Exhibit 10.65
STOCK PURCHASE AGREEMENT
by and among
ALLEGHANY INSURANCE HOLDINGS LLC,
AEGIS HOLDING INC.
and
ASSOCIATED ELECTRIC & GAS
INSURANCE SERVICES LIMITED
Dated as of January 30, 2004
TABLE OF CONTENTS
ARTICLE I DEFINITIONS........................................................... 1
1.1 "2003 Filing Fees"................................................ 1
1.2 "2004 Filing Fees"................................................ 1
1.3 "Affiliate" or "Affiliated"....................................... 2
1.4 "Agreement"....................................................... 2
1.5 "Assignment"...................................................... 2
1.6 "Assumption Agreements"........................................... 2
1.7 "Bankruptcy Exception"............................................ 2
1.8 "Business Day".................................................... 2
1.9 "Closing" and "Closing Date"...................................... 2
1.10 "Closing Date Balance Sheet"...................................... 2
1.11 "Closing Date Shareholder's Equity"............................... 2
1.12 "Closing Date Statement of Assets"................................ 2
1.13 "COBRA"........................................................... 3
1.14 "Code"............................................................ 3
1.15 "Commutation Agreement"........................................... 3
1.16 "Company"......................................................... 3
1.17 "Company Agreements".............................................. 3
1.18 "Company Reinsurance Agreements".................................. 3
1.19 "Confidential Information"........................................ 3
1.20 "Delaware Commissioner"........................................... 3
1.21 "Documents"....................................................... 3
1.22 "Employee Benefit Plan"........................................... 3
1.23 "ERISA"........................................................... 3
1.24 "ERISA Affiliate"................................................. 4
1.25 "Exhibit"......................................................... 4
1.26 "Filing Fees"..................................................... 4
1.27 "GEMICO Agreement"................................................ 4
1.28 "Governmental Entity"............................................. 4
1.29 "Indemnification Event"........................................... 4
1.30 "Indemnitor"...................................................... 4
1.31 "Insurance Permit"................................................ 4
1.32 "Liens or Restrictions"........................................... 4
1.33 "Material Adverse Effect"......................................... 4
1.34 "Multiemployer Plan".............................................. 4
1.35 "Parent".......................................................... 4
1.36 "Parent Reinsurance Agreement".................................... 4
1.37 "PBGC"............................................................ 4
1.38 "Permit".......................................................... 5
1.39 "Person".......................................................... 5
1.40 "Post-Closing Period"............................................. 5
1.41 "Pre-Closing Period".............................................. 5
1.42 "Property"........................................................ 5
1.43 "Purchase Price".................................................. 5
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1.44 "Purchaser"....................................................... 5
1.45 "Purchaser Indemnitees"........................................... 5
1.46 "Purchaser Losses"................................................ 5
1.47 "Purchaser's Knowledge"........................................... 5
1.48 "Schedule"........................................................ 5
1.49 "Seller".......................................................... 5
1.50 "Seller Acquisition Agreement".................................... 5
1.51 "Seller Group".................................................... 5
1.52 "Seller Indemnitees".............................................. 5
1.53 "Seller Losses"................................................... 5
1.54 "Seller's Knowledge".............................................. 6
1.55 "Statutory Accounting Principles"................................. 6
1.56 "Statutory Financial Statements".................................. 6
1.57 "Stock"........................................................... 6
1.58 "Straddle Period"................................................. 6
1.59 "Subsidiary"...................................................... 6
1.60 "Tax" or "Taxes".................................................. 6
1.61 "Taxing Authority"................................................ 6
1.62 "Tax Claim"....................................................... 6
1.63 "Tax Return"...................................................... 7
1.64 "Transfer Taxes".................................................. 7
1.65 "Transferee"...................................................... 7
ARTICLE II PURCHASE OF STOCK.................................................... 7
2.1 Purchase and Sale................................................. 7
2.2 The Purchase Price................................................ 7
2.3 Closing........................................................... 7
2.4 Transfer of Stock................................................. 7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT................. 8
3.1 Organization and Standing......................................... 8
3.2 Authorization of Agreement........................................ 8
3.3 Capital Stock of the Company...................................... 9
3.4 Interests in Securities of the Company............................ 9
3.5 Financial Statements.............................................. 9
3.6 Subsidiaries...................................................... 10
3.7 Tax Returns and Reports........................................... 10
3.8 Required Filings.................................................. 10
3.9 No Breach of Statute or Contract; Governmental Authorizations..... 11
3.10 No Litigation or Adverse Events................................... 12
3.11 Bank Accounts..................................................... 12
3.12 Form of Capital and Surplus....................................... 12
3.13 Liabilities....................................................... 12
3.14 Contracts......................................................... 12
3.15 Employee Matters.................................................. 14
3.16 Powers of Attorney................................................ 14
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3.17 Accuracy of Documents............................................. 14
3.18 Brokers and Finders............................................... 14
3.19 Insurance Business................................................ 15
3.20 Assets and Properties............................................. 15
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER.......................... 15
4.1 Organization and Standing......................................... 15
4.2 Authorization of Agreement........................................ 15
4.3 No Breach of Statute or Contract; Governmental Authorizations..... 15
4.4 Investment Intent................................................. 16
4.5 No Litigation..................................................... 16
4.6 Brokers and Finders............................................... 16
ARTICLE V CONDUCT AND TRANSACTIONS PRIOR TO CLOSING; COVENANTS; INDEMNITIES..... 16
5.1 Investigations; Operation of the Business of the Company.......... 16
5.2 Pending or Threatened Litigation or Action........................ 18
5.3 Tax Audits; Tax Returns........................................... 19
5.4 Indemnifications, Assumptions of Liability and Related Matters.... 21
5.5 Closing Date Statement of Assets and Closing Date Balance Sheet... 27
5.6 Transfer Taxes.................................................... 27
5.7 Conduct of Business by Purchaser.................................. 28
5.8 Change of Name.................................................... 28
5.9 Disclosure of Confidential Information............................ 28
5.10 Compliance with Delaware Insurance Laws........................... 28
5.11 Notification of Changes........................................... 28
5.12 Acquisition Proposals............................................. 28
5.13 Assignment........................................................ 29
5.14 Commutation Agreement............................................. 29
5.15 Payment of Brokers' or Finders' Fees.............................. 29
5.16 Preparation of Statutory Financial Statements..................... 29
ARTICLE VI CONDITIONS TO CLOSING; ABANDONMENT OF THE TRANSACTION................ 29
6.1 Conditions to the Obligations of Purchaser........................ 29
6.2 Conditions to the Obligations of Parent and Seller................ 33
6.3 Termination of Agreement and Abandonment of Transactions.......... 34
ARTICLE VII TERMINATION OF OBLIGATIONS AND WAIVER OF CONDITIONS;
PAYMENT OF EXPENSES......................................... 34
ARTICLE VIII GENERAL............................................................ 35
8.1 Amendment and Waiver.............................................. 35
8.2 Integrated Contract............................................... 35
8.3 Publicity......................................................... 35
8.4 Governing Law..................................................... 36
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8.5 Jurisdiction...................................................... 36
8.6 Notices........................................................... 36
8.7 No Assignment..................................................... 38
8.8 Headings.......................................................... 38
8.9 Counterparts...................................................... 38
8.10 Severability...................................................... 38
8.11 Third Parties..................................................... 38
8.12 Further Assurances................................................ 38
Schedule 3.1(b) - Insurance Permits and Jurisdictions
Schedule 3.1(c) - Officers and Directors/Articles and Bylaws
Schedule 3.7 - Tax Matters
Schedule 3.8(b) - 2003 Filing Fees
Schedule 3.9(b) - Governmental Approvals/Litigation
Schedule 3.11 - Bank Accounts
Schedule 3.12 - Capital and Surplus
Schedule 3.13 - Liabilities
Schedule 3.14(a) - Contracts and Commitments to be Terminated at Closing
Schedule 3.16 - Powers of Attorney
Exhibit A - Assignment
Exhibit B - Form of Opinion of LeBoeuf, Lamb, Xxxxxx & XxxXxx, L.L.P.
Exhibit C - Form of Opinion of Xxxxxxx Xxxxxxxx & Xxxxx
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement, dated as of January 30, 2004,
is by and among Alleghany Insurance Holdings LLC, a Delaware limited liability
company ("Purchaser"), Aegis Holding Inc., a Delaware corporation ("Seller"),
and Associated Electric & Gas Insurance Services Limited, a mutual insurance
company organized under the laws of Bermuda and the sole stockholder of Seller
("Parent").
RECITALS:
WHEREAS, Seller owns 3,500,000 shares, constituting all of the
issued and outstanding shares, of common stock, par value $1.00 per share (the
"Stock"), of U.S. Aegis Energy Insurance Company, a stock insurance company
organized under the laws of Delaware (the "Company");
WHEREAS, prior to the Closing (as defined below), pursuant to
the Commutation Agreement (as defined below), Parent and Company will fully
settle, commute and discharge any and all of their respective obligations and
liabilities under the Company Reinsurance Agreements (as defined below) and
under the Parent Reinsurance Agreement (as defined below) and exchange mutual
releases relating thereto; and
WHEREAS, prior to the Closing, pursuant to the Assignment (as
defined below), all of the rights, obligations and liabilities of the Company
under the Company Reinsurance Agreements and under the Parent Reinsurance
Agreement will be transferred to and assumed by Parent;
WHEREAS, as of the Closing, the Company will have no
liabilities or obligations whatsoever based on or arising out of any act,
omission or event occurring prior to the Closing that are not fully indemnified
by Parent pursuant to this Agreement; and
WHEREAS, Purchaser desires to purchase and Seller desires to
sell the Stock upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual agreements contained herein, intending to be legally bound hereby,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used herein, the terms below shall have the following
meanings, except as otherwise expressly provided or unless the context otherwise
requires:
1.1 "2003 Filing Fees" shall have the meaning set forth
in Section 3.8(b).
1.2 "2004 Filing Fees" shall have the meaning set forth
in Section 5.5(b).
1.3 "Affiliate" or "Affiliated" shall mean with respect
to any Person, any Person directly or indirectly controlling, controlled by, or
under direct or indirect common control with, such Person. A Person will be
deemed to control a Person if such Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise.
1.4 "Agreement" shall refer to this Stock Purchase
Agreement together with all Exhibits and Schedules hereto, as the same may be
amended from time to time.
1.5 "Assignment" shall refer to the Transfer and
Assumption Agreement to be entered into by and between Parent and the Company
and made effective on or prior to the Closing pursuant to which the Company will
transfer to Parent, and Parent will assume, all of the rights, obligations and
liabilities of the Company pursuant to the Company Reinsurance Agreements and
the Parent Reinsurance Agreement. The Assignment shall be in the form attached
hereto as Exhibit A (with such changes thereto as may be approved by Purchaser).
1.6 "Assumption Agreements" shall have the meaning set
forth in Section 3.14(b)(i).
1.7 "Bankruptcy Exception" shall refer, in respect of any
agreement, contract or commitment, to any limitation thereon imposed by any
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
similar law affecting creditors' rights and remedies generally and, with respect
to the enforceability thereof, by general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
1.8 "Business Day" shall mean a Monday, Tuesday,
Wednesday, Thursday or Friday on which banking institutions in the State of New
York are not authorized or obligated by applicable law to close.
1.9 "Closing" and "Closing Date" shall have the
respective meanings set forth in Section 2.3.
1.10 "Closing Date Balance Sheet" shall mean a balance
sheet of the Company as at the Closing Date setting forth all assets of the
Company from the Closing Date Statement of Assets and setting forth all
liabilities of the Company determined in accordance with Statutory Accounting
Principles, provided that the Closing Date Balance Sheet shall give effect to
the treatment of 2004 Filing Fees as provided in Section 5.5(b).
1.11 "Closing Date Shareholder's Equity" shall mean total
assets (valued in accordance with the provisions of Section 5.5, but excluding
any deferred Tax Assets) less total liabilities (determined in accordance with
Statutory Accounting Principles, and excluding any liability for Taxes) of the
Company as set forth on the Closing Date Balance Sheet.
1.12 "Closing Date Statement of Assets" shall refer to the
statement of assets of the Company as of the Closing Date prepared in accordance
with the provisions of Section 5.5.
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1.13 "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended.
1.14 "Code" shall mean the Internal Revenue Code of 1986,
as amended, and the Treasury Regulations promulgated thereunder.
1.15 "Commutation Agreement" shall refer to the
Commutation Agreement and Release by and between Parent and Company, dated
December 31, 2003.
1.16 "Company" shall have the meaning set forth in the
recitals hereto.
1.17 "Company Agreements" shall have the meaning set forth
in Section 3.14(a).
1.18 "Company Reinsurance Agreements" shall refer
collectively to the following reinsurance agreements: the Standard Lines
Aggregate Excess of Loss Reinsurance Agreement between Parent and the Company
(as reinsurer), dated as of January 1, 1996, as amended through Amendment No. 7
thereto dated January 1, 2003; and the Property Quota Share Reinsurance
Agreement between Parent and the Company (as reinsurer), dated as of April 1,
1996, as amended through Amendment No. 4 thereto dated January 1, 2000.
