EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "AGREEMENT") is made as of August 20,
2008, by and between Xxxxxx Financial Group, Inc., a Delaware corporation (the
"PURCHASER"), and National Indemnity Company, a Nebraska corporation (the
"SELLER").
WHEREAS, the Seller owns 337,248 shares (the "SHARES") of the common stock,
par value $10.00 per share of Unione Italiana Insurance Company of America, a
New York corporation (the "COMPANY"), which Shares constitute all of the
outstanding capital stock of the Company; and
WHEREAS, the Seller desires to sell to the Purchaser, and Purchaser desires
to purchase from the Seller, all of the Shares of the Company, subject to the
terms and conditions set forth herein; and
WHEREAS, it is the intention of the parties hereto that contemporaneously
with the consummation of the transactions contemplated by this Agreement, all
liabilities under the Insurance and Reinsurance Contracts (including contingent
liabilities in respect of claims thereunder) shall be reinsured by the Seller
pursuant to the NICO Reinsurance Agreement (as defined herein) to be entered
into between the Company and the Seller at Closing.
NOW, THEREFORE, intending to be legally bound and in consideration of the
mutual provisions set forth in this Agreement and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. The following terms, as used herein, have the following
meanings:
"ACCOUNTING FIRM" has the meaning set forth in SECTION 2.5
"AFFILIATE" means, with respect to any Person, any other Person
controlling, controlled by, or under common control with such other Person. For
purposes of this definition, "CONTROL," when used with respect to any Person,
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise, and the terms "CONTROLLING" and "controlled" have correlative
meanings.
"ADVERSE CONSEQUENCES" has the meaning set forth in SECTION 9.1(A).
"AGREEMENT" has the meaning set forth in the Preamble.
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"APPLICABLE INSURANCE CODE(S)" means the insurance laws to which the
Company is subject, including the insurance laws of the State of New York. In
all cases, Applicable Insurance Code shall include the rules and regulations
promulgated under any of the foregoing laws.
"BASE PURCHASE PRICE" has the meaning set forth in SECTION 2.1.
"BUSINESS DAY" means a day other than a Saturday, Sunday or other day on
which commercial banks in Charleston, West Virginia or Stamford, Connecticut are
authorized or required by law to close.
"CLOSING" has the meaning set forth in SECTION 2.2.
"CLOSING ASSETS" shall mean the Licenses, the Statutory Deposits, the
Portfolio Investments, the Corporate Records, the Insurance and Reinsurance
Contracts, the Bank Accounts, the assets set forth in the Company's Statutory
Statements and the NICO Reinsurance Agreement.
"CLOSING DATE" has the meaning set forth in SECTION 2.2.
"CLOSING DATE POLICYHOLDERS' SURPLUS" shall mean the Policyholders' Surplus
as of the Closing Date.
"CLOSING SURPLUS STATEMENT" has the meaning set forth in SECTION 2.5.
"COMPANY" has the meaning set forth in the Preamble.
"COMPANY BOOKS AND RECORDS" has the meaning set forth in SECTION 5.9.
"COMPANY INSURANCE POLICIES" has the meaning set forth in SECTION 3.17.
"CONSENTS" has the meaning set forth in SECTION 3.6.
"CONTRACT" means any written or oral contract, lease or other property
agreement, license, indenture, note, bond, agreement, permit, concession,
franchise, commitment, insurance policy, bond, mortgage, partnership or joint
venture agreement or instrument.
"CORPORATE RECORDS" means the corporate records of the Company, other than
Company Books and Records, including, without limitation, articles of
incorporation, by-laws, corporate seal, stock book and stock transfer ledger,
minutes of meetings of the shareholders and directors and other records of
corporate actions, books of account, ledgers, , all filings, correspondence and
communications with insurance regulatory authorities, business records and
documents reflecting the qualifications, assets, liabilities, commitments,
obligations, rights and entitlements of the Company of whatever nature.
"DEPOSIT" means the deposit in the amount of $75,000 previously paid by
Purchaser to Seller pursuant to the letter agreement, dated December 3, 2008 by
and between Purchaser and Seller.
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"DOMICILIARY INSURANCE DEPARTMENT" means the New York Insurance Department.
"EMPLOYEE BENEFIT PLAN" means any benefit plan or arrangement of the
Company for its employees, including but not limited to employee pension benefit
plans, as defined in Section 3(2) of ERISA, Multiemployer Plans, if any, as
defined in Section 3(37) of ERISA, employee welfare benefit plans, as defined in
Section 3(1) of ERISA, deferred compensation plans, stock option plans, bonus
plans, stock purchase plans, hospitalization, disability and other insurance
plans, severance or termination pay plans and policies, whether or not described
in Section 3(3) of ERISA, in which employees of the Company, their spouses or
dependents participate.
"ENVIRONMENTAL LAWS" has the meaning set forth in SECTION 3.16.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESTIMATED POLICYHOLDERS' SURPLUS" shall mean the Policyholders' Surplus as
of the Closing Date as estimated in good faith by the Seller as set forth on the
Estimated Surplus Statement based upon the Company's Policyholders' Surplus
reflected in the Company's most recent filed statutory financial statement prior
to the Closing Date, with appropriate adjustments in the ordinary course of
business consistent with past practices for the period from the date of that
financial statement until the Closing Date to reflect any change in the
Company's circumstances, prepared in a manner consistent with the Company's
historical accounting practices, and to give effect to any settlement of
intercompany accounts as of the Closing Date pursuant to SECTION 5.8, in each
case to the extent Policyholders' Surplus shall have been changed thereby. The
Seller's calculation of the Estimated Policyholders' Surplus shall be binding on
Purchaser absent manifest error.
"ESTIMATED SURPLUS STATEMENT" shall mean the Seller's estimate of
Policyholders' Surplus as of the Closing Date delivered by the Seller to the
Purchaser not less than two (2) Business Days prior to the Closing Date.
"FINANCING CERTIFICATE" has the meaning set forth in SECTION 5.13.
"GAAP" means United States generally accepted accounting principles as in
effect at the relevant time or for the relevant period.
"GOVERNMENTAL ENTITY" means any federal, state, local or foreign
government, political subdivision, legislature, court, agency, department,
bureau, commission or other governmental or regulatory authority, body or
instrumentality, including any insurance or securities regulatory authority.
"INDEMNIFIED PARTY" has the meaning as set forth in SECTION 9.1(C).
"INDEMNIFYING PARTY" has the meaning as set forth in SECTION 9.1(C).
"INSURANCE AND REINSURANCE CONTRACTS" means all Contracts, treaties,
facultative certificates, policies or other arrangements issued prior to the
Closing Date, other than Company Insurance Policies, to which the Company is a
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party or by which the Company is bound or subject, providing for insurance,
ceding or assumption of reinsurance, excess insurance or retrocession,
including, without limitation, all insurance policies, reinsurance policies, and
retrocession agreements, in each case as such Contract, treaty, facultative
certificate, policy or other arrangement may have been amended, modified or
supplemented, other than Company Insurance Policies, irrespective of how such
arrangement is accounted for.
"INTERCOMPANY AGREEMENT" shall mean any agreement between (i) (x) the
Company on the one hand, and (y) the Seller or any of its Affiliates (other than
the Company) on the other hand, and (ii) (x) any director or officer of the
Seller or any of its Affiliates (including the Company) on the one hand, and (y)
the Company on the other hand.
"LETTER AGREEMENT" has the meaning as set forth in SECTION 2.4.
"LICENSES" means the Company's licenses or certificates of authority to
transact insurance or reinsurance, as applicable, in the states set forth on
ANNEX A hereto.
"LIEN" means any lien, charge, claim, mortgage, covenant, option, pledge,
security interest, right of first refusal, restriction or other encumbrance of
any kind.
"MATERIAL ADVERSE EFFECT" means any event, circumstance, change, occurrence
or effect which, individually or in the aggregate, has a material adverse effect
on (i) the business, operations, financial condition or results of operations of
the Company, or (ii) the ability of the Company or the Seller to consummate the
transactions contemplated hereby, other than arising out of, resulting from,
caused by or attributable to (a) changes in conditions in the United States or
global economy or capital or financial markets generally, including changes in
interest or exchange rates, except to the extent such condition negatively
affects the Company disproportionately compared to other participants in any
segment of the property and casualty insurance or reinsurance industry in which
the Company operates, (b) changes in economic or business trends or conditions
generally applicable to the industries and markets in which the Company
operates, except to the extent such condition negatively affects the Company
disproportionately compared to other participants in any segment of the property
and casualty insurance or reinsurance industry in which the Company operates,
(c) changes in law, regulatory conditions or GAAP or regulatory accounting
principles, including Statutory Accounting Practices, after the date of this
Agreement, (d) the announcement of this Agreement and the identity of the
Purchaser, (e) actions required or permitted to be taken by the Seller pursuant
to this Agreement or taken with the Purchaser's consent, and (f) any action
taken by the Purchaser or its Affiliates in connection with the consummation of
the transactions contemplated hereby.
"NICO REINSURANCE AGREEMENT" means the 100% Quota Share Reinsurance
Agreement by and between the Company and Seller dated the Closing Date, in the
specific form attached hereto as EXHIBIT A, pursuant to which Seller shall
reinsure the Company's liabilities under the Insurance and Reinsurance Contracts
in effect prior to the Closing Date.
"NOTICE OF OBJECTION" has the meaning set forth in SECTION 2.5.
"PERMIT" means any license, permit, franchise, certificate, approval,
consent and other governmental authorization.
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"PERSON" means an individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, unincorporated organization, association or other entity
or form of business enterprise.
"POLICYHOLDERS' SURPLUS" means as of any date "surplus as regards
policyholders" of the Company calculated in accordance with Statutory Accounting
Practices of the Domiciliary Insurance Department applied on a basis consistent
with the Statutory Statements of the Company.
"PORTFOLIO INVESTMENTS" means the portfolio of government and GNMA
Securities, cash and cash equivalents (including accrued interest and dividend
thereon, owned by the Company) as of the date hereof, as such investment
portfolio may change in connection with the management of the Company's
investment portfolio in the ordinary course of business consistent with past
practices.
"PURCHASE PRICE" shall mean the Base Purchase Price, as finally adjusted
pursuant to SECTION 2.5 hereof.
"PURCHASER" has the meaning set forth in the Preamble.
"PURCHASER BOOKS AND RECORDS" has the meaning set forth in SECTION 5.9.
"PURCHASER INDEMNIFIED PARTY" has the meaning set forth in SECTION 9.1.
"SELLER" has the meaning set forth in the Preamble. "SELLER INDEMNIFIED
PARTY" has the meaning set forth in SECTION 9.1.
"SHARES" has the meaning set forth in the Preamble.
"STATUTORY ACCOUNTING PRACTICES" means the accounting practices prescribed
or permitted by the Insurance Department of New York, which are distinct from
GAAP and provide the basis for the Statutory Statements of the Company, as
applied on a consistent basis.
"STATUTORY DEPOSITS" means any financial deposits required to be maintained
by the Company by the Commissioners or Departments of Insurance (or other
governmental or regulatory authority), as a condition of the Company's conduct
of business in the states set forth on ANNEX A hereto.
