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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is made and entered
into as of this 23rd day of August, 1996 by and among ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Insurance Services, a California corporation (the "Company"), ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (collectively, the "Shareholders") and Pan
American Underwriters, Inc., a Nevada corporation ("Purchaser"). The parties
agree that for purposes of determining prorations of expenses and revenues
hereunder, the transaction shall be deemed to have closed at midnight August
31, 1996.
RECITALS
WHEREAS, the Company is an insurance agency focusing on commercial
workers' compensation business (the "Business"), licensed to sell insurance
in the State of California and elsewhere;
WHEREAS, Purchaser desires to acquire substantially all of the non-cash
assets of the Company, including the rights associated with the name "The
▇▇▇▇▇▇▇▇ Company" and "▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Insurance Services, Inc." and the
rights to all policies and policy holder information placed by the Company
with various insurance carriers (collectively, the "Book of Business") and to
assume certain selected liabilities of the Company in exchange for the
consideration set forth herein, and the Company desires that such assets be
sold; and
WHEREAS, the parties adopt this Agreement as a plan of reorganization
under Section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended;
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
representations, warranties and covenants herein set forth, and other good
and valuable
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consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 PURCHASE AND SALE OF PURCHASED ASSETS. On the terms and subject to
the conditions set forth in this Agreement, at the Closing, the Company shall
sell, assign, transfer, convey and deliver to Purchaser, and Purchaser shall
purchase and accept from the Company, all of the right, title and interest of
the Company in and to the Purchased Assets (as defined below), free and clear
of all Liens (as defined below) other than Permitted Liens (as defined below).
"Purchased Assets" shall mean all personal properties and assets,
tangible and intangible of the Company, including without limitation the
names "▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Insurance Services" and "The ▇▇▇▇▇▇▇▇ Company," but
excluding the Excluded Assets (as defined in Section 1.2 below).
"Lien" shall mean any pledge, security interest, lien, charge,
encumbrance, equity or option of whatsoever nature.
"Permitted Liens" shall mean (i) Liens for taxes not yet due and payable
or being contested in good faith and for which adequate reserves have been
taken, and (ii) mechanics', carriers', workers', repairers', materialmens',
warehousemens' and other similar liens arising or incurred in the ordinary
course of business.
Without limiting the foregoing, the Purchased Assets shall include the
following:
(a) REGULATORY LICENSES. All of the Licenses and Employee Licenses of
the Company, to the extent transferable, as defined in Sections 3.19 and 3.20
below.
(b) TANGIBLE PERSONAL PROPERTY. All the Tangible Personal Property.
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"Tangible Personal Property" shall mean all machinery, equipment,
electrical devices, vehicles, furniture, fixtures, office materials and
supplies, hardware, tools, spare parts, phone numbers and other tangible
personal property of every kind and description owned by the Company,
including without limitation, those listed and described on SCHEDULE 3.8
hereto, and any additions, improvements, replacements and alterations thereto
made between the date of this Agreement and the Closing Date in the ordinary
course of business.
(c) ASSUMED CONTRACTS. All the Assumed contracts.
"Assumed Contracts" shall mean all right, title and interest of the
Company in and to the contracts and agreements listed or referred to on
SCHEDULE 1.1(c) hereto, together with the contracts and agreements entered
into between the date of this Agreement and the Closing Date in accordance
with the terms of this Agreement and contracts entered into in the ordinary
course of business pursuant to which the Company's obligations do not exceed
$1,000 per year and which are terminable on less than ninety days' notice
without penalty.
(d) INTANGIBLE RIGHTS. All the Intellectual Property of the Company.
"Intellectual Property" shall mean all intangible rights, including,
without limitation, (i) all trademarks and service marks and all applications
therefor and registrations and recordings thereof, together with the goodwill
symbolized by and associated with such trademarks and service marks, (ii) all
trade dress connected or used with such trademarks and service marks and all
applications, registrations and recordings thereof, (iii) all trade secrets,
proprietary information and know-how, (iv) all franchises, patents, jingles,
slogans, logotypes and other intangible rights, (v) all customer lists, in
each case including, without limitation, those listed and described on
SCHEDULES 3.22 hereto (vi) all rights with respect to the goodwill and
renewal rights with respect to the Policyholders (as defined in Section
3.22), including without limitation the right and authority to issue bills
for existing and renewal policies, the right to issue renewal policies and
process changes and claims on existing policies and the right to communicate
with the Policyholders under color of the agency with whom the
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1.2 EXCLUDED ASSETS. Notwithstanding the foregoing, the Purchased Assets
shall not include the following assets of the Company (collectively, the
"Excluded Assets"):
(a) CORPORATE RECORDS; TAX RETURNS. The stock books, stock ledgers,
shareholder lists, minute books, corporate seals and similar corporate
records of the Company, as well as all tax returns of the Company and any and
all records that the Company is required to retain pursuant to applicable
law.
(b) ACCOUNTS RECEIVABLE. All accounts receivable of the Company as of
the Closing Date which were earned prior to the Closing Date less any
unearned commissions received by the Company prior to the Closing Date.
(c) CASH AND INVESTMENTS. All cash, cash equivalents and securities,
including cash deposited in the Company's trust account(s).
(d) OTHER EXCLUDED ASSETS. The other assets, if any, set forth on
SCHEDULE 1.2(d) hereto.
1.3 ASSUMPTION OF CERTAIN LIABILITIES. Purchaser is not assuming any
debt, liability or obligations of the Company or any Shareholder, whether
known or unknown, fixed or contingent, except for the liabilities of the
Company to be paid or performed after the Closing Date under the Assumed
Contracts listed in SCHEDULE 1.1(c) (the "Assumed Contracts") which are
assigned by the Company to the Purchaser (the "Assumed Liabilities").