1.19 "Confidential Information" shall mean all Documents
and information concerning Parent, Seller or the Company furnished to Purchaser
in connection with this Agreement and any Documents or compilations prepared by
or for Purchaser which contain, reflect or are based upon such information.
1.20 "Delaware Commissioner" shall mean the Insurance
Commissioner of the Delaware Department of Insurance.
1.21 "Documents" shall refer to any books, records, files,
papers, tapes, microfilms and any other documents.
1.22 "Employee Benefit Plan" shall mean any "employee
benefit plan" (as such term is defined in section 3(3) of ERISA), and any other
retirement, pension, profit-sharing, thrift, savings, target benefit, employee
stock ownership, cash or deferred, deferred or incentive compensation, bonus,
stay bonus, stock option, employee stock purchase, phantom stock, stock
appreciation, change in control, retention compensation, medical, dental,
vision, psychiatric or other counseling, employee assistance, tuition
reimbursement, vacation, holiday, sick pay, disability, salary continuation,
termination allowance, severance, employee relocation, death benefit, survivor
income, dependent care assistance, legal assistance or fringe benefit (cash or
noncash) plan, program, policy, practice or arrangement, or any cafeteria plan
under Section 125 of the Code, in which any current or former officer, director,
independent contractor or employee of the Company or any ERISA Affiliate has
ever participated, or as to which the Company or any ERISA Affiliate has ever
had any present or contingent obligation, including any obligation to make
contributions.
1.23 "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, and the regulations promulgated thereunder.
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1.24 "ERISA Affiliate" shall refer to any entity required
to be aggregated with the Company as a single employer under Section 414(b),
(c), (m) or (o) of the Code.
1.25 "Exhibit" shall refer to each of several written
Exhibits to this Agreement, each of which is incorporated into and made a part
of this Agreement for all purposes.
1.26 "Filing Fees" shall have the meaning set forth in
Section 3.8(b).
1.27 "GEMICO Agreement" shall have the meaning set forth
in Section 3.14(b)(ii).
1.28 "Governmental Entity" shall mean 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.
1.29 "Indemnification Event" shall refer to any action,
proceeding or claim for which a Person is entitled to indemnification under this
Agreement.
1.30 "Indemnitor" shall refer to the indemnifying Person
with respect to the occurrence of an Indemnification Event.
1.31 "Insurance Permit" shall mean any Permit in any
jurisdiction to issue, underwrite, assume, place, sell or otherwise transact the
business of insurance.
1.32 "Liens or Restrictions" shall refer to any lien,
pledge, mortgage, security interest, charge, adverse claim or other encumbrance
of any kind.
1.33 "Material Adverse Effect" shall mean any material
adverse effect on the business, operations, financial condition, results of
operations or prospects of the Company.
1.34 "Multiemployer Plan" shall have the meaning ascribed
to such term by Section 4001(a)(3) of ERISA.
1.35 "Parent" shall have the meaning set forth in the
preamble.
1.36 "Parent Reinsurance Agreement" means the Reinsurance
Agreement, dated as of January 1, 1996, as amended through Amendment No. 7
thereto dated January 1, 2003, between the Company and Parent (as reinsurer).
1.37 "PBGC" shall mean the Pension Benefit Guaranty
Corporation.
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1.38 "Permit" shall refer to any federal, state, local or
other governmental consent, license, permit, grant or authorization which is
held by the Company in a particular jurisdiction immediately prior to the
Closing Date.
1.39 "Person" shall mean any individual, corporation,
partnership, limited liability company, joint venture, association, joint stock
company, mutual company, trust, unincorporated organization or Governmental
Entity or agency thereof.
1.40 "Post-Closing Period" shall refer to a taxable period
of the Company beginning after the Closing Date.
1.41 "Pre-Closing Period" shall refer to a taxable period
of the Company ending on or prior to the Closing Date.
1.42 "Property" shall mean any real, personal or mixed
property, whether tangible or intangible.
1.43 "Purchase Price" shall have the meaning set forth in
Section 2.2.
1.44 "Purchaser" shall have the meaning set forth in the
preamble.
1.45 "Purchaser Indemnitees" shall have the meaning set
forth in Section 5.4(c).
1.46 "Purchaser Losses" shall have the meaning set forth
in Section 5.4(c).
1.47 "Purchaser's Knowledge" shall refer to the actual
knowledge of (i) individuals who, at the time of execution of this Agreement,
perform such functions or hold such positions with Purchaser as would reasonably
be expected to require them to be aware of the information in question and (ii)
officers of Purchaser holding the position of Vice President or higher.
1.48 "Schedule" shall refer to each of several written
Schedules to this Agreement, each of which is incorporated into and made a part
of this Agreement for all purposes.
1.49 "Seller" shall have the meaning set forth in the
preamble.
1.50 "Seller Acquisition Agreement" shall mean the Stock
Purchase Agreement by and between Seller and Consolidated Insurance Group of
America, Inc., dated as of December 22, 1995.
1.51 "Seller Group" shall have the meaning set forth in
Section 3.7(a).
1.52 "Seller Indemnitees" shall have the meaning set forth
in Section 5.4(d).
1.53 "Seller Losses" shall have the meaning set forth in
Section 5.4(d).
5
1.54 "Seller's Knowledge" shall refer to the actual
knowledge of (i) individuals who, at the time of execution of this Agreement,
perform such functions or hold such positions with Seller, Parent or the Company
(prior to the Closing) as would reasonably be expected to require them to be
aware of the information in question and (ii) officers of Seller, Parent or the
Company holding the position of Vice President or higher (prior to the Closing).
1.55 "Statutory Accounting Principles" shall mean the
statutory accounting practices prescribed or permitted by the Delaware
Commissioner.
1.56 "Statutory Financial Statements" shall mean the
Annual Statements and the Quarterly Statements of the Condition and Affairs of
the Company filed with the Delaware Insurance Department, in each case including
all exhibits, interrogatories, notes and schedules thereto and any actuarial
opinion, affirmation or certification or other supporting documentation filed in
connection therewith.
1.57 "Stock" shall have the meaning set forth in the first
recital of this Agreement.
1.58 "Straddle Period" shall refer to a taxable period of
the Company beginning before and ending after the Closing Date.
1.59 "Subsidiary" shall mean, with respect to any Person,
any corporation, partnership, limited liability company, joint venture or other
entity in which such Person (i) owns, directly or indirectly, 50% or more of the
outstanding voting securities, equity interests, profits interest or capital
interest, (ii) is entitled to elect at least a majority of the board of
directors or similar governing body, or (iii) in the case of a limited
partnership or limited liability company, is a general partner or managing
member, respectively.
1.60 "Tax" or "Taxes" shall mean all federal, state,
county, municipal, foreign and other income, profits, windfall profits, gains,
gross receipts, net worth, premium, value added, ad valorem, sales, use, excise,
stamp, transfer, franchise, withholding, payroll, employment, occupation,
workers' compensation, disability, severance, unemployment insurance, social
security and property taxes, and all other taxes, levies, fees, imposts, duties
and charges of any kind whatsoever, together with any interest, penalties and
additions thereto imposed by any Taxing Authority, including all amounts imposed
as a result of being a member of an affiliated or combined group.
1.61 "Taxing Authority" shall refer to any Governmental
Entity responsible for the administration or collection of Taxes.
1.62 "Tax Claim" shall have the meaning set forth in
Section 5.3(h).
1.63 "Tax Return" shall mean all returns, reports,
elections, estimates, declarations, information statements and other forms and
documents (including all schedules, exhibits, and other attachments thereto and
any supplements or amendments thereof) relating to, and required to be filed or
maintained in connection with the calculation, determination, assessment or
collection of, any Taxes (including estimated Taxes).
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1.64 "Transfer Taxes" shall have the meaning set forth in
Section 5.6.
1.65 "Transferee" shall have the meaning set forth in
Section 2.4.
ARTICLE II
PURCHASE OF STOCK
2.1 Purchase and Sale. Upon the terms and subject to the
conditions of this Agreement, at the Closing, Purchaser shall purchase from
Seller, and Seller shall sell to Purchaser, all of the Stock.
2.2 The Purchase Price. The price Purchaser shall pay for
the Stock shall be an amount equal to the sum of the following:
(a) Three Million Three Hundred Thousand Dollars
($3,300,000.00),
(b) plus the Closing Date Shareholder's Equity, as
determined in accordance with Section 5.5 (such sum, the "Purchase Price").
2.3 Closing. The closing of the purchase and sale of the
Stock pursuant to this Agreement (the "Closing") shall take place at the offices
of Xxxxx Xxxxxxxxxx LLP, 1301 Avenue of the Americas, New York, New York at
10:00 a.m. New York time on the third business day following the satisfaction or
waiver of all conditions to the obligations of the parties to consummate the
transaction contemplated hereby (other than conditions with respect to actions
the parties will take at the Closing itself) (the "Closing Date"), or such other
place, times or dates as the parties hereto agree in writing. At the Closing:
(a) Seller shall deliver to Purchaser a certificate or
certificates representing the Stock duly endorsed to Purchaser or accompanied by
duly executed stock powers so as to transfer and assign to Purchaser good and
valid title to the Stock free and clear of all Liens or Restrictions and to
constitute Purchaser the sole beneficial and record stockholder of the Company;
(b) Purchaser shall pay to Seller the Purchase Price by
wire transfer of immediately available funds to an account designated in writing
by Seller on or before the Closing; and
(c) Seller shall deliver to Purchaser (i) fully executed
originals of the Assignment and the Commutation Agreement and (ii) fully
executed originals, or copies certified by Seller, of the Assumption Agreements
and the GEMICO Agreement.
2.4 Transfer of Stock. Seller hereby acknowledges and
agrees that, subsequent to the Closing, Purchaser shall have the right to
transfer, exchange or contribute the Stock to any direct or indirect majority
owned or wholly owned Subsidiary of the Purchaser ("Transferee").
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT
Seller and Parent, jointly and severally, hereby represent and warrant to
Purchaser, as of the date of this Agreement (except if another date is specified
in the representation or warranty) and as of the Closing Date, as follows:
3.1 Organization and Standing.
(a) Each of Seller, Parent and the Company is duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction, and each of Seller, Parent and the Company has all
requisite power and authority to own, lease and operate its assets and
Properties (including, without limitation, the Stock) and to conduct its
business as currently being conducted. The Company is duly qualified, licensed
to conduct business, and is in good standing in each jurisdiction set forth in
Schedule 3.1(b), except as noted thereon.
(b) Schedule 3.1(b) is an accurate and complete list of
each Insurance Permit held by the Company and sets forth the scheduled
expiration date of each such Insurance Permit. True, correct and complete copies
of all of such Insurance Permits (as of a recent date) are attached to Schedule
3.1(b). Except as limited by state statute generally applicable to all companies
of a similar type as the Company or as set forth in such Schedule, the Company's
authority to write the lines and classes of insurance set forth on such Schedule
is unrestricted and the Company is not a party to any agreement or arrangement
with any regulatory official or agency limiting or restricting the Company's
ability to make full use of the Insurance Permits. Except as set forth in
Schedule 3.1(b), each such Insurance Permit is currently in good standing, and,
other than as set forth in Schedule 3.1(b), no Insurance Permit has been
withdrawn, modified, restricted or conditioned in any respect by a state
insurance regulatory authority, and no application for an Insurance Permit filed
by the Company within the last 12 months has been denied or withdrawn. No event
has occurred that, with or without notice or lapse of time or both, could
reasonably be expected to result in the revocation, suspension, lapse or
limitation of any Insurance Permit. The Company is not transacting and has not
transacted any insurance business in any jurisdiction requiring an Insurance
Permit or qualification in which it did not possess such Insurance Permit or
qualification.
(c) Schedule 3.1(c) identifies each director and
executive officer of the Company as currently in effect and contains true and
correct copies of the Company's Certificate of Incorporation and the By-laws,
including all amendments thereto through, and as in effect on, the date hereof.
3.2 Authorization of Agreement. Each of Seller and Parent
has all requisite power to execute and deliver this Agreement and perform its
obligations under this Agreement, and the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated by this
Agreement have been duly authorized and approved by all necessary action on the
part of each of Seller and Parent. Each of Parent and the Company has the
requisite power to execute and deliver the Assignment and the Commutation
Agreement and to perform its obligations thereunder, and the execution, delivery
and performance of the
8
Assignment and the Commutation Agreement and the consummation of the
transactions contemplated thereby have been duly authorized by all necessary
requisite action on the part of each of Parent and the Company. This Agreement
has been duly executed and delivered by each of Seller and Parent and is the
valid and binding obligation of each of Seller and Parent enforceable against
each of them in accordance with its terms, subject to the Bankruptcy Exception.
Prior to the Closing Date, the Assignment and the Commutation Agreement will
have been duly authorized, executed and delivered by each of Parent and the
Company, and, on the Closing Date, each of the Assignment and the Commutation
Agreement will be the valid and binding obligations of each of Parent and the
Company enforceable against each of them in accordance with its terms, subject
to the Bankruptcy Exception.
3.3 Capital Stock of the Company. The authorized capital
stock of the Company consists of 10,000,000 shares of common stock, $1.00 par
value per share, of which only the Stock (consisting of 3,500,000 shares of such
common stock) is issued and outstanding. All issued and outstanding shares of
Stock are duly authorized, validly issued and fully paid and non-assessable.
