Contract
SURPLUS
NOTE PURCHASE AGREEMENT, dated
as
of January 31, 2006 (the “Agreement”),
by
and between DCAP
GROUP, INC.,
a
Delaware corporation (“Purchaser”),
and
EAGLE
INSURANCE COMPANY,
a New
Jersey domiciled stock insurance company (“Seller”).
Seller
is
the holder of a Surplus Note, dated April 1, 1998, in the principal amount
of
three million dollars ($3,000,000) and a Surplus Note, dated March 12, 1999,
in
the principal amount of seven hundred fifty thousand dollars ($750,000), each
of
which is payable to the order of Seller by Commercial
Mutual Insurance Company,
a
New
York cooperative insurance company (“CMIC”)
(collectively, the “Surplus
Notes”).
Copies
of the Surplus Notes are attached hereto as Exhibit
A.
Seller
desires to sell, and Purchaser desires to purchase, the Surplus Notes on the
terms and conditions of this Agreement.
NOW,
THEREFORE,
in
consideration of the recitals and the respective covenants, representations,
warranties and agree-ments herein contained, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE
I
1.1 Sale
of Surplus Notes.
At the
Closing (as hereinafter defined), upon and subject to the terms and conditions
of this Agreement, Seller shall grant, sell, convey, assign, transfer and
deliver to Purchaser all of its right, title and interest in and to the Surplus
Notes, free and clear of all mortgages, liens, pledges, security interests,
charges, claims, restrictions and encumbrances of any nature whatsoever
(collectively, “Liens”),
other
than those restrictions on payment provided for in the Surplus Notes themselves
or in the New York State Insurance Law or in any rule, regulation, order or
opinion of the Insurance Department of the State of New York (the “New
York Insurance Department”)
relating to surplus notes (collectively, “Statutory
Restrictions”).
1.2 Purchase
of Surplus Notes.
At the
Closing, upon and subject to the terms and conditions of this Agreement and
in
reliance on the representa-tions, warranties and covenants of Seller contained
herein, Purchaser shall purchase the Notes from Seller in consideration for
the
Purchase Price (as hereinafter defined).
1.3 Purchase
Price.
1.3.1 Purchase
Price.
The
purchase price for the Surplus Notes (the “Purchase
Price”)
shall
be three million seventy-five thousand one hundred forty-one dollars
($3,075,141) (which the parties acknowledge is the dollar amount reflected
in
Column 1 (Current Statement Date) of Line 35 (Surplus as regards
policyholders) of the “Liabilities, Surplus and Other Funds” section of CMIC’s
Quarterly Statement to the New York Insurance Department for the quarter ended
September 30, 2005).
1.3.2 Payment
of Purchase Price.
At the
Closing, Purchaser shall pay the Purchase Price to Seller as follows:
(a) one
million seven hundred seventy-one thousand seven hundred seven dollars
($1,771,707) by certified or bank check or a wire transfer (the “Cash
Payment”);
provided,
however,
that if
a wire transfer is to be utilized, wiring instructions must be provided by
Seller to Purchaser at least two (2) days prior to the Closing Date (as
hereinafter defined); and
(b) one
million three hundred three thousand four hundred thirty-four dollars
($1,303,434) by the delivery of a promissory note in, or substantially in,
the
form attached hereto as Exhibit 1.3.2, in such principal amount (the
“Promissory
Note”).
1.4 No
Assumption of Liabilities.
Other
than as expressly set forth in this Agreement, it is expressly understood and
agreed that in no event shall Purchaser or Seller assume or agree to pay or
incur any liability or obligation of the other or CMIC.
1.5 Commutation
Agreement.
Simultaneously herewith, Seller and CMIC are entering into a 90% Quota Share
Mutual Release, Settlement and Commutation Agreement pursuant to which,
simultaneously herewith, Seller is paying to CMIC, by certified or bank check,
the amount of two hundred thirty-four thousand one hundred thirty-six dollars
($234,136).
ARTICLE
II
Seller
makes the following representations and warranties to Purchaser:
2.1 Valid
Existence.
Seller
is a property and casualty insurance company validly existing and in good
standing under the laws of the State of New Jersey.
2.2 Authority;
Binding Nature of Agreement.