Except as and to the extent otherwise expressly provided in this
Agreement, Purchaser does not, and shall not, assume or be deemed to assume,
nor shall Purchaser discharge, be responsible for or liable with respect to
any other liabilities or obligations of the Company or any other person,
whether arising prior to, on or after the Closing Date (collectively, the
"Retained Liabilities"), including without limitation:
(a) any liability or obligations of the Company arising out of or
relating to any contract or agreement not fully and effectively assigned to
and specifically assumed by
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"Tax" or "Taxes" means all federal, state, local and foreign taxes,
including without limitation, income, profits, franchise, license,
employment, estimated, transfer, premium, withholding, property, excise,
sales, and use taxes (including any interest, penalties, deposits or
additions with respect thereto).
1.4 PURCHASE PRICE FOR PURCHASED ASSETS. On the Closing Date, Purchaser
shall pay to the Company consideration with a value of $220,576.42. Such
consideration will be paid 20% in cash, by wire transfer or delivery of a
certified or cashier's check in the sum of $44,115.28 and 80% by delivery to
the Company of a certificate or certificates representing 5,882 shares of
▇▇▇▇▇ Financial Common Stock, no par value, (the "Shares").
The parties agree to allocate the purchase price among the Purchased
Assets for all purposes in accordance with SCHEDULE 1.4 hereto.
1.5 CLOSING. The Closing of the transactions contemplated by this
Agreement (the "Closing") shall occur at the offices of Purchaser located in
Pasadena, California at 10:00 a.m., on the next business day following the
satisfaction of the last unsatisfied condition set forth in Article V hereof
(the "Closing Date") unless the parties hereto agree in writing upon a
different time, date or place.
Article II
CERTAIN UNDERSTANDINGS AND AGREEMENTS
2.1 EMPLOYMENT AND NON-COMPETITION AGREEMENTS. On or before the Closing
Date, each Shareholder and ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall have executed an
employment agreement with the Purchaser substantially in the form of SCHEDULE
2.1(a) and all employees of the Company which choose to be hired by Purchaser
shall have executed a non-competition agreement with the Purchaser
substantially in the form of SCHEDULE 2.1(b).
2.2 PROFIT SHARING TERMINATION. The Company agrees to give notice of
termination of the profit sharing arrangements between the Company and its
employees immediately prior to the Closing Date.
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2.3 401(k) PLAN AND OTHER PURCHASER BENEFITS. The Purchaser agrees to
give credit to each employee of the Company for time served with the Company
for purposes of determining eligibility, but not vesting, under the
Purchaser's standard employee benefits, including, without limitation, the
Company's 401(k) and Employee Stock Ownership Plan.
2.4 MAINTENANCE OF EXISTENCE. The Company agrees to maintain its
corporate existence and maintain at least one part-time licensed employee
until at least June 30, 1997 in order to facilitate the collection by the
Company of run-off commissions which are to be paid over to Purchaser
pursuant to this Agreement.
2.5 EMPLOYMENT OF COMPANY EMPLOYEES BY PURCHASER. Purchaser agrees to
employ all of the current employees of the Company at the base salaries and
with the benefits set forth on SCHEDULE 2.5 hereof commencing on the day
following the Closing Date. All such employment is considered employment "at
will."
2.6 TRUST ACCOUNT. Effective on the Closing Date, the Company shall
cease depositing client's funds into its existing trust account(s) and shall
commence depositing such funds into Purchaser's trust account(s). The Company
shall be responsible for all payments due to third parties which are required
to be made from funds in the Company's trust account(s) based on Business
conducted prior to the Closing Date. In the event that funds available from
the Company's trust account are insufficient for this purpose, the Company
and/or the Shareholders, and not the Purchaser or the Purchased Assets, will
be solely responsible for contributing additional funds to the Company's
trust account(s) to fund such obligations.
2.7 ACCOUNTING FUNCTIONS. All accounting functions and cash flow
activities will be moved from the Company to Purchaser's Pasadena or Fresno
accounting office effective on the Closing Date. The Company will direct all
insurance carriers and other payors to direct all payments to Pasadena or
Fresno commencing immediately after the Closing Date. Any payments received
at the Company's existing facility in Fresno pending the change of address
will be promptly redirected to Pasadena.
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2.8 CONFIDENTIALITY. Until the Closing, the parties hereto and their
respective agents, accountants and attorneys shall keep confidential any
information (unless readily ascertainable from public or published
information or sources) obtained from any other party hereto. Each party
hereto further agrees that it will not otherwise disclose any such
information to any third party (other than to its agents, accountants and
attorneys in connection with the consummation of the transactions
contemplated by this Agreement) except upon the written consent of the
furnishing party, or except as required by law. Such obligation of
confidentiality shall not extend to any information which is shown to be or
to have been generally known to others engaged in the same trade or business
as the furnishing party, or that is or shall be public knowledge through no
act or omission by the party to whom the information was furnished or any of
its directors, officers, employees, professional advisors or other
representatives.
2.9 CONDITION TO TRANSFER OF CERTAIN CONTRACTS. The Company agrees that
between the date hereof and the Closing Date they will use their best efforts
to obtain the necessary consents to the assignment of each Assumed Contract.
As provided in Section 5.6 hereof, it is a condition precedent to the
obligations of Purchaser to close the transactions contemplated hereby that
all required consents be obtained for each such Assumed Contract.
2.10 NOTIFICATION OF MARKETS. Purchaser and the Company agree to jointly
notify all markets which have appointed the Company of the consummation of
the transactions contemplated hereby promptly after the Closing Date. Such
notification shall seek such markets' consent to such transactions and all
parties agree to use best efforts to obtain such consents.
