Exhibit 2.2
ASSET PURCHASE AGREEMENT
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This ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of
August
26, 2008, is entered into by and among CASTLEPOINT REINSURANCE
COMPANY, LTD., a
Bermuda corporation ("CPRE"), TOWER INSURANCE COMPANY OF NEW YORK,
a New York
corporation ("TICNY"), TOWER NATIONAL INSURANCE COMPANY, a
Massachusetts
corporation ("TNIC"), PRESERVER INSURANCE COMPANY, a New Jersey
corporation
("PIC"), MOUNTAIN VALLEY INSURANCE COMPANY, a New Hampshire
corporation
("MVIC"), and NORTHEAST INSURANCE COMPANY, a Maine corporation
("NIC" and,
together with TICNY, TNIC, PIC, and MVIC, the "Purchasing
Insurers"), and TOWER
RISK MANAGEMENT CORP., a New York corporation ("TRM").
RECITALS
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A. On or before the Closing Date, CPRE will have purchased from
Brookfield US Corporation, a Delaware corporation ("BUSC"), 100% of
the issued
and outstanding shares of the common stock of HIG, Inc., a Delaware
corporation
("HIG"), the ultimate parent of Hermitage Insurance Company, a New
York
corporation ("HIC"), and Kodiak Insurance Company, a New Jersey
corporation
("KIC" and, together with HIC, the "Selling Insurers" and, together
with HIG and
its other direct and indirect subsidiaries, including American
Resources
Insurance Company, Inc., the "HIG Group") pursuant to the Stock
Purchase
Agreement by and among CPRE, BUSC, and HIG, dated the date hereof
(the "Stock
Purchase Agreement").
B. CPRE desires to cause each member of the HIG Group, including
the
Selling Insurers, to sell to the Purchasing Insurers and TRM, and
TRM and each
Purchasing Insurer desires to acquire from the HIG Group, including
the Selling
Insurers, the Transferred Assets, all upon the terms and subject to
the
conditions set forth in this Agreement.
C. The Purchasing Insurers and TRM each desires to make Offers
of
Employment to selected employees of the HIG Group, all upon the
terms and
subject to the conditions more fully set forth below.
NOW, THEREFORE, in consideration of the foregoing recitals and
the
mutual covenants and agreements set forth herein, the parties
hereto, intending
to be legally bound, hereby agree as follows:
ARTICLE 1
DEFINITIONS
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1.1 Definitions. Capitalized terms used in this Agreement and
not
otherwise defined herein shall have the meanings set forth in this
Section 1.1.
"Affiliate" of any Person means another Person that directly or
indirectly controls, is controlled by, or is under common control
with, such
first Person, where "control" means the possession, directly or
indirectly, of
the power to direct or cause the direction of the management
policies of a
Person, whether through the ownership of voting securities, by
contract, as
trustee or executor, or otherwise. For the avoidance of doubt, for
the purposes
of this Agreement, the Tower Entities and the CPRE Entities shall
not be
Affiliates.
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"Ancillary Agreements" means (i) the Bills of Sale and General
Assignment Agreements, (ii) the Tower Guaranty; (iii) the
CastlePoint Guaranty,
(iv) the assignment of the Lease Agreements, (v) the assignment of
the Producer
Agreements, and (vi) the amendments referred to in Sections 2.5(a)
and 2.5(b).
"Applicable Law" means any applicable order, law, statute,
regulation,
rule, pronouncement, ordinance, bulletin, writ, injunction,
directive, judgment,
decree, principle of common law, constitution or treaty enacted,
promulgated,
issued, enforced or entered by any Governmental Authority
applicable to the
relevant Person, or any of such Person's respective businesses,
properties or
assets.
"Bills of Sale and General Assignment Agreements" means one or
more
Bills of Sale and General Assignment Agreements in a form to be
mutually agreed
by CPRE and TRM.
"Books and Records" means originals or copies of the
administrative
records, claim records, policy forms and files, sales records and
files,
customer lists, Producer lists, policy information and underwriting
records (in
whatever form maintained, including computer generated, recording
or stored)
owned by, in the possession of or under the control of any member
of the HIG
Group, including any Selling Insurer, relating to the Business,
Transferred
Assets, or the Employee Group.
"Brokerage Management Agreement" means that certain Management
Agreement entered into on July 1, 2007 by and between CPIC and TRM,
as may be
amended from time to time.
"Business" means all the business and operations of HIG Group and
each
member thereof, including each of the Selling Insurers.
"Business Day" means any day other than a Saturday, Sunday or a day
on
which banking institutions in the State of New York are permitted
or obligated
by Applicable Law to be closed for regular banking business.
"CastlePoint Guaranty" means the Guaranty in the form set forth
at
Exhibit B by which CPH guarantees to pay all amounts due by each of
the CPRE
Entities under this Agreement.
"CPH" means CastlePoint Holdings, Ltd.
"CPIC" means CastlePoint Insurance Company.
"CPRE" has the meaning set forth in the prefatory paragraph of
this
Agreement.
"CPRE Entities" means CPH and its direct and indirect subsidiaries,
but
excluding the Tower Entities.
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"Closing Date" means the date on which the Closing occurs.
"Code" means the United States Internal Revenue Code of 1986,
as
amended.
"Extra-Contractual Obligations" means any Liabilities or
obligations
not covered under the express terms and conditions of, or in excess
of the
policy limits under, any Insurance Contract.
"Governmental Authority" 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, administrative agency, commission,
tribunal or
organization or any political or other subdivision, department,
branch or
representative of any of the foregoing.
"HIG Extension" means the extension of the term of each of the
Brokerage Management Agreement, the Master Agreement and the
Intercompany
Agreements for a one-year period to begin on the date that is the
first day
following the expiration of the term of each such agreement as in
effect on the
date hereof; provided that if, prior to the first day following the
expiration
of the term of each such agreement as in effect on the date hereof,
the Merger
Agreement shall have been terminated and the Two-Year Extension
shall have
become effective, such extension shall be for a six-month period to
begin on the
date that is the first day following the expiration of the term of
each such
agreement as in effect on the date hereof (and prior to the
Two-Year Extension);
and provided, further, that each such extended agreement shall be
on the same
terms and conditions as in effect immediately prior to such
extension, except
that the provisional loss ratio will be adjusted from 61% to 58%
(and the actual
loss ratios will be adjusted accordingly) and the provisional
ceding commission
and provisional management fee will be adjusted from 34% to 37%
(and the actual
ceding commission and management fee will be adjusted accordingly),
as
applicable.
"HIG Group" shall have the meaning set forth in the recitals to
this
Agreement.
"Insurance Contracts" means all insurance contracts, policies,
certificates, binders, slips, covers or other agreements of
insurance, including
all supplements, riders, endorsements, renewals and extensions
thereof produced,
issued, renewed, written, and/or delivered by each Selling
Insurer.
"Insurer Affiliate" means an Affiliate of such Person that is a
duly
licensed, eligible or otherwise authorized insurance company.
"Intercompany Agreements" means those agreements described on
Schedule
1.1(a).
"Lease Agreement(s)" means the lease agreements to which any member
of
the HIG Group is a party.
"Liability" or "Liabilities" means a liability, obligation,
commitment,
expense, claim or cause of action (of any kind or nature
whatsoever, whether
absolute, accrued, contingent or other, and whether known or
unknown).
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"Litigation" means any action, cause of action (whether at law or
in
equity), suit, proceeding, arbitration, mediation, claim or
complaint by any
Person, and any administrative or other similar proceeding,
criminal
prosecution, or investigation by any Governmental Authority.
"Master Agreement" means that certain Master Agreement dated as
of
April 4, 2006, by and between Tower Parent, TICNY and TNIC, on the
one hand, and
CPH and CastlePoint Management Corp., on the other hand, as amended
or as
modified by addenda thereto.
"Merger Agreement" means that certain Agreement and Plan of
Merger,
dated as of August 4, 2008, by and among Tower Parent, CPH and
Ocean I
Corporation.
"Non-Renewal Notice" means a written notice provided by TRM, at
the
sole option of TRM, at any time following the Closing, of its
election to cause
any of the Selling Insurers to non-renew specified Insurance
Contracts.
"Other Liabilities" means all Liabilities of any member of the
HIG
Group (of any kind or nature whatsoever, whether absolute, accrued,
contingent
or other, and whether known or unknown), as such liabilities exist
as of the
Closing, that would not be an Assumed Liability or Excluded
Liability but for
the application of this definition.
"Party" or "Parties" shall mean a party or the parties identified
in
the prefatory paragraph to this Agreement.
"Person" means an individual, corporation, partnership,
association,
joint stock company, limited liability company, Governmental
Authority, trust,
joint venture, labor union, estate, unincorporated organization or
other entity.
"Policyholders" means each policyholder under each of the
Insurance
Contracts.
"Producer Agreements" means any and all agreements, whether oral
or
written, between any of the Selling Insurers or any other member of
the HIG
Group, on the one hand, and any Producer, on the other hand, with
respect to the
sale or marketing of Insurance Contracts.
"Producers" means any Person who markets, sells, solicits,
negotiates,
or procures, or may have marketed, sold, solicited, negotiated, or
procured, any
Insurance Contract by, through, or on behalf of any Selling
Insurer.
"Purchasing Insurers" shall have the meaning set forth in the
recitals
to this Agreement.
"Representative" means, with respect to any Person, such
Person's
officers, directors, employees, agents, representatives, and
Affiliates,
including any investment banker, financial advisor, accountant,
actuary,
appraiser, analyst, consultant, legal counsel, agent,
representative or expert
retained by or acting on behalf of such Person or its
Affiliates.
"Selling Insurers" has the meaning set forth in the recitals to
this
Agreement.
"Stock
Purchase Agreement" has the meaning set forth in the recitals
to
this Agreement.