"STATUTORY STATEMENTS OF THE COMPANY" means the annual statements of the
Company, as filed with its Domiciliary Insurance Department, for the year ended
December 31, 2007 and the quarterly statements of the condition and affairs of
the Company, as filed with its Domiciliary Insurance Department, for the
quarterly periods ended March 31, 2008 and June 30, 2007.
"SUPERINTENDENT" means the Superintendent of Insurance of the State of New
York.
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"TAX" OR "TAXES" means all federal, state, county or local net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add-on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatsoever, together with any interest, penalties, additions to tax or
additional amounts with respect thereto imposed by a Governmental Entity
("TAXING AUTHORITY").
"TAXING AUTHORITY" has the meaning set forth in the definition of Tax.
"TAX RETURN" means all reports, estimates, declarations of estimated Tax,
claims for refund, information statements and returns relating to, or required
to be filed in connection with, any Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
"TRANSACTION DOCUMENTS" means, collectively, this Agreement and the NICO
Reinsurance Agreement.
ARTICLE II
THE TRANSACTION
Section 2.1. PURCHASE AND SALE. Subject to the terms and subject to the
provisions of this Agreement, and in reliance upon the representations and
warranties hereinafter set forth, at the Closing, the Seller agrees to sell,
assign, transfer and deliver to the Purchaser, and the Purchaser agrees to
purchase and acquire from the Seller, all of the Shares, free and clear of all
Liens (other than any restrictions on subsequent transferability by Purchaser of
the Shares imposed by Applicable Insurance Codes, and applicable federal or
state securities laws) for a purchase price equal to the sum of (i) $2,750,000,
PLUS (ii) that amount in U.S. dollars cash equal to Estimated Policyholder's
Surplus, LESS (iii) an amount equal to the Deposit (the "BASE PURCHASE PRICE").
The Base Purchase Price shall be subject to adjustment in accordance with
SECTION 2.5 and shall be paid in the manner and at the time set forth in
SECTIONS 2.3.
Section 2.2. CLOSING. Subject to ARTICLE VI hereof, the closing of the
transactions contemplated by this Agreement (the "CLOSING") will take place at
the offices of the Seller, 000 Xxxxx Xxxxxxxx Xxxxx, Xxxxxxxx, Xxxxxxxxxxx
00000, at 10:00 a.m., local time, on the third Business Day after the
satisfaction or waiver of all of the conditions set forth in ARTICLE VI hereof
(other than conditions relating to actions to be taken at the Closing) or at
such other place, time or date as the Purchaser and the Seller may agree upon in
writing. The date upon which the Closing actually occurs is referred to in this
Agreement as the "CLOSING DATE".
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Section 2.3. CLOSING DELIVERIES.
(a) At the Closing, the Seller will deliver or cause to be delivered to the
Purchaser:
(i) certificate(s) representing the Shares, duly endorsed in blank or
accompanied by stock powers duly executed in blank in form reasonably
satisfactory to the Purchaser for transfer;
(ii) resignations effective as of the Closing of each officer and each
member of the board of directors of the Company; and
(iii) all other documents, certificates and instruments required
hereunder to be delivered by Seller to Purchaser at Closing.
(b) At the Closing, the Purchaser shall (i) pay to the Seller the Base
Purchase Price by wire transfer of immediately available funds to an account or
accounts designated by the Seller at least three (3) Business Days prior to the
Closing Date, and (ii) deliver to the Seller all other documents, certificates
and instruments required hereunder to be delivered by Purchaser to Seller at the
Closing.
Section 2.4. SELLER AND PURCHASER'S LETTER AGREEMENT DATED MAY 14, 2008.
In connection with the pending sale of the Company to the Purchaser, the
Seller and the Purchaser have entered into a letter agreement dated May 14,
2008, pursuant to which the Seller has agreed, subject to certain terms and
conditions, to issue bonds on behalf of the Company to the extent such bonds
require the issuing carrier to have a Certificate of Authority from the
Financial Management Service of the U.S. Department of Treasury (the "LETTER
AGREEMENT"). The Letter Agreement is attached hereto as EXHIBIT B.
Section 2.5. POLICYHOLDERS' SURPLUS ADJUSTMENT.
(a) Within sixty (60) days after the Closing Date, Seller shall prepare and
deliver to the Purchaser a statement (the "CLOSING SURPLUS STATEMENT"), setting
forth the Seller's determination of the Closing Date Policyholders' Surplus,
including but not limited to (i) any changes in market value of the Company's
assets as of the Closing Date, (ii) investment income, and (iii) any tax effect
of such adjusted amounts. For the avoidance of doubt, the Closing Surplus
Statement shall not, and is not intended to take into account the sufficiency
of, or any change in the Company's insurance or reinsurance reserves. The
Closing Surplus Statement shall be prepared in good faith and in a manner
consistent with the Estimated Policyholders' Surplus.
(b) After the receipt by Purchaser of the Closing Surplus Statement and
until such time as the final Closing Date Policyholders' Surplus is determined
in accordance with this SECTION 2.5, the Purchaser and their authorized
representatives shall have full access during reasonable business hours upon
prior written notice to the working papers of Seller and their respective
representatives relating to the Closing Surplus Statement and the calculations
set forth thereon. Unless Purchaser, within thirty (30) days after receipt of
the Closing Surplus Statement, gives Seller a notice objecting thereto and
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specifying, in reasonable detail, the basis for each such objection and the
amount in dispute ("NOTICE OF OBJECTION"), such Closing Surplus Statement and
the Closing Date Policyholders' Surplus reflected therein shall be binding upon
Purchaser and the Seller and the applicable payment required pursuant to
subsection (c) below shall be made. Any Notice of Objection shall specify (x) in
reasonable detail the nature and amount of any disagreement so asserted, and (y)
only include disagreements based on the differences between the Estimated
Surplus Statement and the Closing Surplus Statement and the Estimated
Policyholders' Surplus and the Closing Date Policyholders' Surplus,
respectively. If a timely Notice of Objection is received by Seller, then the
Closing Surplus Statement (as revised in accordance with clause (1) or (2)
below) shall become final and binding upon the parties hereto on the earlier of
(1) the date the Seller and Purchaser resolve in writing any differences they
have with respect to any matter specified in the Notice of Objection and (2) the
date any matters properly in dispute are finally resolved in writing by the
Accounting Firm (as defined below). During the thirty (30) days immediately
following the delivery by Purchaser to Seller of a Notice of Objection, the
Seller and Purchaser shall seek in good faith to resolve in writing any
differences that they may have with respect to any matter specified in the
Notice of Objection. At the end of such thirty (30) day period, the Seller and
Purchaser shall submit to an accounting firm which has not performed work in the
last two (2) years for either Seller or Purchaser jointly selected by the
Seller's accountants and the Purchaser's accountants (the "ACCOUNTING FIRM") for
review and resolution of any and all matters (but only such matters) which
remain in dispute. Purchaser and the Seller shall instruct their respective
accountants to select the Accounting Firm in good faith within ten (10) days. If
the Purchaser's or the Seller's accountants cannot agree upon the Accounting
Firm within such ten (10) day period, within an additional five (5) days, they
shall each designate an accounting firm who has not performed work in the last
two years for either Seller or Purchaser and the Accounting Firm shall be
jointly selected by those two accounting firms. The Accounting Firm so selected
shall be instructed to review and resolve any and all matters (but only such
matters) which remain in dispute and which were properly included in the Notice
of Objection. Purchaser and the Seller shall instruct the Accounting Firm to
make a final determination of the Closing Date Policyholders' Surplus. Purchaser
and the Seller will cooperate with the Accounting Firm during the term of its
engagement. Purchaser and the Seller shall instruct the Accounting Firm not to
assign a value to any item in dispute greater than the greatest value for such
item assigned by Purchaser, on the one hand, or the Seller, on the other hand,
or less than the smallest value for such item assigned by Purchaser, on the one
hand, or the Seller, on the other hand. Purchaser and the Seller shall also
instruct the Accounting Firm to make its determination based solely on
presentations by Purchaser and the Seller (i.e., not on the basis of an
independent review). The Closing Surplus Statement and the Closing Date
Policyholders' Surplus reflected therein shall become final and binding on the
parties hereto on the date the Accounting Firm delivers its final resolution in
writing to Purchaser and the Seller (which final resolution shall be requested
by the parties hereto to be delivered not more than forty five (45) days
following submission of such disputed matters). All of the fees and expenses of
the Accounting Firm pursuant to this SECTION 2.5 shall be borne equally by the
Seller and the Purchaser.
(c) If the Closing Date Policyholders' Surplus (as determined pursuant to
SECTION 2.5(B)) exceeds the Estimated Policyholders' Surplus, then Purchaser
shall pay the Seller the amount of such excess, as directed by the Seller. If
the Closing Date Policyholders' Surplus (as determined pursuant to SECTION
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2.5(B)) is less than the Estimated Policyholders' Surplus, then the Seller shall
pay Purchaser such shortfall as directed by Purchaser. Payments made pursuant to
this SECTION 2.5(C) shall be made by wire transfer of immediately available
funds as follows: (i) if no Notice of Objection is delivered to the Seller, such
amount shall be paid within three (3) Business Days of the earlier of the
expiration of the thirty (30) day period for delivery of such Notice of
Objection and the date of delivery to the Seller of a notice that the Closing
Surplus Statement will be accepted without objection; or (ii) if Notice of
Objection is delivered to the Seller, (x) any net undisputed amount due from
Seller to Purchaser or from Purchaser to Seller (as the case may be) shall be
paid within three (3) Business Days after delivery of such Notice of Objection,
and (y) the remaining amount, if any, due from Seller to Purchaser or Purchaser
to Seller (as the case may be) shall be paid within three (3) Business Days
after the date all disputed items are finally resolved pursuant to SECTION
2.5(B). Any amounts not paid when required pursuant to this SECTION 2.5(C) shall
bear interest compounded annually from the required date of payment to the date
of actual payment at the prime rate of interest announced publicly by Citibank
N.A. in New York, New York from time to time as its prime rate.
Section 2.6. NICO REINSURANCE AGREEMENT.
Subject to any required Consents, immediately prior to the Closing, the
Seller and the Company shall execute and deliver the NICO Reinsurance Agreement,
pursuant to which the Seller shall reinsure all of the Company's remaining gross
insurance liabilities under the Insurance and Reinsurance Contracts issued on or
prior to the Closing Date and expenses related thereto as set forth in the NICO
Reinsurance Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Purchaser that except as
disclosed in any of the Schedules attached hereto (it being understood and
agreed that information disclosed in any Schedule shall be deemed to be
disclosed with respect to, and incorporated in, any other section or subsections
contained in this ARTICLE III unless it is not reasonably apparent that such
disclosure is applicable to another section or subsection) as follows:
Section 3.1. ORGANIZATION AND GOOD STANDING OF SELLER AND THE COMPANY.
(a) The Seller is a corporation duly incorporated and subsisting under the
laws of the state of Nebraska and has all the requisite corporate power and
authority to own and hold its assets and properties and to carry on its business
as now being conducted. Seller has furnished to Purchaser correct and complete
copies of its articles of incorporation and bylaws, in each case as amended to
date.
