OFFERING MEMORANDUM #102
Share Repurchase Agreement
EXHIBIT 10.2
OFFERING MEMORANDUM #102
SHARE REPURCHASE AGREEMENT
This is an Agreement, made _____________ , 2003, between
________________, residing at __________________________________________________
(the "Shareholder") and NATIONAL ATLANTIC HOLDINGS CORP. (the "Corporation"), a
New Jersey corporation located at ▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇.
STATEMENTS OF FACT:
A. The authorized capital stock of the Corporation is 100,000
shares of voting common stock and 100,000 shares of non-voting common stock.
B. The Shareholder has purchased __________ shares of the
issued and outstanding capital stock of the Corporation, directly from the
Corporation.
C. PROFORMANCE INSURANCE COMPANY ("Proformance"), a New Jersey
insurance company authorized to transact property and casualty insurance in the
State of New Jersey, is a wholly owned subsidiary of the Corporation.
D. The parties hereto believe that their best interests will
be served by imposing certain restrictions and limitations on the future sale
and purchase of the Shares.
NOW, THEREFORE, it is hereby agreed as follows:
1. Definitions. For the purposes of this Agreement, the following terms
shall have the meaning defined in this Article 1:
1.1. "Agency" shall mean the licensed insurance agency employing the
Shareholder which has entered into an Agency Agreement with Proformance. ------
1.2. "Agency Agreement" shall mean the agreement between Proformance
and the Agency or the Shareholder directly, pursuant to which the Agency or the
Shareholder has agreed to sell Proformance's insurance products and earn
commissions.
1.3. "Transfer" shall mean any disposition (including, without
limitation, gifts, sales, assignments, pledges, encumbrances, bequests, and all
other intervivos or testamentary dispositions) whether voluntary or involuntary,
or pursuant to court order or by operation of law.
1.4. "Shares" shall mean all shares of capital stock of the Corporation
now or hereafter acquired by the Shareholder.
2. Entire Agreement. Other than the documents executed in connection with
Shareholder's subscription for Shares, this Agreement represents the sole and
entire understanding of the parties regarding the sale and purchase of the
Shares, now or hereafter acquired by the Shareholder directly from the
Corporation, and supersedes any and all prior oral or written agreements among
them, which are hereby rendered null and void.
OFFERING MEMORANDUM #102
3. Limitation On Transfer Of Shares.
3.1. Limitation. No Shareholder may Transfer all of any of his or her
Shares, except as expressly permitted by or provided in this Agreement,
including without limitation, the provisions of Article 4
3.2. Reasonable Restraint. The Shareholder recognizes and acknowledges
that the restraints imposed in this Agreement on the disposition of his or her
Shares are fair and reasonable in consideration of their absolute necessity for
the proper conduct of the business of the Corporation, the closeness between the
Shareholder's Share ownership and agency relationship with the Corporation, and
the provisions of this Agreement providing a market for the Shares.
4. Permitted Transfers Of Shares.
4.1. Holding Period. The Shareholder may not Transfer his or her Shares
for a period of two (2) years from and after the date of this agreement (the
"Holding Period"), without the prior written consent of the Corporation, which
the Corporation may withhold in its sole and absolute discretion.
4.2. Limitation On Permitted Transfers.
(a) If subsequent to the Holding Period, the Shareholder desires
to Transfer all or any of his or her Shares for reasons other than (i) the
Shareholder's death or disability or (ii) the termination of the Agency
Agreement, then the Shareholder shall give the Corporation written notice of his
or her intention to do so, at least ninety (90) days prior to the proposed
effective date of such Transfer.
(b) The written notice shall constitute an offer on the part of
the Shareholder to sell to the Corporation all of the Shareholder's Shares. If
the Corporation desires to exercise the purchase option herein contained, it
shall give written notice to the Shareholder no later than sixty (60) days from
the date of the Shareholder's notice, setting forth the number of the
Shareholder's Shares that the Corporation wishes to purchase.
(c) If all of the Shares shall not be purchased by the
Corporation, the Shareholder shall be free to transfer all of such Shares not
purchased by the Corporation for a period of six (6) months after the
Shareholder's notice, provided, however, that the transferee of such Shares must
agree, in writing, to be bound by the terms and conditions of this Agreement. If
the Shareholder shall fail to Transfer all of his or her Shares within said six
(6) month period, such Shares as he or she shall then own shall once again
become subject to the provisions hereof.
