EXECUTION COPY
EXHIBIT A
PURCHASE AGREEMENT
This Purchase Agreement (this "Agreement") is made and entered into as
of August 4, 2006 between DSC AFFM, LLC, a Delaware limited liability company
("Seller"), and Affirmative Investment LLC ("Purchaser"), a Delaware limited
liability company.
WHEREAS, each of Seller and Purchaser own, individually, 3,930,463.5
Membership Units (as defined in the Amended and Restated Limited Liability
Company Agreement of New Affirmative LLC (the "Company"), dated as of June 30,
2005, by and between Seller and Purchaser (the "LLC Agreement")); and
WHEREAS, Seller desires to sell and transfer to Purchaser, and
Purchaser desires to purchase and accept from Seller, the 3,930,463.5 Membership
Units owned by Seller (the "Seller Units") at a purchase price equal to $16.00
per Seller Unit, representing an aggregate purchase price of $62,887,416.00 (the
"Purchase Price");
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties herein contained, the Seller and Purchaser hereby
agree as follows:
1. Sale and Purchase of Seller Units.
(a) Sale and Purchase of Seller Units. Upon the terms and
subject to the conditions set forth herein, Seller hereby agrees to sell and
transfer to Purchaser, and Purchaser hereby agrees to purchase and accept from
Seller, free and clear of any liens (other than any liens imposed by the LLC
Agreement and other than restrictions on transfer imposed by applicable state
and federal securities laws), the Seller Units for the Purchase Price, payable
in cash.
(b) Closing. The closing (the "Transfer Closing") of the
purchase and sale of the Seller Units shall occur at the offices of Skadden,
Arps, Slate, Xxxxxxx & Xxxx LLP, Xxxx Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 at
10:00 a.m. on August 31, 2006 (or, if the conditions in Section 3 are not
satisfied or waived at that time, the first business day after the satisfaction
or waiver of those conditions (other than those conditions that by their terms
are to be satisfied at the Transfer Closing, but subject to satisfaction or
waiver of those conditions)), or at such other time or place as Purchaser and
Seller may agree. Concurrently with the Transfer Closing, Purchaser shall pay,
or cause to be paid, to Seller the Purchase Price in cash, by wire transfer of
immediately available funds to the account designated on Exhibit A.
(c) LLC Agreement.
(i) Effective as of the Transfer Closing, Seller
hereby withdraws as a member of the Company, and Purchaser hereby
consents to and approves such withdrawal and, except as expressly
provided in Section 1(c)(iii) below, following the Transfer Closing
Seller shall not be subject to any of the terms or provisions of the
LLC Agreement.
(ii) Purchaser shall, effective as of the Transfer
Closing, amend the LLC Agreement to reflect Purchaser as the sole
member of the Company and to make such other amendments to the LLC
Agreement as it determines in its sole discretion.
(iii) Purchaser hereby releases Seller from any and
all obligations that it may have under the LLC Agreement, except that
the provisions of the LLC Agreement set forth in Section 6.3 (with
respect to the period prior to the Transfer Closing) and Article X (as
each Section is currently in effect and without giving effect to any
amendment, modification or waiver thereof after the date of this
Agreement) of the LLC Agreement shall remain applicable to Seller and
Purchaser. Each of Purchaser and Seller, on behalf of itself, its
respective members and their respective affiliates, unconditionally and
irrevocably waives any and all claims it may have against the other
party hereto and/or its officers, members, employees, affiliates,
successors and assigns for any and all causes of action, actions,
claims, liabilities and demands that it may now have or may have had or
that may subsequently accrue to it (whether known or unknown,
liquidated or unliquidated) arising out of, or relating to (A) the LLC
Agreement, except that the Purchaser does not waive the performance, or
any claim with respect thereto, of Seller's obligations set forth in
Section 6.3 and Article X of the LLC Agreement, or (B) the Company's
investment in Affirmative Insurance Holdings, Inc. ("Affirmative");
provided that this provision shall not operate as a waiver of any claim
or obligation of any party arising hereunder.
(d) Further Assurances; Information; Filing.
(i) From and after the date hereof, and subject to
the terms and conditions hereof, each party hereto agrees to use its
reasonable best efforts to take, or cause to be taken, all appropriate
action, and to do, or cause to be done, all things reasonably
necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement, including using their
respective reasonable best efforts to obtain all licenses, permits,
consents, approvals, authorizations, qualifications and orders of, and
make all filings, submissions or notices with, governmental entities
and parties to contracts with each party hereto, to execute, deliver
and/or record such documents, agreements or instruments, and to provide
or make available such information, in each case as are necessary or
desirable for consummation of, or in connection with, the transactions
contemplated by this Agreement.