(b) The Company is a corporation duly incorporated and subsisting under the
laws of the state of New York as a property and casualty company and has all
requisite corporate power and authority to own and hold assets and properties
and to carry on its business as now being conducted in all material respects.
The Company is duly qualified and in good standing as a foreign corporation in
all jurisdictions in which the nature of its business or the ownership of its
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assets makes such qualification necessary, in each case except where the failure
to be so qualified has not had a Material Adverse Effect. Seller has furnished
to Purchaser correct and complete copies of the articles of incorporation and
bylaws of the Company, in each case as amended to date.
Section 3.2. AUTHORITY AND ENFORCEABILITY.
(a) The Seller has all requisite corporate power and authority to execute
and deliver this Agreement and the other Transaction Documents to which it is a
party and to perform its obligations hereunder and thereunder. The execution,
delivery and performance by Seller of this Agreement and the other Transaction
Documents to which it is a party have been duly authorized by all necessary
corporate action on the part of the Seller and no other corporate proceedings on
the part of the Seller is necessary to authorize the execution, delivery and
performance of this Agreement and the other Transaction Documents to which it is
a party or the consummation of any of the transactions contemplated hereby or
thereby. This Agreement and other Transaction Documents (when executed) to which
the Seller is a party have been (or, at Closing will be) duly executed and
delivered by the Seller and constitute (or at Closing, will constitute) the
legal, valid and binding obligations of the Seller, enforceable against the
Seller in accordance with their terms, subject to applicable bankruptcy,
insolvency or similar laws in effect that affect the enforcement of creditors'
rights generally and to general principles of equity (regardless of whether
enforcement is sought in equity or at law).
(b) The Company has all requisite corporate power and authority to execute
and deliver the Transaction Documents to which it is a party and to perform its
obligations thereunder. The execution, delivery and performance by the Company
of the Transaction Documents to which it is a party have been duly authorized by
all necessary corporate action on the part of the Company and no other corporate
proceedings on the part of the Company is necessary to authorize the execution,
delivery and performance of the Transaction Documents to which it is a party or
the consummation of any of the transactions contemplated or thereby. The
Transaction Documents to which the Company is a party (when executed) at Closing
will be duly executed and delivered by the Company and, at Closing, will
constitute the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, subject to applicable
bankruptcy, insolvency or similar laws in effect that affect the enforcement of
creditors' rights generally and to general principles of equity (regardless of
whether enforcement is sought in equity or at law).
Section 3.3. CAPITALIZATION AND OWNERSHIP. SCHEDULE 3.3 sets forth the
designation, par value and the number of authorized, issued and outstanding
shares of capital stock of the Company. The Shares constitute all of the issued
and outstanding shares of capital stock of the Company and there are no other
shares of capital stock of the Company issued or outstanding. All of the Shares
are duly authorized, validly issued, fully paid and non-assessable. The Seller
is, and on the Closing Date will be, the sole record holder and beneficial owner
of all of the Shares, free and clear of any Lien (other than any restriction on
subsequent transferability by Purchaser imposed by Applicable Insurance Codes
and applicable federal or state securities laws). Except for this Agreement,
there are no subscriptions, options, warrants, calls, preemptive rights,
commitments or other rights (contingent or otherwise) to purchase or otherwise
receive, nor are there any securities or instruments of any kind convertible
into or exchangeable for, any capital stock of the Company. Neither Seller nor
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Company is a party to any agreement with a third party which places any
restriction upon, or which creates any voting trust, proxy, or other agreement
with respect to, the voting, purchase, redemption, acquisition or transfer of
the Shares.
Section 3.4. SUBSIDIARIES. As of the Closing, the Company will not own
beneficially, directly or indirectly, any shares of capital stock or securities
convertible into capital stock of any other corporation or have any
participating interest in any partnership, limited liability company, or joint
venture, or control, directly or indirectly, any other Person.
Section 3.5. NO CONFLICTS Assuming receipt of the Consents (as defined in
SECTION 3.6 below), the execution, delivery and performance by the Seller of
this Agreement and of the Seller and the Company of the other Transaction
Documents to which each are a party and the consummation of the transactions
contemplated hereby and thereby do not and will not conflict with, result in any
breach or violation of, constitute a default under (or an event that with the
giving of notice or the lapse of time or both would constitute a default under),
or give rise to any right of termination, cause a loss, cancellation, suspension
or adverse modification of, or acceleration of any right or obligation of the
Seller or the Company under, or result in the creation or imposition of any Lien
upon any assets or properties of the Seller or the Company by reason of the
terms of (a) the certificate or articles of incorporation or bylaws of the
Seller or the Company, (b) except as disclosed on SCHEDULE 3.5, any material
Contract to which the Seller or the Company is a party or by or to which any of
them or their assets or properties (including, without limitation, the Shares)
may be bound or subject, (c) any applicable material order, writ, judgment,
injunction, award, decree, law, statute, ordinance, rule or regulation or (d)
any License or any other material Permit used or held by the Company or Seller,
other than, in the case of clause (b) and (c) above, any such items that would
not be reasonably likely to have a Material Adverse Effect or a material adverse
effect on the ability of the Seller to execute and deliver this Agreement or the
other Transaction Documents to which it is a party, to perform its obligations
hereunder or thereunder, or to consummate the transactions contemplated hereby
and thereby.
Section 3.6. CONSENTS AND APPROVALS. Except as set forth on SCHEDULE 3.6,
no consent, approval, authorization, license or order of, registration or filing
with, or notice to, any Governmental Entity or any other Person (collectively,
"CONSENTS") is necessary to be obtained, made or given by the Seller or the
Company in connection with the execution and delivery by the Seller of this
Agreement or the Seller or the Company of the other Transaction Documents to
which it is a party, the performance by the Seller or the Company of their
obligations hereunder and thereunder and the consummation of the transactions
contemplated hereby and thereby, other than such Consents which, if not obtained
or made, would not be reasonably likely to have a Material Adverse Effect or a
material adverse effect on the ability of the Seller to execute and deliver this
Agreement or the other Transaction Documents to which it is a party, to perform
its obligations hereunder or to consummate the transactions contemplated hereby
or thereby.
Section 3.7. TITLE TO SHARES. The Seller has good and valid title to each
of the Shares, free and clear of all Liens (other than any restrictions on
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subsequent transferability by Purchaser of the Shares imposed by Applicable
Insurance Codes and applicable federal or state securities laws).
Section 3.8. CONTRACTS. SCHEDULE 3.8 sets forth a true and complete list of
all of the following Contracts to which the Company is a party or pursuant to
which any of its properties or assets is bound (excluding Insurance and
Reinsurance Contracts assumed or ceded by the Company in conduct of its
insurance and reinsurance business): (x) all Intercompany Agreements and (y) all
other material Contracts. The Seller has made available to Purchaser true,
correct and complete copies of all Contracts listed on SCHEDULE 3.8.
Section 3.9. FINANCIAL STATEMENTS. The Company has furnished to Purchaser
true, correct and complete copies of the Statutory Statements of the Company.
The Statutory Statements of the Company were prepared in accordance with
Statutory Accounting Practices of the Domiciliary Insurance Department, and the
Applicable Insurance Code, consistently applied throughout the periods involved
(except as may be indicated in the notes thereto regarding the adoption of new
accounting policies), have been audited and present fairly, in accordance with
Statutory Accounting Practices of the Domiciliary Insurance Department, and the
Applicable Insurance Code, the statutory financial position of the Company at
the respective dates thereof and the results of operations of the Company, for
the respective periods then ended, except that the quarterly Statutory
Statements of the Company have not been audited and are or will be subject to
normal recurring year-end audit adjustments. The Statutory Statements of the
Company complied in all material respects with Statutory Accounting Practices of
the Domiciliary Insurance Department, and the Applicable Insurance Code, and
were complete and correct in all material respects when filed, and no material
deficiency has been asserted in writing with respect to any of the Statutory
Statements of the Company by any Applicable Insurance Department.
Section 3.10. NO MATERIAL ADVERSE CHANGE. Since December 31, 2007, except
with respect to the Transaction Documents, the Company has conducted its
business in the ordinary course in all material respects consistent with past
practice and no change or event has occurred or condition exists that has had a
Material Adverse Effect. The Company ceased writing new Insurance and
Reinsurance Contracts in 1991, and has been in run-off since.
Section 3.11. ASSETS AND LIABILITIES AT CLOSING. Except as disclosed in
SCHEDULE 3.11, on the Closing Date (after giving effect to the NICO Reinsurance
Agreement, and the transactions contemplated hereunder, including without
limitation Section 5.8 hereof), the Company's assets shall consist of nothing
more than the Closing Assets (it being understood that such assets shall be free
and clear of all Liens). Except as disclosed in SCHEDULE 3.11, to the knowledge
of the Seller after due inquiry, the Company has no liabilities or obligations
of any nature except (i) as disclosed or reserved against in the Statutory
Statements of the Company, including the notes thereto, and (ii) for
non-material liabilities or obligations that were incurred in the ordinary
course of business consistent with past practice.
Section 3.12. TAXES. Except as otherwise disclosed in SCHEDULE 3.12, (i)
the Company has filed (or joined in the filing of) when due (after taking into
account all properly requested extensions) all material Tax Returns required by
applicable law to be filed with respect to the Company. All Tax Returns,
including amendments to date, filed (or joined in the filing of) by the Company
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completely, accurately, and correctly reflected the facts regarding the income,
properties, operations and status of the Company as required to be shown
thereon. All Taxes shown to be due on such Tax Returns have been paid, (ii)
there is no pending examination or proceeding by any Taxing Authority or agency
with respect to the Company relating to the assessment or collection of any
material Tax or assessment, nor is there any written claim for additional Tax or
assessment being asserted by any Taxing Authority, (iii) there has been no
waiver or extension of any applicable statute of limitations for the assessment
or collection of any such Taxes of the Company; and (iv) the Company is not a
party to any tax sharing agreement other than with Seller and its Affiliates
providing for the payment of Taxes, payment for Tax losses, entitlements to
refunds or similar Tax matters. There is no tax Lien, whether imposed by any
federal, state, county or local taxing authority outstanding against the assets,
properties or businesses of the Company, except for liens arising by operation
of law for accrued taxes not yet due.
Section 3.13. LEGAL PROCEEDINGS. Except as set forth in SCHEDULE 3.13,
there is no action, suit, claim, arbitration, proceeding, inquiry or
investigation pending or, to the knowledge of Seller, threatened against the
Company or against the Seller with respect to the Company, or any of the assets
of the Company, by or before any court, other Governmental Entity or arbitrator
other than actions, suits, claims or proceedings which, if adversely determined,
would have a Material Adverse Effect.
Section 3.14. COMPLIANCE WITH LAW; PERMITS. Except for matters disclosed in
SCHEDULE 3.14, the Company is in compliance in all material respects with (i)
all applicable laws, ordinances, rules and regulations of all governmental
authorities, (ii) all applicable orders, writs, judgments, injunctions, awards,
determinations and decrees of any court, other Governmental Entity or
arbitrator, (iii) the Licenses, and (iv) any Permits (other than the Licenses),
except in the case of clause (iv) where the failure to comply has not had a
Material Adverse Effect. SCHEDULE 3.14(I) contains a complete and accurate list
of all the Licenses. Except for matters disclosed in SCHEDULE 3.14(I), each
License set forth in SCHEDULE 3.14(I) is in full force and effect without any
default or violation thereunder in any material respect by the Company. Except
as set forth in SCHEDULE 3.14(I), no proceeding is pending or, to the knowledge
of Seller, threatened by any governmental authority to revoke or deny the
renewal of any such License. The Company has not received notice in writing that
any License may not in the ordinary course be renewed upon its expiration.
