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EXHIBIT 10.33
EXECUTION COPY
ASSET PURCHASE AGREEMENT
This Asset
Purchase Agreement (the "Agreement") entered into on October
15, 2004, by and between NORTH POINTE
INSURANCE COMPANY, a Michigan corporation
("Seller"), and THI HOLDINGS (DELAWARE),
INC., a Delaware corporation ("Buyer").
The Buyer and Seller are referred to
collectively herein as the "Parties".
Certain capitalized terms used herein are
defined in Section l hereof.
RECITALS
WHEREAS, Seller is a Michigan corporation conducting a property
and
casualty insurance company business in the
State of Michigan; and
WHEREAS,
Buyer, through its subsidiaries, operates a property and
casualty
insurance company in the State of Michigan;
and
WHEREAS,
on the terms and subject to the conditions contained in this
Agreement, Buyer desires to pursue certain
policy replacements of contracts of
non-standard automobile insurance currently
underwritten by Seller, and Seller
desires to exit the business of
underwriting and issuing contracts of
non-standard automobile insurance, to
non-renew its existing non-standard
automobile insurance policies, and to
assist Buyer in its pursuit of such
replacements of contracts of non-standard
automobile insurance currently
underwritten by Seller in the State of
Michigan.
NOW,
THEREFORE, in consideration of the premises and the mutual
covenants
and agreements contained in this Agreement,
intending to be legally bound, the
Parties represent, warrant, covenant and
agree as follows:
SECTION 1.
DEFINITIONS.
"Acquired
Assets" means all of Seller's agent lists and Seller's right to
underwrite and offer policyholder
replacement policies connected to Seller's
non-standard automobile business in the
State of Michigan, and the other assets
described in EXHIBIT A hereto.
Notwithstanding anything in this Agreement to the
contrary, both parties acknowledge that
under the American Agency System, the
independent agents that market Seller's
non-standard automobile insurance
products and have the right to solicit
renewals of those policies. The Parties
acknowledge that Seller has not claimed
that it is selling to Buyer any rights
to the renewals that are superior to those
claimed by those agents.
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"Basis"
means any past or present fact, situation, circumstance,
status,
condition, activity, practice, plan,
occurrence, event, incident, action,
failure to act, or transaction that forms
or could form the basis for any
specified consequence.
"Bill of
Sale" has the meaning set forth in Section 10(a).
"Closing"
has the meaning set forth in Section 2(e) below.
"Closing
Date" has the meaning set forth in Section 2(e) below.
"Confidential Material" has the meaning set forth in Section 12(e)
below.
"Damages"
has the meaning set forth in Section 14(b)(i).
"Days"
shall mean calendar days.
"Exhibit
or Schedule" shall mean the exhibits and schedules delivered by
Seller to Buyer and attached to this
Agreement.
"Indemnified Party" has the meaning set forth in Section 14(b)(iii)
below.
"Indemnifying Party" has the meaning set forth in Section
14(b)(iii)
below.
"Knowledge" or words of similar import means actual knowledge
after
reasonable investigation.
"Legal
Requirement" means any federal, state, local, municipal,
foreign,
international or other administrative
order, constitution, law, ordinance,
principle of common law, regulation,
statute or treaty.
"Liability" means any liability (whether known or unknown,
whether
asserted or unasserted, whether absolute or
contingent, whether accrued or
unaccrued, whether liquidated or
unliquidated, and whether due or to become
due), including any liability for
Taxes.
"Material
Adverse Effect" means any material adverse effect on the
business, financial condition, results of
operations or properties as to any of
the Acquired Assets.
"Opt Out"
means an agent's response to Seller's notification of the
transaction described in this Agreement,
instructing the parties not to offer
Buyer's replacement policy to the agent's
clients, a list of which Buyer will
provide to Seller by October 27, 2004.
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"Ordinary
Course of Business" means the ordinary course of business
consistent with past custom and practice
(including with respect to quantity and
frequency).
"Party" or
"Parties" has the meaning set forth in the preface above.
"Person"
means an individual, a partnership, a corporation (including
limited liability companies), an
association, a joint stock company, a trust, a
joint venture, an unincorporated
organization, or a governmental entity (or any
department, agency, or political
subdivision thereof).