(d) The purchase price of the Shares which shall have been offered
for sale pursuant to this Section 4.2 shall be determined as provided in Article
5 of this Agreement and such purchase shall be effectuated in the manner and
upon the terms and conditions set forth in Article 6 of this Agreement.
2
OFFERING MEMORANDUM #102
(e) The closing of any transaction of purchase and sale pursuant
to this Section 4.2 shall be held at the Corporation's counsel's business office
at 10:00 a.m., seventy-five (75) days after the date of the Shareholder's notice
of his or her intention to sell the Shares.
4.3. Purchase Of Shares In Event Of Death or Disability of Shareholder.
(a) In the event of the death or disability of a Shareholder
during the term of this Agreement, the Shareholder or the legal representative
of the deceased Shareholder's estate shall only be permitted to Transfer the
Shareholder's Shares to the following: (i) the beneficiaries of such
Shareholder's estate, (ii) such party as shall be named in a specific bequest in
the deceased Shareholder's last will and testament, or (iii) another
Shareholder, director, officer or employee of the Agency; provided, however,
that prior to any Transfer pursuant to subparagraph (iii) of this Section, the
Agency provides to the Corporation, within thirty (30) days after the date of
the Shareholder's death or disability, a written agreement in which the Agency
agrees to continue to be bound by the terms of the Agency Agreement
notwithstanding the Shareholder's death or disability, and provided further that
the transferee of the deceased Shareholder's Shares agrees, in writing, to
continue to be bound by the terms of this Agreement, as if the named Shareholder
set forth herein.
(b) In the event that the Agency fails or refuses to be bound by
the terms of the Agency Agreement upon the Shareholder's death or disability, or
if the Shareholder's permitted transferee fails or refuses to continue to be
bound by the terms of this Agreement, then the disabled Shareholder or the legal
representative of the deceased Shareholder's estate shall be obligated to offer
to the Corporation, all of the Shares owned by the deceased or disabled
Shareholders on the date of the Shareholder's death or disability.
(c) If the Corporation desires to exercise the option herein
contained, it shall give written notice to the legal representative of the
deceased Shareholder, no later than sixty (60) days from the date of the
deceased Shareholder's death, setting forth the number of the decease
Shareholder's Shares that the Corporation wishes to purchase.
(d) If the Corporation declines to purchase all of the Shares,
then the disabled Shareholder or legal representative of the deceased
Shareholder shall be free to Transfer all of the Shares not purchased by the
Corporation, free of the provisions of this Agreement, for a period of six (6)
months after the Shareholder's death or disability. If the disabled Shareholder
or the legal representative of the deceased Shareholder's estate shall fail to
Transfer all of the Shares within said six (6) month period, such Shares as he
or she shall then own shall once again become subject to the provisions hereof.
(e) The purchase price of the Shares which have been offered for
sale as aforesaid, shall be determined as provided in Article 5 of this
Agreement, and such purchase shall be effectuated in the manner and upon the
terms and conditions set forth in Article 6 of this Agreement.
3
OFFERING MEMORANDUM #102
(f) The closing of any transaction of purchase and sale pursuant
to this Section 4.3 shall be held at the Corporation's counsel's business office
at 10:00 a.m., seventy-five (75) days after the date of the Shareholder's death
or disability.
4.4. Purchase of Shares In The Event Of Termination of Agency
Agreement.
(a) In the event that the Shareholder's Agency Agreement with
Proformance terminates for any reason whatsoever, whether due to a (i) breach or
default by Proformance, (ii) breach or default by the Agency, (iii) voluntary
termination by the Agency, (iv) voluntary termination by Proformance, (v)
cancellation or nonrenewal of the Agency's license, (vi) fraud, abandonment,
insolvency, gross negligence or willful misconduct by the Agency, or (vii) any
other reason, the Shareholder shall be obligated to offer for sale to the
Corporation, all of the Shareholder's Shares.
(b) If the Corporation desires to exercise the Share purchase
option herein contained, it shall give written notice to the Shareholder not
later than sixty (60) days from the date of the Shareholder's notice, setting
forth the number of the Shareholder's Shares it wishes to purchase.
