EXHIBIT 10.32
EXECUTION COPY
STOCK PURCHASE AGREEMENT
BETWEEN
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
AND
EVEREST REINSURANCE HOLDINGS, INC.
--------------------------------
DATED AS OF FEBRUARY 24, 2000
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SALE OF COMMON STOCK
OF
GIBRALTAR CASUALTY COMPANY
TABLE OF CONTENTS
Section Page
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ARTICLE I
DEFINITION OF TERMS
1.1 Definitions .........................................................1
ARTICLE II
PURCHASE AND SALE OF SHARES
2.1 Purchase of Shares ..................................................5
2.2 Purchase Consideration ..............................................5
2.3 Time and Place of Closing ...........................................5
2.4 Transactions to Be Effected at Closing ..............................6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
3.1 Due Incorporation and Authority .....................................6
3.2 Outstanding Capital Stock, Options and Other Rights .................7
3.3 Transfer of the Shares ..............................................7
3.4 Organization and Qualification of Gibraltar .........................7
3.5 No Violation; Consents ..............................................7
3.6 Financial Statements ................................................8
3.7 Statutory Statements ................................................8
3.8 Assets ..............................................................9
3.9 Investments .........................................................9
3.10 Absence of Certain Changes and Events Since December 31, 1999 .......9
3.11 Liabilities ........................................................10
3.12 Insurance Reserves .................................................11
3.13 Judgments, Decrees and Orders in Restraint of Business .............11
3.14 Litigation and Proceedings .........................................11
3.15 Permits, Licenses and Franchises ...................................12
3.16 Relationships With Affiliates, Officers and Directors ..............12
3.17 Compliance with Applicable Law .....................................12
3.18 Employee Benefit Plans .............................................12
3.19 Intellectual Property ..............................................13
3.20 Governmental Consents ..............................................14
3.21 Contracts and Binding Commitments ..................................14
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3.22 Insurance and Reinsurance ..........................................15
3.23 Operations Insurance ...............................................16
3.24 Taxes ..............................................................16
3.25 Accounts with Financial Institutions ...............................18
3.26 Broker's, Finder's or Similar Fees .................................19
3.27 Employees ..........................................................19
3.28 Actions Taken Prior to December 31, 1999 ...........................19
3.29 Dispute Resolution .................................................19
3.30 GAAP Book Value ....................................................19
3.31 Information Supplied ...............................................19
3.32 Accuracy of Statements .............................................19
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.1 Due Incorporation and Authority ....................................20
4.2 No Violation .......................................................20
4.3 Consents ...........................................................21
4.4 Financing ..........................................................21
4.5 Broker's, Finder's or Similar Fees .................................21
4.6 Purchase for Investment ............................................21
4.7 Information Supplied ...............................................21
4.8 Indemnification ....................................................21
ARTICLE V
COVENANTS OF THE SELLER PENDING THE CLOSING
5.1 Operations in the Ordinary Course ..................................22
5.2 Intentionally Omitted ..............................................22
5.3 Restrictions .......................................................22
5.4 Investment Portfolio ...............................................24
5.5 Investigation by the Purchaser .....................................24
5.6 Financial Statements ...............................................25
5.7 Regulatory Filings and Compliance ..................................25
5.8 Intercompany Accounts; Surplus Notes ...............................26
5.9 Tax Matters ........................................................26
5.10 Investment Income ..................................................26
5.11 Purchase of Shares .................................................26
5.12 Gibraltar Marks License ............................................26
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ARTICLE VI
COVENANTS OF THE PURCHASER PENDING THE CLOSING
6.1 Regulatory and Other Consents ......................................27
6.2 Confidential Information Memorandum ................................27
6.3 Release from Certain Obligations ...................................27
ARTICLE VII
COVENANTS AND AGREEMENTS
7.1 Confidentiality; Return of Documents ...............................28
7.2 Employee Benefit Plans .............................................28
7.3 The Seller's Access to Records .....................................29
7.4 Taxes ..............................................................29
7.5 Commercial Reasonableness ..........................................34
7.6 Termination of Agreements ..........................................35
7.7 Use of Gibraltar Marks .............................................35
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
8.1 Survival of Covenants, Agreements, Representations
or Warranties .....................................................35
ARTICLE IX
JOINT CONDITIONS TO THE OBLIGATIONS OF THE PARTIES TO CLOSE
9.1 Insurance Regulatory Approvals .....................................36
9.2 Regulatory Consents ................................................36
9.3 No Proceedings .....................................................36
9.4 MUF Agreement ......................................................36
9.5 Additional Stop-Loss Coverage ......................................36
ARTICLE X
CONDITIONS TO THE OBLIGATION OF THE PURCHASER TO CLOSE
10.1 Covenants ..........................................................37
10.2 Representations and Warranties of the Seller .......................37
10.3 Certificates .......................................................37
10.4 Other Approvals ....................................................37
10.5 Other Consents .....................................................37
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10.6 Resignation of Directors and Officers ..............................37
10.7 No Material Adverse Change .........................................37
ARTICLE XI
CONDITIONS TO THE OBLIGATIONS OF THE SELLER TO CLOSE
11.1 Covenants ..........................................................38
11.2 Representations and Warranties of the Purchaser ....................38
11.3 Certificates .......................................................38
ARTICLE XII
INDEMNIFICATION
12.1 Indemnification by the Seller ......................................38
ARTICLE XIII
TERMINATION, AMENDMENT AND WAIVER
13.1 Termination ........................................................42
13.2 Effect of Termination ..............................................42
ARTICLE XIV
MISCELLANEOUS
14.1 Amendment ..........................................................43
14.2 Extension; Waiver ..................................................43
14.3 Notices ............................................................43
14.4 Interpretation .....................................................44
14.5 Governing Law ......................................................44
14.6 Assignment; Binding Effect .........................................44
14.7 Counterparts .......................................................44
14.8 Entire Agreement; Third Party Beneficiaries ........................45
14.9 No Waiver ..........................................................45
14.10 Construction .......................................................45
14.11 Fees and Expenses ..................................................45
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EXHIBITS
Exhibit A Form of Opinion of Counsel to the Seller
Exhibit B Form of Opinion of Counsel to the Purchaser
Exhibit C Form of MUF Agreement
Exhibit D Form of Additional Stop-Loss Coverage Agreement
SCHEDULES
Schedule 3.5 Consents
Schedule 3.7 Statutory Statements
Schedule 3.9 Liens on the Investments of Gibraltar
Schedule 3.10 Changes and Events since December 31, 1999
Schedule 3.11 Liabilities of Gibraltar which under GAAP are required to be
disclosed
Schedule 3.12 Pending or Threatened Insurance Claims or Assessments
Schedule 3.13 Judgments, Decrees and Orders in Restraint of Business
Schedule 3.14 Material Actions, Suits, Arbitrations or Legal,
Administrative or Other Proceedings
Schedule 3.15 Jurisdiction of Incorporation and Jurisdictions of
Qualification of Gibraltar
Schedule 3.16 Material Contracts with Affiliates, Officers, Directors and
Interested Parties
Schedule 3.17 Compliance with Applicable Law
Schedule 3.20 Governmental Consents
Schedule 3.21 Contracts, Agreements or Arrangements to which Gibraltar is
a party or by which Gibraltar's Assets or Property are
bound
Schedule 3.22 Contractual Reinsurance, Insurance and Commutation
Agreements
Schedule 3.23 Liability, Property and Casualty, Workers Compensation,
Directors and Officers Liability, Surety Bonds, Key Man
Life Insurance and Other Insurance Contracts of Gibraltar
Schedule 3.24 Taxes
Schedule 3.25 Safe Deposit Boxes, Bank Accounts and Other Deposits of
Gibraltar
Schedule 3.27 Employee Titles; Aggregate Annual Compensation and Bonuses
Schedule 5.1 Exceptions to Operations in the Ordinary Course
Schedule 5.3 Restrictions on Gibraltar
Schedule 6.3 Indemnification and Guarantee Obligations
Schedule 7.6 Agreements and Arrangements to be Terminated
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STOCK PURCHASE AGREEMENT dated as of February 24, 2000 (the
"AGREEMENT"), among THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a mutual
insurance company domiciled in the State of New Jersey (the "Seller"), and
EVEREST REINSURANCE HOLDINGS, INC., a corporation organized and existing under
the laws of the State of Delaware (the "Purchaser").
W I T N E S S E T H
WHEREAS the Seller is the sole owner of the Shares (as defined in
Section 1) of Gibraltar Casualty Company ("GIBRALTAR"), which Shares constitute
all the issued and outstanding shares of Gibraltar's capital stock; and
WHEREAS the Purchaser desires to purchase the Shares from the Seller,
and the Seller desires to sell the Shares to the Purchaser, upon the terms and
subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:
ARTICLE I
DEFINITION OF TERMS
1.1 DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
"ADDITIONAL STOP-LOSS AGREEMENT" shall have the meaning specified in
Section 9.5.
"AFFILIATE" shall have the meaning specified in Rule 12b-2 under the
Exchange Act.
"ANNUAL STATEMENTS" shall have the meaning specified in Section 3.7.
"BUSINESS" of any Person means all the assets, property, business,
business operations, goodwill, practices, contract rights and privileges of such
Person.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day
on which commercial banks in New York City or New Jersey are authorized or
required by law to close.
"CLOSING" shall have the meaning specified in Section 2.3.
"CLOSING DATE" shall have the meaning specified in Section 2.3.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" shall have the meaning specified in Section 3.2.
"CONFIDENTIALITY AGREEMENTS" means, collectively, (i) the
Confidentiality Agreement dated September 15, 1998 between the Seller and the
Purchaser and (ii) the Confidentiality Agreement dated May 26, 1999 between the
Seller and Everest Re.
"CONSOLIDATED GROUP" means the affiliated group (within the meaning of
the Code) of Persons of which the Seller and Gibraltar are members.
"CONTRACTS" shall have the meaning specified in Section 3.21.
"DECEMBER 31 BALANCE SHEET" means the unaudited balance sheet of
Gibraltar as of December 31, 1999, prepared in conformity with GAAP.
"EMPLOYEE," means, as Gibraltar has no common law employees, all
individuals who are employed by the Seller and who are set forth in Schedule
3.27.
"EMPLOYEE BENEFIT PLANS" shall have the meaning specified in Section
3.18(a)(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means any corporation which is a member of
Gibraltar's controlled group of corporations, or any trade or business (whether
or not incorporated) which is under common control with Gibraltar or would be
considered a single employer with Gibraltar pursuant to Section 414 (b), (c) or
(m) of the Code and the regulations thereunder.
"ERISA AFFILIATE PLAN" shall have the meaning specified in Section
3.18(b)(1).
"EVEREST RE" means Everest Reinsurance Company, a corporation organized
and existing under the laws of the State of Delaware and a wholly-owned
subsidiary of the Purchaser.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCLUDED TAXES" shall have the meaning specified in Section 7.4(a).
"FORMER EMPLOYEE" means all Employees who are not Transferred
Employees.
"GAAP" means the accounting principles generally used and recognized
from time to time within the United States which have substantial support from
authoritative agencies or bodies, including the Securities and Exchange
Commission, the American Institute of Certified Public Accountants, the
Financial Accounting Standards Board and general industry practice, which
principles have been applied in a consistent manner throughout the periods
involved.
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"GAAP BOOK VALUE" on any date means the amount of the total
stockholders' equity of Gibraltar as shown on a balance sheet as of such date
prepared in accordance with GAAP consistently applied.
"GAAP FINANCIALS" shall have the meaning specified in Section 3.6.
"GIBRALTAR" shall have the meaning specified in the recitals.
"GIBRALTAR MARKS" shall have the meaning specified in Section 3.19.
"GIBRALTAR MARKS LICENSE" shall have the meaning specified in Section
3.19.
"GOVERNING INSTRUMENTS" means the memorandum, articles or certificate
of incorporation or association and by-laws, if applicable, in the case of a
corporation, the limited liability issuer agreement, in the case of a limited
liability issuer, the partnership agreement, in the case of a partnership or the
comparable document or documents in the case of another kind of entity.
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"INDEMNIFIED PERSON" means the Person or Persons entitled to
indemnification under Article XII.
"INDEMNIFYING PERSON" means the Person or Persons obligated to provide
to an Indemnified Person the indemnification under Article XII.
"INVESTMENT PORTFOLIO" means the list provided by the Seller to the
Purchaser setting forth all investments, including stocks, bonds and limited
partnership interests, owned by Gibraltar as of a particular date, the issuer of
the investments, and the amount owned.
"LIEN" means any lien, pledge, mortgage, security interest, lease,
charge, option, right of first refusal, easement, transfer restriction under any
shareholder or similar agreement or any other similar encumbrance.
"LOSS RESERVES" means all reserves customarily established by property
and casualty insurance companies under Statutory Accounting Principles for
incurred losses, including case reserves, reserves for incurred but not reported
losses and reserves for loss adjustment expenses, both allocated and
unallocated.
"LOSSES" shall have the meaning specified in Section 12.1(a).
"MATERIAL ADVERSE EFFECT" with respect to any Person hereto means a
material adverse effect on (a) the financial condition, results of operations,
cash flows or Business of such Person and its subsidiaries, if any, taken as a
whole, or (b) the ability of such Person to perform its obligations under this
Agreement.
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"MEMORANDUM" shall have the meaning specified in Section 6.2.
"MUF" means Everest Re's management underwriting facility which began
in 1977 and was a reinsurance arrangement pursuant to which Everest Re ceded
business to a number of insurance and reinsurance companies.
"MUF AGREEMENT" shall have the meaning specified in Section 9.4.
"OCCUPANCY AGREEMENT" means the Occupancy Agreement between Gibraltar
and The Prudential Service Company dated July 1, 1995.
"PBGC" means the Pension Benefit Guaranty Corporation.
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"PERMITTED LIENS" shall have the meaning specified in Section 3.8(a).
"PERSON" means an individual, corporation, partnership, firm, joint
venture, association, limited liability company, joint stock company, trust,
unincorporated organization, governmental or regulatory authority or other
entity.
"PROPERTY" means the real property and personal property of Gibraltar.
"PURCHASE PRICE" shall have the meaning specified in Section 2.2.
"PURCHASER" shall have the meaning specified in the recitals.
"QUARTERLY STATEMENTS" shall have the meaning specified in Section
3.7(a).
"REQUIRED RESERVE INCREASES" means the aggregate increase in the Loss
Reserves of Gibraltar required under Section 5.10 and the $80,000,000 increase
in the Loss Reserves described in Section 3.28.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLER" shall have the meaning specified in the recitals.
"SERVICE CONTRACT" means the Service Contract between Gibraltar and the
Seller dated May 10, 1990.
"SHARES" means all the issued and outstanding shares of Common Stock of
Gibraltar.
"STATE INSURANCE COMMISSIONER" means the Insurance Commissioner of the
State of Delaware.
"STATE INSURANCE COMMISSION" means the Office of the Insurance
Commissioner of the State of Delaware.
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"STATUTORY ACCOUNTING PRINCIPLES" means the accounting procedures and
practices prescribed or permitted from time to time by the National Association
of Insurance Commissioners and adopted or promulgated by the State of Delaware
or the State Insurance Commissioner and employed in a consistent manner
throughout the periods involved.
"STRADDLE PERIOD" means any taxable year or period beginning before and
ending after the Closing Date.
"SURPLUS NOTES" means the surplus notes issued by Gibraltar and held by
the Seller or one of its subsidiaries (other than Gibraltar).
"TAX OR TAXES" means any federal, state, local, foreign or other
income, premium, profits, franchise, license, sales, use, payroll, withholding,
employment, wage, occupation, value added, property (real or personal), excise
or other similar taxes, fees, duties, assessments or withholdings (including
interest or penalties on such items), imposed by any governmental authority.
"TAX CLAIM" shall have the meaning specified in Section 12.1(f).
"TAX PACKAGE" shall have the meaning specified in Section 7.4(c).
"TAX RETURN" means any return, report or similar statement required to
be filed with respect to any Tax (including any attached schedules), including
any information return, amended return or declaration of estimated Tax.
"THIRD PARTY CLAIM" shall have the meaning specified in Section
12.1(e).
"TRANSFERRED EMPLOYEE" shall have the meaning specified in Section
7.2(a).
"UNAUDITED STATUTORY STATEMENTS" shall have meaning specified in
Section 3.7(a).
ARTICLE II
PURCHASE AND SALE OF SHARES
2.1 PURCHASE OF SHARES. Upon the terms and subject to the conditions
contained in this Agreement, the Seller agrees to sell, assign, transfer and
deliver to the Purchaser, and the Purchaser agrees to purchase and accept from
the Seller, on the Closing Date, the Shares for the consideration specified
herein.
2.2 PURCHASE CONSIDERATION. The purchase price for the Shares shall
be an amount in cash equal to $51.8 million (the "Purchase Price"). At the
Closing (as defined in Section 2.3 below), the Purchaser shall pay to the
Seller by wire transfer (to the bank account of the Seller specified by the
Seller in writing to the Purchaser at least one Business Day prior to the
Closing), immediately available funds in an amount equal to the Purchase Price.
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2.3 TIME AND PLACE OF CLOSING. The consummation of the purchase and
sale of the Shares and the other transactions contemplated by this Agreement to
occur simultaneously therewith (the "Closing") shall take place at the offices
of Sidley & Austin, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, or at such other place
as may be mutually agreed upon by the parties. The Closing will occur at 10:00
a.m. New York City time on or before the tenth Business Day following the date
on which all the conditions set forth in Articles IX, X and XI shall have been
satisfied or waived, as may be agreed upon by the parties hereto, or at such
other time as may be agreed upon by the parties hereto. The time and date of the
Closing are referred to herein as the "Closing Date".
2.4 TRANSACTIONS TO BE EFFECTED AT CLOSING. At the Closing:
(a) The Seller shall deliver to the Purchaser free and clear of all
Liens (i) the certificates representing the Shares, properly endorsed in
blank or accompanied by stock powers or other instruments of transfer duly
executed in blank, and accompanied by all requisite stock transfer stamps, if
any, (ii) an opinion of counsel, substantially to the effect provided in Exhibit
A, (iii) good standing certificates, incumbency certificates and all such other
documents as the Purchaser and its counsel may reasonably request; and (iv)
all other documents and instruments required by this Agreement to be delivered
by the Seller at the Closing.
(b) The Purchaser shall pay to the Seller the Purchase Price and shall
deliver to the Seller (i) good standing certificates, incumbency certificates
and all such other documents as the Seller and its counsel may reasonably
request; (ii) an opinion of counsel substantially to the effect provided in
Exhibit B; and (iii) all other documents and instruments required by this
Agreement to be delivered by the Purchaser at the Closing.
(c) The Gibraltar Marks License shall be terminated and the Seller
and the Purchaser shall cause Gibraltar to file with the Secretary of State of
the State of Delaware, on the Closing Date, a certificate of amendment to
Gibraltar's Governing Instruments that changes the name of Gibraltar to any name
designated by the Purchaser, as long as such name is not confusingly similar
to the word "Gibraltar", "Prudential" or any other "Pru" formative xxxx.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller represents and
warrants to the Purchaser as follows:
3.1 DUE INCORPORATION AND AUTHORITY. The Seller is a mutual insurance
company domiciled, validly existing and in good standing under the laws of the
State of New Jersey and has all requisite corporate power and authority
to execute and deliver this Agreement and each other agreement required
to be executed and delivered by the Seller pursuant hereto, to perform
its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution, delivery
and performance by the Seller of this Agreement and each other
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agreement required to be executed and delivered by the Seller pursuant hereto,
and the consummation by the Seller of the transactions contemplated hereby and
thereby, have been duly and validly authorized by all necessary corporate
action, and no other corporate proceedings on the part of the Seller are
necessary to authorize the execution, delivery and performance by the Seller of
this Agreement and each of the other agreements contemplated by this Agreement,
or the consummation of the transactions contemplated hereby and thereby. This
Agreement has been duly and validly executed and delivered by the Seller and
constitutes a legal, valid and binding obligation of the Seller, enforceable
against the Seller in accordance with its terms, except as such enforcement may
be limited by bankruptcy, insolvency, moratorium or other similar laws affecting
creditors' rights generally and except as rights to specific enforcement may be
limited by the application of equitable principles (whether such equitable
principles are applied in a proceeding at law or in equity).
(b) Gibraltar is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
power and authority to own, lease and operate its Business and to carry on its
Business as now conducted. Gibraltar is duly licensed or qualified to do
business in each jurisdiction in which the nature of the Business conducted by
it or the character of the assets owned by it makes such qualification or
licensing necessary, except where the failure to be so qualified or licensed,
individually or in the aggregate, would not have a Material Adverse Effect.
3.2 OUTSTANDING CAPITAL STOCK, OPTIONS AND OTHER RIGHTS. The
authorized capital stock of Gibraltar consists solely of 2,000 shares of common
stock, $5,000 par value per share, all of which are issued and outstanding (the
"COMMON STOCK"). The Shares constitute all the issued and outstanding capital
stock of Gibraltar. All the outstanding Shares are owned of record and
beneficially by the Seller free and clear of all Liens. All the Shares are duly
authorized, validly issued, fully paid and nonassessable. Gibraltar does not
beneficially own any interest in any Person except through its Investment
Portfolio made in the ordinary course of business. There is no outstanding
right, subscription, warrant, call, preemptive right, option or other similar
agreement to purchase or otherwise to receive from the Seller or Gibraltar any
of the outstanding, authorized but unissued, unauthorized or treasury shares
of the capital stock of Gibraltar, and there is no outstanding security of any
kind convertible into such capital stock.
3.3 TRANSFER OF THE SHARES. The Seller has and on the Closing Date
shall have full power and authority to convey, transfer and sell the Shares to
the Purchaser as contemplated hereby. Upon the Closing as contemplated hereby,
the Purchaser shall have good and valid title to the Shares, free and clear of
all Liens (except as may be or have been created or permitted by the Purchaser).
3.4 ORGANIZATION AND QUALIFICATION OF GIBRALTAR. The Seller has
delivered to the Purchaser true and complete copies of Gibraltar's Governing
Instruments as in effect on the date hereof and such instruments will be in
full force and effect on the Closing Date.
3.5 NO VIOLATION; CONSENTS. Except as set forth in Schedule 3.5,
neither the execution, delivery and performance of this Agreement by the Seller
or of each other agreement required to be executed and delivered by the
Seller pursuant hereto, nor the sale of the Shares pursuant to this
Agreement nor the consummation by the Seller of the transactions contemplated
hereby or thereby, will, with or without the giving of notice or
the passage of time, or both, (i) violate any provision of
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the Governing Instruments of the Seller; (ii) violate or result in any breach of
or constitute a default under, or give rise to a right of termination or
cancellation of, or accelerate the performance required by any terms of, as the
case may be, any contract, agreement, lease, license, mortgage, note,
reinsurance agreement, franchise, permit or instrument to which Gibraltar is a
party or by which any of its assets are bound, or result in the creation of any
Lien upon any of the Property owned by Gibraltar; (iii) violate any law,
regulation, judgment, order, writ, injunction or decree of any court,
governmental body (domestic or foreign), or administrative agency of any
jurisdiction applicable to the Seller or Gibraltar; or (iv) require the consent
or approval of any third parties; other than, in the case of (ii), (iii) and
(iv), such violations, breaches, defaults, terminations, cancellations,
accelerations, consents, approvals and Liens, the failure to obtain which or the
creation of which would not, in the aggregate, reasonably be expected to have a
Material Adverse Effect on Gibraltar.
3.6 FINANCIAL STATEMENTS. The Seller has delivered to the Purchaser
the unaudited balance sheets as of December 31, 1999 and December 31, 1998 of
Gibraltar, and the related statements of income, stockholders' equity and cash
flows for the two years then ended, including the related notes thereon, each of
which presents fairly in all material respects the financial position of
Gibraltar, as of December 31, 1999 and December 31, 1998 and its results of
operations and cash flows for the years then ended, in conformity with GAAP
(except as may be indicated therein or in the notes thereto) (the "GAAP
FINANCIALS"), except that no representation or warranty is made with respect to
any Loss Reserves in this Section 3.6.
3.7 STATUTORY STATEMENTS. (a) The Seller has delivered to the Purchaser
complete and correct copies of (i) the Annual Statements of Gibraltar to
the State Insurance Commissioner for the years ended December 31, 1999 and
December 31, 1998, together with all exhibits and schedules thereto
(the "ANNUAL STATEMENTS"), and (ii) the unaudited statutory financial statements
of Gibraltar for the years ended December 31, 1999 and December 31, 1998 (the
"UNAUDITED STATUTORY STATEMENTS"). The Seller has furnished, or will furnish
to the Purchaser, as soon as practicable after their preparation, complete and
correct copies of the Quarterly Statements of Gibraltar to the State
Insurance Commissioner for periods subsequent to December 31, 1999 and all
exhibits and schedules thereto (the "QUARTERLY STATEMENTS"). The Annual
Statements, Unaudited Statutory Statements and the Quarterly Statements of
Gibraltar have been prepared in accordance with Statutory Accounting
Principles throughout the periods involved and in accordance with the books
and records of Gibraltar, except as expressly set forth or disclosed in the
notes, exhibits or schedules thereto. Except as set forth in Schedule 3.7 and
except that no representation or warranty is made with respect to any Loss
Reserves in this Section 3.7, each of the statutory financial statements
contained in the Annual Statements, the Unaudited Statutory Statements and
the Quarterly Statements fairly and accurately presents or will fairly and
accurately present, as the case may be, in all material respects, the assets,
liabilities and capital and surplus of Gibraltar as of the dates thereof in
accordance with Statutory Accounting Principles, subject, in the case of the
Quarterly Statements, to normal year-end adjustments and any other adjustments
described therein.
(b) The Seller has delivered to the Purchaser complete and correct
copies of all reports of examination and market conduct examinations issued by
any insurance regulatory commissions, agencies or authorities with respect to
Gibraltar since January 1, 1996 and all written responses made by the Seller or
Gibraltar with respect to any written comments since January 1, 1998, from any
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insurance regulatory commissions, agencies or authorities concerning the Annual
Statements, the Unaudited Statutory Statements, Quarterly Statements, reports of
examination and market conduct examinations.
(c) Except as set forth in Schedule 3.7, as of December 31, 1999,
Gibraltar had no material liability, whether accrued, absolute, fixed,
contingent or otherwise, of a nature required to be reflected on its balance
sheet prepared in accordance with Statutory Accounting Principles which is not
fully and correctly reflected or reserved against in the balance sheet forming
a part of the Annual Statement of Gibraltar for the year ended December 31,
1999.
3.8 ASSETS. (a) Gibraltar owns all personal property which it purports
to own, as reflected on the December 31 Balance Sheet and that it acquired in
the normal and ordinary course of business since December 31, 1999 (in either
case other than that disposed of in the ordinary course of business), free and
clear of all Liens except for (i) Liens on the portfolio investments of
Gibraltar set forth in Schedule 3.9; (ii) the claims of materialmen, carriers,
landlords and like Persons not yet due, all of which are not delinquent or are
being contested in good faith; (iii) Liens securing Taxes, assessments,
governmental charges or levies not yet due, all of which are not yet delinquent
or are being contested in good faith; and (iv) statutory liens on special
deposit funds held by state regulatory authorities (collectively, the "PERMITTED
LIENS").
(b) Gibraltar owns no real property. Gibraltar is not a party to any
lease for real property except for the Occupancy Agreement.
3.9 INVESTMENTS. Except as set forth in Schedule 3.9, Gibraltar has
legal and valid title, free and clear of all Liens, to all its portfolio
investments. The Seller has delivered an Investment Portfolio to the Purchaser
as of December 31, 1999. Such Investment Portfolio is, and each other
Investment Portfolio delivered by the Seller to the Purchaser shall be, as of
their respective dates, complete and correct in all material respects.
