Exhibit 10.2
Execution Copy
Pursuant to Section 14.1 of the Stock Purchase Agreement (the
"Agreement"), dated as of February 24, 2000, by and among THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA, a mutual insurance company domiciled in the State
of New Jersey (the "Seller"), and EVEREST REINSURANCE HOLDINGS, INC., a
corporation organized and existing under the laws of the State of Delaware (the
"Purchaser"), the parties hereto hereby agree to amend the Agreement as follows:
1. Section 1.1 of the Agreement is hereby amended by adding the following
definitions:
""Employee Terminations and Transfer" shall have the meaning specified
in Section 12.1(a).
"Guarantee" shall have the meaning specified in Section 9.6.
"PruPac" means Prudential Property and Casualty Insurance Company,
an Indiana corporation and an indirect subsidiary of Seller."
2. Section 1.1 of the Agreement is hereby amended so that the definitions
of "Employee," "State Insurance Commissioner" and "State Insurance
Commission" read in their entirety as follows:
""Employee" means all individuals who are employed by the Seller
and perform substantial work for Gibraltar or who are employed by
Gibraltar."
"State Insurance Commissioner" means each of the Insurance
Commissioners of the States of Delaware, Indiana and New Jersey,
as applicable.
"State Insurance Commission" means each of the Offices of the
Insurance Commissioner of the States of Delaware, Indiana and
New Jersey, as applicable."
3. Section 3.1 of the Agreement is hereby amended by adding the following
paragraph at the end of such Section:
"(c) Prupac is an insurance company domiciled, validly existing and
in good standing under the laws of the State of Indiana and has all
requisite corporate power and authority to execute and deliver the MUF
Agreement and the Additional Stop-Loss Agreement, to perform its
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obligations thereunder and to consummate the transactions contemplated
thereby. At the Closing, the execution, delivery and performance by
Prupac of the MUF Agreement and the Additional Stop-Loss Agreement
and the consummation by Prupac of the transactions contemplated
thereby will have been duly and validly authorized by all necesssary
corporate action, and no other corporate proceedings on the part of
Prupac will be necessary to authorize the execution, delivery and
performance by Prupac of the MUF Agreement and the Additional Stop-
Loss Agreement or the consummation of the transactions contemplated
thereby. At the Closing, the MUF Agreement and the Additional Stop-
Loss Agreement will each have been duly and validly executed and
delivered by Prupac and will constitute a legal, valid and binding
obligation of Prupac, enforceable against Prupac in accordance with
its terms, except as such enforcement may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting creditors'
rights generally and except as rights to specific enforcement may be
limited by the application of equitable principles (whether such
equitable principles are applied in a proceeding at law or in
equity)."
4. Section 3.20 of the Agreement is hereby amended by adding the
following sentence at the end of such Section:
"Except as set forth in Schedule 3.20, no consent, authorization,
order or approval of, or filing or registration with, any governmental
authority, board or other regulatory body is required for or in
connection with the execution and delivery of the MUF Agreement and
the Additional Stop-Loss Agreement by Prupac or the consummation by
Prupac of the transactions contemplated thereby, except for
notifications to be given to, and the approval to be obtained from,
the applicable State Insurance Commissioner."
5. The first sentence of Section 3.27 of the Agreement is hereby amended
by so that such sentence reads in its entirety as follows:
"Except for Adam Kenney, there are no employees of Gibraltar."
6. The third sentence of Section 3.27 of the Agreement is hereby amended
by so that such sentence reads in its entirety as follows:
"Except for the Employee Terminations and Transfer, the Seller's
relationship with the Employees is good and no labor dispute or
disturbance exists and, to the knowledge of Gibraltar, none is
threatened."
7. Schedule 3.27 to the Agreement is hereby replaced in its entirety by
Schedule 3.27 attached to this Amendment.
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8. Section 5.7(b) of the Agreement is hereby amended by inserting in the
first sentence after the phrase "Seller or Gibraltar" the words "or
Prupac."
9. Section 5.7(c) of the Agreement is hereby amended by inserting in the
first sentence after the phrase "or by Gibraltar" the words "or
Prupac."
10. Section 9.4 of the Agreement is hereby amended so that Section 9.4
reads in its entirety as follows:
"9.4 MUF Agreement. PruPac and Gibraltar shall have entered a quota
share reinsurance agreement (the "MUF Agreement") substantially in the
form of Exhibit C to this Agreement, relating to certain uncollectible
MUF reinsurance recoveries and the Purchaser shall or shall cause
Everest Re to provide to the Seller Schedule A to the MUF Agreement on
or before the first Business Day following the date on which all
the conditions set forth in Articles IX, X and XI shall have been
satisfied or waived."
11. Section 9.5 of the Agreement is here by amended so that Section 9.5
reads in its entirety as follows:
"9.5 Additional Stop-Loss Coverage. PruPac and Gibraltar shall have
entered into a proportional excess of loss reinsurance agreement (the
"Additional Stop-Loss Agreement") substantially in the form of Exhibit
D to this Agreement, relating to the provision by PruPac of additional
stop-loss coverage."
12. Article IX is hereby amended by adding the following Section:
"9.6 Guarantee The Seller shall have executed and delivered to
Gibraltar a guarantee (the "Guarantee") substantially in the form of
Exhibit E to this Agreement."
13. Exhibit C to the Agreement is hereby amended in its entirety by the
form of MUF Agreement attached hereto as Exhibit C.
14. Exhibit D to the Agreement is hereby amended in its entirety by the
form of Additional Stop-Loss Agreement attached hereto as Exhibit D.
15. Exhibit E attached hereto shall be added as Exhibit E to the Agreement.
16. Section 12.1(a) of the Agreement is hereby amended by inserting in the
first and second sentence of the second paragraph after the phrase "the
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MUF Agreement and the Additional Stop-Loss Agreement" the words "and
the Guarantee" and by adding the following subsection after subsection
(ii) and before the first proviso:
"or (iii) any termination by Seller of the employment of Joanne Poles,
Erika Kill, Rosemarie Weisshapp, Felicia Pittman, Marco Abdelsayed or
Michael Rant or transfer by Seller of the employment of Adam Kenney
(the "Employee Terminations and Transfer")"
17. Section 13.1(d) of the Agreement is hereby amended so that Section
13(d) reads in its entirety as follows:
"(d) By either the Purchaser or the Seller if the Closing shall not
have occurred by September 30, 2000; provided, however, that the right
to terminate this Agreement under this Section 13.1 shall not be
available to the party whose failure to fulfill any obligation under
this Agreement has been the cause or shall result in the failure of the
Closing to occur prior to such date."
18. Exhibit A to the Agreement is hereby amended by replacing all
references to "the MUF Agreement and the Additional Stop-Loss
Agreement" with a reference to "and the Guarantee" and by adding the
following paragraphs to the end of such Exhibit:
"5. Prupac is an insurance company domiciled, validly existing and in
good standing under the laws of the State of Indiana and has all
requisite corporate power and authority to execute and deliver the MUF
Agreement and the Additional Stop-Loss Agreement, to perform its
obligations thereunder and to consummate the transactions contemplated
thereby.
6. The execution and delivery by Prupac of the MUF Agreement and the
Additional Stop-Loss Agreement, the performance by Prupac of its
obligations thereunder and the consummation by Prupac of the
transactions contemplated thereby have been duly and validly authorized
by all necessary corporate action on the part of Prupac. The MUF
Agreement and the Additional Stop-Loss Agreement have each been duly
and validly executed and delivered by a duly authorized officer of
Prupac and constitute a legal, valid and binding obligation of Prupac,
enforceable against Prupac in accordance with its terms (subject to
applicable bankruptcy, insolvency, fraudulent transfer, reoganization,
moratorium or other laws affecting creditors' rights generally from
time to time in effect). The enforceability of Prupac's obligations
is also subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
7. All necessary filings or registrations with any governmental or
regulatory authority required for the consummation by Prupac of the
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transactions contemplated by the MUF Agreement and the Additional Stop-
Loss Agreement have been duly made, and all permits, authorizations,
consents or approvals of any governmental or regulatory authority
required in connection with such transactions have been duly obtained."
19. The Purchaser hereby consents to the termination by the Seller of the
employment of Joanne Poles, Erika Kill, Rosemarie Weisshapp, Felicia
Pittman and Marco Abdelsayed and waives any breach of the Agreement,
including Section 5.1 and Section 5.3(i), that may have occurred in
connection therewith. The Purchaser hereby consents to the termination
by the Seller of the employment of Michael Rant and waives any breach
of the Agreement, including Section 5.1 and Section 5.3(i), that may
occur in connection therewith; provided, that such termination occurs
no earlier than five Business Days prior to the Closing. The Purchaser
hereby consents to the transfer of the employment of Adam Kenney from
the Seller to Gibraltar and waives any breach of the Agreement,
including Section 5.1 and Section 5.3(i), that may occur in connection
therewith; provided, that such transfer occurs not earlier than
immediately prior to the Closing on the Closing Date.
20. Capitalized terms used herein but not otherwise defined herein shall
have the meanings given to such terms in the Agreement.
21. The provisions of the Agreement, as amended hereby, shall remain in
full force and effect in accordance with its terms.
22. This Amendment shall be governed by and construed in accordance with
the laws of the State of New York.
23. This Amendment may be executed in two or more counterparts, all of
which shall be considered one and the same agreement, and shall become
effective when two or more counterparts have been signed by each of the
parties and delivered to the other parties, it being understood that
the parties need not sign the same counterpart.
