Exhibit 2.1
AMENDMENT NO. 1 (this "Amendment") dated November 14, 2006 to the Stock
Purchase Agreement (the "Purchase Agreement") dated September 8, 2006 by and
among Embarcadero Insurance Holdings, Inc., the shareholders of Embarcadero, CRM
USA Holdings Inc. and CRM Holdings, Ltd. Capitalized terms used but not defined
in this Amendment shall have the respective meanings ascribed thereto in the
Purchase Agreement.
WHEREAS, Embarcadero, Sellers, Purchaser and Parent entered into the
Purchase Agreement on September 8, 2006;
WHEREAS, pursuant to the Purchase Agreement, Sellers agreed to sell to
Purchaser all of the issued and outstanding shares of capital stock of
Embarcadero, and Purchaser agreed to purchase the Embarcadero Shares from
Sellers, for a purchase price equal to the Consolidated Book Value of
Embarcadero on the Closing Date;
WHEREAS, Sellers and Purchaser wish to amend the Purchase Agreement to
provide that the Purchase Price for the Shares shall be equal to the
consolidated net book value of Embarcadero as of September 30, 2006, plus
fifteen thousand dollars ($15,000) per day for each day from October 1, 2006
until the Closing Date;
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Amendment, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree to amend the Purchase Agreement as
follows:
1. Definitions. (a) The following definitions in Section 1.1 of
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the Purchase Agreement are hereby deleted in their entirety:
(i) Accountant Certificate;
(ii) Closing Date Balance Sheet;
(iii) Consolidated Book Value of Embarcadero;
(iv) Dispute Notice;
(v) Estimated Consolidated Book Value of Embarcadero;
(vi) Initial Purchase Price;
(vii) Negotiation Deadline; and
(viii) Related Items.
(b) In the following definitions in Section 1.1 of the
Purchase Agreement, the term "Closing Date" is hereby changed to "2006" and such
definitions, as so changed, are hereby reinserted into said Section 1.1 in the
correct alphabetical order:
(i) Closing Date Loss Reserves;
(ii) Closing Date Policies; and
(iii) Closing Date Report.
(c) The following definition is hereby inserted into
Section 1.1 of the Purchase Agreement in the correct alphabetical order:
"2006 Estimated Subject Premium" shall have the
meaning ascribed to it in Section 10.7(b)."
2. Purchase Price. Section 2.2(a) of the Purchase Agreement is
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hereby amended to read in its entirety as follows:
"(a) The aggregate purchase price (the "Purchase
Price") for all of the Embarcadero Shares will be an amount equal to
the sum of (i) forty five million six hundred and seventeen thousand
two hundred and forty one dollars ($45,617,241) and (ii) an amount
equal to the product of (A) fifteen thousand dollars ($15,000) and (B)
the actual number of days elapsed from October 1, 2006 to the Closing
Date. At the Closing, Purchaser shall pay to Sellers an amount equal to
the Purchase Price in accordance with the provisions of Section
2.3(c)."
3. Payment of Purchase Price. Section 2.3(c) of the Purchase
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Agreement is hereby amended to change the reference to "Initial Purchase Price"
in the second line thereof to "Purchase Price."
4. Post Closing Audit of Estimated Consolidated Book Value of
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Embarcadero.
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(a) Sections 2.4 and 2.5 of the Purchase Agreement are
hereby deleted in their entirety, but the remaining Sections of Article II of
the Purchase Agreement shall not be renumbered.
(b) The reference to "or 2.5(a)" in the second and third
lines of Section 2.6 of the Purchase Agreement and the entire second sentence of
Section 2.6 of the Purchase Agreement are hereby deleted.
5. Financial Statements. Section 3.2(d)(i)(B) of the Purchase
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Agreement is hereby amended to change the references to "June" in the second and
fourth lines thereof to "September" and to change the reference to "six" in the
third line thereof to "nine".