3.10 ABSENCE OF CERTAIN CHANGES AND EVENTS SINCE DECEMBER 31, 1999.
Except as set forth in Schedule 3.10, from December 31, 1999 through the date
hereof, Gibraltar has operated in the ordinary course consistent with past
practice and there has not been:
(a) Any change in the business policies of Gibraltar, including the
establishment or adjustment of Loss Reserves or investment or claims adjustment
policies and practices, or any change in any activity that (i) has had the
effect of materially accelerating the recording of accounts receivable or
materially retarding the payment of expenses or establishing or adjusting Loss
Reserves in connection with any accounts or Business of Gibraltar or (ii) has
had the effect of materially altering, modifying or changing the historic
financial or accounting practices or policies of Gibraltar, including accruals
of and reserves for Tax liabilities;
(b) Any damage, destruction or loss (whether or not covered by
insurance) to any Property of Gibraltar which could reasonably be expected to
have a Material Adverse Effect on Gibraltar or its Business;
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(c) Any declaration, setting aside or payment of any dividend or
other distribution in respect of any class of capital stock of Gibraltar;
(d) Any employment, bonus, incentive or deferred compensation
agreement or arrangement between Gibraltar or the Seller and an Affiliate,
director, officer or other employee or consultant of Gibraltar or the Seller
principally with respect to Gibraltar and/or the Business of Gibraltar;
(e) Any indebtedness incurred by Gibraltar for borrowed money or
any commitment to borrow money entered into or any guarantee given by Gibraltar;
(f) Any amendment to any Governing Instrument of Gibraltar;
(g) Any Material Adverse Effect on Gibraltar or its Business;
(h) Any change in the employment terms or conditions or terminations
of any Employee or any increase in the compensation payable or to become payable
by the Seller to any Employee, other than in the ordinary course consistent with
past practice;
(i) The creation of any Lien, except for Permitted Liens, on any
portion of the assets, properties or rights of Gibraltar;
(j) Any amounts paid in settlement or compromise of any suits or
claims against Gibraltar, other than insurance claims paid or settled in the
ordinary course of business;
(k) Any loans, advances or capital contributions made by Gibraltar to
any other Person;
(l) Any acquisition or lease of any assets other than in the ordinary
course of business;
(m) Any sale, transfer or other disposition of any assets, properties
or business of Gibraltar other than portfolio investments in the ordinary
course of business;
(n) Any new material contract, agreement or license to which Gibraltar
is a party, other than in the ordinary course of business;
(o) Any amendment, modification, alteration or termination of any
material contract, agreement or license to which Gibraltar is a party; or
(p) Any waiver of any rights of material value or any cancellation
of any claims, debts or accounts receivable owing to Gibraltar other than
in the ordinary course of business.
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3.11 LIABILITIES. (a) As of the date of this Agreement, Gibraltar has
no liabilities, whether accrued, absolute, fixed, contingent or otherwise (but
excluding liabilities of a type for which Gibraltar carries Loss Reserves and
excluding liabilities for Taxes), of a nature required to be reflected on its
balance sheet prepared in accordance with GAAP other than:
(i) liabilities disclosed or provided for in the December 31 Balance
Sheet;
(ii) liabilities incurred by Gibraltar in the ordinary course of its
Business since December 31, 1999; and
(iii) liabilities set forth in Schedule 3.11.
(b) To the knowledge of Gibraltar, as of the date of this Agreement
Gibraltar has no material liabilities, whether accrued, absolute, fixed,
contingent or otherwise (but excluding liabilities of a type for which Gibraltar
carries Loss Reserves and excluding liabilities for Taxes), other than:
(i) liabilities disclosed or provided for in the December 31 Balance
Sheet;
(ii) liabilities incurred by Gibraltar in the ordinary course of its
Business since December 31, 1999; and
(iii) liabilities set forth in Schedule 3.11.
3.12 INSURANCE RESERVES. Notwithstanding anything to the contrary,
expressly or implicitly, contained in this Agreement, this Section 3.12 and
Section 3.22 set forth the only representations or warranties by the Seller
relating to Gibraltar's Loss Reserves.
(a) Gibraltar's aggregate Loss Reserves as recorded in its Annual
Statements, Unaudited Statutory Statements and Quarterly Statements were
determined in accordance with generally accepted actuarial standards
consistently applied (except as otherwise noted therein), were fairly stated in
accordance with sound actuarial principles and met the requirements of the
insurance laws of the State of Delaware.
(b) Gibraltar's aggregate Loss Reserves as recorded in its GAAP
Financials were determined in accordance with generally accepted actuarial
standards consistently applied (except as noted therein) and were fairly
stated in accordance with GAAP.
(c) Except for regular periodic assessments in the ordinary course
of business and except as set forth in Schedule 3.12, no claim or assessment is
pending nor, to the knowledge of Gibraltar, threatened against Gibraltar by any
state insurance guaranty association in connection with that association's
fund relating to insolvent insurers.
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3.13 JUDGMENTS, DECREES AND ORDERS IN RESTRAINT OF BUSINESS. Except as
set forth in Schedule 3.13, Gibraltar is not a party to or subject to any
judgment or decree or order entered in any suit or arbitration or any proceeding
(other than any market conduct examinations commenced after the date hereof)
brought by a governmental agency or by any other Person enjoining it in respect
of (a) any business practice, (b) the acquisition of any property or (c) the
conduct of business in any area.
3.14 LITIGATION AND PROCEEDINGS. Except as set forth in Schedule 3.14,
as of the date hereof there are no actions, suits, arbitrations or legal,
administrative or other proceedings pending or (other than those relating to
insurance claims) threatened against or affecting Gibraltar, at law or in
equity, or before or by any governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, or before any arbitrator
of any kind. Gibraltar is not subject to any material judgment, order, writ,
injunction, decree or award of any court, arbitration, governmental department,
commission, bureau, board, agency or instrumentality.
3.15 PERMITS, LICENSES AND FRANCHISES. Schedule 3.15 contains a true
and complete list, as of the date hereof, of all jurisdictions in which
Gibraltar is licensed as an insurer or reinsurer and all jurisdictions in which
Gibraltar is operating as an insurer or reinsurer, whether on a licensed or
unlicensed basis, and all jurisdictions in which Gibraltar is qualified as an
eligible surplus lines insurer. Gibraltar has all material permits, licenses,
franchises and other authorizations necessary to, and has complied in all
material respects with all laws applicable to, the conduct of its Business in
the manner and in the areas in which such Business is presently being conducted,
all such permits, licenses, franchises and authorizations are valid and in
full force and effect and Gibraltar is in compliance in all material respects
with all its obligations under such permits, licenses, franchises and
authorizations. Gibraltar has not engaged in any activity which would cause
revocation or suspension of any such material permit, license, franchise or
authorization. No action or proceeding seeking the revocation or suspension
of any thereof is pending or, to the knowledge of Gibraltar, threatened. Except
for compliance with periodic renewal procedures and as set forth in Section 9.1,
no approvals or authorizations are required to permit Gibraltar to continue its
Business, as presently conducted, after the consummation of the transactions
contemplated hereby.
3.16 RELATIONSHIPS WITH AFFILIATES, OFFICERS AND DIRECTORS. Except as
set forth in Schedule 3.16, the Seller has not, and no officer, director or
Affiliate of the Seller has, entered into any written contract or agreement
with Gibraltar that is binding upon Gibraltar following the Closing, except for
agreements or contracts that are cancelable at will by Gibraltar without
penalty.
3.17 COMPLIANCE WITH APPLICABLE LAW. Gibraltar is in compliance in all
material respects with all applicable laws, rules, regulations, orders,
ordinances, judgments, decrees, orders, writs and injunctions of all
governmental authorities (Federal, state, local, or foreign) except as disclosed
in Schedule 3.17. Gibraltar has not received notification from any governmental
authority of any asserted failure to so comply or material deficiency which has
not been resolved or otherwise settled. Except for the stop-loss agreement
between Gibraltar and Everest Re, Gibraltar has not written any insurance or
reinsurance since 1991. Gibraltar was an authorized insurer, whether on a
licensed or unlicensed basis, in each state in which it previously wrote
insurance for the type of insurance it wrote in such states and met all
statutory and regulatory requirements of all governmental authorities which
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had jurisdiction over it to be an authorized insurer. To the knowledge of
Gibraltar, all policy form and rate filings required to be made by Gibraltar
have been made and are up to date, and all material policies which have been
written are on forms approved by the insurance regulatory authority of the
jurisdiction where issued or are on forms which comply with applicable laws and
regulations.
3.18 EMPLOYEE BENEFIT PLANS. (1) Gibraltar does not sponsor or
maintain any separate or "stand alone" employee benefit plan within the
meaning of Section 3(3) of ERISA, or any separate or stand alone retirement or
deferred compensation plan, incentive compensation plan, stock plan,
unemployment compensation plan, vacation pay, severance pay, bonus or benefit
arrangement, insurance or hospitalization program or any other fringe benefit
arrangements for any Transferred Employee or Former Employee, whether pursuant
to contract, arrangement, custom or informal understanding, which does not
constitute an employee benefit plan (collectively, "EMPLOYEE BENEFIT PLANS")
and does not contribute to or have any obligation to contribute to any ERISA
Affiliate Plan (as defined below). Gibraltar has no common law employees.
(2) Since January 1, 1995, neither Gibraltar nor any ERISA Affiliate
has incurred any withdrawal liability with respect to a multiemployer plan
within the meaning of Section 3(37) of ERISA.
(b) (1) To the extent applicable to any Employee Benefit Plan
sponsored or maintained by the Seller or any other ERISA Affiliate ("ERISA
AFFILIATE PLAN"), as of the Closing Date there will not exist any accumulated
funding deficiency or unpaid required installment within the meaning of Section
412 of the Code or Section 302 of ERISA, nor has there been issued a waiver
or variance of the minimum funding standards imposed by the Code with respect to
any such plan, nor has any lien been created under Section 302(f) of ERISA or
412(n) of the Code or security been required under Section 307 of ERISA, nor
are there any excise Taxes due or hereafter to become due under Section 4971,
4972 or 4980B of the Code with respect to any fiscal period ending on or before
the Closing Date for which Gibraltar has or may have any liability.
(2) With respect to each ERISA Affiliate Plan subject to Title
IV of ERISA, (A) there has not occurred any "reportable event" within the
meaning of Section 4043(b) of ERISA or the regulations thereunder with respect
to which the 30 day notice requirement has not been waived under applicable
regulations, and (B) there exists no ground upon which the PBGC under ERISA
Section 4042 could demand termination of the ERISA Affiliate Plan or appointment
of itself or its nominee as trustee thereunder. The PBGC has not instituted or
threatened a proceeding to terminate an ERISA Affiliate Plan subject to Title IV
of ERISA. All PBGC premiums due on or before the Closing Date with respect to
each ERISA Affiliate Plan subject to Title IV of ERISA have been paid in full or
appropriately accrued on the balance sheet of the Seller or any ERISA Affiliate,
including late fees, interest and penalties, if and to the extent applicable.
Neither Gibraltar or any ERISA Affiliate has any liability under Section 4062,
4063, 4064 or 4069 of ERISA. None of the ERISA Affiliate Plans is a
multiemployer plan.
(c) Each ERISA Affiliate Plan complies in form and has been
administered in operation in all material respects with all applicable
requirements of law.
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3.19 INTELLECTUAL PROPERTY. Gibraltar owns or has licenses to use all
intellectual property necessary to carry on the Business as presently conducted,
and to its knowledge the use of any such intellectual property licensed from a
third party does not infringe upon or otherwise violate any intellectual
property rights of any third party. Neither the Seller nor Gibraltar has
received any written notice alleging that the use of such intellectual property
infringes upon or otherwise violates any intellectual property rights of any
third party. Gibraltar owns no copyright or trademark registrations or patents.
The only servicemarks and logos used by Gibraltar in connection with its
Business are GIBRALTAR and the Rock of Gibraltar logo (collectively, the
"GIBRALTAR MARKS"). The use of the Gibraltar Marks by Gibraltar does not
infringe upon or otherwise violate any intellectual property rights of any third
party. Neither the Seller nor Gibraltar has received any written notice alleging
that its use of the Gibraltar Marks infringes the intellectual property rights
of any third party. Gibraltar uses the Gibraltar Marks pursuant to a license
from the Seller (the "GIBRALTAR MARKS LICENSE").
3.20 GOVERNMENTAL CONSENTS. Except as set forth in Schedule 3.20, no
consent, authorization, order or approval of, or filing or registration with,
any governmental authority, board or other regulatory body is required for or in
connection with the execution and delivery of this Agreement by the Seller and
each other agreement required to be executed and delivered by the Seller
pursuant hereto or the consummation by the Seller of the transactions
contemplated hereby and thereby, except for (i) the notifications to be given
to, and the approval to be obtained from, the State Insurance Commissioner, (ii)
notifications and filings under the HSR Act; and (iii) those as may be necessary
as a result of any facts or circumstances relating solely to the Purchaser.
3.21 CONTRACTS AND BINDING COMMITMENTS. (a) Schedule 3.21 contains a
true and complete list, as of the date hereof, of all contracts, agreements or
arrangements (but, with respect to the contracts, agreements or arrangements
entered into prior to November 16, 1994, only to the extent available or known
to Gibraltar after conducting a reasonable investigation of its records) of the
following types to which Gibraltar is a party or by which Gibraltar's assets or
Property are or may be bound ("CONTRACTS"), as such Contracts may have been
amended, modified or supplemented:
(i) All Contracts out of the ordinary course of business;
(ii) All Contracts or similarly binding arrangements with any
Person containing any provision or covenant limiting the ability of
Gibraltar to engage in any line of business or compete with any Person;
(iii) All partnership, joint venture or profit-sharing Contracts
with any Person (other than participations in reinsurance arrangements
and underwriting agreements entered into in the ordinary course of
business);
(iv) Except with respect to the agreements and arrangements to
be terminated as set forth on Schedule 7.6, all Contracts relating to
the borrowing of money, or the direct or indirect guarantee of any
obligation for, or Contract to service the repayment of, borrowed money
or any other liability in respect of indebtedness for borrowed
money of any other Person, including any Contract relating
to (A) the maintenance of compensating balances that
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are not terminable by Gibraltar without penalty upon not more than 30
days' notice, (B) any lines of credit, (C) the payment for property,
products or services which are not conveyed, delivered or rendered, (D)
any obligation to keep-well, make-whole or maintain working capital or
earnings levels or perform similar requirements or (E) the guarantee of
any lease or other similar periodic payments to be made by any other
Person;
(v) All leases, subleases or rental or use Contracts to which
Gibraltar is a party with respect to personal property used by
Gibraltar in the conduct of its business operations or affairs;
(vi) All Contracts relating to the future disposition or
acquisition of any investment in any Person or of any interest in any
business enterprise (other than the disposition or acquisition of
portfolio investments in the ordinary course of business), and all
Contracts requiring Gibraltar to purchase any security (other than
such purchases of portfolio investments in the ordinary course of
business);
(vii) All Contracts between or among (x) Gibraltar and (y) the
Seller or any of the Seller's Affiliates or any director, officer or
employee of the Seller;
(viii) All reinsurance pools pursuant to which Gibraltar has
assumed reinsurance risks and all assigned risk pools in which
Gibraltar is participating;
(ix) All Contracts relating to computer software licensing or
data processing services utilized in its Business;
(x) All Contracts relating to licenses of trademarks, trade
names, service marks or other similar property rights;
(xi) Each Contract (other than Contracts cancelable at will)
involving payments of more than, or a series of payments which in the
aggregate are more than, $100,000 during its term for the purchase of
materials, supplies or services or which has a term of or requires the
performance of obligations in excess of, six months; and
(xii) Any power of attorney which is presently effective and
outstanding other than powers of attorney which exist as a matter of
law or which have been granted pursuant to requirements of applicable
state insurance or securities regulatory authorities;
(b) All the Contracts are valid and binding in all material respects
in accordance with their terms and are in full force and effect. Gibraltar has
not breached any provision of, and is not in material default under the terms
of, any Contract. No condition exists or event has occurred which, with or
without notice or the passage of time or both, would constitute a breach
of, or a default under, any Contract by Gibraltar. To the knowledge of
Gibraltar, no other party to any Contract has breached any provision of, or
is in default under the terms of, any Contract, other than in connection with
insurance or reinsurance agreements where Gibraltar is in good faith disputing
coverage.
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3.22 INSURANCE AND REINSURANCE. Except with respect to information
relating to outstanding facultative certificates, Schedule 3.22 contains a true
and complete list, as of the date hereof, of all the contractual reinsurance,
insurance and commutation agreements entered into since January 1, 1995 to which
Gibraltar is a party. Except as set forth in Schedule 3.22, (i) the reserves
recorded for potential liabilities that Gibraltar may incur pursuant to the
contractual reinsurance, insurance and commutation agreements listed in Schedule
3.22 are properly determined in accordance with the applicable statutory
and GAAP requirements; (ii) receivables due to Gibraltar pursuant to such
reinsurance, insurance and commutation agreements have been properly recorded in
the books of account of Gibraltar and reflected in its Annual Statements and
GAAP Financials for the year ended December 31, 1999 and its Quarterly
Statements for periods subsequent to December 31, 1999 and to the knowledge of
Gibraltar are collectible (less any reserves for uncollectability) in due
course; and (iii) no notice of intended cancellation has been received by
Gibraltar in connection with the contractual reinsurance, insurance and
commutation agreements listed on Schedule 3.22. Any letters of credit held by
Gibraltar that support receivable balances from unauthorized reinsurers comply
in all material respects with the applicable insurance laws or regulations.
3.23 OPERATIONS INSURANCE. Schedule 3.23 contains a summary
description of all liability, property and casualty, workers compensation,
directors and officers liability, surety bonds, key man life insurance and
other similar insurance contracts that insure Gibraltar or its Business
specifying the insurer (including whether the insurer is an Affiliate of the
Seller or Gibraltar), the amount of coverage, the type of insurance under each
such policy and whether such insurance will continue to be applicable to
Gibraltar following the Closing. All such insurance is in full force and effect
as of the date hereof and will be in full force and effect on the Closing
Date. No notice of cancellation or termination has been received by the Seller
or Gibraltar with respect to any such policy. To the knowledge of Gibraltar,
such insurance is in accordance with normal industry practice including self
insurance and, in light of the Business of Gibraltar, is in amounts and
provides coverage that is reasonable, adequate and customary for Persons in
similar Businesses.
3.24 TAXES. Except as set forth on Schedule 3.24,
(i) The amount accrued on the December 31 Balance Sheet
for all Taxes imposed by any taxing authority are adequate to
cover all material unpaid Tax liabilities, whether or not
disputed, that have accrued with respect to or are applicable
to all years or periods ending on or prior to December 31, 1999
and for which Gibraltar may be directly or contingently liable
in its own right or as a transferee of the assets of, or
successor to, any Person.
(ii) Gibraltar has not incurred any material Tax
liabilities other than in the ordinary course of business for
any taxable yearfor which the applicable statute of limitations
has not expired; there are no Tax liens (other than liens for
current Taxes not yet due and payable) upon the properties or
assets of Gibraltar.
(iii) Gibraltar has not granted or been requested in
writing to grant waivers of any statute of limitations applicable
to any claim for Taxes which requests are pending or waivers
are currently in effect.
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(iv) No member of the Consolidated Group has waived or
been requested in writing to waive any statute of limitations in
respect of Taxes for which Gibraltar may be liable which
requests are pending or waivers are currently in effect.
(v) All Tax Returns for Gibraltar required by
applicable law to have been filed for Gibraltar prior to the
Closing Date (taking into account extensions) have been filed.
All Taxes shown as due on all such Tax Returns have been paid.
Each such Tax Return is true and correct in all material
respects.
(vi) Either all of the income Tax Returns that include
the operations of Gibraltar have been audited by the Internal
Revenue Service or the appropriate taxing authority and all
liabilities therefor have been paid in full, or the statute of
limitations with respect to assessment of Taxes for the period
for which such Tax Returns were required to be filed has
expired. No material issues have been raised in writing in any
examination by any taxing authority with respect to the
business and operations of Gibraltar for any taxable period
for which the statute of limitations with respect to
assessment of Taxes for such taxable period has not expired.
(vii) No federal, state, local or foreign audits or
other administrative proceeding or court proceeding exist with
regard to any Taxes or Tax Returns of Gibraltar. Gibraltar has
not received any written notice that an audit or other
administrative proceeding is pending or threatened with
respect to any Taxes due from or with respect to Gibraltar or
any Tax Return filed by or with respect to Gibraltar.
(viii) No written position has been taken on any Tax
Return with respect to the business or operations of Gibraltar
for a taxable year for which the statute of limitations for the
assessment of any Taxes with respect thereto has not expired
that is directly in violation of the Code, final or temporary
Treasury regulations promulgated under the Code, or published
Internal Revenue Service revenue rulings promulgated under the
Code and not superseded.
(ix) All material Taxes which Gibraltar is required by
law to withhold or collect, including without limitation, sales
and use taxes, and amounts required to be withheld for Taxes of
employees, have been duly withheld or collected and , to the
extent required, have been paid over to the proper
governmental authorities or are held in separate bank accounts
for such purpose.
(x) The Seller is not a "foreign person" as defined in
Section 1445(f)(3) of the Code.
(xi) Gibraltar is not a party to any joint venture,
partnership or other arrangement or contract which is treated
as a partnership for Federal income tax purposes other
than any joint venture, partnership or other arrangement
or contract that is held as a portfolio investment in
the ordinary course of business. Gibraltar is
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not a party to any tax sharing agreement, other than the tax
sharing agreement currently in effect among the members of the
Consolidated Group, a true, complete and correct copy of which
is attached hereto in Schedule 3.24.
(xii) None of the assets of Gibraltar constitutes tax-
exempt bond financed property or tax-exempt use property within
the meaning of Section 168 of the Code, and none of the assets
reflected on the December 31 Balance Sheet is subject to a
lease, safe harbor lease or other arrangement as a result of
which Gibraltar is not treated as the owner for Federal income
tax purposes.
(xiii) Gibraltar has not made or become obligated to
make, and will not as a direct result of the sale contemplated
herein become obligated to make, any "excess parachute payment"
as defined in Section 280G of the Code (without regard to
subsection (b)(4) thereof).
(xiv) The basis of all depreciable or amortizable
assets, and the methods used in determining allowable
depreciation or amortization (including cost recovery) deductions
of Gibraltar, are correct and in compliance with the Code and the
Treasury regulations thereunder in each case, in all material
respects.
(xv) All Surplus Notes will be canceled on or before
the Closing in transactions that did not create cancellation of
indebtedness income to Gibraltar.
(xvi) Gibraltar is not required to include in income any
adjustment pursuant to Section 481(a) of the Code for any Tax
period after the Closing Date by reason of any voluntary or
involuntary change in accounting method for a Tax period
ending on or before the Closing Date (nor has any taxing
authority proposed in writing any such adjustment or change of
accounting method).
(xvii) None of the assets of Gibraltar are subject to a
consent pursuant to Section 341(f) of the Code (or any
predecessor provision).
(xviii) No excess loss account exists with respect to the
stock of a member of the Consolidated Group that is a direct or
indirect subsidiary of Gibraltar under Treasury regulation
Section 1.1502-19 (or similar provision under state, local or
foreign law).
(xix) Gibraltar has not executed, entered into nor is
subject to any closing agreement pursuant to Section 7121 of the
Code, or any predecessor provisions thereof or any comparable
provisions of state, local or foreign law with respect to any
period for which the statute of limitations has not expired.
(xx) No power of attorney has been granted by or with
respect to Gibraltar with respect to any matter relating to
Taxes, which is currently effective.
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(xxi) Gibraltar has filed its Federal income tax returns
as an insurance company subject to subchapter L of the Code.
Notwithstanding anything to the contrary in this Agreement, nothing in this
Section 3.24 shall cause the Seller to be liable for any Taxes for which the
Seller is not expressly liable pursuant to Section 7.4.
3.25 ACCOUNTS WITH FINANCIAL INSTITUTIONS. Schedule 3.25 sets forth
a true and correct list, as of the date hereof, of all safe deposit boxes, bank
accounts, custody accounts and other time, demand, statutory or regulatory
deposits of Gibraltar, together with the names and address of the applicable
financial institution or other depository, the account number and the names of
all persons authorized to draw thereon or who have access thereto.
3.26 BROKER'S, FINDER'S OR SIMILAR FEES. There are no brokerage
commissions, finder's fees or similar fees or commissions payable in connection
with the transactions contemplated hereby based on any agreement, arrangement
or understanding with the Seller, or any action taken by the Seller, except for
a fee payable by the Seller to Xxxxxxx, Xxxxx & Co. or except as otherwise
disclosed to the Purchaser in writing. Neither the Purchaser nor Gibraltar shall
have any obligation or responsibility for the payment of said fee.
3.27 EMPLOYEES. There are no employees of Gibraltar. Schedule 3.27
sets forth a true and correct list as of the date hereof of the titles or job
descriptions and the hourly rate schedule or aggregate annual compensation
and bonuses payable for the current fiscal year of the Employees. The Seller's
relationship with the Employees is good and no labor dispute or disturbance
exists and, to the knowledge of Gibraltar, none is threatened. None of the
Employees is covered by any collective bargaining agreement.
3.28 ACTIONS TAKEN PRIOR TO DECEMBER 31, 1999. Prior to December 31,
1999 and in connection with the transactions contemplated by this Agreement,
Gibraltar (i) received a capital contribution from the Seller in the amount of
$64,168,131; and (ii) increased the total amount of its Loss Reserves by (1)
$80,000,000 above the level carried at December 31, 1998, less (2) Gibraltar's
net incurred losses (excluding the $80,000,0000 increase in its Loss Reserves),
for the period January 1, 1999 through June 30, 1999.
3.29 DISPUTE RESOLUTION. Pursuant to the Report of the Independent
Examiner issued on December 20, 1999 to Gibraltar and Everest Re, the aggregate
claim of Everest Re against Gibraltar was reduced by the amount of $60,800,000
and the amount of such reduction has not been used by Gibraltar to reduce
its Loss Reserves.
3.30 GAAP BOOK VALUE. The GAAP Book Value on the Closing Date will be
at least $55,800,000.
3.31 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by the Seller in writing specifically for any document to be filed
with any regulatory agency by the Seller, Gibraltar or the Purchaser in
connection with the transactions contemplated by this Agreement will, at the
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respective times filed with such regulatory agency, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
3.32 ACCURACY OF STATEMENTS. Neither this Agreement nor any schedule,
certificate or other agreement furnished or to be furnished by or on behalf of
the Seller to the Purchaser or any representative or Affiliate of the Purchaser
in connection with this Agreement contains or will contain any untrue statement
of a material fact.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants to the Seller as follows:
4.1 DUE INCORPORATION AND AUTHORITY. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to
execute and deliver this Agreement and each other agreement required to be
executed and delivered by the Purchaser pursuant hereto, to perform its
obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance
by the Purchaser of this Agreement and each other agreement required to be
executed and delivered by the Purchaser pursuant hereto, and the consummation by
the Purchaser of the transactions contemplated hereby and thereby, have
been duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of the Purchaser are necessary to authorize
the execution, delivery and performance by the Purchaser of this Agreement
and each of the other agreements contemplated by this Agreement, or the
consummation of the transactions contemplated hereby and thereby. This Agreement
has been duly and validly executed and delivered by the Purchaser and
constitutes a legal, valid and binding obligation of the Purchaser, enforceable
against the Purchaser in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency, moratorium or other similar laws
affecting creditors' rights generally and except as rights to specific
enforcement may be limited by the application of equitable principles (whether
such equitable principles are applied in a proceeding at law or in equity).
4.2 NO VIOLATION . Neither the execution, delivery nor performance
of this Agreement by the Purchaser, nor the purchase of the Shares pursuant
to this Agreement or the consummation by the Purchaser of the transactions
contemplated hereby, will, with or without the giving of notice or the passage
of time, or both, (i) violate any provision of the Governing Instruments of the
Purchaser; (ii) violate or result in any breach of or constitute a default
under, or give rise to a right of termination or cancellation of, or accelerate
the performance required by any terms of, as the case may be, any contract,
agreement, lease, license, mortgage, note, reinsurance agreement, franchise,
permit or instrument to which the Purchaser is a party or by which any of its
assets is bound, or result in the creation of any material Lien upon any of the
property owned by it; (iii) violate any law, regulation, judgment, order, writ,
injunction or decree of any court, governmental body (domestic or foreign)
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or administrative agency of any jurisdiction; or (iv) require the consent or
approval of any third parties; other than, in the case of (ii), (iii) and (iv),
such violations, breaches, defaults, terminations, cancellations, accelerations,
consents, approvals and Liens, the failure to obtain or the creation of which
would not in the aggregate reasonably be expected to have a Material Adverse
Effect on the Purchaser.
4.3 CONSENTS. No consent, authorization, order or approval of, or
filing or registration with, any governmental authority, board or other
regulatory body is required for or in connection with the execution and delivery
of this Agreement by the Purchaser or the consummation by the Purchaser of
the transactions contemplated hereby, except for (i) the notifications to be
given to, and the approvals to be obtained from, the State Insurance
Commissioner; (ii) notifications and filings under the HSR Act; and (iii) as may
be necessary as a result of any facts or circumstances relating solely to the
Seller.
4.4 FINANCING. As of the date of this Agreement, the Purchaser has no
reason to believe that it will not be able timely to perform its obligations
under this Agreement. The Purchaser or any permitted assignee of the Purchaser
has sufficient financial resources to consummate the transactions contemplated
hereby and to pay all of the Purchaser's, or such permitted assignee's, fees and
expenses.
