EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
This
Stock Purchase
Agreement (the
"AGREEMENT") is made
as of August 20,
2008, by and between Jacobs Financial Group, Inc., a Delaware corporation (the
"PURCHASER"), and
National Indemnity Company, a Nebraska corporation (the
"SELLER").
WHEREAS, the Seller owns 337,248 shares (the "SHARES") of the
common stock,
par value $10.00 per share of Unione Italiana Insurance Company of America, a
New York corporation (the "COMPANY"), which Shares constitute all of the
outstanding capital stock of the Company; and
WHEREAS, the Seller desires to sell to the Purchaser, and Purchaser
desires
to purchase from the
Seller, all of the
Shares of the Company,
subject to the
terms and conditions set forth herein; and
WHEREAS, it is the
intention of the parties hereto that contemporaneously
with the consummation
of the transactions
contemplated by this Agreement, all
liabilities under the Insurance and Reinsurance Contracts (including
contingent
liabilities in respect
of claims thereunder)
shall be reinsured by
the Seller
pursuant to the NICO
Reinsurance Agreement
(as defined
herein) to be
entered
into between the Company and the Seller at Closing.
NOW, THEREFORE, intending to be legally bound and
in consideration of the
mutual provisions
set forth in this
Agreement and for
other good and valuable
consideration, the
receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. The
following terms, as used herein, have the following
meanings:
"ACCOUNTING FIRM" has the meaning set forth in SECTION 2.5
"AFFILIATE"
means, with
respect to any Person, any other Person
controlling,
controlled by, or under common control with such other Person.
For
purposes of this
definition, "CONTROL,"
when used with respect
to any Person,
means the power to direct the management and policies of such Person,
directly
or indirectly, whether
through the ownership of voting securities, by contract
or otherwise, and the
terms "CONTROLLING"
and "controlled" have correlative
meanings.
"ADVERSE CONSEQUENCES" has
the meaning set forth in SECTION 9.1(A).
"AGREEMENT" has the meaning set forth in the Preamble.
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"APPLICABLE INSURANCE
CODE(S)" means the insurance laws to which the
Company is subject,
including the
insurance laws of the
State of New York. In
all cases, Applicable
Insurance Code shall include the rules and
regulations
promulgated under any of the foregoing laws.
"BASE PURCHASE PRICE" has the meaning set forth in SECTION 2.1.
"BUSINESS DAY" means a
day other than a
Saturday, Sunday or
other day on
which commercial banks in Charleston, West Virginia or Stamford,
Connecticut are
authorized or required by law to close.
"CLOSING" has the meaning set forth in SECTION 2.2.
"CLOSING ASSETS" shall
mean the Licenses,
the Statutory Deposits, the
Portfolio Investments,
the Corporate
Records, the Insurance and Reinsurance
Contracts, the Bank
Accounts, the assets
set forth in the Company's Statutory
Statements and the NICO Reinsurance Agreement.
"CLOSING DATE" has the meaning set forth in SECTION 2.2.
"CLOSING DATE POLICYHOLDERS' SURPLUS" shall mean the Policyholders'
Surplus
as of the Closing Date.
"CLOSING SURPLUS STATEMENT" has the meaning set forth in SECTION
2.5.
"COMPANY" has the meaning set forth in the Preamble.
"COMPANY BOOKS AND RECORDS" has the meaning set forth in SECTION
5.9.
"COMPANY INSURANCE POLICIES" has the meaning set forth in SECTION
3.17.
"CONSENTS" has the meaning set forth in SECTION 3.6.
"CONTRACT" means any
written or oral
contract, lease or other property
agreement, license,
indenture,
note, bond, agreement, permit, concession,
franchise, commitment,
insurance policy,
bond, mortgage,
partnership or joint
venture agreement or instrument.
"CORPORATE RECORDS" means the corporate records of the Company,
other than
Company Books
and Records, including, without limitation, articles of
incorporation,
by-laws, corporate
seal, stock book and
stock transfer ledger,
minutes of meetings of
the shareholders
and directors and other records of
corporate actions, books of account, ledgers, , all filings,
correspondence and
communications with
insurance regulatory authorities, business records and
documents reflecting
the qualifications, assets, liabilities, commitments,
obligations, rights and entitlements of the Company of whatever
nature.
"DEPOSIT" means the
deposit in the amount
of $75,000 previously
paid by
Purchaser to Seller pursuant to the letter agreement, dated December 3, 2008 by
and between Purchaser and Seller.
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"DOMICILIARY INSURANCE DEPARTMENT" means the New York Insurance
Department.
"EMPLOYEE BENEFIT
PLAN" means any benefit plan or arrangement of the
Company for its employees, including but not limited to employee
pension benefit
plans, as defined in
Section 3(2) of ERISA,
Multiemployer
Plans, if any, as
defined in Section 3(37) of ERISA, employee welfare benefit plans,
as defined in
Section 3(1) of ERISA,
deferred compensation
plans, stock option
plans, bonus
plans, stock purchase
plans, hospitalization, disability and other insurance
plans, severance or termination pay plans and policies, whether or
not described
in Section 3(3) of ERISA, in which employees of the Company,
their spouses or
dependents participate.