SCHEDULE 3.14(II) contains a complete and accurate list of all material Permits
(other than the Licenses) used or held by the Company or the Seller. Except for
matters disclosed in SCHEDULE 3.14(II), each such material Permit set forth in
SCHEDULE 3.14(II) is in full force and effect without any default or violation
thereunder, except as otherwise would not have a Material Adverse Effect. Except
as set forth in SCHEDULE 3.14(II), no proceeding is pending or, to the knowledge
of Seller, threatened by any governmental authority to revoke or deny the
renewal of any such material Permit and the Company has not received notice in
writing that any material Permit may not in the ordinary course be renewed upon
its expiration, except as otherwise would not have a Material Adverse Effect.
Section 3.15. EMPLOYEES AND BENEFIT PLANS. Except as disclosed on SCHEDULE
3.15, the Company (i) does not currently have any employees, (ii) does not
currently sponsor any Employee Benefit Plans, (iii) has no liability or
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responsibility with respect to any Person who was previously an employee of the
Company or with respect to any Employee Benefit Plan previously maintained by
the Company, and (iv) has no liability or responsibility with respect to any
employee or any Employee Benefit Plan sponsored or maintained by Seller or any
other Affiliate of the Company.
Section 3.16. ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 3.16,
(i) the Company has complied and is now in compliance, in all material respects,
with all applicable federal, state and local laws, statutes, regulations and
ordinances governing or relating to pollution or the management, handling,
disposal or release of hazardous substances, or the protection of human health
or the environment ("ENVIRONMENTAL LAWS"), and (ii) neither the Company nor the
Seller, has received any written notice, request for information, order,
complaint, notice of potential responsibility, penalty or claim from any
governmental authority or other Person alleging that the Company is not in
compliance with any Environmental Law, or other than liabilities arising from
Insurance or Reinsurance Contracts, alleging that the Company is responsible or
liable under Environmental Laws or under common law (with respect to
environmental matters), nor, to the knowledge of the Seller, is any such
environmental notice, request, order, complaint or claim threatened.
Section 3.17. COMPANY INSURANCE POLICIES. SCHEDULE 3.17 contains a list of
all material policies of insurance (excluding Insurance and Reinsurance
Contracts assumed or ceded by the Company in conduct of its insurance and
reinsurance business) maintained by or for the benefit of the Company as of the
date hereof with respect to its properties and the conduct of its business (the
"COMPANY INSURANCE POLICIES").
Section 3.18. BANK ACCOUNTS. SCHEDULE 3.18 contains a true and complete
list of the names and locations of all banks and other financial institutions at
which the Company has an account or safe deposit box or maintains a banking,
custodial, or other similar relationship
Section 3.19. NO BROKERS. No broker, finder or investment banker or other
Person acting on behalf of the Seller or Company is or will be entitled to any
brokerage, finder's or other fee, compensation or commission from Seller or
Company.
Section 3.20. NO OTHER REPRESENTATIONS OR WARRANTIES. EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS ARTICLE III (AS QUALIFIED BY
THE SCHEDULES) OR THE TRANSACTION DOCUMENTS, NEITHER THE SELLER NOR ANY OTHER
PERSON MAKES ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WITH
RESPECT TO THE SELLER, THE SELLER'S AFFILIATES, THE COMPANY, OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR THE TRANSACTION DOCUMENTS, AND THE SELLER
DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES, WHETHER MADE BY THE SELLER,
THE SELLER'S AFFILIATES, THE COMPANY OR ANY OF THEIR RESPECTIVE AFFILIATES,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES. EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS ARTICLE III (AS QUALIFIED BY
THE SCHEDULES) OR THE TRANSACTION DOCUMENTS, THE SELLER HEREBY DISCLAIMS ALL
LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, PROJECTION,
FORECAST, STATEMENT OR INFORMATION MADE, COMMUNICATED OR FURNISHED (ORALLY OR IN
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WRITING) TO THE PURCHASER OR ANY OF ITS AFFILIATES OR REPRESENTATIVES (INCLUDING
ANY OPINION, INFORMATION, PROJECTION OR ADVICE THAT MAY HAVE BEEN OR MAY BE
PROVIDED TO THE PURCHASER OR ANY OF ITS AFFILIATES BY ANY DIRECTOR, OFFICER,
EMPLOYEE, AGENT, CONSULTANT OR REPRESENTATIVE OF THE SELLER, THE COMPANY OR ANY
OF THEIR RESPECTIVE AFFILIATES)..
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller that except as
disclosed in any of the Schedules attached hereto (it being understood and
agreed that the information disclosed in any Schedule shall be deemed to be
disclosed with respect to, and incorporated in, any other section or subsections
contained in this ARTICLE IV unless it is not reasonably apparent that such
disclosure is applicable to another section or subsection) as follows:
Section 4.1. THE ORGANIZATION AND GOOD STANDING. The Purchaser is a
corporation duly incorporated and subsisting under the laws of the state of
Delaware and has all the requisite corporate power and authority to own and hold
its assets and properties and to carry on its business as now being conducted.
Section 4.2. AUTHORITY AND ENFORCEABILITY. The Purchaser has all requisite
corporate power and authority to execute and deliver this Agreement and the
other Transaction Documents to which it is a party and to perform its
obligations hereunder and thereunder. The execution, delivery and performance of
this Agreement and the other Transaction Documents to which it is a party have
been (or at Closing, will be) duly authorized by all necessary corporate action
on the part of the Purchaser and no other corporate proceedings on the part of
the Purchaser are necessary to authorize the execution, delivery and performance
of this Agreement and the other Transaction Documents to which it is a party or
the consummation of any of the transactions contemplated hereby or thereby. This
Agreement and all other Transaction Documents to which it is a Party has been
(or at Closing, will be) duly executed and delivered by the Purchaser and
constitutes the legal, valid and binding obligations of the Purchaser,
enforceable against the Purchaser in accordance with their terms, subject to any
applicable bankruptcy, insolvency, or similar laws in effect that affect the
enforcement of creditors' rights generally and to general principles of equity
(regardless of whether enforcement is sought in equity or at law).
Section 4.3. INVESTMENT INTENT. The Purchaser is acquiring the Shares for
its own account and not with a view to, or for offer or resale in connection
with, their distribution within the meaning of the Securities Act of 1933 (the
"SECURITIES ACT"). The Purchaser acknowledges that the Shares are not registered
under the Securities Act or registered or qualified for sale under any state
securities law, and that none of the Shares may be offered for sale, sold or
otherwise transferred unless they are registered or otherwise qualified under
federal and any applicable state securities law or unless an exemption from such
registrations or qualifications is available. The Purchaser has sufficient
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knowledge and experience in financial and business matters to enable it to
evaluate the risks of investment in such Shares and has the ability to bear the
economic risks of such investment.
Section 4.4. NO CONFLICTS Assuming receipt of the Consents (referred to in
SECTION 4.5 below), the execution, delivery and performance by the Purchaser of
this Agreement and the other Transaction Documents to which it is a party and
the consummation of the transactions contemplated hereby and thereby do not and
will not conflict with, result in any breach or violation of, constitute a
default under (or an event that with the giving of notice or the lapse of time
or both would constitute a default under), or give rise to any right of
termination, cause a loss, cancellation, suspension or adverse modification of,
or acceleration of any right or obligation of the Purchaser under, or result in
the creation or imposition of any Lien upon any assets or properties of the
Purchaser by reason of the terms of (a) the certificate or articles of
incorporation or bylaws of the Purchaser, (b) any material Contract to which the
Purchaser is a party or by or to which any of them or their assets or properties
may be bound or subject, (c) any applicable material order, writ, judgment,
injunction, award, decree, law, statute, ordinance, rule or regulation or (d)
any material Permit used or held by the Purchaser (including, without
limitation, any certificate of authority or license to conduct insurance
business in any state), other than, in the case of clause (b) and (c) above, any
such items that would not be reasonably likely to have a material adverse effect
on the ability of the Purchaser to execute and deliver this Agreement or the
other Transaction Documents to which it is a party, to perform its obligations
hereunder or thereunder, or to consummate the transactions contemplated hereby
and thereby.
Section 4.5. CONSENTS AND APPROVALS. Except as set forth on SCHEDULE 4.5,
no Consents are necessary to be obtained, made or given by the Purchaser in
connection with the execution and delivery by the Purchaser of this Agreement
and the other Transaction Documents to which it is a party, the performance by
the Purchaser of its obligations hereunder and thereunder and the consummation
of the transactions contemplated hereby and thereby, other than such Consents
which, if not obtained or made, would not be reasonably likely to have a
material adverse effect on the ability of the Purchaser to execute and deliver
this Agreement or the other Transaction Documents to which it is a party, to
perform its obligations hereunder or to consummate the transactions contemplated
hereby and thereby.
Section 4.6. LEGAL PROCEEDINGS. There is no action, suit, claim,
arbitration, proceeding, inquiry or investigation pending or, to the knowledge
of the Purchaser, threatened against the Purchaser by or before any court, other
governmental entity or arbitrator that could delay, impair or prevent the
Purchaser from performing its obligations hereunder.
Section 4.7. NO BROKERS. Except as set forth on SCHEDULE 4.7, no broker,
finder or investment banker or other Person acting on behalf of the Purchaser is
or will be entitled to any brokerage, finder's or other fee, compensation or
commission as a result of this transaction.
Section 4.9. NO OTHER REPRESENTATIONS OR WARRANTIES. EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS ARTICLE IV (AS QUALIFIED BY THE
SCHEDULES) OR THE TRANSACTION DOCUMENTS, NEITHER THE PURCHASER NOR ANY OTHER
PERSON MAKES ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WITH
RESPECT TO THE PURCHASER, THE PURCHASER'S AFFILIATES OR THE TRANSACTIONS
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CONTEMPLATED BY THIS AGREEMENT OR THE TRANSACTION DOCUMENTS, AND THE PURCHASER
DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES, WHETHER MADE BY THE PURCHASER
OR THE PURCHASER'S AFFILIATES OR ANY OF THEIR RESPECTIVE AFFILIATES, OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES
ARTICLE V
COVENANTS
Section 5.1. CONSENTS AND FILINGS; FURTHER ASSURANCES.
(a) Subject to the terms and conditions of this Agreement, each of the
parties hereto will use its commercially reasonable efforts to take promptly, or
cause to be taken promptly, all actions, and to do promptly, or cause to be done
promptly, all things necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement.
(b) Each of the parties hereto shall use its commercially reasonable
efforts to obtain, as soon as practicable after the date hereof, any necessary
Consents of, and make any filing with or give any notice to, any Governmental
Entities and other Persons (including, without limitation, insurance approvals)
as are required to be obtained, made or given by such party to consummate the
transactions contemplated by this Agreement and any Transaction Document.