* * *
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment
Number 1 to Stock Purchase Agreement to be executed as of this 8th day of
August, 2000.
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /S/ DOUGLAS A. GREGORY
--------------------
Name: Douglas A. Gregory
Its: Vice President
EVEREST REINSURANCE HOLDINGS, INC.
By: /S/ STEPHEN L. LIMAURO
-------------------
Name: Stephen L. Limauro
Its: Senior Vice President and Chief
Financial Officer
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EXHIBIT C
QUOTA SHARE REINSURANCE AGREEMENT
(hereinafter referred to as the "Agreement")
between
GIBRALTAR CASUALTY COMPANY, a Delaware Corporation
(hereinafter referred to as the "Company")
and
PRUDENTIAL PROPERTY AND CASUALTY INSURANCE COMPANY, an Indiana Corporation
(hereinafter referred to as the "Reinsurer")
(Both the Company and the Reinsurer collectively are referred to as
the "Parties" and individually as "Party")
WHEREAS, The Prudential Insurance Company of America ("Prudential") is the
ultimate parent of the Reinsurer;
WHEREAS Prudential and Everest Reinsurance Holdings, Inc., a Delaware
corporation ("Holdings"), have executed a Stock Purchase Agreement dated as of
February 24, 2000 ("Sale Agreement") wherein Holdings will purchase from
Prudential all issued and outstanding shares of the Company, a wholly owned
subsidiary of Prudential, effective as of the "Closing Date" set forth in the
Sale Agreement.
WHEREAS, Holdings is the parent of Everest Reinsurance Company, formerly known
as Prudential Reinsurance Company ("Everest Re").
WHEREAS, the Company has, and in the future may have, Uncollectible Reinsurance
Recoverables, as defined herein, with regard to business reinsured by or through
the Management Underwriting Facility ("MUF"), as defined in the Sale Agreement.
WHEREAS, the Company desires to procure reinsurance coverage for its
Uncollectible Reinsurance Recoverables.
NOW, THEREFORE, in consideration of mutual covenants, representations,
warranties, and agreements contained herein and in the Sale Agreement, the
Parties agree as follows:
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ARTICLE I - CLASSES OF BUSINESS COVERED
A. By this Agreement and subject to the terms and conditions set forth
below, the Reinsurer agrees to indemnify the Company for the Company's
Uncollectible Reinsurance Recoverables, as defined herein, with regard
to business reinsured by or through MUF respecting Direct Excess
Business and Gibraltar-Sourced Business, as defined herein.
B. "Uncollectible Reinsurance Recoverables", with respect to Reinsurance
Coverage, is defined as including (i) Uncollected Reinsurance and (ii)
Settlement Concessions.
C. "Reinsurance Coverage" is defined as any amount of paid and unpaid
losses and loss adjustment expenses ceded by Everest Re to MUF
reinsurers with respect to Direct Excess Business or Gibraltar-Sourced
Business, whether such amounts were ceded prior to or during the term
of this Agreement.
D. "Uncollected Reinsurance" is defined as Reinsurance Coverage for paid
loss and loss adjustment cessions relating to Direct Excess Business,
with respect to each company on Schedule A hereto, that is unpaid by
the reinsurer after one-hundred-and-eighty (180) days from the date
that such paid loss and loss adjustment cessions were due to be paid by
the reinsurer.
E. "Settlement Concessions" is defined as the difference, with respect to
each company on Schedule A hereto, between the Reinsurance Coverage for
Direct Excess Business or Gibraltar-Sourced Business reinsured by MUF
and ceded to such company and the amount received from such company.
F. "Direct Excess Business" is defined as policies, contracts, and binders
of insurance or reinsurance ("Policies") that were issued by Everest
Re prior to January 1, 1986.
G. "Gibraltar-Sourced Business" is defined as Policies that were issued by
the Company prior to January 1, 1986.
H. Although Everest Re rather than the Company has the direct ceding
relationship with MUF, solely for purposes of this Agreement and only
up to the amounts scheduled in Schedule A hereto, the Parties hereby
deem any Uncollectible Reinsurance Recoverables to belong to the
Company and not to Everest Re.
ARTICLE II - COMMENCEMENT AND TERMINATION
A. This Agreement shall become effective on the Closing Date. This
Agreement will terminate, with respect to the Reinsurer's Per-Company
Sub-Limit of Liability under Article V, on the earlier of (i) two years
following the Reinsurer's payment of the sub-limit or (ii) the tenth
anniversary of Closing Date. This Agreement shall terminate, with
respect to the Reinsurer's Aggregate Limit of Liability under Article
V, on the earlier of (i) two years following the Reinsurer's payment of
the limit or (ii) the tenth anniversary of the Closing Date.
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B. Neither Party may terminate this Agreement.
ARTICLE III - TERRITORY
The territorial scope of this Agreement shall be identical to that of the
Policies.
ARTICLE IV - CONSIDERATION
The consideration for this reinsurance coverage is deemed paid as of the Closing
Date and, with respect to the Reinsurer, includes, among other things, certain
operational and other assistance (i) previously provided to the Reinsurer, which
is deemed paid as of the Closing Date, and (ii) to be provided to the Reinsurer
in connection with this Agreement, including pursuant to the Keepwell Agreement
between Prudential and the Reinsurer of even date herewith. No further
consideration shall be due to the Reinsurer.
ARTICLE V - SCHEDULE OF UNCOLLECTIBLE REINSURANCE RECOVERABLES AND REINSURER'S
LIMIT OF LIABILITY
Pursuant to the Sale Agreement, on or before the first Business Day following
the date on which all of the conditions set forth in Articles IX, X, and XI of
the Sale Agreement have been satisfied or waived, Holdings will cause Everest Re
to provide to the Reinsurer a schedule setting forth all expected Uncollectible
Reinsurance Recoverables ("Schedule A"), which shall be incorporated herein by
reference. Schedule A shall identify, by reinsurer name, (1) the expected
amounts of Uncollected Reinsurance attributable to each reinsurer with respect
to Direct Excess Business and (2) the expected amounts of Settlement Concessions
with respect to Direct Excess Business and Gibraltar-Sourced Business. If the
Company identifies a given reinsurer on Schedule A with respect to both
Uncollected Reinsurance and for Settlement Concessions, then the amount
scheduled for Uncollected Reinsurance shall represent only paid loss and loss
adjustment expense amounts and the amount scheduled for Settlement Concessions
shall include only unpaid loss and loss adjustment expense amounts.
The Reinsurer shall pay to the Company one hundred percent (100.0%) of up to the
scheduled amount of the Company's Uncollectible Reinsurance Recoverables with
respect to each company listed on Schedule A ("Per Company Sub-Limit of
Liability"), provided that the Reinsurer's total liability under this Agreement
shall in no event be greater than $8,500,000 ("Aggregate Limit of Liability").
<PAGE>
ARTICLE VI - PAYMENT OF ADVANCES BY REINSURER AND REFUNDS BY COMPANY
Subject to the limits set forth in Article V, pursuant to Article IX the
Reinsurer shall make payments ("Advances") to the Company in the amount of the
Uncollected Reinsurance and Settlement Concessions shown on the Company's
statements.
If after receiving an Advance from the Reinsurer with respect to an Uncollected
Reinsurance amount, the Company actually collects all or a portion of the amount
due from the reinsurer identified on Schedule A, then the Company shall pay to
the Reinsurer a sum equal to the amount so collected ("Refund"), up to the
amount of the corresponding Advance paid by the Reinsurer. Refunds shall not
bear interest except as set forth in Article IX (G), and in no event shall the
Reinsurer be entitled to a Refund in an amount greater than the corresponding
Advance. In the event that a Refund is made to the Reinsurer, the Per Company
Sub-Limit of Liability and the Aggregate Limit of Liability shall each be
replenished by the amount of such Refund. No Refunds shall be due for Advances
paid by the Reinsurer with respect to Settlement Concessions.
ARTICLE VII - OTHER REINSURANCE
On or after the Closing Date, the Company shall be permitted to obtain other
reinsurance, recoveries under which shall inure solely to the benefit of the
Company, and all recoveries under such other reinsurance shall be entirely
disregarded in applying all of the provisions of this Agreement.
ARTICLE VIII - ORIGINAL CONDITIONS
A. The Reinsurer shall follow the fortunes of the Company with respect
to settlements of any Reinsurance Coverage and with respect to
Uncollectible Reinsurance Recoverables.
B. The reinsurance coverage provided under this Agreement shall be subject
to all interpretations, modifications, waivers, and alterations of the
Policies and Reinsurance Coverage.
C. Nothing herein shall in any manner create any obligations or establish
any rights against the Reinsurer in favor of any third party or any
person not a Party to this Agreement.
ARTICLE IX - REPORTS AND REMITTANCES
A. The first statement of account shall be due to the Reinsurer from the
Company on the anniversary of the Closing Date. The first statement
only shall include a charge for interest on any Uncollectible
Reinsurance Recoverables due from the Reinsurer as of the statement
date. Such interest charge shall be equal to the rate of interest
announced by Citibank, N.A. as its prime or base rate as of the
statement date, calculated on the basis of the actual number of days
elapsed since the Uncollectible Reinsurance Recoverables accrued or the
Closing Date, whichever is less, divided by
three-hundred-and-sixty-five (365) days. Such interest charge shall be
included in the Per Company Sub-Limit of Liability set forth on
Schedule A.
