-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DMoULBgPa9tT/NcYc4Kcao19tLBzjRffXtQkX5clXV6cx3KQRLJTC6BJCF1wpO+a nPCg0qThf4S5O/zlYBi0Cw== 0001010192-99-000007.txt : 19990118 0001010192-99-000007.hdr.sgml : 19990118 ACCESSION NUMBER: 0001010192-99-000007 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19981231 ITEM INFORMATION: FILED AS OF DATE: 19990115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LOCKHART CARIBBEAN CORP CENTRAL INDEX KEY: 0001041128 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF NONRESIDENTIAL BUILDINGS [6512] IRS NUMBER: 660491618 STATE OF INCORPORATION: VI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 333-35105 FILM NUMBER: 99506824 BUSINESS ADDRESS: STREET 1: #44 ESTATE THOMAS CITY: ST THOMAS US STATE: VI ZIP: 00812 BUSINESS PHONE: 3407761900 MAIL ADDRESS: STREET 1: P O BOX 7020 CITY: ST THOMAS STATE: VI ZIP: 00801 FORMER COMPANY: FORMER CONFORMED NAME: LOCKHART COMPANIES INC DATE OF NAME CHANGE: 19970617 8-K 1 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported): December 31, 1998 LOCKHART CARIBBEAN CORPORATION ----------------------------------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) U.S. Virgin Islands ----------------------------------------------------------------------------- (State or Other Jurisdiction of Incorporation or Organization) 333-35105 65-0491618 ------------- --------------- (Commission File Number) (I.R.S. Employer Identification Number) No. 44 Estate Thomas St. Thomas, U.S. Virgin Islands 00802 -------------------------------- ----------- (Address of Principal Executive Officers) (Zip Code) Registrant's telephone number, including area code (340) 776-1900 --------------------------------------------------------------------------- Item 2. Acquisition or Disposition of Assets. On December 31, 1998, Lockhart Caribbean Corporation (the "Company") completed the acquisition of Guardian Insurance Company, Inc. ("Guardian") and of Heritage Insurance Company (Caribbean), Limited ("Heritage"). The Company issued a press release on January 4, 1999, regarding the acquisition of Guardian and Heritage. A copy of the Company's press release has been filed as Exhibit 99.1 to this report. Guardian is authorized to write personal and commercial lines of insurance in the U.S. Virgin Islands and has offices in St. Thomas and St. Croix. Guardian's primary lines of business include automobile physical damage and automobile liability coverage. The Company acquired all of Guardian's outstanding common stock for 467,997 shares of the Company's Class A common stock. Of the 467,997 shares, 184,931 shares have been transferred to the sellers on the Company's books and 283,066 shares are subject to transfer pending resolution of certain unresolved claims related to Hurricane Marilyn in September, 1995. The Guardian stock purchase agreement also provides that, if the Company issues shares of its Class A common stock for a price less than $6.50 per share at any time prior to January 1, 2000, the number of shares of Class A common stock issued in connection with the Guardian acquisition will be proportionally increased. In addition, the sellers have the right to require that the Company redeem the shares issued in this transaction at a price of $8.30 per share for a 180-day period commencing on December 31, 2001. Guardian now operates as an indirect wholly-owned subsidiary of the Company. Heritage is organized under the laws of the British Virgin Islands as a property and casualty insurer authorized to originate risks located in the British Virgin Islands, the Turks and Caicos Islands, and Anguilla, West Indies. Heritage has offices in the British Virgin Islands and the Turks and Caicos Islands. The Company acquired all of Heritage's outstanding common stock for approximately $1.25 million. The Company paid $125,000 in cash at closing and issued a note payable for $1.125 million. The note is due on March 31, 1999, and it bears interest at the prime rate published in the Wall Street Journal. The note is also secured by the stock of Guardian and Heritage. The Company expects to repay the note with bank borrowings. Heritage now operates as an indirect wholly-owned subsidiary of the Company. All of the employees of both Guardian and Heritage (27 in the aggregate) are now employees of the Company. In addition, Raymond L. Fournier, President of both Guardian and Heritage, now serves as a member of the Company's Board of Directors. Item 7. Financial Statements and Exhibits. (a) Financial statements of business acquired. It is impracticable to provide financial statements at this time. In accordance with Item 7(a)(4), the Company will file the required financial statements as an amendment to this Form 8-K as soon as practicable, but not later than. (b) Pro forma financial information. It is impracticable to provide pro forma financial statements at this time. In accordance with Item 7(a)(4), the Company will file the required financial statements as an amendment to this Form 8-K as soon as practicable, but not later than March 15, 1999. (c) Exhibits. 10.1 Stock Purchase Agreement, dated as of July 31, 1998 (the "Guardian Purchase Agreement"), by and between Unlimited Holdings, Inc., Lockhart Caribbean Corporation and Guardian Insurance Company, Inc. 10.2 First Addendum to the Guardian Purchase Agreement, dated as of December 31, 1998. 10.3 Stock Purchase Agreement, dated as of July 31, 1998 (the "Heritage Purchase Agreement"), by and between Walter R. Fournier, as Trustee of the Fournier Ruiz Trust, and Alba E. Del Valle, as trustee of the Fournier Del Valle Trust, Lockhart Caribbean Corporation and Heritage Insurance Company (Caribbean), Limited. 10.4 First Amendment to the Heritage Purchase Agreement, dated as of December 31, 1998. 99.1 January 4, 1999 Press Release SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: January 15, 1999 LOCKHART CARIBBEAN CORPORATION By: /s/John P. deJongh, Jr. ---------------------------- John P. deJongh, Jr. President and Chief Operating Officer LOCKHART CARIBBEAN CORPORATION Index to Exhibits to Form 8-K dated March 31, 1998 Exhibit Description - -------- --------------- 10.1 Stock Purchase Agreement, dated as of July 31, 1998 (the "Guardian Purchase Agreement"), by and between Unlimited Holdings, Inc., Lockhart Caribbean Corporation and Guardian Insurance Company, Inc. 10.2 First Addendum to the Guardian Purchase Agreement, dated as of December 31, 1998. 10.3 Stock Purchase Agreement, dated as of July 31, 1998 (the "Heritage Purchase Agreement"), by and between Walter R. Fournier, as Trustee of the Fournier Ruiz Trust, and Alba E. Del Valle, as trustee of the Fournier Del Valle Trust, Lockhart Caribbean Corporation and Heritage Insurance Company (Caribbean), Limited. 10.4 First Amendment to the Heritage Purchase Agreement, dated as of December 31, 1998. 99.1 January 4, 1999 Press Release EX-10.1 2 EXHIBIT 10.1 Exhibit 10.1 STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT dated as of July 31, 1998 by and between UNLIMITED HOLDINGS, INC. (hereinafter referred to as "Seller"), LOCKHART CARIBBEAN CORPORATION (hereinafter referred to as "Buyer") and GUARDIAN INSURANCE COMPANY, INC. (hereinafter referred to as the "Corporation"). WITNESSETH: IN CONSIDERATION of the promises and mutual covenants herein contained, the parties hereto, intending to be legally bound, agree as follows: 1. SUPERSEDING EFFECT This Stock Purchase Agreement (the "Agreement") supersedes all oral or written agreements between the parties and constitutes the entire agreement between the parties, except for paragraphs 6, 7 and 8 of a Preliminary Acquisition Agreement dated June 4, 1998 between the parties hereto respecting this transaction (the "Preliminary Acquisition Agreement"). 