4.5 BROKER'S, FINDER'S OR SIMILAR FEES. There are no brokerage
commissions, finder's fees or similar fees or commissions payable in connection
with the transactions contemplated hereby based on any agreement, arrangement
or understanding with the Purchaser, or any action taken by the Purchaser.
4.6 PURCHASE FOR INVESTMENT. The Purchaser represents that it is
acquiring the Shares for its own account for investment and not with a
view to or in connection with their distribution and will not sell or transfer
such Shares in violation of the Securities Act and the rules and regulations
promulgated thereunder. The Purchaser is a sophisticated institutional
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7)
under the Securities Act. The Purchaser acknowledges that the Shares are
not registered under the Securities Act and constitute "restricted securities"
under Rule 144 thereunder.
4.7 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by the Purchaser in writing specifically for any document to be filed
with any regulatory agency by the Purchaser, Gibraltar or the Seller in
connection with the transactions contemplated by this Agreement will, at the
respective times filed with such regulatory agency, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
4.8 INDEMNIFICATION. To the knowledge of the Purchaser there are no
other indemnification or guarantee obligations of Gibraltar or any Third
Party in respect of the Business of Gibraltar other than those listed on
Schedule 6.3.
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ARTICLE V
COVENANTS OF THE SELLER PENDING THE CLOSING
5.1 OPERATIONS IN THE ORDINARY COURSE. Prior to the Closing Date, the
Seller agrees to cause the Business of Gibraltar to be operated only in the
ordinary course consistent with past practice, except as otherwise contemplated
by this Agreement or except as provided in Schedule 5.1. Prior to and including
the Closing Date and except as otherwise contemplated by this Agreement, the
Seller shall cause Gibraltar to (a) maintain insurance coverages and its
books, accounts and records in the usual manner on a basis consistent with past
practice; (b) comply in all material respects with all laws, ordinances and
regulations of governmental authorities applicable to Gibraltar; (c) maintain
and keep its properties and equipment in good repair, working order and
condition, subject to normal wear and tear; (d) perform in all material respects
its obligations under all Contracts to which it is a party and (e) use its
commercially reasonable efforts to maintain and preserve its Business.
5.2 INTENTIONALLY OMITTED.
5.3 RESTRICTIONS. Except as otherwise set forth in Schedule 5.3 or
contemplated by this Agreement, subsequent to the date of this Agreement and
prior to the Closing Date without the prior written consent of the Purchaser,
the Seller agrees to cause Gibraltar not to or (where and only to the extent
noted below) Seller agrees not to:
(a) incur any indebtedness or encumber or grant any Lien (other
than Permitted Liens) on any asset of Gibraltar;
(b) Seller agrees not to grant or promise to grant to any of the
Employees, any new or increased salary, commission, fee or other
benefit, other than those that are consistent with the Seller's current
compensation plan or as may be required by law and excluding any stay
or transaction bonuses paid or payable to Employees by the Seller in
connection with this transaction or, make any commitment to any
Employee regarding such Employee's employment by Gibraltar subsequent
to the Closing provided, however, for purposes of this Section 5.3(b),
the term "commitment" shall not include any discussion by the Seller
with any Employee with respect to the Seller's Employee Benefit Plans;
(c) hire any new employees or agents or enter into any written
employment agreements except to the extent necessary to replace an
Employee who has been terminated or has resigned;
(d) issue or sell any security issued by Gibraltar, grant any
option, warrant or any other right to purchase or convert any
obligation into any security issued by Gibraltar;
(e) declare or pay any dividend on, or make any other
distribution in respect of the Shares;
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(f) amend any of its Governing Instruments, except as required to
change the name of Gibraltar;
(g) merge or consolidate with any other Person, acquire all or
substantially all the assets of any other Person or sell, transfer or
otherwise dispose of any part of its assets other than sales of
portfolio investments in the ordinary course of business;
(h) enter into any leases for real property or personal property;
(i) Seller agrees not to terminate the employment of any Employee
except in the ordinary course consistent with past practice; provided
that the Seller shall have no liability to the Purchaser for the
failure to keep the services of any Employee who voluntarily resigns;
(j) except as provided in Section 7.6, forfeit, abandon, modify,
waive, terminate or otherwise change Gibraltar's rights, duties or
obligations under any of the Contracts other than in the ordinary
course consistent with past practice;
(k) forfeit, abandon, modify, waive, terminate or otherwise
change Gibraltar's licenses, operating rights or registrations;
(l) pay any amounts in settlement or compromise of any suits or
claims against Gibraltar, other than insurance or reinsurance claims
paid in the ordinary course of business;
(m) make any loans, advances or capital contributions to any
other Person;
(n) acquire any assets other than in the ordinary course of
business;
(o) enter into any contract, agreement or license that is
material or is not in the ordinary course of business;
(p) change any of its accounting or investment policies;
(q) enter into any transaction with or pay any amount to the
Seller or its Affiliates involving an amount in excess of or a series
of related amounts that in the aggregate are in excess of $100,000,
including the transfer of investments or other assets of Gibraltar,
but excluding amounts payable to the Seller or any of its Affiliates
pursuant to the Service Contract that in the aggregate are less than
$1,500,000 per quarter;
(r) after the applicable waiting period under the HSR Act shall
have expired or early termination shall have been granted in connection
with this Agreement, pay or settle any insurance or reinsurance claims
(other than pursuant to agreements in existence prior to the date
hereof) (i) in excess of two hundred fifty thousand dollars ($250,000)
but equal to or less than two million five hundred thousand
dollars ($2,500,000), without notifying the Purchaser on a monthly
basis of the payment or settlement of such claims; (ii) in
excess of two million dollars five hundred thousand ($2,500,000),
but equal to or less than five million dollars
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($5,000,000), without providing notice to the Purchaser in advance of
the payment or settlement of such claims and consulting with the
Purchaser with respect thereto; or (iii) in excess of five million
dollars ($5,000,000), without the prior written consent of the
Purchaser, which consent shall not be unreasonably withheld;
(s) reduce the amount of any of its Loss Reserves except on
account of payments in the ordinary course of business consistent with
past practice; or
(t) enter into any Contract to do any of the foregoing.
5.4 INVESTMENT PORTFOLIO. Prior to the Closing Date, the Seller shall
cause Gibraltar to update the Investment Portfolio as of the end of each month
and shall deliver the updated Investment Portfolio to the Purchaser as promptly
as practicable, but in no event later than thirty days after the end of such
month.
5.5 INVESTIGATION BY THE PURCHASER. (a) Prior to the Closing Date,
upon reasonable notice, the Seller will cause Gibraltar to give the Purchaser
and its agents access at all reasonable times and upon reasonable prior
notice to the properties and non-privileged, non-proprietary portions of
its books and records, employees, accountants and actuaries of Gibraltar and
furnish to the Purchaser and its agents such non-privileged, non-proprietary
portions of its documents, financial, operating data and other information
(including information concerning Loss Reserves) with respect to the Business
and Property of Gibraltar as the Purchaser or its agents shall from time to time
reasonably request.
(b) The Purchaser acknowledges and agrees that it (i) has made
its own inquiry and investigation into, and, based thereon, has formed an
independent judgment concerning, Gibraltar and its Business, (ii) has been
furnished with or given adequate access to such information about Gibraltar and
its Business as it has requested, and (iii) will not assert (except pursuant
to the terms of Section 12) any claim against the Seller or any of its
directors, officers, employees, agents, stockholders, affiliates, consultants,
investment bankers or representatives, or hold the Seller or any such persons
liable, for any inaccuracies, misstatements or omissions with respect to
information furnished by the Seller or such persons concerning the Seller,
Gibraltar or the Business of Gibraltar in connection with the transactions
contemplated by this Agreement.
(c) In connection with the Purchaser's investigation of Gibraltar
and its Business, the Purchaser received from the Seller certain estimates,
projections and other forecasts for Gibraltar, and certain plan and budget
information. The Purchaser acknowledges that there are uncertainties inherent
in attempting to make such estimates, projections, forecasts, plans and budgets,
that the Purchaser is familiar with such uncertainties, that the Purchaser is
taking full responsibility for making its own evaluation of the adequacy and
accuracy of all estimates, projections, forecasts, plans and budgets so
furnished to it, and that the Purchaser will not assert any claim against the
Seller or any of its affiliates or any of its directors, officers, employees,
agents, stockholders, affiliates, consultants, investment bankers or
representatives, or hold the Seller or any such persons liable with respect
thereto. Accordingly, the Seller makes no representation or warranty, either
express or implied, with respect to any such estimates, projections, forecasts,
plans or budgets.
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5.6 FINANCIAL STATEMENTS. (a) The Seller shall provide to the
Purchaser as promptly as practicable, but in any event, prior to the Closing
Date, the audited balance sheets of Gibraltar as of December 31, 1999 and
December 31, 1998 and the related statements of income, stockholders' equity
and cash flow for the two years then ended, including the related notes thereon,
prepared in accordance with GAAP and the audited statutory statements of
Gibraltar for the years ended December 31, 1999 and December 31, 1998 prepared
in accordance with Statutory Accounting Principles.
(b) Through the Closing Date the Seller shall provide to the
Purchaser as promptly as practicable, but in no event later than thirty (30)
days after the end of each fiscal quarter, (a) the unaudited quarterly balance
sheets of Gibraltar and related statements of income and cash flows for the
period then ended, each of which shall present fairly the financial position of
Gibraltar as of the balance sheet date and its results of operations and cash
flows for the period then ended in conformity with GAAP, and will include all
adjustments, consisting of normal recurring accruals, which in the opinion of
the Seller are consistent for a fair presentation of results on an interim
basis; and (b) copies of the Quarterly Statements filed by Gibraltar which shall
be prepared in accordance with Statutory Accounting Principles.
(c) The Seller shall provide to the Purchaser as promptly as
practicable, not in no event later than thirty days after the Closing Date, an
unaudited balance sheet of Gibraltar as of the Closing Date and the related
statement of income, stockholders' equity and cash flow for the period then
ended prepared in accordance with GAAP.
5.7 REGULATORY FILINGS AND COMPLIANCE. (a) The Seller will furnish the
Purchaser with such information as the Purchaser may reasonably request in
connection with any application or notification the Purchaser may make to
applicable Federal, State, local or foreign law authorities in connection with
the transactions contemplated hereby.
(b) The Seller shall promptly prepare and file and prosecute
diligently (including responding promptly to all reasonable requests for
supplemental information) with the appropriate regulatory agency or body all
documentation and information required by law or requested by such agency or
body to be filed by the Seller or Gibraltar to permit consummation of the
transactions contemplated hereby. The Seller shall prepare and file or cause to
be prepared and filed promptly, and in any event within twenty Business Days of
the date of this Agreement, the notifications and filings required to be made
under the HSR Act in connection with the transactions contemplated hereby. The
Seller shall use all commercially reasonable efforts to obtain prompt favorable
action from any such agency or body.
(c) The Seller shall timely deliver to the Purchaser copies of
all documents filed after the date hereof with regulatory authorities by
the Seller with respect to the transactions contemplated hereby or by Gibraltar,
and copies of all correspondence after the date hereof to and from such
regulatory authorities in connection therewith. The Seller shall timely deliver
to the Purchaser copies of all regulatory reports that may be filed after the
date hereof with respect to Gibraltar.
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5.8 INTERCOMPANY ACCOUNTS; SURPLUS NOTES. (a) All receivables, if any,
of Gibraltar from the Seller or its Affiliates and all payables, if any, of
Gibraltar to the Seller or any of its Affiliates shall be cancelled prior to the
Closing without any payment by any Person in respect of such cancellation (or,
at the option of the Seller in the case of the Gibraltar payables, paid in
accordance with their terms prior to the Closing).
(b) Prior to the Closing, the Seller shall or shall cause its
Affiliates to (i) cancel the Surplus Notes and deliver such notes to Gibraltar
without any payment by Gibraltar in respect of such cancellation.
5.9 TAX MATTERS. All current Federal income Tax receivables or
payables of Gibraltar as of the Closing Date shall be determined in accordance
with GAAP (calculated assuming full current use of net operating losses and/or
capital losses), shall be paid in full in cash by the Seller or Gibraltar, as
the case may be, on or prior to the Closing Date, and shall be redetermined
and paid accordingly within thirty days after the tax returns of Gibraltar
for the taxable year ending on December 31, 1999 and for the taxable year ending
on the Closing Date are filed.
5.10 INVESTMENT INCOME. (a) The Seller shall cause Gibraltar to take
an amount equal to its investment income from July 1, 1999 until the later of
April 30, 2000 and twenty days after the later of (i) the receipt of all
consents, approvals and waivers of the State Insurance Commission contemplated
by Section 9.1 and (ii) the satisfaction of the condition set forth in Section
9.2, less investment and operating expenses of Gibraltar incurred in the
ordinary course of business consistent with past practice during such period and
less unrealized and realized depreciation on any bonds (after Taxes) less
$4 million of after-tax net investment income, plus unrealized and realized
appreciation on any bonds (after Taxes) during such period, collectively, and
use such amount to increase its Loss Reserves. Any such increase in the Loss
Reserves of Gibraltar pursuant to this Section 5.10 shall be made in conformity
with GAAP.
(b) No more than ten Business Days prior to the Closing Date,
the Seller shall cause Gibraltar to liquidate its portfolio investments in a
commercially reasonable manner and invest the proceeds in short-term investments
reasonably satisfactory to the Purchaser.
5.11 PURCHASE OF SHARES. Prior to the end of the three-month period
commencing three trading days after the public announcement by the Purchaser and
the Seller of the transactions contemplated by this Agreement, the Seller shall
purchase or cause one of its Affiliates (or a trustee or other third party on
its behalf) to purchase on The New York Stock Exchange shares of common stock
of Everest Re Group, Ltd. in an amount equal to $25,000,000 in the aggregate;
provided, however, that the Seller shall be obligated to purchase such
securities pursuant to this Section 5.11 only if the average daily closing
prices for such securities on such exchange during such three-month period
is $25 per share or less (such price to be adjusted to equitably reflect any
stock splits, stock dividends, recapitalizations or other similar transactions
occurring during such three-month period).
5.12 GIBRALTAR MARKS LICENSE. The Gibraltar Marks License shall be
terminated upon the Closing of this Agreement and thereafter neither the
Purchaser nor Gibraltar shall have any rights to use the Gibraltar Marks in any
manner.
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ARTICLE VI
COVENANTS OF THE PURCHASER PENDING THE CLOSING
6.1 REGULATORY AND OTHER CONSENTS. The Purchaser shall prepare and
file or cause to be prepared and filed promptly, and in any event within twenty
Business Days of the date of this Agreement, the notification and filings
required to be made under the HSR Act in connection with the transactions
contemplated hereby, and shall file or cause to be filed within ten Business
Days of the date of this Agreement the filings with the State Insurance
Commissioner contemplated by Section 9.1. The Purchaser will promptly file or
cause to be filed, and prosecute diligently (including responding promptly to
all reasonable requests for supplemental information), all other applications
and documents required to be filed with applicable authorities, including all
amendments thereto, in order to effect as soon as practicable the transactions
contemplated hereby, including filings with the appropriate authorities of the
states, countries and other jurisdictions where such filings are required
for the consummation of the transactions contemplated hereby. The Purchaser
will use all commercially reasonable efforts promptly to obtain the consent
or approval of the State Insurance Commissioner and other appropriate
authorities whose consent or approval will be required to be obtained as a
condition to consummation of the transactions herein contemplated. Promptly
following the execution hereof, the Purchaser will notify the State Insurance
Commissioner and other appropriate authorities of the states, countries
and other jurisdictions where such notification is necessary for the
consummation of the transactions contemplated hereby.
6.2 CONFIDENTIAL INFORMATION MEMORANDUM. The Purchaser acknowledges
receipt of the Confidential Information Memorandum related to Gibraltar (the
"Memorandum"). The Purchaser acknowledges that neither the Seller nor Gibraltar
makes any representation or warranty, express or implied, with respect to the
Memorandum and that the Purchaser has not relied on the Memorandum in its
decision to execute this Agreement but rather has relied solely on the
Purchaser's independent investigation of Gibraltar and its Business and on the
terms and provisions hereof including the representations and warranties of the
Seller and Gibraltar set forth in Article III.
6.3 RELEASE FROM CERTAIN OBLIGATIONS. The Purchaser will use all
commercially reasonable efforts to assist the Seller in arranging for the
complete release and discharge of the Seller at or prior to the Closing from its
indemnification and guarantee obligations to Gibraltar or any third party in
respect of the Business of Gibraltar listed on Schedule 6.3. The form of such
release shall be evidenced by one or more duly executed instruments in form
satisfactory to the Seller and its counsel.
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ARTICLE VII
COVENANTS AND AGREEMENTS
7.1 CONFIDENTIALITY; RETURN OF DOCUMENTS. (a) All information
provided to the Purchaser or its Affiliates pursuant hereto shall be
subject to the Confidentiality Agreements and all documents (and copies thereof)
provided to the Purchaser or its Affiliates shall be promptly returned upon
termination of this Agreement.
(b) Except as provided in Section 7.1(c), neither the Seller nor
the Purchaser shall, and each shall cause their respective Affiliates not to,
publicly disclose the execution, delivery or contents of this Agreement, other
than with the prior written consent of the other party hereto, or other than as
required by law or any securities exchange upon prior notice to the other party
hereto.
(c) The Seller and the Purchaser shall agree with each other as
to the form and substance of any press release related to this Agreement or the
transactions contemplated hereby, and shall consult each other as to the form
and substance of other public disclosures related thereto; provided, however,
that nothing contained herein shall prohibit either party, following
notification to the other party if practicable, from making any disclosure
which its counsel determines to be required by law or any securities exchange.
7.2 EMPLOYEE BENEFIT PLANS. (a) TRANSFERRED EMPLOYEES. Effective as of
the Closing Date, the Purchaser shall make offers of employment to those
Employees as the Purchaser shall determine in its sole discretion, on such terms
and conditions as determined in the sole discretion of Purchaser. Each Employee
who accepts the Purchaser's offer of employment and becomes an employee of
the Purchaser, Gibraltar or an Affiliate of the Purchaser as of the Closing
Date shall be referred to herein as a "Transferred Employee". Transferred
Employees shall be eligible to participate in such employee benefit plans,
programs, policies or arrangements as are determined from time to time
by the Purchaser on substantially the same terms and conditions as apply to
similarly situated employees of the Purchaser. The Purchaser shall notify the
Seller at the time any Transferred Employee terminates employment with the
Purchaser. In addition, the Purchaser shall provide to the Seller such
additional information as the Seller may reasonably request relating to the
payment of benefits to the Transferred Employees from any ERISA Affiliate
Plan which is intended to be subject to Code Section 401(k).
(b) SERVICE CREDIT. With respect to any Transferred Employee,
the Purchaser shall cause service with the Seller, Gibraltar or any of their
Affiliates (or their respective predecessors) prior to the Closing Date to
be treated as service for all benefit plans and arrangements described in
Section 7.2(a) for all purposes of eligibility and vesting under such
benefit plans and arrangements (but not benefit accrual), including for purposes
of pre-existing conditions limitations and waiting periods; PROVIDED, HOWEVER,
that this Section 7.2(b) shall not require that credit for any prior service
be given to the extent it would result in a duplication of benefits.
(c) ROLLOVER DISTRIBUTION. With respect to any Transferred
Employee who (i) as a result of the sale of Gibraltar, becomes eligible to
receive an "eligible rollover distribution" (as such term is defined under
Code Section 402(f)(2)(A) and Code Section 402(c)(4)) from any defined
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contribution plan sponsored by the Seller or an ERISA Affiliate of the Seller,
and (ii) elects to transfer such eligible rollover contribution from such plans
in accordance with the provisions of Code Section 401(a)(31), Purchaser agrees
to take all necessary and appropriate action to permit the transfer of such
amounts to an "eligible retirement plan" (as such term is used under Code
Section 401(a)(31)) sponsored by the Purchaser or any ERISA Affiliate of the
Purchaser on or after the Closing Date; provided, however, that nothing in this
paragraph (c) shall require any plan of the Purchaser or any ERISA Affiliate of
the Purchaser to accept a rollover contribution consisting of assets other than
cash and promissory notes or other evidence of outstanding loans.
7.3 THE SELLER'S ACCESS TO RECORDS. The Purchaser agrees that after
the Closing Date it shall, preserve and keep all books and records of Gibraltar
relating to periods prior to the Closing in the Purchaser's possession for a
period of at least six years from the Closing Date and the Purchaser shall and
shall cause Gibraltar to, allow the Seller to examine and make copies of the
books and records pertaining to the Business conducted by Gibraltar pertinent to
this Agreement and the transactions contemplated hereby, for reasonable business
purposes, including the preparation and examination of Tax Returns and financial
statements and conduct of any litigation or regulatory dispute resolution,
whether pending or threatened, concerning the Business of Gibraltar pertinent to
this Agreement and the transactions contemplated hereby. Access to and copying
of such books and records shall be restricted to normal business hours, shall be
at the Seller's expense and shall not unreasonably interfere with the Business
or operations of the Purchaser or Gibraltar and shall be subject to the Seller
agreeing to reasonable restrictions regarding the use and disclosure of
confidential information. Before the Purchaser shall dispose of any of such
books and records, at least 90 calendar days' prior written notice to such
effect shall be given by the Purchaser to the Seller, and the Seller shall be
given an opportunity, at its cost and expense, to remove and retain all or any
part of such books and records as the Seller may select.
7.4 TAXES.(a) LIABILITY FOR TAXES; INDEMNIFICATION.(i) The Seller shall
be liable for and pay, and indemnify the Purchaser against any and all liability
for Taxes, but net of any tax benefits that would be realized by the Purchaser
or any of its Affiliates, including Gibraltar, assuming that the payment or
accrual of the Taxes with respect to which indemnification is being made would
give rise to a currently utilizable tax benefit calculated using the maximum
applicable tax rate then in effect, (A) imposed on the Purchaser or Gibraltar
as a result of the Seller's breach of any representation made in Section 3.24;
(B) imposed on the Purchaser or Gibraltar as a result of the Seller's breach
of any covenant requiring performance after the Closing Date contained in this
Section 7.4; (C) imposed on Gibraltar pursuant to Treasury regulation Section
1.1502-6 or similar provision of state or local law solely as a result of
Gibraltar having been a member of the Consolidated Group or, for state or local
tax purposes, any other combined filing for Tax purposes; and (D) imposed on
Gibraltar, or for which Gibraltar may otherwise be liable, in either case, that
relate to any taxable year or period that ends on or before the Closing Date
and, with respect to any Straddle Period, the portion of such Straddle Period
ending on and including the Closing Date, PROVIDED, HOWEVER, that the Seller
shall not have any liability under this Section 7.4 for any breach of a
representation made in Section 3.24 or contained in the exhibit thereto or
in any document delivered pursuant thereto if the Seller sustains the burden
of proof that the chief executive officer, the chief operating officer, the
chief financial officer, and/or the tax director of the Purchaser had actual
knowledge of such breach on or prior to the date of this Agreement; and
PROVIDED FURTHER, HOWEVER, that the Seller shall not indemnify or hold
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harmless the Purchaser and Gibraltar against, (I) any Taxes shown as a liability
or reserve on the December 31 Balance Sheet, (II) any Taxes that result from any
actual or deemed election under Section 338 of the Code or any similar
provisions of state, local or foreign law as a result of the purchase of the
Shares or that result from the Purchaser, any Affiliate of the Purchaser or
Gibraltar engaging in any activity or transaction that would cause the
transactions contemplated by this Agreement to be treated as a purchase or sale
of assets of Gibraltar for federal, state or local Tax purposes, and (III) any
Taxes imposed on Gibraltar or for which Gibraltar may otherwise be liable as a
result of transactions occurring on the Closing Date that are properly allocable
(based on, among other relevant factors, factors set forth in Treas. Reg. ss.
1.1502-76(b)(1)(ii)(B)) to the portion of the Closing Date after the Closing
(Taxes described in this proviso, hereinafter "EXCLUDED TAXES"). The Purchaser
and the Seller agree that, with respect to any transaction described in clause
(III) of the preceding sentence, Gibraltar and all persons related to Gibraltar
under Section 267(b) of the Code immediately after the Closing shall treat the
transaction for all federal income tax purposes in accordance with Treas. Reg.
ss.1.1502-76(b)(1)(ii)(B), and (to the extent permitted) for other income Tax
purposes, as occurring at the beginning of the day following the Closing Date.
The Seller shall be entitled to any refund of (or credit for) Taxes allocable to
any taxable year or period that ends on or before the Closing Date and, with
respect to any Straddle Period, the portion of such Straddle Period ending on
and including the Closing Date.
(ii) The Purchaser shall be liable for and pay, and indemnify
the Seller against any and all liability, for (A) all Taxes imposed on
Gibraltar, or for which Gibraltar may otherwise be liable, for any
taxable year or period that begins after the Closing Date and, with
respect to any Straddle Period, the portion of such Straddle Period
beginning after the Closing Date and (B) Excluded Taxes. Except as
otherwise provided herein, the Purchaser shall be entitled to any
refund of (or credit for) Taxes allocable to any taxable year or period
that begins after the Closing Date and, with respect to any Straddle
Period, the portion of such Straddle period beginning after the Closing
Date.
(iii) For purposes of paragraphs (a)(i) and (a)(ii) of this
Section 7.4, whenever it is necessary to determine the liability for
Taxes of Gibraltar for a Straddle Period, the determination of the
Taxes of Gibraltar for the portion of the Straddle Period ending on and
including, and the portion of the Straddle Period beginning after, the
Closing Date shall be determined by assuming that the Straddle Period
consisted of two taxable years or periods, one which ended at the close
of the Closing Date and the other which began at the beginning of the
day following the Closing Date, and items of income, gain, deduction,
loss or credit of Gibraltar for the Straddle Period shall be allocated
between such two taxable years or periods on a "closing of the books
basis" by assuming that the books of Gibraltar were closed at the close
of the Closing Date, provided, however, that (A) transactions occurring
on the Closing Date that are properly allocable (based on, among other
relevant factors, factors set forth in Treas. Reg.ss.1.1502-76(b)
(1)(ii)(B)) to the portion of the Closing Date after the Closing shall
be allocated to the taxable year or period that is deemed to begin at
the beginning of the day following the Closing Date, and for this
purpose the cancellation of Surplus Notes and the transaction
contemplated by Section 9.5 shall be presumed to be pre-Closing Date
transactions, (B) exemptions, allowances or deductions that are
calculated on an annual basis, such as the deduction for
depreciation, shall be apportioned between such two taxable years
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or periods on a daily basis, and (C) in the case of a franchise or
similar Tax not based on income, Tax allocable to the portion of the
Straddle Period ending on and including the Closing Date shall be equal
to the amount of franchise Tax for the taxable year which would have
been imposed if such Tax were determined based on the assets and
liabilities of Gibraltar as of the Closing, or the amount of franchise
Tax for the taxable year based on the number of Shares outstanding as
of the Closing, whichever amount is applicable, in each case multiplied
by a fraction, the numerator of which shall be the number of days from
the beginning of the taxable year to the Closing Date and the
denominator of which shall be the number of days in the taxable year.
(iv) If, as a result of any action, suit, investigation,
audit, claim, assessment or amended Tax Return, there is any change
after the Closing Date in an item of income, gain, loss, deduction,
credit or amount of Tax that results in an increase in a Tax liability
for which the Seller would otherwise be liable pursuant to paragraph
(a)(i) of this Section 7.4, and such change would result in a decrease
in the Tax liability of Gibraltar, the Purchaser or any Affiliate or
successor of any thereof for any taxable year or period beginning after
the Closing Date or for the portion of any Straddle Period beginning
after the Closing Date assuming that Gibraltar, the Purchaser or any
Affiliate or successor of any thereof were to claim any loss,
deduction, credit or refund which it was eligible to claim as a result
of such change and such claim resulted in a currently fully utilizable
tax benefit, including any utilizable Tax benefit attributable to an
increase in the adjusted Tax basis of the assets of Gibraltar, the
Seller shall not be liable pursuant to such paragraph (a)(i) with
respect to such increase to the extent of such decrease (and, to the
extent such increase in Tax liability is paid to a taxing authority by
the Seller or any Affiliate thereof, the Purchaser shall pay the Seller
an amount equal to such decrease); provided, however, that if such
claim does not result in a currently fully utilizable tax benefit but
does result in a utilizable tax benefit in one or more subsequent
periods, then Purchaser shall pay the Seller an amount equal to such
decrease in a post-Closing Date Tax period no later than the time the
statute of limitation expires for adjustments to the Purchaser's or
Gibraltar's tax return for the post-Closing Date Taxable year in which
Gibraltar claimed the benefit.
