STOCK PURCHASE AGREEMENT
THIS
STOCK PURCHASE AGREEMENT (this “Agreement”)
is
made and entered into as of October 31, 2008 by and between MAIDEN
HOLDINGS NORTH AMERICA, LTD., a Delaware corporation (the “Buyer”),
and
GMAC INSURANCE MANAGEMENT CORPORATION, a Delaware corporation (the “Seller”).
RECITALS
WHEREAS,
the Seller owns Five Hundred Thousand (500,000) shares (the “Shares”)
of the
common stock, par value Ten Dollars ($10.00) per share, of Integon Specialty
Insurance Company, a North Carolina domiciled property and casualty insurance
company (the “Company”),
which
Shares constitute all of the outstanding capital stock of the Company;
and
WHEREAS,
the Seller desires to sell to the Buyer, and the Buyer desires to purchase
from
the Seller, all of the Shares of the Company, in each case on and subject to
the
terms and conditions set forth herein;
NOW,
THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements contained herein, and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE
I
DEFINITIONS
1.1 General
Provisions.
For all
purposes of this Agreement:
(a) The
terms
defined in this Article I have the meanings ascribed to them in this Article
I
and include the plural as well as the singular.
(b) All
references herein to designated “Articles,” “Sections” and other subdivisions
and to “Annexes”, “Exhibits” and “Disclosure Schedules” are to the designated
Articles, Sections and other subdivisions of the body of this Agreement and
to
the exhibits and other schedules to this Agreement.
(c) Pronouns
of either gender or neuter shall include, as appropriate, the other pronoun
forms.
(d) The
words
“herein,” “hereof” and “hereunder” and other words of similar import refer to
this Agreement as a whole and not to any particular Article, Section or other
subdivision.
(e) On
or
prior to the date hereof, the Seller, on the one hand, and the Buyer, on the
other, have delivered to each other schedules (respectively, its “Disclosure
Schedule”)
setting forth, among other things, items the disclosure of which is necessary
or
appropriate either (i) in response to an express informational requirement
contained in a provision hereof or (ii) as an exception to one or more
representations, warranties or covenants contained in a section of this
Agreement. The inclusion of an item on a Disclosure Schedule in response to
a
disclosure obligation or as an exception to a representation, warranty or
covenant shall not be deemed an admission by the disclosing party that such
item
represents a material exception or fact, event or circumstance or that such
item
would, or would be reasonably likely to, result in a Material Adverse Effect
on
the disclosing party.
1.2 Definitions.
The
following terms when used in this Agreement (including the Schedules, Annexes
and Exhibits hereto) shall have the following meanings:
“Accounting
Firm”
has
the
meaning set forth in Section
2.4(b)
hereof.
“Action”
means
any action, cause of action (whether at law or in equity), arbitration, claim
or
complaint by any Person alleging potential Liability, wrongdoing or misdeed
of
another Person, or any administrative or other similar proceeding, criminal
prosecution or investigation by any Governmental Entity alleging potential
Liability, wrongdoing or misdeed of another Person.
“Affiliate”
(and,
with a correlative meaning, “Affiliated”) means, with respect to any Person, any
other Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such first
Person. As used in this definition, “control” (including, with correlative
meanings, “controlled by” and “under common control with”) shall mean
possession, directly or indirectly, of power to direct or cause the direction
of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract, as trustee or executor, or
otherwise).
“Agreement”
has
the
meaning set forth in the preface above.
“Ancillary
Agreements”
means
the Commutation and Termination Amendment, the Partial Commutation and
Termination Amendment, the FRR Agreement and the Reinsurance
Agreement.
“Applicable
Insurance Code”
means
the insurance laws to which the Company is subject, including the insurance
laws
of the State of North Carolina. In all cases, Applicable Insurance Code shall
include the rules and regulations promulgated under any of the foregoing
laws.
“Applicable
Insurance Department”
means
the insurance regulatory agencies by which the Company is subject to
supervision, including the North Carolina Department of Insurance.
“Applicable
Law”
means
any domestic federal, state or local statute, law, ordinance, rule,
administrative interpretation, regulation, order, writ, injunction, directive,
pronouncement, bulletin, judgment, decree, policy, administrative or judicial
doctrine, guideline or other requirement or principle of common law applicable
to the Buyer, the Seller or the Company or any of their respective businesses,
properties or assets, as the case may be.
“Business
Day”
means
any day other than a Saturday, Sunday or a day on which banks in New York City
are authorized by law or executive order to be closed.
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“Buyer”
has
the
meaning set forth in the preface above.
“Buyer
Insurance Approvals”
means
all Consents required to be obtained, made or given by the Buyer pursuant to
the
Applicable Insurance Codes.
“CERCLA”
shall
mean the federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
“Closing”
has
the
meaning set forth in Section
2.2
hereof.
“Closing
Date”
has
the
meaning set forth in Section
2.2
hereof.
“Closing
Surplus Statement”
has
the
meaning set forth in Section
2.4(a)
hereof.
“Code”
means
the Internal Revenue Code of 1986, as amended.
“Commutation
and Termination Amendment”
means
the Commutation and Termination Endorsement in the form attached hereto as
Annex
A
by and
between the Company and Motors to be executed immediately following the
Closing.
“Company”
has
the
meaning set forth in the first Recital of this Agreement.
“Company
Books and Records”
has
the
meaning set forth in Section
5.7(a)
hereof.
“Company
Claim”
means
any Action brought against the Company relating to or arising from the conduct
or operations of the Company that occurred prior to the Closing
Date.
“Company
Insurance Policies”
has
the
meaning set forth in Section
3.18
hereof.
“Company
Materials”
means
(i) all previously prepared memoranda of law and all analyses and materials
related to a Company Claim, (ii) all agreements, Contracts and other memoranda,
including preparatory materials, drafts and all oral and written communications
pertaining to a Company Claim, and (iii) any documents or other information
relating to a Company Claim that would otherwise be protected by any applicable
privilege or work product protection from disclosure to third parties other
than
the parties hereto. For the avoidance of doubt, Company Materials shall not
include any information relating to a party which is or becomes publicly
available other than through a breach of this Agreement by the disclosing
party.
“Consents”
has
the
meaning set forth in Section
3.4
hereof.
“Contemplated
Transactions”
means
the transactions contemplated under this Agreement and the Ancillary
Agreements.
“Contracts”
means
any written, oral or other contract, subcontract, agreement, undertaking,
understanding, option, warranty, purchase order, license, sublicense, indenture,
note, debenture, bond, loan, policy, instrument, lease, mortgage, plan, or
legally binding commitment or arrangement of any nature.
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“Damages”
means
all costs, damages, disbursements or expenses (including, but not limited to
interest and reasonable legal, accounting and other professional fees and
expenses incurred in the investigation, collection, prosecution and defense
of
claims and amounts paid in settlement) that are actually imposed or otherwise
actually incurred or suffered by the indemnified Person, but shall not include
incidental, consequential, exemplary, punitive or other special damages (unless
such damages have been awarded to a third party and as to which an indemnifying
party is determined to be liable).
“Debt”
shall
mean any Liability in respect of borrowed money or guarantees of the
foregoing.
“Domiciliary
Insurance Department”
means
the North Carolina Department of Insurance.
“Employee”
means
each current and former full-time or part-time employee of the Company or its
predecessors-in-interest, including any such employee who is on disability
or
leave of absence.
“Environmental
Law”
shall
mean any federal, state or local law, statute, rule, order, directive, judgment,
Permit or regulation or the common law relating to the environment, occupational
health and safety, or exposure of persons or property to Materials of
Environmental Concern, including any statute, regulation, administrative
decision or order pertaining to: (i) the presence of or the treatment,
storage, disposal, generation, transportation, handling, distribution,
manufacture, processing, use, import, export, labeling, recycling, registration,
investigation or remediation of Materials of Environmental Concern or
documentation related to the foregoing; (ii) air, water and noise
pollution; (iii) groundwater and soil contamination; (iv) the release,
threatened release, or accidental release into the environment, the workplace
or
other areas of Materials of Environmental Concern, including emissions,
discharges, injections, spills, escapes or dumping of Materials of Environmental
Concern; (v) transfer of interests in or control of real property which may
be
contaminated; (vi) community or worker right-to-know disclosures with respect
to
Materials of Environmental Concern; (vii) the protection of wild life,
marine life and wetlands, and endangered and threatened species;
(viii) storage tanks, vessels, containers, abandoned or discarded barrels
and other closed receptacles; and (ix) health and safety of Employees and
other persons. As used above, the term “release” shall have the meaning set
forth in CERCLA.
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended, and any rules
and regulations promulgated thereunder.
“ERISA
Affiliate”
means
any person that, together with the Company, would be treated as a single
employer under Section 414 of the Code.
“Estimated
Policyholders’ Surplus”
shall
mean the Policyholders’ Surplus as of the Closing Date as estimated in good
faith by the Seller as set forth on the Estimated Surplus Statement based upon
the Company’s Policyholders’ Surplus reflected in the Company’s most recently
filed statutory financial statement prior to the Closing Date, with appropriate
adjustments for the period from the date of that financial statement until
the
Closing Date to reflect any change in the Company’s circumstances, prepared in a
manner consistent with the Company’s historical accounting practices, and to
give effect to any settlement of intercompany accounts as of the Closing Date
pursuant to Section
5.3,
in each
case to the extent Policyholders’ Surplus shall have been changed
thereby.
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“Estimated
Surplus Statement”
shall
mean the Seller’s estimate of Policyholders’ Surplus as of the Closing Date
delivered by the Seller to the Buyer not less than two (2) Business Days prior
to the Closing Date.
“Fronting
Agreement”
means
that certain Fronting Agreement of even date herewith by and among Buyer, the
Company, Motors Insurance Corporation, MIC Property and Casualty Insurance
Corporation, Integon National Insurance Company and Integon Preferred Insurance
Company.
“FRR
Agreement”
means
the Fronting and Renewal Rights Agreement in the form attached hereto as
Annex
B
by and
between the Company and Motors to be executed immediately following the
Closing.
“GMAC
Re SPA”
means
that certain Securities Purchase Agreement by and among the Buyer, Maiden
Holdings, Ltd. and GMACI Holdings LLC pursuant to which the Buyer will acquire
all of the outstanding membership interests of GMAC Re LLC.
“Governmental
Entity”
means
any foreign, domestic, federal, territorial, state or local U.S. or non-U.S.
governmental authority, quasi-governmental authority, instrumentality, court
or
government, self-regulatory organization, commission, tribunal or organization
or any political or other subdivision, department, branch or representative
of
any of the foregoing.
“Insurance
Approvals”
means
the Buyer Insurance Approvals and the Seller Insurance Approvals.
“Insurance
License”
has
the
meaning set forth in Section
3.14
hereof.
“Intellectual
Property Right”
has
the
meaning set forth in Section
3.15(a)
hereof.
“Intercompany
Agreement”
shall
mean any agreement between (x) the Company, on the one hand, and (y) the Seller
or any of its Affiliates, on the other hand.
“Investment
Broker”
has
the
meaning set forth in Section
3.22
hereof.
“IRS”
means
the U.S. Internal Revenue Service.
“Liabilities”
means
any and all debts, losses, liabilities, offsets, claims, damages, fines,
commitments, obligations, payments and accounts payable (including, without
limitation, those arising out of any award, demand, assessment, settlement,
judgment or compromise relating to any Action), and accruals for out-of-pocket
costs and expenses (including, without limitation, reasonable attorneys’ fees
and expenses incurred in investigating, preparing or defending any Action)
of
any kind or nature whatsoever, whether absolute, accrued, contingent or other,
and whether known or unknown.
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“Lien”
means
any mortgage, deed of trust, pledge, hypothecation,
assignment, security interest, lien (statutory or otherwise), preference,
priority, charge or other encumbrance, adverse claim (whether pending or, to
the
knowledge of the Person against whom the adverse claim is being asserted,
threatened) or restriction of any kind affecting title or resulting in an
encumbrance against Property, real or personal, tangible or intangible, or
a
security interest of any kind, including, without limitation, any easement,
servitude, encroachment, conditional sale or other title retention agreement,
any right of first refusal on real property, and any filing of or agreement
to
give any financing statement under the Uniform Commercial Code (or equivalent
statute) of any jurisdiction (other than a financing statement which is filed
or
given solely to protect the interest of a lessor).
“Material
Adverse Effect”
means
(a) with respect to the Company, any change, effect, event or occurrence
resulting in a material adverse effect on (i) the business, financial condition
or results of operations of the Company, taken as a whole or (ii) the ability
of
the Company to enter into new reinsurance contracts, other than in the case
of
(i) or (ii) any change, effect, event or occurrence relating to (A) the
effects of changes affecting the economy and securities markets generally;
(B) the effects of changes affecting the insurance, reinsurance and
financial services industries generally, including the general competitive
forces in the insurance and reinsurance markets and changes to Applicable Laws,
or accounting or reserving principles, practices or conventions; (C) the
announcement of the Contemplated Transactions and (D) any changes resulting
from actions or omissions of a party hereto taken with the prior written consent
of the other parties with respect to this Agreement or the other Transaction
Documents or the Contemplated Transactions; (b) with respect to the Seller,
any
change, effect, event or occurrence resulting in a material adverse effect
on
the ability of the Seller to consummate the transactions contemplated hereby
on
a timely basis and perform its obligations hereunder; and (c) with respect
to
the Buyer, any change, effect, event or occurrence resulting in a material
adverse effect on (i) the business, financial condition or results of operations
of the Buyer, taken as a whole or (ii) the ability of the Buyer to consummate
the transactions contemplated hereby on a timely basis and perform its
obligations hereunder.
“Material
Contract”
means
any Contract required to be set forth on Schedule
3.12(a) hereof.
“Material
Permit”
has
the
meaning set forth in Section
3.11(b)
hereof.
“Materials”
means
(i) all previously prepared memoranda of law and all analyses and materials
related to a Seller Third-Party Claim; (ii) all agreements, Contracts and other
memoranda, including preparatory materials, drafts and all oral and written
communications pertaining to a Seller Third-Party Claim; and (iii) any documents
or other information relating to a Seller Third-Party Claim that would otherwise
be protected by any applicable privilege or work product protection from
disclosure to third parties other than the parties hereto. For the avoidance
of
doubt, Materials shall not include any information relating to a party which
is
or becomes publicly available other than through a breach of this Agreement
by
the disclosing party.
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“Materials
of Environmental Concern”
shall
mean any: pollutants, contaminants or hazardous substances (as such terms are
defined under CERCLA), pesticides (as such term is defined under the Federal
Insecticide, Fungicide and Rodenticide Act), solid wastes and hazardous wastes
(as such terms are defined under the Resource Conservation and Recovery Act),
chemicals, other hazardous, radioactive or toxic materials, oil, petroleum
and
petroleum products or derivatives (and fractions thereof), or any other material
(or article containing such material) listed or subject to regulation under
any
law, statute, rule, regulation, order, Permit, or directive due to its
potential, directly or indirectly, to harm the environment or the health of
humans or other living beings.
“Maximum
Indemnification Amount”
has
the
meaning set forth in Section
7.3(a)
hereof.
“Motors”
means
Motors Insurance Corporation, a Michigan domiciled property and casualty
insurance company.
“Notice
of Objection”
has
the
meaning set forth in Section
2.4(b)
hereof.
“Ordinary
Course of Business”
means
the manner in which the Company has conducted its business and operations prior
to the Closing Date.
“Overlap
Period”
has
the
meaning set forth in Section
5.8(b)
hereof.
“Partial
Commutation and Termination Amendment”
means
the Partial Commutation and Termination Amendment in the form attached hereto
as
Annex
C
by and
among the Company, Integon Indemnity Corporation, Integon General Insurance
Corporation, New South Insurance Company, Integon Preferred Insurance Company,
Integon National Insurance Company, Integon Casualty Insurance Company and
Motors to be executed immediately following the Closing.
“Permits”
means
all licenses, certificates of authority, permits, orders, Consents, approvals,
registrations, authorizations, qualifications and filings under any applicable
federal, state, municipal, local, foreign or other laws or with any Governmental
Entities.
“Permitted
Liens”
means
all imperfections of title or Liens (a) that are reflected or reserved against
or disclosed on the books of the Company, (b) that arise out of Taxes or
general or special assessments not in default and payable without penalty or
interest or the validity of which is being contested in good faith by
appropriate proceedings, (c) of carriers, warehousemen, mechanics, materialmen
and other similar Persons or otherwise imposed by law incurred in the Ordinary
Course of Business for sums not yet delinquent or being contested in good faith
and for which there are adequate reserves in accordance with SAP, or (d) that
relate to deposits made in the Ordinary Course of Business in connection with
workers’ compensation, unemployment insurance and other types of social
security.
“Person”
means
an individual, corporation, partnership, association, joint stock company,
limited liability company, Governmental Entity, trust, joint venture, labor
union, estate, unincorporated organization, private agency or other
entity.