<PAGE>
B. Thereafter, the Company shall submit quarterly statements of account
("quarterly reports") within forty-five (45) days after the end of each
calendar quarter.
C. Such quarterly reports shall be sent by both facsimile transmission
and United States Postal Service or any other delivery service used by
the Company.
D. Such quarterly reports shall include information showing, as applicable
with respect to each company listed on Schedule A, Uncollected
Reinsurance, Settlement Concessions, Advances received, Advances due,
Refunds due, and unpaid amounts outstanding.
E. Remittances shall be on a "Net Basis," defined as amounts owed between
the Parties under this Agreement.
F. Remittances, whether due to the Company from the Reinsurer or to the
Reinsurer from the Company, shall be due within forty-five (45) days
from the date of receipt of the facsimile transmission of each
quarterly report.
G. Failure by the Reinsurer or the Company to pay amounts owed when due
under this Agreement shall result in imposition of an interest penalty
equal to the rate of interest announced by Citibank, N.A. as its prime
or base rate as of the due date of any remittance, calculated on the
basis of the actual number of days elapsed past the due date of any
remittance divided by three-hundred-and-sixty-five (365) days and
payment of other losses, costs, and expenses accrued or incurred by the
Company or Reinsurer as a result of the other Party's late payment.
ARTICLE X - OFFSET
The Company and the Reinsurer shall have the right to offset any balance or
amounts due from one party to the other under this Agreement.
ARTICLE XI - ACCESS TO RECORDS
A. The Company shall place at the disposal of the Reinsurer at all
reasonable times, and the Reinsurer will have the right to inspect, all
books, records, and papers of the Company in connection with any
reinsurance coverage hereunder or any claims in connection herewith.
B. All records reviewed by the Reinsurer are deemed proprietary and
confidential property of the Company. Further, unless pursuant to the
express, written permission of the Company, the Reinsurer shall not
disclose the contents of such information to any other person, persons,
entity, or entities; provided, that the Reinsurer may disclose such
information or portions thereof in connection with any arbitration
hereunder or any legal or regulatory process, or to its directors,
officers and employees and the directors, officers and employees of its
affiliates and to its agents, representatives, attorneys, accountants,
auditors, reinsurers (collectively, "the Reinsurer's Representatives"),
<PAGE>
in each case, who have a legitimate need to know such information
(which would include, but not be limited to the right to dispute and/or
assess in furtherance of a dispute) and who are informed of and agree
to be bound by the confidentiality terms of this Agreement. The
Reinsurer shall indemnify and hold harmless the Company for all damages
resulting from any unauthorized disclosure by the Reinsurer or the
Reinsurer's Representatives of records obtained pursuant to this
Article. Nothing contained in this Agreement shall be construed to
prevent the Company from applying to a court of competent jurisdiction
for equitable relief including injunction and specific performance as a
remedy if the Reinsurer or any of the Reinsurer's Representatives
breach or threaten to breach any of the provisions of this Article.
Without prejudice to the rights and remedies otherwise available at law
or equity to the Company, it is understood and agreed that the Company
would be irreparably injured by a breach of this Article, that money
damages would not be a sufficient remedy for any actual or threatened
breach of this Article by the Reinsurer or any of the Reinsurer's
Representatives and that the Company shall (without proof of actual
damages) be entitled to equitable relief. In the event of litigation
relating to this Article, if a court of competent jurisdiction
determines that the Reinsurer or any of the Reinsurer's Representatives
have breached this Article, then the Reinsurer shall be liable and pay
to the Company the reasonable legal fees incurred by the Company in
connection with the subject litigation, including any appeal therefrom.
ARTICLE XII - ERRORS AND OMISSIONS
Inadvertent delays, errors or omissions in connection with this Agreement or any
transaction hereunder shall not relieve either Party of any liability which
would have attached had such delay, error or omission not occurred, provided
always that such error or omission is rectified as soon as possible after
discovery.
ARTICLE XIII - SECURITY
A. If the Company is or becomes unable to take credit in any financial
statement filed with its domiciliary insurance regulator or with
insurance regulators in New Jersey, California or any other state in
which it currently is approved as a surplus lines insurer (or any
successors to said regulators) for the reinsurance coverage provided
hereunder, or if Prudential's Financial Strength Rating published by
A.M. Best becomes less than "A-," the Reinsurer agrees to fund within
thirty (30) days from receipt of notice from the Company that funding
is required its share of Uncollectible Reinsurance Recoverables (and to
replenish such funding from time to time as necessary) by:
1. Clean, irrevocable and nconditional letters of credit issued and
confirmed, if confirmation is required by the insurance regulatory
authorities involved, by a qualified United States financial
institution acceptable to said insurance regulatory authorities;
<PAGE>
2. cash; and/or
3. a Trust in compliance with the requirements of and acceptable to
said insurance regulatory authorities.
B. With regard to funding in whole or in part by letters of credit, it is
agreed that each letter of credit will be in a form that would be
acceptable to the Company's domiciliary insurance regulatory authority,
will be issued for a term of at least one year and will include an
"evergreen clause," that automatically extends the term for at least
one additional year at each expiration date unless written notice of
non-renewal is given to the Company not less than 30 days prior to said
expiration date. The Company and the Reinsurer further agree that said
letters of credit may be drawn upon by the Company or its successors in
interest at any time, without diminution because of the insolvency of
the Company or the Reinsurer, but only for one or more of the following
purposes:
1. To reimburse itself for the Reinsurer's share of Uncollectible
Reinsurance Recoverables, unless paid in cash by the Reinsurer;
2. To reimburse itself for the Reinsurer's share of any other amounts
claimed to be due hereunder, unless paid in cash by the Reinsurer;
3. To fund a cash account in an amount equal to the Reinsurer's
share of Uncollectible Reinsurance Recoverables funded by means
of a letter of credit that is under non-renewal notice, if said
letter of credit has not been renewed or replaced by the Reinsurer
10 days prior to its expiration date;
4. To refund to the Reinsurer any sum in excess of the actual
amount required to fund the Reinsurer's share of Uncollectible
Reinsurance Recoverables and other amounts claimed to be due
hereunder, if so requested by the Reinsurer.
C. In the event the amount drawn by the Company on any letter of credit is
in excess of the actual amount required for B (1), B (3) or B (4), or
in the case of B (2), the actual amount determined to be due, the
Company shall promptly return to the Reinsurer the excess amount so
drawn.
D. In the event of funding through a Trust:
1. The Reinsurer shall establish a Trust Account for the benefit
of the Company to fund the amounts receivable under the Agreement
in a qualified United States financial institution reasonably
acceptable to the Company and to said insurance regulatory
authorities.
<PAGE>
2. The assets deposited into the Trust Account shall be valued
according to their current fair market value and shall consist
only of cash (United States legal tender), certificates of
deposit (issued by a United States bank and payable in United
States legal tender) and investments of the type permitted by
and acceptable to said insurance regulatory authorities or any
combination of the above, provided that such investments are
issued by an institution that is not the parent, subsidiary or
affiliate of either the Reinsurer or the Company;
3. The Reinsurer, prior to depositing assets with the trustee,
shall execute assignments, endorsements in blank, or transfer
legal title to the trustee of a ll shares, obligations or any
other assets requiring assignments, in order that the Company,
or the trustee upon the Company's direction, may whenever
necessary negotiate any such assets without consent or signature
from the Reinsurer or any other entity;
4. All settlements of account between the Reinsurer and the Company
shall be in cash or its equivalent;
5. The assets in the trust account may be withdrawn by the
Company at any time, notwithstanding any other provisions in
this Agreement, and shall be utilized by the Company or any
successor by operation of law, including without limitation
any liquidator, rehabilitator, receiver or conservator of the
Company, for the purposes set forth in paragraphs B(1) -B(4)
above.
ARTICLE XIV - INSOLVENCY
In the event of the insolvency of the Company, the reinsurance coverage
hereunder shall be payable directly to the Company or to its liquidator,
receiver, conservator or statutory successor on the basis of the amount of claim
allowed in the insolvency proceeding without diminution by reason of the
inability of the Company to pay all or any part of the claim. It is agreed,
however, that the liquidator, receiver, conservator or statutory successor of
the Company shall give written notice to the Reinsurer of the pendency of a
claim against the Company, indicating the Policy or bond covered hereunder which
claim would involve a possible liability on the part of the Reinsurer, within a
reasonable time after such claim is filed in the conservation or liquidation
proceeding or in the receivership, and that during the pendency of such claim,
the Reinsurer may investigate such claim and interpose, at its own expense, in
the proceeding where such claim is to be adjudicated, any defense or defenses
that it may deem available to the Company or its liquidator, receiver,
conservator or statutory successor. The expense thus incurred by the Reinsurer
shall be chargeable, subject to the approval of the Court, against the Company
as part of the expense of conservation or liquidation to the extent of a pro
rata share of the benefit which may accrue to the Company solely as a result of
the defense undertaken by the Reinsurer.
<PAGE>
ARTICLE XV - ARBITRATION
A. Except with respect to disputes arising solely out of or solely in
connection with Article XI above (Access to Records), as a condition
precedent to any right of action hereunder, in the event of any dispute
or difference of opinion hereafter arising with respect to this
Agreement, including its formation and validity, it is hereby mutually
agreed that such dispute or difference of opinion shall be submitted to
arbitration.
B. Except as provided in subsections A. and D. of this Article or with
respect to judicial proceedings instituted in aid of arbitration, this
Article shall constitute a waiver of the Parties' rights to commence an
action in any court of competent jurisdiction in the United States, to
remove an action to a United States District Court, or to seek a
transfer of a case to another court as might otherwise be permitted by
the laws of the United States or of any State or other jurisdiction in
the United States.