2. STOCK TO BE PURCHASED The Buyer shall purchase from the Seller all the issued and outstanding capital stock of the Corporation, consisting of Fifteen Thousand Five Hundred Fifty-Six (15,556) shares of common stock (the "Corporation's Stock"), thus transferring every asset reflected on the Corporation's financial statements and all other off-balance sheet assets, including all of the Corporation's right, title and interest in and to all tangible and intangible assets of the Corporation excluding only such assets as are set forth in Exhibit "A", entitled "Non-Transferred Assets of the Corporation", dated July 31, 1998. Notwithstanding anything to the contrary in this agreement, Buyer shall not assume any liabilities or obligations of the Corporation not disclosed in the Corporation's unaudited financial statements for the quarter ending June 30, 1998, or specifically assumed and provided for in this Agreement. 3. ACQUISITION PRICE The total purchase price for the Corporation's Stock will be equal to 1.5 times the Net Aggregate Stated Capital and Surplus (as hereinafter defined) as appearing on the Closing Financial Statements (as hereinafter defined), subject to adjustment as stated in Subsections 3A and 3B (the "Acquisition Price"). The "Closing Financial Statements" means those financial statements to be provided by Seller to Buyer, as set forth in Subsection 6Q , consisting of a statement of profit and loss of the Corporation for the period from January 1, 1997 ending December 31, 1997, and a balance sheet for the Corporation as at December 31, 1997, provided that the Closing (as hereinafter defined) shall occur on or before October 31, 1998. Said Closing Financial Statements shall be certified by a certified public accountant satisfactory to Buyer and shall contain an unqualified expression of opinion that, after an audit conducted by said accountant in accordance with generally accepted auditing standards, the financial statements have been prepared in accordance with generally accepted accounting principles consistently applied. A. Eagle Star Account Receivable In determining the Acquisition Price, the aggregate stated capital and surplus appearing on the Closing Financial Statements shall be reduced by the amount stated on said statements as the value of the Eagle Star account receivable (the "Eagle Star Adjustment"). B. Marilyn Claims Adjustment In determining the Acquisition Price, the aggregate stated capital and surplus appearing on the Closing Financial Statements shall be reduced further (the "Marilyn Claims Adjustment") by an amount equal to the reserve (the "Marilyn Claims Reserve") established by agreement of the parties to fund payment of the pending disputed insurance claims (including litigation costs and expenses) that arose out of casualty losses that occurred during Hurricane Marilyn (a list of said claims are attached hereto as Exhibit "B"). After Closing, during the pendency of the Marilyn Claims Reserve, to the extent that the Corporation shall be able to off-set future net revenues against the net loss carryforward appearing on the Closing Financial Statements, the Marilyn Claims Reserve shall be reduced by an amount equal to each such off-set and the Seller shall receive additional Acquisition Shares (as hereafter defined) determined as provided in Section 3 on the basis of the value of each such off-set. The balance of the aggregate stated capital and surplus appearing on the Closing Financial Statements remaining after the Eagle Star Adjustment and the Marilyn Claims Adjustment is referred to herein as the "Net Aggregate Stated Capital and Surplus." C. Further Adjustment. The Acquisition Price may be reduced further with the consent of the Seller, based on developments or events that have a materially adverse effect on the Corporation or its Business prior to Closing. 4. PAYMENT The Acquisition Price shall be paid by delivery to Seller at Closing of such number of shares of Class A Common Stock of Buyer valued at $6.50 per share as are necessary to equal the Acquisition Price (the "Acquisition Shares"); provided, however, that in the event Buyer issues Class A Common Stock of Buyer for a price less than $6.50 per share at any time prior to January 1, 2000, the number of Acquisition Shares shall be proportionately increased and provided, further, that Seller shall have the right for a 180-day period commencing three (3) years from the Closing, to require Buyer to redeem from Seller the Acquisition Shares at a price of $8.30 per share (prorated by any subsequent increase in the number of shares delivered to Seller resulting from a reduction in the issue price per share below $6.50). Seller acknowledges that (i) Buyer is in the process of becoming a publicly held company under the Securities Act of 1933, as amended (the "Securities Act"), and as such the Acquisition Shares held by Seller will be subject to the provisions of Rule 144 of the Securities Act regarding the disposal of such shares to third parties; and (ii) the Class A Common Stock currently is not listed or traded on any stock exchange or other quotation system, and there can be no assurance that the initial public offering will be completed or that an active public market for Buyer's Class A Common Stock will develop or be sustained in the event of a successful completion of the initial public offering. 5. CLOSING The Closing of the transaction contemplated by the Agreement shall occur in accordance with the following (the "Closing"): A. Place The Closing shall take place at the offices of Dudley, Topper and Feuerzeig, 1A Frederiksberg Gade, St. Thomas, U.S. Virgin Islands. The Closing date will be scheduled within thirty (30) days of (i) completion of due diligence to the satisfaction of Buyer and (ii) the receipt of regulatory consents from applicable governmental authorities, including the specific approval of this transaction by the insurance regulatory authorities for the U.S. Virgin Islands (the "Closing Date"); provided, however, that the Closing shall in all events be held by no later than October 31, 1998. If for any reason the Closing shall not take place on or before October 31, 1998, and the deadline date has not been extended by mutual agreement, by written notice to the other party, either party may cancel the transaction after any such deadline date and neither party shall have any further obligation to the other. B. Deliveries and Payment (1) At the Closing the Seller shall deliver to the Buyer (or to a designated wholly-owned subsidiary of the Buyer) those items set forth in Section 6, and Buyer shall deliver to Seller the Acquisition Shares as set forth in Section 4. (2) At the Closing the Seller shall deliver to the Buyer (or to a designated wholly-owned subsidiary of the Buyer) a certificate signed by the President and Secretary of the Corporation and guaranteed by the Seller to the effect that there has been no material adverse change in the financial condition or business of the Corporation as of the Closing Date. C. Memorandum of Closing On the Closing Date, the parties shall execute a Memorandum of Closing which shall state the events that occurred at the Closing. All transactions at the Closing shall be considered to take place simultaneously. No delivery shall be considered to be made until all transactions are completed. 