“Plan”
means
any “employee benefit plan” (as such term is defined in section 3(3) of ERISA),
and any other employment, consulting, severance, change in control, retention,
retirement, pension, profit-sharing, thrift, savings, target benefit, stock
ownership, cash or deferred, deferred or incentive compensation, bonus, stay
bonus, stock option, stock purchase, phantom stock, stock appreciation, other
equity-based, change in control, medical, dental, vision, cafeteria (Section
125
plan), psychiatric counseling, employee assistance, vacation, sick pay,
disability or other compensation or fringe benefit plan, program, agreement
or
arrangement which is or has been maintained sponsored, contributed to, or
required to be contributed to by the Company or any ERISA Affiliate in which
any
current or former officer or Employee of the Company have participated, or
as to
which the Company has any present or contingent Liability.
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“Policyholders’
Surplus”
means
as of any date “surplus as regards policyholders” of the Company calculated in
accordance with SAP applied on a basis consistent with the Statutory Statements
of the Company.
“Pre-Closing
Taxable Period”
means
all Taxable Periods ending on or before the Closing Date and, with respect
to
any Taxable Period that includes but does not end on the Closing Date, the
portion of such period that ends on and includes the Closing Date.
“Property”
means
any real, personal or mixed property, whether tangible or
intangible.
“Property
Taxes”
means
real, personal and intangible property Taxes of the Company.
“Purchase
Price”
has
the
meaning set forth in Section
2.1
hereof.
“Regulatory
Body Matters”
means
any proceeding, investigation or inquiry, whether formal or informal, or Action
involving or undertaken by any Governmental Entity including without limitation
the United States Securities and Exchange Commission, any state attorney general
office or any state insurance department.
“Reinsurance
Agreement”
means
the Quota Share Reinsurance Agreement in a form and pursuant to terms mutually
acceptable to parties by and between the Company and Motors to be executed
immediately following the Closing.
“Reinsurance
Contracts”
means
all Contracts, treaties, facultative certificates, policies or other
arrangements, to which the Company is a party or by which the Company is bound
or subject, providing for ceding or assumption of reinsurance, excess insurance
or retrocession, including, without limitation, all reinsurance policies, and
retrocession agreements, in each case as such Contract, treaty, facultative
certificate, policy or other arrangement may have been amended, modified or
supplemented irrespective of how such arrangement is accounted for.
“Representatives”
has
the
meaning set forth in Section
5.2(a).
“SAP”
means
the applicable statutory accounting practices prescribed or permitted by the
Domiciliary Insurance Department.
“Seller”
has
the
meaning set forth in the preface above.
“Seller
Insurance Approvals”
means
all Consents required to be obtained, made or given by the Seller or the Company
pursuant to the Applicable Insurance Codes.
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“Seller
Third-Party Claim”
means
any Action brought against the Seller relating to or arising from the conduct
or
operations of the Company that occurred prior to the Closing Date.
“Seller’s
Knowledge”
and,
with a correlative meaning, “Knowledge of Seller” means actual knowledge of Xxxx
Xxxx, Xxxxx Xxxxxx and Xxxxxx Xxxxx, after reasonable inquiry.
“Shares”
has
the
meaning ascribed to it in the first Recital of this Agreement.
“SRS
Business”
has
the
meaning set forth in the Fronting Agreement.
“Statutory
Statements of the Company”
means
the annual statements of the Company, as filed with its Domiciliary Insurance
Department, for the year ended December 31, 2007 and the quarterly statements
of
the condition and affairs of the Company, as filed with its Domiciliary
Insurance Department, for the quarterly periods ended March 31, 2008 and June
30, 2008.
“Subsequent
Period Financial Statement”
has
the
meaning set forth in Section
5.11(a)
hereof.
“Subsidiary”
of
any
Person means any corporation, partnership, joint venture or other entity in
which such Person (a) owns, directly or indirectly, 50% or more of the
outstanding voting securities or equity interests, or (b) has the right to
designate a majority of its board of directors or similar governing body or
to
direct the management of such corporation, limited liability company,
partnership, joint venture or other entity.
“Surplus
or Excess Lines Qualified”
or
“Surplus
or Excess Lines Qualification”
means
(i) with respect to those United States jurisdictions which maintain a list
of
insurance companies which are approved, qualified or eligible to write insurance
coverage on a “surplus lines” or “excess lines” basis, as those terms are
commonly understood in the United States insurance industry, the inclusion
of
the Company on such list or written confirmation from the insurance department
of such United States jurisdiction that the Company will appear in the next
publication of such list; (ii) with respect to those United States jurisdictions
in which a surplus lines association or excess lines association maintains
a
list of insurance companies approved, qualified or eligible to write insurance
coverage on a surplus lines or excess lines basis, the inclusion of the Company
on such list or the written confirmation from the surplus lines association
or
excess lines association that the Company will appear in the next publication
of
such list; and (iii) with respect to the United States jurisdictions in which
the surplus lines brokers or excess lines brokers are responsible for
determining the eligibility of insurance companies to write insurance coverage
on a surplus lines or excess lines basis, the general acceptance of the Company
by such brokers.
“Tax”
and
“Taxes”
mean
(a) all taxes (whether U.S. federal, state or local or foreign) based upon
or
measured by income and any other tax whatsoever, including, without limitation,
gross receipts, profits, sales, use, occupation, value added, ad valorem,
transfer, franchise, withholding, payroll, employment, excise, premium or
Property Taxes, together with any interest, penalties or additions to tax
imposed with respect thereto, (b) any obligations under any agreements or
arrangements with respect to any Taxes described in clause (a), and (c) any
transferee or secondary Liability or joint or several Liability in respect
of
any amounts described in clause (a) imposed by law or as a result of being
a
member of any affiliated, consolidated, combined, unitary or similar
group.
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“Tax
Claim”
means
any claim, assessment or proceeding related to Taxes.
“Tax
Return”
means
all returns, reports, elections, estimates, declarations, information statements
and other forms and documents (including all schedules, exhibits, and other
attachments thereto) relating to, and required to be filed or maintained in
connection with the calculation, determination, assessment or collection of,
any
Taxes (including estimated Taxes).
“Taxable
Period”
means
any taxable year or any other period that is treated as a taxable year with
respect to which any Tax may be imposed under any statute, rule or
regulation.
“Taxing
Authority”
means
any federal, state, local or foreign governmental authority, quasi-governmental
authority, instrumentality or political or other subdivision, department or
branch of any of the foregoing, with the legal authority to impose, assess
or
collect Taxes.
“Threshold”
has
the
meaning set forth in Section
7.3(a)
hereof.
“WARN
Act”
means
the Worker Adjustment and Retraining Notification Act of 1988, as
amended.
ARTICLE
II
PURCHASE
AND SALE OF THE SHARES
2.1 Purchase
and Sale of the Shares.
Upon
the terms and subject to the conditions set forth in this Agreement, the Buyer
agrees to purchase, acquire and accept from the Seller, and the Seller agrees
to
sell, convey, transfer, assign, and deliver to the Buyer, the Shares, free
and
clear of all Liens for a purchase price equal to Three Million Two Hundred
Thousand Dollars ($3,200,000) plus that amount in U.S.
dollars
equal to the Policyholders’ Surplus as of the Closing Date (the “Purchase
Price”).
2.2 The
Closing.
Subject
to the satisfaction or waiver of all of the conditions to closing set forth
in
Article VI, the closing (the “Closing”)
of the
purchase and sale of the Shares hereunder shall take place at the offices of
the
Xxxxxxx Xxxxxx Xxxxxx & Dodge LLP, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000 at 10:00 a.m., Eastern Standard Time, on the fifth Business Day following
the date on which all of the conditions set forth in Article VI (other than
those conditions that are contemplated to be satisfied by the respective parties
at the Closing itself) have been satisfied or waived, or at such other time
or
place as may be mutually agreed upon by the parties hereto. The date on which
the Closing occurs is referred to herein as the “Closing
Date.”
All of
the Contemplated Transactions under this Agreement and the Ancillary Agreements
shall be deemed to be consummated as of 12:01 a.m. Eastern Standard Time on
the
Closing Date and all actions taken at Closing shall be deemed to have occurred
simultaneously and shall be deemed effective as of the dates and times specified
in this Agreement or the Ancillary Agreements.
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2.3 Deliveries
at the Closing.
(a) At
the
Closing, the Seller shall deliver to the Buyer
(i) A
certificate representing the Shares, free and clear of all Liens (other than
restrictions on transfer under federal and state securities laws), duly endorsed
for transfer or accompanied by duly executed stock powers in favor of the Buyer
with all necessary stock transfer tax stamps affixed thereto;
(ii) The
written resignation of all officers and directors of the Company;
(iii) A
certificate complying with the Code and the Treasury Regulations, in form and
substance reasonably satisfactory to the Buyer and executed under penalties
of
perjury, certifying that the Seller is not a “foreign person” as defined in
Section 1445 of the Code;
(iv) The
written consent of the parties identified on Schedule
3.4;
(v) All
Company Books and Records, including, without limitation, all minute books,
employment records, financial and accounting records and other files of the
Company;
(vi) A
certificate, executed and acknowledged by the Seller, in a form and substance
reasonably satisfactory to the Buyer attaching copies of resolutions duly
adopted by the board of directors of the Seller authorizing the execution and
performance of this Agreement and the other documents contemplated hereby and
the transactions contemplated hereby;
(vii) A
certificate, executed and acknowledged by the Seller, in form and substance
satisfactory to the Buyer and its counsel, attesting to the truth of the matters
following:
(A) All
representations and warranties of the Seller contained in this Agreement shall
have been true and correct when made and all such representations and warranties
are also true and correct in all material respects with the same force and
effect as though such representations and warranties had been made at and as
of
the Closing Date except as affected by actions taken after the date of this
Agreement with the prior written consent of the Buyer, and except for
representations and warranties made as of a specified date, which shall be
true
and correct in all material respects as of such specified date, it being
understood that, for purposes of determining the accuracy of such
representations and warranties pursuant to this Section
2.3(a)(vii)(A),
all
qualifications based on the words “material” or similar phrases contained in
such representations and warranties shall be disregarded; and
(B) The
Seller and the Company shall have performed and complied in all material
respects with all of the covenants and agreements required by or pursuant to
this Agreement to be performed or complied with by them on or prior to the
Closing Date, it being understood that, for purposes of determining the
performance of such covenants pursuant to this Section
2.3(a)(vii)(B),
all
qualifications based on the words “material” or similar phrases contained in
such covenants shall be disregarded.
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(viii) Certificates,
obtained by the Seller, dated as of a date not more than twenty (20) days before
the Closing Date certified by the Secretary of State of Delaware as to the
corporate existence and good standing of the Seller and the Insurance
Commissioner of the State of North Carolina as to the corporate existence and
good standing of the Company;
(ix) Evidence
that shall be reasonably acceptable to the Buyer of the appointment as sole
signatories on each deposit, securities, brokerage, investment or other account
of the Company of the Persons designated by the Buyer in writing to the Seller
at least five (5) Business Days prior to the Closing;
(x) The
Commutation and Termination Endorsement duly executed by Motors and effective
in
accordance with its terms;
(xi) The
Partial Commutation and Termination Amendment duly executed by the Motors and
the other Affiliates of the Motors that are parties thereto and effective in
accordance with its terms;
(xii) The
FRR
Agreement duly executed by Motors and effective in accordance with its
terms;
(xiii) The
Reinsurance Agreement duly executed by Motors and effective in accordance with
its terms;
(xiv) a
schedule of all passwords, pass codes or similar secure authorizations related
to the operation of the business of the Company or its websites.
(b) At
the
Closing, the Buyer shall deliver to the Seller:
(i) Three
Million Two Hundred Thousand Dollars ($3,200,000) plus the Estimated
Policyholders’ Surplus by wire transfer of immediately available funds to an
account or accounts designated by the Seller in a written notice delivered
to
the Buyer not later than five (5) Business Days prior to the Closing
Date;
(ii) a
certificate, executed and acknowledged by the Buyer, in a form and substance
reasonably satisfactory to the Seller attaching copies of resolutions duly
adopted by the board of directors of the Buyer authorizing the execution and
performance of this Agreement and the other documents contemplated hereby and
the transactions contemplated hereby;
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(iii) A
certificate, executed and acknowledged by the Buyer, in form and substance
satisfactory to the Seller and its counsel, attesting to the truth of the
matters following:
(A) All
representations and warranties of the Buyer contained in this Agreement shall
have been true and correct when made and all such representations and warranties
are also true and correct in all material respects with the same force and
effect as though such representations and warranties had been made at and as
of
the Closing Date except as affected by actions taken after the date of this
Agreement with the prior written consent of the Seller, and except for
representations and warranties made as of a specified date, which shall be
true
and correct in all material respects as of such specified date, it being
understood that, for purposes of determining the accuracy of such
representations and warranties pursuant to this Section
2.3(b)(iii)(A),
all
qualifications based on the words “material” or similar phrases contained in
such representations and warranties shall be disregarded;
(B) The
Buyer
shall have performed and complied in all material respects with all of the
covenants and agreements required by or pursuant to this Agreement to be
performed or complied with by it on or prior to the Closing Date, it being
understood that, for purposes of determining the performance of such covenants
pursuant to this Section
2.3(b)(iii)(B),
all
qualifications based on the words “material” or similar phrases contained in
such covenants shall be disregarded.
(iv) The
Commutation and Termination Endorsement duly executed by the Company and
effective in accordance with its terms;
(v) The
Partial Commutation and Termination Amendment duly executed by the Company
and
effective in accordance with its terms
(vi) The
FRR
Agreement duly executed by the Company and effective in accordance with its
terms;
(vii) The
Reinsurance Agreement duly executed by the Company and effective in accordance
with its terms;
(viii) A
General
Agency Agreement with GMAC Insurance Agency LLC pursuant to terms to be agreed
by the Buyer and GMAC Insurance Agency LLC;
(ix) A
General
Agency Agreement with GMAC Risk Services, Inc. pursuant to terms to be agreed
by
the Buyer and GMAC Risk Services, Inc.;
(x) all
other
documents and instruments required hereunder to be delivered by the Buyer to
the
Seller at the Closing.
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2.4 Policyholder’s
Surplus Adjustment.
(a) Within
sixty (60) days after the Closing Date, the Buyer shall deliver to the Seller
a
statement (the “Closing Surplus Statement”), setting forth the Buyer’s
determination of the Policyholders’ Surplus as of the Closing Date.
(b) After
the
receipt by the Seller of the Closing Surplus Statement and until such time
as
the final Policyholders’ Surplus as of the Closing Date is determined in
accordance with this Section
2.4,
the
Seller and its authorized Representatives shall have full access during
reasonable business hours upon prior written notice to the working papers of
the
Buyer and its Representatives relating to the Closing Surplus Statement and
the
calculations set forth thereon. Unless the Seller, within thirty (30) days
after
receipt of the Closing Surplus Statement, gives the Buyer a notice objecting
thereto and specifying, in detail, the basis for each such objection and the
amount in dispute (“Notice of Objection”), such Closing Surplus Statement and
the Policyholders’ Surplus as of the Closing Date reflected therein shall be
binding upon the Buyer and the Seller and the applicable payment required
pursuant to subsection (c) below shall be made. Any Notice of Objection shall
specify (x) in detail the nature and amount of any disagreement so asserted,
and
(y) only include disagreements based on the differences between the Estimated
Surplus Statement and the Closing Surplus Statement and the Policyholders’
Surplus as of the Closing Date. If a timely Notice of Objection is received
by
the Buyer, then the Closing Surplus Statement (as revised in accordance with
clause (1) or (2) below) shall become final and binding upon the parties hereto
on the earlier of (1) the date the Seller and the Buyer resolve in writing
any
differences they have with respect to any matter specified in the Notice of
Objection and (2) the date any matters properly in dispute are finally resolved
in writing by the Accounting Firm (as defined below). During the ninety (90)
days immediately following the delivery by the Seller to the Buyer of a Notice
of Objection, the Seller and the Buyer shall seek in good faith to resolve
in
writing any differences that they may have with respect to any matter specified
in the Notice of Objection. At the end of such ninety (90) day period, the
Seller and the Buyer shall submit to an accounting firm jointly selected by
the
Seller’s accountants and the Buyer’s accountants (the “Accounting Firm”) for
review and resolution of any and all matters (but only such matters) which
remain in dispute. The Buyer and the Seller shall instruct their respective
accountants to select the Accounting Firm in good faith within ten (10) days.
If
either the Buyer’s or the Seller’s accountants shall not be willing to select
the Accounting Firm within such ten (10) day period, the other accountant shall
select the accounting firm. If the Buyer’s or the Seller’s accountants cannot
agree upon the Accounting Firm within such ten (10) day period, within an
additional five (5) days, they shall each designate an Accounting Firm who
has
not performed work in the last two years for either the Seller or the Buyer
and
the Accounting Firm shall be selected by lot from those two accounting firms.