C. One Arbiter shall be chosen by the Company, the other by the Reinsurer,
and an Umpire shall be chosen by the two Arbiters before they enter
upon arbitration, all of whom shall be active or retired disinterested
executive officers of United States domiciled insurance or reinsurance
companies. In the event that either Party should fail to choose an
Arbiter within 30 days following a written request by the other Party
to do so, the requesting Party may choose two Arbiters who shall in
turn choose an Umpire before entering upon arbitration. If the two
Arbiters fail to agree upon the selection of an Umpire within 30 days
following their appointment, each Arbiter shall nominate three
candidates within 10 days thereafter, two of whom the other shall
decline, and the decision shall be made by drawing lots.
D. The Arbiters and the Umpire ("the Arbitration Panel") shall consider
this Agreement as an honorable engagement rather than merely as a legal
obligation, and they are relieved of all judicial formalities and may
abstain from following the strict rules of law. The majority decision
of the Arbitration Panel shall be final and binding on both Parties.
Judgment upon the final decision of the Arbitration Panel may be
entered in any court of competent jurisdiction.
E. Except as provided in sub-section G. of this Article, each Party shall
bear the expense of its own Arbiter, and shall jointly and equally bear
with the other the expense of the Umpire and of the arbitration. In the
event that the two Arbiters are chosen by one Party, as above provided,
the expense of the Arbiters, the Umpire and the arbitration shall be
equally divided between the two Parties.
F. Any arbitration pursuant to this Article shall be conducted in New
York, New York unless otherwise agreed by the parties; provided,
however, that the Arbitration Panel may choose to take evidence and/or
convene a hearing in a place other than New York for the convenience of
the parties, the witnesses or the Arbitration Panel.
<PAGE>
G. The Arbitration Panel shall have the power to award costs, expenses,
and interest to the prevailing Party in an arbitration.
ARTICLE XVI - SERVICE OF SUIT
A. It is agreed that in the event of the failure of the Reinsurer to pay
any amount claimed to be due hereunder or to otherwise perform its
obligations hereunder, the Reinsurer will, at the request of the
Company, submit to the jurisdiction of any court of competent
jurisdiction within the State of New Jersey or such other jurisdiction
within the United States as the Company can select as a forum, and will
comply with all requirements necessary to give such court jurisdiction
and all matters arising hereunder shall be determined in accordance
with the law and practice of such court.
B. Service of process in such suit may be made on the Reinsurer by serving
the Commissioner of Insurance of the State of New Jersey, who shall
forward such process to the Reinsurer in accordance with Article XXI or
at such other address as the Reinsurer shall advise. In any suit
instituted, the Reinsurer will abide by the final decision of such
court.
C. Further, pursuant to any statute of any state, territory, or district
of the United States of America which makes provisions therefore, the
Reinsurer herein hereby designates the superintendent, commissioner or
director of insurance or other officer specified for that purpose in
the statute, or his successor or successors in office, as its true and
lawful attorney upon whom may be served any lawful process in any
action, suit or proceeding instituted by or on behalf of the Company or
any beneficiary hereunder arising out of this Agreement of reinsurance
and hereby designates the above-named person to whom the said office is
authorized to mail such process or a true copy thereof.
D. This Article is not meant to supersede Article XV of this Agreement
or override the obligation of the parties to arbitrate their disputes
in accordance with Article XV.
ARTICLE XVII - ENTIRE AGREEMENT
This Agreement, the Sale Agreement and the Guaranty, and any exhibits to such
agreements, collectively constitute the entire agreement between the Parties
regarding the subject matter hereof and supercede all prior agreements and
understandings, both written and oral and do not confer any rights or remedies
to any other party or any other person.
ARTICLE XVIII - AMENDMENTS AND ALTERATIONS
This Agreement shall not be changed, supplemented, modified, or amended except
by an endorsement/addendum signed by the Parties and attached hereto.
<PAGE>
ARTICLE XIX - NO WAIVER
No forbearance to enforce any provision or right hereunder shall be deemed a
waiver thereof, and no waiver of any breach of any term or covenant herein shall
be construed as a waiver of any other breach of the same, or any other term or
covenant herein.
ARTICLE XX - CONSTRUCTION
This Agreement is the result of arms-length negotiations between the Parties and
has been prepared jointly by the Parties. In applying and interpreting the
provisions of this Agreement, there shall be no presumption that either the
Company or the Reinsurer prepared this Agreement, or that this Agreement shall
be construed in favor of or against either the Company or the Reinsurer.
ARTICLE XXI - NOTICES
Any notice or other communication required or permitted hereunder shall be in
writing and shall be delivered personally, telegraphed, telexed, sent by
facsimile transmission, or sent by certified, registered or express mail,
postage prepaid, to:
If to the Reinsurer, to:
Richard Green,
Vice President
Prudential Property and Casualty Insurance Company
23 Main St., 4th Floor
Holmdel, NJ 07032
Phone: 732-946-5082
Fax: 732-946-5029
with a copy to:
Doreen Faga
President, Gibraltar Operations
The Prudential Insurance Company of America
Eisenhower Corporate Center, Building 3
290 West Mt. Pleasant Avenue
Livingston, NJ 07039
Phone: 973-548-5980
Fax: 973-548-5950
<PAGE>
If to the Company, to:
Janet J. Burak
Senior Vice President and General Counsel
Everest Reinsurance Holdings
477 Martinsville Road
P.O. Box 830
Liberty Corner, NJ 07938
Phone: 908-604-3170
Fax: 908-604-3450
or in each case to such other address as a party may designate for itself by
like notice to the other party.
ARTICLE XXII - GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York.
<PAGE>
IN WITNESS WHEREOF, the Company, by its duly authorized representative, has
executed this Agreement as of the date undermentioned at:
__________, ____________, this ____________ day of _______________________ 2000.
--------------------------------------------------------------------------------
IN WITNESS WHEREOF, the Reinsurer, by its duly authorized representative, has
executed this Agreement as of the date undermentioned at:
__________, ____________, this ____________ day of _______________________ 2000.
<PAGE>
EXHIBIT D
PROPORTIONAL EXCESS OF LOSS REINSURANCE AGREEMENT
(hereinafter referred to as the "Agreement")
between
GIBRALTAR CASUALTY COMPANY, a Delaware Corporation
(hereinafter referred to as the "Company")
and
PRUDENTIAL PROPERTY AND CASUALTY INSURANCE COMPANY, an Indiana Corporation
(hereinafter referred to as the "Reinsurer")
(Both the Company and the Reinsurer collectively are referred
to as the "Parties" and individually as "Party")
WHEREAS, The Prudential Insurance Company of America ("Prudential") is the
ultimate parent of the Reinsurer;
WHEREAS Prudential and Everest Reinsurance Holdings, Inc., a Delaware
corporation ("Holdings"), have executed a Stock Purchase Agreement dated as of
February 24, 2000 ("Sale Agreement") wherein Holdings will purchase from
Prudential all issued and outstanding shares of the Company, a wholly owned
subsidiary of Prudential, effective as of the "Closing Date" set forth in the
Sale Agreement.
WHEREAS, as of the "Closing Date," as this term is defined in the Sale
Agreement, the Company has outstanding "Loss Reserves," as defined in the Sale
Agreement, relating to all Policies, as defined herein, in the amount stated in
the "Closing Date Financial Statement," as defined in the Sale Agreement.
WHEREAS, the Company also has potential adverse Loss Reserves development
("Adverse Loss Development"), as defined herein, and the Company desires
reinsurance coverage for such Adverse Loss Development.
NOW, THEREFORE, in consideration of mutual covenants, representations,
warranties, and agreements contained herein and in the Sale Agreement, the
Parties agree as follows:
<PAGE>
ARTICLE I - CLASSES OF BUSINESS COVERED
A. By this Agreement and subject to the terms and conditions set
forth below, the Reinsurer agrees to indemnify the Company for the
Adverse Loss Development that may accrue to the Company under all
policies, contracts, and binders of insurance or reinsurance
(hereinafter "Policies") issued or renewed by the Company prior to
the Closing Date.
B. Adverse Loss Development is defined as the Company's Ultimate Net
Loss that is in excess of the Loss Reserves carried by the Company
at the Closing Date. Subject to the Reinsurer's Limit of Liability
set forth in Article V hereof, the Reinsurer shall reimburse the
Company for the Adverse Loss Development paid by the Company,
provided that the Company has paid an amount equal to the Loss
Reserves carried by the Company at the Closing Date. Provided,
however, that this Agreement shall not apply to the first four
million dollars ($4,000,000) of any Settlement Concessions on
Gibraltar-Sourced Business, as those terms are defined in the
Quota Share Reinsurance Agreement between the Parties ("Quota
Share Reinsurance Agreement"), in excess of Settlement Concessions
listed on Schedule A to the Quota Share Reinsurance Agreement.
C. "Ultimate Net Loss" is defined as the Company's determination of
the sum or sums (including Loss Adjustment Expenses, as defined
herein) incurred by the Company in settlement of claims and in
satisfaction of judgments rendered on account of such claims under
all Policies, after deduction of all reinsurance and insurance
recoveries and subrogation and salvage recoveries collected and
received by the Company and losses paid prior to the Closing Date.
