Asset Sale certain adjustments to the
Final Business Balance Sheet are required based on (i) certain provisions of the
Letter Agreement; (ii) the value of certain assets identified on Exhibit F-1
included among the Transferred Assets on the Final Business Balance Sheet that
in fact were not transferred to Zenith, and (iii) the value of a treasury note
acquired by Zenith that was not included among the Transferred Assets on the
Final Business Balance Sheet. In addition, certain adjustments to the Final
Balance Sheet may be required based on certain errors that were allegedly made
by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ in determining the Final Business Balance Sheet; and
J. Zenith and RISCORP desire to compromise and settle the claims and
all pending and potential litigation between them (except as otherwise expressly
provided herein), and they have therefore agreed to enter into this Settlement
Agreement to settle and resolve, on the terms specified herein, all such claims
and disputes.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter set forth, it is hereby agreed as follows:
1. The Final Business Balance Sheet. Zenith and RISCORP agree not to
commence or prosecute any action or proceeding, or to take any other action,
that seeks to confirm, modify, vacate, challenge or otherwise review the Final
Business Balance Sheet or the Revised Final Business Balance Sheet (as defined
herein) except as provided below in this paragraph 1.
(a) The parties agree that RISCORP may request that ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ review and/or correct any alleged errors made in its determination of
the Final Business Balance Sheet with respect to its failure to make appropriate
adjustment for certain reinsurance treaties in effect during accident years 1991
through 1993, inclusive, including, without limitation, whether issues relating
to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇'▇ adjustment to reinsurance recoverable were in dispute
between the parties (the "RISCORP Reinsurance Claims").
(b) Within five business days after the date of this
Settlement Agreement, Zenith may make a submission to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ regarding
the RISCORP Reinsurance Claims in respect of (i) correspondence from ▇▇▇▇▇▇▇
Hammock & Company to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ dated May 17, 1999; (ii) correspondence
from ▇▇▇▇▇▇ & Bird LLP to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ dated May 24, 1999; and (iii)
correspondence from ▇▇▇▇▇▇ & Bird LLP to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ dated June 4, 1999.
Zenith's submission to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall be to the effect that the RISCORP
Reinsurance Claims were not "in dispute" under Section 2.02(b) of the Asset
Purchase Agreement and that ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ did not make an error with respect
to this issue in the Final Business Balance Sheet. On or before July 27, 1999,
RISCORP may make an additional submission to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ addressing the
RISCORP Reinsurance Claims or any issues raised in Zenith's submission to ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ pursuant to this paragraph 1(b).
(c) Zenith and RISCORP agree that, in reviewing the RISCORP
Reinsurance Claims, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ may: (i) determine whether such claims were
"in dispute" under Section 2.02(b) of the Asset Purchase Agreement; (ii) resolve
such claims on the merits by applying the standards for review by the Neutral
Auditors and Neutral Actuary under Section 2.02(b) of the Asset
Purchase Agreement; and (iii) if appropriate, issue a revised or corrected Final
Business Balance Sheet reflecting any resolution of such claims (the "Revised
Final Business Balance Sheet").
(d) If ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ issues the Revised Final Business
Balance Sheet, then (i) RISCORP shall pay to Zenith the amount of the net
reduction, if any, in the Net Assets Transferred reflected on the Revised Final
Business Balance Sheet; or (ii) Zenith shall pay to RISCORP on behalf of the
Sellers the amount of the net increase, if any, in the Net Assets Transferred
reflected on the Revised Final Business Balance Sheet. RISCORP or Zenith, as the
case may be, shall pay interest on any amounts due under this paragraph 1 at the
rate of 6.25% per annum from (and including) April 1, 1998 to (but excluding)
the date of payment. Any such payment shall be made within five business days
after receipt of the Revised Final Business Balance Sheet by wire transfer of
immediately available funds to an account designated by the party entitled to
receive such payment.
(e) Notwithstanding anything to the contrary in this
Settlement Agreement, including, without limitation, the foregoing provisions of
this paragraph 1, neither Zenith nor RISCORP has waived any right to commence
legal action in any court of competent jurisdiction: (i) to seek correction of
alleged errors with respect to the RISCORP Reinsurance Claims that were not
corrected by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ in a Revised Final Business Balance Sheet pursuant
to this paragraph 1; or (ii) to correct, modify, vacate or set aside any
revision of the Final Business Balance Sheet made in the Revised Final Business
Balance Sheet.