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"Taxes" means all taxes, charges, duties, fees, levies, or
other
similar assessments or liabilities, including all net and gross
income, gross
receipts, ad valorem, premium, excise, real property, personal
property,
windfall profit, sales, use, transfer, license, withholding,
employment,
payroll, profit, estimated, severance, stamp, occupation, value
added,
registration, environmental, workers' compensation, social security
and
franchise taxes imposed by the United States Internal Revenue
Service or any
taxing authority (whether domestic or foreign including any state,
county, local
or foreign government or any subdivision or taxing agency thereof
(including a
United States possession)); and such term shall include any
interest, fines,
penalties, assessments, or additions to tax relating to, resulting
from,
attributable to, or incurred in connection with any such tax or any
contest or
dispute thereof.
"Tower Entities" means the Tower Parent and its direct and
indirect
subsidiaries, but excluding the CPRE Entities.
"Tower Guaranty" means the Guaranty in the form set forth at
Exhibit C
by which Tower Parent guarantees to pay all amounts due by each of
the Tower
Entities under this Agreement.
"Tower Parent" means Tower Group, Inc., the ultimate parent of TRM
and
the Purchasing Insurers.
"Transfer Date" means in respect of a Transferred Employee, the
date on
which a Transferred Employee becomes an employee of any of the
Tower Entities.
"Transferred Assets" means the properties, assets and rights of
every
nature, kind and description, tangible and intangible, including
the Producer
Agreements and the rights of the members of the HIG Group
thereunder, whether
real, personal or mixed, whether accrued, contingent or otherwise
and whether
now existing or hereinafter acquired of any member of the HIG Group
other than
the Excluded Assets.
"Two-Year Extension" shall have the meaning given to such term in
the
Merger Agreement.
1.2 Terms Defined Elsewhere in this Agreement. For purposes of
this
Agreement, the following terms have meanings set forth in the
sections
indicated:
Term
Section
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Allocable Amount
2.7(d)
Allocation Schedule
2.7(d)
Assumed Liabilities
2.3
Closing
2.1
CPRE Indemnified Parties
11.3(a)
Dispute Notice
2.10(b)
Disputed Item
2.10(b)
Employee Group
7.1
Employment Agreement
7.2
Excluded Assets
2.2(b)
Excluded Liabilities
2.4
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HIG Adjustment Amount
2.10(a)
HIG Adjustment Amount Statement
2.10(a)
HIG Extension Anniversary Date
2.10(a)
HIG Payment Amount Approvals
2.10(e)
Indemnified Party
11.4
Indemnifying Party
11.4
Independent Accountant
2,10(d)
Loss or Losses
11.2(a)
Non-Transferred Employees
7.1
Offer of Employment
7.1
Purchase Price
2.7(a)
Purchaser Indemnified Parties
11.2(a)
Purchasing Insurer Policy
2.9(b)
Required Approvals
8.1
Resolution Period
2,10(c)
Tax Dispute Accountant
2.7(d)
Termination Date
10.1(b)
Transfer Taxes
12.9
Transferred Employees
7.1
Unresolved Items
2,10(d)
UPR Fee
2.7(c)
ARTICLE 2
TRANSFER OF ASSETS
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2.1 The Closing. The closing of the transactions contemplated by
this
Agreement ("Closing") will take place as promptly as practicable
following the
satisfaction or waiver of the conditions set forth in Articles 8
and 9 (other
than conditions that by their nature are to be satisfied at the
Closing, but
subject to the satisfaction or waiver of those conditions at such
time) or at
such other time and place as the Parties may agree; provided that
the Parties
shall use their commercially reasonable efforts to cause (i) the
Closing to take
place immediately following and at the same location as the closing
under the
Stock Purchase Agreement, but in no event later than the
Termination Date, and
(ii) the transactions contemplated by Article 2 of this Agreement
to be deemed
to be effective immediately following the effective time of the
closing under
the Stock Purchase Agreement.
2.2 The
Closing Transactions.
(a) Transferred Assets. Upon the terms and subject to
the conditions and limitations set forth in this Agreement, at the
Closing, CPRE
shall cause each member of the HIG Group to sell, assign and
transfer to TRM or
any other Tower Entity, as directed by TRM, and TRM (either
directly or through
one or more Tower Entities, as directed by TRM) will acquire and
accept, all of
the respective rights, title and interest of each member of the HIG
Group in and
to the Transferred Assets. All sales, assignments and transfers of
the
Transferred Assets to TRM or any other Tower Entity, as directed by
TRM,
hereunder will be evidenced by one or more Bills of Sale and
General Assignment
Agreements, which will be executed and delivered by each member of
the HIG
Group, as applicable, on the Closing Date.
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(b) Excluded Assets. The Transferred Assets shall not
include, or otherwise be deemed to include any of the following
(collectively,
the "Excluded Assets"):
(i)
the Insurance Contracts;
(ii) any shares of the share capital of any
member of the HIG Group or any
other equity security issued by any member of the HIG Group;
and
(iii) those other properties, assets and
rights expressly identified on
Exhibit A.
(c) Offers of Employment. On or before the Closing
Date, in accordance with Article 7, the Purchasing Insurers shall
extend Offers
of Employment to employees in the Employee Group selected by TRM
and the
Purchasing Insurers.
2.3 Assumption of Liabilities. Upon the terms and subject to
the
conditions and limitations set forth in this Agreement, at the
Closing, TRM or
the applicable Tower Entity will assume from the applicable member
of the HIG
Group, as appropriate, any and all Liabilities of such Person of
any kind or
character to the extent relating to or arising from the ownership
or use of the
Transferred Assets or the Employee Group, including Transferred
Employees and
Non-Transferred Employees, as such Liabilities exist as of the
Closing, but
excluding all Excluded Liabilities, regardless of when such
Liabilities may be
discovered or reported ("Assumed Liabilities"), including the
following
Liabilities:
(a) any Liability relating to any failure or alleged
failure to comply with, or any violation or alleged violation of,
any Applicable
Law to the extent relating to the Transferred Assets, the Employee
Group,
including any Transferred Employees and any Non-Transferred
Employees;
(b) any Liability to the extent relating to any
breach of any contract or agreement included in the Transferred
Assets;
(c) any Liability to the extent relating to any
employee within the Employee Group, including any Transferred
Employee or any
Non-Transferred Employee, including any Liability to the extent
relating to (i)
any employee benefit plan or employee benefits maintained by any
member of the
HIG Group or any Person who was an Affiliate of the HIG Group on or
prior to the
Closing Date with respect to any employee within the Employee
Group, including
any Transferred Employee or any Non-Transferred Employee, (ii) the
termination
of any employee benefit or employee benefit plans with respect to
any employee
within the Employee Group, including any Transferred Employee or
any
Non-Transferred Employee, (iii) payroll and employee benefits
accrued by any
employee within the Employee Group, including any Transferred
Employee or any
Non-Transferred Employee, (iv) the termination of employment of any
employee
within the Employee Group, including any Transferred Employee or
any
Non-Transferred Employee, including, any termination of any such
Person deemed
to have occurred upon the consummation of the transactions
contemplated by this
Agreement or the Stock Purchase Agreement, or (v) any "Success
Bonus", "Stay
Bonus" or other bonus, profit sharing or incentive compensation
payable to any
Transferred Employee pursuant to any bonus plan of or maintained by
any member
of the HIG Group or any Person who was an Affiliate of the HIG
Group on or prior
to the Closing Date;
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(d) any Liability arising under any Producer
Agreement or to the extent relating to the Producer under any such
Producer
Agreement or the activities of such Producer under such Producer
Agreement;
(e) 50% of any Other Liability; and
(f) any Liability for Taxes relating to or arising
from the ownership or use of the Transferred Assets, or any of the
Employee
Group, including the Transferred Employees and the Non-Transferred
Employees
prior to the Closing Date.
2.4 Excluded Liabilities. The members of the HIG Group shall
retain,
and none of TRM, the Purchasing Insurers or any other Tower Entity
shall assume,
any Liabilities of any member of the HIG Group or any other CPRE
Entity set
forth in this Section 2.4, as such Liabilities exist as of the
Closing and
regardless of when discovered or reported (collectively, the
"Excluded
Liabilities"). The Excluded Liabilities shall consist of only the
following
Liabilities:
(a) any
Liability to the extent relating to the
Excluded Assets, including Liabilities relating to any Insurance
Contract,
whether or not in-force at the Closing, and any Liability to the
extent relating
to any breach of any such Insurance Contract, and all reserves for
claims,
including claims incurred but not reported and claims in course of
settlement,
expenses or unearned premium, any loss or loss adjustment expenses,
and any
Extra Contractual Obligations, with respect to such Insurance
Contracts;
(b) any Liability relating to any failure or alleged
failure to comply with, or any violation or alleged violation of,
any Applicable
Law to the extent relating to the Excluded Assets;
(c) 50% of any Other Liability;
(d) notwithstanding anything to the contrary
contained in this Agreement, including in Section 2.3, any
Liability to the
extent accrued for on the "Closing Date Balance Sheet" prepared
pursuant to
Section 3.3 of the Stock Purchase Agreement, including any
Liabilities for Taxes
and any Liabilities for any "Success Bonus", "Stay Bonus" or other
bonus, profit
sharing or incentive compensation payable to any member of the
Employee Group;
and
(e) any Liability for Taxes to the extent relating to
the Excluded Assets.
2.5 Closing
Deliveries.