(ii) Seller shall promptly provide to Purchaser, the
Company and their respective agents, upon reasonable notice and for
purposes reasonably related to (A) this Agreement or (B) financial,
regulatory, accounting or tax matters in connection with the Company's
acquisition and ownership of Affirmative common stock, copies (at
Purchaser's expense) of Seller's books and records to the extent such
books and records (x) are in the Seller's possession or control and (y)
are directly related to the Company, Seller's ownership of the Seller
Units and Seller's acquisition and ownership of the shares of common
stock of Affirmative that were contributed to the Company.
(iii) Following the Transfer Closing, the Purchaser
shall use its reasonable efforts to cause Affirmative Insurance Company
and Insura Property and Casualty Insurance Company to make the
appropriate registration statement (amended Form Bs) disclosures with
the Illinois Department of Financial and Professional Regulation,
Division of Insurance within the required time period.
2. Representations and Warranties.
(a) Representations and Warranties of Purchaser. Purchaser
represents and warrants to Seller that:
(i) Purchaser is duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization.
Purchaser has all the requisite power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. This
Agreement has been duly and validly authorized, executed and delivered
by Purchaser. This Agreement constitutes the valid, binding and
enforceable agreement of Purchaser, except as enforceability may be
limited by (A) applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws relating to or
affecting creditor's rights generally and (B) general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(ii) The execution, delivery and performance by
Purchaser of this Agreement does not and will not (A) violate any
provision of Purchaser's organizational documents, (B) constitute or
result in a breach of or a default (or an event which, with notice or
lapse of time, or both, has the potential of constituting a default)
under any agreement to which Purchaser is a party, (C) violate any law
binding upon Purchaser or to which any of its assets are subject or (D)
require the consent of any third party or governmental body or agency.
(iii) Purchaser is acquiring the Seller Units to be
purchased by it for its own account for investment purposes and not
with a view to or for sale or distribution in violation of the
Securities Act of 1933, as amended, and the rules and regulations in
effect from time to time thereunder (the "Securities Act") or other
applicable law.
(iv) Purchaser has been advised by the Seller that:
(A) neither the offer nor sale of any Seller Units has been registered
under the Securities Act or any state or foreign securities or "blue
sky" laws; (B) the Seller Units are characterized as "restricted
securities" under the Securities Act; (C) it is not anticipated that
there will be any public market for the Seller Units in the foreseeable
future; and (D) any disposition without registration, when and if
permitted Securities Act in reliance on an exception from registration
under the Securities Act, can be made only in accordance with the terms
and conditions of such exemption.
(v) Purchaser is an "accredited investor" as defined
in the Securities Act and Purchaser has such knowledge, skill and
experience in business, financial and investment matters so that
Purchaser is capable of evaluating the merits, risks and consequences
of an investment in the Seller Units to be purchased by it and is able
to bear the economic risk of loss of its investment.
(VI) AS IS, WHERE IS. PURCHASER ACKNOWLEDGES THAT IT
IS FAMILIAR WITH THE COMPANY AND AFFIRMATIVE AND, EXCEPT AS EXPRESSLY
SET FORTH IN THIS AGREEMENT, IS NOT RELYING UPON ANY REPRESENTATIONS,
STATEMENTS, OR WARRANTIES (ORAL OR WRITTEN, IMPLIED OR EXPRESS) OF ANY
MEMBER, OFFICER, EMPLOYEE, AGENT, AFFILIATE OR REPRESENTATIVE OF
SELLER, OR ANY SALESPERSON OR BROKER (IF ANY) INVOLVED IN THIS
TRANSACTION AS TO THE COMPANY, AFFIRMATIVE OR THE SELLER UNITS.
(b) Representations and Warranties of Seller. Seller
represents and warrants to Purchaser that:
(i) Seller is duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization.
Seller has the requisite power and authority to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
has been duly and validly authorized, executed and delivered by Seller.
This Agreement constitutes the valid, binding and enforceable agreement
of Seller, except as such enforceability may be limited by (A)
applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws relating to or affecting
creditors' rights generally and (B) general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(ii) The execution, delivery and performance by
Seller of this Agreement does not and will not (A) violate any
provision of Seller's organizational documents, (B) constitute or
result in a breach of or a default (or an event which, with notice or
lapse of time, or both, has the potential of constituting a default)
under any agreement to which Seller is a party, (C) violate any law
binding upon Seller or to which any of its respective assets are
subject or (D) require the consent of any third party or governmental
body or agency.