Nothing herein shall be construed to mean that losses under this
Agreement are not recoverable until the Company's Ultimate Net
Loss has been ascertained. Ultimate Net Loss shall not include
Loss in Excess of Policy Limits or Extra Contractual Obligations
(as defined herein) incurred by the Company.
ARTICLE II - COMMENCEMENT AND TERMINATION
A. This Agreement shall become effective on the Closing Date and
shall continue in force thereafter until two (2) years after the
earlier of when (i) the Company settles all claims under all
Policies, or (ii) the Reinsurer exhausts its Limits of Liability
as set forth in Article V.
B. Neither Party may terminate this Agreement.
ARTICLE III - TERRITORY
The territorial scope of this Agreement shall be identical to that of the
Policies reinsured hereunder.
<PAGE>
ARTICLE IV - CONSIDERATION
The consideration for the reinsurance coverage is deemed paid as of the Closing
Date and, with respect to the Reinsurer, includes, among other things, certain
operational and other assistance (i) previously provided to the Reinsurer, which
is deemed paid as of the Closing Date, and (ii) to be provided to the Reinsurer
in connection with this Agreement, including pursuant to the Keepwell Agreement
between Prudential and the Reinsurer of even date herewith. No further
consideration shall be due to the Reinsurer.
ARTICLE V - REINSURER'S LIMIT OF LIABILITY AND COMPANY'S RETENTION
The Reinsurer shall pay to the Company an 80% quota share interest of the first
two hundred million dollars ($200,000,000) of Adverse Loss Development paid by
the Company, with the Reinsurer's maximum liability under this Agreement limited
to one hundred and sixty million dollars ($160,000,000). The Company may
reinsure its 20% quota share retention in the first two hundred million dollars
($200,000,000) of Adverse Loss Development only with an affiliate within its
insurance holding company system, with `affiliate' and `insurance holding
company system' having the meanings set forth under Section 5001 of the Delaware
Insurance Code. Such reinsurance by the Company of any share of its 20% quota
share retention with an affiliate is permissible only if the assuming affiliate
fully retains and does not further cede or retrocede any share of its assumption
of the 20% quota share retention, except to another affiliate of the Company;
and any affiliate of the Company which assumes some share of the Company's 20%
quota share retention under this provision shall be subject to the same
prohibition on ceding or retroceding any share of the Company's 20% quota share
retention to any person or entity that is not an affiliate of the Company.
ARTICLE VI - LOSS IN EXCESS OF POLICY LIMITS/EXTRA CONTRACTUAL OBLIGATIONS
Ultimate Net Loss shall not include any amounts that the Company pays or is held
liable to pay in excess of its Policy limit, but otherwise within the terms of
its Policy ("Loss in Excess of Policy Limits"), or any punitive, exemplary,
compensatory or consequential damages ("Extra Contractual Obligations"), because
of alleged or actual bad faith or negligence on its part in rejecting a
settlement within Policy limits, or in discharging its duty to defend or prepare
the defense in the trial of an action against its policyholder, or in
discharging its duty to prepare or prosecute an appeal consequent upon such an
action, or in otherwise handling a claim under a Policy.
ARTICLE VII - OTHER REINSURANCE
Subject always to the retention provision set forth in Article V above, on or
after the Closing Date, the Company shall be permitted to obtain other
reinsurance, recoveries under which shall inure solely to the benefit of the
Company and all recoveries under such other reinsurance shall be entirely
disregarded in applying all of the provisions of this Agreement; provided,
however, that the Quota Share Reinsurance Agreement shall inure to the benefit
of this Agreement.
<PAGE>
ARTICLE VIII - LOSS ADJUSTMENT EXPENSES
Loss Adjustment Expenses shall include both allocated and unallocated loss
expenses and shall be included in the Ultimate Net Loss, and are defined as all
expenses of the Company, including expenses for declaratory judgment actions,
monitoring of underlying litigation or claims, and coverage opinions, incurred
by the Company in the settlement, investigation, defense, or adjustment of all
claims under all Policies.
ARTICLE IX - SUBROGATION AND SALVAGE
The Reinsurer shall be credited with subrogation and salvage collected and
received by the Company, less the actual cost, excluding salaries and expenses
of officials and employees of the Company respecting their time spent on
subrogation and salvage recoveries and also excluding sums paid to any attorney
as a retainer in obtaining such reimbursement or making such recovery, on
account of claims and settlements involving the reinsurance coverage hereunder.
Enforcement of subrogation and salvage rights shall be determined solely by the
Company.
ARTICLE X - ORIGINAL CONDITIONS
A. The Reinsurer shall follow the fortunes of the Company for it
Ultimate Net Loss for all loss settlements and shall pay as
paid by the Company.
B. The reinsurance coverage provided under this Agreement shall be
subject to all interpretations, modifications, waivers, and
alterations of the Policies; provided, however, that the
agreements set forth on Exhibit A hereto that are in force as of
the Closing Date shall remain, or shall for purposes of
determining the parties' rights and obligations under this
Agreement be deemed to have remained, in force during the term of
this Agreement and shall not be modified or altered, or shall
for purposes of determining the parties' rights and obligations
under this Agreement be deemed not to have been modified or
altered, during the term of this Agreement, unless otherwise
mutually agreed by the Parties.
C. Nothing herein shall in any manner create any obligations or
establish any rights against the Reinsurer in favor of any third
party or any person not a Party to this Agreement.
ARTICLE XI - REPORTS AND REMITTANCES
A. The first statement of account shall be due to the Reinsurer from
the Company forty-five (45) days after the close of the first
fiscal quarter that includes the Closing Date.
B. Thereafter, the Company shall submit quarterly statements of
account ("quarterly reports") within forty-five (45) days after
the end of each calendar quarter.
<PAGE>
C. Such quarterly reports shall be sent by both facsimile
transmission and United States Postal Service or any other
delivery service used by the Company.
D. Such quarterly reports shall be in the form attached hereto as
Exhibit B, or in any other form mutually agreed by the Parties.
E. Remittances shall be on a "Net Basis," defined as amounts owed
between the Parties under this Agreement.
F. Remittances shall be due to the Company from the Reinsurer within
forty-five (45) days from the date of receipt of the facsimile
transmission of each quarterly report.
G. Failure of a Party to pay amounts owed when due under this
Agreement shall result in imposition on that Party of an interest
penalty equal to the rate of interest announced by Citibank,
N.A. as its prime or base rate as of the due date of any
remittance, calculated on the basis of the actual number of days
elapsed past the due date of any remittance divided by three-
hundred-and-sixty-five (365) days and payment of other losses,
costs, and expenses accrued or incurred by the other Party as a
result of the late payment.
ARTICLE XII - OFFSET
The Company and the Reinsurer shall have the right to offset any balance or
amounts due from one Party to the other under this Agreement.
ARTICLE XIII - ACCESS TO RECORDS
A. The Company shall place at the disposal of the Reinsurer at all
reasonable times, and the Reinsurer will have the right to
inspect, all books, records, and papers of the Company in
connection with any reinsurance coverage hereunder or any claims
in connection herewith.
B. All records reviewed by the Reinsurer are deemed proprietary
and confidential property of the Company. Further, unless pursuant
to the express, written permission of the Company, the Reinsurer
shall not disclose the contents of such information to any other
person, persons, entity, or entities; provided, that the Reinsurer
may disclose such information or portions thereof in connection
with any arbitration hereunder or any legal or regulatory process,
or to its directors, officers and employees and the directors,
officers and employees of its affiliates and to its agents,
representatives, attorneys, accountants, auditors, reinsurers
(collectively, "the Reinsurer's Representatives"), in each case,
who have a legitimate need to know such information (which would
include, but not be limited to the right to dispute and/or assess
in furtherance of a dispute) and who are informed of and agree
to be bound by the confidentiality terms of this Agreement.
The Reinsurer shall indemnify and hold harmless the Company for
all damages resulting from any unauthorized disclosure by the
<PAGE>
Reinsurer or the Reinsurer's Representatives of records obtained
pursuant to this Article. Nothing contained in this Agreement
shall be construed to prevent the Company from applying to a court
of competent jurisdiction for equitable relief including
injunction and specific performance as a remedy if the Reinsurer
or any of the Reinsurer's Representatives breach or threaten to
breach any of the provisions of this Article. Without prejudice to
the rights and remedies otherwise available at law or equity to
the Company, it is understood and agreed that the Company would
be irreparably injured by a breach of this Article, that money
damages would not be a sufficient remedy for any actual or
threatened breach of this Article by the Reinsurer or any of the
Reinsurer's Representatives and that the Company shall (without
proof of actual damages) be entitled to equitable relief. In the
event of litigation relating to this Article, if a court of
competent jurisdiction determines that the Reinsurer or any of the
Reinsurer's Representatives have breached this Article, then the
Reinsurer shall be liable and pay to the Company the reasonable
legal fees incurred by the Company in connection with the subject
litigation, including any appeal therefrom.
ARTICLE XIV - ERRORS AND OMISSIONS
Inadvertent delays, errors or omissions in connection with this Agreement or any
transaction hereunder shall not relieve either Party of any liability which
would have attached had such delay, error or omission not occurred, provided
always that such error or omission is rectified as soon as possible after
discovery.