"ENVIRONMENTAL LAWS" has the meaning set forth in SECTION 3.16.
"ERISA" means the
Employee Retirement
Income Security Act of 1974, as
amended.
"ESTIMATED POLICYHOLDERS' SURPLUS" shall mean the Policyholders'
Surplus as
of the Closing Date as estimated in good faith by the Seller as set
forth on the
Estimated Surplus
Statement based upon the Company's
Policyholders'
Surplus
reflected in the Company's most recent filed statutory financial
statement prior
to the Closing Date,
with appropriate
adjustments
in the ordinary
course of
business consistent
with past practices for the period from the date of
that
financial statement
until the Closing Date to reflect any change in the
Company's
circumstances,
prepared in a manner
consistent with the
Company's
historical accounting
practices,
and to give effect to any settlement of
intercompany accounts
as of the Closing Date
pursuant to SECTION
5.8, in each
case to the extent
Policyholders' Surplus
shall have been changed thereby. The
Seller's calculation of the Estimated Policyholders' Surplus shall
be binding on
Purchaser absent manifest error.
"ESTIMATED
SURPLUS
STATEMENT" shall
mean the Seller's estimate of
Policyholders' Surplus
as of the Closing Date
delivered by the Seller to the
Purchaser not less than two (2) Business Days prior to the Closing
Date.
"FINANCING CERTIFICATE" has the meaning set forth in SECTION
5.13.
"GAAP" means United States generally accepted accounting principles as in
effect at the relevant time or for the relevant period.
"GOVERNMENTAL
ENTITY" means
any federal, state, local or foreign
government, political
subdivision,
legislature,
court, agency, department,
bureau, commission
or other governmental or regulatory authority, body or
instrumentality, including any insurance or securities regulatory
authority.
"INDEMNIFIED PARTY" has the meaning as set forth in SECTION
9.1(C).
"INDEMNIFYING PARTY" has the meaning as set forth in SECTION
9.1(C).
"INSURANCE AND
REINSURANCE
CONTRACTS"
means all Contracts, treaties,
facultative
certificates, policies
or other arrangements
issued prior to
the
Closing Date, other than Company Insurance Policies, to which the Company is a
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party or by which the
Company is bound or
subject, providing
for insurance,
ceding or assumption of reinsurance, excess insurance or retrocession,
including, without limitation, all insurance policies, reinsurance
policies, and
retrocession
agreements, in each
case as such Contract,
treaty, facultative
certificate, policy or
other arrangement
may have been
amended, modified or
supplemented, other
than Company Insurance
Policies, irrespective
of how such
arrangement is accounted for.
"INTERCOMPANY
AGREEMENT" shall
mean any agreement between (i) (x) the
Company on the one hand, and (y) the Seller or any of its
Affiliates (other than
the Company)
on the other
hand, and (ii) (x) any director or officer of the
Seller or any of its Affiliates (including the Company) on the one
hand, and (y)
the Company on the other hand.
"LETTER AGREEMENT" has the meaning as set forth in SECTION 2.4.
"LICENSES" means the
Company's licenses or
certificates
of authority to
transact insurance or
reinsurance,
as applicable,
in the states set
forth on
ANNEX A hereto.
"LIEN" means any lien, charge, claim, mortgage, covenant, option, pledge,
security interest,
right of first refusal, restriction or other encumbrance
of
any kind.
"MATERIAL ADVERSE EFFECT" means any event, circumstance, change,
occurrence
or effect which, individually or in the aggregate, has a material
adverse effect
on (i) the business, operations, financial condition or results of
operations of
the Company, or (ii)
the ability of the Company or the Seller to consummate the
transactions
contemplated hereby,
other than arising out
of, resulting
from,
caused by or
attributable to (a)
changes in conditions in the United States or
global economy or capital or financial markets generally, including changes in
interest or exchange
rates, except to the extent such condition negatively
affects the Company
disproportionately
compared to other
participants in
any
segment of the property and casualty insurance or reinsurance
industry in which
the Company operates,
(b) changes in
economic or business trends or conditions
generally applicable
to the industries and markets in which the Company
operates, except to
the extent such
condition negatively
affects the
Company
disproportionately compared to other participants in any segment of
the property
and casualty insurance
or reinsurance
industry in which the Company operates,
(c) changes in law,
regulatory
conditions
or GAAP or
regulatory
accounting
principles, including
Statutory Accounting
Practices,
after the date of
this
Agreement, (d) the
announcement
of this Agreement and the identity of the
Purchaser, (e) actions
required or permitted to be taken by the Seller pursuant
to this Agreement
or taken with the
Purchaser's
consent, and (f) any action
taken by the Purchaser or its Affiliates in connection with the
consummation of
the transactions contemplated hereby.