6. DOCUMENTS TO BE DELIVERED BY SELLER AT CLOSING The originals of all documents set forth below shall be delivered by the Seller or the Corporation to Buyer (or to a designated wholly-owned subsidiary of the Buyer) at the Closing except for items B, C, D, G, H, K, O and Q, which shall be provided at least ten (10) business days before the Closing: A. The Corporation Stock Certificates, free and clear of all encumbrances, fully paid, non-assessable, and duly endorsed in blank. B. All leases to which the Corporation is a party, together with the written consent of any landlord as may be required under such leases. C. The Corporation's license(s) to do business in the jurisdictions in which it operates. D. Broker/Agent Agreements to which the Corporation is a party. E Contracts requiring performance after the Closing and contracts with warranties which shall remain in effect after the Closing. F. Warranties on the Corporation's equipment assets. G. Opinion letter of the Corporation's and Seller's counsel, as described in Section 13 and Section 14 hereof. H. Certificates of good standing of the Seller and of the Corporation (and of any subsidiaries thereof) certified by the Office of the Lieutenant Governor of the Virgin Islands or any other appropriate official, as of no more than four weeks prior to the Closing Date. I. Resignations of all present directors and officers of the Corporation effective on the Closing Date. J. Minute book(s), stock transfer book(s), stock certificate book and corporate seal(s) of the Corporation. K. Noncompetition Agreements as described in Section 11 of this Agreement. L. Documentation that the Corporation's insurance contract forms have been filed and approved pursuant to 22 V.I.C. ss.810. M. Resolutions of the Board of Directors of Seller unanimously approving the sale of the stock and unanimously approving the guaranty and indemnities given to Buyer by Seller as set forth in Subsection 5B(2) and Section 15 hereof. N. Written approval of the sale of the Corporation by the Shareholders of Seller. O. Annual reports filed by the Corporation under 22 V.I.C.ss.222 and 22 V.I.C.ss.602. P. A paid receipt from the law firm of Hodge & Francois, indicating that all attorney's fees, costs and expenses incurred by the Corporation in the pursuit of the Eagle Star Claim have been paid in full, through the month immediately preceding Closing. Q. The Closing Financial Statements (as defined in Section 3). These shall be provided to Buyer as soon as they are available. R. The certificate specified in Subsection 5B(2) above. S. Any other instruments and documents which are required to fulfill the obligations of the Seller under this Contract. 7. CONDITIONS TO THE OBLIGATIONS OF THE BUYER The obligations of Buyer to proceed with the Closing are subject to the satisfaction on or before the Closing Date of all of the following conditions: A. Seller shall have complied with each of its covenants and agreements contained herein, and each of Seller's representations and warranties contained in Section 9 shall be true on and as of the Closing Date. B. Delivery of the items required to be delivered by Seller pursuant to Section 6. C. Approval by the insurance authorities for the U.S. Virgin Islands and by any other regulatory authority as may be required for the lawful transfer of ownership or control of the Corporation by any jurisdiction in which the Corporation does business. D. Completion of due diligence to the reasonable satisfaction of Buyer in accordance with the terms of Section 20 of this Agreement. E. No material adverse change in the financial condition of the Corporation from that stated in the Closing Financial Statements, or in the relationships with the insurance agents or reinsurers with whom the Corporation does business. F. No material change in the conduct of the Corporation's business pending Closing, in accordance with the terms of Section 18 of this Agreement. G. The Corporation and Seller shall have entered into an agreement satisfactory to the Buyer modifying the rent provisions of the lease agreement for the Corporation's occupancy of its offices in the Guardian Building located at 14A Estate Thomas, St. Thomas, V.I., to take effet not later than thirty (30) months from the Closing Date. 8. CONDITIONS TO OBLIGATIONS OF SELLER AND THE CORPORATION. The conditions of Seller and the Corporation to proceed with the Closing are subject to the satisfaction on or before the Closing Date of all of the following conditions. A. Buyer shall have complied with each of its covenants and agreements contained herein and each of Buyer's representations and warranties contained in Section 10 of this Agreement shall be true on and as of the Closing Date. B. Delivery of the items required to be delivered by Buyer pursuant to Section 5B of the Agreement. C. Approval by the insurance authorities for the U.S. Virgin Islands and by any other regulatory authority as may be required for the lawful transfer of ownership or control of the Corporation by any jurisdiction in which the Corporation does business. D. Buyer shall have executed the employment agreements with Raymond Fournier and Octavio Estrada as provided in Section 19B of this Agreement. E. Buyer and/or the Corporation shall have executed an agreement satisfactory to Seller assigning to Seller the RMS and the Eagle Star Claims as provided in Sections 32A and B of this Agreement. F. Buyer shall have delivered to Seller a resolution of the Board of Directors of Buyer approving the purchase of the Corporation's Stock, the issuance and delivery of the Acquisition Shares and the execution and delivery of any other documents required to be delivered by Buyer under this Agreement. G. Buyer shall have simultaneously closed the transaction pursuant to which it acquires the shares of stock of Heritage Insurance Company (Carribean), Ltd. from the Fournier-Ruiz Trust and the Fournier-del Valle Trust pursuant to the terms of a stock purchase agreement of even date executed by and between the Buyer and said trusts. 9. REPRESENTATIONS OF CORPORATION AND SELLER The Corporation and Seller warrant and represent as follows, which representations shall survive the Closing for five (5) years except those dealing with taxes that will survive for the applicable statute of limitations period: A. Right to Sell Seller and the Corporation have the full power and right to execute this Contract and Seller has the full right and power to sell the Corporation's Stock. The Seller and the Corporation will present directors' resolutions approving the sale of the Corporation's Stock, certificates of good standing, certificates of incumbency as to officers and directors and any other corporate documentation reasonably requested by Buyer. B. Stock Ownership Seller is the owner, free and clear of any lien or encumbrance, of the Corporation's Stock. Said Corporation Stock constitutes all of the issued and outstanding shares of the Corporation. The Seller has not issued or granted any options or other rights to purchase the Corporation's Stock; neither is there any contract or other obligation on the part of the Seller or the Corporation to issue any stock of the Corporation to any third party. C. Capitalization The entire authorized capital stock of the Corporation consists of fifty thousand (50,000) shares of common stock, of which presently fifteen thousand five hundred fifty-six (15,556) are issued and outstanding, fully paid and non-assessable. D. Subsidiaries, Cross-Guarantees and Inter-Company Transfers The Corporation does not have any subsidiaries. The Corporation has not guaranteed or agreed to guarantee any debts of its shareholders, or of any of its officers, directors or employees, or any other person or entity whatsoever. There are no accounts receivable or transfers between the Seller or affiliates of the Seller (including any related corporation or director, officer or employee of Seller) and the Corporation that are being questioned from an accounting standpoint or by any regulatory body. Notwithstanding the foregoing, the parties acknowledge that accounts receivables due from Unlimited Holdings in the amount of Four Thousand Dollars ($4,000.00) and Heritage Holdings in the amount of One Hundred Thirty-Five Thousand ($135,000.00) appearing on the Closing Financial