Without limiting the generality of the foregoing, from the date hereof until the
earlier of the Closing Date and the termination of this Agreement, Seller agrees
to continue to use its commercially reasonable efforts to obtain, for the
benefit of the Company, as soon as practicable after the date hereof, a
Certificate of Authority from the Commonwealth of Kentucky and a Certificate of
Authority from the Financial Management Service of the U.S. Department of
Treasury. Each party shall pay all amounts reasonably required to be paid by it
in connection with obtaining any Consents that it is required to obtain. In
furtherance of the foregoing, each party shall use its commercially reasonable
efforts to obtain the necessary Consents of any Governmental Entities on or
prior to December 31, 2008. The Seller and the Purchaser shall provide each
other with a reasonable opportunity to review and comment upon submissions made
to the applicable Insurance Departments in connection with the Seller insurance
approvals and the Purchaser insurance approvals, respectively, and shall keep
one another reasonably informed of developments relating to their efforts to
obtain such insurance approvals.
(c) To the extent permitted by law and the applicable Governmental Entity,
the Seller and Purchaser shall each have the right to participate in any
meetings or telephone conferences in which the substance of the Form A and any
other regulatory filings is discussed. Subject to applicable law relating to the
sharing of information, the Purchaser shall submit all such filings, requests,
responses and hearing testimony, witness lists and other similar materials
relating to any hearing to the Seller for its review prior to filing thereof,
provided that nothing herein shall obligate Company to provide Seller with
private information concerning any proposed new director or officer of Company
or any Affiliate of Company and nothing herein shall obligate Company to provide
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Seller with any confidential information concerning Purchaser or any private
information regarding any director or officer of Purchaser or its Affiliates.
(d) In furtherance and not in limitation of the covenants of the parties
hereto contained in this SECTION 5.1, each of the parties hereto shall use its
commercially reasonable efforts to resolve such objections, if any, as may be
asserted by any governmental entity with respect to the transactions
contemplated by this Agreement or any other Transaction Document.
Section 5.2. PUBLIC ANNOUNCEMENTS. Prior to the Closing Date, neither the
Purchaser nor the Seller will (and the Seller shall cause the Company not to)
issue any public announcement or similar publicity with respect to this
Agreement or the transactions contemplated by this Agreement without the prior
consent of the Seller (in the case of the Purchaser) or the Purchaser (in the
case of the Seller or the Company), except to the extent required by law.
Section 5.3. TAX MATTERS.
(a) PREPARATION AND FILING OF TAX RETURNS; PAYMENT OF TAXES.
(i) The Seller shall be responsible for the preparation and filing of
(A) all Tax Returns for any Income Taxes (as hereinafter defined) of the
Company for all taxable periods that end on or before the Closing Date,
including a Tax Return for the partial year January 1, 2008 to the date of
Closing if permitted under the provisions of subsection (v) of this
subsection (a), and (B) all other Tax Returns of the Company required to be
filed prior to the Closing Date. For purposes of this Agreement, "INCOME
TAXES" shall mean any taxes imposed upon or measured by net income. The
Seller shall make or cause to be made all payments required with respect to
any such Tax Returns.
(ii) For all Tax Returns for periods beginning before and ending after
the Closing Date, the Tax liability with respect thereto shall be accrued
as of the Closing Date based upon a closing of the Company's books. Seller
shall be responsible for and shall pay to Purchaser an amount equal to the
Tax liability so accrued within 30 days after the Closing Date, provided
that such Tax liability has not been accounted for in the calculation of
the Closing Date Policyholders' Surplus. Purchaser shall be responsible for
the preparation and filing of all such Tax Returns.
(iii) The Purchaser shall be responsible for the preparation and
filing of all other Tax Returns for the Company. The Purchaser shall make
all payments required with respect to any such Tax Returns.
(iv) The Purchaser shall be responsible for the payment of, and hereby
covenants and agrees to pay, any transfer, sales, use, stamp, conveyance,
value added, recording, registration, documentary, filing, and other
non-Income Taxes and administrative fees (including notary fees) arising in
connection with the consummation of the sale of the Shares which are the
responsibility of Purchaser under applicable law. Each of the Seller and
the Purchaser shall prepare all necessary Tax Returns and other
documentation that it is required to prepare under applicable law with
respect to all taxes referenced in the previous sentence.
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(v) The Seller and Purchaser agree that if the Company is permitted
but not required under applicable foreign, state, or local tax laws to
treat the Closing Date as the last day of a taxable period, the Seller, the
Purchaser, and the Company shall treat such day as the last day of a
taxable period.
(b) REFUNDS.
(i) The Seller shall be entitled to any refunds (including any
interest paid thereon) or credits of taxes with respect to the Company for
which the Seller is responsible for filing the Tax Return under
subparagraph (a) (i) of this SECTION 5.3, and for the preclosing taxable
period under subparagraph (a)(ii), provided that such amounts were not
accounted for in the calculation of the Closing Date Policyholders'
Surplus.
(ii) The Purchaser shall be entitled to any refunds (including any
interest paid thereon) or credits of taxes with respect to the Company for
which the Purchaser is responsible for filing the Tax Return under
subparagraph (a) (iii) of this SECTION 5.3, provided that such amounts were
not accounted for in the calculation of the Closing Date Policyholders'
Surplus..
(iii) The Purchaser shall forward to or reimburse the Seller for any
such refunds (including any interest paid thereon) or credits due the
Seller after receipt thereof, and the Seller shall promptly forward to the
Purchaser or reimburse the Purchaser for any such refunds (including any
interest paid thereon) or credits due the Purchaser after receipt thereof.
(c) COOPERATION ON TAX MATTERS; TAX AUDITS.
(i) The Seller and the Purchaser (each a "PARTY") shall cooperate in
the preparation of all Tax Returns for any tax periods for which one Party
could reasonably require the assistance of the other Party in obtaining any
necessary information. Such cooperation shall include, but not be limited
to, furnishing prior years' Tax Returns or return preparation packages to
the extent related to the Company illustrating previous reporting practices
or containing historical information relevant to the preparation of such
Tax Returns, and furnishing such other information within such Party's
possession requested by the Party filing such Tax Returns as is relevant to
their preparation. Such cooperation and information also shall include
provision of limited powers of attorney for the purpose of signing Tax
Returns and defending audits and promptly forwarding copies of appropriate
notices and forms or other communications received from or sent to any
Taxing Authority that relate to the Company, and providing copies of all
relevant Tax Returns to the extent related to the Company, together with
accompanying schedules and related workpapers, documents relating to
rulings or other determinations by any Taxing Authority, and records
concerning the ownership and tax basis of property, which the requested
Party may possess. The Seller or the Purchaser shall make their respective
employees and facilities available on a mutually convenient basis to
explain any documents or information provided hereunder.
(ii) The Seller shall have the right, at its own expense, to control
any audit or examination by any Taxing Authority ("TAX AUDIT"), initiate
any claim for refund, and contest, resolve, and defend against any
assessment, notice of deficiency, or other adjustment or proposed
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adjustment relating to any and all taxes for any taxable period ending on
or before the Closing Date for which it must file a Tax Return with respect
to the Company. The Purchaser shall have the right, at its own expense, to
control any other Tax Audit, initiate any other claim for refund, and
contest, resolve, and defend against any other assessment, notice of
deficiency, or other adjustment or proposed adjustment relating to taxes
with respect to the Company.
(d) TERMINATION OF TAX SHARING AGREEMENTS. All tax sharing agreements or
similar arrangements, if any, with respect to or involving the Company shall be
terminated with respect to the Company prior to the Closing Date and, after the
Closing Date, the Company and the Purchaser shall not be bound thereby or have
any liability thereunder for amounts due in respect of periods ending on or
before the Closing Date.
Section 5.4. CONDUCT OF BUSINESS. Except as set forth on SCHEDULE 5.4 and
except as otherwise expressly permitted by this Agreement or any other
Transaction Document (including, without limitation, SECTION 5.4 hereto), or as
consented in writing by the Purchaser, from the date hereof to and including the
Closing Date, the Seller shall cause the Company to conduct its business in the
ordinary course consistent with past practice. Without limiting the generality
of the foregoing, from the date hereof to and including the Closing Date, the
Seller will not, without the prior written consent of the Purchaser (such
consent not to be unreasonably withheld or delayed), permit the Company to
directly or indirectly:
(i) amend or modify its certificate or articles of incorporation,
bylaws or other charter or organization documents;
(ii) merge or consolidate with or acquire the business of any other
corporation or other business organization or, except in the ordinary
course of business, acquire any property or assets of any other Person;
(iii) split, combine or reclassify any shares of its capital stock, or
declare, pay or set aside any sum for any dividend or other distribution
(whether in cash, stock or property, any combination thereof or otherwise)
in respect of its capital stock, or redeem, purchase or otherwise acquire
(or agree to redeem, purchase or otherwise acquire) any of its capital
stock or any of its other securities or any securities of the Company;
(iv) adopt a plan of complete or partial liquidation, dissolution,
rehabilitation, merger, consolidation, restructuring, recapitalization,
redomestication or other reorganization; or
(v) take any action (or omit to take any action) which would result in
a Material Adverse Effect; or
(vi) enter into any agreement, or otherwise become obligated, to do
any of the foregoing.
Section 5.5. ACCESS; CONFIDENTIALITY. From the date hereof until the
Closing Date, Purchaser, and its representatives will have reasonable access to
the books and records, Contracts, management and personnel of Company relating
to the operations and business of Company at all reasonable times, upon
reasonable notice. Subject to the prior written consent of the Seller, any
Person providing financing in connection with the transactions contemplated
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hereby will have reasonable access to the books and records of Company relating
to the operations and business of Company at all reasonable times, upon
reasonable notice. The Purchaser, its representatives, and such other Persons,
as applicable, shall keep confidential all information and documents provided
under this SECTION 5.5 in accordance with the terms of the Mutual Non-Disclosure
Agreement entered into between the Purchaser and Seller dated September 26, 2007
(the "CONFIDENTIALITY AGREEMENT"), the terms of which are incorporated herein by
reference and shall continue in force until the Closing Date.
Section 5.6. LITIGATION COOPERATION. From and after the Closing Date, the
Purchaser shall cause the Company to use commercially reasonable efforts to
cooperate, engage in communications and share, exchange and jointly create
documents, information, and analyses in connection with, and in order to enable
Seller to respond to any action brought against the Seller or its current or
former Affiliates (other than the Company) relating or arising from the conduct
or operations of the Company that occurred prior to the Closing Date (a
"THIRD-PARTY CLAIM"). Such cooperation shall include, without limitation, (i)
the provision to the Seller of all records and information relating to the
Company concerning Third-Party Claims as reasonably requested by the Seller, and
(ii) providing Seller with access (upon reasonable advance notice) to materials,
documents, emails and data residing with or in the possession, custody or
control of the Company or employees relating to any Third-Party Claim (provided,
that such access shall be granted only during normal business hours of the
Company and shall not otherwise be disruptive to the operations of the Purchaser
or the Company). To the extent that the Seller and the Company are parties to
the same Third-Party Claim, subject to the Purchaser's rights under Section 9.1
hereof, the appropriate parties to such claim shall consult as to strategy and
seek to coordinate their actions.