6. No Undisclosed Liabilities. Section 3.2(e) of the Purchase
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Agreement is hereby amended to read in its entirety as follows:
"No Undisclosed Liabilities. There were no Liabilities of the
Companies as of September 30, 2006, except (i) as reflected in the Stub
Period Financial Statements as of and for the nine months ended
September 30, 2006; (ii ) Liabilities that would not be required by
GAAP to be included in the Stub Period Financial Statements, none of
which Liabilities is reasonably expected to have an Embarcadero
Material Adverse Effect; (iii) Liabilities for insurance claims,
incurred but not reported; (iv) as disclosed in Section 3.2(e) of
Sellers Disclosure Schedule or in any other section of Sellers
Disclosure Schedule so long as it is reasonably apparent that such
disclosure describes a Liability; or (v) Liabilities that are not
material in the aggregate. Since September 30, 2006, the Companies have
not incurred any Liabilities, except (A) in the ordinary course of
business and consistent with past practice, (B) as disclosed in Section
3.2(e) of Sellers Disclosure Schedule or in any other section of
Sellers Disclosure Schedule so long as it is reasonably apparent that
such disclosure describes a Liability, or (C) Liabilities that are not
material in the aggregate, none of which, in the case of Liabilities
described in clause (A), (B) or (C) of this Section 3.2(e), is
reasonably expected to have an Embarcadero Material Adverse Effect."
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7. Absence of Changes. Section 3.2(i)(xix) of the Purchase
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Agreement is hereby amended to read in its entirety as follows:
"(xix) except as required by GAAP or SAP, any action or
failure to take any action by any Company that has the effect of
shifting income or surplus from the period preceding December 31, 2005
to the period following December 31, 2005, unless such action or
failure was based primarily on a reasonable and valid business purpose
and was not taken with the intent of increasing the Purchase Price to
the detriment of Purchaser or Parent."
8. Employee Benefit Plans. Section 3.2(m)(vi) of the Purchase
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Agreement is hereby amended to delete at the end thereof the words "and that
will be accrued on the Closing Date Balance Sheet".
9. Labor Relations. Section 3.2(n)(ix) of the Purchase Agreement
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is hereby amended to delete at the end thereof the words "and that to the extent
applicable will be accrued on the Closing Date Balance Sheet".
10. Refund Adjustment. Section 5.11 of the Purchase Agreement is
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hereby amended in its entirety to read as follows:
"5.11 Refund Adjustment. In the event that Majestic refunds
(whether by payment or offset against amounts owed to Majestic) to the
Reinsurer (as defined in Section 3.2(e) of the Sellers Closing
Schedule) any portion of the previously booked commissions described in
Section 3.2(e) of the Sellers Disclosure Schedule, as reflected in the
balance sheet included in the Stub Period Financial Statements, Sellers
hereby agree that Purchaser shall be entitled to recover directly from
the Escrow Accounts the amount that Majestic so refunds the Reinsurer,
less any reserve for such refund reflected on the balance sheet
included in the Stub Period Financial Statements, up to a maximum
recovery of one million dollars ($1,000,000) net of tax savings
actually expected to be realized by the Purchaser in the year of refund
from any loss, deduction or credit which is allowable with respect to
such refund, by Purchaser giving written notice thereof to the Escrow
Agent pursuant to Section 8(a)(viii) of the Escrow Agreement; provided,
however, that if after making such refund Majestic recovers any portion
of such refund from the Reinsurer the amount of such recovery, less any
taxes payable by Purchaser with respect to the net amount of such
refund, (a) shall be repaid to the Escrow Accounts, or, (b) if such
recovery is made after the Expiration Date, shall be refunded 75% to
▇▇▇▇▇▇▇ and 25% to the ▇▇▇▇▇▇▇▇ Trust."
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11. Claims Limitations. Section 10.5(d)(i) of the Purchase
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Agreement is hereby amended to add the words "and any amounts pursuant to
Section 5.11" after the words "Section 10.1(a)" in the fourth line thereof.
Section 10.5(d)(i) of the Purchase Agreement is hereby further
amended to add the words "and Seller's obligations pursuant to Section 5.11"
after the words "Section 10.1(a) or 10.1(b)" in the last sentence thereof.
Section 10.5(d)(iii) is hereby amended to add the words "or
under Section 5.11" after the words "Section 10.1(a) or 10.1(b)" in subsection
(A) thereof.