2.11 TAX MATTERS.
(a) TAX PAYMENTS. If either the Company or Purchaser is required by law
to file a Tax Return attributable to the ownership of the Purchased Assets
for a taxable year or period which begins before and ends after the Closing
Date, then (i) Purchaser shall be responsible for all Taxes shown on such Tax
Return allocable to the period after the Closing
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Date, and (ii) the Company shall be responsible for all Taxes allocable to
the period ended on or prior to the Closing Date. Taxes allocable to such
taxable year or period shall be determined using an interim closing of the
books method assuming that such taxable year or period ended on the Closing
Date. The parties shall cooperate in the preparation and filing of any such
Tax Returns.
(b) SALES AND TRANSFER TAXES. All Taxes incurred in connection with the
consummation of the transactions contemplated by this Agreement shall be
borne by the Company, including, without limitation, all sales, bulk sales,
transfer, gains and recording and registration Taxes, and the Company will,
at its own expense, file all necessary Tax Returns and other documentation
with respect to all such sales, transfer, gains and recording Taxes.
2.12 NFLCA ENDORSEMENT. The Company and the Shareholders will use their
best efforts to cause the National Farm Labor Contractors Association to
endorse the Purchaser as the agent of record on the Association's group
workers' compensation insurance polices and to endorse ▇▇▇▇▇ Insurance
Company as the preferred workers' compensation insurance carrier for the
Association.
2.13 BUILDING LEASE. The Purchaser shall not assume the Company's
obligations under its existing building lease, but the Purchaser will
reimburse the Company for a portion of its rental payments under that lease
on the following terms. The Purchaser shall pay the Company $1,800 per month
(the current rent) beginning on the Closing Date and continuing through the
earlier of (i) the end of the third month after the Company's personnel
relocate to the Purchaser's Fresno, CA office and (ii) the date a subtenant
takes possession of the space currently leased by the Company.
2.14 AGENA LICENSE AGREEMENT. The Purchaser shall not assume the
Company's obligations under its existing licensing agreement for its Agena
software, but the Purchaser will reimburse the Company for a portion of its
licensing payments under the licensing agreement on the following terms. The
Purchaser shall pay the Company $250 per
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month (the current maintenance fee) beginning on the Closing Date and
continuing through the end of the sixth month after the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Company and each of the Shareholders jointly and severally represent
and warrant to Purchaser that:
3.1 MARKETABLE TITLE. The Company has good and marketable title to the
Purchased Assets, free and clear of any and all Liens except Permitted Liens.
3.2 POWER AND AUTHORITY. The Company and each of the Shareholders has
the full right, power and authority to enter into this Agreement and, in the
case of the Company, to transfer, convey and sell to Purchaser at the Closing
the Purchased Assets.
3.3 LITIGATION. Neither the Company nor any Shareholder is a party to,
subject to or bound by any agreement, judgment or order of any court,
governmental body or arbitrator which would prevent the execution or delivery
of this Agreement by the Company or any Shareholder or the sale of the
Purchased Assets to Purchaser pursuant to the terms hereof.
3.4 NO BROKERAGE FEES. No broker or finder has acted for the Company or
any Shareholder in connection with this Agreement or the transactions
contemplated hereby.
3.5 AUTHORIZATION OF AGREEMENT. This Agreement and all other agreements
and instruments to be executed by the Shareholders and the Company in
connection herewith have been (or upon execution will have been) duly
executed and delivered by the Shareholders and the Company, have been
effectively authorized by all necessary action, corporate or otherwise, and
constitute (or upon execution will constitute) valid and binding obligations
of each Shareholder and the Company enforceable in accordance with their
respective terms.
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3.6 FINANCIAL STATEMENTS. Included in SCHEDULE 3.6 are the balance
sheets of the Company as of June 30, 1994, 1995 and 1996 and the related
statement of income for the years ended June 30, 1994, 1995 and 1996
(collectively, the "Financial Statements"). The Financial Statements (i) were
prepared in accordance with the books and records of the Company; and (ii)
fairly present the Company's financial condition and the results of its
operations as of the relevant dates thereof and for the periods covered
thereby;
3.7 TANGIBLE PERSONAL PROPERTY. There is listed on SCHEDULE 3.8 a
description of each item of Tangible Personal Property owned by or in the
possession of the Company having on the date hereof either a depreciated book
value or estimated fair market value per unit in excess of $1,000; and (ii) a
description of the owner of, and any agreement relating to the use of, each
such item of Tangible Personal Property not owned by the Company and the
circumstances under which such property is used. Except as indicated in
SCHEDULE 3.8:
(a) Each item of Personal Property not owned by the Company is in such
condition that upon the return of such property to its owner the obligations
of the Company to such owner or lessor will be discharged;
(b) Each item of Tangible Personal Property is in operating condition
and repair and is currently in use in connection with the operation of the
Business; and
(c) The Company owns or otherwise has the right to use all of the
Tangible Personal Property now used by the Company in the operation of the
Business.
3.9 INTANGIBLE PERSONAL PROPERTY.
(a) No actions or other judicial or adversary proceedings concerning any
Intellectual Property has been initiated, there is no known basis for any
such action or proceeding and, to the best knowledge of the Company and each
Shareholder, no such action or proceeding is threatened;
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(b) The Company has the unrestricted right and authority to use the
Intellectual Property and such use does not conflict with, infringe upon or
violate any rights of any other person, firm or corporation;
(c) There are no outstanding, nor any threatened, disputes or other
disagreements with respect to any licenses or similar agreements or
arrangements;
(d) The Company is the owner of all right, title and interest in and to
each item of Intellectual Property, free and clear of all Liens; and
(e) Purchaser shall be permitted to do business under the names "▇▇▇▇▇
▇▇▇▇▇▇▇▇ Insurance Services" and "The ▇▇▇▇▇▇▇▇ Company" or derivations
thereof following the Closing Date.
