EXHIBIT A
PURCHASE AGREEMENT
This Purchase Agreement (this "AGREEMENT") is made and entered into as
of August 4, 2006 between DSC AFFM, LLC, a Delaware limited liability company
("SELLER"), and Affirmative Investment LLC ("PURCHASER"), a Delaware limited
liability company.
WHEREAS, each of Seller and Purchaser own, individually, 3,930,463.5
Membership Units (as defined in the Amended and Restated Limited Liability
Company Agreement of New Affirmative LLC (the "COMPANY"), dated as of June 30,
2005, by and between Seller and Purchaser (the "LLC AGREEMENT")); and
WHEREAS, Seller desires to sell and transfer to Purchaser, and
Purchaser desires to purchase and accept from Seller, the 3,930,463.5 Membership
Units owned by Seller (the "SELLER UNITS") at a purchase price equal to $16.00
per Seller Unit, representing an aggregate purchase price of $62,887,416.00 (the
"PURCHASE PRICE");
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties herein contained, the Seller and Purchaser hereby
agree as follows:
1. Sale and Purchase of Seller Units.
(a) Sale and Purchase of Seller Units. Upon the terms and subject
to the conditions set forth herein, Seller hereby agrees to sell and transfer to
Purchaser, and Purchaser hereby agrees to purchase and accept from Seller, free
and clear of any liens (other than any liens imposed by the LLC Agreement and
other than restrictions on transfer imposed by applicable state and federal
securities laws), the Seller Units for the Purchase Price, payable in cash.
(b) Closing. The closing (the "TRANSFER CLOSING") of the purchase
and sale of the Seller Units shall occur at the offices of Skadden, Arps, Slate,
Xxxxxxx & Xxxx LLP, Xxxx Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 at 10:00 a.m. on
August 31, 2006 (or, if the conditions in Section 3 are not satisfied or waived
at that time, the first business day after the satisfaction or waiver of those
conditions (other than those conditions that by their terms are to be satisfied
at the Transfer Closing, but subject to satisfaction or waiver of those
conditions)), or at such other time or place as Purchaser and Seller may agree.
Concurrently with the Transfer Closing, Purchaser shall pay, or cause to be
paid, to Seller the Purchase Price in cash, by wire transfer of immediately
available funds to the account designated on Exhibit A.
(c) LLC Agreement.
(i) Effective as of the Transfer Closing, Seller hereby
withdraws as a member of the Company, and Purchaser hereby consents to and
approves such withdrawal and, except as expressly provided in Section
1(c)(iii) below, following the Transfer Closing Seller shall not be subject
to any of the terms or provisions of the LLC Agreement.
(ii) Purchaser shall, effective as of the Transfer Closing,
amend the LLC Agreement to reflect Purchaser as the sole member of the
Company and to make such other amendments to the LLC Agreement as it
determines in its sole discretion.
(iii) Purchaser hereby releases Seller from any and all
obligations that it may have under the LLC Agreement, except that the
provisions of the LLC Agreement set forth in Section 6.3 (with respect to
the period prior to the Transfer Closing) and Article X (as each Section is
currently in effect and without giving effect to any amendment,
modification or waiver thereof after the date of this Agreement) of the LLC
Agreement shall remain applicable to Seller and Purchaser. Each of
Purchaser and Seller, on behalf of itself, its respective members and their
respective affiliates, unconditionally and irrevocably waives any and all
claims it may have against the other party hereto and/or its officers,
members, employees, affiliates, successors and assigns for any and all
causes of action, actions, claims, liabilities and demands that it may now
have or may have had or that may subsequently accrue to it (whether known
or unknown, liquidated or unliquidated) arising out of, or relating to (A)
the LLC Agreement, except that the Purchaser does not waive the
performance, or any claim with respect thereto, of Seller's obligations set
forth in Section 6.3 and Article X of the LLC Agreement, or (B) the
Company's investment in Affirmative Insurance Holdings, Inc.
("AFFIRMATIVE"); provided that this provision shall not operate as a waiver
of any claim or obligation of any party arising hereunder.
(d) Further Assurances; Information; Filing.
(i) From and after the date hereof, and subject to the terms
and conditions hereof, each party hereto agrees to use its reasonable best
efforts to take, or cause to be taken, all appropriate action, and to do,
or cause to be done, all things reasonably necessary, proper or advisable
to consummate and make effective the transactions contemplated by this
Agreement, including using their respective reasonable best efforts to
obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of, and make all filings, submissions or notices
with, governmental entities and parties to contracts with each party
hereto, to execute, deliver and/or record such documents, agreements or
instruments, and to provide or make available such information, in each
case as are necessary or desirable for consummation of, or in connection
with, the transactions contemplated by this Agreement.