(iii) All the Seller Units are owned by Seller
beneficially and of record free and clear of any lien, encumbrance or
other restriction (other than any liens imposed by the LLC Agreement
and other than restrictions on transfer imposed by applicable state and
federal securities laws), Seller has not conveyed, transferred or sold
any interest in the Seller Units to any other person and subject to the
terms and conditions of the LLC Agreement and applicable law, upon
consummation of the transactions contemplated by this Agreement, Seller
will transfer to Purchaser the Seller Units, in each case free and
clear of any lien, encumbrance or restriction whatsoever (other than
any liens imposed by the LLC Agreement and other than restrictions on
transfer imposed by applicable state and federal securities laws).
Except for this Agreement and the LLC Agreement, there are no contracts
relating to the sale or transfer of the Seller Units to which Seller
(or any of its affiliates (other than the Company)) is a party.
(iv) There is no pending or, to Seller's knowledge,
threatened, litigation, action, proceeding, application, complaint or
investigation (A) affecting or with respect to the Seller Units or (B)
which purports to affect the legality, validity or enforceability of
this Agreement or the transactions contemplated hereby.
(v) Seller acknowledges that it is aware of the
matters described in Schedule 2(b)(v) hereto.
(vi) Seller acknowledges that following the Transfer
Closing, it shall have no right or interest (other than by reason of
Seller's right to dividends as set forth in Section 5 to the extent not
paid prior to the Transfer Closing) in the shares of common stock of
Affirmative owned by the Company.
(vii) NO ADDITIONAL REPRESENTATIONS. THE
REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS SECTION 2(b) ARE THE
ONLY REPRESENTATIONS AND WARRANTIES MADE BY SELLER. EXCEPT AS
SPECIFICALLY SET FORTH HEREIN, ALL WARRANTIES, EXPRESS OR IMPLIED, ARE
HEREBY DISCLAIMED AND EXCLUDED. IN NO EVENT SHALL SELLER BE LIABLE FOR
SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES.
3. Conditions to Closing.
(a) The obligation of Purchaser to effect the Transfer Closing
is subject to the satisfaction or waiver of the following conditions:
(i) Seller shall have performed in all material
respects all of its obligations under this Agreement required to be
performed by it at or before the Transfer Closing;
(ii) Each representation and warranty of Seller
contained in this Agreement shall be true and correct in all material
respects (except for the representations set forth in Section 2(b)(i),
Section 2(b)(iii), Section 2(b)(v) and Section 2(b)(vi), which shall be
true and correct in all respects) as of the time of the Transfer
Closing, as if made at and as of such time; and
(iii) No law, statute, ordinance, rule, regulation,
code, order, judgment, injunction or decree enacted, issued,
promulgated, enforced or entered by a government entity shall be in
effect prohibiting the transactions contemplated hereby.
(b) The obligation of Seller to effect the Transfer Closing is
subject to the satisfaction or waiver of the following conditions:
(i) Purchaser shall have performed in all material
respects all of its obligations under this Agreement required to be
performed by it at or before the Transfer Closing;
(ii) Each representation and warranty of Purchaser
contained in this Agreement shall be true and correct in all material
respects (except for the representations set forth in Section 2(a)(i),
Section 2(a)(iii), Section 2(a)(iv), 2(a)(v) and Section 2(a)(vi),
which shall be true and correct in all respects) as of the time of the
Transfer Closing, as if made at and as of such time; and
(iii) No law, statute, ordinance, rule, regulation,
code, order, judgment, injunction or decree enacted, issued,
promulgated, enforced or entered by a government entity shall be in
effect prohibiting the transactions contemplated hereby.
4. Survival; Indemnification.
(a) The representations, warranties, covenants and agreements
of the parties set forth in this Agreement shall survive the Transfer Closing.
(b) Each party hereto shall indemnify the other party, its
affiliates and their respective members, directors, officers, employees and
agents against, and agrees to hold each of them harmless from, any damage, loss,
liability, cost, charge, fee, penalty, tax or expense (including reasonable
expenses of investigation and reasonable attorneys' fees and expenses) incurred
or suffered by them arising out of, or relating to, any breach by such party of
any provision of this Agreement. Notwithstanding the foregoing, no party hereto
shall be liable under this Section 4(b) for any punitive, incidental or
consequential damages, unless such punitive, incidental or consequential damages
are awarded against the indemnified party in a third-party claim.
5. Payment of Dividend. Notwithstanding anything to the contrary in
this Agreement, Purchaser shall cause the Company to deliver to Seller, within
one (1) business day following receipt thereof by the Company, the gross amount
(without taking into account any holdback, deduction or other expense
contemplated by the LLC Agreement) of any cash dividend on the common stock of
Affirmative for which the record date occurred prior to the date hereof that is
allocable to the Seller Units under the current terms of the LLC Agreement and
which has not been previously received by the Seller.