"Purchase
Price" has the meaning set forth in Section 2(c) below.
"Security
Interest" means any mortgage, encumbrance, charge, claim,
equitable interest, lien, option, pledge,
Security Interest, or right of first
refusal, including any restriction on use,
voting, transfer, receipt of income,
or exercise of any other attribute of
ownership, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens
for taxes not yet due and payable or
for taxes that the taxpayer is contesting
in good faith through appropriate
proceedings, and (c) purchase money liens
and liens securing rental payments
under capital lease arrangements.
"Tax" or
"Taxes" means any federal, state, local, or foreign income,
gross
receipts, license, payroll, employment,
excise, severance, stamp, occupation,
premium, windfall profits, environmental
(including taxes under Code Section
59A), customs duties, capital stock,
franchise, profits, withholding, social
security (or similar), unemployment,
disability, real property, personal
property, sales, use, transfer,
registration, value added, alternative or add-on
minimum tax or estimated tax, including any
interest, penalty, or addition
thereto, whether disputed or not.
SECTION 2.
BASIC TRANSACTION.
(a)
Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, Buyer agrees
to purchase from Seller, and Seller
agrees to sell, transfer, convey, and
deliver to Buyer, all of the Acquired
Assets free and clear of all Security
Interests at the Closing for the
consideration specified below.
(b) No
Assumption of Seller's Liabilities. Buyer will not assume or
have
any responsibility with respect to any
obligation or Liability of Seller, and
shall not become a successor in interest of
Seller that may result in Buyer
assuming any obligation or Liability of
Seller. For the avoidance of doubt,
without limitation, Buyer shall not assume,
directly or indirectly, any of the
Seller's liabilities and or obligations,
whether direct, indirect, contingent or
otherwise, related to any insurance
policies issued by Seller.
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(c)
Purchase Price. The aggregate purchase price of the Acquired
Assets
shall be Four Million Dollars ($4,000,000)
("Purchase Price"). Subject to the
terms and conditions of this Agreement,
Buyer agrees to wire in immediately
available funds to Seller at Closing, the
sum of Three Million Dollars
($3,000,000) ("Closing Payment"). Buyer
will wire to Seller the sum of One
Million Dollars ($1,000,000) ("Second
Payment") on the first business day
following 60 days after the Closing, upon
Seller's doing the following
post-closing requirements during that 60
day period:
(i) Keeping to
its ordinary course of business, underwrite and
service the in-force non-standard policies, including those
that are renewed on Seller's paper prior to Closing, the
policy terms of which expire after Closing.
(ii) Provide daily
transaction detail supporting upcoming policy
renewals to be effective 40 days prior to expiration for
policies expiring on and after December 1, 2004, in a mutually
agreed upon format. Additionally, Seller will provide to Buyer
a listing of changes and copies of endorsements affecting
policies referenced above.
(iii) Within two (2) business days following Closing, Seller
shall
send letters which have been mutually agreed upon by the
Parties to all of Seller's agents notifying them of this
transaction and specifying the last day for the agent to
submit any pending policies.
(iv) Issue non-renewal
notices along with a cover letter mutually
agreed upon by the Parties to all insureds, agents and legally
interested third parties 33 days prior to expiration in a
mutually agreed upon format for policies expiring on and after
December 1, 2004. For any insured for whom the agent has not
provided a written intent to Opt Out and to whom Buyer wishes
to offer a replacement policy, Buyer will provide Seller with
a policy application, premium quote and any other document
that Buyer deems appropriate, for Seller to mail to the
insured shortly after the mailing of the non-renewal notice.
(v) Send its
Vice President of Marketing or other members of its
marketing staff to visit the agents who produce in the
aggregate no less than 75% of Seller's current book of
non-standard auto business to inform such agents of this
transaction, and attempt to persuade those agents to move
their business to Buyer. Buyer's representative shall be
afforded an opportunity to participate in such agent visits.
(vi) After October 29,
2004, Seller shall cease accepting any
non-standard automobile applications from agents and shall
return any application to the agent from whom it was received.