"NICO REINSURANCE
AGREEMENT"
means the 100% Quota Share Reinsurance
Agreement by and between the Company and Seller dated the Closing
Date, in the
specific form
attached hereto as EXHIBIT A, pursuant to which Seller shall
reinsure the Company's liabilities under the Insurance and
Reinsurance Contracts
in effect prior to the Closing Date.
"NOTICE OF OBJECTION" has the meaning set forth in SECTION 2.5.
"PERMIT" means any
license, permit, franchise, certificate, approval,
consent and other governmental authorization.
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"PERSON" means
an individual, corporation (including any non-profit
corporation), general
or limited partnership, limited liability company,
joint
venture, estate, trust, unincorporated organization, association or
other entity
or form of business enterprise.
"POLICYHOLDERS'
SURPLUS" means
as of any date "surplus as regards
policyholders" of the Company calculated in accordance with
Statutory Accounting
Practices of the Domiciliary Insurance Department applied on a
basis consistent
with the Statutory Statements of the Company.
"PORTFOLIO
INVESTMENTS" means
the portfolio of government and GNMA
Securities, cash and
cash equivalents
(including accrued interest and dividend
thereon, owned
by the Company) as of the date hereof, as such investment
portfolio may
change in connection with the management of the Company's
investment portfolio
in the ordinary course
of business consistent
with past
practices.
"PURCHASE PRICE" shall
mean the Base Purchase Price, as finally adjusted
pursuant to SECTION 2.5 hereof.
"PURCHASER" has the meaning set forth in the Preamble.
"PURCHASER BOOKS AND RECORDS" has the meaning set forth in SECTION
5.9.
"PURCHASER INDEMNIFIED PARTY" has the meaning set forth in SECTION
9.1.
"SELLER" has the
meaning set forth in the Preamble. "SELLER INDEMNIFIED
PARTY" has the meaning set forth in SECTION 9.1.
"SHARES" has the meaning set forth in the Preamble.
"STATUTORY ACCOUNTING
PRACTICES" means the accounting practices prescribed
or permitted by the Insurance Department of New York, which are distinct from
GAAP and provide the
basis for the
Statutory Statements
of the Company, as
applied on a consistent basis.
"STATUTORY DEPOSITS" means any financial deposits required to be
maintained
by the Company by the
Commissioners
or Departments of Insurance (or other
governmental or regulatory authority), as a condition of the Company's
conduct
of business in the states set forth on ANNEX A hereto.
"STATUTORY STATEMENTS
OF THE COMPANY" means
the annual statements
of the
Company, as filed with its Domiciliary Insurance Department,
for the year ended
December 31, 2007 and the quarterly statements of the condition and
affairs of
the Company,
as filed with its Domiciliary Insurance Department, for the
quarterly periods ended March 31, 2008 and June 30, 2007.
"SUPERINTENDENT" means
the Superintendent of Insurance of the State of New
York.
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"TAX" OR "TAXES" means
all federal,
state, county or local net or gross
income, gross
receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank
shares, withholding,
payroll, employment, excise, property,
deed, stamp,
alternative
or add-on minimum, environmental or other taxes,
assessments, duties,
fees, levies or other
governmental charges
of any nature
whatsoever,
together with
any interest, penalties, additions to tax or
additional amounts
with respect thereto imposed by a Governmental Entity
("TAXING AUTHORITY").
"TAXING AUTHORITY" has the meaning set forth in the definition of
Tax.
"TAX
RETURN" means all reports, estimates, declarations of estimated Tax,
claims for refund,
information statements
and returns relating to, or required
to be filed in connection with, any Taxes, including any schedule or
attachment
thereto, and including any amendment thereof.
"TRANSACTION
DOCUMENTS" means,
collectively, this
Agreement and the NICO
Reinsurance Agreement.
ARTICLE II
THE TRANSACTION
Section 2.1. PURCHASE AND SALE. Subject to the terms and subject
to the
provisions of this
Agreement,
and in reliance
upon the representations and
warranties hereinafter
set forth,
at the Closing,
the Seller agrees to
sell,
assign, transfer
and deliver to the
Purchaser,
and the Purchaser agrees to
purchase and acquire from the Seller, all of the Shares, free and clear of all
Liens (other than any restrictions on subsequent transferability by
Purchaser of
the Shares imposed by Applicable Insurance Codes, and applicable federal or
state securities laws)
for a purchase price equal to the sum of (i) $2,750,000,
PLUS (ii) that amount in U.S. dollars cash equal to Estimated Policyholder's
Surplus, LESS (iii) an
amount equal to the Deposit (the "BASE PURCHASE PRICE").
The Base Purchase
Price shall be subject to adjustment in accordance with
SECTION 2.5 and
shall be paid in the manner and at the time set forth in
SECTIONS 2.3.
Section 2.2.