Statements shall, in consideration of the results of operations subsequent to December 31, 1997, be deemed settled at Closing. E. Organization and Standing of the Corporation and the Seller (1) The Corporation is a corporation duly organized, validly existing and in good standing under the laws of the U.S. Virgin Islands. A copy of the Corporation's Articles of Incorporation and all amendments thereto as of the date of this Agreement, duly certified by the Office of the Lieutenant Governor, is attached hereto as Exhibit "C". A copy of the Corporation's By-Laws, certified by the Corporation's Secretary, and all amendments thereto as of the date of this Agreement is attached hereto as Exhibit "D". Said copies of the Articles of Incorporation and the Bylaws are complete and correct as of the date of this Agreement. The Corporation is qualified to do business and is doing business in the United States Virgin Islands and the British Virgin Islands, and is qualified to operate and is in good standing in the U.S. Virgin Islands, the British Virgin Islands and any other jurisdiction in which the nature of the business conducted by it and the property owned by it makes such qualification necessary. (2) The Seller is a corporation duly organized, validly existing and in good standing under the laws of the U.S. Virgin Islands. The execution of this Agreement and Seller's performance thereunder has been duly authorized under the terms of its corporate charter and governing documents and the Closing shall not result in the breach of any contract or other obligation by which the Seller is bound. F. Title The Corporation is the owner of and has good and marketable title, free from any and all encumbrances, to all assets of the Corporation except as set forth in Exhibit "E", entitled "Encumbered Assets of the Corporation", dated July 31, 1998. G. Financial Statements The financial statements referenced in Subsections 9G (1) and (2) below which have been delivered to Buyer and attached hereto as Exhibit "F", together with the Closing Financial Statements (as defined in Section 3), once they are delivered to Buyer in accordance with Subsection 6Q, (the "Financial Statements") accurately set forth the results of operations of the Corporation for the applicable periods, and such balance sheets present a true and complete statement of the financial condition, assets and liabilities of the Corporation for the applicable periods. There has not been any material adverse change in the financial condition of the Corporation from that stated in the Financial Statements, or in the relationships with the insurance agents or reinsurers with whom the Corporation does business. The foregoing notwithstanding, the parties acknowledge the sale of the Corporation portfolio held by C.E. Brathwaite & Associates, Inc. to Marshall & Sterling, Inc. and, further, the pending negotiations by the Corporation for the acquisition of the insurance portfolio owned by J.C. Morton and Associates, Inc. (1) Statements of profit and loss of the Corporation for the calendar years 1995 through 1997, inclusive, and balance sheets for the Corporation as of December 31 for each of said three (3) years were certified by Price Waterhouse, LLP, a certified public accountant and contain an unqualified expression of opinion that said statements have been prepared in accordance with generally accepted accounting principles consistently applied; and (2) A statement of profit and loss of the Corporation for the calendar quarter ending June 30, 1998, unaudited and verified by the Corporation's President and Treasurer; (3) In the event that Buyer determines that it is required to provide financial statements of the Corporation in order to comply with federal or state securities law requirements, Seller shall provide, or shall cause the Corporation to provide, to Buyer audited financial statements (including a balance sheet and statements of income and cash flows) for the Corporation for the Corporation's most recent fiscal year and unaudited financial statements for all interim periods specified in Rules 3-01 and 3-02 of Regulation S-X promulgated by the Securities and Exchange Commission (the "SEC"). In addition, Sellers shall direct, or shall cause the Corporation to direct, the Corporation's independent certified public accountants to cooperate with the Buyer for purposes of developing and compiling the financial information desired by Buyer in order to comply with federal or state securities law requirements. H. Compliance with Laws To the best of Seller's knowledge and belief, the Corporation has complied with all federal, state, territorial and other local laws, rules and regulations applicable in the jurisdictions in which it operates and has the following licenses: Certificate of Authority dated_____________ issued by the Lieutenant Governor of the Virgin Islands with an expiration date of December 31, 1998 authorizing the Corporation to engage in the business of an insurance company pursuant to Title 22 of the Virgin Islands Code, and specific authority to write automobile insurance. I. Contracts to Sell or Mortgage Assets or Stock Other than as set forth in the Preliminary Acquisition Agreement, neither the Corporation nor the Seller has entered into any contract to sell, assign, pledge or mortgage all or any part of the Corporation's Stock or its assets or Seller's interest in either. J. Contracts (1) All contracts material to the operation of the business of the Corporation -- a full and complete list of which is attached hereto as Exhibit "F.1" -- are in good standing, valid and binding on the parties thereto, free of material default by any party thereto, and will continue to be the valid and binding obligation of the parties thereto in accordance with their respective terms after Closing; (2) prior to the Closing Date Seller shall have caused the Corporation to deliver to Buyer correct and complete copies of all material contracts; and (3) to the extent that the transaction contemplated by this Agreement shall constitute an assignment of any material contract, which shall require the consent of any party to such contract, such consent shall have been obtained in writing on or before the Closing Date. K. Taxes The Corporation shall not on the Closing Date be in default for payment of federal, state, territorial or other local taxes including withholding, insurance premium, gross receipts, personal or real property, sales, use, social security and unemployment taxes, fees and obligations. L. Litigation (1) Except as set forth in Exhibit "G" attached hereto, there are no suits, claims, consent decrees or other proceedings in law or equity pending, nor are there regulatory proceedings of any kind pending, or threatened against the Corporation or, with respect to the Corporation's Stock, against the Seller. (2) Except as set forth in Exhibit "G" attached hereto, there are no suits, claims consent decrees or other proceedings in law or equity pending or contemplated in which the Corporation or, with respect to the Corporation's Stock, in which the Seller is plaintiff or petitioner. M. Judgments There is not now nor shall there be at the time of Closing any judgments, liens or other encumbrances outstanding against the Corporation generally, or, with respect to the Corporation's Stock, against the Seller. N. Investigations We are not aware of any pending or anticipated federal, state, territorial or local investigations with respect to the Corporation generally, or, with respect to the Corporation's Stock, the Seller, including investigations by regulatory officials by regulatory officials, except for the 1993 and 1994 audits being performed by the Division of Banking and Insurance, which are still pending final report. O. Power of Attorney Neither Seller