2. Disbursements from Escrow. (a) Zenith and RlSCORP agree to cause all
funds currently on deposit with the Escrow Agent to be distributed as soon as
reasonably practicable, but in no event later than 20 business days after
execution of this Settlement Agreement, as follows:
(i) Six million dollars ($6,000,000) to Zenith;
and
(ii) the balance of all principal and interest to
RISCORP, Inc.
(b) Following the foregoing disbursement of funds, the Escrow
Agreement shall be terminated and the parties shall execute such documents or
instruments as may be reasonably necessary to evidence such termination.
(c) RISCORP acknowledges that Zenith intends to treat the
amounts received under this paragraph 2 as reimbursement for unexpected expenses
incurred by Zenith in connection with carrying on the Business acquired from
RISCORP.
3. Claims for Refunds. The parties agree that RISCORP's claims for
refunds made to the Florida Department of Labor and Employment Security,
Division of Workers' Compensation Administrative and Field Support Unit will be
divided between them as follows:
(a) RISCORP, Inc. shall be the sole owner of and is entitled
to any refund granted in connection with its request for a refund for Five
Million Two Hundred Ninety Two Thousand, One Hundred Eighty-Three Dollars
($5,292,183) related to deductions for commissions against gross premiums (the
"Commission Refund"); and
(b) Of the approximate balance of Twenty-Seven Million Dollars
($27,000,000) of potential additional refunds related to deduction for premiums
ceded to others (the "Reinsurance Refunds"), RISCORP, Inc. shall receive the
first Ten Million Dollars ($10,000,000) of any Reinsurance Refunds recovered,
and should the Reinsurance Refunds recovery exceed Ten Million Dollars
($10,000,000), RISCORP and Zenith will share equally in any excess proceeds.
(c) The fees and expenses incurred in connection with
RISCORP's efforts to seek recovery of the Reinsurance Refunds shall be shared by
Zenith and RISCORP in the same ratio as the amounts which each ultimately
recovers. All such fees and expenses shall initially be borne by RISCORP, which
shall be entitled to reimbursement for Zenith's share of such fees and expenses
only if Zenith shares in any Reinsurance Refunds. RISCORP shall have the right
to direct and control the prosecution of any attempts to recover the Reinsurance
Refunds. RISCORP shall not compromise or settle such claims without the prior
written approval of Zenith, which approval shall not be unreasonably withheld.
At RISCORP's request, Zenith shall jointly prosecute the claims to recovery of
the Reinsurance Refunds, but RISCORP shall retain the right to direct and
control the prosecution in such event. RISCORP may cease prosecuting such claims
at any time in its sole discretion, provided, however, that RISCORP first offers
in writing to assign such claims to Zenith without consideration, and Zenith
does not accept such assignment within ten business days of receipt of such
offer. If Zenith does accept such Assignment, RISCORP shall be dismissed as a
party, and Zenith, as assignee of RISCORP, shall be substituted. Zenith shall
thereafter bear all fees and expenses incurred in connection with its
prosecution of such claim.
4. Release by Zenith. Effective with the execution of this Settlement
Agreement, Zenith and its affiliates, subsidiaries, parents, shareholders,
agents, employees, attorneys, accountants, representatives, directors, and
officers (the "Zenith Releasors") hereby release, acquit and forever discharge
RISCORP and its affiliates, subsidiaries, parents, shareholders, agents,
employees, attorneys, accountants, representatives, directors and officers (the
"RISCORP Releasees") from any and all claims, causes of action, debts, accounts,
contracts, torts, demands, judgments, whether at law
or in equity, accrued or contingent, known or unknown, discovered or
undiscovered, in the past or in the future, which the Zenith Releasors had,
have, or may in the future have, of any form or nature, from the beginning of
time through and including the date of this Settlement Agreement (collectively,
"Zenith Claims"), except for any Zenith Claims that arise from, relate to, or
are based on (i) any of the obligations contained within this Settlement
Agreement; (ii) the surviving provisions of the Asset Purchase Agreement; and
(iii) the surviving provisions of the Transaction Documents.