Section 5.7. PROPRIETARY AND THIRD PARTY SOFTWARE. (a) Purchaser
acknowledges and agrees that all rights in and to any software, including
without limitation, source code, object code and related documentation, that was
created, conceived developed or acquired, whether jointly or individually, by
the Seller or any of its Affiliates (but excluding any third party software
licensed by the Seller or any of the Seller's Affiliates) prior to the Closing
Date shall belong solely to the Seller, shall be proprietary to the Seller and
shall be excluded from the assets of the Company to be transferred to Purchaser
at Closing ("PROPRIETARY SOFTWARE").
(b) Purchaser acknowledges and agrees that Purchaser, the Company, and
their respective Affiliates are not acquiring any ownership interest or any
other rights, in whole or in part, in the Proprietary Software. The Purchaser,
acting on behalf of itself, the Company, and their respective Affiliates hereby
assigns, transfers, quit-claims and relinquishes to the Seller or its designee
all right, title and interest the Purchaser, the Company, and their respective
Affiliates may heretofore have had in and to the Proprietary Software, including
ownership interests in the Proprietary Software. From and after the Closing
Date, if reasonably requested by Seller, Purchaser shall cause the Company to
execute such other or additional instruments of transfer or conveyance in
respect of the Proprietary Software to give full effect to and to perfect the
ownership and proprietary rights of Seller in and to the Proprietary Software;
PROVIDED, HOWEVER, that Seller shall bear all costs and expenses payable by
Purchaser or the Company (including, without limitation, reasonable attorneys
fees and expenses) in connection with the execution by Company of any such
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instruments at the specific request of the Seller. Purchaser agrees (and agrees
to cause the Company) not to contest the ownership or validity of any rights of
the Seller or any of its Affiliates in the Proprietary Software.
Section 5.8. INTERCOMPANY ACCOUNTS; INTERCOMPANY AGREEMENTS. Except as set
forth in SCHEDULE 5.8, the Seller shall cause all intercompany accounts
receivable or payable (whether or not currently due or payable) between (x) the
Company, on the one hand, and (y) the Seller or any of its Affiliates (other
than the Company), on the other hand, to be settled in full (without any premium
or penalty), at or prior to the Closing, and all Intercompany Agreements, except
for the NICO Reinsurance Agreement and Reinsurance Agreement between the Company
and Columbia, shall be terminated as of the Closing Date without further
liability to the Company thereunder.
Section 5.9. RECORDS RETENTION. From and after the Closing Date, upon
reasonable notice, Purchaser and Seller agree to furnish or cause to be
furnished to each other and their representatives, employees, counsel and
accountants access, during normal business hours, to such information in a
readily readable and accessible form, assistance and cooperation relating to the
Company as is reasonably necessary for financial reporting, loss reporting and
accounting matters, the preparation and filing of any Tax Returns, or the
defense of any Tax Claim, or third party claim, and to meet reporting
requirements to any retrocessionaires or any Governmental Entities; PROVIDED,
HOWEVER, that such access and cooperation does not unreasonably disrupt the
normal operations of Purchaser, Seller or the Company. From and after the
Closing Date, Purchaser hereby acknowledges that Seller shall on behalf of the
Company maintain and keep original copies of all books and records of the
Company to the extent such books and records relate to the business that is the
subject of the NICO Reinsurance Agreement (the "COMPANY BOOKS AND RECORDS").
Seller acknowledges, that notwithstanding its maintenance and possession of the
Company Books and Records, all such Company Books and Records remain the sole
property of the Company. Purchaser shall, upon reasonable notice and for any
reasonable business purpose, have access during normal business hours to
examine, inspect and copy and to remove from Seller's possession the original
copies of such Company Books and Records; provided that, if any of such Company
Books and Records are reasonably necessary, as determined by Seller, for Seller
to perform its obligations under the NICO Reinsurance Agreement, Seller may
retain copies of such Company Books and Records and the Company shall reimburse
Seller for its out-of-pocket costs to copy same. Before the Seller may dispose
of any of Company Books and Records, Seller shall give Purchaser at least ninety
(90) days' prior written notice of its intention to dispose of such Company
Books and Records and Purchaser or its designee shall be given an opportunity,
at its cost and expense, to remove and retain all or any part of such Company
Books and Records as Purchaser may elect. From and after the Closing Date,
Purchaser shall cause the Company to preserve, maintain and keep, or cause to be
preserved, maintained and kept, in a readily readable and accessible form, all
original books and records of the Company that do not constitute Company Books
and Records, including all books and records necessary and pertinent to the
Company for financial reporting and accounting purposes, the preparation and
filing of any Tax Returns, or the defense of any Tax Claim, or third party claim
(the "PURCHASER'S BOOKS AND RECORDS") for the shorter of any statute of
limitations applicable to any such matters and a period of seven (7) years from
the Closing Date. During such seven-year period, Seller and its Representatives
shall, upon reasonable notice and for any reasonable business purpose, have
access during normal business hours to examine, inspect and copy such Purchaser
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Books and Records. After such seven-year period, before the Company may dispose
of any of such Purchaser Books and Records, the Company shall give Seller at
least ninety (90) days' prior written notice of its intention to dispose of such
Purchaser Books and Records and Seller shall be given an opportunity, at its
cost and expense, to remove and retain all or any part of such Purchaser Books
and Records as Seller may elect
Section 5.10. NOTICE OF DEVELOPMENTS. Seller and Purchaser shall each keep
the other advised of developments with respect to (a) regulatory submissions and
responses with respect to the transactions contemplated hereby and (b) any
notice or other communication from any Person alleging that the consent of such
Person is or may be required in connection with the transactions contemplated
hereunder. Prior to the Closing, Seller and Purchaser shall give the other party
prompt notice of any breach or default by it of any representation, warranty,
covenant or agreement hereunder.
Section 5.11. FURTHER ACTIONS. FROM AND AFTER THE CLOSING DATE AND SUBJECT
TO the other express provisions of this Agreement and the other Transaction
Documents, upon the request of any party to this Agreement, the other party will
(a) execute and deliver any other documents and (b) take any other actions as
the requesting party may reasonably request to fully carry out the intent of
this Agreement and the transactions contemplated by this Agreement.
Section 5.12. MAINTENANCE OF POLICYHOLDERS' SURPLUS. From and after the
date hereof until the Closing Date, the Seller shall not, and shall cause the
Company not to, affirmatively undertake to increase the level of Policyholders'
Surplus to exceed $50.0 million as of the Closing Date (it being understood and
agreed that Seller shall in no event be obligated seek regulatory approval to
cause the Company to declare and pay an extraordinary dividend to Seller in the
event that such Policyholders' Surplus exceeds $50.0 million at any time on or
prior to the Closing Date). Under no circumstances shall the foregoing be
construed to restrict the Seller or the Company from any ordinary course
business activities, including, but not limited to, the commutation or
resolution of liabilities or outwards recoveries, which may in fact have an
impact on the level of Policyholders' Surplus.
Section 5.13. FINANCING. Purchaser shall deliver to Seller, on or prior to
October 15, 2008, an officer's certificate of Purchaser to the effect that, as
of the date of such certificate, Purchaser has cash available or has existing or
committed (subject to customary closing conditions) borrowing facilities which
together are sufficient to enable it to consummate the transactions contemplated
by this Agreement (the "FINANCING CERTIFICATE"). From and after the date of the
Financing Certificate until the Closing Date, Purchaser shall use its
commercially reasonable efforts to comply with the covenants and to satisfy all
conditions to funding set forth in the existing or committed borrowing
facilities described in the Financing Certificate which are within the exclusive
control of Purchaser. Notwithstanding anything to the contrary contained herein,
the failure of Purchaser to deliver the Financing Certificate to Seller shall
not constitute a willful breach of this Agreement by Purchaser, including,
without limitation, for purposes of Seller's rights pursuant to SECTION 7.2
hereof.
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ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATION TO CLOSE
Section 6.1. CONDITIONS TO THE OBLIGATION OF THE PURCHASER. The obligation
of the Purchaser to consummate the purchase of the Shares and to consummate the
other transactions contemplated by this Agreement is subject to the
satisfaction, on or before the Closing Date, of each of the following conditions
(any of which may be waived by the Purchaser, in whole or in part):
(a) each of the Seller's representations and warranties set forth in this
Agreement must have been true and correct in all material respects as of the
date of this Agreement and must be true and correct in all material respects
(except for (x) representations and warranties that contain qualifications as to
materiality and (y) SECTION 3.3 (Capitalization and Ownership),which shall be
true and correct in all respects) as of the Closing Date as though made on the
Closing Date (except to the extent that any such representations or warranties
speak as of another date, in which case such representations and warranties
shall be true and correct in all material respects at and as of the date
specified therein);
(b) all of the covenants and obligations that the Seller is required to
perform or comply with under this Agreement or any other Transaction Document on
or before the Closing Date must have been duly performed and complied with in
all material respects;
(c) Purchaser shall have received a certificate from Seller to the effect
set forth in SECTIONS 6.1(A) and (B);
(d) all Consents or approvals set forth in SCHEDULE 6.1(D) must have been
obtained and must be in full force and effect;
(e) there must not be in effect any law, or court, arbitration or
regulatory order or judgment, and there must not have been commenced or
threatened by any Governmental Entity any proceeding, that in any case would (i)
prohibit or make illegal the consummation of any of the transactions
contemplated by this Agreement or the other Transaction Documents, or (ii) cause
any of the transactions contemplated by this Agreement to be rescinded following
their consummation;
(f) the Seller shall deliver to Purchaser certificates of the Company and
the Seller, each dated the Closing Date, signed by the secretary or any
assistant secretary of the Company and the secretary or any assistant secretary
of the Seller, respectively, each attesting to the completion of all necessary
corporate action by the Company and Seller respectively, to execute and deliver
this Agreement and the Transaction Documents to which each are a party and to
perform their respective obligations hereunder and thereunder, including copies
of the organizational documents of the Company and the Seller and all corporate
resolutions or other actions, required in connection with this Agreement or any
other Transaction Document and attesting to the incumbency of the officers of
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the Company and Seller, respectively, signing the Transaction Documents to which
each of the Company and Seller is a party, respectively;
(g) the Seller must deliver each document that SECTION 2.3(A) requires it
to deliver;
(h) the NICO Reinsurance Agreement in the form attached as EXHIBIT A hereto
shall have been executed and delivered by Seller and the Company, and shall be
in full force and effect;
(i) each of the Company's Licenses listed on SCHEDULE 6.1(I) shall be in
full force and effect as of the Closing Date;
(j) Purchaser shall have received from internal counsel to Seller, an
opinion dated as of the Closing Date covering the matters described in EXHIBIT C
hereto substantially the form attached hereto as EXHIBIT C;
(k) all Intercompany Agreements (other than the NICO Reinsurance Agreement
and the Columbia Reinsurance Agreement) shall have been terminated with no
further liability to the Company; and
(l) the agreements set forth on SCHEDULE 6.1(L) shall have been terminated
with no further liability to the Company.