nor the Corporation have a power of attorney outstanding with respect to Corporation's Stock or the Corporation's business. P. Directors, Officers and Bank Accounts The Corporation has delivered to the Buyer a true and complete list, attached hereto as Exhibit "H" as of the date of this Agreement, certified by an authorized officer of the Corporation, setting forth the following: (1) The names and addresses of all the Corporation's directors and officers; and (2) The name, address and account number of each bank in which the Corporation has an account or safe deposit box and the names and addresses of all persons authorized to draw thereon or to have access thereto. Q. Government and Other Consents Other than the approval of the Lieutenant Governor of the U.S. Virgin Islands, no consent, authorization, license, permit, registration or approval of, or exemption or other action by, any governmental or public body, commission or authority is required in connection with (a) the execution, delivery and performance by the Corporation or Seller of this Agreement, and (b) the sale and delivery of the Corporation's Stock. R. Maintain Business as a Going Concern The Seller and the Corporation will use their best efforts to maintain the Corporation as a going concern operating in its normal course of business as a licensed Virgin Islands insurance company . S. Minute Books The minute books of the Corporation accurately reflect all material corporate action of its shareholders and Board of Directors. T. Disclosures The Buyer has been informed of all matters concerning or relating to the Corporation or its affairs, assets, and business which are or could be deemed material to making an informed judgment as to whether to enter into and, at Closing, to consummate this Agreement. U. Employee Benefit Plans Except as set forth in Exhibit I the Corporation is not bound by or liable under any "employee benefit plan" or "pension plan" as such terms are defined in the Employment Retirement Income Security Act of 1974 ("ERISA"), as amended. In addition, any such plan by which the Corporation is bound is (i) fully funded , (ii) current in all respects, and (iii) qualified under ERISA and the United States Internal Revenue Code of 1984, as amended. V. Business Records The books and records of the Corporation, including but not limited to all of the books and records made available to Buyer for inspection during the course of its due diligence investigation pursuant to Section 20 of this Agreement, are maintained at the Corporation's principal place of business located at Guardian Insurance Company, Guardian Building, 14A Estate Thomas, P.O. Box 9109, St. Thomas, Virgin Islands 00801, and are intact, complete, true and accurate. W. Year 2000 Compliance The status of the Corporation's software and related hardware used in connection with the Corporation's business with respect to their ability to handle date information before, during, and after January 1, 2000, including, but not limited to accepting date-sensitive input, performing date- sensitive calculations, and providing date-sensitive output is reflected in the letter attached hereto as Exhibit K. 10. REPRESENTATION OF BUYER Buyer warrants and represents as follows, which representations shall Survive the Closing for a period of five (5) years: A. Right to Buy Buyer has the full power and right to execute this Agreement and has the full right and power to acquire the Corporation's Stock and to issue the Acquisition Shares provided herein. Buyer will present directors' resolutions approving the purchase of the Corporation's Stock and any other corporate documentation reasonably requested by Seller. B. Organization and Standing of the Buyer Buyer is a corporation duly organized, validly existing and in good standing under the laws of the U.S. Virgin Islands. The execution of this Agreement and Buyer's performance thereunder has been duly authorized under the terms of its corporate charter and governing documents and the Closing shall not result in the breach of any contract or other obligations by which the Buyer is bound. 11. COVENANT NOT TO COMPETE A. At Closing the Seller shall cause Walter R. Fournier, Raymond L. Fournier, Octavio Estrada and W. Ricardo Fournier to enter into the appropriate covenants not to compete with the Corporation, which covenants not to compete shall provide that the individual executing said agreement will not directly or indirectly, either as an employee, partner, stockholder, officer, director, proprietor, owner or otherwise, engage or become interested financially or otherwise in any business in competition with the Corporation for five (5) years in jurisdictions in which the Corporation is licensed or qualified or otherwise conducts the business of insurance, specifically excepting, however, from the scope of the agreement the Commonwealth of Puerto Rico. B. If the Buyer sells the Corporation, its stock or all of its assets, the Buyer shall have the right to assign the covenants set forth above. The individuals executing said covenants shall remain bound by the terms of said covenants to any and all subsequent purchasers of the Corporation, its stock or all of its assets. 12. DAMAGE OR DESTRUCTION OF CORPORATION'S ASSETS A. The Corporation shall maintain its assets in the condition as they existed at the time of Buyer's inspection, ordinary wear and tear excepted. B. However, if the Corporation's assets are damaged or destroyed, to the extent of Twenty Percent (20%) or more of the value of such assets as set forth in the Closing Financial Statements, or the Corporation loses insurance accounts to the extent of Fifty Percent (50%) or more of such accounts prior to Closing, Buyer's sole remedy shall be the right to terminate this Agreement without any liability on either Buyer or Seller. 13. OPINION OF CORPORATION'S COUNSEL On the Closing Date, the Corporation shall deliver an opinion of the Corporation's counsel dated the Closing Date, which shall opine that: A. The Corporation's existence, good standing and authorized and issued stock are as stated in Section 9. B. This Agreement has been duly and validly authorized, executed and delivered by the Corporation and constitutes the valid, binding and enforceable obligation of the Corporation. C. The Corporation has good and marketable title to all of its property and assets covered by this Agreement. D. Counsel does not know or have reasonable cause to know of any claim, litigation, administrative proceeding, regulatory proceeding or governmental investigation pending or threatened against the Corporation or its assets other than those disclosed on Exhibits B and G. 14. OPINION OF THE SELLER'S COUNSEL On the Closing Date, the Seller shall deliver an opinion of the Seller's counsel dated the Closing Date, which shall opine that: A. The Seller's existence and good standing are as stated in Section 9. B. This Agreement has been duly and validly authorized, executed and delivered by the Seller, and constitutes the valid, binding and enforceable obligation of the Seller. 