5. Release by RISCORP. Effective with the execution of this Settlement
Agreement, the RISCORP Releasees hereby release, acquit and forever discharge
the Zenith Releasors from any and all claims, causes of action, debts, accounts,
contracts, torts, demands, judgments, whether at law or in equity, accrued or
contingent, known or unknown, discovered or undiscovered, in the past or in the
future, which the RISCORP Releasees had, have, or may in the future have, of any
form or nature, from the beginning of time through and including the date of
this Settlement Agreement (collectively, "RISCORP Claims"), except for any
RISCORP Claims that arise from, relate to, or are based on (i) any of the
obligations contained within this Settlement Agreement including, without
limitation, any claims arising out of or related to any alleged errors made by
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ as provided in paragraph 1 hereof; (ii) the surviving provisions
of the Asset Purchase Agreement; (iii) the surviving provisions of the
Transaction Documents; and (iv) RISCORP's right to seek indemnification from
Zenith with respect to Bristol Hotel Management Corporation, et al. v. Aetna
Casualty & Surety Company, a/k/a Aetna Group, et al. (the "Bristol Hotel
Action").
6. Covenant Not to ▇▇▇ or Arbitrate by Zenith. Except as
contemplated by paragraphs 1 and 14 hereof, effective with the execution of this
Settlement Agreement Zenith and its affiliates,
subsidiaries, parents, shareholders, agents, employees, attorneys, accountants,
representatives, directors, and officers (the "Zenith Convenantors") hereby
covenant not to ▇▇▇ and covenant not to arbitrate against RISCORP and its
affiliates, subsidiaries, parents, shareholders, agents, employees, attorneys,
accountants, representatives, directors and officers (the "RISCORP Covenantees")
as to any and all claims, causes of action, debts, accounts, contracts, torts,
demands, and judgments, whether at law or in equity, which the Zenith
Covenantors had, have, or may have in the future, of any form or nature, based
in whole or in substantial part on facts actually known to the officers or
former officers of Zenith identified on Exhibit B attached hereto, or which
should have been known to such officers of Zenith after reasonable inquiry, from
the beginning of time up to the date of this Settlement Agreement.
7. Covenant Not to ▇▇▇ or Arbitrate by RISCORP. Except as contemplated
by paragraphs 1 and 14 hereof and as to the Bristol Hotel Action, effective with
the execution of this Settlement Agreement the RISCORP Covenantees hereby
covenant not to ▇▇▇ and covenant not to arbitrate against the Zenith Covenantors
as to any and all claims, causes of action, debts, accounts, contracts, torts,
demands, and judgments, whether at law or in equity, which the RISCORP
Covenantees had, have, or may have in the future, of any form or nature, based
in whole or in substantial part on facts actually known to the officers of
RISCORP, or which should have been known to the officers of RISCORP after
reasonable inquiry, from the beginning of time up to the date of this Settlement
Agreement.
8. Dismissal of Florida Action. Within five business days of the
execution of this Settlement Agreement, Zenith and RISCORP agree to submit a
Stipulation in the form annexed
hereto as Exhibit C to the United States District Court for the Middle District
of Florida, Tampa Division, for filing in the action captioned RISCORP. Inc., et
al. v. Zenith Insurance Co., Case No. 98-2122-CIV-T-25E.
9. Dismissal of New York Action. Within five business days of the
execution of this Settlement Agreement, Zenith and RISCORP agree to submit a
Stipulation in the form annexed hereto as Exhibit D to the United States
District Court for the Southern District of New York for filing in the action
captioned Zenith Insurance Co. v. RISCORP, Inc., et al., Case ▇▇. ▇▇ ▇▇▇. ▇▇▇▇
(▇▇▇).
10. Release of Securities. Zenith agrees promptly to execute upon
RISCORP's request letters in substantially the form attached as Exhibit E
evidencing Zenith's acknowledgment that it has no right, title or interest in or
to certain funds on deposit with various state regulatory agencies and its
consent to the release of such funds or securities to RISCORP. Zenith further
covenants and agrees that it shall execute any additional documents or
instruments as may be reasonably necessary to assist RISCORP in the recovery of
such funds. The funds or securities currently on deposit with various state
agencies to which Zenith acknowledges RISCORP's full entitlement are set forth
on Exhibit F.
11. Assessments. Responsibility for satisfaction of assessments,
including those assessments at issue in the Florida Action and the New York
Action and those arising in the future, from state insurance departments and
other state and federal regulatory agencies will be borne by the parties as
follows:
(a) The parties have set forth on Exhibit G those assessments
currently known to the parties and have identified whether or the extent to
which each such assessment is the
responsibility of RISCORP or Zenith. Unless otherwise specifically provided on
Exhibit G, the parties will each satisfy their respective obligations as
reflected on Exhibit G within 15 days of the execution of this Settlement
Agreement and shall provide to the other party evidence of such satisfaction.
(b) Any other assessment or Tax attributable to the Business
for a period prior to April 1, 1998 will be the responsibility of RISCORP.