Seller
has the power and authority to enter into this Agreement and to carry out its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery by Seller of this Agreement and the consummation
by
Seller of the transactions contemplated hereby have been duly authorized by
all
necessary corporate action, and no other corporate proceedings on the part
of
Seller are necessary to authorize the execution and delivery by Seller of this
Agreement or the consummation of the transactions contemplated hereby. Subject
to the receipt of the consent referred to in Section 2.3 below, this Agreement
will constitute the valid and binding obligation of Seller and will be
enforceable in accordance with its terms. The individual who executed this
Agreement on behalf of Seller was duly authorized and empowered to take such
action on Seller’s behalf and to bind Seller by his signature
hereto.
2.3 Consents.
Other
than the consent of Department of Banking and Insurance of the State of New
Jersey (the “New
Jersey Insurance Department”),
no
consents of any governmental or other regulatory agencies or of other person
or
entity (collectively, “Person”)
are
required to be received on the part of Seller to enable it to enter into and
carry out this Agreement and the transactions contemplated hereby.
2
2.4 No
Breach. Subject
to the receipt
of the consent referred to in Section 2.3 above, neither the execution and
delivery of this Agreement by Seller, nor compliance by Seller with any
provision hereof nor consummation of the transactions contemplated hereby,
will:
(a) violate or conflict with any provision of the Certificate of Incorporation
or Bylaws of Seller; (b) violate
or, alone or with notice or the passage of time, result in the breach or
termination of, or otherwise give any contracting party the right to terminate,
or declare a default under, the terms of any contract, agreement, lease,
arrangement, commitment, understanding or obligation (collectively,
“Contract”)
to
which Seller is a party, or by which Seller or any of its assets may be
bound;
(c)
violate any order, injunction, judgment, award or decree (collectively
“Decree”)
against, or binding upon, Seller; or (d) subject to the accuracy of Purchaser’s
representations and warranties in Article III hereof, violate any law or
regulation relating to Seller.
2.5 Untrue
or Omitted Facts.
No
representation, warranty or statement by Seller in this Agreement contains
any
untrue statement of a material fact, or omits to state a fact necessary in
order
to make such representations, warranties or statements not materially
misleading. Without limiting the generality of the foregoing, to Seller’s
knowledge, there is no fact known to Seller that has had, or which may be
reasonably expected to have, a materially adverse effect on CMIC or any of
its
assets or business that has not been disclosed in this Agreement or in the
due
diligence process.
2.6 Ownership
of Surplus Notes.
Seller
owns the Surplus Notes free and clear of all Liens (other than Statutory
Restrictions) and the Surplus Notes may be transferred to Purchaser hereunder
free of any restriction with regard to transferability. No Person other than
Seller has any rights directly or indirectly, to the Surplus Notes. There are
no
Contracts with any Person to acquire the Surplus Notes or any right or interest
therein. The Surplus Notes are payable by CMIC in accordance with their terms
and, subject to the Statutory Restrictions, are not subject to any offset,
claim
or reduction of any kind or nature. No payment of principal or interest or
other
amount has been made by or in behalf of CMIC pursuant to or with respect to
either of the Surplus Notes.
2.7 Brokers.
Seller
has not engaged, consented to, or authorized any broker, finder, investment
banker or other third party to act on its behalf, directly or indirectly, as
a
broker or finder in connection with the transactions contemplated by this
Agreement.
ARTICLE
III
Purchaser
makes the following representations and warranties to Seller:
3.1 Valid
Existence.
Purchaser is a corporation validly existing and in good standing under the
laws
of the State of Delaware.
3.2 Consents.
Except
for the consents referred to in this Agreement, no consents of governmental
or
other regulatory agencies, foreign or domestic, or of other parties are required
to be received by or on the part of Purchaser to enable it to enter into and
carry out this Agreement and the transactions contemplated hereby.
3
3.3 Authority;
Binding Nature of Agreement.
Purchaser has the power and authority to enter into this Agreement and to carry
out its obligations hereunder. The execution and delivery of this Agreement
and
the consummation of the transactions contemplated hereby have been duly
authorized by the Insurance Committee and Audit Committee of the Board of
Directors of Purchaser and no other proceedings on the part of Purchaser are
necessary to authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement constitutes
the valid and binding obligation of Purchaser and is enforceable in accordance
with its terms. The individual who executed this Agreement on behalf of
Purchaser was duly authorized and empowered to take such action on Purchaser’s
behalf and to bind Purchaser by his signature hereto.
3.4 No
Breach.