15 INDEMNIFICATION BY THE PARTIES A. Indemnification by Seller The Seller hereby agrees to indemnify and hold the Buyer and its successors and assigns harmless in respect of any and all liabilities and expenses (including, without limitation, settlement costs and legal, accounting, and other expenses in connection therewith) incurred by the Buyer and its successors and assigns in connection with any breach of the representations and warranties by Seller set forth in Section 9, of this Agreement, notice of which have been received by Seller within a period of three (3) years from the Closing date. These provisions shall survive the Closing. B. Indemnification by Buyer Buyer hereby agrees to indemnify and hold the Seller and its successors and assigns harmless in respect of any and all liabilities and expenses (including, without limitation settlement costs and legal, accounting and other expenses in connection therewith) incurred by the Seller and its successors and assigns in connection with any breach of the representations and warranties of Buyer set forth in Section 10 of this Agreement, notice of which have been received by Buyer within a period of three (3) years from the Closing Date. These provisions shall survive the Closing. C. Procedure for Indemnification (i) The party claiming indemnification (the "Claimant"), shall give reasonably prompt notice to the party from whom identification is claimed (the "Indemnifying Party") of any claim whether between the parties or brought by a third party, specifying: (a) the factual basis for such claim and (b) the amount of the claim. If the claim relates to an action, suit or proceeding filed by a third party against Claimant, such notice shall be given by Claimant within ten (10) days after written notice of such action, suit or proceeding is received by Claimant. (ii) Following receipt of notice from the Claimant of a claim, the Indemnifying Party shall have 20 days (or such shorter period of time as it required to respond to the subject litigation or proceeding) to make such investigation of the claim as the Indemnifying Party deems necessary or desirable. For the purposes of such investigation, the Claimant agrees to make available to the Indemnifying Party or its authorized representative(s) the information relied upon the Claimant to substantiate the claim. If the Claimant and the Indemnifying Party agree at or prior to the expiration of said 20-day period (or any mutually agreed upon extension thereof) to the validity and amount of such claim, the Indemnifying Party shall immediately pay tot he Claimant the full amount of the claim. If the Claimant and the Indemnifying Party do not agree, the parties shall use their reasonable efforts to negotiate a resolution of such dispute within said period (or any mutually agreed upon extension thereof.) If the parties fail to agree within said period (or any mutually agreed upon extension thereof), the Claimant may seek appropriate legal remedy. (v) With respect to any claim by a third party as to which the Claimant is entitled to indemnification hereunder, the Indemnifying Party shall have the right at its own expense, to participate in or assume control of the defense of such claim, and the Claimant shall cooperate fully with the Indemnifying Party. If the Indemnifying Party elects to assume control of the defense of any third party claim, the Claimant shall have the right to participate in the defense of such claim and retain separate co-counsel at its own expense; provided (a) if requested to participate at Indemnifying Party's request, (b) if the Claimant reasonably believes that a conflict of interest exists between Claimant and the Indemnifying Party, (c) if the Indemnifying Party does not admit to Claimant right to reimbursement or (d) if the Indemnifying Party fails to promptly assume and prosecute the defense of such third party claim, then the Claimant will be reimbursed for reasonable expenses of its own counsel. The indemnifying Party will select counsel reasonably satisfactory to the Claimant. The Indemnifying Party will not consent to an entry of judgment or settlement without release of liability and, with respect to nonmonetary terms, the Claimant's consent (not to be unreasonably withheld or delayed). (iv) If a claim, whether between the parties or by a third party, requires immediate action the parties will make every effort to reach a decision with respect thereto as expeditiously as possible. (v) If the Indemnifying party does not elect control or otherwise participate in the defense of any third party claim, it shall be bound by the results obtained by the Claimant with respect to such claim. 16. FURTHER ASSURANCES Buyer and Seller shall execute any and all documents, prior to and after the Closing Date, that are required to implement or confirm the terms and intent of this Agreement. 17. DEFAULT BY THE SELLER If the Seller shall fail, refuse or be incapable of delivering any of the Corporation's Stock to be sold hereunder, such failure, refusal or incapacity shall not relieve the Seller of any obligation under this Agreement. In such event, the Buyer, at its option, may either purchase the remaining stock which it is entitled to purchase hereunder, or refuse to make such purchase and terminate all of its obligations under this Agreement. 18. CONDUCT OF THE CORPORATION'S BUSINESS PENDING CLOSING The Corporation and Seller warrant and represent that, until the Closing: A. The business of the Corporation shall be conducted in its ordinary course. B. Without the written consent of the Buyer, the Corporation shall not enter into any contract -- other than insurance contracts issued in the ordinary course of business -- that shall (i) commit the Corporation to an expenditure in excess of Two Thousand Five Hundred ($2,500.00) Dollars, or (ii) be for a term lasting more than ninety (90) days after the Closing Date . C. The Corporation shall comply with all laws, rules and regulations of Federal, State, Territorial, Commonwealth, City, and Local Governments applicable in any jurisdiction in which it operates. D. The Corporation shall not knowingly violate or default under the terms of any lease or contract used or useful in the conduct of the business of the Corporation. E. The Corporation shall not sell, exchange or otherwise encumber any of the assets of the Corporation in any way whatsoever. F. The Corporation shall not dispose of any of its assets except those consumed in the regular conduct of the business. G. The Corporation shall not increase the compensation payable to any of the employees, officers, directors or consultants of the business, excepting only those specifically agreed by the Buyer to take effect August 1, 1998. H. The Corporation shall not hire additional permanent employees for use in the business or discharge any present employees of the business without prior written notification to the Buyer. I. The Seller and Corporation shall preserve the goodwill of the Corporation's customers and accounts and others having business relations with the Corporation. J. There shall be no modifications in the financial condition of the Corporation as set forth in the Closing Financial Statements, except as will occur in the ordinary and regular conduct of the Corporation's business. K. There will not be any changes in the legal structure of the Corporation, or its Articles of Incorporation, or its By-Laws. L. No dividends will be declared or paid on the stock of the Corporation. M. The Corporation shall not enter into or renew any employment contracts without the Buyer' s prior written consent (which shall not be unreasonably withheld). N. The Corporation shall not modify the fringe benefits offered to its employees without the Buyer's prior written consent (which shall not be unreasonably withheld). O. The Corporation shall not grant any bonuses other than routine cash bonuses to employees in accordance with past practice and in a commensurate amount. P. The Corporation shall not engage in any transaction regarding its stock or options with respect thereto different in character or scale than those in which it has customarily engaged without the Buyer's prior written consent (which shall not be unreasonably withheld). Q. The Corporation shall not issue stock or cash dividends on the Corporation's shares. 