(c) Any other assessment or Tax attributable to the Business
for a period on or after April 1, 1998 will be the responsibility of Zenith,
regardless of whether the premiums or other amounts used to calculate such
assessment or Tax relate to a period before or after April 1, 1998.
(d) Any other assessment or Tax attributable to the Business
for a period both prior to and following April 1, 1998 shall be prorated between
RISCORP and Zenith, respectively, by following the methodology described in
paragraphs (b) and (c) above based on the ratio of (i) the number of days in the
period prior to April 1, 1998, to (ii) the number of days in the period on and
after April 1, 1998 in the period being assessed.
12. Amendment to Asset Purchase Agreement. The parties hereto
agree that the Asset Purchase Agreement is hereby amended as follows:
(a) The following Sections or Articles of the Asset Purchase
Agreement shall have no further force or effect: Sections 3.03, 3.04, 3.05,
3.06, 3.07, 3.09, 3.10, 3.11, 3.12, 3.13, 3.14, 3.15, 3.15 A, 3.18, 3.19, 3.20,
3.21, 3.22, 4.03, 4.04; Article V; Article VI; Article VII; and Article X.
(b) The following Sections of the Asset Purchase Agreement are
amended as set forth below:
(i) Section 8.01. Section 8.01 of the Asset
Purchase Agreement is amended to provide as
follows:
Section 8.01: Survival of Representations and
Warranties. All representations and warranties
contained in Sections 3.01, 3.02, 3.08, 3.16, 3.17,
4.01, and 4.02 of the Asset Purchase Agreement shall
survive the Closing and shall terminate and expire at
the close of business on April 1, 2000.
(ii) Section 11.06. Section 11.06 of the Asset
Purchase Agreement is hereby amended by
deleting subpart (b) thereof in its
entirety.
(c) To the extent that any provisions of this Settlement
Agreement may conflict with any surviving provisions
of the Asset Purchase Agreement or the Transaction
Documents, the provisions of this Settlement
Agreement shall control.
13. Pending Litigation. Attached as Exhibit H is a schedule of pending
litigation, along with a designation as to which party shall be responsible for
the defense of, and satisfaction of any judgment or settlement arising from,
each suit.
14. Voided Checks/Stop Payment Orders. (a) Zenith and RISCORP agree
that Zenith shall have 60 days from the date of this Settlement Agreement to
submit to RISCORP the following: (i) a Schedule of Unpaid Checks listing checks
that were issued by any RISCORP company prior to April 1, 1998 that either (A)
were voided by Zenith, or (B) are subject to stop payment orders issued by
Zenith; and (ii) copies of canceled checks, reasonable proof of reissuance or
other documentation demonstrating Zenith's right to reimbursement for checks
listed on the Schedule of Unpaid Checks
(collectively, the "Check Documentation"); provided, however, Zenith's right to
reimbursement shall be limited to the lesser of (A) the amount actually paid by
Zenith in connection with the reissuance of a check listed on the Schedule of
Unpaid Checks, or (B) the amount RISCORP carried on its outstanding check list
for such check as of April 1, 1998.
(b) Within ten business days after RISCORP's receipt of the
Check Documentation, RISCORP shall (i) provide Zenith a written schedule listing
its objections, if any, to reimbursing Zenith for checks listed on the Schedule
of Unpaid Checks, and (ii) reimburse Zenith, by wire transfer to an account
designated by Zenith, in an aggregate amount equal to the amount of all checks
as to which RISCORP is not objecting to reimbursement.
(c) Except for checks for which Check Documentation has been
provided to RISCORP within 60 days of the date of this Settlement Agreement,
Zenith agrees that it has no right to assert any claim against RISCORP or any
RISCORP company for reimbursement of any check that was issued by any RISCORP
company prior to April 1, 1998 whether or not such check was included on the
Schedule of Unpaid Checks.
(d) Any disputes between the parties concerning Zenith's right
to reimbursement for unpaid checks that are the subject of this paragraph 14
shall be resolved by arbitration pursuant to paragraph 15 hereof.