CLOSING. Subject to ARTICLE VI hereof,
the closing of the
transactions
contemplated by this
Agreement (the "CLOSING") will take place at
the offices of the
Seller, 100 First
Stamford Place, Stamford, Connecticut
06902, at 10:00 a.m., local time, on the third Business Day after the
satisfaction or waiver
of all of the
conditions set forth in ARTICLE VI hereof
(other than conditions
relating to actions to be taken at the
Closing) or at
such other place, time or date as the Purchaser and the Seller may
agree upon in
writing. The date upon
which the Closing actually occurs is referred to in this
Agreement as the "CLOSING DATE".
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Section 2.3. CLOSING DELIVERIES.
(a)
At the Closing, the Seller will deliver or cause to be delivered to
the
Purchaser:
(i) certificate(s)
representing the Shares, duly endorsed in blank or
accompanied by stock
powers duly executed in blank in form reasonably
satisfactory to the Purchaser for transfer;
(ii) resignations effective as of the Closing of each officer and
each
member of the board of directors of the Company; and
(iii) all other
documents,
certificates
and instruments required
hereunder to be delivered by Seller to Purchaser at Closing.
(b)
At the Closing,
the Purchaser shall (i) pay to the Seller the Base
Purchase Price by wire transfer of immediately available funds to an account
or
accounts designated by
the Seller at least three (3) Business Days prior to the
Closing Date, and (ii) deliver to the Seller all other documents, certificates
and instruments required hereunder to be delivered by Purchaser to
Seller at the
Closing.
Section 2.4. SELLER AND PURCHASER'S LETTER AGREEMENT DATED MAY 14,
2008.
In
connection with the
pending sale of the Company to the Purchaser, the
Seller and the
Purchaser have
entered into a letter
agreement dated May 14,
2008, pursuant
to which the Seller
has agreed,
subject to certain
terms and
conditions, to issue
bonds on behalf of the
Company to the extent
such bonds
require the
issuing carrier to have a Certificate of Authority from the
Financial Management
Service of the U.S.
Department
of Treasury (the
"LETTER
AGREEMENT"). The Letter Agreement is attached hereto as EXHIBIT
B.
Section 2.5. POLICYHOLDERS' SURPLUS ADJUSTMENT.
(a)
Within sixty (60) days after the Closing Date, Seller shall prepare
and
deliver to the Purchaser a statement (the "CLOSING SURPLUS
STATEMENT"),
setting
forth the Seller's
determination of the
Closing Date
Policyholders'
Surplus,
including but not
limited to (i) any changes in market value of the Company's
assets as of the Closing Date, (ii) investment income, and (iii) any tax
effect
of such adjusted
amounts. For the avoidance of doubt, the Closing Surplus
Statement shall not,
and is not intended to
take into account the
sufficiency
of, or any change in
the Company's
insurance or reinsurance reserves. The
Closing Surplus
Statement shall be prepared in good faith and in a manner
consistent with the Estimated Policyholders' Surplus.
(b)
After the receipt by Purchaser of the Closing Surplus Statement and
until such time as the final Closing Date Policyholders' Surplus is determined
in accordance
with this SECTION 2.5, the Purchaser and their authorized
representatives shall
have full access during reasonable business hours upon
prior written
notice to the
working papers of Seller and their respective
representatives
relating to the Closing Surplus Statement and the calculations
set forth thereon.
Unless Purchaser,
within thirty (30)
days after receipt of
the Closing Surplus
Statement,
gives Seller a notice objecting thereto and
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specifying, in
reasonable
detail, the basis for each such
objection and the
amount in dispute
("NOTICE OF OBJECTION"), such Closing Surplus Statement and
the Closing Date Policyholders' Surplus reflected therein shall be
binding upon
Purchaser and the
Seller and the applicable payment required pursuant to
subsection (c) below shall be made. Any Notice of Objection shall
specify (x) in
reasonable detail the nature and amount of any disagreement so
asserted, and (y)
only include
disagreements
based on the
differences
between the Estimated
Surplus
Statement and
the Closing Surplus Statement and the Estimated
Policyholders'
Surplus and
the Closing Date Policyholders' Surplus,
respectively. If a
timely Notice of
Objection is received by Seller, then the
Closing Surplus
Statement (as revised in accordance with clause (1) or (2)
below) shall become final and binding upon the parties hereto on the earlier of
(1) the date the Seller and Purchaser resolve in writing any
differences
they
have with respect to any matter specified in the Notice of
Objection and (2) the
date any matters
properly in dispute
are finally resolved in writing by the
Accounting Firm (as
defined below).
During the thirty
(30) days immediately
following the
delivery by Purchaser
to Seller of a Notice
of Objection,
the
Seller and
Purchaser shall seek in good faith to resolve in writing any
differences that they
may have with respect
to any matter specified in the
Notice of Objection.
At the end of such thirty (30) day period, the Seller and
Purchaser shall submit to an accounting firm which has not
performed work in the
last two (2) years for
either Seller or Purchaser jointly selected by the
Seller's accountants and the Purchaser's accountants (the
"ACCOUNTING FIRM") for
review and resolution
of any and all
matters (but only such matters) which
remain in dispute.