(v) The Seller shall promptly notify Purchaser and Gibraltar
of any proposed adjustment of any item on any tax return of the
Consolidated Group for any period, if such proposed adjustment would
materially affect the tax liability of Gibraltar or the Purchaser for
the Straddle Period or any period beginning after or including the
Closing Date. The Seller shall advise the Purchaser of the status of
any conferences, meetings and proceedings with tax authorities or
appearances before any court pertaining to such adjustment or
adjustments, and shall advise the Purchaser of the outcome of such
proceedings. However, nothing herein shall entitle the Purchaser to
interfere with the Seller's right to make any judgments or to take any
actions it deems appropriate in connection with the disposition of any
such proposed adjustments.
(b) TAX RETURNS AND PAYMENTS. (i) The Purchaser shall cause
Gibraltar to consent to join, for all taxable periods of Gibraltar
ending on or before the Closing Date for which Gibraltar is
eligible to do so, in any consolidated, combined or unitary
federal, state, local or foreign income and franchise
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Tax Returns which the Seller shall request it to join. The Seller shall cause to
be prepared and filed all such consolidated, combined or unitary Tax Returns.
The Purchaser agrees to take no position inconsistent, and to cause its
Affiliates to take no position inconsistent, with Gibraltar's being a member of
the consolidated, combined or unitary group of which the Seller is a member for
such periods. The Seller shall cause to be timely paid all Taxes to which such
Tax Returns relate for all periods covered by such Tax Returns. Within fifteen
(15) days of the Seller's written request therefor, but in no event earlier than
five days prior to the date on which the Seller is required to cause to be paid
the related Tax liability, whichever is later, the Purchaser shall pay to the
Seller an amount equal to the Taxes for which the Purchaser is liable pursuant
to paragraph (a)(ii) of this Section 7.4 but which are payable with a Tax Return
to be filed by the Seller pursuant to this paragraph (b).
(ii) The Seller shall cause to be prepared and the Purchaser
shall cause to be timely filed all required federal, state, local and
foreign Tax Returns of Gibraltar (other than those to be prepared by
the Seller pursuant to Section 7.4(b)(i)) for any period which ends on
or before the Closing Date, for which Tax Returns have not been filed
as of the Closing Date. The Seller shall provide a copy of all such Tax
Returns to the Purchaser within thirty (30) days of their completion.
The Purchaser shall cause to be prepared and timely filed all required
federal, state, local and foreign Tax Returns of Gibraltar (other than
those to be prepared by the Seller pursuant to Section 7.4(b)(i)) for
any Straddle Period. The Purchaser shall submit all such Tax Returns
to the Seller no later than 30 days prior to the due date for filing
such Tax Returns for review and approval in writing by the Seller,
which approval may not be unreasonably withheld.
(iii) The Purchaser shall timely cause to be paid all Taxes for
the periods to which the Tax Returns to be caused to be filed by the
Purchaser pursuant to clause (ii) of this paragraph (b) relate. The
Seller shall pay to the Purchaser an amount equal to the Taxes for
which the Seller is liable pursuant to paragraph (a)(i) of this Section
7.4 but which are payable with any Tax Return to be filed by the
Purchaser pursuant to this paragraph upon the written request of the
Purchaser, which request shall set forth in detail the computation of
the amount owed by the Seller, within fifteen days of the Purchaser's
written request therefor but in no event earlier than five days prior
to the date on which the Purchaser is required to cause to be paid
the related Tax liability, whichever is later.
(iv) If the Seller's liability pursuant to Section 7.4(a)(i)
with respect to Taxes of Gibraltar for the portion of a Straddle Period
ending on and including the Closing Date is less than the payments
previously made by or credited to Gibraltar with respect to such
Straddle Period, the Purchaser shall cause Gibraltar to pay to the
Seller the excess of such previous payments over such Tax liability of
the Seller within fifteen days of Gibraltar's receiving the benefit
of such excess payments through a reduction in any Tax payment required
to be made by Gibraltar after the Closing.
(v) Neither the Purchaser nor any Affiliate of
the Purchaser shall (or shall cause or permit Gibraltar
to) amend, refile or otherwise modify (or grant an
extension of any statute of limitation with
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respect to) any Tax Return relating in whole or in part to Gibraltar
with respect to any taxable year or period ending on or before the
Closing Date (or with respect to any Straddle Period) without the prior
written consent of the Seller.
(c) ASSISTANCE AND COOPERATION. After the Closing Date, each of
the Seller and the Purchaser shall (and shall cause their respective Affiliates
to) assist the other party in (i) preparing any Tax Return which such other
party is responsible for preparing in accordance with paragraph (b) of this
Section 7.4, and (ii) contesting any proposed adjustment in an audit examination
or otherwise by any government taxing authority of any Tax Return referred to in
clause (i), which assistance shall include (x) making available to the other, as
reasonably requested, and to any taxing authority all information, records or
documents relating to Tax liabilities or potential Tax liabilities of Gibraltar
for all periods prior to or including the Closing Date and (y) preserving all
such information, records and documents until the expiration of any applicable
statute of limitations or extensions thereof. After the expiration of any
applicable statute of limitations or extensions thereof, before any such
information, records and documents are disposed of, at least ninety calendar
days prior written notice to such effect shall be given to the other party and
such other party shall be given an opportunity at its cost and expense to remove
and retain all or any part of such information, records and documents as it may
select. The Purchaser shall cause Gibraltar to prepare and provide to the Seller
a package of Tax information materials, including, without limitation, schedules
and work papers (the "Tax Package") required by the Seller to enable the Seller
to prepare Tax Returns required to be prepared by it pursuant to paragraph (b)
of this Section 7.4. The Tax Package shall be completed in accordance with past
practice, including past practice as to providing such information and as to the
method of computation of separate taxable income or other relevant measure of
income of Gibraltar. Such tax information packages shall be provided to the
Seller within 45 days after the Seller's request therefor. Notwithstanding any
other provisions hereof, each party shall bear its own expenses in complying
with the foregoing provisions.
(d) TAX ELECTIONS GENERALLY. Without the prior written consent of
the Purchaser, Gibraltar shall not make or change any Tax election, change an
annual Tax accounting period, adopt or change any method of Tax accounting,
enter into any closing agreement, settle or compromise any Tax claim or
assessment, surrender any right to claim a Tax refund, consent to any extension
or waiver of the limitations period applicable to any Tax claim or assessment or
take or omit to take any other action except, in each case, in the ordinary
course of business consistent with past practice, if any action or omission
referred to above would (i) have a legally binding effect upon Gibraltar with
respect to items in any taxable year ending on or before the Closing Date
or any Straddle Period (including without limitation, under a closing agreement
pursuant to Section 7121 of the Code or comparable provision under state, local
or foreign law) and (ii) have the effect of materially increasing the Tax
liability of Gibraltar with respect to any taxable year that ends after the
Closing Date or any Straddle Period
(e) TREATMENT OF REQUIRED RESERVE INCREASES. (i) The Purchaser
and the Seller agree that the Federal income tax deduction for the Required
Reserve Increases, after appropriate discounting as required by Sections 832
and 846 of the Code, shall be claimed by Gibraltar in a taxable year ending
on or prior to the Closing Date, and that except as provided in this Section
7.4(e), Gibraltar shall not increase its discounted unpaid losses for an
amount attributable to the Required Reserve Increases in any taxable year
commencing after the Closing Date.
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(ii) In the event that the Internal Revenue Service ultimately
determines that Gibraltar may not appropriately claim a deduction in a
pre-Closing Date Tax period for all or any portion of the Required Reserve
Increases, then:
(A) Gibraltar shall have no obligation to repay to
the Seller the payment the Seller made to Gibraltar pursuant to the Tax
Sharing Agreement in accordance with Section 5.9 except as provided in
this Section 7.4(e);
(B) At the Seller's request, Gibraltar shall file its
federal income tax returns for one or more post-Closing Periods (or to
amend a previously filed return) to claim a deduction or Tax benefit
(including any Tax benefit attributable to an increase in the adjusted
Tax basis of the assets of Gibraltar) for all or part of the Required
Reserve Increase in the applicable Tax year; provided that such
deduction or tax benefit is either (a) consistent with the rationale
given by the Internal Revenue Service in writing for the disallowance
of the deduction for the Required Reserve Increase in the pre-Closing
Date Tax year in which it was initially claimed by Gibraltar, or (b) in
accordance with some rationale for which the Seller delivers to the
Purchaser an opinion of nationally known tax counsel familiar with
insurance company taxation to the effect that it is more likely than
not that Gibraltar would be entitled to the deduction or Tax benefit
for all or part of the Required Reserve Increase in a particular
post-Closing Date Taxable year;
(C) The Purchaser shall cause Gibraltar to pay to the
Seller the amount of actual federal income tax savings obtained by
Gibraltar or the Purchaser by complying with Seller's request for
Gibraltar to claim a deduction or Tax benefit (including any Tax
benefit attributable to an increase in the adjusted Tax basis of the
assets of Gibraltar) for all or part of the Required Reserve Increase
in a post-Closing Date Tax period no later than the time the statute of
limitations expires for adjustments to the Purchaser's or Gibraltar's
tax return for the post-Closing Date Taxable year in which Gibraltar
claimed the deduction; and
(D) If Gibraltar receives cash due to a refund of
federal income taxes or a deduction in actual taxes paid as a result of
complying with the Seller's request in clause B above, then, in
addition to the payment to the Seller described in clause C above, the
Purchaser shall cause Gibraltar to pay interest to the Seller at a rate
equal to the applicable Federal short term rate as defined in Section
1274(d)(1) of the Code.
7.5 COMMERCIAL REASONABLENESS. Subject to the terms and conditions of
this Agreement, each party will use all commercially reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective in the most expeditious manner
practicable, the Closing and the other transactions contemplated by this
Agreement, including (a) the obtaining of all necessary actions or nonactions,
waivers, consents and approvals from governmental entities and the making of all
necessary registrations and filings and the taking of all reasonable steps as
may be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by, any governmental entity, (b) the obtaining of all
necessary consents, approvals or waivers from third parties, (c) the
defending of any lawsuits or other legal proceedings, whether judicial or
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administrative, brought against such party challenging this Agreement or the
consummation of the transactions contemplated hereby, including seeking to have
any stay or temporary restraining order entered by any court or other
governmental entity vacated or reversed and (d) the execution and delivery of
any additional instruments necessary to consummate the transactions contemplated
by this Agreement.
7.6 TERMIATION OF AGREEMENTS. The Seller shall (i) terminate, or cause
the termination of, in writing, as of the Closing Date, the agreements and
arrangements listed on Schedule 7.6, without requiring additional payments or
other consideration and without any further liability or obligation on or after
the Closing Date of any party to any other party pursuant to those agreements or
arrangements, and (ii) cause all Tax allocation agreements, Tax sharing
agreements or agreements between the Seller and its Affiliates on the one hand,
and Gibraltar on the other, to be extinguished and terminated with respect to
Gibraltar and any rights or obligations existing under such agreement or
arrangement to be no longer enforceable. The Seller further agrees that it and
its Affiliate, Prudential Property and Casualty Insurance Company will release
Gibraltar from all liabilities under the Service Contract dated May 1, 1997
between Gibraltar and Prudential Property and Casualty Insurance Company.
7.7 USE OF GIBRALTAR MARKS. The Purchaser shall cause Gibraltar to
cease all use whatsoever of the Gibraltar Marks effective immediately after
the Closing Date. The Purchaser may continue to use the Gibraltar name for a
sixty-day period commencing on the Closing Date for the purpose of preparing and
filing with the Secretary of State and/or Office of the Insurance Commissioner
in each State where Gibraltar is licensed or qualified to conduct business, the
regulatory or other filings necessary to effect the transactions contemplated by
this Agreement. The Purchaser shall provide the Seller with representative
samples of its use of the Gibraltar name pursuant to this Section 7.7 at the
conclusion of each calendar month during such sixty-day period. The Purchaser
acknowledges that any use of the Gibraltar name pursuant to this Section 7.7
shall inure to the benefit of the Seller. The Purchaser further acknowledges the
Seller's rights in the Gibraltar name and the Gibraltar Marks and the goodwill
pertaining thereto. The Purchaser agrees that neither it nor its Affiliates
shall challenge the validity of the Seller's ownership of the Gibraltar name and
the Gibraltar Marks or contest the validity of the Gibraltar Marks.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
8.1 SURVIVAL OF COVENANTS, AGREEMENTS, REPRESENTATIONS OR WARRANTIES.
The representations and warranties in this Agreement and in any other document
delivered in connection herewith shall survive the Closing solely for purposes
of Sections 12.1(a) and (b) of this Agreement and shall terminate at the close
of business 15 months following the Closing Date (except those representations
and warranties contained in Sections 3.1, 3.2 and 3.3, which representations
and warranties shall survive forever and except those representations and
warranties with respect to Taxes provided in Section 3.24, which
representations and warranties shall terminate 90 days after the
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expiration of any statute of limitations in respect of Taxes). The covenants
contained in this Agreement shall survive the Closing.
ARTICLE IX
JOINT CONDITIONS TO THE OBLIGATIONS OF THE PARTIES TO CLOSE
The obligations of the Purchaser and the Seller to consummate the sale
of the Shares and the other transactions contemplated by this Agreement are
subject to the satisfaction or waiver by each party on or prior to the Closing
Date of the following conditions:
9.1 INSURANCE REGULATORY APPROVALS. All consents, approvals and
waivers of the State Insurance Commission required to consummate the
transactions contemplated hereby shall have been obtained without any material
conditions, restrictions or limitations (it being understood that any
conditions, restrictions or limitations relating to risk based capital shall be
deemed not to be material) and such consents, approvals and waivers shall remain
in full force and effect and all statutory waiting periods in respect thereof
shall have expired (it is expressly understood that nothing in this Agreement
shall be construed as granting to the Purchaser any power, right or authority to
control, directly or indirectly, the management, policies, business, operations
or affairs of Gibraltar until the conditions precedent to the closing of the
transactions contemplated hereby have been satisfied, including obtaining the
approval of the State Insurance Commissioner described in this Section).
9.2 REGULATORY CONSENTS. The applicable waiting period under the HSR
Act shall have expired or early termination shall have been granted.
9.3 NO PROCEEDINGS. No order of any court or administrative agency
shall be in effect which restrains or prohibits the transactions contemplated
hereby and no suit, action or legal or administrative proceeding shall be
pending which (i) has been brought by a governmental entity and challenges
consummation of the transactions contemplated hereby or (ii) has a reasonable
probability of having a Material Adverse Effect on the Business of Gibraltar or
(iii) has a reasonable probability of having a Material Adverse Effect on the
ability of the Purchaser to own and control such Business or the Shares.
9.4 MUF AGREEMENT. The Seller and Gibraltar shall have entered into an
indemnification agreement (the "MUF AGREEMENT") substantially in the form of
Exhibit C to this Agreement, relating to certain uncollectible MUF reinsurance
recoveries and the Purchaser shall or shall cause Everest Re to provide to the
Seller Schedule A to the MUF Agreement on or before the first Business Day
following the date on which all of the conditions set forth in Articles IX, X
and XI shall have been satisfied or waived.
9.5 ADDITIONAL STOP-LOSS COVERAGE. The Seller (or one of its Affiliates
so long as the Seller provides a guarantee (in a form acceptable to the
Purchaser) of such Affiliate's obligations) and Gibraltar shall have
entered into an indemnification agreement (the "ADDITIONAL STOP-LOSS
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AGREEMENT") substantially in the form of Exhibit D to this Agreement, relating
to the provision by the Seller (or one of its Affiliates) of additional
stop-loss coverage.
ARTICLE X
CONDITIONS TO THE OBLIGATION OF THE PURCHASER TO CLOSE
The obligation of the Purchaser to consummate the purchase of the
Shares and the other transactions contemplated by this Agreement is subject to
the satisfaction or waiver by the Purchaser on or prior to the Closing Date of
the following conditions:
10.1 COVENANTS. The Seller shall have performed and complied in all
material respects with all covenants and agreements required by this Agreement
and each other document required hereby to be delivered to the Purchaser to be
performed or complied with by it on or prior to the Closing Date.
10.2 REPRESENTATIONS AND WARRANTIES OF THE SELLER. The representations
and warranties of the Seller contained in this Agreement and in each other
document required hereby to be delivered by the Seller shall be true and correct
on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date (except to
the extent an earlier date is specified in such representations and warranties),
except where the failure to be true and correct would not, in the aggregate,
reasonably be expected to have a Material Adverse Effect on Gibraltar.
10.3 CERTIFICATES. The Purchaser shall have received a certificate,
dated the Closing Date and executed by the President or any Vice President of
the Seller, certifying that, to the best knowledge of such officer, the
conditions set forth in Sections 10.1 and 10.2 and have been satisfied.
10.4 OTHER APPROVALS. Gibraltar shall be authorized as an eligible
surplus lines insurer in the State of New Jersey and shall hold all approvals
and licenses necessary to enable it to continue to carry on its Business as
presently conducted after consummation of the sale of the Shares and the other
transactions contemplated hereby, other than approvals or licenses the failure
to obtain which would not, in the aggregate, reasonably be expected to have a
Material Adverse Effect on Gibraltar.
10.5 OTHER CONSENTS. Gibraltar shall have received all consents of
other parties to the Contracts of Gibraltar necessary to permit the consummation
of the transactions contemplated hereby other than consents the failure to
obtain which would not, in the aggregate, reasonably be expected to have a
Material Adverse Effect on Gibraltar.
10.6 RESIGNATION OF DIRECTORS AND OFFICERS. Written resignations from
each of the directors and officers of Gibraltar shall have been delivered to
the Purchaser.
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10.7 NO MATERIAL ADVERSE CHANGE. Since December 31, 1999, there shall
have been no material adverse change in the financial condition, results of
operations, cash flows or Business of Gibraltar.
ARTICLE XI
CONDITIONS TO THE OBLIGATIONS OF THE SELLER TO CLOSE
The obligations of the Seller to consummate the sale of the Shares and
the other transactions contemplated by this Agreement is subject to the
satisfaction or waiver by the Seller on or prior to the Closing Date of the
following conditions:
11.1 COVENANTS. The Purchaser shall have performed and complied in all
material respects with all covenants, agreements and conditions required by
this Agreement and each other document required hereby to be delivered to the
Seller to be performed or complied with by it on or prior to the Closing Date.
11.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The
representations and warranties of the Purchaser contained in this Agreement and
each other document required hereby to be delivered by the Purchaser shall be
true and correct in all material respects on and as of the Closing Date with
the same effect as though such representations and warranties had been made on
and as of such date (except to the extent an earlier date is specified in such
representations and warranties).
11.3 CERTIFICATES. The Seller shall have received a certificate, dated
the Closing Date and executed by the President or any Vice President of the
Purchaser, certifying that, to the best knowledge of such officer, the
conditions set forth in Sections 11.1 and 11.2 have been satisfied.
ARTICLE XII
INDEMNIFICATION
12.1 INDEMNIFICATION BY THE SELLER. (a) The Seller shall indemnify the
Purchaser and its directors, officers, employees and Affiliates against, and
hold each of them harmless from, any loss, liability, claim, damage or expense
(including reasonable legal fees and expenses, but excluding any consequential
or special damages) (collectively, for purposes of this Article 12, "Losses")
suffered or incurred by any such Indemnified Person (other than any Losses
relating to Taxes, for which indemnification provisions are set forth in Section
7.4(a)) to the extent arising from (i) any breach of any representation or
warranty of the Seller contained in this Agreement (other than in Section
3.24) or in any certificate, instrument or other document delivered pursuant
hereto or thereto (all of which representations and warranties shall be deemed
to have been remade on and as of the Closing Date (except to the extent an
earlier date is specified in such representations and warranties)) or
(ii) any breach of any covenant of the Seller contained in this Agreement
which breach continues for ten Business Days after notice thereof
has been furnished by the Purchaser to the Seller; PROVIDED,
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HOWEVER, that the Seller shall not have any liability under clause (i) above
unless the sum of the aggregate of all Losses relating thereto for which the
Seller would, but for this proviso, be liable, exceeds on a cumulative basis an
amount equal to $499,000, and then only to the extent of any such excess;
PROVIDED FURTHER, HOWEVER, that the Seller shall not have any liability under
clause (i) above to the extent that the sum of the aggregate of all Losses
relating thereto exceeds $20,000,000; and PROVIDED FURTHER, HOWEVER, that the
Seller shall not have any liability under this Section 12.1(a) to the extent the
liability or obligation arises as a result of any action taken or omitted to be
taken by the Purchaser or any of its Affiliates other than those actions or
omissions arising out of the operation of Gibraltar in the ordinary course of
business; and PROVIDED, FURTHER, HOWEVER, that the limitations set forth in this
Section 12.1(a) shall not apply to any Losses caused by fraud on the part of the
Seller.
The Purchaser acknowledges and agrees that, from and after the Closing,
its sole and exclusive remedy with respect to any and all claims relating to the
subject matter of this Agreement (other than claims under the MUF Agreement and
the Additional Stop-Loss Agreement or claims of fraud) shall be pursuant to the
indemnification provisions set forth in this Section 12.1(a) and Section 7.4(a)
(solely with respect to Taxes). In furtherance of the foregoing, the Purchaser
hereby waives, and releases and discharges the Seller and its affiliates in
respect of, from and after the Closing, to the fullest extent permitted under
applicable law, any and all rights, claims and causes of action (other than
claims of, or causes of action arising from, fraud) it, may have against the
Seller, its Affiliates, directors, officers, employees, agents or assigns
relating to the subject matter of this Agreement except under the MUF Agreement
and the Additional Stop-Loss Agreement or the ownership prior to the Closing of
Gibraltar by the Seller or its Affiliates or Gibraltar's Business, and arising
under or based upon any federal, state, local or foreign statute, law,
ordinance, rule or regulation.
(b) INDEMNIFICATION BY THE PURCHASER. The Purchaser shall indemnify
the Seller and its directors, officers, employees and Affiliates against, and
hold each of them harmless from, any Losses suffered or incurred by any such
Indemnified Person (other than any relating to Taxes, for which indemnification
provisions are set forth in Section 7.4(a)) to the extent arising from (i) any
breach of any representation or warranty of the Purchaser contained in this
Agreement or in any certificate, instrument or other document delivered pursuant
hereto or thereto (all of which representations and warranties shall be deemed
to have been remade on and as of the Closing Date (except to the extent an
earlier date is specified in such representations and warranties)), (ii) any
breach of any covenant of the Purchaser contained in this Agreement, which
breach continues for ten Business Days after notice thereof has been furnished
by the Seller to the Purchaser, (iii) from and after the Closing Date, any
guarantee or obligation to assure performance given or made by the Seller or an
Affiliate of the Seller with respect to any obligation of Gibraltar, that is
specified on Schedule 6.3 and is required to be performed after the Closing
Date; PROVIDED, HOWEVER, that the Purchaser shall not have any liability under
clause (i) above unless the aggregate of all Losses relating thereto for which
the Purchaser would, but for this proviso, be liable exceeds on a cumulative
basis an amount equal to $499,000, and then only to the extent of any such
excess; PROVIDED FURTHER, HOWEVER, that the Purchaser shall not have any
liability under clause (i) above to the extent Losses relating thereto in
aggregate exceed $20,000,000; PROVIDED FURTHER, HOWEVER, that the limitations
set forth in this Section 12.1(b) shall not apply to any Losses caused
by fraud on the part of the Purchaser.
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The Seller acknowledges and agrees that, from and after the Closing,
its sole and exclusive remedy with respect to any and all claims relating to the
subject matter of this Agreement (other than claims of fraud) shall be pursuant
to the indemnification provisions set forth in this Section 12.1(b) and Section
7.4(b) (solely with respect to Taxes). In furtherance of the foregoing, the
Seller hereby waives, and releases and discharges the Purchaser and its
Affiliates in respect of, from and after the Closing, to the fullest extent
permitted under applicable law, any and all rights, claims and causes of action
(other than claims of, or causes of action arising from, fraud) it may have
against the Purchaser, its Affiliates, directors, officers, employees, agents or
assigns relating to the subject matter of this Agreement, and arising under or
based upon any federal, state, local or foreign statute, law, ordinance, rule or
regulation.
(c) LOSSES NET OF INSURANCE, ETC. The amount of any Loss for which
indemnification is provided under this Section 12.1 shall be net of any amounts
recovered or recoverable by the Indemnified Person under insurance policies with
respect to such Loss and shall be reduced to take account of any Tax benefits
that would be realized by the Indemnified Person arising from the incurrence or
payment of any such Loss assuming that the incurrence or payment of any such
Loss would give rise to a currently utilizable Tax benefit calculated using the
maximum applicable tax rate then in effect. Any indemnity payment under this
Article XII or Section 7.4 of this Agreement shall be treated as an adjustment
to the Purchase Price for Tax purposes, unless a final determination (which
shall include the execution of a Form 870 or successor form) with respect to the
Indemnified Person or any of its affiliates causes any such payment not to be
treated as an adjustment to the Purchase Price for United States federal income
Tax purposes.
(d) TERMINATION OF INDEMNIFICATION. The obligations to indemnify and
hold harmless a party hereto (i) pursuant to Sections 12.1(a)(i) or 12.1(b)(i)
(other than Tax liabilities), shall terminate when the applicable representation
or warranty terminates pursuant to Section 8.1, (ii) solely with respect to
Taxes pursuant to Section 7.4, shall terminate 90 days after the time the
applicable statutes of limitations with respect to the Tax liabilities in
question expire (giving effect to any extension thereof), and (iii) pursuant
to the other clauses of Sections 12.1(a) and 12.1(b) shall not terminate;
PROVIDED, HOWEVER, that as to clauses (i) and (ii) above such obligations to
indemnify and hold harmless shall not terminate with respect to any item as to
which the person to be indemnified or the related party hereto shall have,
before the expiration of the applicable period, previously made a claim by
delivering a notice (stating in reasonable detail the basis of such claim) to
the indemnifying party.
(e) PROCEDURES RELATING TO INDEMNIFICATION. In order for an Indemnified
Person to be entitled to any indemnification provided for under this Agreement
in respect of, arising out of or involving a claim or demand made by any Person
against the Indemnified Person (a "THIRD PARTY CLAIM"), such Indemnified Person
must notify the Indemnifying Person in writing, and in reasonable detail, of the
Third Party Claim within ten Business Days after receipt by such Indemnified
Person of written notice of the Third Party Claim; PROVIDED, HOWEVER, that
failure to give such notification shall not affect the indemnification provided
hereunder except to the extent the Indemnifying Person shall have been actually
prejudiced as a result of such failure (except that the Indemnifying Person
shall not be liable for any expenses incurred during the period in which the
Indemnified Person failed to give such notice). Thereafter, the Indemnified
Person shall deliver to the Indemnifying Person, within five Business Days
after the Indemnified Person's receipt thereof, copies of all notices and
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documents (including court papers) received by the Indemnified Person relating
to the Third Party Claim.
If a Third Party Claim is made against an Indemnified Person (except as
provided in Section 12.1(f)), the Indemnifying Person will be entitled to
participate in the defense thereof and, if it so chooses, to assume the defense
thereof with counsel selected by the Indemnifying Person and reasonably
satisfactory to the Indemnified Person. Should the Indemnifying Person so elect
to assume the defense of a Third Party Claim, the Indemnifying Person will not
be liable to the Indemnified Person for legal and other professional adviser
expenses subsequently incurred by the Indemnified Person in connection with the
defense thereof. If the Indemnifying Person assumes such defense, the
Indemnified Person shall have the right to participate in the defense thereof
and to employ counsel, at its own expense, separate from the counsel employed by
the Indemnifying Person, it being understood that the Indemnifying Person shall
control such defense. The Indemnifying Person shall be liable for the fees and
expenses of counsel employed by the Indemnified Person for any period during
which the Indemnifying Person has not assumed the defense thereof (other than
during any period in which the Indemnified Person shall have failed to give
notice of the Third Party Claim as provided above). If the Indemnifying Person
chooses to defend or prosecute any Third Party Claim, all the parties hereto
shall cooperate in the defense or prosecution thereof. Such cooperation shall
include the retention and (upon the Indemnifying Person's request) the provision
to the Indemnifying Person of records and information which are reasonably
relevant to such Third Party Claim, and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Whether or not the Indemnifying Person shall have
assumed the defense of a Third Party Claim, (i) the Indemnified Person shall not
admit any liability with respect to, or settle, compromise or discharge, such
Third Party Claim without the Indemnifying Person's prior written consent (which
consent shall not be unreasonably withheld) and (ii) the Indemnifying Person
shall not, without the Indemnified Party's consent, settle, compromise or
discharge (A) any Third Party Claim if such settlement, compromise or discharge
imposes any equitable obligations on the Indemnified Party or (B) any Third
Party Claim for an amount that together with all other amounts therefore paid by
the Indemnifying Party under Section 12.1 (a) or (b), as the case may be, would
exceed $20,000,000 in the aggregate. All Tax Claims shall be governed by Section
7.4.