12. Tax Indemnification. Section 10.6(a) of the Purchase Agreement
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is hereby amended to delete the words "Closing Date Balance Sheet" in the fourth
line of the proviso thereto and to insert in lieu thereof the words " balance
sheet included in the Stub Period Financial Statements".
13. Indemnification for Reserves for Losses and Loss Adjustment
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Expenses. Section 10.7 of the Purchase Agreement is hereby amended to read in
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its entirety as follows:
"10.7 Indemnification for Reserves for Losses and Loss
Adjustment Expenses; Escrow Provisions Therefor. (a) On the Closing
Date, Purchaser shall deliver to Escrow Agent for deposit into the Loss
Reserve Escrow Account pursuant to Section 2.7 an amount in cash equal
to the Loss Reserve Escrow Amount.
(b) Following the Closing, Embarcadero shall
require Milliman to prepare an actuarial report (the "2006 Report")
setting forth as of September 30, 2006 the estimated ultimate loss
(loss and loss adjustment expense) for all open and incurred but not
reported claims as of September 30, 2006 ("2006 Loss Reserves") and
estimated subject premiums ("2006 Estimated Subject Premium") for the
insurance policies written by Majestic and in force on September 30,
2006 (the "2006 Policies"). Such report shall be prepared on a basis
that uses the same assumptions, criteria and methodology as were used
by Milliman to prepare the actuarial report prepared by Milliman in
connection with the preparation of the Year-End Financial Statements.
As soon as practicable, and in any event no later than October 31,
2011, Embarcadero shall require Milliman to prepare an actuarial report
(the "Final Report") setting forth as of September 30, 2011 the
estimated ultimate loss (loss and loss adjustment expense) of the 2006
Loss Reserves (the "Anniversary Date Loss Reserves") and actual subject
premiums for the 2006 Policies as of September 30, 2011 (the
"Anniversary Date Actual Premium"). The Final Report shall be prepared
on a basis that is consistent with the preparation of the 2006 Report.
For purposes of this Section 10.7(b), subject premiums shall mean total
premiums including deposit, audit and retrospective premiums and any
expected adjustments thereto.
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(c) Within three (3) Business Days after the
delivery of the Final Report, Purchaser, ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
and the ▇▇▇▇▇▇▇▇ Trust shall jointly instruct Escrow Agent in writing
to release (i) to Purchaser so much of the Loss Reserve Escrow Amount,
if any, as is equal to the amount by which the sum of (A) the
Anniversary Date Loss Reserves and (B) the 2006 Estimated Subject
Premium is greater than the sum of (C) the 2006 Loss Reserves and (D)
the Anniversary Date Actual Premium, and (ii) to ▇▇▇▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇. and to the ▇▇▇▇▇▇▇▇ Trust in the same proportions as they
deposited cash in the Loss Reserve Escrow Account, any balance of the
Loss Reserve Escrow Amount, in each case together with any Escrowed
Income thereon. In no event shall Purchaser be (i) entitled to recover
any amounts under this Section 10.7 from ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. or
the ▇▇▇▇▇▇▇▇ Trust in excess of the Loss Reserve Escrow Amount
(together with any Escrowed Income thereon), or (ii) obligated to make
any additional payment to ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. or the ▇▇▇▇▇▇▇▇
Trust, or any other Seller, if the sum of (A) the 2006 Loss Reserves
and (B) the Anniversary Date Actual Premium is greater than the sum of
(C) the Anniversary Date Loss Reserves and (D) the 2006 Estimated
Subject Premium.
(d) Subject to the provisions of Article IX and
Sections 10.1, 10.3 and 10.5, the Loss Reserve Escrow Account shall be
the sole source of recovery for Purchaser Indemnitees to recover
Damages arising out of a breach of the representations and warranties
set forth in Section 3.2(d)(iii) as provided in the Escrow Agreement,
and the aggregate amount which ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. and the
▇▇▇▇▇▇▇▇ Trust may be required to pay for indemnification for any such
Damages, together with the indemnification provided for in Section
10.7(c), shall not exceed the Escrowed Consideration from time to time
on deposit in the Loss Reserve Escrow Account."