Seller is the lawful owner, beneficially and of record, of all of the Stock and
has good and valid title to the Stock, free and clear of all Liens or
Restrictions, voting trusts or other voting agreements, contracts, calls,
commitments of any kind, including any such agreement, arrangement, commitment
or understanding restricting or otherwise relating to the voting, dividend
rights or dispositions of the Stock. Upon consummation of the transactions
contemplated by this Agreement, Purchaser will acquire record and beneficial
ownership of the Stock, free and clear of any Liens or Restrictions, voting
trusts or other voting agreements, contracts, calls, commitments of any kind,
including any such agreement, arrangement, commitment or understanding
restricting or otherwise relating to the voting, dividend rights or dispositions
of the Stock.
3.4 Interests in Securities of the Company. There are no
outstanding options, convertible securities, warrants or other rights to
subscribe for or purchase from Seller or the Company, and there are no plans,
contracts or commitments for the granting by Seller or the Company of rights to
acquire: (i) any capital stock or other ownership interests in the Company
including the Stock; or (ii) any securities convertible into or exchangeable for
any such capital stock or ownership interests in the Company.
3.5 Financial Statements. Seller has delivered to
Purchaser true, correct and complete copies of the Statutory Financial
Statements of the Company for the year ended December 31, 2002 and for the
quarterly periods ended March 31, June 30 and September 30, 2003. Such Statutory
Financial Statements fairly represent the financial position and the results of
operations of the Company as of the dates and for the periods to which such
financial statements relate in accordance with Statutory Accounting Principles.
Except as disclosed on such Statutory Financial Statements or in the notes
thereto, there has not been any change in the business, financial condition or
results of operations of the Company during the last 12 months that has had, or
could reasonably be expected to have, a Material Adverse Effect. Seller has
heretofore delivered to Purchaser true, correct and complete copies of the
Statutory Financial Statements of the Company for each of the years ended
December 31, 1997, 1998, 1999, 2000 and 2001.
9
3.6 Subsidiaries. The Company does not own, either of
record or beneficially, any direct or indirect equity interest or any right
(contingent or otherwise) to acquire the same in any other Person.
3.7 Tax Returns and Reports.
(a) Seller is the common parent of an affiliated group of
corporations (within the meaning of section 1504(a) of the Code) (such group,
the "Seller Group") that files a consolidated federal income Tax Return. For all
periods during which it has owned the Company, Seller has properly included (or,
with respect to the taxable year ending on the Closing Date, will properly
include) the Company in its consolidated federal income Tax Return as a member
of the Seller Group.
(b) Other than as set forth on Schedule 3.7, (i) the
Company has filed (or joined in the filing of) when due all material Tax Returns
required to be filed by or with respect to the Company, including Tax Returns of
the Seller Group and of any other consolidated, combined, unitary or other
affiliated group of which the Company is a member, and all Taxes shown to be due
on such Tax Returns have been timely paid; (ii) all such Tax Returns were true,
correct and complete in all respects; (iii) there is no action, suit,
proceeding, investigation, audit or claim now pending against, or with respect
to, the Company in respect of any Tax or assessment, nor is any claim for
additional Tax or assessment being asserted by any Taxing Authority; (iv) no
claim has been asserted in writing by any Taxing Authority in a jurisdiction in
which the Company does not currently file a Tax Return that it is or may be
subject to Tax by such jurisdiction; (v) the Company is not a party to any
agreement, whether written or unwritten, providing for the payment of Taxes,
payment for Tax losses, entitlement to refunds or similar Tax matters; (vi) the
Company has withheld and remitted to its applicable Taxing Authorities all Taxes
required to be withheld in connection with any material amounts paid or owing to
any employee, creditor, attorney, independent contractor or other Person; (vii)
neither Seller nor the Company has made, changed or revoked, or permitted to be
made, changed or revoked, any material election or method of accounting with
respect to material Taxes affecting or relating to the Company, or entered into,
or permitted to be entered into, any closing or other agreement or settlement
with respect to Taxes affecting or relating to the Company; (viii) no ruling
with respect to Taxes has been requested by or on behalf of the Company or by
Seller with respect to any transaction involving the Company that could affect
the liability of the Company for Taxes for any period after the Closing; (ix)
the Company has no liability for the Taxes of any Person (other than pursuant to
Treasury Regulation Section 1.1502-6, or any analogous state, local or foreign
law or regulation) as a transferee or successor, by contract or otherwise; (x)
the statutes of limitations for Tax years of the Company have closed for all
years ending prior to January 1, 2000; (xi) the Seller is not a "foreign person"
within the meaning of Section 1445(f)(2) of the Code.
3.8 Required Filings.
(a) All statements, reports, forms or other information
required to be filed with respect to the Company have been or will be timely
filed, and all required regulatory approvals in respect thereof are in full
force and effect, except for any such information or regulatory approvals that
if not made or obtained would not reasonably be expected, individually
10
or in the aggregate, to have a Material Adverse Effect. All such regulatory
filings were true and correct in all material respects when filed and were in
compliance with applicable laws, and no deficiencies have been asserted by any
such Governmental Entity with respect to such regulatory filings that have not
been satisfied.
(b) Schedule 3.8(b) sets forth: (i) all amounts paid by
the Company as annual statement filing fees, license renewal fees, examination
fees, membership fees or dues to state guaranty associations and joint
underwriting associations, minimum required state insurance premium taxes (i.e.
those imposed without regard to the amount of premiums written) and other taxes,
fees or assessments required to be paid by the Company in order to maintain its
Insurance Permits in good standing (collectively, "Filing Fees") for the year
ending December 31, 2003 (the "2003 Filing Fees"); and (ii) the dates on which
such 2003 Filing Fees were due. To Seller's Knowledge, no Filing Fees were due
for such period other than as shown on said Schedule 3.8(b).
3.9 No Breach of Statute or Contract; Governmental
Authorizations.
(a) Neither the execution and delivery of this Agreement
by Parent or Seller, nor the execution and delivery of the Assignment and the
Commutation Agreement by Parent and the Company, nor performance by any of them
of any of their obligations hereunder or thereunder will (x) conflict with, or
result in a breach of, any of the terms, conditions or provisions of: (i) the
certificate of incorporation or by-laws (or comparable organizational documents)
of Seller, Parent or the Company; (ii) subject to receipt of approvals referred
to in Section 3.9(b), any judgment, order, injunction, decree or ruling of any
court or governmental authority, domestic or foreign, or any law, statute or
regulation, to which Seller, Parent or the Company is subject; or (iii) any
agreement, contract or commitment to which Seller, Parent or the Company is a
party or is subject, except, in the case of clauses (ii) and (iii) only, for
such conflicts or breaches that (A) would not be reasonably expected to have a
Material Adverse Effect, (B) would not materially impair the ability of Parent
or Seller to execute, deliver and perform its obligations under this Agreement,
(C) would not materially impair the ability of Parent or the Company to execute,
deliver and perform its obligations under the Assignment and the Commutation
Agreement, and (D) would not impair the validity of any Insurance Permit, or (y)
result in the creation or imposition of any Lien or Restriction on any of the
Properties or assets of the Company.
(b) To Seller's Knowledge, except as set forth in
Schedule 3.9(b), there are no governmental approvals, consents, licenses, orders
or registrations required to be obtained, made or given to permit the
consummation of the transactions contemplated by this Agreement, except for (i)
approval by the Delaware Commissioner with respect to the change in control of
the Company and (ii) approvals by the insurance department of any other
jurisdiction asserting regulatory authority over the transactions contemplated
by this Agreement which are required by applicable law, regulation or rule to be
obtained by Purchaser.
(c) The Company is in compliance with all applicable
laws, statutes, ordinances, orders, rules and regulations promulgated, and
judgments entered, by any federal, foreign or local court or governmental
authority relating to the operation, conduct or ownership
11
of the Property or business of the Company, except for any such failure to
comply that would not reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect.
(d) None of Seller, Parent or the Company has received
any notice of, nor to Seller's Knowledge is there, any violation of any
applicable law, statute, ordinance, order, rule or regulation promulgated, or
judgment entered, by any federal, foreign, state or local court or governmental
authority relating to the operation, conduct or ownership of the business of the
Company other than a violation which has been resolved and for which no sanction
is pending.
(e) Except as disclosed on Schedule 3.1(b), no proceeding
is pending nor, to Seller's Knowledge, is any proceeding threatened in which any
Person is seeking to revoke or deny the renewal of any Insurance Permit.
3.10 No Litigation or Adverse Events. Other than (i)
applications filed with state insurance departments by Purchaser, (ii)
applications requesting approval of the change in control of the Company
pursuant to this Agreement, and (iii) as set forth on Schedule 3.9(b), there are
no actions, suits or administrative, arbitration or other proceedings or
governmental investigations (including counterclaims) pending or, to Seller's
Knowledge, threatened against the Company. None of Seller, Parent or the Company
has received any written notice of, nor to Seller's Knowledge is there, any
claim or assertion of liability on the part of the Company.
3.11 Bank Accounts. Schedule 3.11 sets forth a list of all
bank accounts maintained by the Company together with the addresses of the banks
at which such accounts are maintained and the contact persons for the Company
thereat.
3.12 Form of Capital and Surplus. The Company's capital
and surplus consist only of (i) cash and cash equivalents, (ii) fixed income
securities traded in a recognized public market and (iii) bonds on deposit with
certain states as required to obtain licenses in those states. Schedule 3.12
sets forth a description of the items constituting the Company's capital and
surplus, including the values thereof, valued as of January 28, 2004 in
accordance with the valuation methods to be used in the preparation of the
Closing Date Statement of Assets, as set forth in Section 5.5 of this Agreement.
3.13 Liabilities. The Company has no liabilities, losses
or claims (contract or otherwise) other than those set forth in the Statutory
Financial Statements of the Company for the period ended December 31, 2002 and
for the quarterly periods ended March 31, June 30 and September 30, 2003, or as
set forth in Schedule 3.13; and at the Closing, the Company will have no
liabilities or obligations other than those set forth in Schedule 3.13.
3.14 Contracts.
(a) To the Seller's Knowledge, the Company Reinsurance
Agreements, the Parent Reinsurance Agreement, the Assumption Agreements and the
GEMICO Agreement (collectively, the "Company Agreements") constitute all of the
contracts and commitments by which the Company is bound or to which the Company
is subject, and there are no other contracts or commitments to which the Company
is now a party or by which the Company or its assets are or may be bound or to
which the Company or its assets are or may be subject, other than (i) contracts
and commitments identified on Schedule 3.14(a) that will be terminated on or
12
prior to the Closing except as indicated on such Schedule and (ii) this
Agreement. The Company Agreements are valid and binding agreements of the
Company and, to the Seller's Knowledge, each of the other parties thereto,
enforceable against each of them in accordance with their terms, subject to the
Bankruptcy Exception. To the Seller's Knowledge, on the Closing Date, the
Assignment, the Commutation Agreement, the Assumption Agreements and the GEMICO
Agreement will constitute all of the contracts and commitments by which the
Company or its assets are or may be bound or to which the Company or its assets
are or may be subject, and there will be no other contracts or commitments to
which the Company is a party or by which the Company or its assets are or may be
bound or to which the Company or its assets are or may be subject, other than
this Agreement.
(b) Seller represents and warrants to Purchaser that the
intent of the agreements set forth below was to render the Company devoid of any
liabilities or obligations, including, but not limited to, any liabilities or
obligations under insurance policies or reinsurance agreements written by the
Company.
(i) With respect to (a) the Assumption Agreement, dated
as of April 1, 1995, by and between the Company (then
named Peninsula Property and Casualty Company) and
American Bankers Insurance Company of Florida and (b)
the Assumption Agreement, dated as of June 28, 1995,
by and between the Company and Wesco Insurance
Company (each agreement hereinafter referred to
individually as an "Assumption Agreement" and
collectively as the "Assumption Agreements"), Seller
hereby represents and warrants to Purchaser, based on
representations in the Seller Acquisition Agreement
and to the Seller's Knowledge, that (1) the Company
had, at the time such Assumption Agreement was
executed and delivered, full corporate power and
authority to execute, deliver and perform its
obligations under such Assumption Agreement and the
other documents executed or required to be executed
in connection therewith; (2) each Assumption
Agreement and the other documents required to be
executed and delivered in connection therewith were
duly authorized, executed and delivered by the
Company; (3) each Assumption Agreement and the other
documents required to be executed and delivered in
connection therewith were the legal, valid and
binding obligations of the Company, enforceable in
accordance with its terms, subject to the Bankruptcy
Exception; (4) all consents, approvals,
authorizations and orders necessary to permit the
transactions contemplated by each Assumption
Agreement have been obtained; (5) all notices to
direct policyholders required to effect valid and
binding novations of the insurance policies which are
the subject of each Assumption Agreement have been
sent; (6) each Assumption Agreement and the other
documents required to be executed and delivered in
connection therewith are valid and continuing
obligations of the parties thereto, (7) no party to
such agreements has given notice of termination or
taken any action inconsistent with the continuance of
such agreements, and (8) the execution, delivery and
performance of this Agreement will not affect the
enforceability of such agreements against the parties
thereto.