19. EMPLOYEES OF THE CORPORATION A. The Seller and Corporation warrant and represent that: (1) The employees of the Corporation do not have any interest in any of the Corporation's property, real or personal or tangible or intangible. (2) The attached Exhibit J, entitled, "Employees of the Corporation", dated July 31, 1998 sets forth all employees of the Corporation, their compensation, vacations, holidays and other fringe benefits, and attaches a true and complete copy of any employment contract with respect to said employees (or any of them) by which the Corporation is bound. B. As a condition precedent to Seller's obligation to close, Buyer and Raymond Fournier, and Buyer and Octavio Estrada shall have reached agreements on satisfactory employment arrangements for said individuals with the Corporation. This condition may be waived by Seller for any reason in its sole and absolute discretion, and it is specifically acknowledged that Raymond Fournier and Octavio Estrada are not third party beneficiaries of this Agreement; except to the extent that either may have a beneficial interest in the Seller. 20. DUE DILIGENCE AND INSPECTION OF RECORDS The Buyer has the right to inspect, or have inspected by a Certified Public Accountant or other appropriately qualified consultant or advisor appointed by the Buyer and at Buyer's expense, the books and records of the Corporation and the operations of the Corporation. Seller and the Corporation will make available to Buyer, Buyer's counsel, accountants, and other representatives access to such information and documents regarding the Corporation's business operations and financial records as Buyer may reasonably request including a review of all insurance contracts, accounts, material contracts, licenses, bonds, reports to regulatory authorities, agency agreements, reinsurance agreements, litigation files (including environmental cases, and other run-offs on previous property and casualty coverages) and all regulatory files as to administrative proceedings involving the Corporation and the status of any orders or consent decrees issued in connection therewith, and any audit or other review of the Corporation's financial records. Seller and the Corporation will authorize the Corporation's attorneys and accountants to discuss freely the affairs of the Corporation with the Buyer and its counsel, accountants or other representatives. In accordance with the Preliminary Acquisition Agreement, Buyer shall keep confidential and cause its agents, attorneys and accountants to keep confidential the information reviewed during due diligence. 21. LABOR RELATIONS The Corporation warrants and represents that there is no employment discrimination, wrongful discharge or other employment complaint or litigation pending and no work stoppage pending or threatened with respect to the business of the Corporation and no applications for certification of a collective bargaining agent or other union organization activity with respect to the Corporation or its employees are pending or anticipated. 22. SURVIVAL OF REPRESENTATIONS AND WARRANTIES The representations and warranties of the Buyer, Seller and the Corporation herein shall survive the Closing. 23. BINDING ON SUCCESSORS Subject to Section 31, this Agreement shall be binding upon the heirs, executors, administrators, successors and assigns of the Buyer and Seller. 24. BROKERS AND EXPENSES A. Buyer, Seller and the Corporation warrant and represent to each other that neither has employed any broker, finder or other person or entity in connection with matters contemplated by this Agreement. B. Buyer and Seller shall indemnify each other from any claim and any costs associated therewith by any such broker, finder, person or entity. C. Each of the parties hereto shall pay all expenses and disbursements incurred by it, its officers, employees, attorneys, accountants, financial advisers and other agents and representatives in connection with this Agreement and the performance of its obligations hereunder. 25. CHANGES TO SELLER'S WARRANTIES AND REPRESENTATIONS If there are any changes to the Seller' s and the Corporation's warranties or representations set forth in this Agreement, the Seller or the Corporation, as the case may be, shall notify the Buyer immediately in writing of such changes by certified or registered mail, return receipt requested or by delivery to Buyer's President in person of such writing. 26. SECTION HEADINGS The heading or subheadings of sections contained herein are used for convenience and ease of reference and shall not limit the scope or intent of the section. 27. ARBITRATION AND APPLICABLE LAW Any controversy or claim arising out of or relating to this Agreement or the breach thereof, shall be settled by arbitration to be held in St. Thomas, U.S. Virgin Islands in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Judgment upon the award rendered by the arbitrators shall be final and may be entered in any court having jurisdiction thereof. This Agreement shall be governed by the laws of the U.S. Virgin Islands. 28. DOCUMENTS INCORPORATED BY REFERENCE The following documents are hereby incorporated by reference: A. Exhibit A entitled, "Non-Transferred Assets of the Corporation", dated July 31,1998. B. Exhibit B entitled, "Marilyn Claims List", dated July 31, 1998. C. Exhibit C. entitled, "Articles of Incorporation of the Corporation", dated July 31, 1998. D. Exhibit D entitled, "Bylaws of the Corporation", dated July 31, 1998. E. Exhibit E entitled, "Encumbered Assets of the Corporation", dated July 31, 1998. F. Exhibit F entitled, "Financial Statements of the Corporation", dated July 31, 1998. G Exhibit F.1 entitled, "Material Contracts of the Corporation", dated July 31, 1998. H. Exhibit G entitled, "Litigation of the Corporation and/or Seller" , dated July 31, 1998. I. Exhibit H entitled, "Officers, Directors, Bank Accounts and Safe Deposit Boxes of the Corporation," dated July 31, 1998. J. Exhibit I entitled, "Employees Benefit Plans of the Corporation, dated July 31, 1998. K Exhibit J entitled, "Employees of the Corporation," dated July 31, 1998. L. Exhibit K entitled, "Status of Corporation's Software and Related Hardware", dated July 31, 1998. 29. NOTICES AND CORRESPONDENCE All notices and correspondence shall be sent by either party to the other in all matters dealing with this Agreement to the following addresses: (a) To the Seller Sue Boland President UNLIMITED HOLDINGS, INC. P.O. Box 9109 St. Thomas, U.S. Virgin Islands 00801 (b) To the Corporation: Raymond L. Fournier President GUARDIAN INSURANCE COMPANY, INC. P.O. Box 9109 St. Thomas, U.S. Virgin Islands 00801 with a copy to: Maria T. Hodge, Esq. HODGE & FRANCOIS 1340 Taarneberg St. Thomas, U.S. Virgin Islands 00802 (c) To the Buyer: John P. de Jongh, Jr., President LOCKHART CARIBBEAN CORPORATION No. 44 Estate Thomas P.O. Box 7020 Charlotte Amalie St. Thomas U.S. Virgin Islands 00801 with a copy to: Thomas C. O'Keefe, Esq. DUDLEY, TOPPER AND FEUERZEIG 1A Frederiksberg Gade St. Thomas, U.S. Virgin Islands 00802 or any other address provided prior written notice is given to the other party. 30. NOTICES AND CORRESPONDENCE The Seller acknowledges that it has used as its counsel for the negotiation of this Agreement the attorneys also used by the Corporation in the conduct of the Corporation's business: nevertheless, Seller is satisfied that it has received proper legal advice in connection with the execution of this Agreement. 31. ASSIGNMENT This Agreement is personal in nature and none of the parties hereto shall, without the written consent of the others, assign or transfer its rights or obligations hereunder to another company or person, except that the Buyer may transfer all or any portion of its rights or obligations hereunder(excluding its guaranty under Section 32) to any of its wholly-owned subsidiaries without such prior written consent. 