ARTICLE XV - SECURITY
A. If the Company is or becomes unable to take credit in any financial
statement filed with its domiciliary insurance regulator or with
insurance regulators in New Jersey, California or any other state in
which it currently is approved as a surplus lines insurer (or any
successors to said regulators) for the reinsurance coverage provided
hereunder, or if Prudential's Financial Strength Rating published by
A.M. Best becomes less than "A-," the Reinsurer agrees to fund within
thirty (30) days from receipt of notice from the Company that funding
is required its share of Adverse Loss Development (and to replenish
such funding from time to time as necessary) by:
1. Clean, irrevocable and unconditional letters of credit issued and
confirmed, if confirmation is required by the insurance regulatory
authorities involved, by a qualified United States financial
institution acceptable to said insurance regulatory authorities;
2. cash; and/or
3. a Trust in compliance with the requirements of and acceptable to
said insurance regulatory authorities.
<PAGE>
B. With regard to funding in whole or in part by letters of credit, it is
agreed that each letter of credit will be in a form that would be
acceptable to the Company's domiciliary insurance regulatory authority,
will be issued for a term of at least one year and will include an
"evergreen clause," that automatically extends the term for at least
one additional year at each expiration date unless written notice of
non-renewal is given to the Company not less than 30 days prior to said
expiration date. The Company and the Reinsurer further agree that said
letters of credit may be drawn upon by the Company or its successors in
interest at any time, without diminution because of the insolvency of
the Company or the Reinsurer, but only for one or more of the following
purposes:
1. To reimburse itself for the Reinsurer's share of paid Adverse Loss
Development, unless paid in cash by the Reinsurer;
2. To reimburse itself for the Reinsurer's share of any other amounts
claimed to be due hereunder, unless paid in cash by the Reinsurer;
3. To fund a cash account in an amount equal to the Reinsurer's
share of Adverse Loss Development funded by means of a letter
of credit that is under non-renewal notice, if said letter of
credit has not been renewed or replaced by the Reinsurer 10
days prior to its expiration date;
4. To refund to the Reinsurer any sum in excess of the actual
amount required to fund the Reinsurer's share of Adverse Loss
Development and other amounts claimed to be due hereunder, if
so requested by the Reinsurer.
C. In the event the amount drawn by the Company on any letter of credit is
in excess of the actual amount required for B (1), B (3) or B (4), or
in the case of B (2), the actual amount determined to be due, the
Company shall promptly return to the Reinsurer the excess amount so
drawn.
D. In the event of funding through a Trust:
1. The Reinsurer shall establish a Trust Account for the benefit
of the Company to fund the amounts receivable under the
Agreement in a qualified United States financial institution
reasonably acceptable to the Company and to said insurance
regulatory authorities.
2. The assets deposited into the Trust Account shall be valued
according to their current fair market value and shall consist
only of cash (United States legal tender), certificates of
deposit (issued by a United States bank and payable in United
States legal tender) and investments of the type permitted by
and acceptable to said insurance regulatory authorities or any
combination of the above, provided that such investments are
issued by an institution that is not the parent, subsidiary or
affiliate of either the Reinsurer or the Company;
<PAGE>
3. The Reinsurer, prior to depositing assets with the trustee,
shall execute assignments, endorsements in blank, or transfer
legal title to the trustee of all shares, obligations or any
other assets requiring assignments, in order that the Company,
or the trustee upon the Company's direction, may whenever
necessary negotiate any such assets without consent or
signature from the Reinsurer or any other entity;
4. All settlements of account between the Reinsurer and the Company
shall be in cash or its equivalent;
5. The assets in the trust account may be withdrawn by the
Company at any time, notwithstanding any other provisions in
this Agreement, and shall be utilized by the Company or any
successor by operation of law, including without limitation
any liquidator, rehabilitator, receiver or conservator of the
Company, for the purposes set forth in paragraphs B(1) -B(4)
above.
ARTICLE XVI - INSOLVENCY
In the event of the insolvency of the Company, the reinsurance coverage
hereunder shall be payable directly to the Company or to its liquidator,
receiver, conservator or statutory successor on the basis of the amount of claim
allowed in the insolvency proceeding without diminution by reason of the
inability of the Company to pay all or any part of the claim. It is agreed,
however, that the liquidator, receiver, conservator or statutory successor of
the Company shall give written notice to the Reinsurer of the pendency of a
claim against the Company, indicating the Policy or bond covered hereunder which
claim would involve a possible liability on the part of the Reinsurer, within a
reasonable time after such claim is filed in the conservation or liquidation
proceeding or in the receivership, and that during the pendency of such claim,
the Reinsurer may investigate such claim and interpose, at its own expense, in
the proceeding where such claim is to be adjudicated, any defense or defenses
that it may deem available to the Company or its liquidator, receiver,
conservator or statutory successor. The expense thus incurred by the Reinsurer
shall be chargeable, subject to the approval of the Court, against the Company
as part of the expense of conservation or liquidation to the extent of a pro
rata share of the benefit which may accrue to the Company solely as a result of
the defense undertaken by the Reinsurer.
ARTICLE XVII - ARBITRATION
A. Except with respect to disputes arising solely out of or solely in
connection with Article XIII above (Access to Records), as a condition
precedent to any right of action hereunder, in the event of any dispute
or difference of opinion hereafter arising with respect to this
Agreement, including its formation and validity, it is hereby mutually
agreed that such dispute or difference of opinion shall be submitted to
arbitration.
<PAGE>
B. Except as provided in subsections A. and D. of this Article or with
respect to judicial proceedings instituted in aid of arbitration, this
Article shall constitute a waiver of the Parties' rights to commence an
action in any court of competent jurisdiction in the United States, to
remove an action to a United States District Court, or to seek a
transfer of a case to another court as might otherwise be permitted by
the laws of the United States or of any State or other jurisdiction in
the United States.
C. One Arbiter shall be chosen by the Company, the other by the Reinsurer,
and an Umpire shall be chosen by the two Arbiters before they enter
upon arbitration, all of whom shall be active or retired disinterested
executive officers of United States domiciled insurance or reinsurance
companies. In the event that either Party should fail to choose an
Arbiter within 30 days following a written request by the other Party
to do so, the requesting Party may choose two Arbiters who shall in
turn choose an Umpire before entering upon arbitration. If the two
Arbiters fail to agree upon the selection of an Umpire within 30 days
following their appointment, each Arbiter shall nominate three
candidates within 10 days thereafter, two of whom the other shall
decline, and the decision shall be made by drawing lots.
D. The Arbiters and the Umpire ("the Arbitration Panel") shall consider
this Agreement as an honorable engagement rather than merely as a legal
obligation, and they are relieved of all judicial formalities and may
abstain from following the strict rules of law. The majority decision
of the Arbitration Panel shall be final and binding on both Parties.
Judgment upon the final decision of the Arbitration Panel may be
entered in any court of competent jurisdiction.
E. Except as provided in sub-section G. of this Article, each Party shall
bear the expense of its own Arbiter, and shall jointly and equally bear
with the other the expense of the Umpire and of the arbitration. In the
event that the two Arbiters are chosen by one Party, as above provided,
the expense of the Arbiters, the Umpire and the arbitration shall be
equally divided between the two Parties.
F. Any arbitration pursuant to this Article shall be conducted in New
York, New York unless otherwise agreed by the parties; provided,
however, that the Arbitration Panel may choose to take evidence and/or
convene a hearing in a place other than New York for the convenience of
the parties, the witnesses or the Arbitration Panel.
G. The Arbitration Panel shall have the power to award costs, expenses,
and interest to the prevailing Party in an arbitration.
ARTICLE XVIII - SERVICE OF SUIT
A. It is agreed that in the event of the failure of the Reinsurer to pay
any amount claimed to be due hereunder or to otherwise perform its
obligations hereunder, the Reinsurer will, at the request of the
Company, submit to the jurisdiction of any court of competent
<PAGE>
jurisdiction within the State of New Jersey or such other jurisdiction
within the United States as the Company can select as a forum, and will
comply with all requirements necessary to give such court jurisdiction
and all matters arising hereunder shall be determined in accordance
with the law and practice of such court.
B. Service of process in such suit may be made on the Reinsurer by serving
the Commissioner of Insurance of the State of New Jersey, who shall
forward such process to the Reinsurer in accordance with Article XXIII
or at such other address as the Reinsurer shall advise. In any suit
instituted, the Reinsurer will abide by the final decision of such
court.
C. Further, pursuant to any statute of any state, territory, or district
of the United States of America which makes provisions therefore, the
Reinsurer herein hereby designates the superintendent, commissioner or
director of insurance or other officer specified for that purpose in
the statute, or his successor or successors in office, as its true and
lawful attorney upon whom may be served any lawful process in any
action, suit or proceeding instituted by or on behalf of the Company or
any beneficiary hereunder arising out of this Agreement of reinsurance
and hereby designates the above-named person to whom the said office is
authorized to mail such process or a true copy thereof.
D. This Article is not meant to supersede Article XVII of this Agreement
or override the obligation of the parties to arbitrate their disputes
in accordance with Article XVII.
ARTICLE XIX - ENTIRE AGREEMENT
This Agreement, the Sale Agreement and the Guaranty, and any exhibits to such
agreements, collectively constitute the entire agreement between the Parties
regarding the subject matter hereof and supercede all prior agreements and
understandings, both written and oral and do not confer any rights or remedies
to any other party or any other person.
ARTICLE XX - AMENDMENTS AND ALTERATIONS
This Agreement shall not be changed, supplemented, modified, or amended except
by an endorsement/addendum signed by the Parties and attached hereto.
ARTICLE XXI - NO WAIVER
No forbearance to enforce any provision or right hereunder shall be deemed a
waiver thereof, and no waiver of any breach of any term or covenant herein shall
be construed as a waiver of any other breach of the same, or any other term or
covenant herein.