13
(ii) With respect to the Assumption Agreement, dated as of
December 30, 1993, by and between the Company (then
named General Electric Guaranty Insurance
Corporation) and General Electric Mortgage Insurance
Corporation (the "GEMICO Agreement"), Seller hereby
represents and warrants to Purchaser that, to
Seller's Knowledge, (a) the GEMICO Agreement and the
other documents required to be executed and delivered
in connection therewith are valid and continuing
obligations of the parties thereto, (b) no party to
such agreements has given notice of termination or
taken any action inconsistent with the continuance of
such agreements and (c) the execution, delivery and
performance of this Agreement will not affect the
enforceability of such agreements against the parties
thereto.
3.15 Employee Matters. The Company (i) does not have, and
since the time that Seller acquired the Company the Company has not had, any
employees or independent contractors (including independent insurance agents),
(ii) is not a party to or obligated under, and does not have any liabilities or
obligations with respect to, any employment, consulting or agency contract with
any Person, including any former employee or former independent contractor
(including a former independent sales agent), and (iii) does not otherwise have
any liabilities or obligations with respect to any current or former employee or
independent contractor (including any current or former independent sales
agent). At the Closing, the Company will not have any liabilities or obligations
to any current or former officers or directors of the Company. Since December
30, 1993, the Company has not maintained, contributed to or been obligated to
contribute to any Employee Benefit Plan. The Company is not a party to or
otherwise obligated under any collective bargaining agreement. Seller
acknowledges that Purchaser is assuming no liability or responsibility with
respect to benefits payable or any other obligation owed under any Employee
Benefit Plan, or for any insurance agent arrangements which may have existed
prior to the date hereof (including any commissions or fees owed in connection
therewith).
3.16 Powers of Attorney. Other than as set forth in
Schedule 3.16 and other than any powers of attorney granted to insurance
commissioners in connection with state licensing matters, all powers of attorney
granted by the Company have expired or been revoked prior to the date hereof.
3.17 Accuracy of Documents. All minute books and stock
records of the Company and all other Documents delivered by Seller or the
Company to Purchaser in connection with the transactions contemplated hereby are
complete and accurate in all material respects. All corporate books and records
of the Company are maintained in compliance in all material respects with all
applicable statutes, including requirements as to their location.
3.18 Brokers and Finders. Except for Merger & Acquisition
Services, Inc., no broker, finder or investment banker is entitled to any fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of Parent, Seller or the Company.
14
3.19 Insurance Business. Since December 22, 1995, the
Company has not engaged in any business of insurance or reinsurance other than
the business transacted pursuant to the Company Reinsurance Agreements and the
Parent Reinsurance Agreement, all of which will be commuted and the parties
thereto released pursuant to the Commutation Agreement. To Seller's Knowledge
and based on representations in the Seller Acquisition Agreement, during the
period from December 30, 1993 until December 22, 1995, the Company did not write
any business other than business which was assumptively reinsured under the
Assumption Agreements.
3.20 Assets and Properties.
(a) The Company owns and has good and marketable title to
all of its assets and Properties, free from any Liens or Restrictions (other
than any escrowed amounts or other deposits made with state insurance
commissioners).
(b) On the Closing Date, the Company will not own any
assets or Properties, except (i) its corporate charter and the Insurance Permits
set forth on Schedule 3.1(b), (ii) the assets set forth on the Closing Date
Statement of Assets, and (iii) the contractual rights of the Company pursuant to
the Assignment, the Commutation Agreement, the Assumption Agreements and the
GEMICO Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller and Parent, as of the date of this
Agreement (except if another date is specified in the representation or
warranty) and as of the Closing Date, as follows:
4.1 Organization and Standing. Purchaser is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware, and Purchaser has all requisite power and
authority to execute and deliver this Agreement and perform its obligations
under this Agreement.
4.2 Authorization of Agreement. Purchaser has the
corporate power to execute and deliver this Agreement and perform its
obligations under this Agreement, and the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated by this
Agreement have been duly authorized and approved by all necessary corporate
action on the part of Purchaser. This Agreement has been duly executed and
delivered by Purchaser and is the valid and binding obligation of Purchaser
enforceable against it in accordance with its terms, subject to the Bankruptcy
Exception.
4.3 No Breach of Statute or Contract; Governmental
Authorizations.
(a) Neither the execution and delivery by Purchaser of
this Agreement nor performance by Purchaser of its obligations hereunder will
conflict with, or result in a breach of, any of the terms, conditions or
provisions of: (i) the Restated Certificate of Incorporation or
15
By-laws of Purchaser; (ii) subject to receipt of approvals referred to in
Section 4.3(b), any judgment, order, injunction, decree or ruling of any court
or governmental authority, domestic or foreign, or any law, statute or
regulation, to which Purchaser is subject; or (iii) any agreement, contract or
commitment to which Purchaser is a party or is subject, except, in the case of
clauses (ii) and (iii) only, for such conflicts or breaches which would not
materially impair the ability of Purchaser to execute, deliver and perform its
obligations under this Agreement.
(b) To Purchaser's Knowledge, except for (i) the approval
by the Delaware Commissioner with respect to the change in control of the
Company and (ii) any approvals by the insurance department of any other
jurisdiction asserting regulatory authority over the transactions contemplated
by this Agreement which are required by applicable law, regulation or rule to be
obtained by Seller, there are no governmental approvals required to permit the
consummation of the transactions contemplated by this Agreement.
4.4 Investment Intent. Purchaser represents and warrants
that (i) subject to the provisions of Section 2.4 hereof, Purchaser is acquiring
the Stock for its own account, for investment purposes only and not with a view
to the resale, distribution or other disposition thereof or any part thereof or
any interest therein, and (ii) Purchaser has such knowledge of and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its prospective investment in the Company as contemplated by this
Agreement. Purchaser acknowledges that the Stock will not be registered under
the Securities Act of 1933, as amended, or under any state securities law and,
therefore, may not be sold by Purchaser except pursuant to an effective
registration statement under such Securities Act or an exemption from
registration thereunder and pursuant to registration or qualification under any
applicable state securities law or exemption therefrom.
4.5 No Litigation. There are no actions, suits or
administrative, arbitration or other proceedings or governmental investigations
(including counterclaims) pending or, to Purchaser's Knowledge, threatened in
writing to restrain, prohibit or otherwise challenge the performance by
Purchaser of the transactions contemplated by this Agreement.
4.6 Brokers and Finders. Except for Merger & Acquisition
Services, Inc., no broker, finder or investment banker is entitled to any fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of Purchaser.
ARTICLE V
CONDUCT AND TRANSACTIONS PRIOR TO
CLOSING; COVENANTS; INDEMNITIES
5.1 Investigations; Operation of the Business of the
Company. Between the date of this Agreement and the Closing:
(a) (i) Upon receipt of reasonable notice, Seller and
Parent will give, or cause to be given, to Purchaser or Purchaser's
representatives and agents, reasonable access to the books, records and
officers of the Company and, to the extent that the same pertain to the
Company, the books and records of Seller and Parent, and Seller and
16
Parent will cause the officers and employees of Seller and Parent and
of the Company to furnish to Purchaser upon reasonable prior notice
such financial data and other information with respect to the assets
and the conduct of the business of the Company as Purchaser shall from
time to time reasonably request; provided, however, that any such
investigation shall be conducted during normal business hours and in
such manner so as not to interfere unreasonably with the operation of
the business of Seller, Parent or the Company.
(ii) Until the Closing Date, Purchaser shall hold any
Confidential Information in confidence unless and until such time as
such information otherwise becomes publicly available, and, in the
event of the termination of this Agreement, upon request by Seller,
shall deliver to Seller all such Confidential Information so obtained
by Purchaser; provided, however, that notwithstanding anything to the
contrary contained in this Agreement, the parties hereto (and each
employee, representative, or other agent of the parties) may disclose
to any and all persons, without limitation of any kind, the Tax
treatment and any facts that may be relevant to the Tax structure of
the transaction, beginning on the earliest of (i) the date of the
public announcement of discussions relating to the transaction, (ii)
the date of public announcement of the transaction, or (iii) the date
of the execution of this Agreement (with or without conditions) to
enter into the transaction, provided, however, that neither party (nor
any employee, representative or other agent thereof) may disclose any
information that is not necessary to understanding the Tax treatment
and any facts that may be relevant to the Tax structure of the
transaction (including the identity of the parties and any information
that could lead another to determine the identity of the parties), or
any other information to the extent that such disclosure could result
in a violation of any federal or state securities law.
(iii) Notwithstanding any other provision of this
Agreement, the covenants of Purchaser set forth in this Section 5.1(a)
shall survive the cancellation, abandonment or termination of this
Agreement.
(b) Each of Seller, Parent and Purchaser agrees that it
will promptly make or cause to be made any filing or submission required to be
made by it or on its behalf or on behalf of the Company with the Delaware
Commissioner and with the insurance department or similar regulatory authority
of any other jurisdiction asserting regulatory authority over the transactions
contemplated by this Agreement.
(c) Seller, Parent and Purchaser shall cooperate in using
all reasonable efforts to cause the conditions to the Closing hereunder to be
satisfied as soon as practicable including, without limitation, obtaining the
consents, approvals and authorizations necessary for the Closing. For purposes
of this Agreement, the covenant of the parties to use their "reasonable best
efforts" shall not require any party to incur any unreasonable expenses.
(d) Except as otherwise provided for by the terms of this
Agreement, without the prior written consent of Purchaser, Seller and Parent
will not permit the Company to: (i) issue or sell, or commit to issue or sell,
any shares of its capital stock; (ii) grant or commit to grant any options,
warrants or rights to subscribe for, purchase, or otherwise acquire any shares
of its capital stock; (iii) issue or commit to issue any securities convertible
into or exchangeable for
17
shares of its capital stock; (iv) either declare, set aside, pay or commit to
pay any dividend or other distribution with respect to its capital stock or
transfer any asset for any other purpose; (v) directly or indirectly redeem,
purchase or otherwise acquire or dispose of, or commit to acquire or dispose of,
any shares of its capital stock; (vi) effect a split, modification or
reclassification of its capital stock or a recapitalization of the Company;
(vii) change the Certificate of Incorporation or By-laws of the Company; (viii)
make, or agree to make, any borrowings or any guarantee, or agree to guarantee,
the borrowings of any other Person; (ix) enter into or become party to any
contract or commitment other than the Assignment and the Commutation Agreement;
(x) write any new insurance or reinsurance business or engage in any business
except as may be specifically contemplated in this Agreement; (xi) take any
action that would cause the Company to incur any liability whatsoever not fully
indemnified hereby or that would have the effect of impairing the value of the
assets or the validity of any Insurance Permit; (xii) enter into any new
employment, severance or consulting contracts or otherwise hire any new
employees; (xiii) subject any of its Properties or assets to any Liens or
Restrictions; or (xiv) except as set forth herein, take any action not in the
ordinary course of the Company's business or which would be inconsistent with
delivering to Purchaser a corporation as otherwise contemplated in this
Agreement. Further, after preparation and delivery of the Closing Date Statement
of Assets and the Closing Date Balance Sheet, without the prior written consent
of Purchaser, Seller and Parent shall not, nor shall Seller or Parent permit the
Company to, take any action which would cause or require any changes to the
information set forth in the Closing Date Statement of Assets or the Closing
Date Balance Sheet, or which would cause the sale or disposition of any assets
reflected in the Closing Date Statement of Assets.
(e) Except as specifically consented to in writing by
Purchaser, Seller and Parent shall not, and shall not permit the Company to,
take any action or omit to take action that would result in a breach of any
representation or warranty of Seller or Parent contained in this Agreement.
(f) Except as otherwise contemplated by this Agreement or
specifically consented to in writing by Purchaser, from the date of this
Agreement through the Closing Date, Seller and Parent shall cause the Company to
(i) conduct its business only in the ordinary course consistent with past and
current practices, (ii) comply in all material respects with all applicable
laws, (iii) preserve and maintain in full force and effect the Insurance Permits
and (iv) perform in all material respects its obligations under all contracts
and commitments to which it is a party or by which it is bound.
(g) Purchaser covenants to use reasonable efforts to file
as promptly as practicable the Statement Regarding the Acquisition of Control of
or the Merger with a Domestic Insurer (Form A) with the Delaware Commissioner.
5.2 Pending or Threatened Litigation or Action. Between
the date of this Agreement and the Closing Date, Seller and Parent, on the one
hand, and Purchaser, on the other hand, shall each inform the other, promptly
upon any party's obtaining knowledge thereof, of any pending or threatened
litigation or action by any regulatory authority which could reasonably be
anticipated (i) to prohibit or restrain or impair the consummation of the
transactions contemplated by this Agreement or the performance by Seller, Parent
or Purchaser of their respective obligations under this Agreement, (ii) to have
a Material Adverse Effect or (iii) to
18
have the effect of impairing the value of the assets to be transferred at the
Closing or the validity of any Insurance Permit.
5.3 Tax Audits; Tax Returns.
(a) Seller shall file or cause to be filed when due all
Tax Returns that are required to be filed for any Pre-Closing Period by or with
respect to the Company and Seller shall remit (or cause to be remitted) any
Taxes due in respect of such Tax Returns. All such Tax Returns will be prepared
in a manner consistent with the past practice of Seller and the Company.