Upon
Seller performing all of these post-closing requirements during
the
period 60 days following Closing, Buyer
will pay Seller the Second Payment
within two (2) business days of the 60th
day following Closing. For the
avoidance of doubt, however, Seller's
obligation to
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continue to perform all of the above
post-closing requirements, shall be ongoing
following the payment of the Second
Payment, will not cease upon payment of the
Second Payment, and shall continue until
all of Seller's non-standard automobile
policies shall legally non-renew.
Seller has
provided necessary instructions for wire transfers of the
Closing Payment. Seller will provide to
Buyer any change in wire transfer
instructions no less than three days prior
to the Second Payment date.
(d)
Closing. The closing of the transactions contemplated herein
(the
"Closing") will take place on or before
October 15, 2004 in Southfield, MI at
Seller's business offices, at which time
and place, subject to the satisfaction
or waiver of each condition precedent, the
assets and instruments of conveyance
will be delivered and all rights, title and
interest will vest in the party
receiving them (the "Closing Date").
(e) Bonus
Payments. In addition to the Purchase Price, subject to the
terms and conditions of this Agreement,
Buyer shall pay Seller performance
bonuses for assisting Buyer in converting
Seller's in-force policies (as
measured at Closing), such performance
bonuses to be paid as bonus level
percentages are achieved and reported in
Buyer's reports ("Bonus Payments"). A
policy is "renewed" when the first payment
is received on Buyer's new or renewal
policies relating to Seller's previous
in-force policy. Seller shall pay Buyer
$250,000 for assisting Buyer if Buyer
converts 28% of the Sellers' in-force
policies (as measured from Closing) no
later than nine months following the
Closing. Buyer shall pay Seller an
additional $250,000 if the number of in-force
policies that are converted reaches 35% of
the Sellers' in-force policies (as
measured from Closing) no later than nine
months following the Closing. Bonus
Payments will be paid as earned and
reported in Buyer's reports. Buyer will
provide Seller daily transaction detail
supporting its replacements of Seller's
policies in a mutually agreed upon
format.
The
Parties will calculate the bonus level percentages as follows:
(i) Credit will
be given for policies that cancel and renew with
Buyer through the same agent, and within 45 days of the date
of cancellation.
(ii) Policies written
by agents who have been cancelled by any of
Buyer's affiliates in the 4 year period prior to closing will
not be included in the calculation of in-force policies at
Closing.
(iii) Policies written by agents to whom Buyer does not offer
an
agent agreement will not be included in the calculation of
in-force policies at Closing.
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In order
for Buyer to achieve its goal of transferring business and for
Seller to achieve its goal of receiving the
Bonus Payments, the Parties also
agree Buyer will not file a rate change
regarding Seller's insurance contracts
in excess of 2% overall for a period of
four months following the Closing Date.
SECTION 3.
REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby
represents
and warrants to the Buyer as follows:
(a)
Organization. Seller is duly organized and validly existing as
a
corporation and in good standing under the
laws the State of Michigan, and has
all requisite power and authority to own,
lease, and sell the assets, properties
and business contemplated in this
Agreement.
(b)
Authority. Seller has all requisite corporate power and authority
to
execute and deliver this Agreement and to
carry out its obligations hereunder.
The execution and delivery of this
Agreement and the consummation of the
transactions contemplated hereby have been
duly authorized by all necessary
corporate action on the part of Seller and
this Agreement has been duly executed
and delivered by Seller and constitutes the
valid and legally binding obligation
of Seller, enforceable against it in
accordance with its terms, except as
enforceability may be limited by applicable
bankruptcy, insolvency,
reorganization, moratorium, rehabilitation,
or similar laws affecting the
enforcement of creditors' rights
generally.
(c)
Brokers' Fees. Seller has no liability or obligation to pay any
fees
or commissions to any broker, finder, or
agent with respect to the transactions
contemplated by this Agreement for which
the Buyer or any of Buyer's affiliates
could become liable or obligated. Seller
will indemnify Buyer for any
misrepresentation contained in this Section
3(c).