Neither
the execution and delivery of this Agreement nor compliance by Purchaser with
any of the provisions hereof nor the consummation of the transactions
contemplated hereby, will:
(a) |
violate
or conflict with any provision of the Certificate of Incorporation
or
By-laws of Purchaser;
|
(b) |
violate
or, alone or with notice or the passage of time, result in the breach
or
termination of, or otherwise give any contracting party the right
to
terminate, or declare a default under, the terms of any Contract
to which
Purchaser is a party, or by which Purchaser or any of its assets
may be
bound;
|
(c) |
violate
any Decree against, or binding upon, Purchaser; or
|
(d) |
subject
to the accuracy of Seller=s
representations and warranties in Article II hereof, violate any
law or
regulation of any jurisdiction relating to
Purchaser.
|
3.5 Brokers.
Purchaser has not engaged, consented to, or authorized any broker, finder,
investment banker or other third party to act on its behalf, directly or
indirectly, as a broker or finder in connection with the transactions
contemplated by this Agreement.
3.6 Directors.
Attached hereto as Schedule 3.6 is a true and complete list of the individuals
who Purchaser is seeking to have elected to the Board of Directors of
CMIC.
ARTICLE
IV
The
obligation of Purchaser to consummate the transactions contemplated hereby
is
subject to the fulfillment, prior to or at the Closing, of each of the following
conditions, any one or more of which may be waived by Purchaser (except when
the
fulfillment of such condition is a requirement of law):
4.1 Assignment
of Surplus Notes.
Seller
shall have (a) tendered to Purchaser the original Surplus Notes and (b) executed
and tendered to Purchaser a Surplus Note Assignment Form, in form mutually
satisfactory to the parties (the “Surplus
Note Assignment Form”),
with
regard to each of the Surplus Notes.
4
4.2 Consents;
License and Permits. Seller
and Purchaser shall have obtained all consents, licenses and permits of third
parties, including, without limitation, from the New Jersey Insurance Department
and other regulatory authorities, necessary for the performance by Seller of
all
of its obligations under this Agreement, including, without limitation, the
transfer of the Surplus Notes as contemplated hereby, and the acquisition of
the
Surplus Notes by Purchaser.
ARTICLE
V
The
obligation of Seller to consummate the transactions contemplated hereby is
subject to the fulfillment, prior to or at the Closing, of each of the following
conditions, any one or more of which may be waived by Seller (except when the
fulfillment of such condition is a requirement of law):
5.1 Cash
Payment; Promissory Note.
Purchaser shall have tendered to Seller the Cash Payment and the Promissory
Note.
5.2 Escrow
Agreement.
Purchaser shall have executed and tendered to Seller and Manufacturers and
Traders Trust Company, as escrow agent (the “Escrow
Agent”),
an
Escrow Agreement with respect to the Surplus Notes (the “Escrow
Agreement”).
5.3 Consents;
Licenses and Permits.
Seller
shall have obtained all consents, licenses and permits of third parties,
including, without limitation, from the New Jersey Insurance Department and
other regulatory authorities, necessary for the performance by Seller of all
of
its obligations under this Agreement, including, without limitation, the
transfer of the Surplus Notes as contemplated hereby.
ARTICLE
VI
6.1 Location.
The
closing (the “Closing”)
provided for herein shall take place at the offices of Certilman Balin Xxxxx
& Xxxxx, LLP, 00 Xxxxxxx Xxxxxx, Xxxx Xxxxxx, Xxx Xxxx at 10:00 a.m.
concurrently with the execution hereof.
ARTICLE
VII
7.1 Items
to be Delivered by Seller.
At the
Closing, Seller will deliver or cause to be delivered to Purchaser or the Escrow
Agent, as the case may be:
(a) to
Purchaser, the original Surplus Notes and the Surplus Note Assignment Form
required by Section 4.1 hereof;
5
(b) to
Purchaser and the Escrow Agent, the Escrow Agreement;
(c) to
Purchaser, the consents required by Section 4.2 hereof; and
(d) to
Purchaser, certified copies of all actions necessary to authorize the execution
of this Agreement by Seller and the consummation of the transactions
contemplated hereby.