14. Refunds and Tax Benefits. Section 12.2 of the Purchase
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Agreement is hereby amended to delete the words "Closing Date Balance Sheet" in
the last line thereof and to insert in lieu thereof the words " balance sheet
included in the Stub Period Financial Statements".
15. Expenses. Section 13.3 of the Purchase Agreement is hereby
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amended to (a) delete the words "Closing Date Balance Sheet" in the last line
thereof, (b) insert in lieu thereof the words " balance sheet included in the
Stub Period Financial Statements", and (c) add the following words to the end
thereof:
"and Sellers hereby covenant and agree to reimburse
Embarcadero at the Closing for any such costs and expenses of any
Seller paid by Embarcadero after September 30, 2006 and prior to the
Closing Date."
16. Sellers Disclosure Schedule. The parties agree that the Closing
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Schedules are attached to this Amendment as Exhibit A.
17. Schedule 5.9 - Related Persons Agreements. Schedule 5.9 to the
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Purchase Agreement is hereby amended to add the words "and Service Level
Agreement listed as Item 1" after the words "Item 3" in Part II Number 1
thereof.
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18. Escrow Agreement. Exhibit A to the Purchase Agreement is
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hereby deleted in its entirety and Exhibit B hereto is substituted thereof.
19. Table of Contents. The Table of Contents of the Purchase
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Agreement is hereby amended to reflect the amendments set forth in this
Amendment.
20. Miscellaneous.
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(a) Except as expressly amended by this Amendment, the
terms, provisions, representations, warranties, covenants, agreements,
indemnities and conditions set forth in the Purchase Agreement remain in full
force and effect.
(b) This Amendment may be executed simultaneously in any
number of counterparts, each of which will be deemed an original, but all of
which will constitute one and the same agreement. An originally executed copy of
this Amendment may be delivered by e-mail or facsimile and such e-mailed or
faxed executed copy shall constitute an originally executed copy of this
Amendment for all purposes.
(c) This Amendment will be governed by and construed and
enforced in accordance with the internal laws of the State of New York (without
regard to the principles of conflict of laws) applicable to a Contract executed
and entirely performable in such state.
(d) This Amendment is binding upon and will inure to the
benefit of the parties and their respective successors and beneficiaries and
permitted assigns.
(e) If any provision of this Amendment or portion thereof
is held to be illegal, invalid or unenforceable under any Law, (i) such
provision or portion thereof will be fully severable; (ii) this Amendment will
be construed and enforced as if such illegal, invalid or unenforceable provision
or portion thereof had never comprised a part hereof; (iii) the remaining
provisions of this Amendment shall remain in full force and effect and shall not
be affected by the illegal, invalid or unenforceable provision or portion
thereof or by its severance from this Agreement; and (iv) in lieu of such
illegal, invalid or unenforceable provision or portion thereof, there shall be
added automatically as part of this Amendment a provision or portion thereof as
similar in terms to such illegal, invalid or unenforceable provision or portion
thereof as may then be legal, valid and enforceable under applicable Law.
(f) The headings of the Sections of this Amendment have
been inserted for convenience of reference only, are not intended to be
considered a part hereof and shall not affect the meaning or interpretation of
any term or provision hereof.
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signatures are on next succeeding page]
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IN WITNESS WHEREOF, this Amendment has been duly executed and delivered
as of the date first written above by duly authorized officers of Purchaser and
Parent and by Sellers.
PURCHASER:
CRM USA HOLDINGS INC.
By:
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Name:
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Title:
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PARENT:
CRM HOLDINGS, LTD.
By:
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Name:
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Title:
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SELLERS:
▇▇▇▇▇▇▇ Marital Trust u/t/d March 17, 1987
By:
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Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: Trustee
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▇▇▇▇▇▇▇ Survivors Trust u/t/d March 17, 1987
By:
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Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: Trustee
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▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇▇ Family 1996 Trust u/t/d
July 10, 1996, as restated, May 31, 2006
By:
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Trustee
By:
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Trustee
EMBARCADERO:
Embarcadero Insurance Holdings, Inc.
By:
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
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EXHIBIT A
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CLOSING SCHEDULES
(Attached)
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EXHIBIT B
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ESCROW AGREEMENT
(Attached)
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