If
only one of the Seller’s and the Buyer’s accountants shall so designate a name
of an accounting firm for selection by lot, such accounting firm so designated
shall be the Accounting Firm. The Accounting Firm so selected shall be
instructed to review and resolve any and all matters (but only such matters)
which remain in dispute and which were properly included in the Notice of
Objection. The Buyer and the Seller shall instruct the Accounting Firm to make
a
final determination of the Policyholders’ Surplus as of the Closing Date. The
Buyer and the Seller will cooperate with the Accounting Firm during the term
of
its engagement. The Buyer and the Seller shall instruct the Accounting Firm
not
to assign a value to any item in dispute greater than the greatest value for
such item assigned by the Buyer, on the one hand, or the Seller, on the other
hand, or less than the smallest value for such item assigned by the Buyer,
on
the one hand, or the Seller, on the other hand. The Buyer and the Seller shall
also instruct the Accounting Firm to make its determination based solely on
presentations by the Buyer and the Seller (i.e., not on the basis of an
independent review). The Closing Surplus Statement and the Policyholders’
Surplus as of the Closing Date reflected therein shall become final and binding
on the parties hereto on the date the Accounting Firm delivers its final
resolution in writing to the Buyer and the Seller (which final resolution shall
be requested by the parties hereto to be delivered not more than thirty (30)
days following submission of such disputed matters). All of the fees and
expenses of the Accounting Firm pursuant to this Section
2.4(b)
shall be
borne equally by the Seller and the Buyer.
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(c) If
the
Policyholders’ Surplus as of the Closing Date (as determined pursuant to
Section
2.4(b))
exceeds
the Estimated Policyholders’ Surplus, then the Buyer shall pay the Seller the
amount of such excess, as directed by the Seller. If the Policyholders’ Surplus
as of the Closing Date (as determined pursuant to Section
2.4(b))
is less
than the Estimated Policyholders’ Surplus, then the Seller shall pay the Buyer
such shortfall as directed by the Buyer. Payments made pursuant to this
Section
2.4(c)
shall be
made by wire transfer of immediately available funds as follows: (i) if no
Notice of Objection is delivered by the Seller, such amount shall be paid within
three (3) Business Days of the earlier of the expiration of the thirty (30)
day
period for delivery of such Notice of Objection and the date of delivery by
the
Seller of a joint notice that the Closing Statement will be accepted without
objection; or (ii) if Notice of Objection is delivered by the Seller, (x) any
net undisputed amount due from the Seller to the Buyer or from the Buyer to
the
Seller (as the case may be) shall be paid within three (3) Business Days after
delivery of such Notice of Objection, and (y) the remaining amount, if any,
due
from the Seller to the Buyer or the Buyer to the Seller (as the case may be)
shall be paid within three (3) Business Days after the date all disputed items
are finally resolved pursuant to Section
2.4(b).
Any
amounts not paid when required pursuant to this Section
2.4(c)
shall
bear interest compounded annually from the required date of payment to the
date
of actual payment at the prime rate of interest announced publicly by Citibank
N.A. in New York, New York from time to time as its prime rate.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE SELLER
The
Seller hereby represents and warrants to the Buyer as follows:
3.1 Organization
of the Seller.
The
Seller is a corporation duly organized, validly existing and in good standing
under the laws of State of Delaware.
3.2 Authorization,
Validity and Enforceability.
The
Seller has all requisite corporate power and authority to execute and deliver
this Agreement and the Ancillary Agreements, to perform its obligations
hereunder and to consummate the Contemplated Transactions, including, without
limitation, the sale of the Shares. The execution, delivery and performance
by
the Seller of this Agreement and the Ancillary Agreements and the consummation
of the Contemplated Transactions by the Seller have been duly and validly
authorized by all necessary corporate action on the part of the Seller and
no
other corporate proceeding on the part of the Seller is necessary to authorize
the execution, delivery and performance of this Agreement or the consummation
of
any of the Contemplated Transactions. This Agreement and the Ancillary
Agreements have been duly executed and delivered by the Seller and constitute
the legal, valid and binding obligations of the Seller, enforceable against
the
Seller in accordance with their terms, subject to the effect of receivership,
conservatorship and subject to the effect of bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to or affecting the enforcement of creditors’ rights generally and subject to
general principles of equity (regardless of whether enforcement is sought in
a
proceeding at law or in equity).
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3.3 No
Conflicts.
Assuming compliance with the matters referred to in Section
3.4
below,
except as set forth in Schedule
3.3,
the
execution, delivery and performance by the Seller of this Agreement and each
Ancillary Agreement to which it is a party and the consummation of the
Contemplated Transactions or any Ancillary Agreement do not and will not
conflict with, result in any breach or violation of, constitute a default under
(or an event that with the giving of notice or the lapse of time or both would
constitute a default under), or give rise to any right of termination or
acceleration of any right or obligation of the Seller or the Company under,
or
result in the creation or imposition of any Lien upon any assets or Properties
(including, without limitation, the Shares) of the Seller or the Company by
reason of the terms of (a) the certificate or articles of incorporation or
bylaws of the Seller or the Company; (b) any Contract to which the Seller or
the
Company is a party or by or to which either of them or their assets or
Properties (including, without limitation, the Shares) may be bound or subject;
(c) any applicable order, writ, judgment, injunction, award, decree, law,
statute, ordinance, rule or regulation of any Governmental Entity; or (d) any
other Permit of the Seller or the Company.
3.4 Seller
Consents and Approvals.
Except
as set forth in Schedule
3.4,
no
consent, approval, authorization, license or order of, registration or filing
with, or notice to, any Governmental Entity or any other Person (collectively,
“Consents”)
is
necessary to be obtained, made or given by the Seller or the Company in
connection with the execution and delivery by the Seller of this Agreement
or
the Ancillary Agreements, the performance by the Seller of its obligations
hereunder and thereunder and the consummation of the Contemplated Transactions,
other than such Consents which, if not obtained or made, could not reasonably
be
expected to have a Material Adverse Effect on the Company or a material adverse
effect on the ability of the Seller to execute and deliver this Agreement or
the
Ancillary Agreements, to perform its obligations hereunder or to consummate
the
Contemplated
Transactions
3.5 Organization
and Qualification of the Company; No Subsidiaries.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of North Carolina as a property and casualty insurance company
and has all requisite corporate power and authority to own its assets or
Properties and to conduct its business as currently being conducted. The Company
is duly qualified and in good standing as a foreign corporation in all
jurisdictions in which the nature of its business or the ownership of its
Properties makes such qualification necessary, except where the lack of such
qualification or good standing would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
The
Company has no Subsidiaries and no equity or other ownership interest of any
kind in any other Person.
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3.6 Capitalization
of the Company.
(a)
Schedule
3.6
sets
forth the designation, par value and the number of authorized, issued and
outstanding Shares of capital stock of the Company. The issued and outstanding
capital stock of the Company consists solely of the Shares. Except as set forth
in Schedule
3.6,
no
other class of equity securities, preferred stock, bonds, debentures, notes,
other evidences of indebtedness for borrowed money or other securities of any
kind of the Company (except for the Shares) is authorized, issued or
outstanding. All of the Shares are duly authorized, validly issued, fully paid
and non-assessable.
(b) There
are
no subscriptions, options, warrants, calls, preemptive rights or other rights
to
purchase or otherwise receive, nor are there any securities or instruments
of
any kind convertible into or exchangeable for, any capital stock of the Company.
Neither the Company nor the Seller is a party to any agreement with a third
party (other than the Buyer) which places any restriction upon, or which creates
any voting trust, proxy, or other agreement with respect to, the voting,
purchase, redemption, acquisition or transfer of the Shares.
3.7 Title
to Shares.
The
Seller has good and valid title to each of the Shares, free and clear of any
Lien.
3.8 Financial
Statements.
(a)
The
Seller has heretofore delivered to the Buyer true and complete copies of the
Statutory Statements of the Company.
(b) The
Statutory Statements of the Company were prepared and the Subsequent Period
Financial Statements will be prepared in accordance with SAP and the Applicable
Insurance Code, consistently applied throughout the periods involved (except
as
may be indicated in the notes thereto regarding the adoption of new accounting
policies), and present fairly, in all material respects, in accordance with
SAP
and the Applicable Insurance Code, the statutory financial position of the
Company at the respective dates thereof and the results of operations of the
Company, for the respective periods then ended, except that the Statutory
Statements of the Company have not been, and any Subsequent Period Financial
Statement will not have been, audited and are or will be subject to normal
recurring year-end audit adjustments. The Statutory Statements of the Company
complied and the Subsequent Period Financial Statements will comply in all
material respects with SAP and the Applicable Insurance Code, and were or will
be complete and correct in all material respects when filed, and no material
deficiency has been asserted in writing with respect to any of the Statutory
Statements of the Company by any Applicable Insurance Department.
3.9 Absence
of Changes.
(a) Except
as
set forth in Schedule
3.9
or any
other schedule hereto and except for the Contemplated Transactions, since
December 31, 2007, there has not occurred a Material Adverse Effect on the
Company.
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(b) Except
as
set forth in Schedule
3.9,
or any
other Schedule hereto and except for the Contemplated Transactions, between
December 31, 2007, through the date hereof, the Company has operated its
businesses in the Ordinary Course of Business.
(c) Without
limiting the foregoing, except as set forth in Schedule
3.9,
or any
other Schedule hereto and except for the Contemplated Transactions, none of
the
Company, the Seller or any Person acting on behalf of the Company or the Seller
has taken any of the following actions since December 31, 2007:
(i) sold
(or
granted any warrants, options or other rights to purchase) any of the Shares,
or
otherwise issued any other interests in the Company;
(ii) acquired
any assets or Property of the Company for a cost in excess of Fifty Thousand
Dollars ($50,000), individually or in the aggregate;
(iii) created,
incurred or assumed any indebtedness relating to or affecting the Company other
than accounts payable incurred in the Ordinary Course of Business;
(iv) made
any
loans, advances or capital contributions to or investments in any Person
relating to or affecting the Company;
(v) materially
changed billing, payment or credit practices of the Company with any insurer,
reinsurer, producer, agent, broker or intermediary or changed the timing of
rendering invoices;
(vi) entered
into any material Lease or contract, or terminated, modified or changed in
any
material respect any contract, relating to or affecting the Company other than
in the Ordinary Course of Business or as contemplated pursuant to this Agreement
or the Ancillary Agreements;
(vii) entered
into any employment, independent contractor, severance, termination or other
compensation agreement with any Employee or consultant of the
Company;
(viii) increased
the rate or terms of compensation of, or entered into any new, or extended
the
term of any existing, bonus or incentive agreement or arrangement with, any
Employee or consultant of the Company;
(ix) adopted
any new Plan or amendment to increase the compensation or benefits payable
under
any of the Plans;
(x) induced
any Employee or consultant of the Company to leave his or her employment or
terminate his or her engagement in order to accept employment or an engagement
with the Seller or any of its Affiliates, or acted to otherwise adversely affect
the relations of the Company with any employee or consultant to the detriment
of
the Company;
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(xi) entered
into any material transaction, agreement, contract or understanding with an
Affiliate or altered the terms of any material transaction, agreement, contract
or understanding with any Affiliate;
(xii) suffered
any material breach or waived any rights of the Company arising under or in
connection with any of the assets other than in the Ordinary Course of
Business;
(xiii) entered
into any merger, consolidation, recapitalization or other business combination
or reorganization;
(xiv) changed
any of the Company’s methods of accounting or accounting systems, policies or
practices;
(xv) without
limiting the foregoing, entered into any material transaction (except as
expressly contemplated by this Agreement) affecting any of the assets or the
operations, prospects or financial condition of the Company other than in the
Ordinary Course of Business; or
(xvi) entered
into any oral or written agreement, contract, commitment, arrangement or
understanding with respect to any of the foregoing.
3.10 Legal
Proceedings.
Except
as
set forth in Schedule
3.10,
there
is no civil, criminal, administrative or other Action pending or, to the
Seller’s Knowledge, threatened against the Company or any of its assets or
Properties or against the Shares, by or before any court, other Governmental
Entity or arbitrator, which has or could reasonably be expected to have a
Material Adverse Effect. Except as set forth in Schedule
3.10,
there
is no outstanding order, writ, judgment, injunction, fine, award, determination
or decree of any court, other Governmental Entity or arbitrator against the
Company or any of its assets or Properties which has had or could reasonably
be
expected to have a Material Adverse Effect. Except as disclosed in Schedule
3.10,
there
is no Action pending or, to the Seller’s Knowledge, threatened against or
affecting the Seller or the Company that (i) seeks to restrain or enjoin the
consummation of any of the Contemplated Transactions or (ii) has or could
reasonably be expected to materially impair the ability of the Seller to
consummate any of the Contemplated Transactions.
3.11 Compliance
with Laws; Permits.
(a) Except
as
set forth in Schedule
3.11,
the
Company is in compliance with, is not in default under and has received no
written notice from any Governmental Entity and the Seller has no Knowledge
that
it is not in compliance with or default under (i) all Applicable Laws; (ii)
all
applicable rules, ordinances, resolutions, codes, edicts, regulations, rulings,
requirements, orders, Consents, approvals, writs, judgments, injunctions,
awards, determinations and decrees issued, enacted, adopted, promulgated,
implemented or otherwise put into effect by any court, other Governmental Entity
or arbitrator; (iii) the Insurance Licenses; and (iv) its Permits (other than
the Insurance Licenses), except, with respect to clauses (i) - (iv), where
noncompliance or default would not reasonably be expect to have, individually
or
in the aggregate, a Material Adverse Effect on the Company.
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(b) The
Company has all Permits necessary for the ownership of its assets and Properties
and to conduct its business (a “Material
Permit”),
and
all such Material Permits are valid and in full force and effect, except where
the failure by the Company to have any Permit would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on the
Company.
(c) To
the
Seller’s Knowledge, since January 1, 2003, the Company has not engaged in any
corrupt business practices or price fixing, bid rigging or any other
anticompetitive activity of any type.
(d) Since
January 1, 2003 neither the Company nor its directors or officers, nor to the
Seller’s Knowledge any Employees or agents, has (i) directly or indirectly given
or agreed to give any illegal gift, contribution, payment or similar benefit
to
any supplier, customer, governmental official or employee or other Person who
was, is or may be in a position to help or hinder the Company (or assist in
connection with any actual or proposed transaction) or made or agreed to make
any illegal contribution, or reimbursed any illegal political gift or
contribution made by any other Person, to any candidate for federal, state,
local or foreign public office (x) which could reasonably be expected to subject
the Company, the Buyer or the business to any damage or penalty in any civil,
criminal or governmental litigation or proceeding or (y) the non-continuation
of
which has had or could reasonably be expected to have a Material Adverse Effect
on the Company or (ii) established or maintained any unrecorded fund or asset
or
made any false entries on any books or records for any purpose.
3.12 Contracts.
(a) Schedule
3.12(a),
contains a true and complete list of all of the following Contracts in effect
or
pursuant to which any party thereto has any obligations (excluding policies
of
insurance written by the Company, Plans and Company Insurance Policies which
are
the subject of Sections
3.16
and
3.18,
respectively) to which the Company is a party:
(i) material
partnership or joint venture Contracts;
(ii) Contracts
containing any covenant of the Company not to compete with any Person or in
any
location or geographic area or any limitation or restriction on the ability
of
the Company to engage in any line of business or the manner in which Company
conducts business;
(iii) Contracts
relating to the borrowing of money, or the direct or indirect guaranty of any
obligation for borrowed money by the Company, or Contracts to service the
repayment of borrowed money or any other Liability in respect of indebtedness
for borrowed money of any other Person;
(iv) lease,
sublease, rental, licensing, use or similar Contracts with respect to Property
providing for annual rental, license, or use payments or the guaranty of any
such lease, sublease, rental, licensing or other Contracts;
(v) Contracts
(A) for the purchase, acquisition, sale or disposition of any assets or
Properties or the Shares or equity interests of the Company or any Person,
other
than in connection with the management of the Company’s investment portfolio in
the Ordinary Course of Business, or (B) for the grant to any Person (excluding
the Company) of any option or preferential rights to purchase any Shares, other
equity interests, assets or Properties of the Company;
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(vi) any
Contract that provides for the indemnification of any officer, director,
Employee or agent and any employment or other similar Contracts with any current
officer, director, Employee or agent;
(vii) Reinsurance
Contracts to which the Company is a party;
(viii) material
agency, broker, selling, marketing or similar Contracts;
(ix) asset
management agreements with any other Person;
(x) Contracts
under which Persons provide material information, technology products or
information technology services to the Company;
(xi) Contracts
providing for indemnification of any special purpose vehicle or other financing
entity, including off balance sheet entities;
(xii) Any
contract providing for future payments that are conditioned on, or an event
of
default as a result of, a change of control of the Company or any similar
event;
(xiii) other
material Contracts not listed above.
(b) The
Seller has heretofore delivered or made available to the Buyer true and complete
copies of all of the Material Contracts whether or not listed on Schedule
3.12(a).