Purchaser and the
Seller shall instruct
their respective
accountants to select the Accounting Firm in good faith within ten
(10) days. If
the Purchaser's
or the Seller's
accountants
cannot agree upon the
Accounting
Firm within such ten (10) day period, within an additional five (5) days, they
shall each designate
an accounting firm who
has not performed work in the last
two years for either
Seller or Purchaser and the Accounting Firm shall be
jointly selected by those two accounting firms. The Accounting Firm so
selected
shall be instructed
to review and resolve
any and all matters
(but only such
matters) which remain in dispute and which were properly
included in the
Notice
of Objection.
Purchaser and the Seller shall instruct the Accounting Firm to
make a final determination of the Closing Date Policyholders'
Surplus. Purchaser
and the Seller will cooperate with the Accounting Firm during the term of its
engagement. Purchaser
and the Seller shall instruct the Accounting Firm not to
assign a value to any item in dispute greater than the greatest
value for such
item assigned by Purchaser, on the one hand, or the Seller,
on the other hand,
or less than the smallest value for such item assigned by
Purchaser, on the
one
hand, or the Seller,
on the other hand.
Purchaser and the Seller shall also
instruct the
Accounting
Firm to make its determination based solely on
presentations by
Purchaser and the Seller (i.e., not on the basis of an
independent review).
The Closing Surplus Statement and the Closing Date
Policyholders' Surplus
reflected therein
shall become final and binding on the
parties hereto on the date the Accounting Firm delivers its final
resolution in
writing to Purchaser and the Seller (which final resolution shall be requested
by the parties
hereto to be delivered not more than forty five (45) days
following submission of such disputed matters). All of the fees and expenses
of
the Accounting
Firm pursuant to this
SECTION 2.5 shall be borne equally by the
Seller and the Purchaser.
(c)
If the Closing Date
Policyholders' Surplus
(as determined pursuant to
SECTION 2.5(B))
exceeds the Estimated
Policyholders'
Surplus, then
Purchaser
shall pay the Seller the amount of such excess, as directed by the Seller.
If
the Closing
Date Policyholders' Surplus (as determined pursuant to SECTION
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2.5(B)) is less than the Estimated Policyholders' Surplus, then the
Seller shall
pay Purchaser such shortfall as directed by Purchaser. Payments
made pursuant to
this SECTION 2.5(C)
shall be made by wire
transfer of
immediately
available
funds as follows: (i) if no Notice of Objection is delivered to the
Seller, such
amount shall be paid
within three (3) Business Days of the earlier of the
expiration of the
thirty (30) day period for delivery of such Notice of
Objection and the date
of delivery
to the Seller of a
notice that the Closing
Surplus Statement
will be accepted without objection; or (ii) if Notice of
Objection is delivered
to the Seller, (x) any
net undisputed
amount due from
Seller to Purchaser
or from Purchaser to Seller (as the case
may be) shall be
paid within three (3) Business Days after delivery of such Notice of
Objection,
and (y) the remaining
amount, if any, due from Seller to Purchaser or Purchaser
to Seller (as the case
may be) shall be paid
within three (3)
Business Days
after the date all
disputed items are
finally resolved pursuant to SECTION
2.5(B). Any amounts not paid when required pursuant to this SECTION
2.5(C) shall
bear interest
compounded annually from the required date of payment to the
date
of actual payment at the prime rate of interest announced publicly by Citibank
N.A. in New York, New York from time to time as its prime rate.
Section 2.6. NICO REINSURANCE AGREEMENT.
Subject to any required Consents, immediately prior to the Closing, the
Seller and the Company shall execute and deliver the NICO
Reinsurance Agreement,
pursuant to which the Seller shall reinsure all of the Company's
remaining gross
insurance liabilities under the Insurance and Reinsurance Contracts
issued on or
prior to the Closing Date and expenses related thereto as set forth in
the NICO
Reinsurance Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The
Seller represents and warrants to the Purchaser that except as
disclosed in any of
the Schedules
attached hereto (it being understood and
agreed that
information
disclosed in any Schedule shall be deemed to be
disclosed with respect to, and incorporated in, any other section
or subsections
contained in this
ARTICLE III unless it is not reasonably apparent that such
disclosure is applicable to another section or subsection) as
follows:
Section 3.1. ORGANIZATION AND GOOD STANDING OF SELLER AND THE
COMPANY.
(a)
The Seller is a corporation duly incorporated and subsisting under
the
laws of the state of
Nebraska and has all
the requisite
corporate power and
authority to own and hold its assets and properties and to carry on
its business
as now being conducted. Seller has furnished to Purchaser
correct and
complete
copies of its articles of incorporation and bylaws, in each case as amended to
date.