(ii) Seller shall promptly provide to Purchaser, the Company
and their respective agents, upon reasonable notice and for purposes
reasonably related to (A) this Agreement or (B) financial, regulatory,
accounting or tax matters in connection with the Company's acquisition and
ownership of
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Affirmative common stock, copies (at Purchaser's expense) of Seller's books
and records to the extent such books and records (x) are in the Seller's
possession or control and (y) are directly related to the Company, Seller's
ownership of the Seller Units and Seller's acquisition and ownership of the
shares of common stock of Affirmative that were contributed to the Company.
(iii) Following the Transfer Closing, the Purchaser shall use
its reasonable efforts to cause Affirmative Insurance Company and Insura
Property and Casualty Insurance Company to make the appropriate
registration statement (amended Form Bs) disclosures with the Illinois
Department of Financial and Professional Regulation, Division of Insurance
within the required time period.
2. Representations and Warranties.
(a) Representations and Warranties of Purchaser. Purchaser
represents and warrants to Seller that:
(i) Purchaser is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Purchaser has
all the requisite power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. This Agreement has been duly and
validly authorized, executed and delivered by Purchaser. This Agreement
constitutes the valid, binding and enforceable agreement of Purchaser,
except as enforceability may be limited by (A) applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other
similar laws relating to or affecting creditor's rights generally and (B)
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(ii) The execution, delivery and performance by Purchaser of
this Agreement does not and will not (A) violate any provision of
Purchaser's organizational documents, (B) constitute or result in a breach
of or a default (or an event which, with notice or lapse of time, or both,
has the potential of constituting a default) under any agreement to which
Purchaser is a party, (C) violate any law binding upon Purchaser or to
which any of its assets are subject or (D) require the consent of any third
party or governmental body or agency.
(iii) Purchaser is acquiring the Seller Units to be purchased
by it for its own account for investment purposes and not with a view to or
for sale or distribution in violation of the Securities Act of 1933, as
amended, and the rules and regulations in effect from time to time
thereunder (the "SECURITIES ACT") or other applicable law.
(iv) Purchaser has been advised by the Seller that: (A)
neither the offer nor sale of any Seller Units has been registered under
the Securities Act or any state or foreign securities or "blue sky" laws;
(B) the Seller
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Units are characterized as "restricted securities" under the Securities
Act; (C) it is not anticipated that there will be any public market for the
Seller Units in the foreseeable future; and (D) any disposition without
registration, when and if permitted Securities Act in reliance on an
exception from registration under the Securities Act, can be made only in
accordance with the terms and conditions of such exemption.
(v) Purchaser is an "accredited investor" as defined in the
Securities Act and Purchaser has such knowledge, skill and experience in
business, financial and investment matters so that Purchaser is capable of
evaluating the merits, risks and consequences of an investment in the
Seller Units to be purchased by it and is able to bear the economic risk of
loss of its investment.
(vi) AS IS, WHERE IS. PURCHASER ACKNOWLEDGES THAT IT IS
FAMILIAR WITH THE COMPANY AND AFFIRMATIVE AND, EXCEPT AS EXPRESSLY SET
FORTH IN THIS AGREEMENT, IS NOT RELYING UPON ANY REPRESENTATIONS,
STATEMENTS, OR WARRANTIES (ORAL OR WRITTEN, IMPLIED OR EXPRESS) OF ANY
MEMBER, OFFICER, EMPLOYEE, AGENT, AFFILIATE OR REPRESENTATIVE OF SELLER, OR
ANY SALESPERSON OR BROKER (IF ANY) INVOLVED IN THIS TRANSACTION AS TO THE
COMPANY, AFFIRMATIVE OR THE SELLER UNITS.
(b) Representations and Warranties of Seller. Seller represents
and warrants to Purchaser that:
(i) Seller is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Seller has the
requisite power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement has been duly and validly
authorized, executed and delivered by Seller. This Agreement constitutes
the valid, binding and enforceable agreement of Seller, except as such
enforceability may be limited by (A) applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws
relating to or affecting creditors' rights generally and (B) general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(ii) The execution, delivery and performance by Seller of
this Agreement does not and will not (A) violate any provision of Seller's
organizational documents, (B) constitute or result in a breach of or a
default (or an event which, with notice or lapse of time, or both, has the
potential of constituting a default) under any agreement to which Seller is
a party, (C) violate any law binding upon Seller or to which any of its
respective assets are subject or (D) require the consent of any third party
or governmental body or agency.