(d)
Noncontravention. Neither the execution and the delivery of
this
Agreement, nor the consummation of the
transactions contemplated thereby, will
(i) violate any statute, regulation, rule,
injunction, judgment, order, decree,
ruling, charge, or other restriction of any
government, governmental agency, or
court to which Seller is subject or any
provision of the charter or bylaws of
Seller or (ii) conflict with, result in a
breach of, constitute a default under,
result in the acceleration of, create in
any party the right to accelerate,
terminate, modify, or cancel, or require
any notice under any material
agreement, contract, lease, license or
instrument to which Seller or any of its
material properties or assets are subject
(or result in the imposition of any
Security Interest upon any of its assets),
except where the violation, conflict,
breach, default, acceleration, termination,
modification, cancellation, failure
to give notice or creation of a Security
Interest would not materially impair
the ability of the Parties to consummate
the transactions contemplated by this
Agreement.
(e) Title
to Acquired Assets. Seller has good and marketable title to
each
of the Acquired Assets, and except for
liens to be paid and released at Closing,
all of which shall be
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satisfied by Seller at or prior to Closing,
each of the Acquired Assets is free
and clear of all Security Interests,
restrictions, liens and other encumbrances.
(f)
Notices, Consents and Approvals. Other than as set forth in
SCHEDULE
3(f) hereto, the execution and delivery by
the Seller of this Agreement, the
performance by the Seller of Seller's
obligations hereunder, and the
consummation by the Seller of the
transactions contemplated hereby do not
require the Seller to obtain any consent,
approval or action of, or make any
filing with or give any notice to, any
governmental or regulatory body or other
third party.
(g)
Undisclosed Liabilities. There is no Liability relating to the
transactions contemplated under this
Agreement (and to the Knowledge of Seller
there is no Basis for any present or future
charge, complaint, action, suit,
proceeding, hearing, investigation, claim,
or demand against Seller giving rise
to any such Liability) not retained by
Seller that has not been disclosed by
Seller to Buyer or shall not be disclosed
by Seller to Buyer prior to the
Closing Date.
(h) Legal
Compliance. Seller is not in violation of any federal, state or
local law, ordinance, statute, rule,
regulation, order, judgment, injunction,
award, decree or requirement of any
governmental or regulatory body, court or
arbitrator, which violation individually or
in the aggregate would have a
Material Adverse Effect on any of the
Acquired Assets, and Seller has not
received any written notice that any such
violation is being or may be alleged.
(i) Powers
of Attorney. There are no outstanding powers of attorney
executed that would have any effect on the
Acquired Assets or the transactions
contemplated herein.
(j)
Litigation. To the Knowledge of the Seller, there are no
actions,
suits, hearings, arbitration, proceedings
(public or private) or governmental
investigations that have been brought by or
against any governmental authority
or any other Person (collectively,
"Proceedings") pending or threatened in
writing against or affecting the Seller or
any of the Acquired Assets as to
which could result in a determination or
resolution adverse and which, if so
adversely determined or resolved, would
have a Material Adverse Effect; and (ii)
there are no existing or threatened in
writing orders, judgments or decrees
(other than those of general application)
of any governmental authority which
would have a Material Adverse Effect on any
of the Acquired Assets.
(k) Tax
Matters. Seller has, and as of the Closing Date will have, paid
and discharged all Taxes owed by Seller
attributable to the Acquired Assets or
the operation of the Acquired Assets by
Seller (or any affiliate) that are due
and payable, excepting such taxes,
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assessments and other levies which will not
be due until or after the Closing
Date and Taxes that the taxpayer is
contesting in good faith through appropriate
proceedings.
(l)
Disclosure. To the best of Seller's Knowledge, this Agreement,
including the Schedules and any other
Exhibits, does not contain any untrue
statement of a material fact or omit to
state any fact necessary in order to
make the statements and information
contained herein, in light of the
circumstances in which they are made, not
misleading. There is no fact which has
not been disclosed to the Buyer in writing
of which Seller is aware and which is
or could reasonably be anticipated to be
material to Buyer's decision to
consummate the transactions contemplated by
this Agreement on the terms and
conditions set forth herein.
SECTION 4.
REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby
represents
and warrants to the Seller as follows:
(a)
Organization. Buyer is duly organized and validly existing as a
limited liability company and in good
standing under the laws the State of
Delaware.
(b)
Authority. Buyer has all requisite corporate power and authority
to
execute and deliver this Agreement and to
carry out its obligations hereunder.