Section 6.2. CONDITIONS TO THE OBLIGATION OF THE SELLER. The obligation of
the Seller to consummate the sale of the Shares and the other transactions
contemplated by this Agreement is subject to the satisfaction, on or before the
Closing Date, of each of the following conditions (any of which may be waived by
the Seller, in whole or in part):
(a) each of the Purchaser's representations and warranties set forth in
this Agreement must have been true and correct as of the date of this Agreement
and must be true and correct in all material respects (except for
representations and warranties that contain qualifications as to materiality
which shall be true and correct in all respects) as of the Closing Date as
though made on the Closing Date (except to the extent that any such
representations or warranties speak as of another date, in which case such
representations and warranties shall be true and correct in all material
respects at and as of the date specified therein);
(b) all of the covenants and obligations that the Purchaser is required to
perform or comply with under this Agreement or any other Transaction Document on
or before the Closing Date must have been duly performed and complied with in
all material respects;
(c) Seller shall have received a certificate from Purchaser to the effect
set forth in SECTIONS 6.2(A) and 6.2(B);
(d) all Consents or approvals set forth in SCHEDULE 6.2(D) must have been
obtained and must be in full force and effect;
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(e) there must not be in effect any law, or court, arbitration or
regulatory order or judgment, and there must not have been commenced or
threatened by any governmental entity any proceeding, that in any case would (i)
prohibit or make illegal the consummation of any of the transactions
contemplated by this Agreement or the other Transaction Documents or (ii) cause
any of the transactions contemplated by this Agreement to be rescinded following
their consummation;
(f) Purchaser shall deliver to the Seller a certificate, dated the Closing
Date, signed by the secretary or any assistant secretary of Purchaser, attesting
to the completion of all necessary corporate action by Purchaser to execute and
deliver this Agreement and the Transaction Documents to which it is a party and
to perform its obligations hereunder and thereunder, including copies of the
organizational documents of Purchaser and all corporate resolutions required in
connection with this Agreement or any other Transaction Document and attesting
to the incumbency of the officers of Purchaser signing the Transaction Documents
to which Purchaser is a party;
(g) the NICO Reinsurance Agreement in the forth attached as EXHIBIT A
hereto shall have been executed and delivered by Seller and the Company, and
shall be in full force and effect; and
(h) the Purchaser shall have delivered to Seller all items required
pursuant to SECTION 2.3(B).
ARTICLE VII
TERMINATION
Section 7.1. TERMINATION EVENTS. This Agreement may, by written notice
given before the Closing, be terminated:
(a) by mutual written consent of the Purchaser and the Seller;
(b) by the Purchaser if there has been a breach of any of the Seller's
representations, warranties or covenants contained in this Agreement and which
breach has not been cured or cannot be cured within 15 days after the written
notice of the breach from the Purchaser;
(c) by the Purchaser if (i) for purposes of determining the Base Purchase
Price pursuant to SECTION 2.1 hereof, the Policyholders' Surplus exceeds $50.0
million, or (ii) if the Company fails to maintain its Licenses in good standing;
(d) by the Seller if (i) there has been a breach of any of the Purchaser's
representations, warranties or covenants contained in this Agreement, and which
breach has not been cured or cannot be cured within 15 days after the written
notice of breach from the Sellers, (ii) the Purchaser shall have failed to
deliver to Seller the Financing Certificate on or prior to October 15, 2008 or
(iii) if Purchaser shall have delivered the Financing Certificate on or prior to
October 15, 2008 and thereafter notifies Seller (which the Purchaser hereby
agrees it will do as promptly as practicable) that the representations and
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warranties set forth in the Financing Certificate shall cease to be true and
correct in all material respects, in which case such failure shall constitute a
breach of a representation and warranty of Purchaser for purposes of SECTION
7.1(D)(I) above and the Seller shall have the rights described in such SECTION
7.1(D)(I) and SECTION 7.2);
(e) by either the Purchaser or the Seller if any governmental authority of
competent jurisdiction (including the Insurance Department of the state of New
York) has issued a nonappealable final judgment or taken any other nonappealable
final action, in each case having the effect of permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement; or
(f) by the Seller or the Purchaser if the Closing has not occurred on or
before December 31, 2008 (provided that the right to terminate this Agreement
under this SECTION 7.1(F) shall not be available to any party if the Closing has
not occurred at least in material part because of the failure of such party to
comply fully with its obligations under this Agreement).
Section 7.2. EFFECT OF TERMINATION. (a) Subject to the provisions of
SECTION 7.2(B), and except as provided in the following sentence, in the event
of the termination of this Agreement pursuant to SECTION 7.1, this Agreement
shall thereafter become void and have no effect, and no party hereto shall have
any liability or obligation to any other party hereto in respect of this
Agreement, except that the provisions of SECTION 5.2 (Public Announcements),
SECTION 5.5 (Access; Confidentiality), ARTICLE VIII (General Provisions) (but
excluding SECTION 8.6) and this SECTION 7.2 shall survive any such termination.
Nothing herein shall relieve any party from liability for any willful breach of
any of its covenants or agreements or willful breach of its representations or
warranties contained in this Agreement prior to termination of this Agreement.
(b) Notwithstanding anything to the contrary set forth herein, if this
Agreement is terminated by Purchaser pursuant to SECTION 7.1(B) OR (C)(II),
Seller shall, within two (2) Business Days following the effective date of such
termination, return the Deposit to Purchaser by wire transfer of immediately
available funds to an account designated by the Purchaser, and the parties
hereto acknowledge and agree that, except in the case of a willful breach of
this Agreement by Seller, such right shall constitute the sole damages that will
be suffered by, and an adequate and reasonable remedy for, Purchaser as a result
of such termination. Notwithstanding anything to the contrary contained herein,
if this Agreement is terminated for any reason other than by Purchaser pursuant
to SECTION 7.1(B) OR (C)(II), then Seller shall have the right to retain the
Deposit, and the parties hereto acknowledge and agree that, except in the case
of a willful breach of this Agreement by Purchaser, such right shall constitute
the sole damages that will be suffered by, and an adequate and reasonable remedy
for, Seller as a result of such termination.
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ARTICLE VIII
GENERAL PROVISIONS
Section 8.1. NOTICES. All notices and other communications under this
Agreement must be in writing and will be deemed duly delivered when (a)
delivered if delivered personally or by nationally recognized overnight courier
service (costs prepaid), (b) sent by facsimile with confirmation of transmission
by the transmitting equipment or (c) received or rejected by the addressee, if
sent by certified mail, return receipt requested; in each case to the following
addresses or facsimile numbers and marked to the attention of the individual (by
name or title) designated below (or to such other address, facsimile number or
individual as a party may designate by notice to the other parties):
If to the Seller:
National Indemnity Company
x/x Xxxxxxxxx Xxxxxxxx Group
000 Xxxxx Xxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attn: General Counsel
Fax: (000) 000-0000
If to Purchaser:
Xxxxxx Financial Group, Inc.
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxx Xxxxxxxx 00000
Attn: Xxxx Xxxxxx
Fax: (000) 000-0000
With a copy to:
Dechert LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxx, Esq. and Xxxxxxxx X. Xxxxxxxxxxx, Esq.
Fax: (000) 000-0000
Either party may upon fifteen days notice to the other change the location
for delivery of notice to the notifying party.
Section 8.2. AMENDMENT. This Agreement may not be amended, supplemented or
otherwise modified except in a written document signed by each party to be bound
by the amendment.
Section 8.3. WAIVER AND REMEDIES. The parties may (a) extend the time for
performance of any of the obligations or other acts of any other party to this
Agreement, (b) waive any inaccuracies in the representations and warranties of
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any other party to this Agreement contained in this Agreement or (c) waive
compliance with any of the covenants, agreements or conditions for the benefit
of such party contained in this Agreement. Any such extension or waiver by any
party to this Agreement will be valid only if set forth in a written document
signed on behalf of the party or parties against whom the waiver or extension is
to be effective. Any enumeration of a party's rights and remedies in this
Agreement is not intended to be exclusive, and a party's rights and remedies are
intended to be cumulative to the extent permitted by law and include any rights
and remedies authorized in law or in equity.
Section 8.4. ENTIRE AGREEMENT. This Agreement (together with the
Confidentiality Agreement and the Letter Agreement) constitute the entire
agreement among the Parties and supersede any prior understandings, agreements
or representations by or among the Parties and/or the Company, or any of them,
written or oral, with respect to the subject matter of this Agreement.
Section 8.5. EXPENSES. Each Party will bear its respective direct and
indirect expenses incurred in connection with the preparation and negotiation of
this Agreement and the consummation of the transactions contemplated by this
Agreement, including all fees and expenses of its advisors and representatives
(it being understood and agreed that any such direct and indirect expenses
incurred by the Company shall be borne by the Seller).
Section 8.6. SURVIVAL. The representations and warranties of the parties
set forth in ARTICLES III and IV of this Agreement shall survive the Closing and
shall continue for a period of two (2) years following the Closing Date, at
which time all such representations and warranties shall expire; provided that
(x) the representations and warranties set forth in SECTION 3.1 (Organization
and Good Standing), SECTION 3.2 (Authority and Enforceability), SECTION 3.3
(Capitalization and Ownership), SECTION 3.4 (Subsidiaries), SECTION 3.19 (No
Brokers), SECTION 4.1 (Organization and Good Standing), SECTION 4.2 (Authority
and Enforceability), and SECTION 4.7 (No Brokers) shall survive indefinitely,
(y) the representations and warranties set forth in SECTION 3.12 (Taxes) and
SECTION 3.15 (Employee Benefit Plans) shall survive for sixty (60) days after
the termination of the statute of limitations applicable to the subject matter
of such representations and warranties, and (z) any claim with respect to fraud
shall survive indefinitely. Any claim for Adverse Consequences asserted within
the applicable period of survival as herein provided in this SECTION 8.6 shall
be timely made for purposes hereof. Such representations and warranties shall
survive in full force and effect notwithstanding any investigation by the other
party. Each of the other covenants, agreements and provisions contained in this
Agreement shall survive indefinitely, unless such covenant, agreement or
provision, either by its express terms or its inherent sense, is to survive for
a limited period of time.
Section 8.7. ASSIGNMENT AND SUCCESSORS. This Agreement binds and benefits
the Parties and their respective heirs, successors and permitted assigns. No
Party may assign or delegate any of its rights or obligations under this
Agreement without the prior written consent of the Purchaser (in the case of the
Seller) or the Seller (in the case of the Purchaser). No provision of this
Agreement is intended or will be construed to confer upon any Person other than
the parties to this Agreement and their respective heirs, successors and
permitted assigns any right, remedy or claim under or by reason of this
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Agreement, other than the provisions of SECTION 8.14, which are intended to be
for the benefit of Persons covered thereby and may be enforced by such Persons.
Section 8.8. SEVERABILITY. If any provision of this Agreement is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions of this Agreement will not be affected or impaired in
any way and the parties agree to negotiate in good faith to replace such
invalid, illegal and unenforceable provision with a valid, legal and enforceable
provision that achieves, to the greatest lawful extent under this Agreement, the
economic, business and other purposes of such invalid, illegal or unenforceable
provision.
Section 8.9. INTERPRETATION. The language used in this Agreement is the
language chosen by the parties to express their mutual intent, and no provision
of this Agreement will be interpreted for or against any party because that
party or its attorney drafted the provision. The article and section headings in
this Agreement are inserted for convenience of reference only and shall not
affect the interpretation of this Agreement.