(b) Purchaser shall file or cause to be filed when due
all Tax Returns that are required to be filed for any Post-Closing Period or any
Straddle Period by or with respect to the Company and, subject to Section 5.4(a)
hereof, Purchaser shall remit (or cause to be remitted) any Taxes due in respect
of such Tax Returns.
(c) Purchaser shall cause the Company to prepare in a
manner consistent with past practice of the Company and to deliver to Seller all
relevant Tax information relating to the Company reasonably required to permit
Seller to file or cause to be filed when due all Tax Returns required to be
filed or caused to be filed by Seller pursuant to Section 5.3(a) of this
Agreement.
(d) Purchaser and the Company will provide Seller (and
its attorneys, accountants and agents) with the right, at reasonable times, upon
reasonable notice, to have access to, copy and use, any records or information
that are reasonably available to the Company and that Seller deems in its
reasonable discretion relevant for the preparation of any Tax Returns, any audit
or other examination by any Taxing Authority, the filing of any claim for a
refund of Tax or for the allowance of any Tax credit, or any judicial or
administrative proceedings relating to liability for Taxes of the Company for
taxable periods ending on or prior to the Closing Date. Purchaser shall be
reimbursed by Seller or Parent for all reasonable out-of-pocket expenses
incurred by Purchaser in connection with providing such information. Any
information obtained pursuant to this Section 5.3(d) shall be held in strict
confidence and shall be used solely in connection with the reason for which it
was requested.
(e) In the case of any income or premium Tax Return for
any Straddle Period, Purchaser shall provide Seller with copies of the completed
Tax Return for such taxable period and a schedule apportioning the Tax shown on
such Tax Return as between Seller and Purchaser and specifying the amount due to
or from Seller (all computed in accordance with Section 5.4(a) hereof), together
with such related work papers and other documents as Seller shall reasonably
request, no later than forty-five (45) days before the due date for the filing
of such Tax Return. Seller and its authorized representatives shall have the
right to review the Tax Return and schedule received from Purchaser pursuant to
the terms of this Section 5.3(e). Seller and Purchaser agree to consult each
other and resolve in good faith any issues arising under the terms of this
Section 5.3(e) as a result of the review of any such Tax Return and schedule
received from Purchaser and the amount of Tax, if any, due from Seller shall be
paid by Seller to Purchaser no later than two (2) days prior to the date of
filing of such Tax Return or the amount
19
of Tax due, if any, from Purchaser to Seller shall be paid by Purchaser to
Seller no later than three (3) days after the date of filing of such Tax Return.
(f) Seller shall cause any Tax sharing agreement or
similar arrangement with respect to Taxes involving the Company, on the one
hand, and Seller, or any Affiliates of Seller, on the other hand, to be
terminated effective as of the Closing Date, so that to the extent any such
agreement or arrangement relates to the Company after the Closing Date, none of
the Company, Seller, nor its Affiliates shall have any obligation thereunder to
the other, whether to make payment or otherwise, under any such agreement or
arrangement for any past, present or future period.
(g) Except as otherwise expressly contemplated by this
Agreement, from the date hereof to and including the Closing Date, Seller,
without the prior written consent of Purchaser will not permit the Company to
directly or indirectly (i) make, change or revoke, or permit to be made, changed
or revoked, any election or method of accounting, with respect to Taxes
affecting the Company for Post-Closing Tax Periods, (ii) enter into, or permit
to be entered into, any closing or other agreement or settlement with respect to
Taxes of the Company affecting or relating to Post-Closing Tax Periods, or (iii)
enter into any transaction or series of transactions other than in the ordinary
course of business, or take any position on any Tax Return for any taxable
period (or portion thereof) ending on or prior to the Closing Date that would
have the effect of increasing the Company's tax liability for any taxable period
(or portion thereof) beginning after the Closing Date.
(h) If (i) Seller receives a written notice from any
Taxing Authority proposing an audit or other examination of a Tax Return of the
Company for any Pre-Closing Period or (ii) a claim is made or threatened in
writing by any Taxing Authority that, if successful, may result in an indemnity
payment under Section 5.4(a) hereof (each a "Tax Claim"), Purchaser shall
promptly notify Seller in writing stating the nature and basis of such Tax
Claim, and the amount thereof, to the extent known. Failure to give such notice
shall not relieve Seller from any liability that it may have on account of this
indemnification or otherwise, unless and to the extent that Seller is materially
adversely prejudiced thereby. Seller will have the right, upon notification to
Purchaser within thirty (30) days of the date Purchaser notified Seller of such
Tax Claim, to assume at its own expense the control of any audit or other
defense of any Tax Claim with its own counsel. If Seller elects not to control
any audit or other defense of a Tax Claim, Purchaser shall have the authority to
settle without Seller's consent such Tax Claim. Seller's right to control a Tax
Claim will be limited to issues in respect of which amounts in dispute would be
paid by Seller or for which Seller would be liable pursuant to Section 5.4(a)
hereof. Purchaser shall cooperate in good faith with Seller in contesting any
Tax Claim, which cooperation shall include providing records and information
that are reasonably available to the Company and relevant to such Tax Claim. All
reasonable out-of-pocket expenses of Purchaser related to such cooperation shall
be borne by Seller. Notwithstanding the foregoing: (i) Seller shall not have the
right to control any issue involved in a Tax Claim unless Seller first
acknowledges in writing its obligation to fully indemnify Purchaser for the
Taxes asserted in connection with such issue; (ii) no settlement or disposition
of any Tax Claim shall be made without Purchaser's prior written consent (which
consent shall not be unreasonably withheld); and (iii) Purchaser and Seller
shall jointly control all proceedings involving any claims for Taxes
20
assessed in respect of a Straddle Period, and each party shall bear its own
out-of-pocket costs and expenses relating to such claims.
(i) Seller, Purchaser and the Company agree that for all
income Tax purposes, the taxable period of the Company shall be terminated as of
the close of business on the date of the Closing in accordance with Treasury
Regulations Section 1.1502-76(b)(1) (other than transactions properly allocable
thereunder to the portion of the day after the Closing shall occur) and items of
income, gain, loss, deduction or credit shall be apportioned based upon a
closing of the books for Tax purposes in accordance with Treasury Regulation
Section 1.1502-76(b). No elections shall be made under either Treasury
Regulation Section 1.1502-76(b)(2)(ii) (relating to ratable allocation of a
year's items) or Treasury Regulation Section 1.1502-76(b)(2)(iii) (to ratably
allocate the items for the month which includes the Closing Date). Seller,
Purchaser and the Company further agree to file all Tax Returns, handle the
contest of any audit and otherwise act for all Tax purposes consistent with the
provisions of this Section 5.3(i).
5.4 Indemnifications, Assumptions of Liability and
Related Matters.
(a) Subject to the provisions of Sections 5.4(e), (f) and
(g) and 5.5(b) hereof, Parent and Seller, jointly and severally, shall pay and
shall indemnify and hold harmless Purchaser, Transferee and the Company from:
(i) all liability of the Company for Taxes (other than any Tax constituting a
part of the 2004 Filing Fees) assessed in respect of, and all costs and expenses
of Tax audits or the preparation of Tax Returns for, all Pre-Closing Periods,
and the Seller's portion of any Straddle Period; (ii) all liability resulting by
reason of the several liability of the Company pursuant to Treasury Regulation
Section 1.1502-6 or any analogous state, local or foreign law or regulation or
by reason of the Company having been a member of an affiliated, consolidated,
combined or unitary group of which the Company was a member on or prior to the
Closing Date; (iii) all liability of the Company in respect of Taxes of any
other Person or entity pursuant to any agreement or contract, whether written or
unwritten, entered into on or before the Closing Date, or as a transferor or
successor, by contract or otherwise; and (iv) all liability arising as a result
of a breach of the representations provided in Section 3.7 hereof, or the
failure of Seller to perform its obligations pursuant to Section 5.3 or Section
5.6 hereof. In the case of any Straddle Period, Parent and Seller shall be
solely responsible for all Taxes (other than any Tax constituting a part of the
2004 Filing Fees) of the Company (and that portion of the Company's costs for
the preparation of each such Tax Return and Tax Audits) attributable to the
portion of the period ending on, and that includes, the Closing Date, and
Purchaser shall be solely responsible and shall indemnify Seller for all Taxes
imposed on the income or operations of the Company and attributable to the
portion of the period beginning after the Closing Date. For purposes of this
Agreement, the portion of any Tax (other than any Tax constituting a part of the
2004 Filing Fees) that is attributable to the portion of a Straddle Period up to
and including the Closing Date shall be (i) in the case of a Tax that is not
based on gross or net income, premiums, sales or gross receipts (including real
property taxes), the total amount of such Tax for the period in question
multiplied by a fraction, the numerator of which is the number of days in the
Straddle Period through and including the Closing Date, and the denominator of
which is the total number of days in such Straddle Period, and (ii) in the case
of any Tax that is based on any of gross income, premiums, sales or gross
receipts, the Tax that would be due with respect to the portion of the Straddle
Period through and including the Closing Date, if such portion of the Straddle
Period were a separate taxable period, except that exemptions, allowances,
deductions,
21
credits or graduated rates that are calculated or applied on an annual basis
(such as the deduction for depreciation or capital allowances) shall be
apportioned on the basis of the gross income, premiums, sales or gross receipts
for each such period, or if not based upon such gross income, premiums, sales or
gross receipts, then on a per diem basis.
(b) Subject to the provisions of Sections 5.4(e) and (g)
hereof, from and after the Closing Date, Parent shall indemnify and hold
harmless Purchaser, Transferee and the Company from and against any and all
losses, claims, damages, liabilities, guaranty fund assessment or similar
obligation, costs, expenses (together with reasonable attorneys' fees and all
costs and expenses of enforcing such right of indemnification against Parent),
Taxes and penalties, if any, arising out of or based upon the employment of any
individual or entity or arising with respect to or out of any Employee Benefit
Plan including, without limitation, any liability: (i) to the PBGC or any other
person under Title IV of ERISA; (ii) with respect to a Multiemployer Plan under
Title IV of ERISA; (iii) with respect to any notice and benefit continuation
requirements of COBRA; (iv) with respect to any noncompliance with ERISA or any
other applicable laws, or with the terms of the Employee Benefit Plan; (v) any
excise tax imposed under Sections 4971 through 4980F of the Code; (vi) with
respect to any failure to make any contribution to the Employee Benefit Plan;
and (vii) with respect to any suit, proceeding or claim which is brought against
the Company, its officers or directors, any Employee Benefit Plan or any
fiduciary or former fiduciary of any Employee Benefit Plan; provided, however,
that Parent's obligation to indemnify Purchaser, Transferee and the Company
pursuant to the provisions of this Section 5.4(b) shall not apply to any loss,
claim, damage, liability, guaranty fund assessment or similar obligation, cost
or expense (together with reasonable attorneys' fees and all costs and expenses
of enforcing such right of indemnification) which (A) relates to any individual
or entity that was not employed by, and performed no services for, the Company
prior to the Closing Date; (B) is based upon or arose out of an act taken by or
omission by the Company, Transferee or Purchaser with respect to an event
occurring after the Closing Date which event has no connection, directly or
indirectly, with any Employee Benefit Plan or employment arrangement for which
the Company had (prior to the Closing Date), or a pre-Closing ERISA Affiliate
had, an obligation or potential obligation; or (C) is based upon or arose out of
any employee benefit plan which was not maintained by the Company or a
pre-Closing ERISA Affiliate prior to the Closing Date, or with respect to which
neither the Company nor any pre-Closing ERISA Affiliate had any obligations
which arose before the Closing Date. Purchaser shall indemnify and hold harmless
Seller to the same extent as Parent's indemnity of Purchaser set forth in this
Section 5.4(b) with respect to the matters described in clauses (A), (B) and (C)
of this proviso.
(c) Subject to the provisions of Sections 5.4(e), (f) and
(g) and 5.5(b) hereof, from and after the Closing Date, Parent shall indemnify
and hold harmless Purchaser, Transferee and the Company and their respective
directors, officers and employees (collectively, the "Purchaser Indemnitees")
from and against any and all losses, claims, damages, liabilities, guaranty fund
assessments or similar obligations, costs, expenses (including reasonable
attorneys' fees and all costs and expenses of enforcing such right of
indemnification against Parent) and penalties, if any (collectively, the
"Purchaser Losses"), arising out of, based upon or with respect to: (i) any
breach of or failure by Seller, Parent or any of their respective Affiliates to
perform or comply with any of the covenants, agreements or undertakings to be
performed or complied with by any of them under the Company Reinsurance
Agreements, the Parent
22
Reinsurance Agreement, the Assignment or the Commutation Agreement; (ii) any
breach of or failure by Seller, Parent or any of their respective Affiliates to
perform or comply with any of the covenants, agreements or undertakings to be
performed or complied with by any of them under this Agreement; (iii) any breach
of any representation or warranty made by Seller or Parent in this Agreement or
in any certificate, instrument or other documentation delivered pursuant hereto;
and (iv) any liability of the Company (whether known or unknown at the time of
execution of this Agreement) based on or arising out of any act, omission or
event occurring prior to the Closing.