(f) PROCEDURES RELATING TO INDEMNIFICATION OF TAX CLAIMS. If a claim
shall be made by any Taxing authority, which, if successful, might result in an
indemnity payment to the Purchaser or one of its affiliates pursuant to Section
7.4, the Purchaser shall promptly notify the Seller in writing of such claim
(a "TAX CLAIM"). If notice of a Tax Claim is not given to the Seller within a
sufficient period of time to allow the Seller to effectively contest such Tax
Claim, or in reasonable detail to apprise the Seller of the nature of the Tax
Claim, in each case taking into account the facts and circumstances with respect
to such Tax Claim, the Seller shall not be liable to the Purchaser or any of its
Affiliates to the extent that the Seller's position is actually prejudiced as a
result thereof.
With respect to any Tax Claim (other than a Tax Claim relating
solely to Taxes of Gibraltar for any taxable period that includes (but
does not end on) the Closing Date), the Seller shall control all
proceedings taken in connection with such Tax Claim (including, without
limitation, selection of counsel) and, without limiting the foregoing,
may in its sole discretion pursue or forego any and all
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administrative appeals, proceedings, hearings and conferences with any Taxing
authority with respect thereto, and may, in its sole discretion, either pay the
Tax claimed and xxx for a refund where applicable law permits such refund suits
or contest the Tax Claim in any permissible manner. The Seller and the Purchaser
shall jointly control all proceedings taken in connection with any Tax Claim
relating solely to Taxes of Gibraltar for a Straddle Period. The Purchaser and
the Seller and each of their respective Affiliates shall fully cooperate with
one another in contesting any Tax Claim, which cooperation shall include,
without limitation, the retention and (upon the other party's request) the
provision to such other party of records and information which are reasonably
relevant to such Tax Claim, and making employees available on a mutually
convenient basis to provide additional information or explanation of any
material provided hereunder or to testify at proceedings relating to such Tax
Claim.
In no case shall the Purchaser settle or otherwise compromise any
Tax Claim without the Seller's prior written consent. Nothing contained herein
shall require the Purchaser to contest a Tax Claim if the Purchaser shall waive
in writing the payment by the Seller of any amount that might otherwise be
payable by the Seller pursuant to this Agreement in respect of such Tax Claim.
ARTICLE XIII
TERMINATION, AMENDMENT AND WAIVER
13.1 TERMINATION. This Agreement may be terminated at any time prior
to the Closing as follows:
(a) By mutual written consent of the Purchaser and the Seller;
(b) By the Purchaser if there has been a material breach of any
covenant or agreement on the part of the Seller set forth in this
Agreement which has not been cured within 30 days after notice thereof;
or
(c) By the Seller if there has been a material breach of any
covenant or agreement on the part of the Purchaser set forth in this
Agreement and such material breach has not been cured within 30 days
after notice thereof; or
(d) By either the Purchaser or the Seller if the Closing shall
not have occurred by June 30, 2000; PROVIDED, HOWEVER, that the
right to terminate this Agreement under this Section 13.1 shall not be
available to the party whose failure to fulfill any obligation
under this Agreement has been the cause or shall result in the failure
of the Closing to occur prior to such date.
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13.2 EFFECT OF TERMINATION. In the event that this Agreement
terminates, the obligations set forth herein shall terminate except that the
obligations of each party under Section 7.1 and 14.11 shall survive the
termination of the Agreement; PROVIDED, HOWEVER, that termination shall not
defeat or impair the right of any party to pursue such relief as may otherwise
be available to it on account of any breach of this Agreement or of any of the
covenants or agreements contained herein.
ARTICLE XIV
MISCELLANEOUS
14.1 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
14.2 EXTENSION; WAIVER. At any time prior to the Closing, the parties
may, in the manner and to the extent legally allowed, (i) extend the time
for the performance of any of the obligations or other acts of the other parties
hereto and (ii) waive compliance with any of the agreements or conditions
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party. The waiver by any party hereto at or before the
Closing Date of any condition to its obligations hereunder which is not
fulfilled shall not preclude such party from seeking redress under Article XII
from the other party hereto for any misrepresentation or breach of any
warranty, covenant or agreement contained in this Agreement. The waiver by
any party hereto of a breach of this Agreement shall not operate or be
construed as a waiver of any subsequent breach.
14.3 NOTICES. All notices or other communications hereunder shall be
in writing and shall be deemed given (i) upon delivery if delivered personally,
(ii) upon receipt if sent by facsimile transmission, (iii) if mailed, three
days after mailing by registered or certified mail (return receipt requested)
or (iv) if sent by a nationally recognized overnight delivery service, one
day after sending by such service to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
(a) If to the Purchaser, to:
c/o Everest Reinsurance Company
000 Xxxxxxxxxxxx Xxxx
X.X. Xxx 000
Xxxxxxx Xxxxxx, Xxx Xxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxx
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with copies to:
Xxxxx, Xxxxx & Xxxxx
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
(b) If to the Seller to:
The Prudential Insurance Company of America
000 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx
with a copy to:
Sidley & Austin
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx
14.4 INTERPRETATION. When a reference is made in this Agreement to a
section, schedule or exhibit, such reference shall be to a section, schedule or
exhibit of this Agreement unless otherwise indicated or unless the context shall
otherwise require. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." The phrase "to the knowledge of
Gibraltar" shall refer to the actual knowledge of Xxxx Xxxxxxx, Xxxxxx Xxxxxxxx,
Xxxxxx Xxxx, Xxxx Xxxxxx, Xxxxxxxxx Xxxxxx, Xxxxxxx Rant, Xxxxxxx Xxxxx and
Xxxxxx Poles. The terms "hereof," "herein" and similar terms shall refer to this
entire Agreement and the date of this Agreement shall be the date first written
herein.
14.5 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
14.6 ASSIGNMENT; BINDING EFFECT. Except as otherwise permitted in
this Agreement, neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto without
the prior written consent of the other parties, except that the Purchaser may
assign this Agreement to an Affiliate of the Purchaser so long as such
Affiliate executes this Agreement and the Purchaser continues as a signatory
hereto (in which case the term "the Purchaser" as used herein shall be deemed
to include such Affiliate). This Agreement will be binding upon, inure
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to the benefit of and be enforceable by the parties and their respective
successors and permitted assigns.
14.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when two or more counterparts have been signed by each
of the parties and delivered to the other parties, it being understood that
the parties need not sign the same counterpart.
14.8 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES. The Confidentiality
Agreements together with this Agreement (including other agreements, documents
and instruments referred to herein) constitute the entire agreement between the
parties relating to the subject matter hereof and supersede all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof and are not intended to confer upon any Person other than
the parties hereto any rights or remedies hereunder.
14.9 NO WAIVER. No forbearance to enforce any provision or right
hereunder shall be deemed a waiver thereof, and no waiver of any breach of any
term or covenant herein shall be construed as a waiver of any other breach of
the same, or any other term or covenant herein.
14.10 CONSTRUCTION. This Agreement is the result of arms-length
negotiations between the parties hereto and has been prepared jointly by the
parties. In applying and interpreting the provisions of this Agreement, there
shall be no presumption that the Agreement was prepared by any one party
or that the Agreement shall be construed in favor of or against any one party.
14.11 FEES AND EXPENSES. Each party hereto shall bear its own fees and
expenses with respect to the transactions contemplated hereby and Gibraltar
shall bear none of such expenses. The Seller and the Purchaser shall each bear
one-half the cost of all sales, use, stamp, transfer, services recording and
like transfer Taxes, if any, imposed by any governmental authority in connection
with the transfer and assignment of the Shares.
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IN WITNESS WHEREOF, the Purchaser and the Seller have executed this
Agreement on the date first above written.
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /S/ Xxxxxxx Xxxxxxx
---------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Vice President
EVEREST REINSURANCE HOLDINGS, INC.
By: /S/ Xxxxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Senior Vice President and
Chief Fiancial Officer
Exhibit A
Form of Opinion of Counsel to the Seller
----------------------------------------
1. The Seller is a mutual insurance company domiciled in the
State of New Jersey. The Seller has all necessary corporate power and authority
to execute and deliver the Agreement, the MUF Agreement and the Additional
Stop-Loss Agreement, to perform its obligations thereunder and to consummate the
transactions contemplated thereby.
2. The execution and delivery by the Seller of the Agreement,
the MUF Agreement and the Additional Stop-Loss Agreement, the performance by the
Seller of its obligations thereunder and the consummation by the Seller of the
transactions contemplated thereby have been duly and validly authorized by all
necessary corporate action on the part of the Seller. The Agreement, the MUF
Agreement and the Additional Stop-Loss Agreement has been duly executed and
delivered by a duly authorized officer of the Seller and constitutes a legal,
valid and binding obligations of the Seller enforceable against the Seller in
accordance with its terms (subject to applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other laws affecting
creditors' rights generally from time to time in effect). The enforceability of
the Seller's obligations is also subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
3. All necessary filings or registrations with any
governmental or regulatory authority required for the consummation by the Seller
of the transactions contemplated by the Agreement, the MUF Agreement and the
Additional Stop-Loss Agreement have been duly made, and all permits,
authorizations, consents or approvals of any governmental or regulatory
authority required in connection with such transactions have been duly obtained.
4. The Shares constitute all the issued and outstanding
capital stock of Gibraltar, all such Shares are, to our knowledge, owned
directly by the Seller free and clear of any liens, encumbrances and other
charges and all such Shares have been duly and validly authorized and issued by
Gibraltar and are fully paid and nonassessable. To our knowledge there are no
agreements, arrangements or understandings restricting the right of the Seller
to sell, assign, transfer and deliver the Shares and, assuming the Purchaser has
the requisite power and authority to be the lawful owner of the Shares, upon
delivery to the Purchaser at the Closing of certificates representing the
Shares, duly endorsed by the Seller for transfer to the Purchaser and upon the
Seller's receipt of the Purchase Price, good and valid title to the Shares will
pass to the Purchaser, free and clear of any liens, encumbrances and other
charges (other than those arising from acts of the Purchaser or its Affiliates).
Exhibit B
Form of Opinion of Counsel to the Purchaser
-------------------------------------------
1. The Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all necessary corporate power and authority to execute and deliver the
Agreement, to perform its obligations thereunder and to consummate the
transactions contemplated thereby.
2. The execution and delivery by the Purchaser of the
Agreement, the performance by the Purchaser of its obligations thereunder and
the consummation by the Purchaser of the transactions contemplated thereby have
been duly and validly authorized by all necessary corporate action on the part
of the Purchaser. The Agreement has been duly executed and delivered by a duly
authorized officer of the Purchaser and constitutes a legal, valid and binding
obligation of the Purchaser enforceable against the Purchaser in accordance with
its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws affecting creditors' rights generally
from time to time in effect). The enforceability of the Purchaser's obligations
is also subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
3. All necessary filings or registrations with any
governmental or regulatory authority required for the consummation by the
Purchaser of the transactions contemplated by the Agreement have been duly made,
and all permits, authorizations, consents or approvals of any governmental or
regulatory authority required in connection with such transactions have been
duly obtained.
4. The execution, delivery and performance of the Agreement
does not conflict with or result in a violation of the General Corporation Law
of the State of Delaware or the Certificate of Incorporation or By-Laws of the
Purchaser.
Exhibit C
Form of MUF Agreement
---------------------
See Attached Agreement
QUOTA SHARE INDEMNITY AGREEMENT
between
GIBRALTAR CASUALTY COMPANY, a Delaware Corporation
(hereinafter referred to as the "Company")
and
PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey Corporation
(hereinafter referred to as the "Indemnitor")
(Both the Company and the Indemnitor collectively are referred to as the
"Parties" and individually as "Party")
WHEREAS, the Indemnitor and Everest Reinsurance Holdings, Inc., a Delaware
corporation ("Holdings"), have executed a Stock Purchase Agreement dated
________ ("Sale Agreement") wherein Holdings will purchase from the Indemnitor
all issued and outstanding shares of the Company, a wholly owned subsidiary of
the Indemnitor, effective as of the "Closing Date" set forth in the Sale
Agreement.
WHEREAS, Holdings is the parent of Everest Reinsurance Company, formerly known
as Prudential Reinsurance Company ("Everest Re").
WHEREAS, the Company has, and in the future may have, Uncollectible Reinsurance
Recoverables, as defined herein, with regard to business reinsured by or through
the Management Underwriting Facility ("MUF"), as defined in the Sale Agreement.
WHEREAS, the Company desires to procure indemnity coverage for its Uncollectible
Reinsurance Recoverables.
NOW, THEREFORE, in consideration of mutual covenants, representations,
warranties, and agreements contained herein and in the Sale Agreement, the
Parties agree as follows:
ARTICLE I - CLASSES OF BUSINESS COVERED
A. By this Agreement and subject to the terms and conditions set forth
below, the Indemnitor agrees to indemnify the Company for the Company's
Uncollectible Reinsurance Recoverables, as defined herein, with regard
to business reinsured by or through MUF respecting Direct Excess
Business and Gibraltar-Sourced Business, as defined herein.
B. "Uncollectible Reinsurance Recoverables", with respect to Reinsurance
Coverage, is defined as including (i) Uncollected Reinsurance and (ii)
Settlement Concessions.
C. "Reinsurance Coverage" is defined as any amount of paid and unpaid
losses and loss adjustment expenses ceded by Everest Re to MUF
reinsurers with respect to Direct Excess Business or Gibraltar-Sourced
Business, whether such amounts were ceded prior to or during the term
of this Agreement.
D. "Uncollected Reinsurance" is defined as Reinsurance Coverage for paid
loss and loss adjustment cessions relating to Direct Excess Business,
with respect to each company on Schedule A hereto, that is unpaid by
the reinsurer after one-hundred-and-eighty (180) days from the date
that such paid loss and loss adjustment cessions were due to be paid by
the reinsurer.
E. "Settlement Concessions" is defined as the difference, with respect to
each company on Schedule A hereto, between the Reinsurance Coverage for
Direct Excess Business or Gibraltar-Sourced Business reinsured by MUF
and ceded to such company and the amount received from such company.
F. "Direct Excess Business" is defined as policies, contracts, and binders
of insurance or reinsurance ("Policies") that were issued by Everest Re
prior to January 1, 1986.
G. "Gibraltar-Sourced Business" is defined as Policies that were issued by
the Company prior to January 1, 1986.
H. Although Everest Re rather than the Company has the direct ceding
relationship with MUF, solely for purposes of this Agreement and only
up to the amounts scheduled in Schedule A hereto, the Parties hereby
deem any Uncollectible Reinsurance Recoverables to belong to the
Company and not to Everest Re.
ARTICLE II - COMMENCEMENT AND TERMINATION
A. This Agreement shall become effective on the Closing Date. This
Agreement will terminate, with respect to the Indemnitor's Per-Company
Sub-Limit of Liability under Article V, on the earlier of (i) two years
following the Indemnitor's payment of the sub-limit or (ii) the tenth
anniversary of Closing Date. This Agreement shall terminate, with
respect to the Indemnitor's Aggregate Limit of Liability under Article
V, on the earlier of (i) two years following the Indemnitor's payment
of the limit or (ii) the tenth anniversary of the Closing Date.
B. Neither Party may terminate this Agreement.
ARTICLE III - TERRITORY
The territorial scope of this Agreement shall be identical to that of the
Policies.
ARTICLE IV - CONSIDERATION
The consideration for this indemnity coverage is included in the consideration
for the Sale Agreement and is deemed paid as of the Closing Date. No further
consideration shall be due to the Indemnitor.
ARTICLE V - SCHEDULE OF UNCOLLECTIBLE REINSURANCE RECOVERABLES AND INDEMNITOR'S
LIMIT OF LIABILITY
Pursuant to the Sale Agreement, on or before the first Business Day following
the date on which all of the conditions set forth in Articles IX, X, and XI of
the Sale Agreement have been satisfied or waived, Holdings will cause Everest Re
to provide to the Indemnitor a schedule setting forth all expected Uncollectible
Reinsurance Recoverables ("Schedule A"), which shall be incorporated herein by
reference. Schedule A shall identify, by reinsurer name, (1) the expected
amounts of Uncollected Reinsurance attributable to each reinsurer with respect
to Direct Excess Business and (2) the expected amounts of Settlement Concessions
with respect to Direct Excess Business and Gibraltar-Sourced Business. If the
Company identifies a given reinsurer on Schedule A with respect to both
Uncollected Reinsurance and for Settlement Concessions, then the amount
scheduled for Uncollected Reinsurance shall represent only paid loss and loss
adjustment expense amounts and the amount scheduled for Settlement Concessions
shall include only unpaid loss and loss adjustment expense amounts.
The Indemnitor shall pay to the Company one hundred percent (100.0%) of up to
the scheduled amount of the Company's Uncollectible Reinsurance Recoverables
with respect to each company listed on Schedule A ("Per Company Sub-Limit of
Liability"), provided that the Indemnitor's total liability under this Agreement
shall in no event be greater than $8,500,000 ("Aggregate Limit of Liability").
ARTICLE VI - PAYMENT OF ADVANCES BY INDEMNITOR AND REFUNDS BY COMPANY
Subject to the limits set forth in Article V, pursuant to Article IX the
Indemnitor shall make payments ("Advances") to the Company in the amount of the
Uncollected Reinsurance and Settlement Concessions shown on the Company's
statements.
If after receiving an Advance from the Indemnitor with respect to an Uncollected
Reinsurance amount, the Company actually collects all or a portion of the amount
due from the reinsurer identified on Schedule A, then the Company shall pay to
the Indemnitor a sum equal to the amount so collected ("Refund"), up to the
amount of the corresponding Advance paid by the Indemnitor. Refunds shall not
bear interest except as set forth in Article IX (G), and in no event shall the
Indemnitor be entitled to a Refund in an amount greater than the corresponding
Advance. In the event that a Refund is made to the Indemnitor, the Per
Company Sub-Limit of Liability and the Aggregate Limit of Liability shall
each be replenished by the amount of such Refund. No Refunds shall be due for
Advances paid by the Indemnitor with respect to Settlement Concessions.
ARTICLE VII - OTHER REINSURANCE
On or after the Closing Date, the Company shall be permitted to obtain other
reinsurance, recoveries under which shall inure solely to the benefit of the
Company, and all recoveries under such other reinsurance shall be entirely
disregarded in applying all of the provisions of this Agreement.
ARTICLE VIII - ORIGINAL CONDITIONS
A. The Indemnitor shall follow the fortunes of the Company with respect
to settlements of any Reinsurance Coverage and with respect to
Uncollectible Reinsurance Recoverables.
B. The indemnity coverage provided under this Agreement shall be subject
to all interpretations, modifications, waivers, and alterations of
the Policies and Reinsurance Coverage.
C. Nothing herein shall in any manner create any obligations or establish
any rights against the Indemnitor in favor of any third party or any
person not a Party to this Agreement.
ARTICLE IX - REPORTS AND REMITTANCES
A. The first statement of account shall be due to the Indemnitor from the
Company on the anniversary of the Closing Date. The first statement
only shall include a charge for interest on any Uncollectible
Reinsurance Recoverables due from the Indemnitor as of the statement
date. Such interest charge shall be equal to the rate of interest
announced by Citibank, N.A. as its prime or base rate as of the
statement date, calculated on the basis of the actual number of days
elapsed since the Uncollectible Reinsurance Recoverables accrued or the
Closing Date, whichever is less, divided by
three-hundred-and-sixty-five (365) days. Such interest charge shall be
included in the Per Company Sub-Limit of Liability set forth on
Schedule A.
B. Thereafter, the Company shall submit quarterly statements of account
("quarterly reports") within forty-five (45) days after the end of each
calendar quarter.
C. Such quarterly reports shall be sent by both facsimile transmission and
United States Postal Service or any other delivery service used by the
Company.
D. Such quarterly reports shall include information showing, as applicable
with respect to each company listed on Schedule A, Uncollected
Reinsurance, Settlement Concessions, Advances received, Advances due,
Refunds due, and unpaid amounts outstanding.
E. Remittances shall be on a "Net Basis," defined as amounts owed between
the Parties under this Agreement.
F. Remittances, whether due to the Company from the Indemnitor or to the
Indemnitor from the Company, shall be due within forty-five (45) days
from the date of receipt of the facsimile transmission of each
quarterly report.
G. Failure by the Indemnitor or the Company to pay amounts owed when due
under this Agreement shall result in imposition of an interest penalty
equal to the rate of interest announced by Citibank, N.A. as its prime
or base rate as of the due date of any remittance, calculated on the
basis of the actual number of days elapsed past the due date of any
remittance divided by three-hundred-and-sixty-five (365) days and
payment of other losses, costs, and expenses accrued or incurred by the
Company or Indemnitor as a result of the other Party's late payment.
ARTICLE X - OFFSET
The Company and the Indemnitor shall have the right to offset any balance or
amounts due from one party to the other under this Agreement.
ARTICLE XI - ACCESS TO RECORDS
A. The Company shall place at the disposal of the Indemnitor at all
reasonable times, and the Indemnitor will have the right to inspect,
all books, records, and papers of the Company in connection with any
indemnity coverage hereunder or any claims in connection herewith.
B. All records reviewed by the Indemnitor are deemed proprietary and
confidential property of the Company. Further, unless pursuant to the
express, written permission of the Company, the Indemnitor shall not
disclose the contents of such information to any other person, persons,
entity, or entities; provided, that the Indemnitor may disclose such
information or portions thereof in connection with any arbitration
hereunder or any legal or regulatory process, or to its directors,
officers and employees and the directors, officers and employees of its
affiliates and to its agents, representative, attorneys, accountants,
auditors, reinsurers (collectively, "the Indemnitor's
Representatives"), in each case, who have a legitimate need to know
such information (which would include, but not be limited to the right
to dispute and/or assess in furtherance of a dispute) and who are
informed of and agree to be bound by the confidentiality terms of this
Agreement. The Indemnitor shall indemnify and hold harmless the Company
for all damages resulting from any unauthorized disclosure by the
Indemnitor or the Indemnitor's Representatives of records obtained
pursuant to this Article.
ARTICLE XII - ERRORS AND OMISSIONS
Inadvertent delays, errors or omissions in connection with this Agreement or any
transaction hereunder shall not relieve either Party of any liability which
would have attached had such delay, error or omission not occurred, provided
always that such error or omission is rectified as soon as possible after
discovery.
ARTICLE XIII - INSOLVENCY
In the event of the insolvency of the Company, the indemnity coverage hereunder
shall be payable directly to the Company or to its liquidator, receiver,
conservator or statutory successor on the basis of the amount of claim allowed
in the insolvency proceeding without diminution by reason of the inability of
the Company to pay all or any part of the claim. It is agreed, however, that the
liquidator, receiver, conservator or statutory successor of the Company shall
give written notice to the Indemnitor of the pendency of a claim against the
Company, indicating the Policy or bond covered hereunder which claim would
involve a possible liability on the part of the Indemnitor, within a reasonable
time after such claim is filed in the conservation or liquidation proceeding or
in the receivership, and that during the pendency of such claim, the Indemnitor
may investigate such claim and interpose, at its own expense, in the proceeding
where such claim is to be adjudicated, any defense or defenses that it may deem
available to the Company or its liquidator, receiver, conservator or statutory
successor. The expense thus incurred by the Indemnitor shall be chargeable,
subject to the approval of the Court, against the Company as part of the expense
of conservation or liquidation to the extent of a pro rata share of the benefit
which may accrue to the Company solely as a result of the defense undertaken by
the Indemnitor.
ARTICLE XIV - ARBITRATION
A. Except with respect to disputes arising out of or in connection with
Article XI above (Access to Records), as a condition precedent to any
right of action hereunder, in the event of any dispute or difference of
opinion hereafter arising with respect to this Agreement, including its
formation and validity, it is hereby mutually agreed that such dispute
or difference of opinion shall be submitted to arbitration.
B. Except as provided in subsections A. and D. of this Article or with
respect to judicial proceedings instituted in aid of arbitration, this
Article shall constitute a waiver of the Parties' rights to commence an
action in any court of competent jurisdiction in the United States, to
remove an action to a United States District Court, or to seek a
transfer of a case to another court as might otherwise be permitted by
the laws of the United States or of any State or other jurisdiction in
the United States.
C. One Arbiter shall be chosen by the Company, the other by the
Indemnitor, and an Umpire shall be chosen by the two Arbiters before
they enter upon arbitration, all of whom shall be active or retired
disinterested executive officers of United States domiciled insurance
or reinsurance companies. In the event that either Party should fail to
choose an Arbiter within 30 days following a written request by the
other Party to do so, the requesting Party may choose two Arbiters who
shall in turn choose an Umpire before entering upon arbitration. If the
two Arbiters fail to agree upon the selection of an Umpire within 30
days following their appointment, each Arbiter shall nominate three
candidates within 10 days thereafter, two of whom the other shall
decline, and the decision shall be made by drawing lots.
D. The Arbiters and the Umpire ("the Arbitration Panel") shall consider
this Agreement as an honorable engagement rather than merely as a legal
obligation, and they are relieved of all judicial formalities and may
abstain from following the strict rules of law. The majority decision
of the Arbitration Panel shall be final and binding on both Parties.
Judgment upon the final decision of the Arbitration Panel may be
entered in any court of competent jurisdiction.
E. Except as provided in sub-section G. of this Article, each Party shall
bear the expense of its own Arbiter, and shall jointly and equally bear
with the other the expense of the Umpire and of the arbitration. In the
event that the two Arbiters are chosen by one Party, as above provided,
the expense of the Arbiters, the Umpire and the arbitration shall be
equally divided between the two Parties.
F. Any arbitration proceedings shall take place in New York, New York.
G. The Arbitration Panel shall have the power to award costs, expenses,
and interest to the prevailing Party in an arbitration.
ARTICLE XV - ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the Parties regarding
the subject matter hereof and supercedes all prior agreements and
understandings, both written and oral and does not confer any rights or remedies
to any other party or any other person.
ARTICLE XVI - AMENDMENTS AND ALTERATIONS
This Agreement shall not be changed, supplemented, modified, or amended except
by an endorsement/addendum signed by the Parties and attached hereto.
ARTICLE XVII - NO WAIVER
No forbearance to enforce any provision or right hereunder shall be deemed a
waiver thereof, and no waiver of any breach of any terms or covenant herein
shall be construed as a waiver of any other breach of the same, or any other
term or covenant herein.
ARTICLE XVIII - CONSTRUCTION
This Agreement is the result of arms-length negotiations between the Parties and
has been prepared jointly by the Parties. In applying and interpreting the
provisions of the Agreement, there shall be no presumption that either the
Company or the Indemnitor prepared this Agreement, or that this Agreement shall
be construed in favor of or against either the Company or the Indemnitor.
ARTICLE XIX - NOTICES
Any notice or other communication required or permitted hereunder shall be in
writing and shall be delivered personally, telegraphed, telexed, sent by
facsimile transmission, or sent by certified, registered or express mail,
postage prepaid, to:
If to the Indemnitor, to:
Xxxxxx Xxxx
President, Gibraltar Operations
Prudential Insurance Company of America
Xxxxxxxxxx Xxxxxxxxx Xxxxxx, Xxxxxxxx 0
000 Xxxx Xx. Xxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Phone: 000-000-0000
Fax: 000-000-0000
If to the Company, to:
Xxxxx X. Xxxxx
Senior Vice President and General Counsel
Everest Reinsurance Holdings
000 Xxxxxxxxxxxx Xxxx
X.X. Xxx 000
Xxxxxxx Xxxxxx, XX 00000
Phone: 000-000-0000
Fax: 000-000-0000
ARTICLE XX - GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York.
IN WITNESS WHEREOF, the Company, by its duly authorized representative, has
executed this Agreement as of the date undermentioned at:
____________, ____________, this ____________ day of _____________________ 2000.
--------------------------------------------------------------------------------
IN WITNESS WHEREOF, the Indemnitor, by its duly authorized representative, has
executed this Agreement as of the date undermentioned at:
____________, ____________, this ____________ day of _____________________ 2000.
-------------------------------------------------------
Exhibit D
Form of Additional Stop-Loss Agreement
--------------------------------------
See Attached Agreement
INDEMNITY AGREEMENT
between
GIBRALTAR CASUALTY COMPANY, a Delaware Corporation
(hereinafter referred to as the "Company")
and
PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey Corporation
(hereinafter referred to as the "Indemnitor")
(Both the Company and the Indemnitor collectively are referred to as the
"Parties" and individually as "Party")
WHEREAS, the Indemnitor and Everest Reinsurance Holdings, Inc., a Delaware
corporation ("Holdings"), have executed a Stock Purchase Agreement dated
________ ("Sale Agreement") wherein Holdings will purchase from the Indemnitor
all issued and outstanding shares of the Company, a wholly-owned subsidiary of
the Indemnitor.