3.10 AGREEMENT NOT IN BREACH OF OTHER INSTRUMENTS. Neither the execution
and delivery of this Agreement, nor the consummation of the transactions
contemplated hereby will violate, or result in a breach of, any of the terms
and provisions of, or constitute a default under, or conflict with (i) any
agreement to which the Company or any Shareholder is a party or by which it
is bound; (ii) the Articles of Incorporation or Bylaws of the Company; or
(iii) any applicable judgment, order or award of any court, governmental body
or arbitrator, or any law, rule or regulation applicable to the Company or
any Shareholder.
3.11 INSURANCE. SCHEDULE 3.11 sets forth a true and correct list of all
insurance policies of any nature whatsoever maintained by the Company at any
time during the three (3) years prior to the date of this Agreement. To the
best knowledge of the Company and the Shareholders, no cancellation,
amendment or increase of premiums with respect to the such insurance is
pending or threatened.
3.12 EMPLOYMENT AGREEMENTS. There are no (i) employment, commission,
profit sharing, deferred compensation, bonus, stock option, stock purchase,
pension, retainer, consulting, retirement, health, welfare, or incentive plan
or contract to which the Company is a party, or by which it is or may be
bound; or (ii) plan and agreement under which "fringe
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benefits" (including, but not limited to, vacation plans or programs, sick
leave plans or programs, dental or medical plans or programs, and related or
similar benefits) are afforded to employees of the Company to which the
Purchaser will be bound.
3.13 TAX RETURNS.
(a) The Company has duly and timely filed with the appropriate federal,
state, local and foreign taxing authorities all Tax returns required to be
filed through the date hereof, and the Company has paid all Taxes owed. The
Company has not requested any extension of time within which to file any such
return;
(b) All Tax returns filed by the Company are complete and accurate in
all material respects; and
(c) There are no material liens for Taxes upon the assets of the
Company, except for statutory liens for Taxes not yet due or delinquent.
3.14 LITIGATION. Except for the on-going litigation between the Company
and The Pacific Rim Assurance Company:
(a) There is no action, suit or proceeding to which the Company is a
party (either as a plaintiff or defendant) pending before any court or
governmental agency, authority or body or arbitrator; there is no action,
suit or proceeding threatened against the Company; and to the best knowledge
of each Shareholder, there is no basis for any such action, suit or
proceeding; and
(b) There is not in existence on the date hereof any order, judgment or
decree of any court or other tribunal or other agency enjoining or requiring
the Company or any Shareholder to take any action of any kind with respect to
the Business or the Company's assets or properties.
3.15 ASSUMED CONTRACTS. SCHEDULE 1.1(c) sets forth the Assumed Contracts
which consists of a list of each contract, agreement, purchase order, lease,
license, or
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commitment, written or oral, to which the Company is a party and has ongoing
rights or obligations or by which any of their respective assets are bound
which the Company expects the Purchaser to assume after the Closing Date.
SCHEDULE 1.1(c) includes all agency appointment agreements which will be
transferred to Purchaser at the Closing Date. True and complete copies of
each of the Assumed Contracts, or where they are oral, true and complete
written summaries thereof, have been delivered to Purchaser by the Company.
Except as set forth in SCHEDULE 1.1(c):
(a) Each of the Assumed Contracts is a valid and binding agreement of
the Company and all other parties thereto, subject to cancellation upon
payment of an appropriate cancellation fee as set forth in such Assumed
Contracts; and
(b) No consent of any party to any of the Assumed Contracts is required
by the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby.
3.16 ACCOUNTS RECEIVABLE AND RUN-OFF COMMISSIONS. Attached hereto as
SCHEDULE 3.16 is a complete listing of the accounts receivable and run-off
commissions of the Company as of July 31, 1995, a statement regarding whether
such accounts receivable and run-off commissions were or will be earned or
received prior to the Closing Date, and a listing of the status of such
accounts receivable and run-off commissions as of August 22, 1996, including
all cash collections, credits or write-offs. Except as disclosed in SCHEDULE
3.16, the accounts receivable and run-off commissions of the Company arose
out of the ordinary course of business.
3.17 NO UNDISCLOSED LIABILITIES. The Company has no liabilities or
obligations of any nature, whether absolute, accrued, contingent or
otherwise, and whether due or to become due (including, without limitation,
any liability for Taxes and interest, penalties and other charges payable
with respect to any such liability or obligation) except those disclosed in
one of the Schedules to this Agreement.
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3.18 REGULATORY APPROVALS. All consents, approvals, authorizations and
other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by the Company and the Shareholders and which are
necessary for (i) the execution and delivery by the Company and the
Shareholders of this Agreement and the related documents and (ii) Purchaser
to continue the Business as presently conducted, have been obtained and
satisfied.
3.19 LICENSES. SCHEDULE 3.19 sets forth all licenses, permits or
authority (collectively, the "Licenses") issued to the Company by any state
insurance department or other insurance regulatory body or agency
(collectively, a "State Insurance Department"). The Licenses set forth on
SCHEDULE 3.19 constitute each license, permit or authority that it is
necessary or appropriate for the Company to obtain from a State Insurance
Department with respect to the transaction of its business. All of the
Licenses are currently in effect. None of the Licenses has at any time been
suspended, revoked, terminated or limited or expired. No notice of any
violation has been received at any time by the Company with respect to any
License, and there is no proceeding or investigation, whether pending or
threatened, or any basis therefor, that could result in the
suspension, revocation, termination or limitation of any License.