(d) Subject to the provisions of Sections 5.4(e), (f) and
(g) hereof, from and after the Closing Date, Purchaser shall indemnify and hold
harmless Parent and Seller and their respective directors, officers and
employees (collectively, the "Seller Indemnitees") from and against any and all
losses, claims, damages, liabilities, guaranty fund assessments or similar
obligations, costs, expenses (including reasonable attorneys' fees and all costs
and expenses of enforcing such right of indemnification against Purchaser) and
penalties, if any (collectively, the "Seller Losses"), arising out of, based
upon or with respect to: (i) any breach of or failure by Purchaser to perform or
comply with any of the covenants, agreements or undertakings to be performed or
complied with by Purchaser under this Agreement; (ii) any breach of any
representation or warranty made by Purchaser in this Agreement; (iii) any
liability of the Company (other than any liability for which Parent is obligated
to indemnify Purchaser, Transferee and the Company under this Section 5.4) based
on or arising out of any act, omission or event occurring after the Closing; and
(iv) all liability of the Company for Taxes assessed in respect of all taxable
periods beginning after the Closing Date.
(e) For the purposes of administering the indemnification
provisions of this Section 5.4 (except for any Tax Claim subject to Section
5.3(h) hereof), the following procedures shall apply from and after the Closing
Date:
(i) An indemnified party shall notify the Indemnitor of
any Indemnification Event reasonably promptly following (A) the receipt
of notice by the indemnified party of the commencement of any action or
proceeding, (B) such indemnified party becoming aware of the assertion
of any claim against such indemnified party, or (C) the discovery by
such indemnified party of any loss giving rise to indemnity pursuant to
this Section 5.4. Such notification shall indicate whether such
indemnified party is requesting indemnification with respect to such
Indemnification Event and the amount of indemnification initially
anticipated. The failure to notify the Indemnitor of any
Indemnification Event shall not relieve the Indemnitor of its indemnity
obligation, unless and to the extent that the Indemnitor is materially
and actually prejudiced thereby.
(ii) After notification is given as required by Section
5.4(e)(i) of this Agreement, the Indemnitor shall be entitled (but is
not obligated) to assume the defense or settlement of any such action
or proceeding, or to participate in any negotiations or proceedings to
settle or otherwise eliminate any claim. Any indemnified party is
hereby authorized prior to the date on which it receives written notice
from the Indemnitor that the Indemnitor intends to assume the defense,
settlement or other disposition of such action or proceeding, to file
any motion, answer or other pleading and to take such other
23
action which the indemnified party shall reasonably deem necessary to
protect its interest or that of the Indemnitor until the date on which
the indemnified party receives such notice from the Indemnitor,
provided that, prior to filing such motion, answer or other pleading or
taking such other action, the indemnified party shall have made
reasonable efforts to consult with the Indemnitor. If the Indemnitor
fails to confirm in writing within one month of the date of the
notification referred to above that the Indemnitor will assume the
defense, the indemnified party may engage counsel to defend, settle or
otherwise dispose of such action or proceeding, and in such event the
indemnified party shall pursue the defense or settlement of any such
action or proceeding in good faith and the Indemnitor shall remain
liable and responsible for all losses in connection therewith,
including the indemnified party's costs, attorneys' fees and expenses,
all as and when incurred by such indemnified party.
(iii) In cases where the Indemnitor has assumed the defense
or settlement with respect to an Indemnification Event, the Indemnitor
shall be entitled to assume such defense or settlement with counsel of
its own choosing, provided that (except with respect to Tax audits
subject to the provisions of Section 5.3(h) of this Agreement): (A) the
indemnified party (and its counsel) shall be entitled to continue to
participate at its own cost in any such action or proceeding or in any
negotiations or proceedings to settle or otherwise eliminate any claim
for which indemnification is being sought (it being understood that the
Indemnitor shall be entitled to make all final determinations with
respect to the defense or (subject to clause (B) hereof) settlement of
such action, proceeding or claim); and (B) unless the settlement of an
action, proceeding or claim involves only the payment of dollar damages
(all of which are to be paid by the Indemnitor), the Indemnitor shall
not be entitled to settle, compromise, decline to appeal, or otherwise
dispose of any such action, proceeding or claim without the consent or
agreement of the indemnified party (which consent will not be
unreasonably withheld or delayed).
(iv) In any case where an Indemnitor shall have assumed
the defense or settlement of any action, proceeding or claim and the
indemnified party is entitled to continue to participate in such
action, proceeding or claim, and shall have elected to do so, it shall
do so at its own expense. In no event shall an Indemnitor be liable to
any indemnified party for the cost of employing or using in-house legal
counsel regardless of whether such Indemnitor has, or has not, assumed
the defense or settlement of such action, proceeding or claim.
(v) In the event indemnification is requested, the
Indemnitor, its representatives and agents shall have reasonable access
to the books, records and other Documents of the indemnified party or
parties seeking such indemnification to the extent reasonably requested
by the Indemnitor in connection with the Indemnitor's defense or
settlement of any action, proceeding or claim; provided, however, that
such access shall be provided upon reasonable prior notice, during
normal business hours and in such manner as not to interfere
unreasonably with the operation of the business of the indemnified
party or parties and shall only take place in the presence of a
representative of the indemnified party or parties unless otherwise so
agreed; and provided, further, that the indemnified party shall not be
required to disclose any information with respect to
24
itself or any of its Affiliates (or former Affiliates), other than the
Company, and shall not be required to participate in the defense of any
action, proceeding or claim to be indemnified under this Agreement
(except as otherwise expressly set forth in this Agreement), unless
such disclosure or participation is required or reasonably necessary in
the defense of any action, proceeding or claim to be indemnified under
this Agreement, in which case the indemnified party shall be fully
reimbursed for the reasonable costs of such participation.
(vi) From the date of this Agreement, each party agrees
that, except as provided below, it shall retain all Documents with
respect to all material matters pertaining to the Company (except to
the extent that such Documents in the possession of Seller at the
Closing and relating to the Company may be transferred at the Closing
to the possession of Purchaser or the Company). Before disposing of or
otherwise destroying any such Documents, the possessor thereof shall
give reasonable notice to such effect and deliver to the other party,
at the other party's expense and upon its request, a copy of any such
Documents. In addition, each party to this Agreement agrees to use its
best efforts to cause its employees (and in the case of Purchaser, the
employees of the Company) to cooperate with and assist the other party
in connection with any claim, action or proceeding for which indemnity
is sought under this Agreement or with respect to which either party
has elected to participate in the defense.
(vii) Following payment by an indemnified party of any
amount for which it is entitled to indemnity, the indemnified party may
demand in writing that the Indemnitor reimburse the indemnified party
for such payment. Such written demand shall set forth the basis and
amount of such payment in reasonable detail and include a copy of any
supporting invoice, demand(s) against which payment(s) were made and
all supporting documentation. If reimbursement is not made by the
Indemnitor within 30 calendar days of receipt by the Indemnitor of such
demand for which the parties agree the Indemnitor is liable, interest
shall thereafter accrue and be payable on the amount to which the
indemnified party is entitled at a rate equal to 6% per annum until
paid; provided however, if the Indemnitor disputes the amount demanded
or the basis for indemnification or disputes that the party seeking
indemnification is entitled thereto, and fails to pay all amounts due
within 30 days after a final determination is made in favor of the
indemnified party, interest shall be payable from and after the 31st
day after such final determination at a rate equal to 10% per annum. If
an amount paid by the Indemnitor pursuant to this Section 5.4 is
finally determined not to have been due from the Indemnitor, the
indemnified party shall return the amount so paid together with
interest at a rate of 6% per annum from the date payment was made by
the Indemnitor until the 30th day after such final determination, and
at a rate of 10% per annum thereafter, until the date such payment is
received by the Indemnitor.
(f) (i) Notwithstanding anything in this Agreement to
the contrary, for purposes of the indemnification provisions set forth
in this Article V, all Material Adverse Effect, materiality and
correlative qualifications included in any of the representations and
warranties contained in this Agreement shall be disregarded (including
for purposes of determining whether a breach has occurred and for
purposes of
25
determining the amount of Purchaser Losses or Seller Losses, as the
case may be, associated with a breach).
(ii) Subject to Section 5.4(f)(iii) below, Parent shall
not be required to make any indemnification payment pursuant to Section
5.4(c)(iii) for any breach of any of the representations or warranties
made by Seller or Parent until such time as the total amount of the
Purchaser Losses (including the Purchaser Losses arising from such
breach and all other Purchaser Losses arising from any other breaches
of the same representation or warranty or any other representation or
warranty) that have been suffered or incurred by the Purchaser
Indemnitees exceeds $50,000 in the aggregate. At such time as the total
amount of such Purchaser Losses exceeds $50,000 in the aggregate, the
Purchaser Indemnitees shall be entitled to be indemnified against the
full amount of such Purchaser Losses (and not merely the portion of
such Purchaser Losses exceeding $50,000).
(iii) The limitation on Parent's indemnification
obligations that is set forth in Section 5.4(f)(ii) above shall not
apply to any breach of any of the representation and warranties set
forth in Section 3.3 (Capital Stock of the Company), Section 3.4
(Interests in Securities of the Company), Section 3.7 (Tax Returns and
Reports), Section 3.12 (Form of Capital and Surplus), Section 3.15
(Employee Matters) and Section 3.18 (Brokers and Finders).
(iv) Subject to Section 5.4(f)(v) below, Purchaser shall
not be required to make any indemnification payment pursuant to Section
5.4(d)(ii) for any breach of any of the representations or warranties
made by Purchaser until such time as the total amount of the Seller
Losses (including the Seller Losses arising from such breach and all
other Seller Losses arising from any other breaches of the same
representation or warranty or any other representation or warranty)
that have been suffered or incurred by the Seller Indemnitees exceeds
$50,000 in the aggregate. At such time as the total amount of such
Seller Losses exceeds $50,000 in the aggregate, the Seller Indemnitees
shall be entitled to be indemnified against the full amount of such
Seller Losses (and not merely the portion of such Seller Losses
exceeding $50,000).
(v) The limitation on Purchaser's indemnification
obligations that is set forth in Section 5.4(f)(iv) above shall not
apply to any breach of the representations and warranties set forth in
Section 4.6 (Brokers and Finders).
(g) All representations, warranties and covenants,
including without limitation any indemnity obligations, of the parties hereto
which are contained in this Agreement, together with the certificates delivered
pursuant hereto, shall survive the Closing and remain operative and in full
force and effect, regardless of any investigation heretofore or hereafter made
by or on behalf of the parties hereto, except that the representations and
warranties set forth in Section 3.7 shall survive the Closing and remain in full
force and effect only until thirty (30) days following the expiration of the
applicable statutes of limitation.
26
5.5 Closing Date Statement of Assets and Closing Date
Balance Sheet.
(a) Seller and Purchaser shall cooperate in the
preparation of the Closing Date Statement of Assets. The Closing Date Statement
of Assets shall be prepared as of the close of business on the business day
immediately prior to the Closing Date and shall set forth the value of all
tangible assets of the Company (other than deferred Tax assets). Assets included
on the Closing Date Statement of Assets shall be valued as follows: (i) cash and
cash equivalents shall be valued at face value and (ii) investment securities
traded in a recognized public market shall be valued at their closing composite
price as reported by Bloomberg LP or, if such values are not reported by
Bloomberg LP, for the preceding business day as reported by the Wall Street
Journal (if there is no closing price, then the average bid and asked prices
shall be used); provided, however, that if the investment security is quoted
only on a yield or discount rate basis, then such security shall be valued at
the price calculated in accordance with generally accepted financial practice
for the mean of the quoted bid and asked yield or rate. Seller shall prepare the
Closing Date Balance Sheet reflecting the Closing Date Shareholder's Equity
based upon the Closing Date Statement of Assets, and shall deliver the Closing
Date Statement of Assets and the Closing Date Balance Sheet reflecting the
Closing Date Shareholder's Equity to Purchaser no later than 6:00 p.m. on the
business day immediately prior to the Closing Date.
(b) The parties agree that Filing Fees for the year
ending December 31, 2004 ("2004 Filing Fees") shall be allocated between the
Seller and Purchaser in accordance with this Section 5.5(b) and that such
allocation shall be binding on the parties for purposes of calculating the
Purchase Price regardless of the actual amount of the 2004 Filing Fees and
regardless of when such 2004 Filing Fees are actually paid. First, the parties
hereto stipulate and agree that the total amount used to calculate 2004 Filing
Fees for purposes of this Section 5.5(b) shall be the aggregate amount of 2003
Filing fees as shown on Schedule 3.8(b). Next, it is agreed that one-fourth of
such Filing Fee shall be chargeable to the Seller and three-fourths of such
Filing Fees shall be chargeable to the Purchaser as follows: From the amount
equal to one-fourth of the 2004 Filing Fees shall be deducted all amounts
actually paid by the Company prior to the Closing Date. If the resulting balance
is less than zero, such negative balance shall considered a prepaid expense and
shall be shown as an asset on the Closing Date Balance Sheet. If the resulting
balance is positive, such amount shall be shown as an accrued unpaid expense on
the Closing Date Balance Sheet. No other accrued unpaid or prepaid expense shall
be shown on the Closing Date Balance Sheet for 2004 Filing Fees. The foregoing
adjustments shall constitute complete settlement and discharge amount the
parties with respect to the 2004 Filing Fees and the indemnification obligation
set forth in Section 5.4 shall not apply with regard to any 2004 Filing Fees,
provided, nothing in this Section 5.5(b) shall relieve Seller from any
obligation as otherwise set froth in this Agreement resulting from a breach of
the representations and warranties set forth in Section 3.8(b).