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(iii) All the Seller Units are owned by Seller beneficially
and of record free and clear of any lien, encumbrance or other restriction
(other than any liens imposed by the LLC Agreement and other than
restrictions on transfer imposed by applicable state and federal securities
laws), Seller has not conveyed, transferred or sold any interest in the
Seller Units to any other person and subject to the terms and conditions of
the LLC Agreement and applicable law, upon consummation of the transactions
contemplated by this Agreement, Seller will transfer to Purchaser the
Seller Units, in each case free and clear of any lien, encumbrance or
restriction whatsoever (other than any liens imposed by the LLC Agreement
and other than restrictions on transfer imposed by applicable state and
federal securities laws). Except for this Agreement and the LLC Agreement,
there are no contracts relating to the sale or transfer of the Seller Units
to which Seller (or any of its affiliates (other than the Company)) is a
party.
(iv) There is no pending or, to Seller's knowledge,
threatened, litigation, action, proceeding, application, complaint or
investigation (A) affecting or with respect to the Seller Units or (B)
which purports to affect the legality, validity or enforceability of this
Agreement or the transactions contemplated hereby.
(v) Seller acknowledges that it is aware of the matters
described in Schedule 2(b)(v) hereto.
(vi) Seller acknowledges that following the Transfer Closing,
it shall have no right or interest (other than by reason of Seller's right
to dividends as set forth in Section 5 to the extent not paid prior to the
Transfer Closing) in the shares of common stock of Affirmative owned by the
Company.
(vii) NO ADDITIONAL REPRESENTATIONS. THE REPRESENTATIONS AND
WARRANTIES SET FORTH IN THIS SECTION 2(b) ARE THE ONLY REPRESENTATIONS AND
WARRANTIES MADE BY SELLER. EXCEPT AS SPECIFICALLY SET FORTH HEREIN, ALL
WARRANTIES, EXPRESS OR IMPLIED, ARE HEREBY DISCLAIMED AND EXCLUDED. IN NO
EVENT SHALL SELLER BE LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL
DAMAGES.
3. Conditions to Closing.
(a) The obligation of Purchaser to effect the Transfer Closing is
subject to the satisfaction or waiver of the following conditions:
(i) Seller shall have performed in all material respects all
of its obligations under this Agreement required to be performed by it at
or before the Transfer Closing;
(ii) Each representation and warranty of Seller contained in
this Agreement shall be true and correct in all material respects (except
for the representations set forth in Section 2(b)(i), Section 2(b)(iii),
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Section 2(b)(v) and Section 2(b)(vi), which shall be true and correct in
all respects) as of the time of the Transfer Closing, as if made at and as
of such time; and
(iii) No law, statute, ordinance, rule, regulation, code,
order, judgment, injunction or decree enacted, issued, promulgated,
enforced or entered by a government entity shall be in effect prohibiting
the transactions contemplated hereby.
(b) The obligation of Seller to effect the Transfer Closing is
subject to the satisfaction or waiver of the following conditions:
(i) Purchaser shall have performed in all material respects
all of its obligations under this Agreement required to be performed by it
at or before the Transfer Closing;
(ii) Each representation and warranty of Purchaser contained
in this Agreement shall be true and correct in all material respects
(except for the representations set forth in Section 2(a)(i), Section
2(a)(iii), Section 2(a)(iv), 2(a)(v) and Section 2(a)(vi), which shall be
true and correct in all respects) as of the time of the Transfer Closing,
as if made at and as of such time; and
(iii) No law, statute, ordinance, rule, regulation, code,
order, judgment, injunction or decree enacted, issued, promulgated,
enforced or entered by a government entity shall be in effect prohibiting
the transactions contemplated hereby.
4. Survival; Indemnification.
(a) The representations, warranties, covenants and agreements of
the parties set forth in this Agreement shall survive the Transfer Closing.
(b) Each party hereto shall indemnify the other party, its
affiliates and their respective members, directors, officers, employees and
agents against, and agrees to hold each of them harmless from, any damage, loss,
liability, cost, charge, fee, penalty, tax or expense (including reasonable
expenses of investigation and reasonable attorneys' fees and expenses) incurred
or suffered by them arising out of, or relating to, any breach by such party of
any provision of this Agreement. Notwithstanding the foregoing, no party hereto
shall be liable under this Section 4(b) for any punitive, incidental or
consequential damages, unless such punitive, incidental or consequential damages
are awarded against the indemnified party in a third-party claim.
5. Payment of Dividend. Notwithstanding anything to the contrary in
this Agreement, Purchaser shall cause the Company to deliver to Seller, within
one (1) business day following receipt thereof by the Company, the gross amount
(without taking into account any holdback, deduction or other expense
contemplated by the LLC Agreement) of any cash dividend on the common stock of
Affirmative for which the record date occurred prior to the date hereof that is
allocable to the Seller Units under the
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current terms of the LLC Agreement and which has not been previously received by
the Seller.