(c) If the Corporation declines to purchase all of the Shares, the
Shareholder shall be free to Transfer all of the unpurchased Shares, free of the
provisions of this Agreement, for a period of six (6) months after the date of
termination of the Agency Agreement; provided, however, that prior to such
Transfer, the transferee of such Shares must agree in writing to be bound by the
terms and conditions of this Agreement. If the Shareholder shall fail to
Transfer all of the Shares within said six (6) month period, such Shares as he
or she shall then own shall once again become subject to the provisions hereof.
(d) The purchase price of the Shares which shall have been offered
for sale, as aforesaid, shall be determined as provided in Article 5 of this
Agreement and such purchase shall be effectuated in the manner and upon the
terms and conditions set forth in Article 6 of this Agreement.
(e) The closing of any transaction of purchase and sale pursuant
to this Section 4.4 shall be held at the Corporation's counsel's business office
at 10:00 a.m., seventy-five (75) days after the date of the termination of the
Agency Agreement.
5. Purchase Price.
5.1. As used in this Agreement, the phrase "Valuation Date" shall mean
(insofar as it relates to the Purchase of Shares pursuant to Article 4 of this
Agreement), the date of the end of the fiscal quarter of the Corporation last
preceding the date upon which the Corporation has given notice of its desire to
purchase the Shares.
5.2. (a) The purchase price of each Share which is purchased and sold
pursuant to any provision of Article 4 of this Agreement (other than Section
4.4(a)(ii), (v) or (vi)), shall be the greater of the Book Value or Alternate
Value per Share as defined in Section 5.3 below, determined as of the Valuation
Date.
4
OFFERING MEMORANDUM #102
(b) The purchase price of each Share which is purchased and sold
pursuant to Section 4.4(a)(ii), (v) or (vi) of this Agreement, shall be the
lesser of the Book Value or Alternate Value per Share as defined in Section 5.3
below, determined as of the Valuation Date.
5.3. The following terms shall have the definitions set forth below for
the purposes of this Agreement: (i) "Book Value" shall mean the shareholder
equity reflected on the Corporation's balance sheet (prepared in accordance with
generally accepted accounting principles) as of the Valuation Date, as certified
by the Corporation's independent certified accountants, DIVIDED BY the number of
outstanding shares of the Corporation determined on a fully diluted basis; and
(ii) "Alternate Value" shall mean the purchase price per share, at the time of
the original acquisition of the Shareholder's Shares from the Corporation.
6. Closing and Payment of Purchase Price.
6.1. At the closing of any purchase and sale pursuant to this
Agreement, the Shareholder shall deliver:
(a) Certificates representing the Shares which are being purchased
and sold pursuant to this Agreement, endorsed in blank;
(b) All documents which the Corporation's counsel shall reasonably
deem necessary or advisable in order to accomplish a complete Transfer of the
Shares to the Corporation;
(c) If applicable, the written resignation of the Shareholder as
an officer, director and employee of the Corporation and/or its affiliates; and
(d) The written termination of the Agency Agreement between
Proformance and the Shareholder or the Agency.
6.2. Payment of the total purchase price due to the Shareholder, in any
sale pursuant to this Agreement, shall be made as follows:
(a) If the Corporation has assigned its right to purchase the
Shares to any third party as permitted by this Agreement, said third party shall
pay at the closing an amount equal to the total purchase price as determined by
Article 5 of this Agreement;
(b) If the Corporation has not assigned its right to purchase the
Shares to a third party, then the Corporation shall pay at closing such amounts
as it is able to pay, subject to the following conditions precedent;
(i) The Corporation must have cash on hand to enable it to
make a payment to the Shareholder without adversely impairing the Corporation's
and its affiliates' ability to operate safely and efficiently pursuant to the
regulations of the New Jersey Department of Insurance;
5
OFFERING MEMORANDUM #102
(ii) Any disbursements made by the Corporation or its
affiliates for the purpose of making any payment to the Shareholder shall not
cause the capital and surplus of Proformance to become "impaired" as defined by
N.J.S.A. 17B:32-1(a), as amended from time to time; and
(iii) If required by law, the New Jersey Department of
Insurance must approve of the payment in writing.