(a) At the Closing, TRM and the Purchasing Insurers,
will deliver to the Selling Insurers the following:
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(i) the payment of the Purchase Price in
accordance with Section 2.7;
(ii) third party consents to the
assignment(s) of the Lease Agreement(s) to the extent obtained;
(iii) third party consents to the
assignments of the Producer Agreements to the extent obtained;
(iv) the Tower Guaranty in the form set
forth at Exhibit C executed by Tower Parent;
(v) subject to any necessary regulatory
approvals, an amendment to the Brokerage Management Agreement
making the Selling
Insurers parties thereto or subject thereto, as appropriate, to
effect the
intent of this Agreement and the Master Agreement, amending the
definition of
"Brokerage Business" (as that term is defined in the Master
Agreement and used
in the Brokerage Management Agreement) to include the Business of
the Selling
Insurers, and effecting the HIG Extension, executed by the
applicable Tower
Entities, or, alternatively, in the absence of regulatory approval
to amend the
Brokerage Management Agreement, a new management agreement between
the Selling
Insurers and the appropriate Tower Entities to effect the intent of
this
Agreement and the Master Agreement and consistent in all material
respects with
the Master Agreement and this Agreement;
(vi) subject to any necessary regulatory
approvals, an amendment to the Master Agreement making the Selling
Insurers
parties thereto or subject thereto, as appropriate, to effect the
intent of this
Agreement and the Master Agreement, amending the definition of
"Brokerage
Business" (as that term is defined in the Master Agreement and used
in the
Brokerage Management Agreement) to include the Business of the
Selling Insurers,
and effecting the HIG Extension, executed by the applicable Tower
Entities; and
(vii) subject to any necessary regulatory
approvals, amendments to the Intercompany Agreements making the
Selling Insurers
parties thereto or subject thereto, as appropriate, amending the
definition of
Brokerage Business in any such agreements to make it consistent
with the
definition of Brokerage Business in the Master Agreement, as
amended pursuant to
the amendment referred to above in this Section 2.5(a), to effect
the intent of
this Agreement and the Master Agreement, and effecting the HIG
Extension,
executed by the applicable Tower Entities.
(b) At the Closing, CPRE will deliver to TRM and the
Purchasing Insurers the following:
(i) The Bills of Sale and General Assignment
Agreements executed by each member of the HIG Group, as
appropriate;
(ii) a list of all in-force Insurance
Contracts and a list of all Producers and Producer Agreements;
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(iii) assignment(s) of the Lease
Agreement(s) executed by each member of the HIG Group, as
appropriate, and any
consents required in connection therewith to the extent
obtained;
(iv) assignment(s) of the Producer
Agreement(s) executed by each member of the HIG Group, as
appropriate, and any
consents required in connection therewith to the extent
obtained;
(v) subject to any necessary regulatory
approvals, an amendment to the Brokerage Management Agreement
making the Selling
Insurers parties thereto or subject thereto, as appropriate, to
effect the
intent of this Agreement and the Master Agreement, amending the
definition of
"Brokerage Business" (as that term is defined in the Master
Agreement and used
in the Brokerage Management Agreement) to include the Business of
the Selling
Insurers, and effecting the HIG Extension, executed by the Selling
Insurers and
the applicable CPRE Entities, or, alternatively, in the absence of
regulatory
approval to amend the Brokerage Management Agreement, a new
management agreement
between the Selling Insurers and the appropriate Tower Entities to
effect the
intent of this Agreement and the Master Agreement and consistent in
all material
respects with the Master Agreement and this Agreement;
(vi) an amendment to the Master Agreement
making the Selling Insurers parties thereto or subject thereto, as
appropriate,
to effect the intent of this Agreement and the Master Agreement,
amending the
definition of "Brokerage Business" (as that term is defined in the
Master
Agreement and used in the Brokerage Management Agreement) to
include the
Business of the Selling Insurers, and effecting the HIG Extension,
executed by
the Selling Insurers and the applicable CPRE Entities;
(vii) subject to any necessary regulatory
approvals, amendments to the Intercompany Agreements making the
Selling Insurers
parties thereto or subject thereto, as appropriate, amending the
definition of
Brokerage Business in any such agreements to make it consistent
with the
definition of Brokerage Business in the Master Agreement, as
amended pursuant to
the amendment referred to above in this Section 2.5(b), to effect
the intent of
this Agreement and the Master Agreement, and effecting the HIG
Extension,
executed by the Selling Insurers and the applicable CPRE
Entities;
(viii) copies of the Books and Records;
(ix) such affidavits or certifications in
form and substance reasonably satisfactory to TRM as are necessary
to exempt the
assignment or transfer of the Transferred Assets pursuant to this
Agreement or
any of the Ancillary Agreements from the provisions of section 1445
of the Code;
(x) the CastlePoint Guaranty in the form set
forth at Exhibit B executed by CPH; and
(xi) a true and complete copy of the Stock
Purchase Agreement, including all exhibits, schedules and other
ancillary
materials, as then in effect, executed by each of the parties
thereto.
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2.6 Issuance
of the Insurance Contracts Following the Closing.
(a) From and after the closing of the transactions
contemplated by the Stock Purchase Agreement and until the Closing,
CPRE shall,
and shall cause the CPRE Entities including the members of the HIG
Group to,
carry on the business of the members of the HIG Group in the usual,
regular and
ordinary course consistent with past practice and to use all
commercially
reasonable efforts to preserve intact the business of the members
of the HIG
Group, including their relationships with employees, Policyholders,
Producers
and others having business dealings with them. Without limiting the
generality
of the foregoing, CPRE shall, and shall cause the CPRE Entities,
including the
members of the HIG Group to, (i) use commercially reasonable
efforts to continue
to renew Insurance Contracts, and enter into new Insurance
Contracts and the
CPRE Entities will continue to provide the necessary capital
capacity for the
Selling Insurers to write the Insurance Contracts consistent with
Section
2.6(b), (ii) consult and cooperate in good faith with TRM regarding
the issuance
of any Insurance Contracts of the types that would be managed by
TRM pursuant to
the Brokerage Management Agreement following the Closing, and (iii)
except as
required by Applicable Law, not sell, assign or transfer any
Insurance Contract
to any Person or grant any rights of the Selling Insurers to offer,
quote and/or
solicit the renewals of any of the Insurance Contracts, including
the right to
offer to non-renew or cancel and rewrite any of the Insurance
Contracts and to
solicit replacement insurance coverage, to any Person.
(b) On and after the Closing, except as otherwise
provided herein, each of the Selling Insurers shall continue to
renew Insurance
Contracts, and enter into new Insurance Contracts and the CPRE
Entities will
continue to provide the necessary capital capacity for the Selling
Insurers to
write the Insurance Contracts and for CPRE's Affiliates that are
authorized
insurance companies to write similar agreements of insurance, all
in accordance
with the ordinary course of business between the Tower Entities and
the CPRE
Entities, consistent with their past practice, except with respect
to the amount
of such capital capacity, which the Parties acknowledge and agree
will be
increased, as necessary, in respect of the Insurance Contracts.
(c) On or after the Closing, CPRE shall, at the
option and direction of TRM, cause each of the Selling Insurers not
to issue any
Insurance Contracts of the types managed by TRM pursuant to the
Brokerage
Management Agreement, except as required by Applicable Law. Except
as provided
in Section 2.9, from and after the Closing, except as required by
Applicable
Law, CPRE shall not, and shall cause the CPRE Entities and the
members of the
HIG Group to not, sell, assign or transfer any Insurance Contract
to any Person
or grant any rights of the Selling Insurers to offer, quote and/or
solicit the
renewals of any of the Insurance Contracts, including the right to
offer to
non-renew or cancel and rewrite any of the Insurance Contracts and
to solicit
replacement insurance coverage, to any Person, in each case,
without the prior
written consent of TRM and the Purchasing Insurers.
2.7
Consideration.
(a) In consideration of the sale, assignment and
transfer of the Transferred Assets and the rights and agreements
under Sections
2.6 and 2.9, subject to the terms and conditions of this Agreement,
on the
Closing Date, TRM or the Purchasing Insurers will pay or cause to
be paid to
CPRE or any Affiliate thereof, as CPRE may direct, an aggregate
amount equal to
$16,000,000 (the "Purchase Price"), and CPRE or any Affiliate
thereof, as
applicable, will accept and acknowledge receipt of the Purchase
Price. The
Purchase Price shall be paid by wire transfer in immediately
available funds to
an account(s) designated by CPRE prior to the Closing Date.
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(b) As further consideration, the Parties shall
respectively deliver those closing deliveries set forth in Section
2.5 of this
Agreement.
(c) Subject to receipt of all Required Approvals,
CPRE shall cause the Selling Insurers to pay, to TRM an amount
equal to 2.5% of
the unearned premium reserve attributable to all Insurance
Contracts that were
in-force as of the Closing Date (the "UPR Fee"). The UPR Fee shall
be paid in
four equal quarterly payments commencing at the end of the first
calendar
quarter following the Closing Date.
(d) Not later than 120 days following the Closing
Date, TRM shall provide to CPRE a proposed allocation of the
Purchase Price and
the Assumed Liabilities (collectively, the "Allocable Amount")
among the
Transferred Assets. The proposed allocation shall be prepared in a
manner
consistent with section 1060 of the Code. For purposes of such
allocation, the
Assumed Liabilities included in the Allocable Amount shall be the
assumed
liabilities as determined for U.S. federal income tax purposes.
CPRE will have
ten (10) Business Days from the receipt of the proposed allocation
to notify TRM
if CPRE disputes the proposed allocation. If TRM has not received
notice of any
such dispute within such ten (10) Business Day period, the proposed
allocation
will become final and binding on the Parties (the "Allocation
Schedule"). If,
however, CPRE has delivered notice of such a dispute to TRM within
such ten (10)
Business Day period, TRM and CPRE shall discuss their differences
with respect
to the proposed allocation and attempt in good faith to resolve
such
differences. If the Parties are unable to resolve such differences
within ten
(10) Business Days of the delivery of the notice of dispute, then
Ernst & Young
(the "Tax Dispute Accountant") shall be engaged to resolve such
dispute;
provided, that such dispute shall be resolved in favor of TRM
unless the Tax
Dispute Accountant determines that there is no reasonable basis for
TRM's
position. The allocation determined by the Tax Dispute Accountant
shall become
the Allocation Schedule and will be final and binding on the
Parties. The fees
and expenses of the Tax Dispute Accountant shall be borne equally
by TRM and
CPRE. CPRE, TRM and the Purchasing Insurers shall prepare and file
all returns
and reports with respect to Taxes, including Internal Revenue
Service Form 8594
(and any replacement or successor form), in a manner consistent
with the
Allocation Schedule; provided that TRM's and the Purchasing
Insurers' cost may
differ from the Allocable Amount to reflect capitalizable costs
incurred in
connection with the transactions contemplated by this Agreement.