7.2 Items
to be Delivered by Purchaser. At
the
Closing, Purchaser will deliver or cause to be delivered to Seller or the Escrow
Agent, as the case may be:
(a) to
Seller, a certified or bank check or wire transfer for the Cash
Amount;
(b) to
Seller, the Promissory Note;
(c) to
Seller
and the Escrow Agent, the Escrow Agreement;
(d) to
the
Escrow Agent, the original Surplus Notes registered in the name of Purchaser
and
an executed Surplus Note Assignment Form, pursuant to the terms of the Escrow
Agreement; and
(e) certified
copies of all actions necessary to authorize the execution of this Agreement
by
Purchaser and the consummation of the transactions contemplated hereby.
ARTICLE
VIII
8.1 Further
Assurances.
On and
after the Closing Date, (a) upon the request of Purchaser, Seller shall take
all
such further actions and execute, acknowledge and deliver all such further
instruments and documents as may be necessary or desirable to convey and
transfer to, and vest in, Purchaser, and to protect Purchaser's right, title
and
interest in and to, and enjoyment of, the Surplus Notes intended to be assigned,
transferred, conveyed and delivered pursuant to this Agreement, and (b) the
parties shall take all such further actions and execute and deliver all such
further instruments and documents as may be necessary or appropriate to carry
out the transactions contemplated by this Agreement.
8.2 Power
of Attorney.
Without
limitation of any provision of this Agreement, effective upon the Closing Date,
Seller constitutes and appoints Purchaser and its successors and assigns, and
each of them, the true and lawful attorney of Seller, with full power of
substitution, in their own names or in the name of Seller, but for their own
benefit and at their own expense, to institute and prosecute all proceedings
which any of them may deem proper in order to collect, assert or enforce any
claim, right or title of any kind in or to the Surplus Notes transferred to
Purchaser hereunder, and to do all such acts and things in relation thereto
as
any of them shall deem advisable. Seller acknowledges that the foregoing powers
are coupled with an interest and shall not be revocable in any manner or for
any
reason. The foregoing does not grant to Purchaser any power to take any action,
as Seller’s attorney in fact, which would serve to amend or avoid Purchaser’s
obligations under the Promissory Note or the Escrow Agreement and/or have a
material negative impact upon the value of the Surplus Notes.
6
ARTICLE
IX
9.1 Expenses.
Each of
the parties shall bear its own expenses in connection herewith.
9.2 Publicity.
The
parties agree that no publicity, release or other public announcement
(collectively, “Announcement”)
concerning the transactions contemplated by this Agreement shall be issued
by
either party or any of its affiliates without the advance approval of both
the
form and substance of the same by the other party, which approval, in the case
of any Announcement required by applicable law, shall not be unreasonably
withheld or delayed. The parties agree further that neither the terms of this
Agreement nor any other transaction contemplated hereby shall be divulged to
any
third party without the written consent of Seller and Purchaser, and such terms
shall be divulged only to such of their employees and representatives who shall
have a “need to know,” in each case except to the extent that such terms have
been publicly released in accordance with the provisions hereof. Notwithstanding
the foregoing, either party may make any Announcement or other disclosure which
it determines in its sole discretion should be made in any required regulatory
report or filing.
9.3 Sales,
Transfer and Documentary Taxes.
Seller
shall pay all federal, state and local sales, documentary and other transfer
taxes, if any, due as a result of the purchase, sale and transfer of the Surplus
Notes in accordance herewith, whether imposed by law on Seller or Purchaser,
and
Seller shall indemnify, reimburse and hold harmless Purchaser in respect of
the
liability for payment of or failure to pay any such taxes or the filing of
or
failure to file any reports required in connection therewith.
9.4 Equitable
Relief.
The
parties acknowledge and agree that, in the event either party shall violate
or
threaten to violate any of the restrictions of Section 9.2 hereof, the aggrieved
party will be without an adequate remedy at law and will, therefore, be entitled
to enforce such restrictions by preliminary, temporary or permanent injunctive
or mandatory relief in any court of competent jurisdiction without the necessity
of proving damages, without the necessity of posting any bond or other security,
and without prejudice to any other rights and remedies which it may have at
law
or in equity.
9.5 Entire
Agreement.
This
Agreement, including the exhibits attached hereto, which are a part hereof,
constitutes the entire agreement of the parties with respect to the subject
matter hereof. No
change, modification, amendment, addition or termination of this Agreement
or
any part thereof shall be valid unless in writing and signed by or on behalf
of
the party to be charged therewith.