WHEREAS, as of the "Closing Date," as this term is defined in the Sale
Agreement, the Company has outstanding "Loss Reserves," as defined in the Sale
Agreement, relating to all Policies, as defined herein, in the amount stated in
the "Closing Date Financial Statement," as defined in the Sale Agreement.
WHEREAS, the Company also has potential adverse Loss Reserves development
("Adverse Loss Development"), as defined herein, and the Company desires
indemnity coverage for such Adverse Loss Development.
NOW, THEREFORE, in consideration of mutual covenants, representations,
warranties, and agreements contained herein and in the Sale Agreement, the
Parties agree as follows:
ARTICLE I - CLASSES OF BUSINESS COVERED
A. By this Agreement and subject to the terms and conditions set
forth below, the Indemnitor agrees to indemnify the Company for
the Adverse Loss Development that may accrue to the Company under
all policies, contracts, and binders of insurance or reinsurance
(hereinafter "Policies") issued or renewed by the Company prior to
the Closing Date.
B. Adverse Loss Development is defined as the Company's Ultimate
Net Loss that is in excess of the Loss Reserves carried
by the Company at the Closing Date. Subject to the
Indemnitor's Limit of Liability set forth in Article V hereof,
the Indemnitor shall pay the Company for the Adverse Loss
Development paid by the Company, provided that the Company has
paid an amount equal to the Loss Reserves carried by the Company
at the Closing Date. Provided, however, that this Agreement shall
not apply to the first four million dollars ($4,000,000) of
any Settlement Concessions on Gibraltar-Sourced Business, as those
terms are defined in the Quota Share Indemnification Agreement
between the Parties ("Quota Share Indemnification Agreement"), in
excess of Settlement Concessions listed on Schedule A to the Quota
Share Indemnification Agreement.
C. "Ultimate Net Loss" is defined as the Company's determination of
the sum or sums (including Loss Adjustment Expenses, as defined
herein) incurred by the Company in settlement of claims and in
satisfaction of judgments rendered on account of such claims under
all Policies, after deduction of all reinsurance and insurance
recoveries and subrogation and salvage recoveries collected and
received by the Company and losses paid prior to the Closing Date.
Nothing herein shall be construed to mean that losses under this
Agreement are not recoverable until the Company's Ultimate Net
Loss has been ascertained. Ultimate Net Loss shall not include
Loss in Excess of Policy Limits or Extra Contractual Obligations
(as defined herein) incurred by the Company.
ARTICLE II - COMMENCEMENT AND TERMINATION
A. This Agreement shall become effective on the Closing Date and shall
continue in force thereafter until two (2) years after the earlier of
when (i) the Company settles all claims under all Policies, or (ii) the
Indemnitor exhausts its Limits of Liability as set forth in Article V.
B. Neither Party may terminate this Agreement.
ARTICLE III - TERRITORY
The territorial scope of this Agreement shall be identical to that of the
Policies covered hereunder.
ARTICLE IV - CONSIDERATION
The consideration for the indemnity coverage is included in the consideration
for the Sale Agreement and is deemed paid as of the Closing Date. No further
consideration shall be due to the Indemnitor.
ARTICLE V - INDEMNITOR'S LIMIT OF LIABILITY AND COMPANY'S RETENTION
The Indemnitor shall pay to the Company an 80% quota share interest of the first
two hundred million dollars ($200,000,000) of Adverse Loss Development paid by
the Company, with the Indemnitor's maximum liability under this Agreement
limited to one hundred and sixty million dollars ($160,000,000). The Company may
reinsure its 20% quota share retention in the first two hundred million dollars
($200,000,000) of Adverse Loss Development only with an affiliate within its
insurance holding company system, with `affiliate' and `insurance holding
company system' having the meanings set forth under Section 5001 of the Delaware
Insurance Code. Such reinsurance by the Company of any share of its 20% quota
share retention with an affiliate is permissible only if the assuming affiliate
fully retains and does not further cede or retrocede any share of its assumption
of the 20% quota share retention, except to another affiliate of the Company;
and any affiliate of the Company which assumes some share of the Company's 20%
quota share retention under this provision shall be subject to the same
prohibition on ceding or retroceding any share of the Company's 20% quota share
retention to any person or entity that is not an affiliate of the Company.
ARTICLE VI - LOSS IN EXCESS OF POLICY LIMITS/EXTRA CONTRACTUAL OBLIGATIONS
Ultimate Net Loss shall not include any amounts that the Company pays or is held
liable to pay in excess of its Policy limit, but otherwise within the terms of
its Policy ("Loss in Excess of Policy Limits"), or any punitive, exemplary,
compensatory or consequential damages ("Extra Contractual Obligations"), because
of alleged or actual bad faith or negligence on its part in rejecting a
settlement within Policy limits, or in discharging its duty to defend or prepare
the defense in the trial of an action against its policyholder, or in
discharging its duty to prepare or prosecute an appeal consequent upon such an
action, or in otherwise handling a claim under a Policy.
ARTICLE VII - OTHER REINSURANCE
Subject always to the retention provision set forth in Article V above, on or
after the Closing Date, the Company shall be permitted to obtain other
reinsurance, recoveries under which shall inure solely to the benefit of the
Company and all recoveries under such other reinsurance shall be entirely
disregarded in applying all of the provisions of this Agreement; provided,
however, that the Quota Share Indemnification Agreement shall inure to the
benefit of this Agreement.
ARTICLE VIII - LOSS ADJUSTMENT EXPENSES
Loss Adjustment Expenses shall include both allocated and unallocated loss
expenses and shall be included in the Ultimate Net Loss, and are defined as all
expenses of the Company, including expenses for declaratory judgment actions,
monitoring of underlying litigation or claims, and coverage opinions, incurred
by the Company in the settlement, investigation, defense, or adjustment of all
claims under all Policies.
ARTICLE IX - SUBROGATION AND SALVAGE
The Indemnitor shall be credited with subrogation and salvage collected and
received by the Company, less the actual cost, excluding salaries and expenses
of officials and employees of the Company respecting their time spent on
subrogation and salvage recoveries and also excluding sums paid to any attorney
as a retainer in obtaining such reimbursement or making such recovery, on
account of claims and settlements involving the indemnity coverage hereunder.
Enforcement of subrogation and salvage rights shall be determined solely by the
Company.
ARTICLE X - ORIGINAL CONDITIONS
A. The Indemnitor shall follow the fortunes of the Company for it Ultimate
Net Loss for all loss settlements and shall pay as paid by the Company.
B. The indemnity coverage provided under this Agreement shall be subject
to all interpretations, modifications, waivers, and alterations of the
Policies; provided, however, that the agreements set forth on Exhibit A
hereto that are in force as of the Closing Date shall remain in force
during the term of this Agreement and shall not be modified or altered
during the term of this Agreement, unless otherwise mutually agreed by
the Parties.
C. Nothing herein shall in any manner create any obligations or establish
any rights against the Indemnitor in favor of any third party or any
person not a Party to this Agreement.
ARTICLE XI - REPORTS AND REMITTANCES
A. The first statement of account shall be due to the Indemnitor from the
Company forty-five (45) days after the close of the first fiscal
quarter that includes the Closing Date.
B. Thereafter, the Company shall submit quarterly statements of account
("quarterly reports") within forty-five (45) days after the end of each
calendar quarter.
C. Such quarterly reports shall be sent by both facsimile transmission and
United States Postal Service or any other delivery service used by the
Company.
D. Such quarterly reports shall be in the form attached hereto as
Exhibit A, or in any other form mutually agreed by the Parties.
E. Remittances shall be on a "Net Basis," defined as amounts owed between
the Parties under this Agreement.
F. Remittances shall be due to the Company from the Indemnitor within
forty-five (45) days from the date of receipt of the facsimile
transmission of each quarterly report.
G. Failure of a Party to pay amounts owed when due under this Agreement
shall result in imposition on that Party of an interest penalty equal
to the rate of interest announced by Citibank, N.A. as its prime or
base rate as of the due date of any remittance, calculated on the basis
of the actual number of days elapsed past the due date of any
remittance divided by three-hundred-and-sixty-five (365) days and
payment of other losses, costs, and expenses accrued or incurred by the
other Party as a result of the late payment.
ARTICLE XII - OFFSET
The Company and the Indemnitor shall have the right to offset any balance or
amounts due from one Party to the other under this Agreement.
ARTICLE XIII - ACCESS TO RECORDS
A. The Company shall place at the disposal of the Indemnitor at all
reasonable times, and the Indemnitor will have the right to inspect,
all books, records, and papers of the Company in connection with any
indemnity coverage hereunder or any claims in connection herewith.
B. All records reviewed by the Indemnitor are deemed proprietary and
confidential property of the Company. Further, unless pursuant to the
express, written permission of the Company, the Indemnitor shall not
disclose the contents of such information to any other person, persons,
entity, or entities; provided, that the Indemnitor may disclose such
information or portions thereof in connection with any arbitration
hereunder or any legal or regulatory process, or to its directors,
officers and employees and the directors, officers and employees of its
affiliates and to its agents, representative, attorneys, accountants,
auditors, reinsurers (collectively, "the Indemnitor's
Representatives"), in each case, who have a legitimate need to know
such information (which would include, but not be limited to the right
to dispute and/or assess in furtherance of a dispute) and who are
informed of and agree to be bound by the confidentiality terms of this
Agreement. The Indemnitor shall indemnify and hold harmless the Company
for all damages resulting from any unauthorized disclosure by the
Indemnitor or the Indemnitor's Representatives of records obtained
pursuant to this Article.
ARTICLE XIV - ERRORS AND OMISSIONS
Inadvertent delays, errors or omissions in connection with this Agreement or any
transaction hereunder shall not relieve either Party of any liability which
would have attached had such delay, error or omission not occurred, provided
always that such error or omission is rectified as soon as possible after
discovery.
ARTICLE XV - SECURITY
A. If the Company determines that it is unable to take credit in any
financial statement filed with its domiciliary insurance regulator for
the indemnity coverage provided hereunder, or if the Indemnitor's
Financial Strength Rating published by A.M. Best becomes less than
"A-," the Indemnitor agrees to fund its share of Adverse Loss
Development (and to replenish such funding from time to time as
necessary) by:
15. Clean, irrevocable and unconditional letters of credit issued and
confirmed, if confirmation is required by the insurance regulatory
authorities involved, by a qualified United States financial institution as
provided in Delaware Insurance Code Title 18, Chapter 9 and Delaware
Department of Insurance Regulation 79 and acceptable to said insurance
regulatory authorities;
16. cash; and/or
17. a Trust in compliance with Delaware Insurance Code Title 18, Chapter 9 and
Delaware Department of Insurance Regulation 79.
B. With regard to funding in whole or in part by letters of credit, it is
agreed that each letter of credit will be in a form that would be
acceptable to the Company's domiciliary insurance regulatory authority,
will be issued for a term of at least one year and will include an
"evergreen clause," that automatically extends the term for at least
one additional year at each expiration date unless written notice of
non-renewal is given to the Company not less than 30 days prior to said
expiration date. The Company and the Indemnitor further agree that said
letters of credit may be drawn upon by the Company or its successors in
interest at any time, without diminution because of the insolvency of
the Company or the Indemnitor, but only for one or more of the
following purposes:
1. To reimburse itself for the Indemnitor's share of paid Adverse Loss
Development, unless paid in cash by the Indemnitor;
2. To reimburse itself for the Indemnitor's share of any other amounts claimed
to be due hereunder, unless paid in cash by the Indemnitor;
3. To fund a cash account in an amount equal to the Indemnitor's share of
Adverse Loss Development funded by means of a letter of credit that is
under non-renewal notice, if said letter of credit has not been renewed or
replaced by the Indemnitor 10 days prior to its expiration date;
4. To refund to the Indemnitor any sum in excess of the actual amount required
to fund the Indemnitor's share of Adverse Loss Development and other
amounts claimed to be due hereunder, if so requested by the Indemnitor.
C. In the event the amount drawn by the Company on any letter of
credit is in excess of the actual amount required for B(1),
B(3) or B(4), or in the case of B(2), the actual amount
determined to be due, the Company shall promptly return to the
Indemnitor the excess amount so drawn.
D. In the event of funding through a Trust:
1. The Indemnitor shall establish a Trust
Account for the benefit of the Company to
fund the amounts receivable under the
Agreement.
2. The assets deposited into the Trust Account
shall be valued according to their current
fair market value and shall consist only of
cash (United States legal tender),
certificates of deposit (issued by a United
States bank and payable in United States
legal tender) and investments of the type
permitted by the Delaware Insurance Code or
any combination of the above, provided that
such investments are issued by an
institution that is not the parent,
subsidiary or affiliate of either the
Indemnitor or the Company;
3. The Indemnitor, prior to depositing assets
with the trustee, shall execute assignments,
endorsements in blank, or transfer legal
title to the trustee of all shares,
obligations or any other assets requiring
assignments, in order that the Company, or
the trustee upon the Company's direction,
may whenever necessary negotiate any such
assets without consent or signature from the
Indemnitor or any other entity;
4. All settlements of account between the
Indemnitor and the Company shall be in cash
or its equivalent;
5. The assets in the trust account may be
withdrawn by the Company at any time,
notwithstanding any other provisions in this
Agreement, and shall be utilized by the
Company or any successor by operation of
law, including without limitation any
liquidator, rehabilitator, receiver or
conservator of the Company, for the purposes
set forth in paragraphs B(1) -B(4) above.
ARTICLE XVI - INSOLVENCY
In the event of the insolvency of the Company, the indemnity coverage hereunder
shall be payable directly to the Company or to its liquidator, receiver,
conservator or statutory successor on the basis of the amount of claim allowed
in the insolvency proceeding without diminution by reason of the inability of
the Company to pay all or any part of the claim. It is agreed, however, that the
liquidator, receiver, conservator or statutory successor of the Company shall
give written notice to the Indemnitor of the pendency of a claim against the
Company, indicating the Policy or bond covered hereunder which claim would
involve a possible liability on the part of the Indemnitor, within a reasonable
time after such claim is filed in the conservation or liquidation proceeding or
in the receivership, and that during the pendency of such claim, the Indemnitor
may investigate such claim and interpose, at its own expense, in the proceeding
where such claim is to be adjudicated, any defense or defenses that it may deem
available to the Company or its liquidator, receiver, conservator or statutory
successor. The expense thus incurred by the Indemnitor shall be chargeable,
subject to the approval of the Court, against the Company as part of the expense
of conservation or liquidation to the extent of a pro rata share of the benefit
which may accrue to the Company solely as a result of the defense undertaken by
the Indemnitor.
ARTICLE XVII - ARBITRATION
A. Except with respect to disputes arising out of or in connection with
Article XIII above (Access to Records), as a condition precedent to any
right of action hereunder, in the event of any dispute or difference of
opinion hereafter arising with respect to this Agreement, including its
formation and validity, it is hereby mutually agreed that such dispute
or difference of opinion shall be submitted to arbitration.
B. Except as provided in subsections A. and D. of this Article or with
respect to judicial proceedings instituted in aid of arbitration, this
Article shall constitute a waiver of the Parties' rights to commence an
action in any court of competent jurisdiction in the United States, to
remove an action to a United States District Court, or to seek a
transfer of a case to another court as might otherwise be permitted by
the laws of the United States or of any State or other jurisdiction in
the United States.
C. One Arbiter shall be chosen by the Company, the other by the
Indemnitor, and an Umpire shall be chosen by the two Arbiters before
they enter upon arbitration, all of whom shall be active or retired
disinterested executive officers of United States domiciled insurance
or reinsurance companies. In the event that either Party should fail to
choose an Arbiter within 30 days following a written request by the
other Party to do so, the requesting Party may choose two Arbiters who
shall in turn choose an Umpire before entering upon arbitration. If the
two Arbiters fail to agree upon the selection of an Umpire within 30
days following their appointment, each Arbiter shall nominate three
candidates within 10 days thereafter, two of whom the other shall
decline, and the decision shall be made by drawing lots.
D. The Arbiters and the Umpire ("the Arbitration Panel") shall consider
this Agreement as an honorable engagement rather than merely as a legal
obligation, and they are relieved of all judicial formalities and may
abstain from following the strict rules of law. The majority decision
of the Arbitration Panel shall be final and binding on both Parties.
Judgment upon the final decision of the Arbitration Panel may be
entered in any court of competent jurisdiction.
E. Except as provided in sub-section G. of this Article, each Party shall
bear the expense of its own Arbiter, and shall jointly and equally bear
with the other the expense of the Umpire and of the arbitration. In the
event that the two Arbiters are chosen by one Party, as above provided,
the expense of the Arbiters, the Umpire and the arbitration shall be
equally divided between the two Parties.
F. Any arbitration proceedings shall take place in New York, New York.
G. The Arbitration Panel shall have the power to award costs, expenses,
and interest to the prevailing Party in an arbitration.
ARTICLE XVIII - ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the Parties regarding
the subject matter hereof and supercedes all prior agreements and
understandings, both written and oral and does not confer any rights or remedies
to any other party or any other person.
ARTICLE XIX - AMENDMENTS AND ALTERATIONS
This Agreement shall not be changed, supplemented, modified, or amended except
by an endorsement/addendum signed by the Parties and attached hereto.
ARTICLE XX - NO WAIVER
No forebearance to enforce any provision or right hereunder shall be deemed a
waiver thereof, and no waiver of any breach of any term or covenant herein shall
be construed as a waiver of any other breach of the same, or any other covenant
herein.
ARTICLE XXI - CONSTRUCTION
This Agreement is the result of arms-length negotiations between the Parties and
has been prepared jointly by the Parties. In applying and interpreting the
provisions of this Agreement, there shall be no presumption that either the
Company or the Indemnitor prepared this Agreement, or that this Agreement shall
be construed in favor of or against either the Company or the Indemnitor.
ARTICLE XXII - NOTICES
Any notice or other communication required or permitted hereunder shall be in
writing and shall be delivered personally, telegraphed, telexed, sent by
facsimile transmission, or sent by certified, registered or express mail,
postage prepaid, to :
If to the Indemnitor, to:
Xxxxxx Xxxx
President, Gibraltar Operations
Prudential Insurance Company of America
Xxxxxxxxxx Xxxxxxxxx Xxxxxx, Xxxxxxxx 0
000 Xxxx Xx. Xxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Phone: 000-000-0000
Fax: 000-000-0000
If to the Company, to:
Xxxxx X. Xxxxx
Senior Vice President and General Counsel
Everest Reinsurance Holdings
000 Xxxxxxxxxxxx Xxxx
X.X. Xxx 000
Xxxxxxx Xxxxxx, XX 00000
Phone: 000-000-0000
Fax: 000-000-0000
ARTICLE XXIII - GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York.
IN WITNESS WHEREOF, the Company, by its duly authorized representative, has
executed this Agreement as of the date undermentioned at:
____________, ____________, this ____________ day of __________________ 2000.
--------------------------------------------------------------------------------
IN WITNESS WHEREOF, the Indemnitor, by its duly authorized representative, has
executed this Agreement as of the date undermentioned at:
____________, ____________, this ____________ day of ___________________ 2000.
-------------------------------------------------------
The following constitutes the Disclosure Schedule as called
for and referred to in the Stock Purchase Agreement (the "AGREEMENT") dated as
of February 24, 2000 between The Prudential Insurance Company of America (the
"SELLER") and Everest Reinsurance Holdings, Inc. (the "PURCHASER"). This
Disclosure Schedule constitutes a part of the Agreement.
Capitalized terms used in this Disclosure Schedule shall have
the same meanings as in the Agreement.
Inclusion of any item under any paragraph hereof shall not be
deemed to be an admission that disclosure of such item is in fact required
pursuant to the Agreement or that the Seller or Gibraltar failed to perform any
obligation in fact required to be performed by either of them.
Headings included herein are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Disclosure
Schedule.
Schedule 3.5
Consents
--------
1. Service Contract dated May 1, 1997 between Gibraltar Casualty
Company and Prudential Property and Casualty Company, as amended.
2. Service Agreement between IRISC, Inc. (n/k/a Cambridge Integrated
Services Group) and Gibraltar Casualty Company, as amended.
3. Technology Service Agreement between IRISC, Inc. (n/k/a Cambridge
Integrated Services Group) and Gibraltar Casualty Company.
4. Letter Agreement between Datasure International Limited, IRISC,
Inc. (n/k/a Cambridge Integrated Services Group), and Gibraltar Casualty Company
relating to the Program License and Support Services Agreement between Datasure
International Limited and RHH Group.
5. Software License Agreement dated April 19, 1995 between The Freedom
Group, Inc. ("TFG") and Gibraltar Casualty Company as amended.
6. Software License Agreement between Datalight Software and The
Prudential Insurance Company of America for the Use of the Concordance
Information Retrieval System by Gibraltar Casualty Company.
Schedule 3.7
Statutory Statements
--------------------
NONE
Schedule 3.9
Liens on the Investments of Gibraltar
-------------------------------------
NONE
Schedule 3.10
Changes and Events since December 31, 1999
------------------------------------------
1 Adjustments to Loss Reserves required pursuant to Section 5.10.
2 Retirement and removal of Xxxxxx Xxxxxxxx as General Counsel of
Gibraltar Casualty Company and Assistant General Counsel of The Prudential
Insurance Company of America.
3 In connection with the retirement and removal of Xxxxxx Xxxxxxxx, the
following changes to the directors and officers of Gibraltar Casualty Company
are effective as of February 16, 2000:
o Appointment of Xxxxxx Xxxx to the Board of Directors;
o Appointment of Xxxxxx Xxxx as Senior Vice President;
o Appointment of Xxxxxx Poles as General Counsel;
o Resignation of Xxxxxx Poles as Corporate Secretary;
o Appointment of Xxxxxxx Rant as Corporate Secretary;
o Resignation of Xxxxxxx Rant as Assistant Corporate Secretary; and
o Appointment of Xxxxx Kill as Assistant Corporate Secretary.
4 Retirement of Xxxx Xxxxxxx, President of Gibraltar Casualty Company on
February 28, 2000.
5 In connection with the retirement of Xxxx Xxxxxxx, the following
changes will occur to the directors and officers of Gibraltar Casualty Company,
effective as of February 28, 2000.
o Resignation of Xxxx Xxxxxxx from the Board of Directors and as
President;
o Resignation of Xxxxxx Xxxx as Senior Vice President; and
o Appointment of Xxxxxx Xxxx as President.
Schedule 3.11
Liabilities of Gibraltar which under GAAP are required to be disclosed
----------------------------------------------------------------------
NONE
Schedule 3.12
Pending or Threatened Insurance Claims or Assessments
-----------------------------------------------------
NONE
Schedule 3.13
Judgments, Decrees and Orders in Restraint of Business
------------------------------------------------------
1. Order by Judge Xxxxxx X. Xxxxx, U.S.D.J., dated September 15, 1995.
2. Order by Judge Xxxxxx X. Xxxxx, U.S.D.J., dated February 11, 1997.
3. Order by Judge Xxxxxx X. Xxxxx, U.S.D.J., dated March 23, 1999.
Schedule 3.14
Material Actions, Suits, Arbitrations or Legal,
-----------------------------------------------
Administrative or Other Proceedings
-----------------------------------
--------------------------------------------------------------------------------
CAPTION POLICYHOLDER COURT
--------------------------------------------------------------------------------
Aerojet General Corp. v. Certain Aerojet General Corp. CA Appellate Court
Underwriters of Lloyds, et al.,
CA State Ct. Case No. 98A 500358
--------------------------------------------------------------------------------
Certain Underwriters at Lloyd's v. Amax Minerals NM Judicial Court
Cypress Amax, Second, Judicial
District, N.M., Docket No. CV
98-11897
--------------------------------------------------------------------------------
Cyprus Amax Minerals Co., et al. v. Amax Minerals CA Superior Court
Allianz Insurance Co., et al, CA
State Ct., Docket No. BC 198946
--------------------------------------------------------------------------------
MRC Holdings, Inc. v. Employers American Can NJ Superior Court
Insurance of Wausau, NJ Superior
Ct., Docket No L-12342-90
--------------------------------------------------------------------------------
XXX x. Asarco, NJ Superior Court, Asarco, Inc. NJ Superior Court
Docket No. L-6164-93
--------------------------------------------------------------------------------
Newmont Mining Corp., et al. v. Asarco, Inc. CO State Court
Casualty & Surety Co., Colorado
State Ct., Docket No 93-CV-4774
--------------------------------------------------------------------------------
Asarco, Inc. v. American Home Asarco, Inc. CO District Court,
Assurance Co., et al, District Xxxxxx
Xxxxx, Xxxx xxx Xxxxxx xx Xxxxxx,
XX
--------------------------------------------------------------------------------
Xxxxxx Ins. Co. x. Xxxxxx Baxter (HIV) IL Circuit Court
International, Inc., et al. Cir.
Ct. IL, Docket No. 94MR46
--------------------------------------------------------------------------------
Beckton Xxxxxxxxx and Company x. Xxxxxx Xxxxxxxxx NJ Superior Court
Adriatic Ins. Co. et al., NJ
Superior Ct., Docket No. C 35-99
--------------------------------------------------------------------------------
Smithkline Xxxxxxx Corp. v. Aetna Xxxxxxx, Inc. NJ Superior Court
et al., NJ Superior Ct., Docket
No. L-007799-94
--------------------------------------------------------------------------------
Nosroc Corporation v. Allianz CCR Member; U.S. District
Underwriters Ins. Co., et al., IU International Court, E.D. PA
US District Court, E.D. PA Civil
Action No. 93-CV-0215
--------------------------------------------------------------------------------
-79-
--------------------------------------------------------------------------------
CAPTION POLICYHOLDER COURT
--------------------------------------------------------------------------------
Commercial Union Ins. Co. and CCR Member: NY Supreme Court
Continental Casualty Co. v. Pfizer, Inc.
Pfizer, Inc., et al., NY State
Sup. Ct., Index No. 28936/91
--------------------------------------------------------------------------------
Pfizer, Inc. and Xxxxxxx CCR Member: U.S. District Ct.,
Company, Inc. v. Affiliated FM Pfizer, Inc. E.D. PA
Insurance Co., et al., U.S.
District Court, E.D. PA, Case
No. 93-CV-0215
--------------------------------------------------------------------------------
Continental Casualty Company v. CCR Member: IL Circuit Court
Maremont Corp; Ferodo America Maremont Corp.
Inc., as successor to Nuturn
Corp., Cir. Ct. IL Docket Xx.
00 XX 0000
--------------------------------------------------------------------------------
American Motorist et al v. Celanese Corporation Court of Common
Hoechst Celanese Corp., Pleas, SC
SC State Ct., Docket No.,
97-CP-23
--------------------------------------------------------------------------------
American Motorist et al v. Celanese Corporation TX District Court
Hoechst Celanese Corp., Dist.
Ct. of Dallas, Texas, Cause
No. 9700133-1
--------------------------------------------------------------------------------
The Coastal Corp., et al v. Coastal Corp. CA Superior Court
The Aetna Casualty and Surety
Co., CA State Ct., Case No.
BC154152
--------------------------------------------------------------------------------
Commonwealth Oil Refining Co. v. Commonwealth Oil NJ Superior Court
Commercial Ins. Co., et al., NJ Refining Company
Superior Court MID-L8792-94
--------------------------------------------------------------------------------
Consolidated Rail Corporation v. Consolidated Rail Court of Common
Certain Domestic Insurance Corp. Pleas, PA
Companies, Pennsylvania Court of
Common Pleas, Philadelphia County,
Civil Action No. July, 1998,
001370
--------------------------------------------------------------------------------
Eljer Industries, Inc., et al, x. Xxxxx-Xxxxxxx Corp. U.S. District
Aetna Casualty & Surety Co., U.S. Court, IL, E.D.
D.C. Northern District of Illinois,
Eastern Division, Docket Xx.
00 X 0000
--------------------------------------------------------------------------------
Xxx Xxxxxxx Ins. x. Xxxxx-Xxxxxxx Xxxxx-Xxxxxxx Corp. NY Supreme Court
Xxxxx, et al., NY Sup. Ct., Docket
No. 97-119830
--------------------------------------------------------------------------------
E.I. du Pont de Nemours & Company v. E.I. du Pont DE Superior Court
Allstate Insurance Company, et al.,
DE Superior Court, New Castle Cty.,
Docket No. 99C-12-253 HLA
--------------------------------------------------------------------------------
-80-
--------------------------------------------------------------------------------
CAPTION POLICYHOLDER COURT
--------------------------------------------------------------------------------
Xxx Xxxxx & Co. v. The Aetna Xxx Lilly & Company IN State Court
Casualty & Surety Co. et al.,
State Court of Indiana, Xxxxxx
County, Cause No. 49D059703CP0422
--------------------------------------------------------------------------------
Home Insurance Co. x. Xxxxxxx Federal Pacific NJ Superior Court
Dubilier, et al., NJ Superior Ct., Electric Co &
Docket No. MER-L-5192-96
--------------------------------------------------------------------------------
GenCorp Inc., v. AIU Insurance Gencorp, Inc. U.S. District
Company, et al., U.S. District Court, OH, N.D.