Notwithstanding
anything to the contrary, any final allocation pursuant to this
Section 2.7(d)
shall to the extent permitted by applicable law be determined
consistently with
the final allocation determined under Section 11.6(b) of the Stock
Purchase
Agreement.
2.8 Consent of Third Parties. Notwithstanding anything to the
contrary
herein, this Agreement shall not constitute an agreement to assign
or transfer
any approval, instrument, contract, lease, permit or other
property, asset, or
right included in the Transferred Assets or any claim, right or
benefit arising
thereunder or resulting therefrom if an assignment or transfer or
an attempt to
make such an assignment or transfer without the approval,
authorization, consent
or permit of a third party would constitute a breach or violation
thereof or
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affect adversely the rights of any Tower Entity, any member of the
HIG Group, or
any CPRE Entity thereunder; and any transfer or assignment to any
Tower Entity
by any member of the HIG Group of any interest under any such
approval,
instrument, contract, lease, permit or other property, asset or
right that
requires the approval, authorization, consent or permit of a third
party shall
be made subject to the same being obtained. In the event any such
approval,
authorization, consent or permit is not obtained on or prior to the
Closing
Date, CPRE shall, and shall cause the members of the HIG Group to,
continue to
use all commercially reasonable efforts to obtain any such
approval,
authorization, consent or permit after the Closing Date until such
time as such
approval, authorization, consent or permit has been obtained, and
CPRE will
cooperate, and will cause the members of the HIG Group to
cooperate, with the
Tower Entities in any lawful arrangement to provide that the
applicable Tower
Entity shall receive the interest of the members of the HIG Group
in the
benefits under any such approval, instrument, contract, lease or
permit or other
property, asset or right, including performance by CPRE and/or the
member of the
HIG Group as agents, provided that the applicable Tower Entity
shall undertake
to pay or satisfy the corresponding Liabilities for the enjoyment
of such
benefit to the extent such Tower Entity, would have been
responsible therefor
hereunder if such approval, authorization, consent or permit had
been obtained.
Nothing in this Section 2.8 shall be deemed a waiver by TRM or any
other Tower
Entity of their respective rights to have received on or before the
Closing an
effective assignment of all of the Transferred Assets nor shall
this Section 2.8
be deemed to constitute an agreement to exclude from the
Transferred Assets any
properties, assets or rights described in Section 2.2(a).
2.9 Renewal
Rights.
(a) At any time following the Closing Date, at the
option of TRM, without any additional consideration and as directed
by TRM by
delivery pursuant to the Brokerage Management Agreement of a
written Non-Renewal
Notice, CPRE shall cause each Selling Insurer, as applicable, to
send to each
Policyholder whose Insurance Contract is indicated in the relevant
Non-Renewal
Notice, within 30 days following receipt of the Non-Renewal Notice,
written
notice in the form directed by TRM and reasonably acceptable to the
applicable
Selling Insurer advising such Policyholder that (i) such Selling
Insurer will
not renew or will cancel the Insurance Contract, and (ii) one or
more of the
Purchasing Insurers, their Insurer Affiliates or other duly
licensed, eligible
or otherwise authorized insurance companies selected by the
Purchasing Insurers
may issue to the Policyholder a Purchasing Insurer Policy (defined
below).
(b) Following delivery of a Non-Renewal Notice, one
or more of the Purchasing Insurers, in its own name and on its own
behalf, or in
the name and on behalf of any of its Insurer Affiliates or other
duly licensed,
eligible or otherwise authorized insurance companies selected by
the Purchasing
Insurers, shall be entitled to and may, in connection with the
first expiration,
renewal, or anniversary date of each specified Insurance Contract
on or after
the date of the Non-Renewal Notice, solicit, quote, bind, write
and/or issue, or
cause to be solicited, quoted, bound, written and/or issued to any
Policyholder
prior to or upon the expiration, cancellation or non-renewal of
such
Policyholder's Insurance Contract(s), policies or other evidences
of insurance
coverage on the policy forms of the applicable Purchasing Insurer,
Insurer
Affiliates or other duly licensed, eligible or otherwise authorized
insurance
companies selected by the Purchasing Insurers (each such new
policy, a
"Purchasing Insurer Policy"), subject in each case to Applicable
Law, and the
rights of Producers and Policyholders.
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(c) Upon receipt of a Notice of Non-Renewal, the
applicable Selling Insurer shall, subject to the provisions of
Applicable Law,
cease renewing the specified Insurance Contracts and shall promptly
make all
required filings with Government Authorities relating to such
non-renewal.
2.10
HIG Extension Adjustment.
(a) If the HIG Extension shall be limited to a period
of six months, pursuant to the first proviso in the definition of
HIG Extension,
CPRE or TRM shall be obliged to pay the HIG Adjustment Amount to
the other
pursuant to the terms of this Section 2.10. Within 60 days
following the first
anniversary of the first day of the HIG Extension (the "HIG
Extension
Anniversary Date"), TRM shall prepare and deliver to CPRE a
statement (the "HIG
Adjustment Amount Statement") setting forth the calculation in
reasonable detail
of the difference (the "HIG Adjustment Amount", which amount may be
a negative
or positive number) between (i) the amount actually paid by CPRE
Entities to
Tower Entities under the Brokerage Management Agreement, the Master
Agreement
and the Intercompany Agreements with respect to the period
beginning on the
first day following the expiration of the HIG Extension and ending
on the HIG
Extension Anniversary Date less (ii) the amount that would have
been paid by
CPRE Entities to Tower Entities under the Brokerage Management
Agreement, the
Master Agreement and the Intercompany Agreements with respect to
the period
beginning on the first day following the expiration of the HIG
Extension and
ending on the HIG Extension Anniversary Date, if the HIG Extension
had been for
a period of one year.
(b) The HIG Adjustment Amount Statement shall become
final, binding and conclusive upon the Parties on the 30th day
following CPRE's
receipt of the HIG Adjustment Amount Statement, unless prior to
such 30th day
CPRE delivers to TRM a written notice (a "Dispute Notice") stating
that CPRE
believes the HIG Adjustment Amount Statement contains errors and
specifying in
reasonable detail each item that CPRE disputes (a "Disputed Item"),
the amount
in dispute for each such Disputed Item and the reasons supporting
CPRE's
positions.
(c) If CPRE delivers a Dispute Notice, then CPRE and
TRM shall seek in good faith to resolve the Disputed Items during
the 15-day
period beginning on the date TRM receives the Dispute Notice (the
"Resolution
Period"). If CPRE and TRM reach agreement with respect to any
Disputed Items,
TRM shall revise the HIG Adjustment Amount Statement to reflect
such agreement.
(d) If TRM and CPRE are unable to resolve all of the
Disputed Items during the Resolution Period, then TRM and CPRE
shall
independently engage and submit the unresolved Disputed Items (the
"Unresolved
Items") to KPMG LLP or such other nationally recognized public
accounting firm
upon whom TRM and CPRE mutually agree (the "Independent
Accountant"). TRM and
CPRE shall use their commercially reasonable efforts to cause the
Independent
Accountant to issue its written determination regarding the
Unresolved Items
within 30 days after such items are submitted for review. The
Independent
Accountant shall make a determination with respect to the
Unresolved Items only
and in a manner consistent with this Section 2.10, and in no event
shall the
Independent Accountant's determination of the Unresolved Items be
for an amount
that is outside the range of TRM's and CPRE's disagreement with
respect to each
individual item. Each Party shall and shall cause its respective
Affiliates to
use commercially reasonable efforts to furnish to the Independent
Accountant
such work papers and other documents and information pertaining to
the
Unresolved Items as the Independent Accountant may request. The
determination of
the Independent Accountant shall be final, binding and conclusive
on the Parties
absent manifest error, and TRM shall revise the HIG Adjustment
Amount Statement
to reflect such determination upon receipt thereof. The fees,
expenses and costs
of the Independent Accountant shall be borne equally by TMR and
CPRE.
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(e) Within five Business Days after the HIG
Adjustment Amount Statement is finalized pursuant to this Section
2.10, each of
the CPRE Entities and the Tower Entities, as applicable, will use
commercially
reasonable efforts to obtain all such approvals, authorizations,
consents and
permits from Governmental Authorities necessary in connection with
payment of
the HIG Payment Amount (collectively, the "HIG Payment Amount
Approvals").
Within five Business Days following receipt of the HIG Payment
Amount Approvals,
(i) if the HIG Adjustment Amount is a negative number, CPRE shall
pay to TRM the
HIG Adjustment Amount (expressed as a positive number) and (ii) if
the HIG
Adjustment Amount is a positive number, TRM shall pay to CPRE the
HIG Adjustment
Amount. Notwithstanding anything to the contrary in the immediately
preceding
sentence, failure to obtain the HIG Adjustment Amount Approvals
shall not limit
the obligations of CPH or Tower Parent to pay the HIG Adjustment
Amount under
the CastlePoint Guaranty or Tower Guaranty, as the case may be,
within five
Business Days after the HIG Adjustment Amount Statement is
finalized pursuant to
this Section 2.10.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF CPRE
--------------------------------------
CPRE represents and warrants to the Purchasing Insurers that as of
the
date hereof and as of the Closing Date (or, if made as of a
specified date, as
of such date):
3.1 Corporate Existence. CPRE has been duly organized, is
validly
existing and is in good standing under the laws of Bermuda, its
country of
incorporation.