(b)
The Company is a corporation duly incorporated and subsisting under
the
laws of the state of New York as a property and casualty company and has all
requisite corporate
power and authority to
own and hold assets and properties
and to carry on its business as now being conducted in all material respects.
The Company is duly
qualified and in good standing as a foreign corporation in
all jurisdictions
in which the nature of
its business or the
ownership of its
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assets makes such qualification necessary, in each case except
where the failure
to be so qualified has not had a Material Adverse Effect. Seller has furnished
to Purchaser correct
and complete copies of the articles of incorporation and
bylaws of the Company, in each case as amended to date.
Section 3.2. AUTHORITY AND ENFORCEABILITY.
(a)
The Seller has all requisite corporate power and authority to execute
and deliver this Agreement and the other Transaction Documents to which it is a
party and to perform its obligations hereunder and thereunder. The execution,
delivery and
performance by Seller of this Agreement and the other Transaction
Documents to which it
is a party have been
duly authorized
by all necessary
corporate action on the part of the Seller and no other corporate
proceedings on
the part of the Seller is necessary to authorize
the execution, delivery and
performance of this Agreement and the other Transaction Documents
to which it is
a party or the
consummation of any of the transactions contemplated hereby or
thereby. This Agreement and other Transaction Documents (when
executed) to which
the Seller is a party
have been (or,
at Closing
will be) duly
executed and
delivered by the Seller and constitute (or at Closing, will constitute) the
legal, valid and
binding obligations
of the Seller,
enforceable
against the
Seller in accordance
with their terms, subject to applicable bankruptcy,
insolvency or similar laws in effect that affect the enforcement of creditors'
rights generally
and to general
principles of equity
(regardless
of whether
enforcement is sought in equity or at law).
(b)
The Company has all requisite corporate power and authority to
execute
and deliver the Transaction Documents to which it is a party
and to perform its
obligations thereunder. The execution, delivery and performance by the
Company
of the Transaction Documents to which it is a party have been duly
authorized by
all necessary corporate action on the part of the Company and no
other corporate
proceedings on the
part of the Company is necessary to authorize the execution,
delivery and performance of the Transaction Documents to which it is a party
or
the consummation
of any of the transactions contemplated or thereby. The
Transaction Documents to which the Company is a party (when
executed) at Closing
will be duly executed
and delivered by the Company and, at Closing, will
constitute the legal, valid and binding obligations of the Company,
enforceable
against the
Company in
accordance
with their
terms, subject to applicable
bankruptcy, insolvency
or similar laws in effect that affect the enforcement of
creditors' rights generally and to general principles of equity (regardless of
whether enforcement is sought in equity or at law).
Section 3.3.
CAPITALIZATION
AND OWNERSHIP. SCHEDULE 3.3 sets forth the
designation, par value
and the number of
authorized, issued
and outstanding
shares of capital stock of the Company. The Shares constitute all of the
issued
and outstanding
shares of capital
stock of the Company
and there are no other
shares of capital stock of the Company issued or outstanding.
All of the Shares
are duly authorized,
validly issued, fully paid and non-assessable. The Seller
is, and on the Closing Date will be, the sole record holder and
beneficial owner
of all of the Shares,
free and clear of any Lien (other than any restriction on
subsequent
transferability by
Purchaser imposed by Applicable Insurance Codes
and applicable federal
or state securities
laws). Except for this Agreement,
there are no subscriptions, options, warrants, calls, preemptive rights,
commitments or other
rights (contingent or
otherwise) to purchase or otherwise
receive, nor are there
any securities or
instruments of any
kind convertible
into or exchangeable
for, any capital stock of the Company. Neither Seller nor
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Company is a
party to any agreement with a third party which places any
restriction upon, or
which creates any voting trust, proxy, or other agreement
with respect to, the voting, purchase, redemption, acquisition or transfer of
the Shares.
Section 3.4.
SUBSIDIARIES.
As of the Closing, the Company will not own
beneficially, directly
or indirectly, any shares of capital stock or securities
convertible into
capital stock of any other corporation or have any
participating interest
in any partnership,
limited liability company, or joint
venture, or control, directly or indirectly, any other Person.
Section 3.5. NO CONFLICTS Assuming receipt of the Consents (as
defined in
SECTION 3.6 below),
the execution,
delivery and
performance by the
Seller of
this Agreement
and of the
Seller and the Company of the other Transaction
Documents to which
each are a party and the consummation of the transactions
contemplated hereby and thereby do not and will not conflict with,
result in any
breach or violation
of, constitute a
default under (or an
event that with the
giving of notice or the lapse of time or both would constitute a
default under),
or give rise to any right of termination, cause a loss,
cancellation, suspension
or adverse
modification of, or
acceleration of any
right or obligation of the
Seller or the Company under, or result in the creation or
imposition of any Lien
upon any assets or
properties
of the Seller or the Company by reason of the
terms of (a) the
certificate or
articles of incorporation or bylaws of the
Seller or the Company,
(b) except as
disclosed on SCHEDULE
3.5, any material
Contract to which the
Seller or the Company is a party or by or to which any of
them or their assets or properties (including, without limitation, the Shares)
may be bound or subject, (c) any applicable material order, writ, judgment,
injunction, award,
decree, law, statute,
ordinance, rule or
regulation or (d)
any License or any other material Permit used or held by the Company
or Seller,
other than, in the
case of clause (b) and (c) above, any such items that would
not be reasonably likely to have a Material Adverse Effect or a
material adverse
effect on the ability of the Seller to execute and deliver this
Agreement or the
other Transaction
Documents to which it
is a party, to perform its obligations
hereunder or thereunder, or to consummate the transactions
contemplated
hereby
and thereby.