The execution and delivery of this
Agreement and the consummation of the
transactions contemplated hereby have been
duly authorized by all necessary
corporate action on the part of Buyer and
this Agreement has been duly executed
and delivered by Buyer and constitutes the
valid and legally binding obligation
of Buyer, enforceable against it in
accordance with its terms, except as
enforceability may be limited by applicable
bankruptcy, insolvency,
reorganization, moratorium, rehabilitation,
or similar laws affecting the
enforcement of creditors' rights
generally.
(c)
Brokers' Fees. Buyer has no liability or obligation to pay any fees
or
commissions to any broker, finder, or agent
with respect to the transactions
contemplated by this Agreement for which
the Seller or any of Seller's
affiliates could become liable or
obligated. Buyer will indemnify Seller for any
misrepresentation contained in this Section
4(c).
(d)
Noncontravention. Neither the execution and the delivery of
this
Agreement, nor the consummation of the
transactions contemplated thereby, will
(i) violate any statute, regulation, rule,
injunction, judgment, order, decree,
ruling, charge, or other restriction of any
government, governmental agency, or
court to which Buyer is subject or any
provision of the charter or bylaws of
Buyer or (ii) conflict with, result in a
breach of, constitute a default under,
result in the acceleration of, create in
any party the right to accelerate,
terminate, modify, or cancel, or require
any notice under any material
agreement, contract, lease, license or
instrument to which Buyer or any of its
material properties or assets are subject
(or result in the imposition of any
Security Interest upon any of its assets),
except where the violation, conflict,
breach,
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default, acceleration, termination,
modification, cancellation, failure to give
notice or creation of a Security Interest
would not materially impair the
ability of the Parties to consummate the
transactions contemplated by this
Agreement.
(e)
Notices, Consents and Approvals. Other than as is set forth in
SCHEDULE 4(e) hereto, the execution and
delivery by the Buyer of this Agreement,
the performance by the Buyer of its
obligations hereunder, and the consummation
by the Buyer of the transactions
contemplated hereby do not require the Buyer to
obtain any consent, approval or action of,
or make any filing with or give any
notice to, any person or any governmental
or regulatory body, or other third
party.
(f)
Financing. The Buyer has, and will have at Closing, available cash
or
existing borrowing facilities that together
are sufficient to enable it to
consummate the transaction contemplated by
this Agreement.
(g) Due
Diligence. Buyer has completed its legal, business, and
financial
due diligence with the results being to the
satisfaction of Buyer in its sole
discretion.
SECTION 5.
SELLER COVENANTS. The Seller covenants and agrees as follows:
(a)
General. The Seller will use Seller's best efforts to take all
actions
and to do all things necessary, proper, or
advisable in order to consummate and
make effective the transactions
contemplated by this Agreement.
(b)
Notices and Consents. Seller will give any notices to third
parties,
and Seller will use Seller's best efforts
to obtain any third party consents,
that Buyer may reasonably request in
connection with the matters referred to in
SECTIONS 3(f) AND 4(e) above. Seller will
give any notices to, make any filings
with, and use its best efforts to obtain
any necessary authorizations, consents,
and approvals of governments and
governmental agencies in connection with the
matters referred to herein. In addition,
Seller shall assist Buyer in providing
notice of the transaction, in a form
satisfactory to both parties, at Closing to
the agents who write Seller's Michigan
non-standard automobile policies. Such
notice shall allow for the agent to notify
the Buyer that Buyer should not send
any policy application to agent's clients
(the "Opt Out").
(c)
Preservation of Acquired Assets. Prior to the Closing, Seller will
use
Seller's best efforts to keep the Acquired
Assets substantially without material
negative change, including present physical
facilities, working conditions, and
relationships with lessors, licensors,
suppliers, customers and employees.
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(d) Full
Access. Seller will permit representatives of Buyer to have
reasonable access during normal business
hours to all premises, properties,
personnel, books, records (including tax
records), contracts, and documents
pertaining to the Acquired Assets.