Each of
such Material Contracts is a valid and binding obligation of the Company and,
to
the Seller’s Knowledge, is a valid and binding obligation of any other Person
party thereto, and is in full force and effect enforceable against the parties
thereto in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and other laws
affecting creditors’ right generally, general principles of equity and the
discretion of courts in granting equitable remedies. Except as specified in
Schedule
3.12(b),
neither
the Company nor, to the Seller’s Knowledge, any other Person party thereto, is
in breach or violation of, or default under, any Material Contract whether
or
not listed on Schedule
3.12(a),
except
for such breaches, violations and defaults that have not had and could not
reasonably be expected to have a Material Adverse Effect and, to the Knowledge
of the Seller no condition or event exists which with the giving of notice
or
the passage of time, or both, would constitute a violation or default of any
Material Contract by the Company or any other party thereto or permit the
termination, modification, cancellation or acceleration of performance of the
obligations of the Company or any other party to the Material
Contract.
3.13 Property
and Assets.
(a) The
Company does not own and has never owned any real Property and the Company
has
no leasehold interests in real Property.
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(b) The
Company has good title to, or valid and subsisting leasehold interests in,
free
of all Liens (other than Permitted Liens) all personal Property and other assets
on its books and reflected in the Statutory Statements of the Company or in
the
Subsequent Period Financial Statements, as applicable, or acquired in the
Ordinary Course of Business since December 31, 2007, which would have been
required to be reflected in the balance sheets included therein, except for
assets that have been disposed of in the Ordinary Course of Business since
December 31, 2007 or otherwise in accordance with the terms of this
Agreement.
(c) The
Company has complied in all material respects with all applicable Environmental
Laws. Other than Liabilities arising from insurance policies issued by the
Company, the Company has no Liabilities or obligations arising from the release
of any Materials of Environmental Concern into the environment. To the Knowledge
of the Seller, there have been no releases of any Materials of Environmental
Concern into the environment at or from any parcel of real Property or any
facility formerly owned, operated or controlled by the Company, or, to the
Knowledge of the Seller, any other owner, operator or lessee of such Property
or
facility.
3.14 Insurance
License and Surplus and Excess Lines Qualifications.
The
Company is licensed to do insurance business in the State of North Carolina.
The
North Carolina insurance license (the “Insurance License”) is in full force and
effect. The Company has not received a written notice of suspension or
termination with respect to such license, Seller does not have Knowledge of any
threatened suspension or termination in connection therewith, nor does Seller
have Knowledge of any event, inquiry, investigation or proceeding that would
reasonably be expected to result in such suspension or termination. Schedule
3.14(a)
contains
a true and correct list of each state in which the Company is Surplus or Excess
Lines Qualified as of the date of this Agreement. Other than as set forth in
Schedule
3.14(a),
the
Company has not received written notice of suspension or termination with
respect to any Surplus or Excess Line Qualification, Seller does not have
Knowledge of any threatened suspension or termination in connection therewith,
nor does Seller have Knowledge of any event, inquiry, investigation or
proceeding that would reasonably be expected to result in such suspension or
termination.
3.15 Intellectual
Property.
(a) Except
as
set forth in Schedule
3.15,
the
Company owns or possesses, or has valid, enforceable rights or licenses to
use,
the patents, patent applications, trademarks, trademark applications, service
marks, trade names, copyrights, Internet domain names (including any
registrations, licenses or rights relating to any of the foregoing), computer
software, trade secrets, inventions and know-how that are necessary to carry
on
its business as presently conducted (each, an “Intellectual Property Right”)
free and clear of all Liens (other than Permitted Liens and restrictions
provided in an agreement, license or other arrangement listed in Schedule
3.15,
except
where the failure to so own or possess, or have licenses to use any Intellectual
Property Right, has not had and could not reasonably be expected to have a
Material Adverse Effect on the Company. The Seller has no Knowledge of any
infringement by any Person of any Intellectual Property Right of the
Company.
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(b) All
Intellectual Property Rights that have been licensed by or on behalf of the
Company are being used substantially in accordance with the applicable license
pursuant to which the Company has the right to use such Intellectual Property
Rights, except where the failure to do so could not reasonably be expected
to
have a Material Adverse Effect on the Company. Schedule
3.15
lists
each agreement, license or other arrangement relating to any licensed
Intellectual Property Right, which if not licensed or available for use by
the
Company, could reasonably be expected to have a Material Adverse Effect on
the
Company or under which a one-time or periodic license fee of more than $50,000
was or shall be payable in the applicable licensing period.
(c) Schedule
3.15
contains
a complete and accurate list of (A) registered and applied for patents,
trademarks, service marks, copyrights, or domain names owned or licensed by
the
Company, in each case specifying the jurisdiction in which the applicable
registration has been obtained or pending application has been filed, and,
where
applicable, the registration or application number therefore (B) material common
law trademarks and service marks owned by the Company and other Intellectual
Property Rights owned or licensed by the Company. Except as set forth in
Schedule
3.15,
as of
the date hereof, there are no claims pending or, to the Knowledge of Seller,
threatened, challenging the ownership, validity or enforceability of any
Intellectual Property Right owned by the Company, except, in each case, for
such
claims that, if adversely determined, could not reasonably be expected to have
a
Material Adverse Effect on the Company.
(d) To
the
Seller’s Knowledge, since January 1, 2003, the Company has not suffered a
material security breach with respect to its data or systems requiring
notification to Employees in connection with such Employees’ confidential
information or to customers, except, in each case, for such security breaches
that have not had and could not reasonably be expected to have a Material
Adverse Effect on the Company.
Except
as
set forth in Schedule
3.15,
since
January 1, 2003, the Company has not received any written notice of any
infringement of the rights of any third party with respect to any Intellectual
Property Right that, if such infringement is determined to be unlawful, could
reasonably be expected to have a Material Adverse Effect on the Company. To
the
Knowledge of Seller, no use by the Company of any Intellectual Property Right
owned by the Company (A) infringes any Intellectual Property Right of any
Person, except to the extent that such infringement, if determined to be
unlawful, has not had and could not reasonably be expected to have a Material
Adverse Effect on the Company or (B) requires any payment for the use of such
Intellectual Property Right of any Person (except for payment of licensing
or
maintenance fees).
3.16 Employee
Benefit Plans.
The
Seller represents that the Company does not currently sponsor, maintain, or
contribute to, and has never sponsored, maintained or contributed to, any Plan.
The Company has no Liabilities or obligations under any Plan. No event has
occurred and no condition exists with respect to any Plan that would reasonably
be expected to subject the Company to any material tax, fine, lien, penalty
or
other Liability imposed by ERISA, the Code or other Applicable
Laws.
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3.17 Employee
Relations.
(i) The
Company has no Employees and has not had any Employees since January 1, 2003;
(ii) there is no labor strike, dispute, slowdown, stoppage or lockout pending
or, threatened against the Company, and during the past twelve months there
has
not been any such action; (iii) the Company is not a party to or bound by any
collective bargaining or similar agreement with any labor organization, or
work
rules or practices agreed to with any labor organization or employee association
applicable to Employees; (iv) within the last twelve months there has been
no
“mass layoff” or “plant closing” as defined by the WARN Act or any similar state
or local “plant closing” law with respect to the Employees; (v) the Company has
no Liabilities, obligations, costs, or expenses of any kind or nature
attributable in any manner to any Employees and (iv) the Company is in material
compliance with all federal, state or other Applicable Laws, domestic or
foreign, respecting employment and employment practices, terms and conditions
of
employment and wages and hours of employment.
3.18 Insurance
Policies.
The
Company is covered by (a) valid and effective insurance policies issued in
favor
of the Seller, an Affiliate of the Seller and/or the Company or (b) self insured
plans that, in the judgment of the Seller, an Affiliate of the Seller and/or
the
Company or (b) self insured plans that, in the judgment of the Seller, are
customary for a company of similar size in the industry and locale in which
the
Company operates. Schedule
3.18
sets
forth a complete and accurate list of all insurance policies covering the
business and operations of the Company issued in favor of an Affiliate of the
Seller, the Seller and/or the Company (the “Company Insurance Policies”),
specifying the type of coverage, the amount of coverage, the insurer, the
policyholder, each covered loss-sharing arrangement, and all self insured plans
covering the business and operations of the Company. Neither the Seller, the
Company nor any Affiliate of the Seller (a) is in material default with respect
to any of the Company Policies, (b) has received any written notice of a
cancellation with respect to any of the Company Policies or (c) has been refused
any insurance coverage sought or applied for with respect to the Company or
its
business. All premiums due and payable on any of the Company Policies or
renewals thereof have been paid or will be paid timely through the Closing
Date.
3.19 Tax
Matters.
(a) The
Company has filed (or joined in the filing of) when due (after taking into
account all properly requested extensions) all Tax Returns required by
Applicable Law to be filed with respect to the Company and all Taxes owed have
been paid (whether or not shown, or required to be shown on any Tax
Return);
(b) there
is
no Action currently pending or, to threatened, regarding any Taxes relating
to
the Company in respect of any Tax or assessment, nor is any written claims
for
additional Tax or assessment being asserted by any Taxing
Authority;
(c) there
has
been no waiver or extension of any applicable statute of limitations for the
assessment or collection of any Taxes of the Company;
(d) the
Company is not a party to any agreement other than with the Seller and its
Affiliates, whether written or unwritten, providing for the payment of Taxes,
payment for Tax losses, entitlements to refunds or similar Tax
matters;
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(e) none
of
the Tax Returns filed by the Company contain a disclosure statement under former
Section 6661 of the Code or Section 6662 of the Code (or any similar provision
of state, local or foreign Tax law);
(f) there
are
no Liens for Taxes upon any of the Company’s assets, other than Liens for Taxes
not yet due and payable;
(g) there
are
no material elections with respect to Taxes affecting the Company, as of the
date hereof;
(h) the
Company is not subject to, nor has applied for any private letter ruling of
the
IRS or comparable rulings of any Taxing Authority;
(i) neither
the Company nor any Person on its behalf has granted to any Person any power
of
attorney that is currently in force with respect to any Tax matter;
(j) the
Company will not be required to include any item of income in, or exclude any
item of deduction from, taxable income for any Taxable Period (or portion
thereof) ending after the Closing Date as a result of any (i) change in method
of accounting for a Taxable Period ending on or prior to the Closing Date,
(ii)
“closing agreement” as described in Section 7121 of the Code (or any
corresponding or similar provision of state, local or non-U.S. Tax law) executed
on or prior to the Closing Date, (iii) intercompany transaction or excess loss
account described in United States Treasury Regulations under Section 1502
of
the Code (or any corresponding or similar provision of state, local, or non-U.S.
Tax law), (iv) installment sale or open transaction made on or prior to the
Closing Date, or (v) prepaid amount received on or prior to the Closing
Date;
(k) none
of
the Shares of outstanding capital stock of the Company is subject to a
“substantial risk of forfeiture” within the meaning of Section 83 of the
Code;
(l) no
portion of the Purchase Price is subject to the Tax withholding provisions
of
Section 3406 of the Code, or of Subchapter A of Chapter 3 of the Code or of
any
other provision of law;
(m) the
Company is not a party to or member of any joint venture, partnership, limited
liability company or other arrangement or contract which could be treated as
a
partnership for federal income Tax purposes;
(n) the
Company has never filed a consent pursuant to Section 341(f) of the Code,
relating to collapsible corporations and Section 341(f)(2) of the Code does
not
apply to any of the Company’s assets;
(o) the
Company is not, and has not been, a U.S. real property holding company (as
defined in Section 897(c)(2) of the Code) during the applicable period specified
in Section 897(c)(1)(A)(ii) of the Code;
(p) the
Company has not constituted either a “distributing corporation” or a “controlled
corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a
distribution of stock qualifying for tax-free treatment under Section 355 of
the
Code (i) in the two (2) years prior to the date of this Agreement or (ii) in
a
distribution which could otherwise constitute part of a “plan” or “series of
related transactions” (within the meaning of Section 355(e) of the Code) in
conjunction with the transactions contemplated by this
Agreement;
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(q) the
Company has not (i) participated or engaged in any transaction, or taken any
Tax
Return position, described in Treasury Regulation Section 301.6111-2(b)(2)
(or
any corresponding or similar provision of state, local or non-U.S. Tax law)
or
(ii) participated or engaged in any “reportable transaction” within the meaning
of Treasury Regulation Section 1.6011-4 (or any corresponding or similar
provision of state, local or non-U.S. Tax law);
(r) the
Company is not and has not been a party to a transaction or agreement that
is in
violation of the Tax rules on transfer pricing in any relevant jurisdiction
and
all transactions and agreements (whether written or oral) between the Company
and any of its Affiliates have been conducted in an arm’s length manner;
and
(s) no
claim
is pending or threatened by a Tax Authority in a jurisdiction where the Company
does not file Tax Returns that the Company is or may be subject to Tax in that
jurisdiction.
3.20 Bank
Accounts.
Schedule
3.20
contains
a true and complete list of the names and locations of all banks, trust
companies, securities brokers and other financial institutions at which the
Company has an account or safe deposit box or maintains a banking, custodial,
trading or other similar relationship.
3.21 Material
Services Provided by Seller; Related Party Transactions.
(a) Except
as
set forth in Schedule
3.21,
neither
the Seller nor its Affiliates (other than the Company) provide any material
services to the Company.
(b) Schedule
3.21
lists
all Contracts, other than Reinsurance Contracts, in effect or pursuant to which
any party thereto has material obligations, between the Company and any of
the
following Persons: (i) the Seller or any of its Affiliates and (ii) any
director, officer or senior executive of the Seller, any Affiliate of the Seller
or the Company.
3.22 No
Brokers.
Except
as set forth in Schedule
3.22,
no
broker, finder or investment banker (an “Investment Broker”) acting on behalf of
the Seller or the Company is or will be entitled to any brokerage, finder’s or
other fee, compensation or commission from the Seller. No Person is or will
be
entitled to any brokerage, finder’s or other fee, compensation or commission
from the Company in connection with the Contemplated Transactions.
3.23 Absence
of Undisclosed Liabilities.
To the
Seller’s Knowledge, the Company has no Liabilities or obligations of any nature,
whether known, unknown, absolute, accrued, contingent or otherwise and whether
due or to become due, except (i) as disclosed or reserved against in the
Statutory Statements of the Company, including the notes thereto, and (ii)
for
Liabilities or obligations that were incurred in the Ordinary Course of Business
since December 31, 2007.
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3.24 Insurance
and Reinsurance Matters.
(a) The
Seller has made available for inspection by the Buyer copies of: (i) each annual
statement filed with or submitted to any insurance regulatory authority by
the
Company since December 31, 2002; (ii) any reports of examination (including,
without limitation, financial, market conduct and similar examinations) of
the
Company issued by any insurance regulatory authority since December 31, 2002;
and (iii) all other material holding company filings or submissions made by
the
Company with any insurance regulatory authority since January 1, 2003. The
Company has filed all material reports, registrations, filings and submissions
required to be filed with any insurance regulatory authority since January
1,
2003. All such reports, registrations, filings and submissions were in
compliance in all material respects with Applicable Law when filed or as amended
or supplemented.
(b) To
the
Knowledge of the Seller, other than as contemplated in the Commutation and
Termination Amendment or the Partial Commutation and Termination Amendment,
all
Reinsurance Contracts of the Company reflected in the Statutory Statements
of
the Company are valid, binding and enforceable against any other party thereto,
in accordance with their terms, subject to applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other laws affecting
creditors’ right generally, general principles of equity and the discretion of
courts in granting equitable remedies, are in full force and effect and transfer
such risk as would be required for such treaties and agreements to be properly
accounted for as reinsurance. Except as contemplated hereby, no such Reinsurance
Contract contains any provision providing that the other party thereto may
terminate or amend such Reinsurance Contract by reason of the Contemplated
Transactions. The Company is entitled to take full credit in its financial
statements pursuant to Applicable Laws for all reinsurance ceded pursuant to
any
Reinsurance Contract to which the Company is a party. The Company has complied
in all material respects with all of its obligations under such Reinsurance
Contracts and has provided the reinsurers thereunder on a timely basis with
all
required loss notices.
3.25 Investment
Company, Etc.
The
Company is not required to be registered, licensed or qualified as, an
investment adviser or a broker-dealer or as a commodity trading advisor, a
commodity pool operator or a futures commission merchant or any or all of the
foregoing. Neither the Company nor the Seller is an investment company within
the meaning of the Investment Company Act of 1940, as amended.
3.26 Disclosure.
To the
Seller’s Knowledge, none of the representations and warranties contained in this
Article III, or the Seller’s Disclosure Schedule contains any untrue statement
of a material fact or omits a material fact necessary to make the statements
contained herein or therein, taken as a whole, in light of the circumstances
in
which they were made, not misleading.
3.27 Exclusion
of Implied Representations and Warranties.
EXCEPT
AS EXPRESSLY SET FORTH IN THIS ARTICLE III, THE SELLER EXCLUDES AND DISCLAIMS
ANY AND ALL IMPLIED REPRESENTATIONS AND WARRANTIES.