<PAGE>
ARTICLE XXII - CONSTRUCTION
This Agreement is the result of arms-length negotiations between the Parties and
has been prepared jointly by the Parties. In applying and interpreting the
provisions of this Agreement, there shall be no presumption that either the
Company or the Reinsurer prepared this Agreement, or that this Agreement shall
be construed in favor of or against either the Company or the Reinsurer.
ARTICLE XXIII - NOTICES
Any notice or other communication required or permitted hereunder shall be in
writing and shall be delivered personally, telegraphed, telexed, sent by
facsimile transmission, or sent by certified, registered or express mail,
postage prepaid, to:
If to the Reinsurer, to:
Richard Green,
Vice President
Prudential Property and Casualty Insurance Company
23 Main St., 4th Floor
Holmdel, NJ 07032
Phone: 732-946-5082
Fax: 732-946-5029
with a copy to:
Doreen Faga
President, Gibraltar Operations
The Prudential Insurance Company of America
Eisenhower Corporate Center, Building 3
290 West Mt. Pleasant Avenue
Livingston, NJ 07039
Phone: 973-548-5980
Fax: 973-548-5950
If to the Company, to:
Janet J. Burak
Senior Vice President and General Counsel
Everest Reinsurance Holdings
477 Martinsville Road
P.O. Box 830
Liberty Corner, NJ 07938
Phone: 908-604-3170
Fax: 908-604-3450
<PAGE>
or in each case to such other address as a party may designate for itself by
like notice to the other party.
ARTICLE XXIV - GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York.
IN WITNESS WHEREOF, the Company, by its duly authorized representative, has
executed this Agreement as of the date undermentioned at:
_________, ____________, this ____________ day of ________________________ 2000.
--------------------------------------------------------------------------------
IN WITNESS WHEREOF, the Reinsurer, by its duly authorized representative, has
executed this Agreement as of the date undermentioned at:
_________, ____________, this ____________ day of ________________________ 2000.
<PAGE>
EXHIBIT A
Aggregate Stop Loss Retrocession Agreement between Prudential Reinsurance
Company and Gibraltar Casualty Company (effective 10/6/95)
Quota Share Reinsurance Agreement issued to Gibraltar Casualty Company by
Prudential Reinsurance Company (dated May 1, 1985) (Gibraltar's cession to
Prudential Reinsurance for MUF eligible business)
Direct Excess Quota Share Reinsurance Agreement between Prudential Reinsurance
Company and Gibraltar Casualty Company (effective January 1, 1986)
Quota Share Reinsurance Agreement between Prudential Reinsurance Company and
Gibraltar Casualty Company ("Med Mal") effective 1/1/89
MUF Commutation Agreements between Gibraltar Casualty Company, Prudential
Reinsurance Company and various MUF participants executed between 1985 and 1987,
the "MUF Buybacks"
<PAGE>
EXHIBIT E
GUARANTEE AGREEMENT
BETWEEN
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
("GUARANTOR")
AND
GIBRALTAR CASUALTY COMPANY
("BENEFICIARY")
DATED AS OF _______, 2000
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions........................................................1
Section 2. Guaranty...........................................................2
2.1 Guaranteed Obligations.............................................2
2.2 Nature of Obligations..............................................2
Section 3. Character of Obligations............................................3
3.1 Obligations Not Affected...........................................3
3.2 Waiver by Guarantor................................................3
3.3 Reinstatement......................................................3
Section 4. Rights of Third Parties.............................................4
Section 5. Representations and Warranties.....................................4
5.1 Due Incorporation, etc.............................................4
5.2 Due Authorization..................................................4
5.3 Consents; No Conflicts.............................................4
5.4 Access to Information..............................................5
5.5 Solvency...........................................................5
Section 6. Miscellaneous.......................................................5
6.1 Expenses...........................................................5
6.2 Amendment..........................................................5
6.3 Notices............................................................5
6.4 Waivers............................................................5
6.5 Counterparts.......................................................6
6.6 Successors and Assigns.............................................6
6.7 Further Assurances.................................................6
6.8 Severability.......................................................6
6.9 Entire Understanding...............................................6
6.10 Applicable Law....................................................6
6.11 Headings..........................................................6
6.12 Term..............................................................6
<PAGE>
GUARANTEE AGREEMENT
-------------------
This GUARANTEE AGREEMENT is made as of the ____ day of ______, 2000, by
and between THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey mutual
insurance company ("Guarantor"), and GIBRALTAR CASUALTY COMPANY, a Delaware
corporation (together with its successors and assigns, "Beneficiary").
W I T N E S S E T H:
WHEREAS, Guarantor and Everest Reinsurance Holdings, Inc., a Delaware
corporation ("Everest"), are parties to that certain Stock Purchase Agreement,
dated as of February 24, 2000, as amended by Amendment No. 1 thereto, dated as
of July, 2000, pertaining to the sale by Guarantor of all of the issued and
outstanding shares of capital stock of Beneficiary to Everest (the "Stock
Purchase Agreement");
WHEREAS, it is a condition to the consummation of the transactions
contemplated by the Stock Purchase Agreement that Beneficiary and Prudential
Property and Casualty Insurance Company, an Indiana corporation and an indirect
subsidiary of Guarantor ("Prupac"), enter into, as of the date hereof, a
proportional excess of loss reinsurance agreement and a quota share reinsurance
agreement (collectively, the "Prupac Reinsurance Agreements"); and
WHEREAS, it is a further condition to the consummation of the
transactions contemplated by the Stock Purchase Agreement that Guarantor enter
into this Agreement.
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Guarantor and Beneficiary hereby agree as follows:
Section 1. DEFINITIONS
When used herein, the following terms shall have the following
meanings:
"Guaranteed Agreements" means the Prupac Reinsurance Agreements (as any
of them may be amended from time to time).
"Obligor" means Prupac and its successors and assigns.
Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Stock Purchase Agreement.
<PAGE>
Section 2. GUARANTY
2.1 GUARANTEED OBLIGATIONS. (a) Guarantor hereby irrevocably and
unconditionally guarantees to Beneficiary the prompt payment of all amounts
payable as and when the same shall become due and payable at any time by Obligor
under, and the full and prompt performance by the Obligor of each and every
agreement, covenant, indemnity and obligation of Obligor under and in accordance
with the terms of, the Guaranteed Agreements, in each case however created,
arising or evidenced, whether direct or indirect, primary or secondary, absolute
or contingent, joint or several, and whether now or hereafter existing or due or
to become due.
(b) Guarantor hereby agrees that if for any reason (including, without
limitation, the liquidation, dissolution, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, composition or
readjustment of, or other similar proceedings affecting the status, existence,
assets or obligations of, Obligor) Obligor shall fail fully and promptly to pay
any amount payable at any time under any of the Guaranteed Agreements as and
when the same shall become due and payable, or if Obligor shall fail to perform
and discharge any agreement, covenant, indemnity or obligation of Obligor under
any of the Guaranteed Agreements, then Guarantor (i) in the event of any such
failure to make payment of any amount, shall promptly pay such amount to
Beneficiary and (ii) in the event of any failure to perform and discharge any
such agreement, covenant, indemnity or obligation, shall promptly cause the same
to be performed and discharged.
(c) The amounts payable by (including, without limitation, any
penalties or default amounts), and the agreements, covenants, indemnities and
obligations of, Obligor hereby guaranteed are hereinafter referred to
collectively as the "Guaranteed Obligations" and individually as a "Guaranteed
Obligation."
2.2 NATURE OF OBLIGATIONS. This Agreement shall constitute a guaranty of payment
when due and of performance when due and not of collection, and Guarantor
specifically agrees that it shall not be necessary, and that Guarantor shall not
be entitled to require, before or as a condition of enforcing the liability of
Guarantor under this Agreement or requiring payment or performance of the
Guaranteed Obligations by Guarantor hereunder, or at any time thereafter, that
any Person: (a) file suit or proceed to obtain judgment or assert a claim
against Obligor or any other Person that may be liable for any Guaranteed
Obligation; (b) make any other effort to obtain payment or performance of any
Guaranteed Obligation from Obligor or any other Person that may be liable for
such Guaranteed Obligation; (c) foreclose against or seek to realize upon any
security now or hereafter existing for any Guaranteed Obligation; (d) exercise
or assert any other right or remedy to which such Person is or may be entitled
in connection with any Guaranteed Obligation or any security or other guaranty
therefor; or (e) assert or file any claim against the assets of Obligor or any
other Person liable for any Guaranteed Obligation.
2
<PAGE>
Section 3. CHARACTER OF OBLIGATIONS
3.1 OBLIGATIONS NOT AFFECTED. The obligations of Guarantor pursuant to
Section 2.1 shall be continuing and irrevocable, absolute and unconditional,
primary and original, immediate and not contingent and shall remain in full
force and effect without regard to and shall not be released, discharged or in
any way affected by any circumstance or condition (other than the defense that
the Guaranteed Obligations are not due and payable or required to be performed
and discharged or the defense of payment or performance by Obligor or any other
Person that may be liable for any Guaranteed Obligation). Should any money or
performance due or owing under this Agreement not be recoverable from or
performed by Guarantor due to any reason, then, in any such case, such money or
performance shall nevertheless be recoverable from or performed by Guarantor as
though Guarantor were the principal obligor in respect thereof and not merely a
guarantor and shall be paid or performed by Guarantor forthwith.