3.20 EMPLOYEE LICENSES. SCHEDULE 3.20 sets forth all licenses, permits
or authority (the "Employee Licenses") issued to any employee or independent
contractor of the Company by a State Insurance Department. All of the
Employee Licenses are currently in effect and constitute each license, permit
or authority that it is necessary or appropriate for the employees or
independent contractors of the Company to obtain from a State Insurance
Department with respect to the performance of their respective job
responsibilities for the Company and as contemplated by Purchaser. All of the
Employee Licenses will remain in effect and will not be subject to
suspension, revocation, termination or limitation in any manner as a result
of the consummation of the transactions contemplated by this Agreement.
Except for the notices required by each State Insurance Department regarding
the commencement of authority of such employee to act for Purchaser and the
termination of
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authority of such employee to act for the Company, none of Purchaser, the
Company or any employee holding an Employee License will be required to
obtain any consent, approval or action of, or make any filing with or give
any notice to, any State Insurance Department with respect to any Employee
License as a result of the consummation of the transactions contemplated by
this Agreement.
3.21 COMPLIANCE WITH LAWS; ABSENCE OF REGULATORY PROCEEDINGS. The
Company has complied with all applicable laws and regulations relating to the
conduct of its business. The Company has not received service or other notice
of any litigation, action, suit, proceeding or investigation by or on behalf
of any State Insurance Department that is presently pending or threatened
against the Company or its Business, nor does any Shareholder have any
knowledge of any basis therefor. Since January 1, 1992, the Company has not
been a party to or has been involved in any litigation, action, suit,
proceeding or investigation by or on behalf of any State Insurance
Department. The Company has not entered into or has been subject to any
consent decrees, settlements, orders, stipulations or other agreements or
understandings with any State Insurance Department with respect to the
conduct of the Business.
3.22 POLICYHOLDERS. SCHEDULE 3.22 sets forth all of the policyholders
(the "Policyholders") that have policies of insurance for which the Company
is currently receiving a commission or has received a commission on or after
July 1, 1995. Except as disclosed to Purchaser in writing, the Company is
currently the agent of record for each of the Policyholders.
After the Closing Date, Purchaser shall have an unconditional right with
respect to each Policyholder to engage in the solicitation, quotation and
sale of ▇▇▇▇▇ Insurance Company's policies of workers' compensation insurance
(and ancillary services related thereto) and ▇▇▇▇▇ Assurance Company's
policies of accident and health and life insurance (and ancillary services
related thereto) without any restriction or limitation of any kind.
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No person or entity has any right (whether pursuant to any agreement or
understanding or otherwise), pursuant to an agreement between the Company and
such person or entity, to preclude or limit the solicitation, quotation or
sale of ▇▇▇▇▇ Insurance Company's policies of workers' compensation insurance
(and ancillary services related thereto) and ▇▇▇▇▇ Assurance Company's
policies of accident and health and life insurance (and ancillary services
related thereto) by Purchaser to any Policyholders after the Closing Date.
After the Closing Date, Purchaser will be entitled to the goodwill and
renewal rights with respect to each of the Policyholders, without any
restriction or limitation of any kind. Except as disclosed in writing to
Purchaser, none of the Company nor any of the Shareholders has any actual
knowledge that any of the Policyholders will not purchase insurance issued by
▇▇▇▇▇ Insurance Company or ▇▇▇▇▇ Assurance Company and sold by Purchaser.
3.23 APPOINTMENTS. The insurance companies that have appointed the
Company and its employees as agents are set forth on SCHEDULE 3.23. All of
the appointments (the "Appointments") set forth on SCHEDULE 3.23 are
currently in effect, and the Company has not received any notice that an
Appointment has been terminated or limited in any manner.
3.24 ASSIGNMENT OF APPOINTMENTS. To the Shareholders' and the Company's
knowledge, no insurance carrier which had appointed the Company or its
employees will refuse to transfer such Appointment to the Purchaser, or its
employees, as the case may be. To the Shareholders' and the Company's
knowledge, there will be no status, preferential treatment or advantage that
currently benefits the Company or any employee of the Company which will not
apply to and benefit Purchaser as of the Closing Date.
3.25 INVESTMENT REPRESENTATIONS.
(a) The Company acknowledges that: (i) the Shares will be issued without
registration under the Securities Act of 1933, as amended (the "Act"), or
qualification under
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the California Corporate Securities Law of 1968, as amended (the "Law"),
pursuant to exemptions from the registration requirements of the Act and the
qualification requirements of the Law, (ii) such exemptions only exempt the
issuance of the Shares to the Company and not any sale or other disposition
of the Shares or any interest therein by the Company; (iii) there can be no
assurance that the Company will be able to sell, transfer or otherwise
dispose of any of the Shares or any interest therein without registration
under the Act or qualification under the Law (which the Company has no right
to compel). The Company further understands that, for these reasons, the
Shares will probably not be usable as collateral for a loan and it may be
impossible for the Company to liquidate its investment in the Shares in case
of an emergency.
(b) The Company represents to the Purchaser and agrees as follows: (i)
The Shares are being acquired and will be taken and received for its private
personal investment for its own account with no intention of selling,
transferring or otherwise disposing of the Shares or any interest therein to
others except for the possible pro rata dividend of the Shares to the
Company's two existing shareholders; (ii) The Company has no contract,
undertaking, agreement, or arrangement with any person to sell, transfer or
otherwise dispose of to any person or to have any person sell, transfer or
otherwise dispose of for the Company any of the Shares or any interest
therein and the Company is presently not engaged, nor does it plan to engage
within the presently foreseeable future, in any discussion with any person
relative to such sale, transfer, or other distribution of any of the Shares
or any interest therein; and (iii) The Company fully comprehends that the
Purchaser is relying to a material degree on the representations and
agreements contained herein and with such realization authorizes the
Purchaser to act as it may see fit in full reliance hereon including the
placement of the legend in substantially the form below on, and notations in
the appropriate records of the Purchaser with respect to, the certificate
representing the Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE
ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, NOR ANY STATE SECURITIES LAWS, AND
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MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS SO REGISTERED OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND SUCH LAWS IS
AVAILABLE."