9.6 Notices.
Any and
all notices or other communications or deliveries required or permitted to
be
given or made pursuant to any of the provisions of this Agreement shall be
deemed to have been duly given or made for all purposes when hand delivered
or
sent by certified or registered mail, return receipt requested and postage
prepaid, overnight mail or courier, or telecopier as follows:
7
If
to
Purchaser, at:
0000
Xxxxxxxx
Xxxxxxx,
Xxx Xxxx 00000
Attn:
Xxxxx X. Xxxxxxxxx, Chief Executive Officer
Telecopier
Number: (000) 000-0000
With
copies to:
Certilman
Balin Xxxxx & Xxxxx, LLP
00
Xxxxxxx Xxxxxx
Xxxx
Xxxxxx, Xxx Xxxx 00000
Attn:
Xxxx Xxxxxxx, Esq.
Telecopier
Number: (000) 000-0000
American
Insurance Management
0000
Xxxxxxx Xxxxxx
Xxxxx
000
Xxxxxxxx,
Xxxxxxxxxxxx 00000
Attn:
Xxxxxxxxx X. Xxxxxx, President
If
to
Seller, at:
Eagle
Insurance Company
000
Xxxxxxx Xxxxxx
Xxxxxxxx,
Xxx Xxxx 00000
Attn:
Xxxxxxxx Xxxxxxxxxxx, President
Telecopier
Number: (000) 000-0000
With
copies to:
Xxxxxx
X.
Xxxxxxx, Esq.
Secretary,
Eagle Insurance Company
000
Xxxxxxx Xxxxxx
Xxxxxxxx,
Xxx Xxxx 00000
Telecopier
Number: (000) 000-0000
American
Insurance Management
0000
Xxxxxxx Xxxxxx
Xxxxx
000
Xxxxxxxx,
Xxxxxxxxxxxx 00000
Attn:
Xxxxxxxxx X. Xxxxxx, President
or
at
such other address as either party may specify by notice given to the other
party in accordance with this Section 9.6.
8
9.7 Choice
of Law; Exclusive Jurisdiction.
This
Agreement shall be governed by, and interpreted and construed in accordance
with, the laws of the State of New York, excluding choice of law principles
thereof. Each of the parties hereby irrevocably and unconditionally: (i)
consents and submits for itself and its property in any action or proceeding
relating to this Agreement to the exclusive jurisdiction of the federal courts
located within the Eastern District of the State of New York and the state
courts located within the County of Nassau in the State of New York; and (ii)
consents that any such action or proceeding may be brought in such courts,
and
waives any objection that it may now or hereafter have to the venue of any
such
action or proceeding in any such court or that such action or proceeding was
brought in an inconvenient court and agrees not to plead or claim the same.
9.8 Severability.
In the
event any clause, section or part of this Agreement shall be held or declared
to
be void, illegal or invalid for any reason, all other clauses, sections or
parts
of this Agreement which can be effected without such void, illegal or invalid
clause, section or part shall nevertheless continue in full force and
effect.
9.9 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns.
9.10 Headings.
The
headings or captions under sections of this Agreement are for convenience of
reference only and do not in any way modify, interpret or construe the intent
of
the parties or affect any of the provisions of this Agreement.
9.11 No
Third Party Beneficiaries.
No
Person not a party to this Agreement shall be entitled to rely upon or enforce
any of the provisions of this Agreement.
9.12 Representation
by Counsel; Interpretation.
The
parties acknowledge that they have been represented by counsel in connection
with this Agreement and the transactions contemplated hereby. Accordingly,
any
rule or law or any legal decision that would require the interpretation of
any
claimed ambiguities in this Agreement against the party that drafted it has
no
application and is expressly waived by the parties. The provisions of this
Agreement shall be interpreted in a reasonable manner to give effect to the
intent of the parties hereto.
9.13 Counterparts. This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed to be an original and all of which together shall constitute one
instrument.
9.14 Facsimile
Signatures.
Signatures hereon which are transmitted via facsimile shall be deemed original
signatures.
{Remainder
of page intentionally left blank. Signature page
follows.}
9
WITNESS
the
execution of this Surplus Note Purchase Agreement as of the date first above
written.
DCAP
GROUP, INC.
By:_______________________________
Name: Xxxxx
X.
Xxxxxxxxx
Title: Chief
Executive Officer
EAGLE
INSURANCE COMPANY
By:_______________________________
Name:
Xxxxxxxx Xxxxxxxxxxx
Title:
President
Exhibits
Exhibit
A Surplus
Notes
Exhibit
1.3.2 Promissory
Note
Schedules
3.6 New
Directors