3.2 Corporate Authority. The execution, delivery and performance
by
CPRE of this Agreement and the Ancillary Agreements are within its
corporate
powers and have been duly authorized by all necessary corporate
action on the
part of CPRE. On the Closing Date, the execution, delivery and
performance by
the members of the HIG Group of the Ancillary Agreements shall have
been duly
authorized by all necessary corporate action on the part of each
such Person.
This Agreement constitutes, and when executed and delivered the
Ancillary
Agreements will constitute, valid and legally binding agreements,
enforceable
against CPRE and the members of the HIG Group party thereto, as
applicable, in
accordance with their respective terms, subject to (i) bankruptcy,
insolvency,
reorganization, fraudulent transfer, moratorium and other similar
laws now or
hereafter in effect relating to or affecting creditors' rights
generally and the
rights of creditors of insurance companies generally, and (ii)
general
principles of equity (regardless of whether considered in a
proceeding at law or
in equity).
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3.3 Governmental Authorization. The execution, delivery and
performance
by CPRE and the members of the HIG Group party thereto of this
Agreement and the
Ancillary Agreements require no action by or in respect of, or
filing with, any
Governmental Authority on the part of CPRE or any Affiliate thereof
(including
the members of the HIG Group) other than the Required Approvals,
filings and
notices not required to be made or given until after the Closing
Date, and any
such other action or filing as to which the failure to make or
obtain would not,
individually or in the aggregate, materially impair the
contemplated benefits of
the transactions contemplated hereby or by the Ancillary Agreements
or the
ability of the applicable Tower Entities to use the Transferred
Assets in the
conduct of their business following the Closing.
3.4 Due Diligence. The CPRE Entities, including CPRE (i) have
conducted
on their own behalf a due diligence examination of the operations,
assets, books
and records of the HIG Group, including the Selling Insurers, and
(ii) have
determined to enter into this Agreement and the Ancillary
Agreements based on
such due diligence examination and the representations, warranties,
covenants
and undertakings of TRM and the Purchasing Insurers herein and in
the Ancillary
Agreements. The determination to enter into this Agreement and the
Ancillary
Agreements is in no way based on, nor have any of the CPRE Entities
relied upon,
any representations and warranties, whether written or oral, made
by any of the
Tower Entities to any of the CPRE Entities, about the business,
operations,
assets, books and records, including the Business, Excluded Assets,
and Excluded
Liabilities, of any member of the HIG Group, including the Selling
Insurers,
except those representations and warranties set forth herein and in
the
Ancillary Agreements.
3.5 Non-Contravention. The execution, delivery and performance by
CPRE
and the CPRE Entities (other than members of the HIG Group) party
thereto of
this Agreement and the Ancillary Agreements does not and will not
(i) violate
the charter or bylaws of CPRE or any of the CPRE Entities (other
than the
members of the HIG Group), (ii) assuming compliance with the
filings, notices,
approvals and other matters referred to in Section 3.3, violate any
Applicable
Law, or (iii) require any consent or other action by any Person
under,
constitute a default under, or give rise to any right of
termination,
cancellation or acceleration of any right or obligation of CPRE or
any of the
CPRE Entities (other than the members of the HIG Group) to a loss
of any benefit
to which CPRE or any of the CPRE Entities (other than the members
of the HIG
Group) is entitled under any Insurance Contract, material
reinsurance agreement,
any material agreement or any other instrument binding upon CPRE or
any of the
CPRE Entities (other than the members of the HIG Group), or any
license,
franchise, permit or other similar authorization held by CPRE or
any of the CPRE
Entities (other than the members of the HIG Group) that is material
to its
business or to the Transferred Assets.
3.6 No Brokers. No broker, finder or other similar agent has
represented CPRE or acted for or on behalf of CPRE in connection
with the
transactions contemplated hereby in such a manner as to give rise
to any valid
claim or demand against any Tower Entity for a brokerage
commission, finder's
fee or other similar payment.
3.7 Stock Purchase Agreement. CPRE has provided a true and
complete
copy of the Stock Purchase Agreement, including all exhibits,
schedules and
ancillary documents thereto, to TRM and the Purchasing Insurers and
there have
been no changes to the Stock Purchase Agreement (or any of such
exhibits,
schedules or ancillary documents) since the date so provided.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASING INSURERS AND TRM
-------------------------------------------------------------
The Purchasing Insurers and TRM each represent and warrant to CPRE
that
as of the date hereof and as of the Closing Date (or, if made as of
a specified
date, as of such date):
4.1 Corporate Existence. Each of the Purchasing Insurers and TRM
has
been duly organized, is validly existing and is in good standing
under the laws
of its state of incorporation.
4.2 Corporate Authority. The execution, delivery and performance by
the
Purchasing Insurers and TRM of this Agreement and the Ancillary
Agreements are
within their respective corporate powers and have been duly
authorized by all
necessary corporate action on the part of each Purchasing Insurer
or TRM, as
applicable. On the Closing Date, the execution, delivery and
performance by any
applicable Tower Entities of the Ancillary Agreements shall have
been duly
authorized by all necessary corporate action on the part of each
such Person.
This Agreement constitutes, and when executed and delivered the
Ancillary
Agreements will constitute, valid and legally binding agreements,
enforceable
against each of the Purchasing Insurers, TRM and the Tower Entities
party
thereto, as applicable, in accordance with their respective terms,
subject to
(i) bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium and
other similar laws now or hereafter in effect relating to or
affecting
creditors' rights generally and the rights of creditors of
insurance companies
generally and (ii) general principles of equity (regardless of
whether
considered in a proceeding at law or in equity).
4.3 Due Diligence. The Tower Entities, including TRM and each
Purchasing Insurer (i) have conducted on their own behalf a due
diligence
examination of the operations, assets, books and records of the HIG
Group,
including the Selling Insurers, and (ii) have determined to enter
into this
Agreement and the Ancillary Agreements based on such due diligence
examination
and the representations, warranties, covenants and undertakings of
CPRE herein
and in the Ancillary Agreements. The determination to enter into
this Agreement
and the Ancillary Agreements is in no way based on, nor have any of
TRM or the
Purchasing Insurers relied upon, any representations and
warranties, whether
written or oral, made by any of the CPRE Entities to any of the
Tower Entities,
about the business, operations, assets, books and records,
including the
Business, Transferred Assets, and Books and Records, of any member
of the HIG
Group, including any of the Selling Insurers, except those
representations and
warranties set forth herein and in the Ancillary Agreements.
4.4 Governmental Authorization. The execution, delivery and
performance
by the Purchasing Insurers, TRM and the Tower Entities party
thereto of this
Agreement and the Ancillary Agreements require no action by or in
respect of, or
filing with, any Governmental Authority on the part of the
Purchasing Insurers,
TRM or any Affiliate (including the other Tower Entities) thereof
(including the
other Tower Entities) other than the Required Approvals, filings
and notices not
required to be made or given until after the Closing Date, and any
such other
action or filing as to which the failure to make or obtain would
not,
individually or in the aggregate, materially impair the
contemplated benefits of
the transactions contemplated hereby or by the Ancillary Agreements
or the
ability of CPRE to conduct the business of the Selling Insurers
following the
Closing.
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4.5 Non-Contravention. The execution, delivery and performance by
the
Purchasing Insurers, TRM and the Tower Entities party thereto of
this Agreement
and the Ancillary Agreements does not and will not (i) violate the
charter or
bylaws of the Purchasing Insurers, TRM or the Tower Entities, (ii)
assuming
compliance with the filings, notices, approvals and other matters
referred to in
Section 4.4, violate any Applicable Law, or (iii) require any
consent or other
action by any Person under, constitute a default under, or give
rise to any
right of termination, cancellation or acceleration of any right or
obligation of
the Purchasing Insurers, TRM or the Tower Entity or to a loss of
any benefit to
which the Purchasing Insurers, TRM or the Tower Entity is entitled
under any
material reinsurance agreement, any material agreement or any other
instrument
binding upon the Purchasing Insurers, TRM or the Tower Entities, or
any license,
franchise, permit or other similar authorization held by the
Purchasing
Insurers, TRM or the Tower Entities that is material to their
business.
4.6 No Brokers. No broker, finder or other similar agent has
represented the Purchasing Insurers and TRM or acted for or on
behalf of the
Purchasing Insurers and TRM in connection with the transactions
contemplated
hereby in such a manner as to give rise to any valid claim or
demand against
CPRE for a brokerage commission, finder's fee or other similar
payment.
ARTICLE 5
COVENANTS OF CPRE
-----------------
5.1 Further Assurances. CPRE shall make commercially reasonable
efforts
to take, or cause to be taken, all actions and do, or cause to be
done, all
things and execute, or cause to be executed, any documents
necessary or
advisable to consummate and make effective the transactions
contemplated by this
Agreement, the Stock Purchase Agreement and the Ancillary
Agreements, in
accordance with their respective terms and subject to their
respective
conditions, including to more effectively sell, transfer and assign
to the
applicable Tower Entities, and to put the applicable Tower Entities
in actual
possession and control of the Transferred Assets, free and clear of
any and all
liens and encumbrances; provided, however, that any such additional
documents
must be reasonably satisfactory to each of the Parties and not
impose upon any
Party any material Liability, risk or obligation not contemplated
by this
Agreement or any of the Ancillary Agreements.
5.2 Compliance With Law. CPRE shall, and, following the closing of
the
transactions contemplated by the Stock Purchase Agreement, shall
cause each
member of the HIG Group to, comply with all Applicable Laws
relating to the
performance by CPRE and the members of the HIG Group of their
duties and
obligations under this Agreement and the Ancillary Agreements.
5.3 Intercompany Agreements. Subject to receipt of all Required
Approvals, CPRE shall cause each of the Selling Insurers to enter
into the
amendments to the Brokerage Management Agreement, the Master
Agreement and the
Intercompany Agreements referred to in clauses (v), (vi) and (vii)
of Section
2.5(a) and clauses (v), (vi) and (vii) of Section 2.5(b).