(c) Interest shall accrue on the outstanding balance of the total
purchase price, if any, due to the Shareholder from and after the closing, at
the minimum rate of interest necessary under the Internal Revenue Code of 1986,
as amended (the "Code"), to avoid an imputed rated of interest under the Code.
Any payment of principal and interest to the Shareholder after closing shall be
subject to the same conditions precedent set forth in Section 6.2(b)(ii) above
regarding the payment of the portion of the purchase price at closing;
(d) If at any time during which there is an outstanding balance of
the total purchase due to the Shareholder, the Corporation commences a public or
private offering of Shares of any class of its capital, the Corporation shall be
obligated to allocate up to fifty percent (50%) of the Corporation's net
proceeds of such offering for the exclusive purpose of making payments of the
outstanding balance of the purchase price of the Shares, plus accrued interest,
to all Shareholders to whom deferred purchase price is owed.
6.3. The Corporation shall have the right to offset against the payment
or payments of the purchase price due from it to the Shareholder, the amount of
all sums due from the Shareholder to the Corporation and/or its affiliates, and
to the extent so credited against the purchase price, such loan or other
indebtedness shall be deemed to be and shall be canceled and discharged. Such
credit against the purchase price shall be made regardless of the due date of
any such loan or other indebtedness.
7. Insufficient Surplus. If, at the time of closing, the surplus of the
Corporation is less than the total purchase price, then the Corporation and the
Shareholder shall take such action which, in the opinion of counsel for the
Corporation, will be legally permissible to enable the Corporation to increase
its surplus, either by reducing its capital stock or by a reappraisal of its
assets, or otherwise, to an amount equal to the total purchase price.
Notwithstanding the foregoing, the Corporation shall not be required to take any
action which, in the opinion of counsel for the Corporation and its Board of
Directors, would cause the capital of an affiliate to become "impaired" as
previously defined or adversely impact an affiliate's ability to operate safely
and efficiently. Any action taken by the Corporation to increase its surplus
pursuant to this Article 7 shall be subject to the prior written approval of the
New Jersey Department of Insurance.
8. Voting Agreement.
8.1. Acknowledgment of Board of Directors Nominees. Until the 2003
annual meeting of the shareholders of the Corporation and Proformance ("Annual
Meeting"), the Shareholder acknowledges that the Boards of Directors of the
Corporation and Proformance are
6
OFFERING MEMORANDUM #102
and shall continue to be, those members of the Board of Directors set forth in
the Certificates of Incorporation of the Corporation and Proformance.
8.2. Director Qualifications. The Shareholder acknowledges that any and
all candidates for the Board of Directors of Proformance, other than ▇▇▇▇▇ ▇.
▇▇▇▇▇▇ and two (2) designees of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, must be licensed insurance
agents who, individually, or on behalf of a New Jersey licensed insurance agency
employing the Shareholder, have entered into an Agency Agreement with
Proformance. The Shareholder shall not nominate, vote for or permit any person
not meeting the aforesaid qualifications, to be elected to or serve on the Board
of Directors of Proformance and shall not permit any amendment to Proformance's
by-laws having the purpose of or intended to abrogate this requirement.
9. Right to Consult Counsel. The Shareholder represents and warrants that he or
she has read and fully understands the section of the Corporation's Private
Placement Memorandum entitled "Risk Factors". The Corporation and the
Shareholder recognize that the law firm of ▇▇▇▇▇, Danzig, Scherer, ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP (the "Law Firm") represents the Corporation and some of the
incorporators of the Corporation, including ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, with respect to the
preparation and execution of this Agreement, the offering of the Shares by the
Corporation and the transactions contemplated hereby and thereby. The
Shareholder represents that he or she has the opportunity to seek and obtain
independent legal counsel and it has not been represented by the Law Firm with
regard to the review and execution of this Agreement, the purchase of Shares
offered by the Corporation and the transactions contemplated hereby and thereby.
In addition, the Shareholder hereby agrees that the Law Firm may represent the
Corporation in any matter in the future. The Shareholder waives any conflict of
interest which has arisen or may arise by virtue of the Law Firm's
representation of the Corporation or any of the Incorporators, unless the
Shareholder hereafter gives notice to the Law Firm to the contrary with respect
to any matter.