6. US Tax Treatment. Consistent with Revenue Ruling 99-6, Seller and
Purchaser agree to treat, for U.S. federal income tax purposes, the sale of the
Seller Units by Seller to Purchaser as follows: (a) as to Seller, as a sale of
the Seller Units to Purchaser and (b) as to Purchaser, as if the Company had
distributed in liquidation of the Company to each of Seller and Purchaser the
assets to be set forth on a Schedule 6 and as if Seller had sold to Purchaser
the assets received from the Company. Seller and Purchaser shall, in good faith,
use their respective best efforts to reasonably agree upon a Schedule 6 prior to
the Transfer Closing; provided that, in no event shall agreement and delivery of
such Schedule 6 be a condition to the Transfer Closing (or otherwise affect the
conditions precedent to the Transfer Closing) .
7. Binding Effect. The provisions of this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and the heirs,
successors and assigns of the parties hereto.
8. Fees and Expenses. Each of Seller and Purchaser shall bear its own
costs and expenses in connection with the negotiation, execution and delivery of
this Agreement and the other documents related hereto and consummation of the
transactions contemplated hereby.
9. Assignment. No party shall assign any of its rights under this
Agreement without the prior written consent of the other party, except that
Purchaser may assign any and all of its rights under this Agreement to one or
more of its affiliates (but no such assignment shall relieve Purchaser of any of
its obligations hereunder nor shall any such assignment hinder or delay the
Transfer Closing). Any purported assignment in contravention of this provision
shall be null and void.
10. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
11. Invalidity of Provisions. The invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not affect the validity or
enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of this Agreement, including that provision, in any
other jurisdiction.
12. Headings; Execution in Counterparts; Facsimile Signatures. The
headings and captions contained herein are for convenience of reference only and
shall not control or affect the meaning or construction of any provision hereof.
This Agreement may be executed in counterparts, each of which shall be deemed to
be an original and all of which together shall constitute but one and the same
instrument. Facsimile transmission of any signed original document and
retransmission of any signed facsimile transmission will be deemed the same as
delivery of an original. At the request of either party, the other party will
confirm facsimile transmission by signing and delivering a duplicate original
document.
13. Notices. All notices and other communications provided for herein
shall be dated and in writing and shall be deemed to have been duly given when
delivered, if delivered personally or sent by registered or certified mail,
return receipt requested, postage prepaid and when received if delivered
otherwise, to the party to whom it is directed:
If to the Seller, to the following address:
DSC AFFM, LLC
000 X. Xxxxxxxx Xxx., 00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxxx Xxxxx
Xxxxxxx X. Xxxx
Telephone: 000-000-0000
Fax: 000-000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx, Esq.
Telephone: 000-000-0000
Fax: 000-000-0000
If to Purchaser, to the following address:
Affirmative Investment LLC
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn.: Xxxxxxxx Xxxxxxxxxxx
Telephone: 000-000-0000
Fax: 000-000-0000
with a copy to:
Xxxxxxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
Telephone: 000-000-0000
Fax: 000-000-0000
or at such other address as such party shall have specified by notice in writing
to the other parties in accordance with this Section 13.
14. Amendment. This Agreement may not be amended, modified or
supplemented and no waivers of or consents to departures from the provisions
hereof may be given unless consented to in writing by the party sought to be
charged therewith. Unless otherwise specified in such waiver or consent, a
waiver or consent given hereunder shall be effective only in the specific
instance and for the specific purpose for which given.
15. Integration. The parties agree that this Agreement contains the
entire understanding among the parties hereto relating to the matter hereof.
16. Third Party Beneficiaries. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer upon or give to any third
party any rights or remedies against any party hereto.
17. Specific Performance. The parties acknowledge and agree that any
breach of the terms of this Agreement would give rise to irreparable harm for
which money damages would not be an adequate remedy and accordingly the parties
agree that, in addition to any other remedies, each party shall be entitled to
enforce the terms of this Agreement by a decree of specific performance without
the necessity of proving the inadequacy of money damages as a remedy.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, Seller and Purchaser have executed this
Agreement as of the date first above written.
SELLER
DSC AFFM, LLC
By: DSC AFFM Manager LLC,
its Managing Member
By: /s/ Xxxxxxx X. Xxxx
-----------------------------------
Name: Xxxxxxx X. Xxxx
Title: Authorized Agent
PURCHASER
AFFIRMATIVE INVESTMENT LLC
By: Affirmative Associates LLC,
its Managing Member
By: /s/ X.X. Xxxxxxx
-------------------------------------
Name: X.X. Xxxxxxx
Title: Member