(c) A copy of the Notice of Transaction to be filed with the California
Commissioner of Corporations is attached hereto as SCHEDULE 3.25 and the
Company hereby confirms that each of the representations by the Purchaser
contained therein is, to the best of the Company's and the Shareholders'
knowledge, true, correct and complete. The Purchaser had given to the Company
and the Company has reviewed copies of the Securities Act Release 33-5226,
Section 25102(f) of the California Corporations Code and Title 10 of the
California Administrative Code Sections 260.102.12 and 260.102.13.
(d) The Company further represents to the Purchaser that, as described
in section 25102(f)(2) and Sections 260.102.12(d),(g) and (h), the Company
has a preexisting personal or business relationship with the Purchaser or its
officers, directors or controlling persons.
The Purchaser represents and warrants to the Company and the
Shareholders that:
3.26 POWER;AUTHORITY; AND GOOD STANDING. The Purchaser has the full
right, power and authority to enter into this Agreement and to fulfill its
respective obligations hereunder. The Purchaser is duly incorporated and in
good standing in the State of Nevada, the State of its domicile, and is duly
qualified and in good standing as a foreign corporation in the State of
California.
3.27 AUTHORIZATION OF AGREEMENT. This Agreement and all other agreements
and instruments to be executed by each of the Purchaser in connection
herewith have been (or upon execution will have been) duly executed and
delivered by the Purchaser, as the case may be, and have been effectively
authorized by all necessary action, corporate or otherwise, and constitute
(or upon execution will constitute) valid and binding obligations of
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the Purchaser, enforceable in accordance with their respective terms, except
as enforcement may be limited by law pertaining to bankruptcy, insolvency or
the enforcement of creditors' rights and by general equitable principles.
ARTICLE IV
CONDITIONS TO OBLIGATIONS OF EACH PARTY
The obligations of each party to effect the transactions contemplated
hereby shall be subject to the fulfillment, at or prior to the Closing Date,
of the following conditions:
4.1 NO ACTION OR PROCEEDING. No claim, action, suit, investigation or
other proceeding shall be pending or threatened before any court or
governmental agency which presents a substantial risk of the restraint or
prohibition of the transactions contemplated by this Agreement or the
obtaining of material damages or other relief in connection therewith.
4.2 COMPLIANCE WITH LAW. There shall have been obtained all permits,
approvals, and consents of all governmental bodies or agencies which counsel
for Purchaser or the Company may reasonably deem necessary or appropriate so
that consummation of the transactions contemplated by this Agreement will be
in compliance with applicable laws.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser to effect the transactions contemplated
hereby shall be, at the option of Purchaser, subject to the fulfillment, at
or prior to the Closing Date, of the following additional conditions:
5.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of the Company and the Shareholders contained in this Agreement
and the Schedules hereto shall be true and correct on the date such
representations and warranties were made and remain true and correct on the
Closing Date. At the Closing, the Company and the Shareholders shall have
delivered to Purchaser certificates to such effect signed by each party.
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5.2 COMPANY'S AND SHAREHOLDERS' PERFORMANCE. Each of the obligations of
the Company and each Shareholder to be performed on or before the Closing
Date pursuant to the terms of this Agreement shall have been duly performed
on or before the Closing Date, and at the Closing, the Company and each
Shareholder Seller shall have delivered to Purchaser a certificate to such
effect.
5.3 NAME CHANGE. On or before the Closing Date, the Company shall have
prepared and executed documentation sufficient to amend its Articles of
Incorporation with the Secretary of State of the State of California to
change its corporate name to a name other than "▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Insurance
Services, Inc." or deviations thereof and executed such other documents and
certificates as Purchaser shall reasonably require to permit Purchaser to
file a fictitious business name statement to do business under the name The
▇▇▇▇▇▇▇▇ Company or deviations thereof, effective on the Closing Date.
5.4 NO ADVERSE CHANGE. There shall not have occurred between the date
hereof and the Closing Date any material adverse changes in the results of
operations, condition (financial or otherwise), assets, liabilities (whether
absolute, accrued, contingent or otherwise), business or prospects of the
Company.
5.5 DUE DILIGENCE EXAMINATION. The Purchaser shall have completed to its
satisfaction an extensive examination of, and shall have obtained full and
complete disclosure regarding, the assets, properties, business and financial
condition of the Company and such examination shall not have revealed any
fact, or facts, which, individually or in the aggregate, could be expected to
have a material adverse effect on the results of operations, condition
(financial or otherwise), assets, liabilities (whether absolute, accrued,
contingent or otherwise), business or prospects of the Company; PROVIDED,
HOWEVER, such examination, or any activities undertaken by the Purchaser to
assist the Company to prepare the schedules to this Agreement, shall not in
any way relieve the Company or any Shareholders of any liability for any
breach of or misrepresentation in this Agreement.
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5.6 CONSENTS TO ASSIGNMENT OF CERTAIN CONTRACTS. All necessary consents
to the assignment of all Assumed Contracts, including without limitation the
Brokerage Agreement with CalComp Insurance Company, shall have been obtained
in writing and delivered at the Closing to Purchaser.
5.7 ENDORSEMENT OF NFLCA. The Company shall have delivered to the
Purchaser a written endorsement of the Purchaser as agent of record for the
Association's group workers' compensation insurance policy and of ▇▇▇▇▇
Insurance Company as the group's preferred workers' compensation insurance
carrier.