Section 3.6. CONSENTS
AND APPROVALS. Except
as set forth on SCHEDULE 3.6,
no consent, approval, authorization, license or order of,
registration or filing
with, or notice to, any Governmental Entity or any other Person
(collectively,
"CONSENTS") is
necessary to be obtained, made or given by the Seller or
the
Company in connection
with the execution and delivery by the Seller of this
Agreement or the
Seller or the Company of the other Transaction Documents to
which it is a party,
the performance
by the Seller or the Company of their
obligations hereunder
and thereunder and the
consummation of the
transactions
contemplated hereby and thereby, other than such Consents which, if
not obtained
or made, would not be
reasonably likely to
have a Material Adverse Effect or a
material adverse effect on the ability of the Seller to execute and
deliver this
Agreement or the other Transaction Documents to which it is a party,
to perform
its obligations hereunder or to consummate the transactions
contemplated
hereby
or thereby.
Section 3.7. TITLE TO
SHARES. The Seller has
good and valid title to each
of the Shares,
free and clear of all
Liens (other
than any restrictions on
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subsequent
transferability by
Purchaser of the
Shares imposed by
Applicable
Insurance Codes and applicable federal or state securities
laws).
Section 3.8. CONTRACTS. SCHEDULE 3.8 sets forth a true and complete
list of
all of the following
Contracts to which the Company is a party or
pursuant to
which any of its
properties
or assets is bound (excluding Insurance and
Reinsurance Contracts
assumed or ceded by the Company in conduct of its
insurance and reinsurance business): (x) all Intercompany
Agreements and (y) all
other material
Contracts.
The Seller has made
available to
Purchaser true,
correct and complete copies of all Contracts listed on SCHEDULE
3.8.
Section 3.9. FINANCIAL
STATEMENTS.
The Company has
furnished to Purchaser
true, correct and
complete copies of the
Statutory Statements
of the Company.
The Statutory
Statements
of the Company were prepared in accordance with
Statutory Accounting Practices of the Domiciliary Insurance
Department, and
the
Applicable Insurance Code, consistently applied throughout
the periods involved
(except as may be indicated in the notes thereto regarding the adoption of new
accounting policies),
have been audited and
present fairly, in accordance with
Statutory Accounting Practices of the Domiciliary Insurance
Department, and
the
Applicable Insurance
Code, the statutory
financial position of
the Company at
the respective dates
thereof and the results of operations of the Company, for
the respective
periods then ended, except that the quarterly Statutory
Statements of the
Company have not been
audited and are or
will be subject to
normal recurring
year-end audit
adjustments. The
Statutory Statements
of the
Company complied in all material respects with Statutory Accounting
Practices of
the Domiciliary
Insurance Department,
and the Applicable
Insurance Code,
and
were complete and correct in all material respects when filed, and no material
deficiency has been
asserted in writing
with respect to any of
the Statutory
Statements of the Company by any Applicable Insurance
Department.
Section 3.10. NO MATERIAL ADVERSE CHANGE. Since December 31, 2007,
except
with respect to the
Transaction
Documents,
the Company has conducted its
business in the ordinary course in all material
respects consistent with past
practice and no change or event has occurred or condition
exists that has had
a
Material Adverse
Effect. The Company ceased writing new Insurance and
Reinsurance Contracts in 1991, and has been in run-off since.
Section 3.11. ASSETS
AND LIABILITIES
AT CLOSING.
Except as disclosed
in
SCHEDULE 3.11, on the Closing Date (after giving effect to the NICO
Reinsurance
Agreement, and
the transactions contemplated hereunder, including without
limitation Section 5.8
hereof), the Company's
assets shall consist
of nothing
more than the Closing Assets (it being understood that such assets
shall be free
and clear of all Liens). Except as disclosed in SCHEDULE
3.11, to the knowledge
of the Seller after due inquiry, the Company has no liabilities or obligations
of any nature except
(i) as disclosed
or reserved against in the Statutory
Statements of
the Company, including the notes thereto, and (ii) for
non-material
liabilities or
obligations
that were incurred in the ordinary
course of business consistent with past practice.
Section 3.12. TAXES.