5.6 Transfer Taxes. Seller shall cause all appropriate
stock transfer Tax stamps to be affixed to the certificate or certificates
representing the Stock. Seller, the Company and Purchaser shall cooperate in the
preparation, execution and filing of all returns, applications or other
documents regarding any real property transfer, transfer gains or other similar
transfer Taxes that become payable in connection with the sale of the Stock
(other than the stock transfer taxes mentioned above) pursuant to this Agreement
(collectively, "Transfer Taxes"). Any Transfer Taxes shown as due on such
returns shall be borne equally by Seller and Purchaser.
27
5.7 Conduct of Business by Purchaser. Purchaser covenants
that it shall not, and it shall not permit the Company to, take any action that
would cause the Company to incur any liability whatsoever until the day
following the Closing Date including, without limitation, the commencement of
operations by the Company, the hiring of employees or insurance agents for the
Company, the writing of any insurance business by the Company or engaging in any
reinsurance or other business by the Company, amending or modifying any
governing document of the Company or the taking of any other action whatsoever
which obligates the Company to act or omit to act.
5.8 Change of Name. As promptly as practicable after the
Closing, the Company shall change its name so that the Company does not have the
word "Aegis" in its name, and the Company shall cease using the word "Aegis" in
any of its business dealings.
5.9 Disclosure of Confidential Information. Seller shall
not, and shall cause its Affiliates and its and their respective officers and
directors not to, disclose any Confidential Information after the date hereof to
any third party, unless compelled to disclose by judicial or administrative
process or, in the opinion of its counsel, by other requirements of law. It is
acknowledged and agreed that unauthorized use of any Confidential Information
would cause irreparable injury constituting the proper subject of injunctive
relief and specific performance, in addition to providing Purchaser an action
for damages.
5.10 Compliance with Delaware Insurance Laws. During the
period from the date hereof to the Closing Date, Seller shall, or shall cause
the Company to, comply with all of the requirements of Delaware insurance laws.
5.11 Notification of Changes.
(a) Seller and/or Parent, as the case may be, shall,
after the first notice or occurrence thereof but not later than the Closing
Date, promptly notify Purchaser in writing of any event or the existence of any
state of facts that would (i) make any of its representations and warranties in
this Agreement untrue or (ii) reasonably be likely to constitute a Material
Adverse Effect.
(b) Purchaser shall, after the first notice or occurrence
thereof but not later than the Closing Date, promptly notify Seller in writing
of any event or the existence of any state of facts that would (i) make any of
its representations and warranties in this Agreement untrue or (ii) materially
impair the ability of Purchaser to execute, deliver and perform its obligations
under this Agreement.
5.12 Acquisition Proposals. From the date hereof through
the Closing Date, neither Seller nor Parent shall, nor shall Seller or Parent
permit any of their respective Affiliates or any of the officers, directors,
employees, representative or agents of Seller, Parent or any of such Affiliates,
directly or indirectly, to solicit, initiate or participate in any way in
discussions or negotiations with, or provide any information or assistance to,
or enter into any agreement with, any person or group of persons (other than
Purchaser) concerning any acquisition of a substantial equity interest in, or in
a merger, consolidation, liquidation, dissolution, or disposition of assets of
the Company, or any disposition of any of the securities of the Company (other
than sales of
28
investment securities in its investment portfolio with the prior written consent
of Purchaser) (each, an "Acquisition Proposal"), or assist or participate in,
facilitate or encourage any effort or attempt by any other person to do or seek
to do any of the foregoing. Seller and/or Parent, as the case may be, shall
promptly communicate to Purchaser the terms of any Acquisition Proposal which it
or any such other person may receive.
5.13 Assignment. On or prior to the Closing Date, Parent
shall, and shall cause the Company to, execute and deliver the Assignment.
5.14 Commutation Agreement. On or prior to the Closing
Date, Parent shall, and shall cause the Company to, execute and deliver the
Commutation Agreement.
5.15 Payment of Brokers' or Finders' Fees. At the Closing,
(i) Purchaser will pay the finder's fee due to Merger & Acquisition Services,
Inc., and (ii) Seller will reimburse Purchaser for one-half of the finder's fee
payable to Merger & Acquisition Services, Inc.; provided, however, that the
amount of such reimbursement payment by Seller shall not exceed $50,000.
5.16 Preparation of Statutory Financial Statements. With
respect to any period ending on or prior to the Closing Date for which Statutory
Financial Statements are required to be filed, Seller shall prepare, on a basis
consistent with past practices, all Statutory Financial Statements of the
Company, and Seller shall promptly provide to Purchaser, at least fifteen (15)
business days prior to the due date, including any extensions, for the filing
thereof, such Statutory Financial Statements together with such other
information reasonably relevant to such Statutory Financial Statements,
including schedules and work papers. Following receipt of any Statutory
Financial Statements prepared by Seller, Purchaser shall promptly notify Seller
if it disputes any of the information contained in such Statutory Financial
Statements. The parties shall cooperate to promptly resolve any such dispute.
During a transitional period not to exceed six months following the Closing
Date, Seller shall provide Purchaser with such assistance in the preparation of
Statutory Financial Statements of the Company as may reasonably be requested by
Purchaser or the Company.
ARTICLE VI
CONDITIONS TO CLOSING; ABANDONMENT OF THE TRANSACTION
6.1 Conditions to the Obligations of Purchaser. Except to
the extent waived by Purchaser in writing, the obligations of Purchaser to
consummate the transactions contemplated herein and to purchase the Stock shall
be subject to the satisfaction of each of the following conditions:
(a) The representations and warranties made by each of
Seller and Parent contained in this Agreement shall be true and correct in all
material respects at and as of the Closing, as if and to the same effect as
though made at and as of the Closing Date. Each of Seller and Parent shall have
performed all of its obligations and complied in all material respects with all
covenants and conditions required by this Agreement to be performed or complied
with by it at or prior to the Closing. Each of Seller and Parent shall have
delivered to Purchaser a
29
certificate, in form and substance satisfactory to Purchaser, dated the date of
the Closing and signed on its behalf by its Chairman, a Vice Chairman, its
President, Vice President, Controller or Treasurer, in his or her respective
representative capacity, and not individually, to all such effects and
certifying to the satisfaction of the conditions to be performed by Seller,
Parent, or the Company (prior to the Closing) set forth in this Section 6.1.
(b) No action or proceeding shall have been instituted
and remain pending before a court or other governmental body (foreign or
domestic) to restrain, prohibit or otherwise challenge the transactions
contemplated by this Agreement, the sale of the Stock to Purchaser or the
performance of the material obligations of the parties to this Agreement; nor
shall any governmental agency or body have notified any party to this Agreement
or the Company that the consummation of the transactions contemplated by this
Agreement would constitute a violation of the laws of the United States (or in
the case of Parent, the laws of Bermuda) or the laws of the State of Delaware to
which Purchaser or the Company is subject and that it intends to commence
proceedings to restrain consummation of such transactions, to force divestiture
if such transactions are consummated or to materially modify the terms or the
results of such transactions, unless such agency or body shall have withdrawn
such notice prior to the Closing Date.
(c) All authorizations, consents and approvals of the
Delaware Commissioner required to be obtained in order to permit the
consummation by Seller of the transactions contemplated by this Agreement shall
have been obtained.
(d) Parent and the Company shall have entered into the
Assignment, a fully executed original of which shall have been delivered to
Purchaser.
(e) Parent and the Company shall have entered into the
Commutation Agreement, a fully executed original of which shall have been
delivered to Purchaser.
(f) Purchaser shall have received from LeBoeuf, Lamb,
Xxxxxx & XxxXxx, LLP, an opinion addressed to Purchaser dated the Closing Date
and substantially in the form attached as Exhibit B hereto. In addition,
Purchaser shall have received from Xxxxxxx Xxxxxxxx & Xxxxx an opinion addressed
to Purchaser dated the Closing Date as to matters of Bermuda law with regard to
Parent and substantially in the from of Exhibit C hereto. Purchaser shall also
have received an opinion of in-house counsel to Seller dated the Closing Date,
in form and substance reasonably satisfactory to Purchaser, as to matters of
corporate laws of the State of Delaware with regard to Seller and as to matters
of corporate and insurance laws of the State of Delaware with regard to the
Company, which opinion shall be to the effect that:
(i) Each of Seller and the Company is duly organized,
validly existing and in good standing under the laws of its respective
jurisdiction;
(ii) the Company is duly qualified as a foreign
corporation and is in good standing in each jurisdiction set forth in
Schedule 3.1(b), except as noted in such Schedule;
30
(iii) the authorized capital stock of the Company consists
of 10,000,000 shares of common stock, $1.00 par value per share,
3,500,000 shares of which have been duly authorized and validly issued
and are outstanding and are fully paid and non-assessable;
(iv) to the knowledge of such counsel after due inquiry,
except for this Agreement, the Company is not a party to or bound by
any outstanding convertible or exchangeable securities or any option,
warrant or other document granting the right to subscribe for or
purchase from Seller or the Company, or any plans, contracts or
commitments providing for the issuance of, or granting of rights to
acquire, any capital stock or other ownership interests in the Company,
including the Stock, or any securities convertible into or exchangeable
for any such capital stock or ownership interests in the Company;
(v) all of the Stock is owned of record and, to the
knowledge of such counsel after due inquiry, beneficially by Seller,
and upon the transfer of the Stock to Purchaser pursuant to the terms
hereof, Purchaser will be vested with good and valid title thereto,
free and clear of all liens, claims and encumbrances, assuming that
Purchaser acquires the Stock without notice of any adverse claim;
(vi) (A) Seller has all requisite corporate power and
authority to execute, deliver and perform its obligations under this
Agreement, (B) all action required on the part of Seller to authorize
the execution, delivery and performance of this Agreement has been
taken, and (C) Seller has the power to perform its obligations
hereunder;
(vii) (A) the Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under the
Assignment and the Commutation Agreement, (B) all actions required on
the part of the Company to authorize the execution, delivery, and
performance of the Assignment and of the Commutation Agreement have
been taken, and (C) the Company has the power to perform its
obligations thereunder;
(viii) this Agreement has been duly executed and delivered
by Seller and constitutes the valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, subject to the
Bankruptcy Exception;
(ix) each of the Assignment and the Commutation Agreement
has been duly executed and delivered by the Company and constitutes the
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to the Bankruptcy
Exception;
(x) the Commutation Agreement fully extinguishes all
liabilities and obligations of the Company pursuant to the Company
Reinsurance Agreements and the Parent Reinsurance Agreement;
(xi) there are no actions, suits or administrative,
arbitration or other proceedings pending or, to the knowledge of such
counsel, threatened, against or affecting Seller or the Company at law
or in equity, or before or by any federal, state, or
31
other government department, commission, court, board, bureau, agency
or instrumentality;
(xii) to the best knowledge of counsel, all authorizations,
consents and approvals of all governmental agencies and authorities of
the United States, of any state or any local jurisdiction required in
order to permit consummation by Seller of the transactions contemplated
by this Agreement have been obtained;
(xiii) neither the execution and delivery by Seller of this
Agreement, nor the execution and delivery of the Assignment and the
Commutation Agreement by the Company, nor the compliance by any of them
with the terms and provisions hereof and thereof will (x) conflict
with, or result in a breach of, any of the terms, conditions or
provisions of: (A) the articles of incorporation or by-laws (or
comparable organizational documents) of Seller or the Company, (B) any
statute, law, regulation, and, to the best knowledge of such counsel,
any judgment, order, injunction, decree or ruling of any Governmental
Entity to which Seller or the Company is subject, or (C) any agreement,
contract or commitment to which Seller or the Company is a party or is
subject, except in the case of clauses (B) and (C) only, for such
conflicts or breaches that (1) would not have a Material Adverse
Effect, (2) would not materially impair the ability of Seller to
execute, deliver or perform its obligations under this Agreement, (3)
would not materially impair the ability of the Company to execute,
deliver and perform its obligations under the Assignment or the
Commutation Agreement, and (4) would not impair the validity of any
Insurance Permit or (y) result in the creation or imposition of any
Lien or Restriction on any of the Properties or assets of the Company;
and
(xiv) such counsel is not aware of any facts (other than
the pending change in control of the Company or the current limited
business activity of the Company) that could result in the Insurance
Permits listed on Schedule 3.1(b) not to be in full force and effect.
In rendering such opinion, such counsel may rely, to the extent such counsel
deems such reliance necessary or appropriate: (A) upon opinions of local counsel
as to matters of law other than that of the federal laws of the United States
(provided such local counsel's opinions are received from counsel reasonably
satisfactory to Purchaser and its counsel and are addressed to Purchaser) and
(B) as to matters of fact, upon certificates of state officials and of any
officer or officers of Seller or the Company, provided in all such cases that
the extent of any such reliance is specified in such opinion.
(g) Purchaser shall have received copies of all Insurance
Permits identified on Schedule 3.1(b), certified by Seller as being in full
force and effect.
(h) At the Closing, Seller shall deliver to Purchaser
resignations of all officers and directors of the Company, effective upon the
Closing.