6. US Tax Treatment. Consistent with Revenue Ruling 99-6, Seller and
Purchaser agree to treat, for U.S. federal income tax purposes, the sale of the
Seller Units by Seller to Purchaser as follows: (a) as to Seller, as a sale of
the Seller Units to Purchaser and (b) as to Purchaser, as if the Company had
distributed in liquidation of the Company to each of Seller and Purchaser the
assets to be set forth on a Schedule 6 and as if Seller had sold to Purchaser
the assets received from the Company. Seller and Purchaser shall, in good faith,
use their respective best efforts to reasonably agree upon a Schedule 6 prior to
the Transfer Closing; provided that, in no event shall agreement and delivery of
such Schedule 6 be a condition to the Transfer Closing (or otherwise affect the
conditions precedent to the Transfer Closing).
7. Binding Effect. The provisions of this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and the heirs,
successors and assigns of the parties hereto.
8. Fees and Expenses. Each of Seller and Purchaser shall bear its own
costs and expenses in connection with the negotiation, execution and delivery of
this Agreement and the other documents related hereto and consummation of the
transactions contemplated hereby.
9. Assignment. No party shall assign any of its rights under this
Agreement without the prior written consent of the other party, except that
Purchaser may assign any and all of its rights under this Agreement to one or
more of its affiliates (but no such assignment shall relieve Purchaser of any of
its obligations hereunder nor shall any such assignment hinder or delay the
Transfer Closing). Any purported assignment in contravention of this provision
shall be null and void.
10. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
11. Invalidity of Provisions. The invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not affect the validity or
enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of this Agreement, including that provision, in any
other jurisdiction.
12. Headings; Execution in Counterparts; Facsimile Signatures. The
headings and captions contained herein are for convenience of reference only and
shall not control or affect the meaning or construction of any provision hereof.
This Agreement may be executed in counterparts, each of which shall be deemed to
be an original and all of which together shall constitute but one and the same
instrument. Facsimile transmission of any signed original document and
retransmission of any signed facsimile transmission will be deemed the same as
delivery of an original. At the request
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of either party, the other party will confirm facsimile transmission by signing
and delivering a duplicate original document.
13. Notices. All notices and other communications provided for herein
shall be dated and in writing and shall be deemed to have been duly given when
delivered, if delivered personally or sent by registered or certified mail,
return receipt requested, postage prepaid and when received if delivered
otherwise, to the party to whom it is directed:
If to the Seller, to the following address:
DSC AFFM, LLC
000 X. Xxxxxxxx Xxx., 00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxxx Xxxxx
Xxxxxxx X. Xxxx
Telephone: 000-000-0000
Fax: 000-000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx, Esq.
Telephone: 000-000-0000
Fax: 000-000-0000
If to Purchaser, to the following address:
Affirmative Investment LLC
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn.: Xxxxxxxx Xxxxxxxxxxx
Telephone: 000-000-0000
Fax: 000-000-0000
with a copy to:
Xxxxxxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
Telephone: 000-000-0000
Fax: 000-000-0000
or at such other address as such party shall have specified by notice in writing
to the other parties in accordance with this Section 13.
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14. Amendment. This Agreement may not be amended, modified or
supplemented and no waivers of or consents to departures from the provisions
hereof may be given unless consented to in writing by the party sought to be
charged therewith. Unless otherwise specified in such waiver or consent, a
waiver or consent given hereunder shall be effective only in the specific
instance and for the specific purpose for which given.
15. Integration. The parties agree that this Agreement contains the
entire understanding among the parties hereto relating to the matter hereof.
16. Third Party Beneficiaries. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer upon or give to any third
party any rights or remedies against any party hereto.
17. Specific Performance. The parties acknowledge and agree that any
breach of the terms of this Agreement would give rise to irreparable harm for
which money damages would not be an adequate remedy and accordingly the parties
agree that, in addition to any other remedies, each party shall be entitled to
enforce the terms of this Agreement by a decree of specific performance without
the necessity of proving the inadequacy of money damages as a remedy.
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IN WITNESS WHEREOF, Seller and Purchaser have executed this Agreement
as of the date first above written.
SELLER
DSC AFFM, LLC
By: DSC AFFM Manager LLC,
its Managing Member
By: /s/ Xxxxxxx X. Xxxx
-----------------------------
Name: Xxxxxxx X. Xxxx
Title: Authorized Person
PURCHASER
AFFIRMATIVE INVESTMENT LLC
By: Affirmative Associates LLC,
its Managing Member
By: /s/ J. Xxxxxxxxxxx Xxxxxxx
-----------------------------
Name: J. Xxxxxxxxxxx Xxxxxxx
Title: Authorized Person