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ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE BUYER
The
Buyer
hereby represents and warrants to the Seller as follows:
4.1 Organization
of the Buyer.
The
Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware.
4.2 Authorization,
Validity and Enforceability.
The
Buyer has all requisite corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
Contemplated Transactions. The execution, delivery and performance by the Buyer
of this Agreement and the consummation of the Contemplated Transactions by
the
Buyer have been duly and validly authorized by all necessary corporate action
on
the part of the Buyer and no other corporate proceedings on the part of the
Buyer is necessary to authorize the execution, delivery and performance of
this
Agreement or the consummation of any of the Contemplated Transactions. This
Agreement has been duly executed and delivered by the Buyer and constitutes
the
legal, valid and binding obligation of the Buyer, enforceable against the Buyer
in accordance with its terms.
4.3 No
Conflicts.
Assuming compliance with the matters referred to in Section
4.4
below,
the execution, delivery and performance by the Buyer of this Agreement and
the
consummation of the Contemplated Transactions do not and will not conflict
with,
result in any breach or violation of, or constitute a default under (or an
event
which with the giving of notice or the lapse of time or both would constitute
a
default under), or give rise to any right of termination or acceleration of
any
right or obligation of the Buyer, or result in the creation or imposition of
any
Lien upon any assets or Properties of the Buyer by reason of the terms of (a)
the certificate of incorporation, bylaws or other charter or organization
documents of the Buyer; (b) any material Contract to which the Buyer is a party
or by or to which it or its assets or Properties may be bound or subject; (c)
assuming compliance with the matters set forth on Schedule
4.4,
any
applicable order, writ, judgment, injunction, award, decree, law, statute,
ordinance, rule or regulation of any Governmental Entity; or (d) any other
Permit of the Buyer other than, in the case of (b), (c) or (d), any such
conflict, breach, violation, default, right, obligation or Lien, that could
not
be reasonably be expected to have a Material Adverse Effect on the ability
of
the Buyer to execute and deliver this Agreement, to perform its obligations
hereunder or to consummate the Contemplated Transactions.
4.4 Buyer
Consents and Approvals.
Except
as set forth in Schedule
4.4,
no
Consent of any Governmental Entity or other Person is necessary to be obtained,
made or given by the Buyer in connection with the execution and delivery by
the
Buyer of this Agreement, the performance by the Buyer of its obligations
hereunder and the consummation of the Contemplated Transactions, except for
Consents which, if not obtained or made, could not be reasonably be expected
to
have a Material Adverse Effect on the ability of the Buyer to execute and
deliver this Agreement, to perform its obligations hereunder or to consummate
the Contemplated Transactions.
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4.5 No
Brokers.
No
Investment Broker acting on behalf of the Buyer is entitled to any brokerage,
finder’s or other fee, compensation or commission from the Buyer in connection
with the Contemplated Transactions.
4.6 Disclosure.
None of
the representations and warranties contained in this Article IV or the Buyer’s
Disclosure Schedule contains any untrue statement of a material fact or omits
a
material fact necessary to make the statements contained herein or therein,
taken as a whole, in light of the circumstances in which they were made, not
misleading.
4.7 Exclusion
of Implied Representations and Warranties.
EXCEPT
AS EXPRESSLY SET FORTH IN THIS ARTICLE IV, THE BUYER EXCLUDES AND DISCLAIMS
ANY
AND ALL IMPLIED REPRESENTATIONS AND WARRANTIES.
ARTICLE
V
COVENANTS
5.1 Conduct
of Business.
(a) Except
as
set forth on Schedule
5.1
or any
of the other Schedules hereto, or as otherwise contemplated by this Agreement
or
the Ancillary Agreements, or as consented to in writing by the Buyer, from
the
date hereof to and including the Closing Date, the Seller will cause the Company
to conduct its operations in the Ordinary Course of Business and in compliance
in all material respects with all Applicable Law and the requirements of all
Permits and Material Contracts (whether or not listed on Schedule
3.12(a))
and
Reinsurance Contracts.
(b) Except
as
set forth in Schedule
5.1
or any
of the other Schedules hereto, or as otherwise contemplated by this Agreement
or
the Ancillary Agreements from the date hereof to and including the Closing
Date,
the Seller will not, without the prior written consent of the Buyer (such
consent not to be unreasonably withheld, delayed or conditioned), permit the
Company to directly or indirectly:
(i) amend
or
modify its certificate or articles of incorporation, bylaws or other charter
or
organization documents;
(ii) merge
or
consolidate or enter into a business combination with or acquire the business
of
any other Person or acquire, lease or license any right or other any Property
or
assets of any other Person;
(iii) other
than in connection with the management of the Company’s investment portfolio in
the Ordinary Course of Business, sell, pledge, lease, license or dispose of
a
material portion of any of its assets;
(iv) enter
into or become bound by, or permit any of the assets owned or used by it to
become bound by, any Material Contract (whether or not listed on Schedule
3.12(a)),
or
amend or terminate, or, other than in the Ordinary Course of Business, waive
or
exercise any material right or remedy under, any such Material
Contract;
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(v) enter
into, amend, terminate or otherwise restructure any Intercompany Agreements
in a
manner that would have a material adverse impact on the Company; provided,
however,
that
the Buyer acknowledges and agrees that all services provided by the Seller
and
its Affiliates (other than the Company) shall cease as of the Closing except
as
provided in the FRR Agreement and the Reinsurance Agreement;
(vi) split,
combine, recapitalize, reverse stock split or reclassify any Shares of its
capital stock or other securities, or declare, pay or set aside any sum for
any
dividend or other distribution (whether in cash, stock or Property, any
combination thereof or otherwise) in respect of its capital stock, or redeem,
purchase or otherwise acquire (or agree to redeem, purchase or otherwise
acquire) any of its capital stock or any of its other securities or any rights,
warrants or options to acquire any such capital stock or securities, unless
after giving effect to such dividend, distribution, redemption, purchase or
other acquisition, Policyholders’ Surplus shall be at least Seven Million
Dollars ($7,000,000);
(vii) authorize,
issue, sell, grant, dispose of, transfer, pledge or otherwise encumber any
Shares of its capital stock, any of its equity interests, any other of its
voting securities or any securities convertible into or exchangeable for, or
any
rights, warrants, call or options to acquire, any such Shares, equity interests,
voting securities or convertible or exchangeable securities;
(viii) adopt
a
plan of complete or partial liquidation, dissolution, rehabilitation, merger,
consolidation, restructuring, recapitalization, redomestication or other
reorganization;
(ix) adopt
a
new Plan, amend any Plan or permit any Plan to enter into any material Contract,
insurance arrangement or funding obligation to increase present or future
benefits to Employees or the present or future cost of providing benefits to
Employees;
(x) enter
into or agree to any regulatory restrictions or arrangements;
(xi) adopt
any
Plan or enter into any employment agreement or employment contract or otherwise
hire any Employee;
(xii) lend
money to any Person or incur or guarantee any Debt;
(xiii) make,
authorize or commit to any capital expenditures;
(xiv) settle
or
compromise any Action, other than (A) any claims or litigation under insurance
policies issued by the Company in the Ordinary Course of Business within policy
limits, (B) any claims or litigation for which the sole remedy is monetary
damages in an amount less than $25,000, (C) as required by a final or
non-appealable judgment of an arbitration panel or court, or (D) Regulatory
Body
Matters; provided,
however,
that if
the settlement or compromise of any Regulatory Body Matter would require the
Buyer or the Company to admit any Liability or pay Damages or other amounts
in
settlement, the Seller may not effect such settlement without the Buyer’s prior
written consent (which consent shall not be unreasonably withheld, delayed
or
conditioned);
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(xv) make
or
change any material Tax election, enter into, amend, terminate or otherwise
restructure any Intercompany Agreements relating to Taxes, change an annual
accounting period, adopt or change any material accounting method, enter into
any closing agreement, settle any Tax Claim, consent to any extension or waiver
of the limitation period applicable to any material Tax Claim or assessment
relating to the Company, if such election, adoption, change, consent or other
action would have the effect of increasing the Tax Liability of the Company
for
any period ending after the Closing Date or decreasing any Tax attribute of
the
Company existing on the Closing Date;
(xvi) enter
into any new Contract or amend in any material respect, or terminate or
non-renew any Material Contract except as provided under Section
5.3
hereof;
(xvii) make
any
change in its financial or statutory accounting methods, principles or practices
used by it materially affecting its assets or Liabilities (including reserve
methods, practices and policies in effect, except insofar as may be required
by
a change in law or applicable accounting principles);
(xviii) forfeit,
abandon, amend, modify, waive or terminate any Insurance License or Surplus
or
Excess Lines Qualification;
(xix) enter
into any material transaction or take any other material action outside the
Ordinary Course of Business or as otherwise contemplated by this Agreement
or
the Ancillary Agreements; or
(xx) agree
in
writing to do any of the foregoing.
5.2 Access;
Confidentiality.
(a) From
the
date hereof until the Closing, the Seller will, and will cause the Company
and
its representatives to (i) allow the Buyer and its officers, employees, counsel,
accountants, actuaries, consultants and other authorized representatives
(“Representatives”) to have reasonable access to the books, records, Tax
Returns, financial statements, Contracts, work papers and other information
and
documents relating to the Company, assets, Properties, facilities, management
and personnel of the Company at all reasonable times, upon reasonable notice
and
in a manner so as not to interfere with the normal operation of the business
of
the Company and (ii) cause the respective Representatives of the Seller and
the
Company to cooperate in good faith with the Buyer and its Representatives in
connection with all such access.
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(b) Each
party hereto will hold, and will use reasonable best efforts to cause its
Affiliates, and their respective Representatives to hold, in strict confidence
from any Person (other than any such Affiliates or Representatives), except
with
the prior written consent of the other party or unless (i) compelled to
disclose by judicial or administrative process (including in connection with
obtaining the necessary approvals of this Agreement, the other Ancillary
Agreements, or any of the Contemplated Transactions by Governmental Entities)
or
by other requirements of Applicable Law or stock exchange regulation, or
(ii) disclosed in an Action or proceeding brought by a party hereto in
pursuit of its rights or in the exercise of its remedies hereunder, all
documents and information concerning the other party or any of its Affiliates
furnished to it by the other party or such other party’s Representatives in
connection with this Agreement, the Ancillary Agreements, or any of the
Contemplated Transactions, except to the extent that such documents or
information can be shown to have been (a) previously known or available to
(on a non-confidential basis) the party receiving such documents or information,
(b) in the public domain (either prior to or after the furnishing of such
documents or information hereunder) through no violation of this provision
by
the receiving party or (c) later acquired by the receiving party from
another source if the receiving party is not aware that such source is under
an
obligation or duty to the party seeking to keep such documents and information
confidential.
5.3 Intercompany
Accounts; Intercompany Agreements.
Except
with respect to (i) that certain Excess of Loss Treaty Reinsurance Agreement,
effective as of October 1, 2007, between the Company and Motors, and (ii) that
certain Amended and Restated Treaty Reinsurance Agreement, effective as of
January 1, 1998 and amended as of October 1, 2005, among the Company Integon
Indemnity Corporation, Integon General Insurance Corporation, New South
Insurance Company, Integon Preferred Insurance Company, Integon National
Insurance Company, Integon Casualty Insurance Company, which agreements shall
be
terminated in accordance with the Commutation and Termination Amendment and
the
Partial Commutation and Termination Amendment, the
Seller shall cause all agreements between the Company and any of its Affiliates,
to be terminated without any further obligation or Liability of the Company
and
all intercompany accounts receivable or payable (whether or not currently due
or
payable) between (x) the Company, on the one hand, and (y) the Seller or any
of
its Affiliates, or any of the officers or directors of any of the Seller and
any
of its Affiliates, on the other hand, to be settled in full (without any premium
or penalty), at or prior to the Closing.
5.4 Cooperation
and Commercially Reasonable Efforts.
Subject
to the terms and conditions hereof, (a) each of the parties hereto shall
cooperate with each other, and the Seller shall cause the Company to cooperate
with the Buyer, in connection with consummating the Contemplated Transactions,
and (b) each of the parties hereto agrees to, and the Seller shall cause the
Company to, use commercially reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things necessary, proper or
advisable under Applicable Law and regulations to consummate and make effective
the Contemplated
Transactions.
5.5 Consents
and Approvals and Licensing.
(a) As
soon
as practicable after the date hereof, but in no event more than twenty (20)
days
following the date hereof, each of the parties hereto shall use commercially
reasonable efforts to obtain any necessary Consents of, and make any filing
with
or give any notice to, any Governmental Entities and other Persons (including,
without limitation, Insurance Approvals) as are required to be obtained, made
or
given by such party to consummate the Contemplated Transactions. Each party
shall pay all amounts required to be paid by it in connection with obtaining
any
Consents that it is required to obtain, including those set forth in
Schedule
5.5(a).
The
Seller and the Buyer shall provide each other with a reasonable opportunity
to
review and comment upon submissions made to the Applicable Insurance Departments
in connection with the Seller Insurance Approvals and the Buyer Insurance
Approvals, respectively, and shall keep one another reasonably informed of
developments relating to their efforts to obtain such Insurance Approvals.
Prior
to the Closing, the Seller will not enter into or agree to any regulatory
restrictions or arrangements which, as a result would materially alter the
Company’s licensing, Surplus or Excess Lines Qualification or regulatory status
in any state without first obtaining the Buyer’s consent thereto, which consent
may be granted or withheld by the Buyer in its sole discretion.
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(b) The
Seller will cause the Company to use commercially reasonable efforts prepare,
file and prosecute applications to state insurance departments for certificates
of authority so that the Company will be authorized to transact business in
the
lines of business and states indicated on Schedule
5.5(b).
5.6 Press
Releases.
Prior
to the Closing, each party hereto shall consult with the other party hereto
prior to issuing, and shall provide the other party with a reasonable,
opportunity to review and comment upon, any press release pertaining to this
Agreement or the Contemplated Transactions and, except as may be required by
Applicable Law or any listing agreement with any national securities exchange,
will not issue any such press release prior to such consultation.
5.7 Records
Retention, Accounting and Tax Support.
(a) From
and
after the Closing Date, upon reasonable notice, the Buyer and the Seller agree
to furnish or cause to be furnished to each other and their Representatives,
employees, counsel and accountants access, during normal business hours, to
such
information in a readily readable and accessible form (including Company
Materials and Materials or other records pertinent to the Company); assistance
and cooperation relating to the Company as is reasonably necessary for financial
reporting, loss reporting and accounting matters, the preparation and filing
of
any Tax Returns, or the defense of any Tax Claim, Seller Third-Party Claim
or
assessment and to meet reporting requirements to any retrocessionaires or any
Governmental Entities; provided,
however,
that
such access and cooperation does not unreasonably disrupt the normal operations
of the Buyer, the Seller or the Company. Such cooperation shall include, without
limitation, making Employees (and, to the extent reasonably feasible, former
Employees) reasonably available on a mutually convenient basis to provide
information and explanations of such records and Materials. From and after
the
Closing Date, the Buyer hereby acknowledges that the Seller shall on behalf
of
the Company maintain and keep original copies of, all Company Materials,
Materials and such other books and records of the Company, including such books
and records necessary and pertinent to the Company for financial reporting
and
accounting purposes, the preparation and filing of any Tax Returns for a
Pre-Closing Taxable Period, or the defense of any Tax Claim related to a
Pre-Closing Taxable Period, Seller Third-Party Claim or assessment, to the
extent such Company Materials, Materials, books and records relate to any date
or period prior to the Closing Date (the “Company Books and Records”). The
Seller acknowledges that, notwithstanding its maintenance and possession of
the
Company Books and Records, all such Company Books and Records remain the sole
property of the Company. The Buyer shall, upon reasonable notice and for any
reasonable business purpose, have access during normal business hours to
examine, inspect and copy and to remove from the Seller’s possession the
original copies of such Company Books and Records; provided that, if any of
such
Company Books and Records are reasonably necessary for Motors or any of its
Affiliates to perform its obligations under any of the Ancillary
Agreements, Seller or Motors, as the case may be, may retain copies of such
Company Books and Records. Before the Seller may dispose of any of the Company
Books and Records, the Seller shall give the Buyer at least ninety (90) days’
prior written notice of its intention to dispose of such Company Books and
Records and the Buyer or its designee shall be given an opportunity, at its
cost
and expense, to remove and retain all or any part of such Company Books and
Records as the Buyer may elect. From and after the Closing Date, the Buyer
shall
cause the Company to preserve, maintain and keep, or cause to be preserved,
maintained and kept, in a readily readable and accessible form, all Company
Books and Records and Materials and all original books and records of the
Company that do not constitute Company Books and Records, including all books
and records necessary and pertinent to the Company for financial reporting
and
accounting purposes, the preparation and filing of any Tax Returns, or the
defense of any Tax Claim, Seller Third-Party Claim or assessment (the “Buyer’s
Books and Records”) for the longer of any statute of limitations applicable to
any such matters and a period of seven (7) years from the Closing Date. During
such seven-year or longer period, the Seller and its Representatives shall,
upon
reasonable notice and for any reasonable business purpose, have access during
normal business hours to examine, inspect and copy such Buyer Books and Records.