5.8 ADDITIONAL CLOSING DOCUMENTS OF COMPANY. Purchaser shall have
received at the Closing the following documents, dated the Closing Date:
(a) Copies, certified by the Secretary of the Company, of resolutions of
the Board of Directors and shareholders of the Company authorizing the
execution, delivery and performance of this Agreement and all other
agreements, documents and instruments relating hereto and the consummation of
the transactions contemplated hereby;
(b) Copies of consent of CalComp Insurance Company to the sale of the
Business to the Purchaser stating that such transaction will not adversely
effect such company's dealings with the Purchaser as successor to the Company
after the Closing Date;
(c) Such other documents as Purchaser may reasonably request.
5.9 SCHEDULES. On or prior to the Closing Date the Company shall have
delivered to the Purchaser all schedules to this Agreement theretofore
undelivered and the information contained in such schedules shall be
reasonably acceptable to the Purchaser.
ARTICLE VI
INDEMNIFICATION
6.1 GENERAL. The Company and the Shareholders, jointly and severally,
shall indemnify and hold harmless Purchaser, in respect of any and all
claims, losses,
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damages, liabilities (absolute, contingent, matured, unmatured or otherwise)
and expenses, contingent or otherwise, matured or unmatured, of any nature
whatsoever (including, without limitation, settlement costs and any legal or
other expenses for investigating or defending any actions or threatened
actions) (collectively, a "Loss"), reasonably incurred by the indemnified
party in connection with or as a result of each and all of the following (a
"Breach"):
(a) Any misrepresentation or breach of any representation or warranty in
this Agreement made by the Company or any Shareholder;
(b) The breach of any covenant, agreement or obligation contained in
this Agreement or any other instrument contemplated by this Agreement of the
Company or any Shareholder;
(c) Any misrepresentation contained in any statement or certificate
furnished by the Company or any Shareholder pursuant to this Agreement or in
connection with the transactions contemplated by this Agreement; and
(d) Any action, liability or Loss relating to any contract or
arrangement to which any Company is a party other than the Assumed
Liabilities or relating to the conduct of business by the Company before, on
or after the Closing Date, including without limitation any and all liability
related to the lawsuit with The Pacific Rim Assurance Company or any errors
and omissions claims against the Company for actions taken, or omissions
made, during the period prior to the Closing Date.
Any such liability, deficiency or indemnity shall be paid by the
indemnifying party within thirty (30) days from the date the indemnified
party notifies the indemnifying party that it has incurred or has become
subject to the referenced liability or deficiency and provides the
indemnifying party with documentation demonstrating that the indemnified
party has incurred such liability or deficiency.
6.2 NOTICE OF CLAIM FOR INDEMNIFICATION. Whenever any claim shall arise
for indemnification under this Article VI, the indemnified party shall
promptly notify the
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indemnifying party of the claim and, when known, the facts constituting the
basis for such claim.
6.3. THIRD PARTY CLAIMS. If a claim by a third party is made against an
indemnified party, and if such indemnified party intends to seek indemnity
with respect thereto hereunder, the indemnified party shall promptly (and in
any case within thirty days of such claim being made and within the period
provided in Section 6.5, if applicable) notify the indemnifying party of such
claim. The indemnifying party shall have thirty (30) days after receipt of
such notice to undertake, conduct and control, through counsel of its own
choosing and at its own expense, the settlement or defense thereof, and the
indemnified party shall cooperate with it in connection therewith; PROVIDED
that (a) the indemnifying party shall permit the indemnified party to
participate in such settlement or defense through counsel chosen by the
indemnified party, provided the fees and expenses of such counsel shall be
borne by the indemnified party and (b) the indemnifying party shall promptly
reimburse the indemnified party for the full amount of any Loss resulting
from such claim and all related expenses incurred by the indemnified party
within the limits of this Article VI (except for expenses contemplated by
clause (a) preceding).
So long as the indemnifying party is reasonably contesting any such
claim in good faith, the indemnified party shall not pay or settle any such
claim. Notwithstanding any of the foregoing, the indemnified party shall have
the right to pay or settle any such claim, provided that in such event it
shall waive any right to indemnity therefor by the indemnifying party. If the
indemnifying party does not notify the indemnified party within thirty (30)
days after the receipt of the indemnified party's notice of claim of
indemnity hereunder that it elects to undertake the defense thereof, the
indemnified party shall have the right to contest, settle or compromise the
claim in the exercise of its reasonable judgment (but with due regard for
obtaining the most favorable outcome reasonably likely under the
circumstances, taking account of costs and expenditures) at the expense of
the indemnifying party.
6.4 MANNER OF INDEMNIFICATION. All indemnification hereunder shall be
effected by payment of cash or delivery of a certified or cashier's check in
the amount of the
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indemnification liability in the case of the Purchaser indemnifying the
Company and in the case of the Company and/or the Shareholders indemnifying
the Purchaser, by the Company or the Shareholders surrendering Shares valued
at the higher of $30 per Share or the then current fair market value thereof;
PROVIDED, HOWEVER, that if neither the Company nor the Shareholders can
deliver adequate Shares, such parties shall be required to deliver cash in
the amount of any remaining indemnification obligation. The indemnified party
shall have the right to offset any matured, unmatured, absolute or contingent
liability for which the indemnified party shall seek indemnification from the
indemnifying party pursuant to this Article VI against any payments due to
the indemnifying party, including, if applicable, payments due from the
Purchaser to any Shareholder in the nature of salary or bonus compensation,
on a PRO RATA basis; PROVIDED that any offset with respect to an unmatured or
contingent liability must be reasonable under the circumstances both in terms
of the amount of the offset and when the offset is made. In addition, at the
Purchaser's option, amounts due to the Purchaser for indemnification
hereunder may be paid by the Purchaser canceling Shares valued at $30 per
share; PROVIDED that any offset with respect to an unmatured or contingent
liability must be reasonable under the circumstances both in terms of the
amount of the offset and when the offset is made.