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5.4 Rights under Stock Purchase Agreement. Both before and after
the
closing of the transactions contemplated by the Stock Purchase
Agreement, CPRE
will not amend or modify the Stock Purchase Agreement in any
respect, and will
not grant any waiver thereunder or take any action, or agree, to
terminate the
Stock Purchase Agreement, without the prior written consent of TRM,
which
consent shall not be unreasonably withheld. CPRE shall, both before
and after
the closing of the transactions contemplated by the Stock Purchase
Agreement,
exercise all of its rights, perform all of its obligations and take
all such
actions under and in accordance with the terms of the Stock
Purchase Agreement,
including in respect of Articles VIII, X and XI of the Stock
Purchase Agreement,
as may be reasonably directed by TRM or the Purchasing Insurers in
order to
protect the rights of TRM and the Purchasing Insurers with respect
to the
Transferred Assets and their other rights hereunder and under the
Ancillary
Agreements and to mitigate TRM's and the Purchasing Insurers' risks
with respect
to the Excluded Liabilities, the Assumed Liabilities and the
obligations under
Article 11 of this Agreement. Without limiting the foregoing, CPRE
shall provide
all Tax Returns required to be prepared or otherwise furnished by
CPRE as
described in Section 11.2(b) of the Stock Purchase Agreement to TRM
for its
consent, which consent shall not be unreasonably withheld, prior to
providing
such Tax Returns to BUSC as provided in Section 11.2(c) of the
Stock Purchase
Agreement. All out of pocket costs and expenses, including
reasonable attorney
fees, incurred by CPRE in connection with exercising all such
rights and taking
all such actions as directed by TRM or the Purchasing Insurers
shall be borne
solely by TRM and the Purchasing Insurers. CPRE hereby assigns to
TRM and the
Purchasing Insurers its rights to enforce the terms of the Stock
Purchase
Agreement, including in respect of Articles VIII, X and XI of the
Stock Purchase
Agreement, in the event that CPRE fails to exercise such rights, or
to promptly
take any actions, to the reasonable satisfaction of TRM and the
Purchasing
Insurers, and confirms that Tower Parent and its subsidiaries are
permitted
assignees with respect to such assignment under the Stock Purchase
Agreement.
CPRE shall pay over or cause to paid over promptly to TRM or
another Tower
Entity, at TRM's direction, any amounts received by CPRE or any
CPRE Entity
under or relating to the Stock Purchase Agreement net of any Taxes
incurred by
any CPRE Entity by reason of the receipt by any CPRE Entity of such
amounts (to
the extent not offset by tax benefits resulting from the
corresponding payment
pursuant to the last sentence of this Section 5.4) in connection
with the
intents and purposes of this Section 5.4.
5.5 Consents; Filings. Without limiting the generality of Section
5.1,
CPRE will use commercially reasonable efforts to (i) obtain as
promptly as
practicable all approvals, authorizations, consents and permits
required to be
obtained by the HIG Group or any CPRE Entity in connection with
the
authorization, execution and delivery of this Agreement, the Stock
Purchase
Agreement and the Ancillary Agreements and the consummation of the
transactions
contemplated hereby and thereby, including the Required Approvals
hereunder and
necessary consents of landlords to the assignment of the Lease
Agreements and
(ii) make, as promptly as practicable, all necessary filings
(including for the
removal of any and all liens and other encumbrances on the
Transferred Assets)
and thereafter make any other required submissions, with respect to
this
Agreement, the Stock Purchase Agreement and the Ancillary
Agreements and the
consummation of the transactions contemplated hereby and thereby,
in each case,
required under any Applicable Law, including using its commercially
reasonable
efforts to contest in good faith any Litigation challenging or
seeking to
prevent, enjoin, alter or materially delay the transactions
contemplated by this
Agreement, the Stock Purchase Agreement or the Ancillary
Agreements. CPRE shall
cooperate with the Tower Entities in connection with the seeking of
all such
approvals, authorizations, consents and permits and the making of
all such
filings, and will promptly notify TRM and the Purchasing Insurers
in writing of
any pending or, to the knowledge of CPRE, threatened Litigation by
any
Governmental Authority or any other Person (A) challenging or
seeking material
monetary damages in connection with the consummation of the
transactions
contemplated by this Agreement, the Stock Purchase Agreement or the
Ancillary
Agreements or (B) seeking to restrain or prohibit, enjoin, alter or
materially
delay the transactions contemplated by this Agreement, the Stock
Purchase
Agreement or the Ancillary Agreements.
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5.6 Full and
Complete Access.
(a) Prior to the closing of the transactions
contemplated by the Stock Purchase Agreement, CPRE shall afford TRM
and the
Purchasing Insurers full and complete access to all books and
records; financial
statements, projections, facilities, personnel, business plans and
work papers;
and financial and other data, in each case, relating to the members
of the HIG
Group, including relating to the Transferred Assets, the Assumed
Liabilities and
the Business to which CPRE is entitled under the terms of the Stock
Purchase
Agreement. CPRE shall, at the sole cost and expense of TRM, furnish
promptly to
TRM and the Purchasing Insurers copies of such materials as they
shall
reasonably request.
ARTICLE 6
COVENANTS OF TRM AND THE PURCHASING INSURERS
--------------------------------------------
6.1 Further Assurances. TRM and each of the Purchasing Insurers
shall
make commercially reasonable efforts to take, or cause to be taken,
all actions
and do, or cause to be done, all things and execute, or cause to be
executed,
any documents necessary, or advisable to consummate and make
effective the
transactions contemplated by this Agreement and the Ancillary
Agreements, in
accordance with their respective terms and subject to their
respective
conditions; provided, however, that any such additional documents
must be
reasonably satisfactory to each of the Parties and not impose upon
any Party any
material Liability, risk or obligation not contemplated by this
Agreement or any
of the Ancillary Agreements.
6.2 Compliance With Law. TRM and each of the Purchasing Insurers
shall,
and shall cause each applicable Tower Entity to, comply with all
Applicable Laws
relating to the performance by TRM, each of the Purchasing Insurers
and each
applicable Tower Entity of their respective duties and obligations
under this
Agreement and the Ancillary Agreements.
6.3 Consents; Filings. Without limiting the generality of Section
6.1,
TRM and the Purchasing Insurers will use commercially reasonable
efforts to (i)
obtain as promptly as practicable all approvals, authorizations,
consents and
permits required to be obtained by any Tower Entity in connection
with the
authorization, execution and delivery of this Agreement and the
Ancillary
Agreements and the consummation of the transactions contemplated
hereby and
thereby, including the Required Approvals hereunder and necessary
consents of
landlords to the assignment of the Lease Agreements and (ii) make,
as promptly
as practicable, all necessary filings and thereafter make any other
required
submissions, with respect to this Agreement and the Ancillary
Agreements and the
consummation of the transactions contemplated hereby and thereby,
in each case,
required under any Applicable Law, including using its commercially
reasonable
efforts to contest in good faith any Litigation challenging or
seeking to
prevent, enjoin, alter or materially delay the transactions
contemplated by this
Agreement or the Ancillary Agreements. TRM and the Purchasing
Insurers shall
cooperate with the CPRE Entities in connection with the seeking of
all such
approvals, authorizations, consents and permits and the making of
all such
filings and will promptly notify CPRE in writing of any pending or,
to the
knowledge of TRM or the Purchasing Insurers, threatened Litigation
by any
Governmental Authority or any other Person (A) challenging or
seeking material
monetary damages in connection with the consummation of the
transactions
contemplated hereby or by the Ancillary Agreements or (B) seeking
to restrain or
prohibit, enjoin, alter or materially delay the transactions
contemplated by
this Agreement or the Ancillary Agreements. Notwithstanding
anything to the
contrary contained in this Agreement or any Ancillary Agreement, no
Tower Entity
shall be required to take any action that involves divestiture of
an existing
business or material assets of such Person.
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6.4 Intercompany Agreements. Subject to receipt of all Required
Approvals, TRM and the Purchasing Insurers shall cause each of
applicable Tower
Entity to enter into the amendments to the Brokerage Management
Agreement, the
Master Agreement and the Intercompany Agreements referred to in
clauses (v),
(vi) and (vii) of Section 2.5(a) and clauses (v), (vi) and (vii) of
Section
2.5(b).
ARTICLE 7
EMPLOYEE MATTERS
----------------
7.1 Offers of
Employment.
(a) On or before the Closing Date, TRM, or at TRM's
direction, another Tower Entity, may extend an offer of employment
to such
employees of the HIG Group (collectively, the "Employee Group")
that the
Purchasing Insurers select (each such offer, an "Offer of
Employment"). The
employment of each employee who accepts the Offer of Employment
(collectively,
the "Transferred Employees") will take effect as of the first
Business Day
following the Closing Date or such date thereafter as agreed
between the
applicable Tower Entity and Transferred Employee (the "Transfer
Date"). Those
employees who are not Transferred Employees will be referred to
as
"Non-Transferred Employees." On the Closing Date, CPRE shall, or
shall cause the
appropriate members of the HIG Group to, terminate the employment
of all
Non-Transferred Employees. Notwithstanding anything to the contrary
set forth
herein, nothing herein shall preclude the applicable Tower Entity
from
terminating the employment of any Transferred Employees for any
reason
whatsoever.
(b) If any such member of the Employee Group is not
offered employment, the Purchasing Insurers shall provide severance
payments to
those employees not offered employment, consistent with the terms
of the Stock
Purchase Agreement.
7.2 Termination of Employment Agreements. With respect to any
Transferred Employee who is a party to an employment agreement with
the HIG
Group (each agreement and "Employment Agreement"), each Purchasing
Insurer shall
use commercially reasonable efforts to obtain, on or prior to the
Transfer Date,
the consent of such Transferred Employee to the termination of such
Employment
Agreement. On and after the Closing Date, CPRE shall cause each
member of the
HIG Group to release such Transferred Employees from any
restrictive covenant in
any employment agreement that would impede, directly or indirectly,
such
Transferred Employee, from accepting the Offer of Employment. Each
Purchasing
Insurer shall be responsible for any and all Liabilities with
respect to, in
connection with, or arising out of the termination of any
Employment Agreement
between a member of the HIG Group and any member of the Employee
Group.