After such seven-year or longer period, the Company may dispose of any of such
Buyer Books and Records.
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(b) The
Seller agrees (i) to keep confidential all of the Company Books and Records,
(ii) not to use any information contained in the Company Books and Records,
except in connection with the transactions contemplated by and services to
be
provided by the Seller for tax, accounting, regulatory, contract compliance
or
legal-related purposes and (iii) not reveal or disclose the Company Information
to any Person other than its Representatives who need to know the Company
Information for tax, accounting, regulatory, contract-compliance or other
legal-related purposes; it being understood that all such Persons will be
informed of the confidential nature of the Company Information and the terms
of
this Section 5.7.
As used
herein, “Company Information” shall mean all non-public, confidential
information contained in the Company Books and Records or relating to the
Company or the Buyer’s Affiliates, their business, financial condition or
insureds, whether oral or written, whether in possession of the Seller or any
Representative as of the Closing Date or obtained, developed or disclosed by
insureds or their Representatives at any time. The term “Company Information”
does not include any information which at the time of disclosure to the Seller
or thereafter is generally available to and known by the public (other than
as a
result of a disclosure directly or indirectly by the Seller or any of its
Representatives). The Seller may disclose Company Information if required to
by
Applicable Law.
5.8 Tax
Matters.
(a)
The
Seller shall cause the Company to be included in the consolidated federal income
Tax Returns of the Seller or an Affiliate of the Seller for all periods for
which it is eligible to be so included, including, without limitation, the
period from January 1, 2008 to the Closing Date, and in any other required
state, local and foreign consolidated, affiliated, combined, unitary or other
similar group Tax Returns that include the Seller or any such Affiliate of
the
Seller for all Taxable Periods ending on or prior to the Closing Date for which
any of them are required to be so included. The Seller shall (A) timely prepare
and file all such Tax Returns and timely pay when due all Taxes relating to
such
Tax Returns and (B) timely prepare and file, or cause to be prepared and filed,
all other Tax Returns of the Company for all Taxable periods ending on or prior
to the Closing Date and timely pay, or cause to be paid, when due all Taxes
relating to such Tax Returns. Prior to the filing of any Tax Return described
in
the preceding sentence that was not filed before the Closing Date, the Seller
shall provide the Buyer with a substantially final draft of such Tax Return
(or,
with respect to Tax Returns described in clause (A) above, the portion of such
draft Tax Return that relates to the Company) at least fifteen (15) Business
Days prior to the due date for filing such Tax Return, and the Buyer shall
have
the right to review such Tax Return prior to the filing of such Tax Return.
The
Buyer shall notify the Seller of any reasonable objections the Buyer may have
to
any items set forth in such draft Tax Returns within fifteen (15) Business
Days,
and the Buyer and the Seller agree to consult and resolve in good faith any
such
objection and to mutually consent to the filing of such Tax Return. Such Tax
Returns shall be prepared or completed in a manner consistent with prior
practice of the Seller, the Company with respect to Tax Returns concerning
the
income, assets, Properties or operations of the Company (including elections
and
accounting methods and conventions), except as otherwise required by law or
regulation or otherwise agreed to by the Buyer prior to the filing
thereof.
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(b) Any
Taxes
with respect to the Company that relate to a Taxable Period beginning before
the
Closing Date and ending after the Closing Date (an “Overlap Period”) shall be
apportioned between the Seller and the Buyer, (i) in the case of Property Taxes
(and any other Taxes not measured or measurable, in whole or in part, by net
or
gross income or receipts), on a per diem basis and, (ii) in the case of other
Taxes, as determined from the books and records of the Company during the
portion of such period ending on the Closing Date (i.e., Seller’s portion) and
the portion of such period beginning on the day following the Closing Date
(i.e., Buyer’s portion) consistent with the past practices of the Seller and the
Company. The Buyer shall cause the Company to file any Tax Returns for any
Overlap Period, and the Buyer shall pay, or cause to be paid, all state, local
or foreign Taxes shown as due on any such Tax Returns. The Seller shall pay
the
Buyer its share of any such Taxes (to the extent the Seller is liable therefor
in accordance with this Section
5.8(b)
due
pursuant to the filing of any such Tax Returns under the provisions of this
Section
5.8(b)
within
five (5) Business Days of receipt of notice of such filing by the Buyer, which
notice shall set forth in reasonable detail the calculations regarding the
Seller’s share of such Taxes.
(c) (i)
If
the Company or any consolidated, affiliated, combined, unitary or other similar
Tax group of which the Company is now or was formerly a member has any reduction
in Tax Liability by reason of an adjustment with respect to a Pre-Closing
Taxable Period and such adjustment has the effect of decreasing deductions
or
credits, or increasing income, for any Taxable Period (or portion thereof)
(including an Overlap Period) ending after the Closing Date, then the Seller
shall pay to the Buyer an amount equal to the detrimental Tax effect
attributable to such decreased deductions or credits, or increased income,
as
and when the Company or any consolidated, affiliated, combined, unitary or
other
similar Tax group of which the Company or may be a member actually suffers
such
detriment. Conversely, if the Company or any consolidated, affiliated, combined,
unitary or other similar Tax group of which the Company is now or was formerly
a
member has any increase in Tax Liability by reason of an adjustment with respect
to a Pre-Closing Taxable Period and such adjustment has the effect of increasing
deductions or credits, or decreasing income, for any Taxable Period (or portion
thereof) (including an Overlap Period) ending after the Closing Date, then
the
Buyer shall pay to the Seller an amount equal to the beneficial Tax effect
attributable to such increased deductions or credits, or decreased income,
as
and when the Company or any consolidated, affiliated, combined, unitary or
other
similar Tax group of which the Company or may be a member actually incurs such
benefit.
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(ii) Any
credit, deduction loss or other Tax attribute of the Buyer, the Company or
their
Affiliates arising in any Taxable Period (or position thereof) beginning after
the Closing Date is required to be carried back and included in any Tax Return
of the Seller, or any Affiliate of the Seller (including the Company), for
any
Pre-Closing Taxable Period, then the Seller shall pay to the Buyer an amount
equal to the actual Tax savings produced by such credit, deduction or loss;
provided,
however,
that
the Seller or such Affiliate shall not be required to file any claim for refund
of any Tax for the benefit of the Buyer, the Company or their Affiliates unless
the Buyer so requests in writing and agrees to pay the reasonable expenses
related to the claim for refund. Conversely, if any income, gain or other Tax
attribute of the Buyer, the Company or their Affiliates arising in any Taxable
Period (or position thereof) beginning after the Closing Date is required to
be
carried back and included in any Tax Return of the Seller, or any Affiliate
of
the Seller (including the Company), for any Pre-Closing Taxable Period, then
the
Buyer shall pay to the Seller an amount equal to the actual Tax Liability
produced by such income or gain; additionally,
with
respect to any obligation to file said amended Tax Return, the Seller or such
Affiliate shall (i) provide the Buyer with a reasonable opportunity to review
and comment upon the amended Tax Return prior to filing; and (ii) pay the
reasonable expenses related to the filing of said amended Tax
Return.
(d) Neither
the Seller nor any Affiliate of the Seller shall, without the prior written
consent of the Buyer, file, or cause to be filed, any amended Tax Return or
claim for Tax refund, with respect to the Company for any Pre-Closing Taxable
Period, to the extent that any such filing may affect the Tax Liability of
the
Buyer, any of its Affiliates or the Company for any Taxable Period (or position
thereof) beginning after the Closing Date (including, but not limited to, the
imposition of Tax deficiencies, the reduction of asset basis or cost
adjustments, the lengthening of any amortization or depreciation periods, the
denial of amortization or depreciation deductions, or the reduction of loss
or
credit carryforwards).
(e) Any
and
all existing Tax sharing, allocation, compensation or like agreements or
arrangements, whether or not written, that include the Company, including,
without limitation, any arrangement by which the Company makes compensating
payments to each other or any other member of any affiliated, consolidated,
combined, unitary or other similar Tax group for the use of certain Tax
attributes, shall be terminated on or prior to the Closing Date (pursuant to
a
writing executed on or before the Closing Date by all parties concerned) and
shall have no further force or effect. All Liabilities of the Company to the
Seller or any Affiliate of the Seller (for Taxes or otherwise pursuant to such
agreements or arrangements) shall be canceled on or prior to the Closing Date.
Any and all powers of attorney relating to Tax matters concerning the Company
shall be terminated as to the Company on or prior to the Closing Date and shall
have no further force or effect.
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(f) After
the
Closing Date, the Buyer and the Seller shall provide each other, and the Buyer
shall cause the Company to provide the Seller, with such cooperation and
information relating to the Company as either party reasonably may request
in
(A) filing any Tax Return, amended Tax Return or claim for refund, (B)
determining any Tax Liability or a right to refund of Taxes, (C) conducting
or
defending any audit or other proceeding in respect of Taxes or (D) effectuating
the terms of this Agreement. The parties shall retain, and the Buyer shall
cause
the Company to retain, all returns, schedules and work papers, and all material
records and other documents relating thereto, until the expiration of the
statute of limitation (and, to the extent notified by any party, any extensions
thereof) of the Taxable Periods to which such Tax Returns and other documents
relate and, unless such Tax Returns and other documents are offered and
delivered to the Seller or the Buyer, as applicable, until the final
determination of any Tax in respect of such Taxable Periods. Any information
obtained under this Section
5.8
shall be
kept confidential, except as may be otherwise necessary in connection with
filing any Tax Return, amended Tax Return, or claim for refund, determining
any
Tax Liability or right to refund of Taxes, or in conducting or defending any
audit or other proceeding in respect of Taxes. Notwithstanding the foregoing,
neither the Seller nor the Buyer, nor any of their Affiliates, shall be required
unreasonably to prepare any document, or determine any information not then
in
its possession, in response to a request under this Section
5.8(f).
(g) The
Seller shall be entitled to all Tax refunds of the Company for any Pre-Closing
Taxable Period except for Tax refunds attributable to carrybacks from Taxable
Periods (or portions thereof) beginning after the Closing Date. If the Buyer
or
the Company receives any Tax refund to which the Seller is entitled pursuant
to
this Section
5.8(g),
the
Buyer will promptly pay (or cause the Company to pay) the amount of such Tax
refund to the Seller net of the reasonable costs to the Buyer, the Company
and
their Affiliates with respect to such Tax including any increase in Taxes owed
by the Buyer, the Company or their Affiliates as a result of the receipt of
such
Tax refund. In the event that any such Tax refund is subsequently disallowed
in
whole or part by any Tax Authority, the Seller shall promptly return any such
amounts to the Buyer or the Company.
5.9 Transfer
Taxes.
All
transfer, documentary, sales, use, stamp, registration and other such Taxes,
and
all conveyance fees, recording charges and other fees and charges (including
any
penalties and interest) incurred in connection with the consummation of the
transactions contemplated by this Agreement shall be shared equally by the
Buyer
and the Seller when due. The Buyer and the Seller will, to the extent require
by
Applicable Law, file all necessary Tax Returns and other documentation with
respect to all such Taxes, fees and charges.
5.10 Tax
Indemnification.
(a) Except
for Taxes specifically reserved for on the Closing Surplus Statement (it being
understood that the aggregate amount of such reserves for Taxes on the Closing
Surplus Statement shall reduce, to the extent of such reserves, the
indemnification obligations of the Seller hereunder) and that are taken into
account in determining the final Purchase Price, the Seller, shall indemnify
the
Buyer for the amount of all Damages attributable to (A) Liabilities of the
Company: (v) for Taxes attributable to Taxable Periods (or portions
thereof) ending on or before the Closing Date; (w) for Taxes allocable to
Taxable Periods (or portions thereof) beginning after the Closing Date that
arise out of a Tax Contest for a Taxable Period beginning prior to the Closing
Date and are attributable to a decrease in income or a gain, or an increase
in
deduction, loss or credit for a Taxable Period ending on or prior to the Closing
Date; and (x) arising from breach of representations or warranties set forth
in
Section 3.19
and
covenants in Section
5.8
hereof,
and (B) the Seller’s obligation to pay Transfer Taxes as determined pursuant to
Section 5.9.
The
Seller’s indemnification obligations under this Section 5.10
are
referred to herein as the “Tax
Indemnity”.
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(b) For
purposes of this Section 5.10
and the
calculation of any indemnity payable or amount recoverable under this Agreement,
any interest, penalties or additions to Tax accruing before or after the Closing
Date with respect to a Liability for Taxes for which the Buyer is entitled
to
recover from the Seller shall be deemed to be attributable to a Tax period
with
respect to which the Sellers is required to indemnify the Buyer.
5.11 Interim
Financial Statements; 2008 Annual Statement.
(a) After
the
date hereof until the date that is five (5) Business Days prior to the
anticipated Closing Date, the Seller shall within five (5) Business Days after
the filing of such items with the Domiciliary Insurance Department, deliver
to
the Buyer the SAP financial statements of the Company as of the end of such
quarter and for the period then ended (which shall be unaudited) (such financial
statements, the “Subsequent Period Financial Statement”). The Subsequent Period
Financial Statements shall be prepared in all material respects in accordance
with SAP and in a manner consistent with the Company’s historical accounting
practices and shall present fairly in all material respects the financial
position of the Company, as of the date thereof, and the results of its
operations for the applicable period then ended (subject, for any Subsequent
Period Financial Statement as of any date other than December 31, 2008, to
normal recurring year-end adjustments).
(b) Following
the Closing Date, unless filed prior thereto, the Seller will prepare and
deliver to the Buyer in the format required for the applicable filing and on
a
timely basis in accordance with SAP, consistently applied, and the Applicable
Insurance Code, (i) all annual and quarterly SAP financial statements of the
Company as of the end of all quarters and for periods ending on or prior to
the
Closing Date, and (ii) if the Closing shall not have occurred on or prior to
December 31, 2008, the audited financial statements of the Company for the
year
ended December 31, 2008, which SAP financial statements and audited financial
statement shall present fairly in all material respects in accordance with
SAP
of the Domiciliary Insurance Department, and the Applicable Insurance Code
and
the statutory financial position and results of operations of the Company,
for
the year or quarter then ended. Prior to completing such annual statement or
audited financial statements the Seller shall provide the Buyer with a draft
thereof and provide the Buyer with a reasonable opportunity to consult with
the
Seller and its accounting personnel and, in the case of the audited financial
statements, its auditor as to same. The Buyer agrees to cause the Company and
its officers, upon reasonable advance written request by the Seller, to
cooperate with the auditors preparing such audited financial
statements.
(c) Following
the Closing Date, the Seller shall provide to the Buyer, or cause its Affiliates
to provide, such cooperation and information relating to the operations and
financial condition of the Company prior to Closing as the Buyer may reasonably
request to prepare SAP financial statements and audited financial statements
required under the Applicable Insurance Code for periods ending after the
Closing Date through the period ended December 31, 2009. Such cooperation shall
include making employees of the Seller or its Affiliates with knowledge of
such
matters available to the Buyer upon reasonable notice and allowing the Buyer
to
inspect and copy documents in the possession of the Seller or its Affiliates
relating to the operations and financial condition of the Company prior to
Closing necessary for the Buyer to prepare the SAP financial statements or
audited financial statements for periods ending after the Closing Date through
the period ended December 31, 2009.
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5.12 Reduction
in Purchase Price.
A
portion of the Purchase Price of the Shares will be reimbursed to the Buyer
by
the Seller on the 120th
day
following the Closing Date if the Insurance License or any Surplus or Excess
Lines Qualification is revoked, cancelled, suspended, terminated or restricted
on or after the date hereof but prior to the 120th day following the Closing
Date for reasons principally attributable to the operations or activities of
the
Company prior to the Closing. The amount of any Purchase Price adjustment
pursuant to this Section
5.12
will be
Fifty Thousand Dollars ($50,000) per state in which any Insurance License or
Surplus or Excess Lines Qualification is revoked, cancelled, suspended,
terminated or restricted.
5.13 Updating
of Schedules.
From
the date hereof until the Closing Date, the Seller shall have the continuing
obligation to supplement or amend the Schedules with respect to any matter
hereafter arising or discovered of which they become aware and which, if
existing or known at the date of this Agreement, would have been required to
be
set forth in the Disclosure Schedules; provided, however, that no such
supplement or amendment shall affect any of the Buyer’s rights to
indemnification or with respect to the failure of any condition to Closing
resulting from the matters disclosed in any such amendment or supplement;
provided further, however, that in the event the Closing shall occur
notwithstanding such supplement or amendment, the Buyer shall not be entitled
to
seek indemnification with respect to the failure of any condition to Closing
resulting directly from the matters expressly disclosed in any such amendment
or
supplement.
5.14 Change
of Name.