15. Submission of Matters to Arbitration. (a) The parties expressly
agree that, except as otherwise set forth in paragraph 1 hereof or as to any
claim or controversy that is subject to the agreement not to ▇▇▇ or arbitrate as
provided in paragraphs 6 or 7 hereof, any claim or controversy arising out of or
in connection with (i) the surviving provisions of the Asset Purchase Agreement,
(ii)
the surviving provisions of the Transaction Documents, (iii) the enforcement or
interpretation of this Settlement Agreement, or (iv) any of the obligations
contained within this Settlement Agreement, shall be resolved by binding
arbitration before the ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, unless he is unavailable or
unwilling to serve. In the event the ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ is unavailable
or unwilling to serve, an arbitrator shall be selected in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. Any
arbitration pursuant to this Settlement Agreement shall be conducted in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association except as modified by this paragraph 15. The arbitration shall take
place in Tampa, Florida. The ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or other arbitrator
selected in accordance with this paragraph shall be hereinafter referred to as
the "Arbitrator." The decision or award of the Arbitrator shall be final,
binding and conclusive. Either party may seek confirmation of any award or
decision entered pursuant to this paragraph 15 by any court of competent
jurisdiction.
(b) The parties expressly waive any right to file a civil
action and any right to a jury trial as to any claim or controversy between
them, except as to the potential claims described in paragraph 1 above.
(c) Except as expressly authorized in this Settlement
Agreement, the parties agree that it shall be a breach of this Settlement
Agreement for any party hereto to file against any other party any civil action
or arbitration proceeding relating to (i) any of the Zenith Claims or RISCORP
Claims that are released pursuant to paragraphs 4 and 5 of this Settlement
Agreement, (ii) the claims in respect of which the parties have agreed not to
▇▇▇ or arbitrate pursuant to paragraphs 6 and 7 of this Settlement Agreement,
(iii) the enforcement or interpretation of this Settlement Agreement, or
(iv) any dispute that may arise between the parties relating to the Asset
Purchase Agreement, the Transaction Documents, or the transactions contemplated
by the Asset Purchase Agreement. In the event of such a breach, the
non-breaching party or parties shall be entitled to recover any consequential
damages as well as its reasonable attorneys' fees and expenses from the
breaching party or parties.
(d) As a condition precedent to the submission of any dispute
for determination by the Arbitrator, a party shall serve upon the other party to
this Settlement Agreement, in the manner provided for notices pursuant to
Section 11.03 of the Asset Purchase Agreement, a written statement of the matter
in dispute, and thereafter the parties shaft negotiate in good faith to attempt
to resolve the matter in dispute for a time period not to exceed ten (10) days
(unless the parties mutually agree in writing to extend this time period).
(e) Within twenty (20) days following the end of the period of
good faith negotiations set forth in the immediately preceding paragraph, any
party to this Settlement Agreement who desires to arbitrate a claim shall submit
to the other party and to the Arbitrator a demand for arbitration setting forth
with reasonable specificity the nature and amount of the claim, and the parties
shall follow the following procedures:
(i) The party receiving the demand for
arbitration shall have ten business days
from receipt of the other party's demand to
dispute the claim in writing. If the claim
is not disputed, the amount claimed in the
arbitration demand will be the award of the
Arbitrator.
(ii) Should the party receiving the claim dispute
it, the party asserting the claim shall
submit, no later than ten business days
after receipt of its adversary's notice of
dispute, a position paper, setting forth its
position as to why it should prevail on its
claim, including any appropriate evidentiary
material.
(iii) The party disputing the demand for
arbitration will have ten business days
after its receipt of its adversary's
position paper to submit a response,
including any appropriate evidentiary
material.
(iv) The Arbitrator shall issue his award within
thirty days of his receipt of the response
of the party opposing the claim.
(v) For purposes of this paragraph 15, all
claims, responses, notices, position papers
or other papers of any kind shall be served
by facsimile and overnight delivery (next
business day) to the persons identified in
paragraph 11.03 of the Asset Purchase
Agreement and upon the Arbitrator, except
that exhibits, appendices, and other lengthy
documents need only be served by overnight
delivery service. The time for any party to
take any action pursuant to this paragraph
after receipt of notice or written material
shall commence to run from receipt of such
notice or written material by overnight
delivery service.
16. Termination of Letter Agreement and Power of Attorney. The parties
expressly agree that the Letter Agreement and the Power of Attorney executed by
RISCORP in connection with the closing of the Asset Sale are hereby terminated
and shall be of no further force or effect.
17. Further Assurances. On and after execution of this Settlement
Agreement, Zenith and RISCORP shall take all reasonably appropriate action and
execute any additional documents, instruments or conveyances of any kind which
may be reasonably necessary to carry out any of the provisions of this
Settlement Agreement or the surviving provisions of the Asset Purchase Agreement
and the Transaction Documents.
18. Entire Agreement. This Settlement Agreement contains the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings, written or oral, with
respect thereto.