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7.3 Employee Benefits. As of the Closing Date, the Tower Entities
will
provide, or will cause to be provided, to Transferred Employees
employee
benefits comparable to those that CPRE has agreed to provide or
cause to be
provided to the Transferred Employees pursuant to the Stock
Purchase Agreement.
CPRE shall cause each member of the HIG Group to transfer to the
relevant Tower
Entities or, at their direction, an Affiliate thereof, assets of
any employee
benefit plan maintained by any member of the HIG Group covering the
members of
the Employee Group, including the Transferred Employees and the
Non-Transferred
Employees, and the relevant Tower Entities shall assume any and all
Liabilities
related to or arising out of such plans.
7.4 Non-Transferred Employees. As of the Closing Date, TRM and
the
Purchasing Insurers will retain and be responsible for all
compensation,
benefit, severance and employment related obligations and
Liabilities relating
to each Non-Transferred Employee and each Transferred Employee in
respect of any
period prior to such Transferred Employee's Transfer Date.
7.5 Cooperation. From and after the Closing Date, CPRE shall cause
the
Non-Transferred Employees to provide reasonable assistance to TRM
and the
Purchasing Insurers, at the expense of TRM and the Purchasing
Insurers, at times
and locations as reasonably requested by TRM or the Purchasing
Insurers that do
not materially interfere with or disrupt the business and
operations of the HIG
Group, CPRE, or any of the Selling Insurers, in the defense of any
Litigation,
arbitration, claim, complaint, audit, proceeding, or investigation
(whether
threatened existing, initiated or contemplated prior to, on or
after the Closing
Date) arising out of any event that occurred on or prior to the
Closing Date
that involves facts or circumstances with which any such
Non-Transferred
Employees was involved or acquainted as a director, officer or
employee or
advisor of any member of the HIG Group.
ARTICLE 8
CONDITIONS PRECEDENT TO THE OBLIGATION OF TRM AND THE
PURCHASING INSURERS TO CLOSE
----------------------------
The obligations of TRM and the Purchasing Insurers to consummate
the
Closing under this Agreement are subject to the satisfaction on or
prior to the
Closing of the following conditions, any one or more of which may
be waived by
TRM and the Purchasing Insurers in writing:
8.1 Governmental Approvals. All approvals, authorizations, consents
and
permits from Governmental Authorities necessary for consummation of
the
transactions contemplated by this Agreement and the Ancillary
Agreements,
including any such approvals, authorizations, consents and permits
from
Governmental Authorities necessary in connection with the
amendments referred to
in clauses (v), (vi) and (vii) of Sections 2.5(a) and 2.5(b)
(collectively, the
"Required Approvals"), shall have been obtained and be in full
force and effect
and TRM and the Purchasing Insurers shall have been furnished with
appropriate
evidence, reasonably satisfactory to them and their counsel, of the
granting of
the Required Approvals.
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8.2 Representations, Warranties and Covenants. (a) CPRE shall
have
performed, and shall have caused the relevant CPRE Entities and,
following the
closing of the transactions contemplated by the Stock Purchase
Agreement, shall
have caused the relevant members of the HIG Group, to perform, in
all material
respects all of their respective obligations under this Agreement
required to be
performed by them on or prior to the Closing Date; and (b) the
representations
and warranties of CPRE contained in this Agreement shall be true,
complete and
correct in all material respects on the Closing Date as if made at
and as of the
Closing Date.
8.3 Closing Deliveries. All of the closing deliveries of CPRE
under
Section 2.5(b) shall have been delivered to TRM and the Purchasing
Insurers.
8.4 Injunction and Litigation. There shall be no effective
injunction,
writ, preliminary restraining order or any other order or legal
restraint or
prohibition of any nature issued by a Governmental Authority of
competent
jurisdiction or any pending Litigation that seeks to prohibit or
enjoin the
consummation of the transactions contemplated in this Agreement or
the Ancillary
Agreements.
8.5 Closing of the Stock Purchase Agreement. The closing of the
transactions contemplated by the Stock Purchase Agreement shall
have occurred in
accordance with the Stock Purchase Agreement and the related
disclosure
schedules and exhibits thereto.
ARTICLE 9
CONDITIONS PRECEDENT TO THE OBLIGATION OF CPRE TO CLOSE
-------------------------------------------------------
The obligations of CPRE to consummate the Closing under this
Agreement
are subject to the satisfaction on or prior to the Closing of the
following
conditions, any one or more of which may be waived by CPRE in
writing:
9.1 Governmental Approvals. All Required Approvals shall have
been
obtained and be in full force and effect and CPRE shall have been
furnished with
appropriate evidence, reasonably satisfactory to it and its
counsel, of the
granting of the Required Approvals.
9.2 Representations, Warranties and Covenants. (a) TRM and the
Purchasing Insurers shall have performed, and shall have caused the
relevant
Tower Entities to perform, in all material respects all of their
respective
obligations under this Agreement required to be performed by them
on or prior to
the Closing Date; and (b) the representations and warranties of TRM
and the
Purchasing Insurers contained in this Agreement shall be true,
complete and
correct in all material respects on the Closing Date as if made at
and as of the
Closing Date.
9.3 Closing Deliveries. All of the closing deliveries of TRM and
the
Purchasing Insurers under Section 2.5(a) shall have been delivered
to CPRE.
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9.4 Payment to CPRE.
CPRE shall have received the Purchase Price in
accordance with Section 2.7.
9.5 Injunction and Litigation. There shall be no effective
injunction,
writ, preliminary restraining order or any other order or legal
restraint or
prohibition of any nature issued by a Governmental Authority of
competent
jurisdiction or any pending Litigation that seeks to prohibit or
enjoin the
consummation of the transactions contemplated in this Agreement or
the Ancillary
Agreements.
9.6 Closing of the Stock Purchase Agreement. The closing of the
transactions contemplated by the Stock Purchase Agreement shall
have occurred in
accordance with the Stock Purchase Agreement and the related
disclosure
schedules and exhibits thereto.
ARTICLE 10
TERMINATION PRIOR TO CLOSING
----------------------------
10.1
Termination of Agreement. This Agreement may be terminated
as
follows:
(a) by CPRE, TRM or the Purchasing Insurers, by
written notice to the other Parties, if there shall be in effect a
final
nonappealable order, writ, injunction or decree of any Governmental
Authority of
competent jurisdiction binding on any of the Parties that
prohibits, restrains
or enjoins any of the Parties from consummating the transactions
contemplated in
this Agreement or the Ancillary Agreements; provided, however, that
the right to
terminate this Agreement under this Section 10.1(a) shall not be
available to a
Party if such order, writ, injunction or decree resulted from the
failure of
such Party to perform any of its obligations under this
Agreement;
(b) by CPRE, TRM or the Purchasing Insurers, by
written notice to the other Parties, if the closing of the
transactions
contemplated by this Agreement have not been consummated on or
prior to April 1,
2011 (the "Termination Date"); provided, however, that the right to
terminate
this Agreement under this Section 10.1(b) shall not be available to
a Party if
the failure of the Closing to occur prior to the such date resulted
from the
failure of such Party to perform any of its obligations under this
Agreement;
(c) by TRM or the Purchasing Insurers, by written
notice to CPRE, if a material breach of any representation,
warranty, covenant
or agreement on the part of CPRE, any CPRE Entity or, following the
closing of
the transactions contemplated by the Stock Purchase Agreement, any
member of the
HIG Group, set forth in this Agreement shall have occurred that
would cause any
of the conditions set forth in Article 8 not to be satisfied, and
such breach is
incapable of being cured or, if capable of being cured, shall not
have been
cured within sixty (60) calendar days following receipt by CPRE of
notice of
such breach from TRM or the Purchasing Insurers;
(d) by CPRE, by written notice to TRM and the
Purchasing Insurers, if a material breach of any representation,
warranty,
covenant or agreement on the part of TRM, any of the Purchasing
Insurers or any
Tower Entity set forth in this Agreement shall have occurred which
would cause
any of the conditions set forth in Article 9 not to be satisfied,
and such
breach is incapable of being cured or, if capable of being cured,
shall not have
been cured within sixty (60) calendar days following receipt by TRM
and the
Purchasing Insurers of notice of such breach from CPRE;
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(e) upon the termination of the Stock Purchase
Agreement in accordance with the Stock Purchase Agreement and the
related
disclosure schedules and exhibits thereto; or
(f) at any time prior to the Closing by mutual
written consent of the Parties.
10.2 Survival Upon Termination. If this Agreement is terminated
pursuant to Section 10.1 hereof, this Agreement will become null
and void and of
no force and effect, except for Article 12, which shall survive
such
termination, provided that, no Party shall be relieved or released
from any
Liabilities arising or resulting directly from any breach of this
Agreement.
ARTICLE 11
SURVIVAL; INDEMNIFICATION
-------------------------
11.1 Survival. All covenants, undertakings and agreements contained
in
this Agreement, the Ancillary Agreements or any document,
certificate, schedule
or instrument delivered or executed in connection herewith or
therewith to be
performed or complied with after the Closing Date shall survive for
the period
of eighteen months following the Closing; provided that the
applicable Parties'
obligation to provide indemnification under Sections 11.2(a)(ii),
11.2(a)(iii),
11.2(a)(iv), and, with respect to the foregoing, 11.2(a)(v), and
Sections
11.3(a)(ii), 11.3(a)(iii), 11.3(a)(iv) and, with respect to the
foregoing,
11.3(a)(v), shall survive indefinitely. Notwithstanding the
foregoing, if prior
to the close of business on the last day of the aforementioned
eighteen month
period, an Indemnified Party shall have been properly notified of a
claim for
indemnity hereunder and such claim shall not have been finally
resolved or
disposed of at such date, such claim shall continue to survive and
shall remain
a basis for indemnity hereunder until such claim is finally
resolved or disposed
of in accordance with the terms hereof.