(e) Notice
of Developments. Seller shall give prompt written notice to the
Buyer of any development causing a breach
of any of its own representations and
warranties. No disclosure by the Parties
pursuant to this Section 5(e), however,
shall be deemed to amend or supplement the
Schedules or Exhibits or to prevent
or cure any misrepresentation, breach of
warranty, or breach of covenant. Seller
shall give prompt written notice to Buyer
upon learning of any Basis which is a
breach of Buyer's representations; provided
however, Seller agrees that this
Section 5(e) shall in no way limit or waive
the remedies available to Buyer
under this Agreement.
(f)
Maintenance of Records. Seller will maintain and continue to keep
the
books, accounts and records associated with
the Acquired Assets in the usual
manner and consistent with prior
practice.
(g) Other
Consents. Seller will use Seller's best efforts to assist Buyer
in obtaining any approvals that may be
necessary in connection with the sale of
the Acquired Assets.
(h)
Continued Effectiveness of Representations and Warranties. From
the
date hereof, through the Closing Date,
Seller shall use Seller's best efforts so
that the representations and warranties
contained in this Agreement hereof shall
continue to be true and accurate on and as
of the Closing Date.
(i)
Non-Compete. Seller shall not directly or indirectly compete
with
Buyer's use of the Acquired Assets for a
period of three (3) years following the
Closing Date in the geographic locations as
further set forth in EXHIBIT B
hereto.
SECTION 6.
BUYER COVENANTS. The Buyer covenants and agrees:
(a)
General. The Buyer will use its best efforts to take all actions
and
to do all things necessary, proper, or
advisable in order to consummate and make
effective the transactions contemplated by
this Agreement.
(b) Notice
of Developments. The Buyer will give prompt written notice to
Seller of any development causing a breach
of any of its own representations and
warranties in Section 4 above. No
disclosure by the Parties pursuant to this
Section 6(b) however shall be deemed to
prevent or cure any misrepresentation,
breach of warranty, or breach of covenant.
Buyer shall give prompt notice to
Seller upon learning of any Basis that
causes a breach of any of Seller's
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representations; provided however, the
Buyer agrees that this Section 6(b) shall
in no way limit or waive the remedies
available to Seller under this Agreement.
(c) Other
Consents. Buyer will use Buyer's best efforts to assist Seller
in obtaining any approvals that may be
necessary in connection with the sale of
the Acquired Assets.
(d)
Continued Effectiveness of Representations and Warranties. From
the
date hereof, through the Closing Date,
Buyer shall use Buyer's best efforts so
that the representations and warranties
contained in this Agreement hereof shall
continue to be true and accurate on and as
of the Closing Date.
SECTION 7.
CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of Seller
to
consummate this transaction are subject to and conditioned upon
the
satisfaction, at or prior to the Closing Date, of each of the
following
conditions
precedent, any of which may be waived by the Seller at or prior
to the
Closing Date:
(a)
Accuracy of Representations and Warranties. The representations
and
warranties made by Buyer herein shall be
true and correct in all material
respects on the Closing Date and shall be
confirmed in writing at the Closing by
Buyer.
(b) Performance
by Buyer. All of the terms and conditions of this
Agreement to be complied with and performed
by Buyer on or before the Closing
Date shall have been complied with and
performed in all material respects,
including, without limitation, the delivery
of each of the items to be delivered
under Section 11 hereof.
(c) Legal
Challenge. No suit, action or other proceeding brought by any
federal or state government or agency shall
be pending, and no claim by any such
authority shall have been asserted, before
any court or governmental agency in
which it is or will be sought to restrain
or prohibit the consummation of the
transactions contemplated hereby.
(d)
Consents and Approvals. Seller shall have obtained all
necessary
consents and approvals.
(e)
Non-Performance. If any of the conditions contained in this Section
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shall not be fulfilled or performed at or
before the Closing Date to the
reasonable satisfaction of Seller, Seller
may, by written notice to Buyer,
terminate all its obligations hereunder
(except as otherwise provided herein)
and where the non-performance or
non-fulfillment of a condition is as a result
of a breach of any covenant, representation
or warranty on the part of Buyer
herein contained, may bring an action
against Buyer for damages suffered by
Seller pursuant to Section 13 below,
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provided that any of the said condition may
be waived in whole or in part by
Seller without prejudice to any claims it
may have for breach of a covenant,
repr