(i) Purchaser shall have received fully executed
originals of the Company Agreements, or copies thereof certified by Seller.
(j) All contracts listed on Schedule 3.14(a) shall have
been terminated.
32
(k) Purchaser shall have received a certificate of Seller
satisfying the requirements of Treasury Regulation Section 1.1445-2(b)(2).
6.2 Conditions to the Obligations of Parent and Seller.
Except to the extent waived by Parent and Seller in writing, the obligations of
Parent and Seller to consummate the transactions contemplated herein and to sell
the Stock shall be subject to the satisfaction of each of the following
conditions:
(a) The representations and warranties of Purchaser
contained in this Agreement shall be true and correct in all material respects
at and as of the Closing, as if and to the same effect as though made at and as
of the Closing Date. Purchaser shall have performed all of its obligations and
complied in all material respects with all covenants and conditions required by
this Agreement to be performed or complied with by it at or prior to the
Closing. Purchaser shall have delivered to Seller certificates of Purchaser, in
form and substance satisfactory to Seller, dated the date of the Closing and
signed on behalf of Purchaser by its President or a Vice President in his or her
respective representative capacity, and not individually, to all such effects
and certifying to the satisfaction of the conditions to be performed by
Purchaser set forth in this Section 6.2.
(b) No action or proceeding shall have been instituted
and remain pending before a court or other governmental body (domestic or
foreign) to restrain, prohibit or otherwise challenge the transactions
contemplated by this Agreement, the sale of the Stock by Seller or the
performance of the material obligations of the parties to this Agreement; nor
shall any governmental agency or body have notified either party to this
Agreement or the Company that the consummation of the transactions contemplated
by this Agreement would constitute a violation of the laws of the United States
(or, in the case of Parent, the laws of Bermuda) or the laws of the State of
Delaware to which Seller or the Company is subject and that it intends to
commence proceedings to restrain the consummation of such transactions, to force
divestiture if such transactions are consummated, or to materially modify the
terms or the results of such transactions, unless such agency or body shall have
withdrawn such notice prior to the Closing Date.
(c) All authorizations, consents and approvals of the
Delaware Commissioner required to be obtained in order to permit the
consummation of the transactions contemplated by this Agreement shall have been
obtained.
(d) Seller shall have received from counsel(s) to
Purchaser, which counsel shall be reasonably satisfactory to Seller and Parent,
one or more opinions, dated the date of the Closing, in form and substance
reasonably satisfactory to Seller and Parent, which opinions shall address the
laws of the State of Delaware and taken together shall be to the effect that:
(i) Purchaser is a limited liability company duly
organized, validly existing and in good standing under the laws of the
State of Delaware;
(ii) all action required on the part of Purchaser to
authorize the execution, delivery and performance of this Agreement by
Purchaser has been taken, and Purchaser has the power to perform its
obligations hereunder; and
33
(iii) this Agreement has been duly executed and delivered
by Purchaser and constitutes the valid and binding obligation of
Purchaser, enforceable against Purchaser in accordance with its terms,
subject to the Bankruptcy Exception.
In rendering such opinions such counsel may rely, to the extent such counsel
deems such reliance necessary or appropriate: (A) upon opinions of local counsel
as to matters of law other than that of the federal laws of the United States
(provided such local counsel's opinions are received from counsel reasonably
satisfactory to Seller and Parent and to counsel to Seller and Parent and are
addressed to Seller and Parent); and (B) as to matters of fact, upon
certificates of state officials and of any officer or officers of Purchaser,
provided in all such cases the extent of any such reliance is specified in such
opinion.
(e) At the Closing, Purchaser shall elect successor
directors for resigning directors of the Company, and such successor directors
shall elect successor officers of the Company.
6.3 Termination of Agreement and Abandonment of
Transactions. Notwithstanding anything in this Agreement to the contrary, this
Agreement and the transactions contemplated hereby may be terminated in any of
the following ways at any time before the Closing and in no other manner:
(a) By mutual written consent of Parent, Seller and
Purchaser executed on behalf of each by its respective president, any vice
president, or chief financial officer;
(b) By Purchaser, if the conditions set forth in Section
6.1 shall not have been met on or before April 30, 2004; or
(c) By Parent and Seller, if the conditions set forth in
Section 6.2 shall not have been met on or before April 30, 2004.
In the event of termination of this Agreement pursuant hereto,
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 5.1(a)(ii),
Article VII and Section 8.3 shall survive any such termination, and except that
nothing herein shall relieve any party from liability for any breach of any of
its covenants or agreements or willful breach of its representations and
warranties contained in this Agreement prior to termination of this Agreement or
any obligations hereunder.
ARTICLE VII
TERMINATION OF OBLIGATIONS AND WAIVER
OF CONDITIONS; PAYMENT OF EXPENSES
In the event that this Agreement shall be terminated pursuant
to Section 6.3(a) of this Agreement, all further obligations of the parties
under this Agreement shall terminate without further liability of either Parent
and Seller, on the one hand, or Purchaser, on the other hand, to the other, and
each party will pay all of its own costs and expenses incident to the
negotiation and preparation of this Agreement and to its performance of, and
compliance with,
34
all agreements and conditions contained in this Agreement on its part to be
performed or complied with, including the fees, expenses and disbursements of
counsel, provided that the obligations of the parties under Section 8.3 and the
obligations of Purchaser under Section 5.1(a)(ii) shall survive any such
termination. Termination of this Agreement pursuant to Section 6.3(b) or Section
6.3(c) shall be without prejudice to the rights and remedies available to each
of Parent and Seller, on the one hand, or Purchaser, on the other hand, under
applicable law, including the right to recover all expenses, costs and other
damages, but no party shall be entitled to incidental or consequential damages
including loss of anticipated profits. If any of the conditions specified in
Section 6.1 have not been satisfied, Purchaser may, nevertheless, at its
election waive such conditions in writing and proceed with the transactions
contemplated by this Agreement. If any of the conditions specified in Section
6.2 have not been satisfied, Parent and Seller may, nevertheless, at their
election waive such conditions in writing and proceed with the transactions
contemplated by this Agreement. In the event that the transactions contemplated
by this Agreement are consummated, each party will pay all of its own costs and
expenses in connection therewith.
ARTICLE VIII
GENERAL
8.1 Amendment and Waiver. This Agreement may not be
amended, modified or supplemented except upon execution and delivery of a
written agreement executed by the parties hereto. Any of the terms, covenants,
representations, warranties or conditions hereof may be waived in writing at any
time by or on behalf of the party which is entitled to the benefits thereof. Any
waiver of any of the provisions of this Agreement by any party hereto shall be
binding only if set forth in an instrument in writing signed on behalf of such
party. No failure to enforce any provision of this Agreement shall be deemed to
or shall constitute a waiver of such provision, and no waiver of any of the
provisions of this Agreement shall be deemed to or shall constitute a waiver of
any other provision hereof (whether or not similar) nor shall such waiver
constitute a continuing waiver.
8.2 Integrated Contract. This Agreement and the Schedules
and Exhibits to this Agreement (which constitute part of this Agreement) and the
other documents and writings referred to herein or delivered pursuant hereto
(including, without limitation, the Company Agreements, the Assignment and the
Commutation Agreement) contain the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof and thereof. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
8.3 Publicity. From the date hereof until the Closing
Date, the parties will consult with each other and will mutually agree by
written consent upon any publication or press release of any nature with respect
to this Agreement or the transactions contemplated hereby (such agreement not to
be unreasonably withheld) and shall not issue any such publication or press
release prior to such consultation and agreement, except as may be required by
applicable law or by obligations pursuant to any listing agreement with any
securities exchange or any securities exchange regulation, in which case the
party proposing to issue such publication or
35
press release shall use reasonable efforts to consult in good faith with the
other party before issuing any such publication or press release.
8.4 Governing Law. This Agreement and the legal relations
between the parties shall be governed by and construed in accordance with the
laws of the State of New York, without regard to the principles regarding the
choice of law.
8.5 Jurisdiction. (a) The parties hereto hereby consent
and agree that they shall commence any action with respect to any claims or
disputes between or among the parties hereto pertaining to this Agreement, the
Company Agreements, the Assignment or the Commutation Agreement or to any matter
arising out of or related to such agreements in the United States District Court
for the Southern District of New York, so long as the action falls within the
subject matter jurisdiction of such court; in the event any such action shall be
determined by the court to be outside its subject matter jurisdiction, then the
parties agree to commence any such action in the state courts of New York
located in New York County. The parties hereto expressly submit and consent in
advance to such jurisdiction in any action or suit commenced in any such court,
and hereby waive any objection which it may have based upon lack of personal
jurisdiction, improper venue or forum non conveniens and hereby consent to the
granting for such legal or equitable relief as is deemed appropriate by such
court. Each party hereto irrevocably consents to the service of process by
registered or certified mail, postage prepaid, to it at its address given
pursuant to Section 8.6 hereof. Subject to the foregoing, nothing in this
Agreement shall be deemed or operate to affect the right of Purchaser, Seller or
Parent to serve legal process in any other manner permitted by law, or to
preclude the enforcement by Purchaser, Seller or Parent of any judgment or order
obtained in the forum specified in this subsection or the taking of any action
under this Agreement, the Company Agreements, the Assignment or the Commutation
Agreement to enforce the same in any other appropriate forum or jurisdiction.
(b) To the extent that Purchaser, Seller or Parent has or
may hereafter acquire any immunity from the jurisdiction of any court or from
any legal process (whether through service or notice, attachment prior to
judgment, attachment in aid of execution, execution or otherwise) with respect
to such party or such party's property, Purchaser, Seller and Parent hereby
irrevocably waive such immunity in respect of their respective obligations under
this Agreement, the Company Agreements, the Assignment and the Commutation
Agreement.
8.6 Notices. All notices, requests, claims, demands and
other communications required or permitted under this Agreement shall be in
writing and sufficiently given, upon receipt or three days after deposit in the
United States mail (registered or certified, postage prepaid, return receipt
requested) or by telex, facsimile or other written form of electronic
communication, to the respective parties as follows:
36
If to Parent, to:
Associated Electric & Gas Insurance Services Limited
c/o AEGIS Insurance Services, Inc.
00 Xxxxxxxx Xxxxx
00xx Xxxxx
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Attn: Xxxx Xxxxx Xxxxxxx, Esq.
Facsimile: (000) 000-0000
with a copy to:
LeBoeuf, Lamb, Xxxxxx & XxxXxx, LLP
000 X. 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
If to Seller, to:
Aegis Holding Inc.
c/o AEGIS Insurance Services, Inc.
00 Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Attn: Xxxx Xxxxx Xxxxxxx, Esq.
Facsimile: (000) 000-0000
with a copy to:
LeBoeuf, Lamb, Xxxxxx & XxxXxx, LLP
000 X. 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
If to Purchaser, to:
Alleghany Insurance Holdings LLC
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000
37
with a copy to:
Xxxxx Xxxxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
or to such other address or person as either party hereto may, from time to
time, designate in a written notice given in like manner (except that a notice
of change of address shall not be deemed to have been given until received by
the addressee).
8.7 No Assignment. Neither this Agreement nor any rights,
interests or obligations hereunder may be assigned by any party hereto without
the prior written consent of all other parties party hereto; provided, however,
that Purchaser may assign its rights, interests and obligations hereunder to a
wholly or majority owned subsidiary of Purchaser without the prior written
consent of Seller or Parent. Any permitted assignment by Purchaser (including
any assignment permitted by the proviso to the preceding sentence) shall not
release Purchaser from its obligations and responsibilities hereunder.
8.8 Headings. The headings contained in this Agreement
are for reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.9 Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement and each of which shall be deemed an original.
8.10 Severability. Any provision of this Agreement which
is invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining provisions hereof
in such jurisdiction or rendering that or any other provision of this Agreement
invalid, illegal or unenforceable in any other jurisdiction.
8.11 Third Parties. Nothing herein expressed or implied is
intended or shall be construed to confer upon or give to any Person, other than
the parties hereto, any rights or remedies under or by reason of this Agreement,
except as provided in Section 5.4 hereof.
8.12 Further Assurances. Each of Seller and Parent, on the
one hand, and Purchaser, on the other hand, will, whenever and as often as
reasonably requested to do so by the other party or its successors, do any and
all such other and further acts, and execute, acknowledge and deliver any and
all such other and further assignments, transfers and instruments of further
assurances, approvals and consents as are necessary or proper in order to
complete, ensure and perfect the transactions contemplated by this Agreement.
38
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf by its officers or representatives
thereunto duly authorized, all as of the day and year first above written.
(Purchaser) ALLEGHANY INSURANCE HOLDINGS LLC
By: /s/ Xxxxx X. Xxxxxxxx
----------------------------
Name: Xxxxx X. Xxxxxxxx
Title: President
(Seller) AEGIS HOLDING INC.
By: /s/ Xxxx X. Xxxxxx Xx.
----------------------------
Name: Xxxx X. Xxxxxx Xx.
Title: Controller
(Parent) ASSOCIATED ELECTRIC & GAS
INSURANCE SERVICES LIMITED
By: /s/ Xxxx X. Xxxxxx Xx.
-------------------------------
Name: Xxxx X. Xxxxxx Xx.
Title: Controller and Treasurer
39