Northern District of Ohio, Docket
5:95-CV-2464
--------------------------------------------------------------------------------
Allstate Ins. Co., et al. v. General Electric NY Supreme Court
General Electric, et al., NY
State Sup. Ct., Docket
601883-97
--------------------------------------------------------------------------------
General Electric Company v. General Electric TX State Court
Adriatic Ins. Co. et al., 000xx
Xxxxxxxx Xx. of Jefferson
County, TX
--------------------------------------------------------------------------------
Aetna v. Goodyear Tire & Rubber Goodyear Tire & Court of Common
Company, Ohio Court of Common Rubber Co. Pleas, OH
Pleas, Summit County, Ohio Case
No. CV93-093226
--------------------------------------------------------------------------------
Viacom International Inc. v. Gulf & Western NJ Superior Court
Admiral Insurance Company, et al.,
NJ Xxxxxxxx Xxxxx, Xxxxxx Xx.
XXX X-0000-00
--------------------------------------------------------------------------------
Hercules, Inc. v. Aetna et al., Hercules, Inc. DE Superior Court
Superior Courr of the State of
Delaware, New Castle County,
Docket No. CA Nos. 92C-10-105
and 90C-FE-195-1-CV
--------------------------------------------------------------------------------
Lonza, Inc. v. Hartford Accident Lonza, Inc. NJ Superior Court
and Indemnity Co., et al., NJ
Superior Ct., Docket No. BER-
11037-97
--------------------------------------------------------------------------------
The Xxxx Corporation v. Aetna Xxxx Corp. AL Circuit Court
Casualty and Surety Company,
Circuit Court of Jefferson
County, Alabama, Civil Action
No. CV-97-5117
--------------------------------------------------------------------------------
Merck & Co., Inc. v. Federal Merck & Co., Inc. NJ Superior Court
Ins. Co., et al., NJ Superior
Court, Docket No. C-340-96
--------------------------------------------------------------------------------
First State Ins. Co. v. Minnesota Minnesota Mining & MN State Court
Mining & Minerals, Minn. State, Minerals Corp.
County of Xxxxxx, No. C3 94-12780
--------------------------------------------------------------------------------
-81-
--------------------------------------------------------------------------------
CAPTION POLICYHOLDER COURT
--------------------------------------------------------------------------------
Minnesota Mining and Manufacturing Minnesota Mining & US District Court,
Co. v. Abeille Reassurances, et al., Minerals Corp. Eastern District,
Eastern District Court of Eastern TX
TX, Docket No. 29SCV0005
--------------------------------------------------------------------------------
Exxon Mobil Corporation, et al. v. Mobile Oil/Bluefield TX State Court
Certain Underwriters at Lloyd's Oil/Superior Oil
London, et al., Xxxxxx, County, TX,
Docket No. 2000-02117
--------------------------------------------------------------------------------
Certain Underwriters at Lloyd's, Mobile Oil/Bluefield NY Supreme Court
London, v. Mobil Corporation, The Oil/Superior Oil
Superior Oil Company, Certain
London Market Insurance Companies,
et al., NY Supreme Court, Index No.
600006/00 (Justice Gammerman)
--------------------------------------------------------------------------------
Xxxxxx Oil USA, Inc. v. United Xxxxxx Oil, USA Inc. AK Circuit Court
States Fidelity Guaranty Company,
et al., Circuit Court of Union
County, Arkansas, Docket No.
91-439-2
--------------------------------------------------------------------------------
American Premier Underwriters, Penn Central Marathan Court of Common
Inc. v. Certain Underwriters at Manufacturing Co. Pleas, OH
Lloyd's , et al., Ct. of Common
Pleas, Xxxxxxxx Cty., Ohio State
Court, Docket No. A97703088
--------------------------------------------------------------------------------
Elf Atochem NA, Inc. v. The Aetna Pennwalt Corp. TX District Court
Casualty & Surety Co., et al.,
Xxxxxxxx County, TX Docket No.
94-1018
--------------------------------------------------------------------------------
American Employer's Insurance Pennwalt Corp. NJ Superior Court
Company, et al., v. Elf Atochem NA,
Inc. et al., NJ Superior Court
Docket No. L-533394
--------------------------------------------------------------------------------
Pfizer Inc. v. Employers Inc. Pfizer, Inc. NJ Superior Court
Company of Wausau et al., NJ
Superior Court Docket No.
C108-92
--------------------------------------------------------------------------------
PPG Industries, Inc. v. Accident PPG Industries, Inc. NJ Superior Court
and Casualty Insurance Company of
Winterhur, et al., NJ Superior
Ct. Docket No. HUD-L-1845-95
--------------------------------------------------------------------------------
Rohm & Xxxx v. United States Rohm & Xxxx Company NJ Superior Court
Liability Insurance Company,
et al., NJ Superior Ct.,
Docket No. XXXX-004664-95
--------------------------------------------------------------------------------
Rohm & Xxxx Texas Inc. v. AIU Rohm & Xxxx Company TX State Court
Ins. Co. et al., Xxxxx Xx. Xx.,
Xxxxxxxxx XX, Xxxxxx Xx.
X000000
--------------------------------------------------------------------------------
-82-
--------------------------------------------------------------------------------
CAPTION POLICYHOLDER COURT
--------------------------------------------------------------------------------
RSR Corp et al., v. AIU Ins. RSR Corp. TX District Court
Co., et al., Xxxxxxxx County
Texas, Case No. 930127
--------------------------------------------------------------------------------
The Xxxxxxx-Xxxxxxxx Company v. Xxxxxxx Xxxxxxxx Court of Common
Travelers Casualty and Surety Pleas, OH
Company et al., Docket No. 99-
399320-CV D13 CM, Ohio Court of
Common Pleas, Cuyahoga County
--------------------------------------------------------------------------------
Inland Paperboard and Packaging, Temple-Inland, Inc. IN Superior Court
Inc. v. Affiliated FM Insurance Time Inc.
Company, Indiana, Xxxxxx Superior
Court, Cause 49D05-9708-CP-1142
--------------------------------------------------------------------------------
Fidelity & Casualty Co. of NY v. Texas Eastern PA District Court
Texas Eastern Transmission Transmission Corp.
Corporation v. Associated Electric
Gas Insurance Services, Ltd., et
al., Docket No. 92-4804,
Pennsylvania District Court,
Eastern District
--------------------------------------------------------------------------------
Texas Eastern Transmission Corp. v. Texas Eastern TX District Court
Fidelity & Casualty Co., TX District Transmission Corp.
Court, Xxxxxx County, 000xx Xxxxxxxx
Xx., Xxxxxx Xx. 00-00000
--------------------------------------------------------------------------------
The Boeing Company v. Certain Boeing Company WA Superior Court
Underwriters at Lloyds, Washington
Superior Court
--------------------------------------------------------------------------------
Certain Underwriters of Lloyds v. Boeing Company Oregon Circuit
The Boeing Company Xxxxxx Xx. Xxxxx
0000-00000, Xxxxxx Circuit Court
--------------------------------------------------------------------------------
Crown Cork & Seal Co. Inc. v. Continental Group, NJ Superior Court
Travelers, et al., NJ Superior Inc.
Ct. MID-L-5965-95
--------------------------------------------------------------------------------
Continental Holdings, Inc. v. Continental Group, NJ Superior Court
AIU Ins. co., NJ Superior Ct. Inc.
MID-L-12453-91
--------------------------------------------------------------------------------
Sonoco Products v. American Continental Group, NJ Superior Court
Motorist Ins. Co., et al., NJ Inc.
Xxxxxxxx Xxxxx, Xxxxxx Xx.
XXX-X000000
--------------------------------------------------------------------------------
Uniroyal Inc. v. American Uniroyal Inc. NJ Superior Court
Reinsurance Company, et al.,
NJ Superior Ct., Docket No.
L-8172-94
--------------------------------------------------------------------------------
Xxxxxx Xxxxxxx Co. et al. x. Xxxxxx Xxxxxxx NJ Superior Court
The Admiral Ins. Co., et al., Company
NJ Superior Ct. Docket No.
3307-92
--------------------------------------------------------------------------------
-83-
--------------------------------------------------------------------------------
CAPTION POLICYHOLDER COURT
--------------------------------------------------------------------------------
Nepera, Inc. (plaintiff- Xxxxxx Xxxxxxx NJ Superior Court
intervenor) v. Admiral Insurance Company
Company, et al., NJ Superior
Court, Docket No. MIDLX-L-
10456-94
--------------------------------------------------------------------------------
Wheeling Pittsburgh Corp. and Wheeling Pittsburgh W VA Circuit Court
Wheeling Pittsburgh Steel Steel Corp.
Corporation v. American Insurance
Company, Virginia St. Ct. Civil
Action No. 93C-340
--------------------------------------------------------------------------------
Witco Corporation v. Adriatic Witco Corporation DE Superior Court
Insurance Company, et al.,
Docket Xx. 00X-00-00, Xxxxxxxx
Xxxxxxxx Xxxxx, Xxx Xxxxxx Xxxxxx
--------------------------------------------------------------------------------
BHP Copper Inc. (f/k/a Magma Copper City Services Arizona St. Ct.
Co.) v. Aetna Casualty & Surety
Co., et al. Docket No. cv.
2000-000808
--------------------------------------------------------------------------------
ARBITRATIONS OR LEGAL, ADMINISTRATIVE OR OTHER PROCEEDINGS
----------------------------------------------------------
1. Request for Information dated September 3, 1998 from the Attorney General of
the State of Minnesota to Gibraltar Casualty Company pursuant to the Landfill
Cleanup Act and letter dated January 19, 1999 from Gibraltar Casualty Company to
the Attorney General of the State of Minnesota.
2. Arbitration pending between Gibraltar Casualty Company and QBE Insurance &
Reinsurance (Europe) Limited pursuant to the Casualty Quota Share Reinsurance
Agreement.
-84-
Schedule 3.15
Jurisdiction of Incorporation and
---------------------------------
Jurisdictions of Qualification of Gibraltar
-------------------------------------------
JURISDICTION OF INCORPORATION
Delaware
LICENSED IN
Delaware
California
JURISDICTIONS OF QUALIFICATION
Alabama
Arkansas
California
Connecticut
District of Columbia
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Maine
Maryland
Massachusetts
Minnesota
Missouri
Montana
Nebraska
Nevada
New Jersey
North Dakota
Oregon
South Dakota
Tennessee
Vermont
Washington
West Virginia
Wisconsin
-85-
Wyoming
-86-
Schedule 3.16
Material Contracts with Affiliates, Officers, Directors and Interested Parties
------------------------------------------------------------------------------
1. Tax Allocation Agreement dated January 17, 1995 between The Prudential
Insurance Company of America and its Affiliates, including Gibraltar Casualty
Company.
2. Service Agreement dated May 10, 1990 between The Prudential Insurance
Company of America and Gibraltar Casualty Company.
3. Separation Agreement dated October 6, 1995 among The Prudential
Insurance Company of America, PRUCO, Inc., Gibraltar Casualty Company,
Prudential Reinsurance Holdings, Inc. and Prudential Reinsurance Company.
4. Surplus Maintenance Agreement dated December 18, 1991 between PRUCO,
Inc. and Gibraltar Casualty Company.
5. Investment Advisory Contract effective as of 1984 between Prudential
Investment Company and Gibraltar Casualty Company.
6. Loan Agreement dated November 21, 1996 between Gibraltar Casualty
Company and Prudential Funding Corporation.
7. Service Contract dated May 1, 1997 between Gibraltar Casualty Company
and Prudential Property and Casualty Company.
8. Occupancy Agreement dated July 1, 1995 between Gibraltar Casualty
Company and The Prudential Service Company.
-87-
Schedule 3.17
Compliance with Applicable Law
------------------------------
1. Notification dated May 7, 1999 from North Carolina Insurance Department
to Gibraltar Casualty Company advising that the Department is unable to
approve Gibraltar Casualty Company as an authorized reinsurer.
-88-
Schedule 3.20
Governmental Consents
---------------------
NONE
-89
Schedule 3.21
Contracts, Agreements or Arrangements
-------------------------------------
to which Gibraltar is a Party or by which
-----------------------------------------
Gibraltar's Assets or Property are bound
----------------------------------------
1. Separation Agreement dated October 6, 1995 among The Prudential
Insurance Company of America, PRUCO, Inc., Gibraltar Casualty Company,
Prudential Reinsurance Holdings, Inc. and Prudential Reinsurance Company.
2. Guarantee dated October 6, 1995 of The Prudential Insurance Company
of America in favor of Prudential Reinsurance Holdings, Inc. (n/k/a Everest
Reinsurance Holdings, Inc.).
3. Guarantee dated October 6, 1995 of The Prudential Insurance Company
of America in favor of Prudential Reinsurance Company (n/k/a Everest Reinsurance
Company).
4. Indemnification Agreement dated October 6, 1995 between PRUCO, Inc.
and Prudential Reinsurance Holdings, Inc. (n/k/a Everest Reinsurance Holdings,
Inc.).
5. Surplus Maintenance Agreement dated December 18, 1991 between PRUCO,
Inc. and Gibraltar Casualty Company.
6. Aggregate Stop Loss Retrocession Agreement dated October 6, 1995
between Gibraltar Casualty Company and Prudential Reinsurance Company.
7. Reinsurance Trust Agreement dated March 11, 1999 among Gibraltar
Casualty Company, Everest Reinsurance Company, and The Bank of New York.
8. Trust Agreement dated April 23, 1999 among Everest Reinsurance
Company, Gibraltar Casualty Company, and Bankers Trust Company.
9. Engagement Letter Agreement dated May 3, 1999 among Deloitte &
Touche LLP, Gibraltar Casualty Company and Everest Reinsurance Company as
suspended by Notice letter dated May 26, 1999 from Gibraltar Casualty Company
and Everest Reinsurance Company to Deloitte & Touche LLP suspending the
Engagement Letter Agreement.
10. Service Contract dated January 1, 1995 between Gibraltar Casualty
Company and Prudential Reinsurance Company.
11. Service Agreement dated May 10, 1990 between Gibraltar Casualty
Company and The Prudential Insurance Company of America.
12. Service Contract dated May 1, 1997 between Gibraltar Casualty Company
and Prudential Property and Casualty Company, as amended.
-90-
13. Service Agreement between IRISC, Inc. (n/k/a Cambridge Integrated
Services Group) and Gibraltar Casualty Company, as amended.
14. Technology Service Agreement between IRISC, Inc. (n/k/a Cambridge
Integrated Services Group) and Gibraltar Casualty Company.
15. Letter Agreement between Datasure International Limited, IRISC, Inc.
(n/k/a Cambridge Integrated Services Group) and Gibraltar Casualty Company
relating to the Program License and Support Services Agreement between Datasure
International Limited and RHH Group.
16. Software License Agreement dated April 14, 1995 between Gibraltar
Casualty Company and The Freedom Group, Inc.
17. Software License Agreement between Gibraltar Casualty Company and
Prudential Reinsurance Company.
18. Software License Agreement between Datalight Software and The
Prudential Insurance Company of America for the Use of the Concordance
Information Retrieval System by Gibraltar Casualty Company.
19. Investment Advisory Contract effective as of 1984 between Prudential
Investment Company and Gibraltar Casualty Company.
20. Tax Allocation Agreement executed on January 17, 1995 between The
Prudential Insurance Company of America and its Affiliates, including Gibraltar
Casualty Company, as amended.
21. Loan Agreement dated November 21, 1996 between Gibraltar Casualty
Company and Prudential Funding Corporation.
22. Letter Agreement dated May 26, 1999 between The Prudential Insurance
Company of America and Everest Reinsurance Company.
23. Confidentiality and Non-Disclosure Agreement dated May 6, 1998
between Everest Reinsurance Company, Gibraltar Casualty Company and Xxxxxxxxxxx-
Xxxxxx Xxxxxx.
24. Letter Agreement dated September 16, 1998 between Xxxxxxxxxxx-Xxxxxx
Xxxxxx and Everest Reinsurance Company.
25. Letter Agreement dated February 24, 1999 between Xxxxxxxx &
Xxxxxxxxx, Inc. and The Prudential Insurance Company of America.
-91-
26. Letter Agreement dated April 8, 1999 between Xxxxxxxxxxx-Xxxxxx
Xxxxxx and The Prudential Insurance Company of America.
27. Letter Agreement dated July 14, 1999 between Xxxxxxxxxxx-Xxxxxx
Xxxxxx and Gibraltar Casualty Company.
28. Occupancy Agreement dated July 1, 1995 between Gibraltar Casualty
Company and The Prudential Service Company.
29. Assignment Agreement dated September 17, 1998 among Prudential
Reinsurance Company (n/k/a Everest Reinsurance Company), Gibraltar Casualty
Company, and NationBank N.A.
30. Uniform Qualified Assignment Agreement effective May 1996 between
Gibraltar Casualty Company and Transamerica Annuity Service Corporation.
31. Tolling Agreement dated January 3, 2000, between Gibraltar Casualty
Company and Everest Reinsurance Company.
32. Letter Agreement dated January 4, 2000 between Gibraltar Casualty
Company and Everest Reinsurance Company.
Claim Agreements With Guaranteed Scheduled Payments
---------------------------------------------------
1. Settlement Agreement dated February 1997 with Bristol Xxxxx Squibb
(Includes Medical Engineering).
2. Settlement Agreement dated January 1996 with Revlon.
3. Agreement dated January 2000 with Pfizer.
Claim Handling Agreements
-------------------------
Gibraltar has claim handling agreements with the following policyholders:
Pfizer CBS/Westinghouse
Union Carbide Colt Industries
Flintkote Revlon/Rhone Poulenc
Xxx Xxxxxx/Celotex Pittsburgh Corning Corp.
RPM/Xxxxx/Bondex Xxxxxx Travenol International
Hoechst Celanese
-92-
Bayer/Rhinechem
American Hospital Supply Co.
Schedule 3.22
Contractual Reinsurance, Insurance and Commutation Agreements
-------------------------------------------------------------
1. Settlement and Commutation Agreement effective February 22, 1999 and
Release by and between Gibraltar Casualty Company and Hamburger Internationale
Ruckversicherung Aktiengesellschaft.
2. Reinsurance Settlement and Commutation Agreement and Release
effective April 14, 1999 between Gibraltar Casualty Company and U.S.
International Reinsurance Company and The Home Insurance Company and its
subsidiaries.
3. Commutation and Settlement Agreement effective May 30, 1997 between
Gibraltar Casualty Company and Imperial Casualty and Indemnity Company.
4. Settlement Agreement and Mutual Release effective May 15, 1997
between Underwriters Reinsurance Company, formerly known as Buffalo Reinsurance
Company, and Gibraltar Casualty Company.
5. Commutation Agreement effective June 20, 1996 between Gibraltar
Casualty Company and The Central National Insurance Company of Omaha.
6. Settlement Agreement and Release between Midstates Reinsurance
Corporation (f/k/a Xxxx Reinsurance Corporation), and Gibraltar Casualty
Company.
7. Settlement Agreement and Release dated July 1997 between CIGNA
Reinsurance Company, for and on behalf of Century Reinsurance Company, and
Gibraltar Casualty Company.
8. Commutation of two Aggregate Excess of Loss Reinsurance Agreements
effective May 27, 1998 between Gibraltar Casualty Company and Citadel
Reinsurance Company Limited.
9. Aggregate Stop Loss Retrocession Agreement dated October 6, 1995
between Gibraltar Casualty Company and Prudential Reinsurance Company.
10. Commutation Agreement between Gibraltar Casualty Company and ICA
(formerly Ormond Reinsurance Co.).
-93-
11. Certificate of Liability Insurance dated July 30, 1999 for Gibraltar
Casualty Company by Aon.
12. Settlement and Commutation Agreement and Release dated August, 1999
by and between Gibraltar Casualty Company and Unione Italiana Reinsurance
Company of America, Inc.
Schedule 3.23
Liability, Property and Casualty, Workers Compensation,
-------------------------------------------------------
Directors and Officers Liability, Surety Bonds, Key Man Life
------------------------------------------------------------
Insurance and Other Insurance Contracts of Gibraltar
----------------------------------------------------
1. See Attached Insurance Summary.
2. There are no Key Man Life Insurance policies.
-95-
GIBRALTAR INSURANCE COVERAGES
-----------------------------
TABLE OF CONTENTS
-----------------
COVERAGE PAGE NUMBER
-------- -----------
INTRODUCTION 2
MASTER PROPERTY PROGRAM 3
BOILER AND MACHINERY INSURANCE 7
CORPORATE PUBLIC LIABILITY PROGRAM 9
UMBRELLA & EXCESS LIABILITY POLICIES 11
WORKERS COMPENSATION & EMPLOYERS LIABILITY 12
MASTER HOME OFFICE GARAGE KEEPER'S LIABILITY 13
MASTER HOME OFFICE AUTOMOBILE LIABILITY 14
DIRECTORS & OFFICERS LIABILITY INSURANCE 16
COMPREHENSIVE CRIME PROGRAM 18
FIDUCIARY LIABILITY INSURANCE 20
ERRORS & OMISSIONS - PROFESSIONAL LIABILITY INSURANCE 21
EMPLOYMENT PRACTICES LIABILITY INSURANCE 22
SURETY BONDS 23
ENTERPRISE RISK MANAGEMENT: FEBRUARY 16, 2000
-96-
ENTERPRISE RISK MANAGEMENT
--------------------------
CORPORATE INSURANCE PROGRAMS
----------------------------
INTRODUCTION
------------
ISSUED: FEBRUARY 16, 2000
-------------------------
INTERNAL USE ONLY
-----------------
This package summarizes the major insurance programs maintained by Enterprise
Risk Management to protect the interests of Prudential. Coverage under these
programs is extended (except where specifically noted) to The Prudential and any
subsidiary or associated companies. If you require a CERTIFICATE OF INSURANCE to
provide evidence of coverage, please click on the certificate request for icon
located on the main page of the database. Questions regarding terms and
conditions, coverage limits, etc. should be referred to Corporate Risk
Management at 000-000-0000.
NOTE: This Insurance Program Summary Manual is prepared for the information and
convince of Prudential's business groups and subsidiaries. It SUMMARIZES the
listed programs and it is not intended to document ALL of the terms and
conditions or exclusions of such programs. The information contained in the
summary reflects coverage as of the effective date noted in the manual.
Subsequent changes and programs modifications are not included. This Insurance
Summary Manual is not an insurance policy. The insurance programs listed in the
summary are subject to the terms, exclusions, and conditions of the actual
policies. For more detailed information please consult the Enterprise Risk
Management at 000-000-0000.
COPIES OF INSURANCE CONTRACTS (POLICIES):
Many of our insurance policies are customized manuscript contracts that contain
proprietary information. Therefore, The Prudential DOES NOT provide copies of
its insurance policies to third parties. In addition, many of our programs are
the blanket type which means that, in most instances, individual locations are
not listed in the policy. Like most large programs, we maintain and file with
the underwriters separate rosters of covered entities.
Under our program we provide our business associates with a certificate of
insurance as evidence of adequate coverage. The issuance of a certificate is an
accepted practice within the industry for programs that are the size of
Prudential's.
In some instances, additional clarification or evidence of coverage may be
requested. For these cases the appropriate Insurance Broker and/or Enterprise
Risk Management will provide a letter that confirms coverage and responds to
specific coverage questions.
ENTERPRISE RISK MANAGEMENT LOCATION:
Enterprise Risk Management
000 Xxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, XX 00000-0000
-97-
Phone # (000) 000-0000 Fax # (000) 000-0000
-98-
MASTER PROPERTY PROGRAM
-----------------------
INTERNAL USE ONLY
-----------------
NAMED INSURED
-------------
The Prudential Insurance Company of America including all divisions, affiliated,
associated and subsidiary companies and/or corporations and/or Joint Ventures
that are specifically enrolled for this insurance.
INSURANCE CARRIERS
------------------
Primary Layer $20,000,000
COMPANY PARTICIPATION POLICY NUMBER
------- ------------- -------------
AIG-NATIONAL UNION $ 16,500,000 4547857
CNA-CONTINENTAL CASUALTY $ 3,500,000 RMP189472013
Excess Program-Various Carriers
POLICY TERM
-----------
December 31, 2001
TERRITORY
---------
The United States of America, its territories and possessions, The District of
Columbia, Canada, Puerto Rico, and the U.S. Virgin Islands including coastal
waterways.
COVERAGES
---------
All real and personal property, owned, used, leased (or otherwise acquired) by
the assured or in its care, custody and control including but not limited to:
I. PROPERTY COVERAGE
-----------------
- Improvements and Betterments - Fine Arts
- Accounts Receivable - Valuable Papers & Records
- EDP Equipment, Media & Extra Expense - Builders Risk and
Installation
- Demolition & Increased Cost of
Construction - Consequential Damage
- Contractors & Subcontractors Interest - Property in Transit
- Unnamed Locations - Newly Acquired Locations
- Contingent Property Coverage - Fiduciary Capacity &
Foreclosure
-99-
- Professional Fees
II. TIME ELEMENT COVERAGE
---------------------
- Business Interruption - Extra Expense
- Contingent Bus. Interruption & Extra Expense - Rental Income & Expense
- Off Premises Service Interruption - Contingent Liability from
Building Laws
- Demolition & Increased Time to Rebuild - Rental Value
- Ingress/Egress - Civil/Military Authority
PERILS INSURED
--------------
"All Risk" of physical loss or damage including flood and earthquake subject to
policy exclusions.
EXCLUSIONS
----------
Loss of market, inherent vice, gradual deterioration, suspension of lapse of
lease, wear and tear, war, nuclear reaction, employee infidelity, asbestos
removal, faulty workmanship, pollution or contamination as defined in the policy
terms and conditions.
PROGRAM LIMITS
--------------
$5,200,000,000 All-Risk, Total Insurable Value (TIV) per occurrence limit with
the following Program Sub-limits:
PROGRAM SUB-LIMITS
------------------
$ 650,000,000 per occurrence for Flood and Non-California Earthquake,
Annual aggregate applies separately for each peril.
$ 100,000,000 any one occurrence and in the annual aggregate in
respect of California Earthquake.
$ 5,000,000 any one occurrence as respects pollution clean-up and
removal from land and water.
MASTER PROGRAM DEDUCTIBLE
-------------------------
CORPORATE
---------
$250,000 per occurrence
-100-
OTHER PROGRAM DEDUCTIBLES
-------------------------
o 5% at time of loss applied separately to real property, personal
property and time element, for earthquake in the state of California,
subject to a minimum of $100,000 in any one occurrence, and a maximum
of $ 10,000,000 per occurrence.
o 2% of value at time of loss for Named Storms (greater than 74 mph) for
locations involved in loss, subject to a minimum of $100,000 and a
maximum of $10,000,000 per occurrence, as respects windstorm in the
states of Florida and Texas.
o $ 5,000 per occurrence as respects to Fine Arts
In the event of an occurrence involving more than one of the above deductibles,
only the highest single deductible shall apply.
Earthquake means loss or damage caused by, resulting from, or aggravated by
earth movement including but not limited to landslide, mud flow, earth sinking
or shifting.
VALUATION
---------
o On finished goods, the regular cash selling price less discounts;
o As respects all other real and personal property, the replacement cost;
o On valuable papers and records and EDP Media, the actual cost of
reconstruction;
o As respects EDP equipment, the upgrade value or functional replacement
cost whichever is greater;
o As respects fine arts, the appraised valued or in absence of such
appraisal, market value at time of loss plus Insured's costs;
o As respects mortgage impairment and time element, the actual loss
sustained by the insured as defined in the policy form;
o As respects leased equipment, as per lease conditions;
o Landmark properties, tailored valuation.
BROKER:
-------
Aon Risk Services, Inc
Xxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
-101-
BOILER & MACHINERY INSURANCE
----------------------------
INTERNAL USE ONLY
-----------------
INSURED
-------
Prudential and/or its affiliated, subsidiary, and associated companies and/or
corporations and/or joint ventures and/or any owned (wholly or partially) or
controlled company(ies) where the Insured maintains an interest or is required
to provide insurance as now exists or may hereafter be constituted or acquired
including their interests as may appear in partnerships or joint ventures
POLICY TERM
-----------
December 31, 2001
COVERAGE
--------
o Broad comprehensive form,( including production machines) covering:
property damage, business interruption (direct & contingent), extra expense
(direct & contingent), consequential damage, service interruption,
mechanical breakdown, and explosion.