10. Notice. Whenever under the provisions of this Agreement notice is required
to be given, it shall be in writing and shall be deemed given when mailed,
postage prepaid, by registered or certified mail, return receipt requested,
addressed to the Shareholder at his address as set forth herein, or to such
other address as may appear on the record books of the Corporation, and
addressed to the Corporation at its principal business office.
11. Miscellaneous.
11.1. Amendments. This Agreement may not be amended or supplemented at
any time unless by a writing executed by the parties hereto, and all such
amendments and supplements shall, except as otherwise provided hereinafter, be
binding upon all other persons interested herein.
11.2. Impairment Of Rights. No amendment, supplement or termination of
this Agreement shall affect or impair any rights or obligations which have
theretofore matured hereunder.
7
OFFERING MEMORANDUM #102
11.3. Further Assurances. All parties will take such further action and
execute such other documents as are reasonably necessary to effectuate the
purposes, terms and conditions of this Agreement.
11.4. Partial Invalidity. The invalidity of any portion of this
Agreement shall not affect the validity of the remainder of this Agreement.
11.5. Assignment. The Corporation may assign any or all of its rights
or obligations under this Agreement to any other person or entity without the
prior consent of the Shareholder. The Shareholder may not assign any of his
rights or obligations under this Agreement without the prior consent
of the Corporation.
11.6. Binding On Successors. This Agreement shall be binding upon and
shall inure to the benefit of all of the parties hereto, and to their respective
heirs, executors, administrators, successors and assigns, and shall be binding
upon any person to whom any Shares are Transferred in violation of the
provisions of this Agreement (whether voluntarily, pursuant to court order, by
operation of law or otherwise), and the heirs, executors, administrators,
successors or assigns of such person. Notwithstanding the foregoing, any
obligation of the Corporation to purchase Shares under this Agreement shall
apply only to Shares owned by the Shareholder or the Shareholder's estate.
11.7. Termination. This Agreement shall terminate upon the written
consent of the parties or upon the occurrence of any of the following events:
(a) The adjudication of the Corporation as a bankrupt, or the
execution by the Corporation of an assignment for the benefit of creditors.
(b) The voluntary or involuntary complete liquidation or
dissolution of the Corporation.
(c) The passage of five (5) years from the date hereof; provided,
however, that, the Corporation shall thereafter retain a right of first refusal
with respect to the Shareholder's Shares which obligates the Shareholder to
offer to the Corporation the right to purchase any Shares which the shareholder
desires to Transfer to any third party, on the same terms as offered to such
third party, prior to the Transfer of any shares to such third party. The
Corporation shall exercise its right of first refusal, if at all, within thirty
(30) days after notice from the shareholder of his or her intent to Transfer
shares to a third party and disclosing to the Corporation the proposed terms of
such Transfer.
11.8. Governing Law. This Agreement shall be governed by the law of the
State of New Jersey.
11.9. Captions. Any Section or Paragraph title or caption contained in
this Agreement is for convenience only, and shall not in any way be construed to
define, describe or limit the terms hereof.
8
OFFERING MEMORANDUM #102
11.10. Restrictive Legend. All certificates representing the Shares now
or hereafter issued shall be endorsed as follows:
The Shares represented by this certificate are issued and held
subject to the restrictions on transfers and other matters
contained in the Certificate of Incorporation of the
Corporation, as such as amended and may be amended from time to
time, and a certain Share Repurchase Agreement by and among the
Corporation and its Shareholders, which are available for
inspection at the offices of the Corporation. Transfer of the
Shares represented by this certificate cannot be made except
upon compliance with such provisions, of which notice is hereby
given. The Corporation will mail to any person affected by such
restrictions, a copy thereof, without charge, within five (5)
days after receipt of a written request therefor.
The Shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or any
state securities laws. They may not be sold or offered for sale
in the absence of an effective registration statement as to the
securities under said act and any applicable state securities
law or an opinion of counsel satisfactory to the Corporation
that such registration is not required.
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands and seal, or caused these presents to be duly executed by their proper
corporate officers, the day and year first above written.
WITNESS: SHAREHOLDER
Name: Name:
ATTEST: NATIONAL ATLANTIC HOLDINGS CORP.
By:
--------------------------------------- ----------------------------------
Name: Name:
Date:
----------------------------
9