11.2
Indemnification by CPRE.
(a) Indemnification. From and after the Closing,
subject to the remainder of this Article 11, CPRE shall indemnify,
defend and
hold harmless each Tower Entity, including TRM and the Purchasing
Insurers, and
their respective officers, directors, employees, agents,
Representatives,
successors and permitted assigns (collectively, the "Purchaser
Indemnified
Parties") from and against any and all damages, losses, charges,
deficiencies,
liabilities, obligations, claims, judgments, costs and expenses
(including
reasonable attorneys' fees and reasonable expenses of investigation
in
connection with any action, suit or proceeding) (collectively,
"Loss" or
"Losses") to which any of them become subject, arising or resulting
from:
(i) any material breach by CPRE of any
representation or warranty contained in this Agreement or in any
Ancillary
Agreement;
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(ii) any material breach by CPRE, any CPRE
Entity or any member of the HIG Group of any covenant made by it in
this
Agreement or in any Ancillary Agreement to which such Person is a
party;
(iii) any of the Excluded Assets or their
use;
(iv) any of the Excluded Liabilities or
their use; and
(v) the enforcement of their rights under
this Section 11.2.
(b)
Limitation.
(i) Notwithstanding the foregoing, CPRE
shall not be liable under this Section 11.2 unless the total
aggregate amount of
Losses with respect to all such claims or matters exceeds $50,000
and then only
to the extent of such excess. The maximum amount of CPRE's
collective and
aggregate liability under Section 11.2(a) shall in no event exceed
the Purchase
Price. Notwithstanding anything to the contrary in this Section
11.2(b), CPRE's
obligation to provide indemnification under Sections 11.2(a)(iii)
and
11.2(a)(iv), and, with respect to the foregoing, 11.2(a)(v), shall
not be
subject to any basket, deductible, cap or other similar
limitation.
(ii) Notwithstanding anything to the
contrary set forth in this Section 11.2, none of the Purchaser
Indemnified
Parties shall be entitled to indemnification pursuant to this
Section 11.2 to
the extent that (i) Losses result from acts, omissions or conduct
of any
Purchaser Indemnified Party, unless such acts, omissions or conduct
were
committed at the written direction of CPRE, or (ii) such Loss is
also a Loss for
which the CPRE Indemnified Parties are indemnified pursuant to
Section 11.3 of
this Agreement. Each of TRM and the Purchaser Insurers acknowledges
that none of
CPRE, the Selling Insurers, or any of their Affiliates shall be
deemed to have
guaranteed the profitability of the Business, Transferred Assets,
or any
transaction contemplated under this Agreement or the Ancillary
Agreements, or
any volume of sales, and no indemnification shall arise based on an
assertion of
such a guarantee of profitability or volume of sales.
11.3
Indemnification by the Purchasing Insurers.
(a) Indemnification. From and after the Closing,
subject to the remainder of this Article 11, each of TRM and the
Purchasing
Insurers, jointly and severally, shall indemnify, defend and hold
harmless CPRE,
the CPRE Entities, the members of the HIG Group, including the
Selling Insurers,
and their respective officers, directors, employees, agents,
Representatives,
successors and permitted assigns (collectively, the "CPRE
Indemnified Parties")
from and against any and all Losses to which any of them become
subject, arising
or resulting from:
(i) any material breach by any of TRM and
the Purchasing Insurers of any representation or warranty contained
in this
Agreement or in any Ancillary Agreement;
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(ii) any material breach by any Tower
Entity, including TRM and the Purchasing Insurers, of any covenant
made by any
of them in this Agreement or in any Ancillary Agreement to which
such Person is
a party;
(iii) any of the Transferred Assets or their
use;
(iv) any of the Assumed Liabilities; and
(v) the enforcement of their rights under
this Section 11.3.
(b)
Limitation.
(i) Notwithstanding the foregoing, TRM and
the Purchasing Insurers shall not be liable under this Section 11.3
unless the
total aggregate amount of Losses with respect to all such claims or
matters
exceeds $50,000 and then only to the extent of such excess. The
maximum amount
of TRM's and the Purchasing Insurers' collective and aggregate
liability under
Section 11.3(a) shall in no event exceed the Purchase Price.
Notwithstanding
anything to the contrary in this Section 11.3(b), TRM's and the
Purchasing
Insurers' obligation to provide indemnification under Sections
11.3(a)(iii),
11.3(a)(iv) and, with respect to the foregoing, 11.3(a)(v), shall
not be subject
to any basket, deductible, cap or other similar limitation.
(ii) Notwithstanding anything to the
contrary set forth in this Section 11.3, none of the CPRE
Indemnified Parties
shall be entitled to indemnification pursuant to this Section 11.3
to the extent
that (a) Losses result from acts, omissions or conduct of any CPRE
Indemnified
Party, unless such acts, omissions or conduct were committed at the
written
direction of TRM or any of the Purchasing Insurers, or (b) such
Loss is also a
Loss for which the Purchaser Indemnified Parties are indemnified
pursuant to
Section 11.2 of this Agreement. CPRE acknowledges that none of TRM,
the
Purchasing Insurers, or any of their Affiliates shall be deemed to
have
guaranteed the profitability of the Excluded Assets or any volume
of sales, and
no indemnification shall arise based on an assertion of such a
guarantee of
profitability or volume of sales.
11.4 Inter-Party Claims. Any Party seeking indemnification pursuant
to
this Article 11 (the "Indemnified Party") shall notify the other
Party or
Parties from whom such indemnification is sought (the "Indemnifying
Party") of
the Indemnified Party's assertion of such claim for
indemnification, specifying
in reasonable detail the basis of such claim and including
documents that
evidence or support such claim or the act, omission or occurrence
giving rise to
such claim.
11.5
Third Party Claims.
(a) Each Indemnified Party shall promptly notify the
Indemnifying Party of the assertion by any third party of any claim
with respect
to which the indemnification set forth in this Article 11 relates
(which shall
also constitute the notice required by Section 11.4). Failure to
timely notify
the Indemnifying Party shall not relieve such Person from its
obligations under
this Article 11, except to the extent the Indemnifying Party shall
have been
prejudiced by such failure. The Indemnifying Party shall have the
right, upon
notice to the Indemnified Party within ten business days after the
receipt of
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any such notice, to undertake the defense of such claim with
counsel of the
Indemnifying Party's choice and with the cooperation of the
Indemnified Parties.
The Indemnifying Party shall not, without the Indemnified Party's
prior written
consent (which will not be unreasonably withheld), settle,
compromise or consent
to the entry of any judgment in any pending or threatened claim in
respect of
which indemnification under this Article 11 is being sought, unless
such
settlement, compromise or consent includes an unconditional release
of each
Indemnified Party from all Liability arising or resulting from such
claim. The
failure of the Indemnifying Party to give such notice and to
undertake the
defense of or to settle or compromise such a claim shall constitute
a waiver of
the Indemnifying Party's rights to assume the defense of such claim
under this
Section 11.5(a). No Indemnified Party shall, without the
Indemnifying Party's
prior written consent (which shall not be unreasonably withheld),
settle,
compromise or consent to the entry of any judgments in any pending
or threatened
claim in respect of which indemnification under this Article 11 is
being sought.
(b) The election by the Indemnifying Party, pursuant
to Section 11.5(a), to undertake the defense of a third party claim
shall not
preclude the Party against which such claim has been made also
from
participating or continuing to participate in such defense, so long
as such
Party bears its own legal fees and expenses for so doing.
11.6 Exclusive Remedy. The Parties hereto expressly acknowledge
that
(i) except as otherwise expressly provided in Sections 10.2 and
12.14, the
provisions of this Article 11 shall be the sole and exclusive
remedy for Losses
caused as a result of any breach of any representation or warranty
or any
breach, nonfulfillment or default in the performance of any
covenant or
agreement contained in this Agreement or in any Ancillary
Agreement, other than
claims based on fraud, and (ii) no Indemnifying Party shall be
liable for
consequential, indirect, punitive or treble Losses in connection
with any
action, suit or proceeding brought by any Party, or for any Losses
based on
either the reduced current or future profitability or earnings of
any
transaction contemplated herein or in any Ancillary Agreement,
including the
Business, Transferred Assets, and Excluded Assets based on a
multiple of such
profitability, earnings or other factor, or reduction therein (it
being
understood that all Losses will for purposes of this Article 11 be
determined
and calculated on a direct, dollar-for-dollar basis), other than
any such Losses
paid to a third party in a third party claim. Any liability for
indemnification
hereunder will be determined without duplication of recovery by
reason of the
state of facts giving rise to such liability constituting a breach
of more than
one representation, warranty, covenant or agreement.
11.7 Calculation of Losses. The amount of any Losses for which
indemnification is provided under this Article 11 shall be net of
any amounts
actually recovered by the Indemnified Parties under insurance
policies or other
collateral sources (such as contractual indemnities of any Person
that are
outside of this Agreement, e.g., the Stock Purchase Agreement) or
otherwise with
respect to such Losses (net of any Tax or expenses incurred in
connection with
such recovery). Each Party will use its commercially reasonable
efforts to
recover under insurance policies or other collateral sources
(including the
Stock Purchase Agreement) for any Losses prior to seeking
indemnification under
this Agreement.
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ARTICLE 12
MISCELLANEOUS PROVISIONS
------------------------
12.1 Entire Agreement. This Agreement and the Ancillary
Agreements
constitute the entire agreement between the Parties with respect to
the subject
matter hereof and thereof, and supersede any and all prior oral or
written
understandings, agreements or negotiations, between or among the
Parties with
respect to the subject matter hereof and thereof. No prior writings
by or