Within
two (2) Business Days following the Closing, the Buyer shall cause the Company
to file with the North Carolina Department of Insurance all documents necessary
to change the Company’s name to a name that does not include the word “Integon”
or any variation thereof. Within ten (10) days of receiving the approval of
the
North Carolina Department of Insurance of the change of name of the Company,
the
Buyer shall cause the Company to file with the insurance department in each
other jurisdiction in which the Company is licensed all documents necessary
to
reflect such change of name. After the Closing, and for so long as the Buyer
or
one of its Affiliates shall control the Company, the Buyer will cause the
Company not to use any letterhead, catalogues, brochures, advertising,
promotional or other materials which bear any trademark, service xxxx, trade
name or service name of the Seller or its Affiliates or the name “Integon” or
any variation thereof, or which in any way incorrectly identify, or suggest,
that the Company is an Affiliate of the Seller or any of its Affiliates;
provided that the Buyer, for a reasonable period of time following the Closing,
may use the prior name of Company in order to inform Governmental Entities,
and
other third parties that the Company has been acquired by the Buyer and that
its
name has changed or is in the process of being changed.
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5.15 NAIC
Group Code.
Promptly following the Closing, the Buyer shall cause the Company to apply
for
and receive a new NAIC Group Code number, along with any similar identification
numbers required by state insurance departments or other state or federal
governmental authorities, including the employer identification number for
federal tax purposes.
5.16 Ancillary
Agreements.
Following the Closing Date, the Buyer shall use commercially reasonable efforts
to cause its Affiliates and the Company to comply with the Ancillary
Agreements.
ARTICLE
VI
CONDITIONS
TO CLOSING
6.1 Conditions
to the Obligation of the Buyer to Close.
The
obligation of the Buyer to purchase the Shares at the Closing shall be subject
to the satisfaction of the following conditions at or prior to the Closing
(unless waived by the Buyer):
(a) Representations,
Warranties and Covenants.
The
representations and warranties of the Seller contained in this Agreement shall
be true and correct in all material respects at and as of the date hereof and
at
and as of the Closing Date, as if made at and as of such time (except to the
extent in either case that any such representations or warranties speak as
of
another date, in which case such representations and warranties shall be true
and correct in all material respects at and as of the date specified therein);
provided, however, that any representation or warranty that is qualified as
to
materiality or a Material Adverse Effect shall be true and correct in all
respects. The Seller shall have performed and complied in all material respects
with all covenants and agreements required to be performed or complied with
by
the Seller on or prior to the Closing Date.
(b) Ancillary
Agreements.
The
Ancillary Agreements shall have been executed and delivered by the Seller or
the
Affiliate of the Seller party thereto and each of the Ancillary Agreements
shall
be in full force and effect.
(c) Insurance
Licenses.
The
Company’s Insurance License and Surplus or Excess Lines Qualifications shall
remain in effect as of the Closing Date, with no adverse change in the status
thereof as compared to the date hereof and the Company shall be authorized
to
transact business in the lines and states indicated on Schedule
5.5(b).
(d) Approvals.
All
Permits, orders, approvals and Consents of, and notices to, registrations and
filings with the Applicable Insurance Departments, or any other applicable
insurance regulatory authority, which are set forth on Schedule
3.4
and
required in connection with the consummation of this Agreement or any Ancillary
Agreement shall have been obtained.
(e) No
Proceedings.
No
injunction, order, decree or judgment shall have been issued by any Governmental
Entity of competent jurisdiction and be in effect, and no statute, rule or
regulation shall have been enacted or promulgated by any Governmental Entity
and
be in effect, which in each case restrains or prohibits the consummation of
the
purchase and sale of the Shares or the consummation of the Contemplated
Transactions or by the Ancillary Agreements. There shall not be pending or
threatened any Action involving or relating to the Company seeking to restrain
or prohibit the consummation of the purchase and sale of the Shares or the
consummation of the Contemplated Transactions or by the Ancillary
Agreements
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(f) Material
Adverse Effect.
Since
the date of this Agreement, there shall not have occurred any Material Adverse
Effect and no event shall have occurred or circumstance shall exist that, in
combination with any other events or circumstances, could reasonably be expected
to have a Material Adverse Effect.
(g) Closing
Deliveries.
The
Seller shall have delivered to the Buyer the items required pursuant to
Section
2.3(a).
6.2 Conditions
to the Obligation of the Seller to Close.
The
obligations of the Seller to sell the Shares at the Closing shall be subject
to
the satisfaction of the following conditions at or prior to the Closing (unless
waived by the Seller):
(a) Representations,
Warranties and Covenants.
The
representations and warranties of the Buyer contained in this Agreement shall
be
true and correct in all material respects at and as of the date hereof and
at
and as of the Closing Date, as if made at and as of such time (except to the
extent in either case that any such representations or warranties speak as
of
another date, in which case such representations and warranties shall be true
and correct in all material respects at and as of the date specified therein);
provided, however, that any representation or warranty that is qualified as
to
materiality or a Material Adverse Effect on the Buyer shall be true and correct
in all respects. The Buyer shall have performed and complied in all material
respects with all covenants and agreements required to be performed or complied
with by the Buyer on or prior to the Closing Date.
(b) Ancillary
Agreements.
The
Ancillary Agreements shall have been executed and delivered by the Company
and
such Ancillary Agreements shall be in full force and effect.
(c) Approvals.
All
permits, orders, approvals and Consents of, and notices to, registrations and
filings with the Applicable Insurance Departments, or any other applicable
insurance regulatory authority, which are set forth on Schedule
4.4
and
required in connection with the consummation of this Agreement or any Ancillary
Agreement.
(d) No
Proceedings.
No
injunction, order, decree or judgment shall have been issued by any Governmental
Entity of competent jurisdiction and be in effect, and no statute, rule or
regulation shall have been enacted or promulgated by any Governmental Entity
and
be in effect, which in each case restrains or prohibits the consummation of
the
purchase and sale of the Shares. No Action before any court or regulatory
authority, domestic or foreign, shall have been instituted or threatened by
any
Governmental Entity which seeks to prevent or delay the consummation of the
purchase and sale of the Shares.
(e) Closing
Deliveries.
The
Buyer shall have delivered to the Seller the items required pursuant to
Section
2.3(b).
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6.3 Waiver
of Closing Conditions.
(a) No
failure on the part of any party to exercise any power, right, privilege or
remedy under this Agreement, and no delay on the part of any party in exercising
any power, right, privilege or remedy under this Agreement, shall operate as
a
waiver of such power, right, privilege or remedy; and no single or partial
exercise of any such power, right, privilege or remedy shall preclude any other
or further exercise thereof or of any other power, right, privilege or
remedy.
(b) No
party
shall be deemed to have waived any claim arising out of this Agreement, or
any
power, right, privilege or remedy under this Agreement, unless the waiver of
such claim, power, right, privilege or remedy is expressly set forth in a
written instrument duly executed and delivered on behalf of such party; any
such
waiver shall not be applicable or have any effect except in the specific
instance in which it is given.
6.4 Frustration
of Closing Conditions.
Neither
the Buyer nor the Seller may rely on the failure of any condition set forth
in
Section
6.1
or
6.2,
respectively, to be satisfied if such failure was caused by such party’s failure
to act in good faith or to use commercially reasonable efforts to cause the
Closing to occur.
ARTICLE
VII
SURVIVAL,
INDEMNIFICATION
7.1 Survival
of Representations and Warranties, Covenants and Agreements.
(a) The
representations and warranties of the Seller contained in this Agreement shall
survive the Closing hereunder for a period of eighteen (18) months, except
that
(i) Section 3.1
(Organization of the Seller), Section
3.2
(Authorization, Validity and Enforceability), Section
3.3
(No
Conflicts), Section
3.5
(Organization and Qualification of the Company; No Subsidiaries), Section
3.6
(Capitalization of the Company), Section 3.7
(Title
to Shares), Section
3.13(c)
(Environmental Matters), and Section 3.22
(No
Brokers), which shall survive indefinitely, and Section
3.19
(Tax
Matters), which shall survive until sixty (60) days after the expiration of
the
applicable statute of limitations.
(b) Any
covenants or agreements of the Seller to be performed after the Closing, shall
survive for one (1) year after the date on which such post-Closing covenant
or
agreement was required to have been performed.
(c) The
representations and warranties of the Buyer contained in this Agreement shall
survive the Closing hereunder for a period of eighteen (18) months, except
that
the representations and warranties set forth in Section
4.1
(Organization of the Buyer), Section
4.2
(Authorization, Validity and Enforceability), Section
4.3
(No
Conflicts) and Section
4.5
(No
Brokers), shall survive indefinitely.
(d) Any
covenants or agreements to be performed by the Buyer after the Closing Date,
shall survive for one (1) year after the date on which such post-Closing
covenant or agreement was required to have been performed.
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7.2 Indemnification.
(a) Subject
to the provisions of this Agreement, the Seller agrees to indemnify and hold
the
Buyer and its Affiliates (including the Company following the Closing Date),
predecessors, successors and assigns (and their respective officers, directors,
employees and agents) harmless from and against and in respect of all Damages
resulting from or relating to:
(i) A
breach
by the Seller or any of its Affiliates of any surviving representation or
warranty made by the Seller or any such Affiliate in this
Agreement;
(ii) A
breach
by the Seller or any of its Affiliates of any covenant or agreement of the
Seller or any such Affiliate in this Agreement and to be performed post-Closing;
and
(iii) Liabilities
of the Company arising from the operation or conduct of the Seller, the Company
or its Affiliates prior to Closing not disclosed or reserved against in the
Statutory Statements of the Company other than Liabilities arising under
contracts of insurance constituting SRS Business, including the production
of
the SRS Business and the settlement and adjustment of claims.
(b) Subject
to the provisions of this Agreement, the Buyer agrees to indemnify and hold
the
Seller and its Affiliates, predecessors, successors and assigns (and their
respective officers, directors, Employees and agents) harmless from and against
and in respect of all Damages, resulting from or relating to:
(i) A
breach
by the Buyer or any of its Affiliates of any surviving representation or
warranty made by the Buyer or any such Affiliate in this Agreement or any
Ancillary Agreement; and
(ii) A
breach
by the Buyer or any of its Affiliates of any covenant or agreement of the Buyer
or any such Affiliate in this Agreement and to be performed post-Closing;
or
(iii) The
conduct of the Buyer or any of any of its Affiliates of the business of the
Company from and after the Closing Date.
(c) For
purposes of calculating the amount of Damages incurred arising out of or
relating to any breach of a representation or warranty by the Seller, the
references to knowledge (but not for purposes of determining if a breach shall
have occurred), Material Adverse Effect or other materiality qualifications
shall be disregarded.
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7.3 Limitations.
(a) Anything
contained in this Agreement to the contrary notwithstanding, (i) the Buyer
(on
behalf of itself and any of its Affiliates including the Company post-Closing)
shall not make any claim for indemnification pursuant to Section 7.2(a)(i)
until
the aggregate amount of all such claims exceeds One Hundred Thousand Dollars
($100,000) (the “Threshold”)
and if
the Threshold is exceeded, the Seller shall be required to pay only those
amounts in excess of the Threshold up to the Maximum Indemnification Amount,
and
(ii) the Seller shall not be required to make indemnification payments for
any claim for indemnification pursuant to Section 7.2(a)(i)
to the
extent indemnification payments would exceed in the aggregate twenty percent
(20%) of the Purchase Price less the amount of the Policyholders’ Surplus (as
adjusted pursuant to Section
2.4
and
Section 5.12)
(the
“Maximum
Indemnification Amount”);
provided,
however,
the
Seller’s obligation and Liability for any and all breaches of the
representations and warranties set forth in Section 3.2
(Authorization, Validity and Enforceability), Section
3.3
(No
Conflicts), Section 3.5
(Organization and Qualification of the Company; No Subsidiaries), Section
3.6
(Capitalization of the Company), Section
3.7
(Title
to Shares), Section 3.19
(Tax
Matters), and Section
3.22
(No
Brokers) shall not be subject to the Threshold and shall not count toward
determining whether the Threshold or the Maximum Indemnification Amount has
been
reached. In determining the amount to which the Buyer is entitled to assert
a
claim for indemnification pursuant to this Article VII, only actual Damages
net
of all Tax benefits actually realized by the Buyer in the year of receipt of
any
indemnity payment shall be included. The Seller and the Buyer acknowledge and
agree that any event, transaction, circumstance, or Liability, whether
contingent or accrued, for which adequate reserves by the Company have been
established on as of the Closing Date, shall not be used at any time as the
basis of any claim for indemnification under this Article VII, or considered
in
any way in determining whether the Threshold or the Maximum Indemnification
Amount has been reached. In addition, in connection with an alleged breach
of
the Seller’s representations, warranties and covenants under this Agreement, the
Buyer’s Damages shall be net of all reserves established by the Company as of
the Closing Date in connection with the particular item or contingency in
dispute.
(b) The
obligation of the Seller to indemnify the Buyer under Section 7.2(a)
above
shall expire, with respect to any representation, warranty, covenant or
agreement of the Seller, on the date on which the survival of such
representation, warranty, covenant or agreement shall expire in accordance
with
Section
7.1
above,
except with respect to any written claims for indemnification which the Buyer
has delivered to the Seller prior to such date.
(c) The
obligation of the Buyer to indemnify the Seller under Section 7.2(b)
above
shall expire, with respect to any representation, warranty, covenant or
agreement of the Buyer, on the date on which the survival of such
representation, warranty, covenant or agreement shall expire in accordance
with
Section
7.1
above,
except with respect to written claims for indemnification which the Seller
has
delivered to the Buyer prior to such date.
(d) Promptly
after receipt by an indemnified party under this Article VII hereof of
notice of any claim or the commencement of any Action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Article VII hereof, notify the indemnifying party in
writing of the claim or the commencement of that Action stating in reasonable
detail the nature and basis of such claim and a good faith estimate of the
amount thereof, provided that the failure to notify the indemnifying party
shall
not relieve it from any Liability which it may have to the indemnified party
unless and only to the extent such failure materially and adversely prejudices
the ability of the indemnifying party to defend against or mitigate Damages
arising out of such claim. If any claim shall be brought against an indemnified
party, it shall notify the indemnifying party thereof and the indemnifying
party
shall be entitled to participate therein, and to assume the defense thereof
with
counsel reasonably satisfactory to the indemnified party, and to settle and
compromise any such claim or Action; provided,
however,
that
the indemnifying party shall not agree or consent to the application of any
equitable relief upon the indemnified party without its written consent. After
notice from the indemnifying party to the indemnified party of its election
to
assume the defense of such claim or Action, the indemnifying party shall not
be
liable for other expenses subsequently incurred by the indemnified party in
connection with the defense thereof; provided,
however,
that if
the indemnifying party elects not to assume such defense, the indemnified party
may retain counsel satisfactory to it and to defend, compromise or settle such
claim on behalf of and for the account and risk of the indemnifying party,
and
the indemnifying party shall pay all reasonable fees and expenses of such
counsel for the indemnified party promptly as statements therefore are received;
and, provided, further, that the indemnified party shall not consent to entry
of
any judgment or enter into any settlement or compromise without the written
consent of the indemnifying party which consent shall not be unreasonably
withheld. The Buyer and the Seller each agree to render to each other such
assistance as may reasonably be requested in order to insure the proper and
adequate defense of any such claim or proceeding. The indemnified party shall
also have the right to select its own counsel, at its own expense, to represent
the indemnified party and to participate in the defense of such claim, as
applicable.
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7.4 Remedies Exclusive.
Except
as otherwise specifically provided in this Agreement or the Ancillary
Agreements, the remedies provided in this Article VII shall be the
exclusive remedies of the parties hereto from and after the Closing in
connection with any breach of a representation or warranty, or non-performance,
partial or total, of any covenant or agreement contained herein. The provisions
of this Article VII shall apply to claims for indemnification asserted as
between the parties hereto as well as to third-party claims.
7.5 Mitigation.
The
parties shall cooperate with each other with respect to resolving any
indemnifiable claim, including by making commercially reasonable efforts to
mitigate or resolve any such claim or Liability. Each party shall use
commercially reasonable efforts to address any claims or Liabilities that may
provide a basis for an indemnifiable claim such that each party shall respond
to
any claims or Liabilities in the same manner it would respond to such claims
or
Liabilities in the absence of the indemnification provisions of this
Agreement.
7.6 Treatment
of Payments.
All
payments made pursuant to this Article VII shall be treated as an adjustment
to
the Purchase Price.
ARTICLE
VIII
TERMINATION
8.1 Termination
of Agreement.