3.2 WAIVER BY GUARANTOR. Except as herein otherwise expressly provided
or as may be required by applicable law, Guarantor hereby expressly and
irrevocably waives diligence, demand for payment, filing of claims with any
court, any proceeding to enforce any provision of any of the Guaranteed
Agreements, notice of acceptance of this Agreement, notice of the creation of
any liabilities of Obligor or any other Person, notice of nonpayment of any
Guaranteed Obligation, any right to require a proceeding first against Obligor
or any other Person, whether to marshall any assets or to exhaust any security
for the performance of the obligations of Obligor or any other Person or
otherwise, any diligence in collection or protection of or realization upon any
Guaranteed Obligation, any obligation hereunder or any collateral security for
any of the foregoing, any right of protest, presentment, notice or demand
whatsoever, all claims of waiver, release, surrender, alteration or compromise,
and all defenses (other than the defense that the Guaranteed Obligations are
not due and payable or required to be performed and discharged and the
defense of payment or performance by Obligor or any other Person that may be
liable for any Guaranteed Obligation), set-offs, counterclaims, recoupments,
reductions, limitations, impairments or terminations, whether arising hereunder
or otherwise. Guarantor agrees that no payment made by it or for its account
pursuant to this Agreement shall entitle it, by subrogation, indemnification,
exoneration, contribution, reimbursement or otherwise to any payment by Obligor
or any other Person or from or out of any property of Obligor or any other
Person unless and until all Guaranteed Obligations are fully and finally paid
and performed, and Guarantor hereby expressly waives, to the fullest extent
possible, and shall not exercise, rights or remedies it has or may in the future
have with respect to any of the foregoing unless and until all Guaranteed
Obligations are fully and finally paid and performed.
3.3 REINSTATEMENT. Guarantor agrees that this Agreement shall be
automatically reinstated if and to the extent that for any reason any payment
or performance by or on behalf of Obligor, or any other Person that may have
paid a Guaranteed Obligation, is rescinded or rendered incomplete or must be
otherwise restored by the Beneficiary, whether as a result of any proceedings
in bankruptcy or reorganization or otherwise.
3
<PAGE>
Section 4. RIGHTS OF THIRD PARTIES
This Agreement is made for the benefit of, and shall be enforceable by,
Beneficiary and its successors and assigns to the extent of its interest
hereunder. This Agreement shall not be construed to create any right in any
Person other than Beneficiary and its successors and assigns or to be a contract
in whole or in part for the benefit of any Person other than Beneficiary and its
successors and assigns.
Section 5. REPRESENTATIONS AND WARRANTIES
Guarantor hereby represents and warrants to Beneficiary as set forth in
this Section 5.
5.1 DUE INCORPORATION, ETC. Guarantor is a mutual insurance company
domiciled, validly existing and in good standing under the laws of the State of
New Jersey and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as they are now owned,
leased and operated. Guarantor is licensed or qualified to do business and is
in good standing as a foreign entity in each jurisdiction where (a) the nature
of the properties owned, leased or operated by it or the businesses transacted
by it require such licensing or qualification and (b) the failure to be so
licensed, qualified or in good standing would adversely affect Guarantor's
ability to perform its obligations hereunder or would materially and adversely
affect Guarantor.
5.2 DUE AUTHORIZATION. Guarantor has all requisite corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution,
delivery and performance by Guarantor of this Agreement and the consummation by
Guarantor of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate proceedings and no other corporate
proceedings on the part of Guarantor are necessary to authorize the execution,
delivery and performance by Guarantor of this Agreement or the consummation
of the transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Guarantor and constitutes a legal, valid and
binding obligation of Guarantor, enforceable against Guarantor in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, moratorium or similar laws affecting creditors' rights generally
and except as rights to specific enforcement may be limited by the application
of equitable principles (whether such equitable principles are applied in a
proceeding at law or in equity).
5.3 CONSENTS; NO CONFLICTS. No consent, authorization, order or
approval of, or filing or registration with, any governmental authority,
board or other regulatory authority is required for or in connection with
the execution, delivery and performance by Guarantor of this Agreement and the
consummation of the transactions contemplated hereby, except those already
duly obtained or made. The execution, delivery and performance by Guarantor of
this Agreement and the consummation by Guarantor of the transactions
contemplated hereby do not and will not, with or without the giving of notice or
the passage of time, or both, (a) violate any provision of the Governing
Instruments of Guarantor, (b) violate, result in a breach of or constitute a
4
<PAGE>
default under or give rise to a right of termination or cancellation of, or
accelerate the performance required by any terms of, as the case may be, any
contract, lease, license, mortgage, note, permit or instrument to which
Guarantor is a party or by which any of its assets are bound, (c) violate any
law, regulation, judgment, order, writ, injunction or decree of any court,
governmental body (domestic or foreign) or administrative agency of any
jurisdiction applicable to Guarantor or (d) require the consent or approval of
any third parties; other than, in the case of (b) and (d), such violations,
breaches, defaults, terminations, cancellations and accelerations which would
not, in the aggregate, reasonably be expected to have a Material Adverse Effect
on Guarantor.
5.4 ACCESS TO INFORMATION. Guarantor now has and will continue
to have independent means of obtaining such information concerning the
affairs, financial condition and business of Obligor as Guarantor desires to
obtain. Except as set forth in the Stock Purchase Agreement, no party hereto
shall have any duty or responsibility to provide Guarantor with any credit
or other information concerning the affairs, financial condition or business of
Obligor or other Persons that may come into its possession. Guarantor has
executed this Agreement based solely on its own knowledge and investigation
of Obligor and other Persons and their financial condition.
5.5 SOLVENCY. The execution, delivery and performance by Guarantor
of this Agreement will not render Guarantor insolvent, nor is it being made in
contemplation of Guarantor's insolvency. Guarantor does not have unreasonably
small capital with which to carry on its business.
Section 6. MISCELLANEOUS.
6.1 EXPENSES. Guarantor shall pay to or reimburse Beneficiary for, and
agrees to indemnify and hold harmless Beneficiary from and against, all costs
and expenses, including, without limitation, reasonable attorneys' fees and
disbursements, incurred by Beneficiary in connection with enforcing this
Agreement or any of its rights hereunder. In the event of any litigation
involving Guarantor and Beneficiary in connection with this Agreement, a court
of applicable jurisdiction may award reimbursement of attorneys' fees and
disbursements to either Guarantor or Beneficiary as such court deems
appropriate.
6.2 AMENDMENT. This Agreement may be amended, modified or supplemented
but only in writing signed by Guarantor and Beneficiary.
6.3 NOTICES. Any notice, request, instruction or other document to be
given hereunder by a party hereto or a Beneficiary shall be in writing and shall
be deemed to have been given (a) when received if given in person or by courier
or a courier service, (b) on the date of transmission if sent by telex,
facsimile or other wire transmission (receipt confirmed) or (c) three (3)
business days after being deposited in the mail, certified or registered,
postage prepaid. Notice shall be given as set forth in the Stock Purchase
Agreement.
6.4 WAIVERS. The failure of a party hereto or any Beneficiary at any
time or times to require performance of any provision hereof shall in no manner
affect its right at a later time to enforce the same. No delay in exercising any
5
<PAGE>
right shall operate as a waiver or impair such right. No single or partial
exercise of any right shall preclude any other or further exercise thereof or
the exercise of any other right. No waiver by a party hereto or any Beneficiary
of any condition or of any breach of any term, covenant, representation or
warranty contained in this Agreement shall be effective unless in writing,
and no waiver in any one or more instances shall be deemed to be a further or
continuing waiver of any such condition or breach in other instances or a waiver
of any other condition or breach of any other term, covenant, representation
or warranty.
6.5 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
6.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
Guarantor and its successors and permitted assigns and shall inure to the
benefit of, and may be enforced by, Beneficiary and its successors and assigns;
provided, that no assignment of any of the rights or obligations of Guarantor
under this Agreement shall be made by Guarantor without the prior written
consent of Beneficiary.
6.7 FURTHER ASSURANCES. Guarantor will, at Guarantor's expense, do,
execute, acknowledge and deliver all and every such further acts, deeds,
agreements, instruments and assurances as may be reasonably necessary or
appropriate in order to protect the right, title and interest of Beneficiary
hereunder.
6.8 SEVERABILITY. If any provision of this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality or enforceability of
the other provisions hereof shall not be affected thereby, and there shall
be deemed substituted for the provision at issue a valid, legal and enforceable
provision as similar as possible to the provision at issue.
6.9 ENTIRE UNDERSTANDING. This Agreement, together with the Stock
Purchase Agreement and the Guaranteed Agreements, set forth the entire agreement
and understanding of the parties hereto with respect to the subject matter
hereof and supersede any and all prior agreements, arrangements and
understandings among the parties relating to the subject matter hereof.
6.10 APPLICABLE LAW. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York
without giving effect to the principles of conflicts of law thereof.
6.11 HEADINGS. The headings of Sections have been included herein
for convenience only and shall not constitute a part of this Agreement for any
other purpose. References in this Agreement to Sections are to Sections of
this Agreement unless otherwise indicated.
6.12 TERM. Subject to reinstatement as set forth in Section 3.3, this
Agreement shall be in effect until payment and performance in full of all
Guaranteed Obligations.
* * *
6
<PAGE>
IN WITNESS WHEREOF, the parties have signed this Agreement on the date first
written above.
THE PRUDENTIAL COMPANY OF
AMERICA
By:
Name:
Title:
GIBRALTAR CASUALTY COMPANY
By:
Name:
Title:
7