LIMITS OF LIABILITY
-------------------
$75,000,000 per each accident subject to the following sublimits:
$10,000,000 each for water damage, ammonia contamination
$ 1,000,000 for Hazardous Substance
VALUATION
---------
Property: Repair or Replacement
Time Element: Actual loss sustained
DEDUCTIBLES
-----------
As per property program deductibles
-102-
TERRITORY
---------
As per property
INSURER
-------
Chubb Insurance Company as reinsurance of AIG/National Union
ADDITIONAL CONDITIONS
---------------------
Joint Loss Agreement clause
Ninety (90) day notice of cancellation
Blanket waiver of subrogation
Omnibus Location Wording
Automatic coverage for newly acquired locations is 365 days.
Demolition, Increased Cost of Construction and Additional Time to Rebuild due to
the operation Building Laws.
Notice of Loss - Notification by Assured as soon as practicable after Risk
Management Dept. of Prudential becomes aware of a reported accident.
Commencement of Liability as respects Time Element losses starts at the time of
the accident.
BROKER
------
Aon Risk Services, Inc
Xxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
-103-
CORPORATE PUBLIC LIABILITY PROGRAM
----------------------------------
GENERAL LIABILITY
-----------------
INTERNAL USE ONLY
-----------------
NAMED INSURED
-------------
The Prudential and all of its subsidiaries, excluding Joint Ventures, Prudential
Real Estate Investors and Prudential Realty Group.
INSURANCE CARRIER
-----------------
The Travelers Insurance Company $ 3,000,000 general aggregate
$ 1,000,000 Combined Single Limit for
Bodily Injury and Property Damage
Policy Number TC2JGLSA-120D399-3-TIL-00
POLICY TERM
-----------
January 1, 2000 - January 1, 2001
TERRITORY
---------
United States., Canada, Puerto Rico and the Virgin Islands.
ADDITIONAL INSUREDS
-------------------
Directors, officers and employees (only at our option before or after a loss)
while acting within the scope of their duties as such and, other persons or
organizations to whom we are obligated under written contract prior to loss to
include as additional insureds.
COVERAGE
--------
All operations, properties (owned and leased), products, etc. However, coverage
does not apply to certain exposures which are the subject of other specific
insurance, such as motor vehicles, aircraft, etc. Separate primary liability
coverage is maintained on properties with outside ownership interests and on
certain small subsidiaries, and on foreign-based subsidiaries.
-104-
The carrier will investigate and defend all claims that occur within the policy
territory, even if they are groundless, and will settle all claims that we
become legally obligated to pay as damages because of:
A. Bodily Injury and Property Damage Liability
-------------------------------------------
Including such tort liability assumed under contract prior to
loss.
B. Personal Injury and Advertising Injury Liability
------------------------------------------------
Including libel, slander, false arrest, invasion of privacy,
infringement of copyright, title, or slogan
The actual policy contains certain other coverage extensions, such as
professional liability coverage on (only) GIB Labs, Incidental Medical
Malpractice (Company Doctors and Nurses only), etc.
EXCLUSIONS
----------
Nuclear reaction or nuclear radiation or radioactive contamination.
Pollution and environmental contamination.
Hostile or warlike action in the time of peace or war.
Property losses covered by the property policy.
Any obligation of the insured under a workers' compensation, disability benefits
or unemployment compensation law or any similar law.
Bodily injury or property damage arising out or caused by asbestos or asbestos
fibers, including any supervision instructions, recommendations warnings or
advice given or which should have been given in connection.
Incidental medical malpractice for HMOs and medical cost containment operations.
Errors and omissions arising from insurance company operations.
Employment Related Practices
UMBRELLA & EXCESS LIABILITY POLICIES
------------------------------------
COVERAGE
--------
This insurance provides coverage in excess of the
primary (underlying) insurance (i.e., Commercial General
Liability, Auto Liability, Foreign General and Automobile
-105-
Liability, Employer's Liability, Aircraft Liability, and Prudential Securities
Auto Liability).
The Umbrella insurance is the first layer of coverage above our primary
insurance. It will follow the terms and conditions of the Primary policies and
will sometimes fill coverage gaps which may exist under the Primary policies.
CARRIER LIMITS*
------- ------
Primary
-------
Travelers $ 1,000,000
First Layer
-----------
American Alternative Insurance Co. $49,000,000 excess Primary per occurrence
$49,000,000 excess Primary general aggregate
Policy Number 01A2UM0000147-02
Second Layer
------------
National Union $50,000,000 quota share excess of $50,000,000
Policy Number 000-00-00
American Zurich Insurance Co. $50,000,000 quota share excess of $50,000,000
Policy Number EU08356048-05
*Call Enterprise Risk Management, 000-000-0000 if there are any questions
regarding coverage or limits of insurance.
BROKER
------
Xxxxx, Inc
00 Xxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
WORKERS' COMPENSATION & EMPLOYERS LIABILITY
-------------------------------------------
INTERNAL USE ONLY
-----------------
NAMED INSURED
-------------
The Prudential and all of its subsidiaries.
INSURANCE CARRIER
-----------------
-106-
THE TRAVELERS TC2JUB203T102-2-00 (All other than Prudential Foundation)
TC2JUB229T425-2-00 (Prudential Foundation)
Limit* Statutory
POLICY ANNIVERSARY
------------------
July 1, 1997 to July 1, 1998
TERRITORY
---------
United States., Canada, Puerto Rico and Virgin Islands
COVERAGE
--------
All Employees of the Named Insured. The Prudential considers special agents who
are working under the Training Allowance Plan and the Incentive Compensation
Program as "employees". All other special agents are considered "independent
contractors" and are not covered.
Workers' Compensation insurance protects the Named Insured against claims of its
employees for losses due to accidents or occupational diseases arising out of
and in the course of their employment.
As most states have their own Workers' Compensation and Occupational Disease
Laws, The Travelers, in protecting the Named Insured, is governed by such laws.
The Named Insured does not carry Workers' Compensation insurance in Canada. CDNO
will authorize payment, over and above any payments due under our regular group
coverage insurance, as though the Canadian employees were covered in accordance
with Provincial Workers' Compensation. Approval of such disbursements should be
made by the Vice President, Administration, in CDNO or by an individual he/she
specifically designates. b
*Call Integrated Disability Management, (000) 000-0000 if there are any
questions regarding coverage or limits of insurance.
-107-
MASTER HOME OFFICE GARAGE KEEPER'S LIABILITY
--------------------------------------------
INTERNAL USE ONLY
-----------------
NAMED INSURED
-------------
The Prudential and its subsidiaries.
INSURANCE CARRIER
-----------------
The Travelers Insurance Company
Policy Number TC2JGAR-120D397-A-TIL - 00 (All States Garage)
TC2E-GAR-120D398-1-TCT- 00 (TX Garage)
Limit* $5,000,000 per occurrence Combined Single Limit (CSL)
subject to a $250,000 deductible
Excess Carriers See General Liability & Umbrella/Excess Liability Program
POLICY TERM
-----------
January 1, 2000 - January 1, 2001
TERRITORY
---------
United States, Canada, Puerto Rico and the Virgin Islands
COVERAGE
--------
Parking garages or lots in (or at) wholly-owned investment and home office
properties.
"Bailee" liability coverage is provided for loss to any non-owned auto which is
left in the care or custody of The Prudential or its parking garage operator for
the purpose of attending, servicing, repairing, parking or storing it in (or at)
our garage facilities.
Coverage is also provided for damages because of bodily injury, or property
damage caused by an accident and resulting from garage operations.
*Call Enterprise Management, 000-000-0000, if there are any questions regarding
coverage or limits of insurance.
BROKER
------
Xxxxx, Inc
00 Xxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
-108-
MASTER HOME OFFICE AUTOMOBILE LIABILITY
---------------------------------------
INTERNAL USE ONLY
-----------------
NAMED INSURED
-------------
The Prudential and all of its subsidiaries.
INSURANCE CARRIER
-----------------
THE TRAVELERS INSURANCE COMPANY
Policy Number XX0XXXX-000X000-0-XXX-00 (Xxx xxxxxx)
XX0X-XXX-000X000-0-XXX-00 (Xxxxx)
TJEAP-120D396-8-TIL-00 (Mass.)
Limit $5,000,000 per occurrence Combined Single Limit (CSL),
subject to a $250,000 deductible
Excess Carriers See General Liability Coverage / Excess Umbrella
Liability Policy
POLICY TERM
-----------
January 1, 2000 - January 1, 2001
TERRITORY
---------
United States, its territories and possessions. (Foreign exposures are insured
separately).
COVERAGE
--------
All Company-owned or leased motor vehicles.
The carrier will investigate and defend all claims relating to automobile
accidents that occur within the policy territory, even if they are groundless,
and will settle all claims that we become legally obligated to pay as damages
because of:
BODILY INJURY AND/OR PROPERTY DAMAGE LIABILITY to others ("third parties").
Coverage is also provided for "No-Fault" benefits required in various states.
For rental vehicles, primary liability coverage of $100,000 per person/$300,000
per occurrence is afforded through the Corporate Travel agreement with both Avis
and Alamo.
-109-
EXCLUSIONS
----------
No coverage is provided for physical damage (i.e., collision or comprehensive)
to Company vehicles, rental cars or personal cars used on Company business.
*Call Enterprise Risk Management 000-000-0000, if there are any questions
regarding coverage or limits of insurance.
BROKER
------
Xxxxx, Inc
00 Xxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
-110-
DIRECTORS & OFFICERS (D&O)
--------------------------
LIABILITY INSURANCE
-------------------
INTERNAL USE ONLY
-----------------
Our D&O insurance program* has two components:
A. The Broad Form Directors & Officers Liability Insurance Policy provides
coverage to Insured Persons (subject to policy terms, conditions and
limitations) for loss from claims not paid by other insurance or as
indemnification.
B. The Executive Indemnification Policy provides coverage to the Company
(subject to policy terms, conditions and limitations) for loss from claims for
which indemnification is provided to Insured Persons.
PARENT ORGANIZATION
-------------------
The Prudential Insurance Company of America and all subsidiaries which are more
than 50 percent owned.
POLICY ANNIVERSARY
------------------
August 31, 2002
INSURED PERSONS
---------------
A. BROAD FORM DIRECTORS LIABILITY POLICY: Any past, present or future
independent director who is not otherwise employed by the Company.
B. Executive Liability Indemnification: Any past, present or future duly
elected or appointed Directors or Officers of the Prudential. This
definition is further amended to include the positions of Managing
Director, Trustee, Committee Member and employees at level 78 or its
investment equivalent, level 54 and those employees with functionally
equivalent responsibilities. Coverage is also extended (on an excess basis)
for certain individuals serving as directors of an outside organization at
Prudential's request. Contact Risk Management for details concerning
coverage applicability for outside directorships.
-111-
TERRITORY
---------
Worldwide
COVERAGE DESCRIPTION
--------------------
Covers insureds against claims arising from actual or alleged "Wrongful Acts" -
(i.e., any act, error, misstatement, misleading statement, breach of duty,
neglect, etc.) committed or attempted by an Insured Person while acting in his
or her Insured Capacity. D&O Insurance is written on a "claims made" policy form
with aggregate limits for the policy period.
-112-
INSURANCE CARRIERS*
-------------------
A. BROAD FORM DIRECTORS LIABILITY INSURANCE POLICY
Primary Layer Insurers Participation Policy No.
------------- -------- ------------- ---------
$50,000,000 a) XXXX $25 million 75207739897
b) Reliance $25 million ND0117757-97
Excess Layers Various
Program Deductible: $0 for non-indemnifiable actions
B. EXECUTIVE LIABILITY INDEMNIFICATION POLICY
Primary Layer Insurers Participation Policy No.
------------- -------- ------------- ----------
$50,000,000 a) Federal Insurance Company $12.5 million 70229415
b) Lloyds of London $10 million XX0000000
c) XXXX $10 million 75107741597
d) Reliance $10 million NDA0117756-97
e) ACE $7.5 million PRUA-8601D
Excess Layers Various
Program Deductible: $25,000,000 per loss Corporate Reimbursement and Entity
NOTE: Questions regarding the D&O insurance program should be referred to
Enterprise Risk Management at (000)000-0000.
BROKER
------
Aon Risk Services, Inc
Xxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
-113-
COMPREHENSIVE CRIME PROGRAM
---------------------------
INTERNAL USE ONLY
-----------------
NAMED INSURED
-------------
The Prudential Insurance Company of America and all subsidiaries, including
Prudential Securities.
INSURANCE CARRIERS
------------------
Primary Carrier Participation Policy No.
------- ------- ------------- ----------
$50,000,000 a) Federal Insurance Company $12.5 million 70229415
b) Lloyds of London $10 million XX0000000
c) Executive Risk $10 million 75107741597
d) Reliance $10 million NDA0117756-97
e) ACE $7.5 million PRUA-8601D
Excess Layers Various
Program Deductible: $25,000,000
POLICY ANNIVERSARY
------------------
August 31, 2002
PERSONS/PROPERTY COVERED
------------------------
All employees of the named insured. Money, Certificated Securities,
Uncertificated Securities of any Federal Reserve Bank of the United States,
Negotiable Instruments, Certificates of Deposit, Acceptance, Evidence of
Debt, Security Agreements, Withdrawal Orders, Letter of Credit, Abstract
of Title, Deeds and Mortgages on real estate, Revenue and other stamps,
Tokens, Unsold State Lottery tickets, Bonds of Account and other
records whether recorded in writing or electronically, Gems,
-114-
Jewelry, Precious metals in bars or ingots and Tangible Items of personal
property not enumerated.
AGENTS: PIFS and PPFS, mortgage servicing agents and agents in the sale of Real
Estate products.
COVERAGE
--------
EMPLOYEE AND AGENT DISHONESTY (FIDELITY)
----------------------------------------
LOSS RESULTING FROM DISHONEST OR FRAUDULENT ACTS COMMITTED BY AN EMPLOYEE OR
AGENT ACTING ALONE OR IN COLLUSION WITH OTHERS.
ON PREMISES
-----------
LOSS OF PROPERTY RESULTING DIRECTLY FROM ROBBERY, BURGLARY, COMMON-LAW OR
STATUTORY LARCENY (COMMITTED BY A PERSON AT ONE OF PRUDENTIAL'S OFFICER),
MISPLACEMENT, MYSTERIOUS, UNEXPLAINABLE DISAPPEARANCE OR DESTRUCTION.
PREMISES COVERED ARE ALL OF THE NAMED INSURED'S OFFICES AND OFFICES OF FINANCIAL
INSTITUTIONS AND CLEARING HOUSES.
IN TRANSIT
----------
LOSS OF PROPERTY RESULTING FROM ROBBERY, COMMON-LAW OR STATUTORY LARCENY, THEFT,
MISPLACEMENT, MYSTERIOUS, UNEXPLAINABLE DISAPPEARANCE OR DESTRUCTION WHILE SUCH
PROPERTY IS IN TRANSIT IN THE CARE OF A NATURAL PERSON ACTING AS A MESSENGER.
FORGERY OR ALTERATION
---------------------
LOSS RESULTING FROM FORGERY OR ALTERATION OF, ON OR IN ANY CHANGE OF BENEFICIARY
REQUEST, POLICY LOAN AGREEMENT, ASSIGNMENT OF A POLICY, NEGOTIABLE INSTRUMENT
OTHER THAN SECURITIES MADE OR DRAWN BY OR ON NAMED INSURED. DOES NOT COVER
PROPERTY BY THE MAIL OR EXPRESS CARRIERS. COVERAGE FOR ARMORED CAR
TRANSPORTATION IS IN EXCESS OF INSURANCE CARRIED BY THE VENDOR.
SECURITIES
----------
LOSS RESULTING DIRECTLY FROM HAVING IN GOOD FAITH ACQUIRED SOLD OR DELIVERED, OR
GIVEN VALUE, EXTENDED CREDIT OR ASSUMED LIABILITY ON THE FAITH OF, ANY ORIGINAL
SECURITY, DEED, EVIDENCE OF DEBT, SECURITY AGREEMENT, LETTER OF CREDIT WHICH
BEARS A SIGNATURE WHICH IS FORGERY OR IS ALTERED LOST OR STOLEN.
-115-
COMPUTER FRAUD
--------------
LOSS RESULTING DIRECTLY FROM A FRAUDULENT ENTRY OF DATA INTO, OR CHANGE OF DATA
ELEMENTS OR PROGRAMS WITHIN YOUR PROPRIETARY OR PURCHASED COMPUTER SYSTEM,
PROVIDED THE FRAUDULENT ENTRY OR CHANGE CAUSES: (A) PROPERTY TO BE TRANSFERRED,
PAID OR DELIVERED, (B) AN ACCOUNT OF THE NAMED INSURED OR ONE OF ITS CUSTOMERS,
TO BE ADDED, DELETED, DEBITED, OR CREDITED, OR (C) AN UNAUTHORIZED OR A
FICTITIOUS ACCOUNT TO BE DEBITED OR CREDITED.
NOTE: QUESTION REGARDING POLICY TERMS AND COVERAGE FOR SPECIFIC INDIVIDUALS
SHOULD BE REFERRED DIRECTLY TO ENTERPRISE RISK MANAGEMENT GENERAL
INFORMATION AT (000) 000-0000.
BROKER
------
Aon Risk Services, Inc
Xxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
-116-
FIDUCIARY LIABILITY INSURANCE
-----------------------------
INTERNAL USE ONLY
-----------------
NAMED INSURED
-------------
The Prudential Insurance Company of America and all subsidiaries, as well as the
individual employee benefit plans sponsored by those entities.
INSURANCE CARRIERS
------------------
Executive Liability and Indemnification Policy:
Primary Carrier Participation Policy No.
------- ------- ------------- ----------
$50,000,000 a) Federal Insurance Company $12.5 million 70229415
b) Lloyds of London $10 million XX0000000
c) Executive Risk $10 million 75107741597
d) Reliance $10 million NDA0117756-97
e) ACE $7.5 million PRUA-8601D
Excess Layers Various
Program Deductible: $25,000,000
POLICY ANNIVERSARY
------------------
August 31, 2002
PERSONS COVERED
---------------
Any natural persons serving as a past, present or future trustee, director,
officer or employee of Prudential or of any of its sponsored employee benefit
plans.
-117-
COVERAGE
--------
This policy covers claims against Prudential and the fiduciaries of its company
sponsored employee benefit plans against suits arising from any actual or
alleged breaches of the Employee Retirement Income Security Act (ERISA) or any
other similar law as well as negligent act, error or omission in the
administration of these plans.
NOTE: QUESTION REGARDING POLICY TERMS AND COVERAGE FOR SPECIFIC INDIVIDUALS
SHOULD BE REFERRED DIRECTLY TO CORPORATE RISK MANAGEMENT GENERAL INFORMATION AT
(000) 000-0000.
BROKER
------
Aon Risk Services, Inc
Xxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
ERRORS & OMISSIONS (PROFESSIONAL LIABILITY) INSURANCE
-----------------------------------------------------
INTERNAL USE ONLY
-----------------
NAMED INSURED
-------------
The Prudential Insurance Company of America and all subsidiaries.
INSURANCE CARRIERS
------------------
Primary Carrier Participation Policy No.
------- ------- ------------- ----------
$50,000,000 a) Federal Insurance Company $12.5 million 70229415
b) Lloyds of London $10 million XX0000000
c) Executive Risk $10 million 75107741597
d) Reliance $10 million NDA0117756-97
e) ACE $7.5 million PRUA-8601D
Excess Layers Various
-118-
Program Deductible: $25,000,000
POLICY ANNIVERSARY
------------------
August 31,2002
PERSONS/PROPERTY COVERED
------------------------
The Prudential Insurance Company of America and all subsidiaries and any past,
present or future director, officer or employee of Prudential in his/her
capacity as a director, officer or employee of Prudential.
COVERAGE
--------
Covers Prudential and its employees for loss which they become legally obligated
to pay as a result of a Claim against them arising out of a Wrongful Act
committed, attempted or allegedly committed or attempted by the Insureds or
someone for whose acts the Insureds are legally responsible, while performing or
while allegedly failing to perform professional services.
NOTE: QUESTION REGARDING POLICY TERMS AND COVERAGE FOR SPECIFIC INDIVIDUALS
SHOULD BE REFERRED DIRECTLY TO CORPORATE RISK MANAGEMENT GENERAL INFORMATION AT
(000) 000-0000.
BROKER
------
Aon Risk Services, Inc
Xxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
-119-
EMPLOYMENT PRACTICES LIABILITY INSURANCE
----------------------------------------
INTERNAL USE ONLY
-----------------
NAMED INSURED
-------------
The Prudential Insurance Company of America and all subsidiaries, including
Prudential Securities
INSURANCE CARRIERS
------------------
Primary Carrier Participation Policy No.
------- ------- ------------- ----------
$50,000,000 a) Federal Insurance Company $12.5 million 70229415
b) Lloyds of London $10 million XX0000000
c) Executive Risk $10 million 75107741597
d) Reliance $10 million NDA0117756-97
e) ACE $7.5 million PRUA-8601D
Excess Layers Various
Program Deductible: $25,000,000
POLICY ANNIVERSARY
------------------
August 31
PERSONS COVERED
---------------
Any past, present or future directors, officers or employee of Prudential.
COVERAGE DESCRIPTION
--------------------
Covers insureds against suits brought by past, present or prospective Prudential
employees with respect to employment practices related matters.
NOTE: QUESTION REGARDING POLICY TERMS AND COVERAGE FOR SPECIFIC INDIVIDUALS
SHOULD BE REFERRED DIRECTLY TO CORPORATE RISK MANAGEMENT GENERAL INFORMATION AT
(000) 000-0000.
-120-
BROKER
------
Aon Risk Services, Inc
Xxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
SURETY BONDS
------------
INTERNAL USE ONLY
-----------------
Surety Bonds are often required by governmental agencies on the Federal, State,
and Municipal levels, Courts, Corporations and private individuals. This type of
bond guarantees that the Principal, such as Prudential or one of its
subsidiaries, will complete a service or other obligation prescribed by a
contract. Also included under the surety ship are license bonds required to
perform a certain job or profession. It must be emphasized that surety ship is
not insurance. Surety Companies writing these types of bonds do not anticipate
paying any claims, therefore, the cost of these bonds is a service charge and
not a premium. When a Surety Bond is issued, the principal indemnifies and holds
the Surety Company writing the bond harmless against any and all loss presented
in connection with the bond.
1. COMMON TYPES OF SURETY BONDS ISSUED FOR COMPANY OPERATIONS
----------------------------------------------------------
A. BROKER/DEALER Bonds required by certain States in order for a firm to
sell securities.
B. COURT BONDS consist of appeal bonds, release of mechanic xxxx xxxxx,
injunction bonds, receiver bonds and attachment bonds.
C. LICENSE AND PERMIT BONDS - consist of bonds required to obtain a
license for a mortgage lender, insurance adjuster, notary public,
surplus lines broker, surplus lines agent, and the selling of liquor.
We have procured for certain Municipalities permit bonds for
canopies, dumpsters, and signs.
D. CONTRACT BONDS, for our purpose, have consisted of performance,
subdivision, and bid bonds.
E. FINANCIAL GUARANTEE BONDS have been written for us or our
subsidiaries running to States and others providing that the obligee on
-121-
the bond will receive a specified amount of money if we fail to fulfill
our obligations under a contract.
F. MISCELLANEOUS BONDS - Consist of various types of instruments including
toll tax, cigarette tax, workers compensation, lost security and
general term (custom) bonds.
2. COVERAGE AND LIMITS
-------------------
Numerous Bonds are maintained for Prudential operations. Questions
regarding Surety Bonds coverage, limits and request forms should be
referred to Corporate Risk Management at (000) 000-0000.
BROKER
------
Aon Risk Services, Inc
Xxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
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Schedule 3.24
Taxes
-----
(1) Gibraltar is a member of Seller's consolidated federal income tax
group. Seller has extended until June 30, 2000 the statute of limitations
applicable to its consolidated federal income tax returns for the tax years 1990
through 1996.
(2) Gibraltar is a party to an Illinois unitary tax audit for tax years
1993 through 1995 that is focused primarily on certain other of Seller's
property and casualty insurance affiliates. The statute of limitations for these
tax years has been extended until April 15, 2000- however, the Illinois auditor
has orally indicated that he intends to drop the audit entirely.
(3) Seller has granted a power of attorney to XxXxxxxxx, Will & Xxxxx
in connection with the audit of Seller's consolidated federal income tax returns
for tax years 1990 through 1996.
(4) See copy of Tax Sharing Agreement attached hereto.
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Schedule 3.25
Safe Deposit Boxes, Bank Accounts
---------------------------------
and Other Deposits of Gibraltar
-------------------------------
See Attached List of Safe Deposit Boxes, Bank Accounts and Other Deposits.
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Schedule 3.27
Employee Titles; Aggregate Annual Compensation
----------------------------------------------
and Bonuses
-----------
EMPLOYEE TITLE
Xxxxxxxxxx, Xxxxx Xxxxx 00
Xxxxx, Xxxxxxx Director
Xxxxxxxx, Xxxx Associate Manager
XxXxxxxxxxx, Xxxxxx Director
Xxxx, Xxxxxx Departmental Vice President
Xxxxxx, Xxxx Functional Vice President
Xxxxxx, Xxxxxxxxx Functional Vice President
Xxxxxxx, Xxxx 1 Departmental Vice President
Xxxxx, Xxxxxxx Executive Assistant
Xxxxxxx, Xxxxxxx Executive Assistant
Xxxxxxx, Xxxxx Xxxxx 00
Xxxx, Xxxxx Assistant General Counsel
Poles, Xxxxxx Assistant General Counsel
Rant, Xxxxxxx Assistant General Counsel
Xxxxxxxx, Xxxxxxxxx Executive Assistant
------------------------
1. Xxxx Xxxxxxx is retiring on February 28, 2000.
ESTIMATED AGGREGATE COMPENSATION & BONUSES* $1,815,021
* Does not include retention bonuses, outplacement services or ARB's
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Schedule 5.1
Exceptions to Operations in the Ordinary Course
-----------------------------------------------
NONE
-128-
Schedule 5.3
Restrictions on Gibraltar
-------------------------
1. Termination of the Contracts listed on Schedule 7.6.
2. Changes in accounting or investment practice as may be required pursuant
to Section 5.10.
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Schedule 6.3
Indemnification and Guarantee Obligations
-----------------------------------------
1. Guarantee dated October 6, 1995 of The Prudential Insurance Company
of America in favor of Prudential Reinsurance Holdings, Inc. (n/k/a Everest
Reinsurance Holdings, Inc.).
2. Guarantee dated October 6, 1995 of The Prudential Insurance Company
of America in favor of Prudential Reinsurance Company (n/k/a Everest Reinsurance
Company).
3. Indemnification Agreement dated October 6, 1995 between PRUCO, Inc.
and Prudential Reinsurance Holdings, Inc. (n/k/a Everest Reinsurance Holdings,
Inc.).
4. Surplus Maintenance Agreement dated December 18, 1991 between
PRUCO, Inc. and Gibraltar Casualty Company.
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Schedule 7.6
Agreements and Arrangements to be Terminated
--------------------------------------------
1. Surplus Maintenance Agreement dated December 18, 1991 between
PRUCO, Inc. and Gibraltar Casualty Company.
2. Guarantee of The Prudential Insurance Company of America dated
October 6, 1995 in favor of Prudential Reinsurance Holdings, Inc.
3. Guarantee of The Prudential Insurance Company of America dated
October 6, 1995 in favor of Prudential Reinsurance Company.
4. Indemnification Agreement dated October 6, 1995 between PRUCO, Inc.
and Prudential Reinsurance Company.
5. Investment Advisory Contract effective as of 1984 between Gibraltar
and The Prudential Insurance Company of America.
6. Occupancy Agreement dated July 1, 1995 between Gibraltar and The
Prudential Service Company.
7. Letter of Credit with Chase Manhattan Bank.
8. Software License Agreement between Datalight Software and The
Prudential Insurance Company of America for the Use of the Concordance
Information Retrieval System by Gibraltar Casualty Company*.
9. Service Agreement dated May 1, 1997 between Gibraltar and
Prudential Property and Casualty Insurance Company.
10. Termination of Tax Allocation Agreement dated January 17, 1995 for
The Prudential Insurance Company of America and its Affiliates, solely as it
relates to Gibraltar Casualty Company.
11. Loan Agreement dated November 21, 1996 between Prudential Funding
Corporation and Gibraltar Casualty Company.
12. License from The Prudential Insurance Company of America to
Gibraltar Casualty Company for the use of the Gibraltar Marks.
13. Service Agreement dated May 10, 1990 between The Prudential
Insurance Company of America and Gibraltar Casualty Company.
-------------------------------
* If the contract permits, such contract will be assigned or transferred to the
Purchaser at Closing.
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