Section 8.10. GOVERNING LAW. The internal laws of the state of New York
(without giving effect to any choice or conflict of law provision or rule
(whether of the state of New York or any other jurisdiction) that would cause
the application of laws of any other jurisdiction) govern all matters arising
out of or relating to this Agreement and the transactions it contemplates,
including its validity, interpretation, construction, performance and
enforcement.
Section 8.11. WAIVER OF JURY TRIAL. EACH OF THE PARTIES KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED
ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE ACTIONS OF ANY PARTY TO
THIS AGREEMENT IN NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT OF
THIS AGREEMENT
Section 8.12. DISPUTE RESOLUTION. Any unresolved controversy or claim that
cannot be resolved by the parties hereto through good faith negotiations within
thirty (30) days of notification to the other of the commencement of the dispute
resolution procedures of this SECTION 8.12 will then, upon written request of
any party hereto, be resolved by binding arbitration conducted in accordance
with the then effective rules of the American Arbitration Association ("AAA"),
by a sole arbitrator. Such arbitrator shall be mutually agreeable to the
parties. If the parties cannot mutually agree upon the selection of an
arbitrator, the arbitrator shall be selected in accordance with the then
effective rules of the AAA. The arbitration shall take place in New York, New
York, in accordance with the then effective AAA rules, and judgment upon any
award rendered in such arbitration will be binding and may be entered in any
court having jurisdiction thereof.
Section 8.13. COUNTERPARTS. The parties may execute this Agreement in
multiple counterparts, each of which constitutes an original as against the
party that signed it, and all of which together constitute one agreement. This
Agreement is effective upon delivery of one executed counterpart from each party
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to the other parties. The signatures of all parties need not appear on the same
counterpart. The delivery of signed counterparts by facsimile or email
transmission that includes a copy of the sending party's signature is as
effective as signing and delivering the counterpart in person.
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION
(a) INDEMNIFICATION OF THE PURCHASER. Subject to the limitations set forth
in SECTION 8.6 above and Section 9.1 (C) and (D) below, and to the extent the
Purchaser or Purchaser Indemnified Party is not indemnified under a Transaction
Document, the Seller agrees to indemnify and hold harmless the Purchaser and its
Affiliates (including, from and after the Closing, the Company) and each of
their respective directors, officers, employees, and each of their respective
successors and permitted assigns (each a "PURCHASER INDEMNIFIED PARTY"), from
and against all liabilities, claims, damages, losses, whether or not arising out
of Third-Party Claims, including, without limitation, penalties, expenses and
fees, including court costs and reasonable attorneys' fees and expenses
("ADVERSE CONSEQUENCES") which such Purchaser Indemnified Party has suffered,
incurred or become subject to arising out of, based upon or otherwise in respect
or resulting from:
(i) any breach of any representation or warranty of the Seller made in
this Agreement or in any other Transaction Document to which it is a party;
(ii) any breach or nonfulfillment of any covenant or obligation of the
Seller contained in this Agreement or the NICO Reinsurance Agreement;
(iii) all liabilities of any kind whatsoever of the Company incurred
or arising with respect to periods prior to the Closing Date (regardless
when any claims are made in respect of such liabilities); and
(iv) without limiting the generality of clause (iii) above, (x) the
Employment Agreement between the Company and Xxxxxxxx Xxxxx, (y) the case
known as Consolidated Rail Corp. vs. Ace, et. al. (P.A. Ct. of Common
Pleas, Phil. Div. C.A. No. 2638) and (z) the arbitration demand made by
Zurich International Insurance Company regarding D.J. expense allocation
under a reinsurance agreement between Zurich International Insurance
Company and the Company;
provided that the Seller shall have no obligation to indemnify the Purchaser
and/or a Purchaser Indemnified Party to the extent any such Adverse Consequence
arises or out or is attributable to the acts or omissions of the Purchaser,
Purchaser Indemnified Party, or any employee, officer, director, and/or agent of
the Company elected or appointed after the Closing Date, or any breach by the
Company after the Closing Date of its obligations under the NICO Reinsurance
Agreement.
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(b) INDEMNIFICATION OF THE SELLER. Subject to the limitations set forth in
SECTION 8.6 above and SECTION 9.1(C) and (D) below, and to the extent the Seller
or Seller Indemnified Party is not indemnified under a Transaction Document, the
Purchaser agrees to indemnify the Seller and its Affiliates and each of their
respective directors, officers, employees, and each of their respective
successors and permitted assigns (each a "SELLER INDEMNIFIED PARTY"), from and
against all Adverse Consequences arising out of or resulting from (i) any
misrepresentation, inaccuracy or breach of any representation or warranty
contained in this Agreement, (ii) any breach of or failure by the Purchaser to
perform any covenant or agreement contained in this Agreement, (iii) the failure
by the Company to perform any covenant or agreement contained in the NICO
Reinsurance Agreement after the Closing Date, (iv) the writing of new business
of the Company following the Closing Date, (iv) any liability, fee or commission
with respect to the Xxxx Consulting or any other broker acting on behalf of the
Purchaser and (v) any Taxes of the Company for any taxable Period or portion
thereof that begins after the Closing Date; provided that the Purchaser shall
have no obligation to indemnify the Seller and/or a Seller Indemnified Party to
the extent any such Adverse Consequence arises out of or is attributable to the
acts or omissions of the Seller, Seller Indemnified Party, or any employee,
officer, director, and/or agent of the Company on or prior to the Closing Date,
or any breach by the Company prior to the Closing Date of its obligations under
the NICO Reinsurance Agreement.
(c) INDEMNIFICATION PROCEDURES. The obligation of the Seller to indemnify
the Purchaser Indemnified Party or the Purchaser to indemnify the Seller
Indemnified Party (each, an "INDEMNIFIED PARTY"), as the case may be, under this
SECTION 9.1 shall be subject to the following conditions:
(i) Each Indemnified Party shall inform the indemnifying party (the
"INDEMNIFYING PARTY") as soon as reasonably practicable of any claim or of
any threat to bring such a claim to which this SECTION 9.1 may apply;
provided however, that the failure or delay to furnish such notice shall
not limit the right of indemnification for such claim unless such failure
or delay is prejudicial; provided further that the Indemnifying Party shall
have no obligation to indemnify the Indemnified Party with respect to any
expenses incurred by the Indemnified Party prior to such notice under any
circumstances;
(ii) Except with the consent in writing of the Indemnifying Party, no
admission, offer, promise or payment shall be made or given by or on behalf
of any Indemnified Party in respect of a claim to which this SECTION 9.1
may apply;
(iii) The Indemnifying Party shall take over and conduct the defense
and settlement of any claim to which this SECTION 9.1 may apply and, upon
the Indemnifying Party taking over the conduct of the defense and
settlement of such claim, the Indemnifying Party shall thereafter not be
obliged to reimburse any Indemnified Party in respect of its own legal and
defense costs incurred after the Indemnified Party received notice that the
Indemnifying Party had elected to take over and conduct the defense and
settlement of the applicable claim and the Indemnified Party shall be
entitled to participate in the defense at its own expense; in the event the
Indemnifying Party fails to take over and to conduct the defense of any
such claim, the Indemnified Party may take over and conduct the defense and
settlement of such claim at the expense of Indemnifying Party;
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(iv) The Indemnified Party shall at the request and cost of the
Indemnifying Party give the Indemnifying Party all reasonable assistance in
the Indemnified Party's power in connection with the defense and settlement
of such claim;
(v) The Indemnifying Party may settle any claim subject to this
SECTION 9.1 and shall have discretion in the conduct of any proceedings in
relation thereto, provided that any settlement shall not impose any
obligation on the Indemnified Party and shall release the Indemnified Party
from such claim; in the event the Indemnifying Party fails to take over and
conduct the defense of any such claim, the Indemnified Party shall be
entitled to settle such claim at the expense of the Indemnifying Party; and
(vi) The Indemnifying Party shall not be liable under this Agreement
to indemnify an Indemnified Party for any award of damages proximately
caused by any criminal or intentional act or omission on the part of such
Indemnified Party finally determined by a court in a final judgment, not
subject to appeal. Notwithstanding the requirement in the foregoing
sentence of a final judgment, the Indemnifying Party shall have the right
to settle any claim alleging such criminal or intentional act or omission
and seek reimbursement through an arbitration to determine whether if the
claim had not been settled, the claimant would have been found in a final
judgment, not subject to further appeal, entitled to judgment against
Indemnified Party by reason of damages proximately caused by a criminal or
intentional act or omission; provided, however, that this limitation shall
not apply to any criminal act or intentional act or omission of the Company
prior to Closing.
(d) COLLATERAL SOURCE RECOVERIES. The amount of an indemnification payment
in respect of an Adverse Consequence required to be made to any Indemnified
Party hereunder shall be limited to the amount of any Adverse Consequence that
remains after deduction therefrom of (i) any Tax benefits to the Indemnified
Party as a result of the Adverse Consequence and (ii) any third party recoveries
relating to the Adverse Consequence giving rise to the indemnification claim
paid to the Indemnified Party (provided, that, in the case of any insurance
benefits or proceeds, any such reduction shall be net of any cost of collection,
deductible, increased premiums, "recoupment" provisions or other costs or
expense (including, without limitation, any reasonable legal fees or expenses)
attributable to collection under such policies).
(e) ADJUSTMENT TO PURCHASE PRICE. The parties agree that any
indemnification payments made pursuant to this Agreement shall be treated for
tax purposes as an adjustment to the Purchase Price, unless otherwise required
by applicable law.
Section 9.2 MITIGATION OF DAMAGES. Subject to the rights of Purchaser and
Seller pursuant to SECTION 9.1(C), Purchaser and Seller shall cooperate with
each other with respect to resolving any claim or liability with respect to
which one party is obligated to indemnify the other party hereunder. Purchaser
and Seller shall use commercially reasonable efforts to mitigate damages in
respect of any Adverse Consequence, provided that such duty shall not be greater
than that imposed by applicable law.
Section 9.3 EXCLUSIVE REMEDY. Notwithstanding anything contained herein to
the contrary, the Purchaser and the Seller acknowledge and agree that (i) prior
to the Closing, the sole and exclusive remedy of the Purchaser for any breach of
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any representation or warranty contained herein of Seller, or of Seller for any
breach of any representation or warranty contained herein of Purchaser, shall be
termination of the Agreement pursuant to SECTION 7.1(B)(in the case of a breach
by Seller) or pursuant to SECTION 7.1(D)(I) (in the case of a breach by
Purchaser)(provided, that the foregoing shall not relieve any party from
liability for any willful breach of any representations or warranties or fraud),
and (ii) following the Closing, other than in the case of fraud, or any action
seeking equitable remedies, the indemnification provided for in this ARTICLE IX
shall be the exclusive remedy in any action brought by any party to this
Agreement in respect of the transactions contemplated hereby.
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The parties have executed and delivered this Agreement as of the date
indicated in the first sentence of this Agreement.
NATIONAL INDEMNITY COMPANY
By: /s/Xxxxx Xxxxxx
----------------------------------------
Name: Xxxxx Xxxxxx
Title: Vice President
XXXXXX FINANCIAL GROUP, INC.
By: /s/Xxxx X. Xxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxx
Title: President
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