This
Agreement may be terminated prior to the Closing:
(a) by
either
the Buyer, on the one hand, or by the Seller, on the other hand, upon written
notice to the other if, without fault of the terminating party, the Closing
shall not have occurred on or before March 31, 2009; provided,
however,
that if
all conditions to the obligations of the Buyer, on the one hand, and the Seller,
on the other hand, to consummate the Closing (as set forth in Article VI
hereof), other than obtaining the Insurance Approvals, have then been satisfied,
and the Buyer and/or the Seller are diligently seeking to obtain such
outstanding Insurance Approvals, then the right to terminate this Agreement
pursuant to this clause (a) shall not be available to any party hereto, and
the
obligations hereunder of the parties hereto shall be extended, until September
30, 2009;
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(b) at
any
time by mutual agreement in writing of the parties hereto;
(c) by
the
Buyer if the Seller has breached any representation, warranty, covenant or
agreement contained in this Agreement such that the conditions set forth in
Section 6.1(a)
hereof
would not be satisfied as of any date following the date of this Agreement;
provided, however, that the Buyer may not terminate this Agreement pursuant
to
this Section 8.1(c)
unless
any such breach has not been cured within sixty (60) days after written notice
thereof by the Buyer to the Seller informing the Seller of such
breach;
(d) by
the
Seller if the Buyer has breached any representation, warranty, covenant or
agreement contained in this Agreement such that the conditions set forth in
Section 6.2(a)
hereof
would not be satisfied as of any date following the date of this Agreement;
provided, however, that the Seller may not terminate this Agreement pursuant
to
this Section 8.1(d)
unless
any such breach has not been cured within sixty (60) days after written notice
thereof by the Seller to the Buyer informing the Buyer of such breach;
or
(e) by
the
Seller or the Buyer if: (i) there shall be a final, non-appealable order of
a
federal, state or foreign court in effect preventing consummation of the
Contemplated Transactions; or (ii) there shall be any final action taken, or
any
final statute, rule, regulation or order enacted, promulgated or issued or
deemed applicable to the Contemplated Transactions by any Governmental Entity
that would make consummation of the Contemplated Transactions illegal;
provided,
however,
that
the right to terminate this Agreement under Section
8.1(a), (b), (c), (d) or (e)
shall
not be available to any party if it is then in breach in any material respect
of
any provision or any obligation under this Agreement.
8.2 Effect
of Termination.
Except
as provided in the following sentence, in the event of the termination of this
Agreement pursuant to Section 8.1,
this
Agreement shall thereafter become void and have no effect, and no party hereto
shall have any Liability or obligation to any other party hereto in respect
of
this Agreement, except that the provisions of Section
5.2
(Access;
Confidentiality), Section 5.6
(Press
Releases), Article IX (Miscellaneous) and this Section
8.2
shall
survive any such termination. Nothing herein shall relieve any party from
Liability for any breach of any of its covenants or agreements or willful breach
of its representations or warranties contained in this Agreement prior to
termination of this Agreement.
ARTICLE
IX
MISCELLANEOUS
9.1 No
Third-Party Beneficiaries.
This
Agreement shall not confer any rights or remedies upon any Person other than
the
parties and their respective successors and permitted assigns.
9.2 Entire
Agreement.
This
Agreement and the Ancillary Agreements (including the documents referred to
herein and therein) and the Disclosure Schedules and Exhibits hereto constitute
the entire agreement among the parties with respect to the subject matter hereof
and there are no other understandings, agreements, or representations by or
among the parties, written or oral, related in any way to the subject matter
hereof.
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9.3 Succession
and Assignment.
This
Agreement shall be binding upon and inure to the benefit of the parties named
herein and their respective successors and permitted assigns. No party may
assign either this Agreement or any of its rights, interests or obligations
hereunder without the prior written approval of the other parties
hereto.
9.4 Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original but all of which together will constitute one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other party.
9.5 Headings.
The
section headings contained in this Agreement are inserted for convenience only
and shall not affect in any way the meaning or interpretation of this
Agreement.
9.6 Notices.
All
notices hereunder shall be sufficiently given for all purposes hereunder if
in
writing and delivered personally, sent by documented overnight delivery service
or, to the extent receipt is confirmed, telecopy, telefax or other electronic
transmission service to the appropriate address or number as set forth below.
Notices to the Buyer shall be addressed to:
00
Xxx-xx-Xxxxx Xxxx, Xxxxx 0000
Xxxxxxxx
XX 00
Xxxxxxx
Attn:
Xxx
Xxxxx
Facsimile
No.: 000-000-0000
E-mail:
xxxxxx@xxxxxx.xx
with
copies to:
Xxxxxxx
Xxxxxx Xxxxxx & Dodge LLP
000
Xxxxxxxxx Xxxxxx
Xxx
Xxxx,
XX 00000
Attention:
Xxxxxxxx Xxxxxxxxxxx
Facsimile
No.: 000-000-0000
Email:
xxxxxxxxxxxx@xxxxxxx.xxx
or
at
such other address and to the attention of such other Person as the Seller
may
designate by written notice to the Buyer. Notices to the Seller shall be
addressed to:
GMAC
Insurance Management Corporation
000
Xxxxxxxx Xxxxxxxxxx, Xxxxx 000
Xxxxxxxxxx,
XX 00000-0000
Attn:
Xxxx X. Xxxx, Xx.
Facsimile
No.: (248-263-7393)
Email:
xxxx.x.xxxx@xxxxxx.xxx
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with
copies to:
General
Counsel
GMACI
Holdings, LLC
000
Xxxxxxxx Xxxxxxxxxx, Xxxxx 000
M/C:
000-000-000
Xxxxxxxxxx,
XX 00000-0000
Attn:
Xxxxxx X. Xxxxx
Facsimile
No.: (248-263-4051)
Email:
xxxxxx.x.xxxxx@xx.xxx
or
at
such other address and to the attention of such other Person as the Buyer may
designate by written notice to the Seller.
9.7 Governing
Law, Jurisdiction and Waiver of Jury Trial.
(a) This
Agreement shall be governed by and construed in accordance with the domestic
laws of the State of New York without giving effect to any choice or conflict
of
law provision or rule (whether of the State of New York or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of New York.
(b) Subject
to Section
9.8,
each of
the parties hereto irrevocably and unconditionally submits to the exclusive
jurisdiction of the U.S. District Court for the Southern District of New York,
sitting in New York, New York, or, if such court does not have jurisdiction,
the
Supreme Court of the State of New York, County of New York for purposes of
enforcing this Agreement. In any such action, suit or other proceeding, each
of
the parties hereto irrevocably and unconditionally waives and agrees not to
assert by way of motion, as a defense or otherwise any claims that it is not
subject to the jurisdiction of the above court, that such action or suit is
brought in an inconvenient forum or that the venue of such action, suit or
other
proceeding is improper. Each of the parties hereto also agrees that any final
and unappealable judgment against a party hereto in connection with any action,
suit or other proceeding shall be conclusive and binding on such party and
that
such award or judgment may be enforced in any court of competent jurisdiction,
either within or outside of the United States. A certified or exemplified copy
of such award or judgment shall be conclusive evidence of the fact and amount
of
such award or judgment. Without limiting the foregoing, each party agrees that
service of process on such party by written notice as provided in Section 9.6
shall be
deemed effective service of process on such party.
(c) Subject
to Section
9.8,
each of
the Parties hereto hereby irrevocably waives any and all right to trial by
jury
in any legal proceeding arising out of or related to this Agreement or the
Ancillary Agreements or the transactions contemplated hereby or thereby. The
waivers in Section 9.7(b)
and in
this Section
9.7(c)
have
been made with the advice of counsel and with a full understanding of the legal
consequences thereof and shall survive the termination of this
Agreement.
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9.8 Dispute
Resolution.
Any
dispute, controversy or claim arising out of or relating to this Agreement
or
any other Ancillary Agreement, or the breach thereof, shall be resolved in
the
manner provided in Section 10.8 of the GMAC Re SPA.
9.9 Amendments
and Waivers.
This
Agreement may not be modified or amended except by an instrument or instruments
in writing signed by the party against whom enforcement of any such modification
or amendment is sought. Either party hereto may, only by an instrument in
writing, waive compliance by the other party hereto with any term or provision
of this Agreement on the part of such other party hereto to be performed or
complied with. The waiver by any party hereto of a breach of any term or
provision of this Agreement shall not be construed as a waiver of any subsequent
breach.
9.10 Severability.
Any
term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability
of
the remaining terms and provisions hereof or the validity or enforceability
of
the offending term or provision in any other situation or in any other
jurisdiction.
9.11 Expenses.
Except
as otherwise provided herein, whether or not the Contemplated Transactions
are
consummated, each of the parties hereto will bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the Contemplated Transactions.
9.12 Construction.
The
parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties
and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any of the provisions of this Agreement.
Any reference to any federal, state, local, or foreign statute or law shall
be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise.
9.13 Incorporation
of Exhibits and Disclosure Schedules and Confidentiality
Agreement.
The
Exhibits, and Disclosure Schedules and Confidentiality Agreement identified
in
this Agreement are incorporated herein by reference and made a part
hereof.
[Signature
page follows]
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IN
WITNESS WHEREOF, each of the parties has executed this Agreement as of the
date
first written above.
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MAIDEN
HOLDINGS NORTH AMERICA, LTD.
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By:
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Name:
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Title:
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GMAC
INSURANCE MANAGEMENT CORPORATION
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By:
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Name:
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Title:
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[SIGNATURE
PAGE TO STOCK PURCHASE AGREEMENT]
SELLER’S
DISCLOSURE SCHEDULES
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Schedule
3.3
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Conflicts
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Schedule
3.4
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Consents
and Approvals
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Schedule
3.6
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Capitalization
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Schedule
3.9
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Absence
of Changes
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Schedule
3.10
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Legal
Proceedings
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Schedule
3.11
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Compliance
with Laws
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|
Schedule
3.12(a)
|
Contracts
|
|
Schedule
3.12(b)
|
Breach
of Contracts
|
|
Schedule
3.14(a)
|
Insurance
License and Surplus and Excess Lines Qualifications
|
|
Schedule
3.15
|
Intellectual
Property
|
|
Schedule
3.18
|
Insurance
Policies
|
|
Schedule
3.20
|
Bank
Accounts
|
|
Schedule
3.21
|
Material
Services
|
|
Schedule
3.22
|
Investment
Brokers
|
|
Schedule
5.1
|
Conduct
of Business
|
|
Schedule
5.5(a)
|
Consents
and Approvals
|
|
Schedule
5.5(b)
|
Licenses
and Lines of Authority
|
BUYER’S
DISCLOSURE SCHEDULES
Schedule
4.4 Consents
and Approvals
ANNEXES
Annex
A – Commutation and Termination Amendment
Annex
B –
Fronting and Renewal Rights Agreement
Annex
C –
Partial Commutation and Termination Amendment
by
and between
MAIDEN
HOLDINGS NORTH AMERICA, LTD.
and
GMAC
INSURANCE MANAGEMENT CORPORATION
dated
as of October 31, 2008
TABLE
OF CONTENTS
|
Page
|
||||
|
ARTICLE
I
|
DEFINITIONS
|
1
|
||
|
1.1
|
General
Provisions
|
1
|
||
|
1.2
|
Definitions
|
2
|
||
|
ARTICLE
II
|
PURCHASE
AND SALE OF THE SHARES
|
10
|
||
|
2.1
|
Purchase
and Sale of the Shares
|
10
|
||
|
2.2
|
The
Closing
|
10
|
||
|
2.3
|
Deliveries
at the Closing
|
11
|
||
|
2.4
|
Policyholder’s
Surplus Adjustment
|
14
|
||
|
ARTICLE
III
|
REPRESENTATIONS
AND WARRANTIES OF THE SELLER
|
15
|
||
|
3.1
|
Organization
of the Seller
|
15
|
||
|
3.2
|
Authorization,
Validity and Enforceability
|
15
|
||
|
3.3
|
No
Conflicts
|
16
|
||
|
3.4
|
Seller
Consents and Approvals
|
16
|
||
|
3.5
|
Organization
and Qualification of the Company; No Subsidiaries
|
16
|
||
|
3.6
|
Capitalization
of the Company
|
17
|
||
|
3.7
|
Title
to Shares
|
17
|
||
|
3.8
|
Financial
Statements
|
17
|
||
|
3.9
|
Absence
of Changes
|
17
|
||
|
3.10
|
Legal
Proceedings
|
19
|
||
|
3.11
|
Compliance
with Laws; Permits
|
19
|
||
|
3.12
|
Contracts
|
20
|
||
|
3.13
|
Property
and Assets
|
21
|
||
|
3.14
|
Insurance
License and Surplus and Excess Lines Qualifications
|
22
|
||
|
3.15
|
Intellectual
Property
|
22
|
||
|
3.16
|
Employee
Benefit Plans
|
23
|
||
|
3.17
|
Employee
Relations
|
23
|
||
|
3.18
|
Insurance
Policies
|
24
|
||
|
3.19
|
Tax
Matters
|
24
|
||
|
3.20
|
Bank
Accounts
|
26
|
||
|
3.21
|
Material
Services Provided by Seller; Related Party Transactions
|
26
|
||
-i-
TABLE
OF CONTENTS
(Continued)
|
Page
|
||||
|
3.22
|
No
Brokers
|
26
|
||
|
3.23
|
Absence
of Undisclosed Liabilities
|
26
|
||
|
3.24
|
Insurance
and Reinsurance Matters
|
27
|
||
|
3.25
|
Investment
Company, Etc
|
27
|
||
|
3.26
|
Disclosure
|
27
|
||
|
3.27
|
Exclusion
of Implied Representations and Warranties
|
27
|
||
|
ARTICLE
IV
|
REPRESENTATIONS
AND WARRANTIES OF THE BUYER
|
28
|
||
|
4.1
|
Organization
of the Buyer
|
28
|
||
|
4.2
|
Authorization,
Validity and Enforceability
|
28
|
||
|
4.3
|
No
Conflicts
|
28
|
||
|
4.4
|
Buyer
Consents and Approvals
|
28
|
||
|
4.5
|
No
Brokers
|
29
|
||
|
4.6
|
Disclosure
|
29
|
||
|
4.7
|
Exclusion
of Implied Representations and Warranties
|
29
|
||
|
ARTICLE
V
|
COVENANTS
|
29
|
||
|
5.1
|
Conduct
of Business
|
29
|
||
|
5.2
|
Access;
Confidentiality
|
31
|
||
|
5.3
|
Intercompany
Accounts; Intercompany Agreements
|
32
|
||
|
5.4
|
Cooperation
and Commercially Reasonable Efforts
|
32
|
||
|
5.5
|
Consents
and Approvals and Licensing
|
32
|
||
|
5.6
|
Press
Releases
|
33
|
||
|
5.7
|
Records
Retention, Accounting and Tax Support
|
33
|
||
|
5.8
|
Tax
Matters
|
34
|
||
|
5.9
|
Transfer
Taxes
|
37
|
||
|
5.10
|
Tax
Indemnification
|
37
|
||
|
5.11
|
Interim
Financial Statements; 2008 Annual Statement
|
38
|
||
|
5.12
|
Reduction
in Purchase Price
|
39
|
||
|
5.13
|
Updating
of Schedules
|
39
|
||
|
5.14
|
Change
of Name
|
39
|
||
|
5.15
|
NAIC
Group Code
|
40
|
||
-ii-
TABLE
OF CONTENTS
(Continued)
|
Page
|
||||
|
5.16
|
Ancillary
Agreements
|
40
|
||
|
ARTICLE
VI
|
CONDITIONS
TO CLOSING
|
40
|
||
|
6.1
|
Conditions
to the Obligation of the Buyer to Close
|
40
|
||
|
6.2
|
Conditions
to the Obligation of the Seller to Close
|
41
|
||
|
6.3
|
Waiver
of Closing Conditions
|
42
|
||
|
6.4
|
Frustration
of Closing Conditions
|
42
|
||
|
ARTICLE
VII
|
SURVIVAL,
INDEMNIFICATION
|
42
|
||
|
7.1
|
Survival
of Representations and Warranties, Covenants and
Agreements
|
42
|
||
|
7.2
|
Indemnification
|
43
|
||
|
7.3
|
Limitations
|
43
|
||
|
7.4
|
Remedies Exclusive
|
45
|
||
|
7.5
|
Mitigation
|
45
|
||
|
7.6
|
Treatment
of Payments
|
45
|
||
|
ARTICLE
VIII
|
TERMINATION
|
45
|
||
|
8.1
|
Termination
of Agreement
|
45
|
||
|
8.2
|
Effect
of Termination
|
46
|
||
|
ARTICLE
IX
|
MISCELLANEOUS
|
46
|
||
|
9.1
|
No
Third-Party Beneficiaries
|
46
|
||
|
9.2
|
Entire
Agreement
|
46
|
||
|
9.3
|
Succession
and Assignment
|
47
|
||
|
9.4
|
Counterparts
|
47
|
||
|
9.5
|
Headings
|
47
|
||
|
9.6
|
Notices
|
47
|
||
|
9.7
|
Governing
Law, Jurisdiction and Waiver of Jury Trial
|
48
|
||
|
9.8
|
Dispute
Resolution
|
49
|
||
|
9.9
|
Amendments
and Waivers
|
49
|
||
|
9.10
|
Severability
|
49
|
||
|
9.11
|
Expenses
|
49
|
||
|
Construction
|
49
|
|||
|
9.13
|
Incorporation
of Exhibits and Disclosure Schedules and Confidentiality
Agreement
|
49
|
||
-iii-