Except as otherwise
disclosed in SCHEDULE
3.12, (i)
the Company has filed
(or joined in the filing of) when due (after taking into
account all properly requested extensions) all material Tax
Returns required by
applicable law to be
filed with respect to the Company. All Tax Returns,
including amendments
to date, filed (or joined in the filing of) by the Company
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completely,
accurately, and correctly reflected the facts regarding the
income,
properties, operations
and status of the Company as required to be shown
thereon. All Taxes
shown to be due on
such Tax Returns
have been paid,
(ii)
there is no pending
examination or proceeding by any Taxing Authority or agency
with respect to the Company relating to the assessment or collection of any
material Tax or assessment, nor is there any written claim for
additional Tax or
assessment being
asserted by any Taxing Authority, (iii) there has been no
waiver or extension of any applicable statute of limitations for the
assessment
or collection
of any such Taxes of
the Company; and (iv)
the Company is not a
party to any tax sharing agreement other than with Seller and its Affiliates
providing for the
payment of Taxes,
payment for Tax
losses, entitlements
to
refunds or similar Tax
matters. There is no
tax Lien, whether
imposed by any
federal, state, county or local taxing authority outstanding
against the assets,
properties or
businesses of the Company, except for liens arising by
operation
of law for accrued taxes not yet due.
Section 3.13.
LEGAL PROCEEDINGS. Except as set forth in SCHEDULE
3.13,
there is no action, suit, claim, arbitration, proceeding, inquiry or
investigation pending
or, to the knowledge
of Seller, threatened
against the
Company or against the Seller with respect to the Company,
or any of the
assets
of the Company, by or
before any court, other Governmental Entity or arbitrator
other than actions, suits, claims or proceedings which, if
adversely determined,
would have a Material Adverse Effect.
Section 3.14. COMPLIANCE WITH LAW; PERMITS. Except for matters
disclosed in
SCHEDULE 3.14,
the Company is in
compliance in all material respects with (i)
all applicable laws,
ordinances,
rules and regulations of all governmental
authorities, (ii) all applicable orders, writs, judgments,
injunctions,
awards,
determinations and
decrees of any court, other Governmental Entity or
arbitrator, (iii) the
Licenses, and (iv) any Permits (other than the Licenses),
except in the case of clause (iv) where the failure to comply has not had a
Material Adverse Effect. SCHEDULE 3.14(I) contains a
complete and accurate list
of all the Licenses.
Except for matters
disclosed in SCHEDULE
3.14(I), each
License set forth in
SCHEDULE 3.14(I) is in
full force and effect
without any
default or violation
thereunder in any material respect by the Company. Except
as set forth in SCHEDULE 3.14(I), no proceeding is pending or, to
the knowledge
of Seller,
threatened
by any governmental authority to revoke or deny the
renewal of any such License. The Company has not received notice in
writing that
any License
may not in the
ordinary course be renewed upon its expiration.
SCHEDULE 3.14(II)
contains a complete and accurate list of all material Permits
(other than the Licenses) used or held by the Company or the
Seller. Except for
matters disclosed in SCHEDULE 3.14(II), each such material Permit set
forth in
SCHEDULE 3.14(II) is
in full force and effect without any default or
violation
thereunder, except as otherwise would not have a Material Adverse
Effect. Except
as set forth in SCHEDULE 3.14(II), no proceeding is pending or, to
the knowledge
of Seller,
threatened
by any governmental authority to revoke or deny the
renewal of any such material Permit and the Company has not
received notice in
writing that any material Permit may not in the ordinary
course be renewed upon
its expiration, except as otherwise would not have a Material
Adverse Effect.
Section 3.15.
EMPLOYEES AND BENEFIT PLANS. Except as disclosed on SCHEDULE
3.15, the Company (i) does not currently have any employees, (ii) does not
currently sponsor
any Employee Benefit Plans, (iii) has no liability or
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responsibility with
respect to any Person who was previously an employee of the
Company or with respect to any Employee Benefit Plan previously maintained by
the Company, and (iv)
has no liability or
responsibility
with respect to
any
employee or any Employee Benefit Plan sponsored or maintained by Seller
or any
other Affiliate of the Company.
Section 3.16.
ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 3.16,
(i) the Company has complied and is now in compliance, in all
material respects,
with all applicable
federal, state and
local laws, statutes,
regulations and
ordinances governing
or relating to
pollution or the management, handling,
disposal or release of hazardous substances, or the protection of human
health
or the environment
("ENVIRONMENTAL LAWS"), and (ii) neither the Company nor the
Seller, has
received any written notice, request for information, order,
complaint, notice
of potential responsibility, penalty or claim from any
governmental authority
or other Person alleging that the Company is not in
compliance with any
Environmental Law, or
other than liabilities
arising from
Insurance or Reinsurance Contracts, alleging that the Company is
responsible or
liable under
Environmental
Laws
or under common law (with respect to
environmental
matters), nor,
to the knowledge of the Seller, is any such
environmental notice, request, order, complaint or claim
threatened.
Section 3.17. COMPANY INSURANCE POLICIES. SCHEDULE 3.1