19. Amendments and Waivers. This Agreement may be amended, superseded,
cancelled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by each of the parties or, in the case of a waiver, by
the party waiving compliance. No delay on the part of any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any waiver on the part of any party of any right, power or privilege, nor
any single or partial exercise of any such right, power or privilege, preclude
any further exercise thereof or the exercise of any other such right, power or
privilege.
20. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors, permitted assigns
and legal representatives.
21. Governing Law. This settlement agreement shall be governed by and
construed in accordance with the laws of the State of Florida, without giving
effect to the principles of conflicts of laws thereof.
22. No Admission of Liability. Zenith and RISCORP agree (a) that
neither this Settlement Agreement nor the fact of settlement are an admission of
any liability or wrongdoing whatsoever; (b) that neither this Settlement
Agreement nor the fact of settlement shall be used or construed as an admission
of any fault, liability or wrongdoing by any person; and (c) that neither this
Settlement Agreement, the fact of settlement, the settlement negotiations, nor
any related document shall be offered or received in evidence as an admission,
concession, presumption or inference against any party in any action or
proceeding other than an action or proceeding to enforce this Settlement
Agreement.
23. Representations of RISCORP. RISCORP, Inc., RMS, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇, IAA, RIS, RMCS, CompSource, RRE, RA, RW, RF, RIC, RP&C, RNIC, RS, RSS
Holding, RSSI and RSSII each represent and warrant that (a) each such entity has
the requisite corporate power and authority to execute, deliver and perform its
obligations under this Settlement Agreement; (b) the execution and delivery of
this Settlement Agreement and the performance of the obligations thereunder have
been duly authorized by all necessary corporate action; (c) this Settlement
Agreement constitutes the legal, valid and binding obligation of each such
entity, enforceable in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or in law); and (d) after
giving effect to the transactions contemplated by this Settlement Agreement, the
RISCORP Companies, individually and on a consolidated basis, will be solvent,
able to pay their debts as they mature, have capital sufficient to carry on
their businesses and all businesses in which they are about to engage, and:
(i) the assets of the RISCORP Companies,
individually and on a consolidated basis, at
a fair evaluation, exceed the total
liabilities (including contingent,
subordinated, unmatured and unliquidated
liabilities) of the RISCORP Companies;
(ii) current projections which are based on
underlying assumptions which provide a
reasonable basis for the projections and
which reflect the RISCORP Companies'
judgment based on present circumstances, the
most likely set of conditions and the
RISCORP Companies' most likely course of
action for the period projected, demonstrate
that the RISCORP Companies, individually and
on a consolidated basis, will have
sufficient cash flow to enable them to pay
their debts as they mature or the RISCORP
Companies are reasonably satisfied that they
will be able to refinance such debt at or
prior to maturity on commercial reasonable
terms; and
(iii) the RISCORP Companies, individually and on a
consolidated basis, do not have unreasonably
small capital base with which to engage in
their anticipated businesses.
24. Representations of Zenith. Zenith represents and warrants that (a)
it has the requisite corporate power and authority to execute, deliver and
perform its obligations under this Settlement Agreement (b) the execution and
delivery of this Settlement Agreement and the performance of its obligations
thereunder have been duly authorized by all necessary corporate action, and (c)
this Settlement Agreement constitutes the legal, valid and binding obligation of
Zenith, enforceable in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or in law).
25. Counterparts. This Settlement Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ZENITH INSURANCE COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇
Title: Chairman and President
RISCORP, INC.
RISCORP MANAGEMENT SERVICES, INC.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ SERVICES, INC.
RISCORP OF ILLINOIS, INC.
INDEPENDENT ASSOCIATION
ADMINISTRATORS INCORPORATED
RISCORP INSURANCE SERVICES, INC.
RISCORP MANAGED CARE SERVICES, INC.
COMPSOURCE, INC.
RISCORP REAL ESTATE HOLDINGS, INC.
RISCORP ACQUISITION, INC,
RISCORP WEST, INC.
RISCORP OF FLORIDA, INC.
RISCORP INSURANCE COMPANY
RISCORP PROPERTY & CASUALTY
INSURANCE COMPANY
RISCORP NATIONAL INSURANCE COMPANY
RISCORP SERVICES, INC.
RISCORP STAFFING SOLUTIONS
HOLDING COMPANY
RISCORP STAFFING SOLUTIONS, INC. I
RISCORP STAFFING SOLUTIONS, INC. II
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Vice President