6.5 LIMITATIONS ON COMPANY/SHAREHOLDER INDEMNIFICATION. None of the
Company or the Shareholders shall be liable to the Company under this Article
VI for any claims which, in the aggregate, amount to less than $1,000, but if
such parties become liable hereunder to the Purchaser for claims in excess of
$1,000, such parties will be liable for all claims hereunder, including the
first $1,000 of claims. In no event will the Company's and the Shareholders'
liability under this Article VI exceed $220,000 in the aggregate.
6.6 PURCHASER INDEMNIFICATION. The Purchaser shall indemnify and hold
harmless the Company and the Shareholders in respect of all Losses reasonably
incurred by the Company in connection with or as a result of any
misrepresentation or breach of representation or warranty in this Agreement
made by the Purchaser or any failure by the Purchaser to comply with all of
the obligations assumed by the Purchaser under the Assumed
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Contracts. The procedures relating to the foregoing indemnification shall be
the same as those set forth in Sections 6.2-6.4 above.
6.7 SURVIVAL. The representations and warranties made in Article II
hereof, and the indemnification obligations set forth in this Article VI,
shall survive the Closing for a period of five years from the Closing Date.
ARTICLE VII
TERMINATION
7.1 TERMINATION. This Agreement may be terminated:
(a) By written consent of the parties hereto;
(b) By Purchaser or by the Company if the terminating party is not in
default hereunder, and if the Closing shall not have occurred on or before
October 31, 1996 or such later date, if any, to which Purchaser and the
Company shall agree in writing; or
(c) By Purchaser if, in the course of its due diligence review, it
discovers material information not previously disclosed to Purchaser which
Purchaser reasonably believes has a material adverse effect on the value of
the Purchased Assets. In such event, the notice of termination delivered by
Purchaser to the Company shall specify in reasonable detail such information.
ARTICLE VIII
MISCELLANEOUS
8.1 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally or mailed by certified or registered mail, postage prepaid, return
receipt requested, addressed as follows:
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To Purchaser: Pan American Underwriters, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
If to the Company or c/o: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
any Shareholder: ▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
8.2 ASSIGNABILITY AND PITIES IN INTEREST. This Agreement shall not be
assignable by any of the parties hereto without the prior written consent of:
(i) in the case of any Shareholder or the Company, Purchaser and (ii) in the
case of Purchaser, the Company. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors.
8.3 GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of California.
8.4 COUNTERPARTS. This Agreement may be executed simultaneously in one .
or more counterparts, each of which shall be deemed an original, but all of
which shall constitute but one and the same instrument.
8.5 BEST EFFORTS. The Company, Shareholders and Purchaser each agree to
use their best efforts to bring about the transactions contemplated by this
Agreement.
8.6 PUBLIC ANNOUNCEMENTS. The parties hereto agree that they will not
make any disclosures about the existence or contents of this Agreement or the
transactions contemplated herein or cause to be publicized in any manner
whatsoever by way of interviews, responses to questions or inquiries, press
releases or otherwise any aspect or proposed aspect of this transaction
without prior written notice to and approval of the other
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parties, except as may be otherwise necessary to comply with applicable law;
provided, however, that the parties hereto may, on a confidential basis,
advise their respective agents, accountants, attorneys and prospective
lenders.
8.7 COMPLETE AGREEMENT. This Agreement, the exhibits hereto and the
Schedules hereto delivered pursuant to this Agreement and all other documents
between the parties dated the date of the Closing to be delivered at the
Closing contain the entire agreement between the parties hereto with respect
to the transactions contemplated herein and, except as provided herein,
supersede all previous oral and written and all contemporaneous oral
negotiations, commitments, writings and understandings. The Shareholders are
not relying on any inducement whatsoever other than that represented by such
agreements in executing and delivering this Agreement.
8.8 MODIFICATIONS AMENDMENTS AND WAIVERS. This Agreement may not be
modified or amended, and no provision or benefit hereof may be waived, except
in a written document executed by the party against whom enforcement is
sought.
8.9 SEVERABILITY. Any provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining provisions
hereof in such jurisdiction or rendering that or any other provision of this
Agreement invalid, illegal or unenforceable in any other jurisdiction.
8.10 PAYMENT OF EXPENSES. Each party shall bear its own expenses in
connection with the preparation of this Agreement and the consummation of the
transactions contemplated herein. EXCEPT AS SPECIFICALLY APPROVED BY
PURCHASER IN WRITING, NO FEES AND EXPENSES INCURRED IN CONNECTION WITH THE
PREPARATION OF THIS AGREEMENT OR THE EXHIBITS, SCHEDULES OR CLOSING DOCUMENTS
RELATING THERETO AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREIN
OR THEREIN SHALL BE PAID BY THE COMPANY OUT OF THE PURCHASED ASSETS.
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8.11 FURTHER ASSURANCES. Each party hereto shall do and perform or cause
to be done and performed all such further acts and things and shall execute
and deliver all such other agreements, certificates, instruments and
documents as any other party hereto reasonably may request in order to carry
out the intent and accomplish the purposes of this Agreement.
8.12 ATTORNEYS' FEES. In the event of any action or proceeding brought
by either party against the other arising out of this Agreement, the
prevailing party, if any, shall be entitled to recover its reasonable
attorneys fees incurred in such action or proceeding, including any appeal,
with the amount of such fees, as well as a determination of prevailing party
status, if any, to be determined by a judge of the court sitting without a
jury.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be signed as of the date first above written.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ INSURANCE
SERVICES SHAREHOLDERS:
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------- ----------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
President
PAN AMERICAN UNDERWRITERS, /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
INC. ----------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
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