32. EAGLE STAR AND RMS ACCOUNTS RECEIVABLE CLAIMS The Corporation currently is the plaintiff in two separate, pending lawsuits, the "RMS Claim" (_________ v. ________) ( )and the "Eagle Star Claim" (________ v. _______)( ). The Buyer agrees to cause the Corporation to continue to pursue these lawsuits following Closing, under the terms and conditions hereinafter set forth. A. In the event that the Corporation still is pursuing the RMS Claim as of the Closing Date, Buyer agrees to cause the Corporation to continue to pursue the RMS Claim, subject to the conditions set forth herein. However, if, at any time, the lawsuit causes a materially adverse financial effect on the conduct of the Corporation's business, the Corporation may discontinue pursuing the claim with consent of the Seller. The proceeds of any judgement obtained in favor of the Corporation on the RMS Claim shall be paid to Seller, after deduction for contingent attorney's fees, any expenses incurred by the Corporation in pursuing the RMS Claim after the Closing Date and after allowance for a reserve for any taxes associated with the recovery incurred by the Corporation. In the event that the funds recovered are payable in installments over time, the full amount of the expenses, attorney's fees, and taxes shall be reimbursed to the Corporation before any payment is made to the Seller. B. In the event that the Corporation still is pursuing the Eagle Star Claim as of the Closing Date, Buyer agrees to cause the Corporation to continue to pursue the Eagle Star Claim, subject to the conditions set forth herein. Seller shall present, at Closing, a paid receipt from the law firm of Hodge & Francois, indicating that all attorney's fees, costs and expenses incurred by the Corporation in the pursuit of the Eagle Star Claim have been paid in full, through the month immediately preceding the Closing Date. Following Closing, the Corporation shall continue to pursue, and shall pay the costs of continuing to pursue the Eagle Star Claim. However, if, at any time, the lawsuit causes a materially adverse effect on the conduct of the Corporation's business, the Corporation may discontinue pursuing the Eagle Star Claim upon delivery by the Buyer to Seller of such number of additional shares of the corporate stock of Buyer as shall equal One Million Three Hundred Fifty Thousand Dollars ($1,350,000.00) at the time of delivery. In the event that the Eagle Star Claim is settled, or a judgment in favor of the Corporation is rendered, the "net proceeds" (as hereinafter defined), paid to the Corporation shall be paid to Seller. The "net proceeds" shall be the funds recovered on the case, reduced by (a) all costs and expenses, including, but not limited to, attorney's fees, paid by the Corporation from and after the Closing Date; (b) interest, at the legal rate (currently 9%), on said costs and expenses, from the date the costs and expenses were incurred, until the date of payment of the proceeds to the Corporation; and (c) any taxes associated with the receipt or disbursement of the funds recovered. In the event that the funds recovered are payable in installments over time, the full amount of the expenses, attorney's fees, interest, and taxes shall be reimbursed to the Corporation before any payment is made to the Seller. The foregoing notwithstanding, should the Eagle Star Claim still be pending three (3) years from the Closing Date, fifty percent (50%) of all legal fees and other costs of the litigation thereafter incurred by the Corporation shall be reimbursed by the Seller on a current basis upon presentation of evidence of the expenses incurred. Further, should the Seller exercise its right to have the Buyer redeem the Acquisition shares as provided in Section 4 hereof, from and after the date of said redemption all legal fees and other costs of the litigation shall be borne by the Seller on a current basis. C. The payment obligations of the Corporation arising pursuant to the foregoing subsections shall be unconditionally guaranteed by the Buyer from and after the Closing. The provisions of this Section 32 shall survive the Closing. 33. TERMINATION This Agreement may be terminated by either Seller of Buyer, if the terminating party is not then in breach of any material obligation under this Agreement, on written notice to the other at any time prior to Closing as follows: (i) By Buyer or Seller, as the case may be, if the other shall be in material breach of any of the provisions applicable to it hereunder and provided that such material breach shall not have been cured within 30 days of receipt of the breaching party of written notice describing in detail such breach; (ii) By mutual agreement of Buyer and Seller at any time, set forth in writing executed by other party; (iii) By Buyer or Seller, if any of the conditions to their respective performance obligations under Sections 7 and 8 are not satisfied on or before October 31, 1998; or (iv) By Buyer or Seller by written notice to the other, if a court of competent jurisdiction or other governmental authority shall have issued an order, decree or ruling or taken any other action (which order, decree or ruling the parties hereto shall use their best efforts to lift), in each case permanently restraining, permanently enjoining or otherwise such order, decree, ruling or other action shall have become final and nonappealable. In the case of termination of this Agreement pursuant to this Section 33, each party will pay all of its costs and expenses and neither will have any further liability or obligation of any nature to the other. IN WITNESS WHEREOF, the parties hereto have executed this Agreement which is effective as of July 31, 1998. CORPORATION: WITNESSES: GUARDIAN INSURANCE COMPANY, INC. /s/ J. Summer Westman By: /s/ Raymond L. Fournier - ------------------------- ----------------------------------- Raymond L. Fournier, President [Seal] /s/ Lisa N. Sweet Attest: /s/ Octavio Estrada - ------------------------- ----------------------------------- Octavio Estrada , Secretary SELLER: UNLIMITED HOLDINGS, INC. /s/ Warner L. Bowers, Jr. By: /s/ Sue Boland - ------------------------- ----------------------------------- Sue Boland, President [Seal] Attest: /s/ Raymond L. Fournier - ------------------------- ----------------------------------- Raymond L. Fournier, Secretary BUYER: LOCKHART CARIBBEAN CORPORATION /s/ J. Summer Westman By: /s/ John P. deJongh, Jr. - ------------------------- ----------------------------------- John P. de Jongh, Jr., President [Seal] /s/ Lisa N. Sweet Attest: /s/ Christine O'Keefe - ------------------------- ----------------------------------- Christine O'Keefe, Secretary EX-10.2 3 EXHIBIT 10.2 Exhibit 10.2 FIRST ADDENDUM TO STOCK PURCHASE AGREEMENT FIRST ADDENDUM TO STOCK PURCHASE AGREEMENT dated December 31, 1998 by and between UNLIMITED HOLDINGS, INC. (hereinafter referred to as "Seller"), LOCKHART CARIBBEAN CORPORATION (hereinafter referred to as "Buyer") and GUARDIAN INSURANCE COMPANY, INC. (hereinafter referred to as the "Corporation") WALTER R. FOURNIER, AS TRUSTEE OF THE FOURNIER RUIZ TRUST, and ALBA E. DEL VALLE, AS TRUSTEE OF THE FOURNIER DEL VALLE TRUST (hereinafter collectively referred to as the "Shareholders"). C. The above parties entered into a Stock Purchase Agreement dated as of July 31, 1998 (the "Stock Purchase Agreement") in which the Seller agreed to sell and the Buyer agreed to purchase all the issued and outstanding capital stock of the Corporation in return for shares of Class A Common Stock of Buyer. D. The Stock Purchase Agreement provides that in determining the Acquisition Price, the aggregate stated capital and surplus appearing on the Closing Financial Statements shall be reduced by certain adjustments, including the Marilyn Claims Adjustment, to be equal to the Marilyn Claims Reserve, which was to be established by agreement of the parties to be reserved by Buyer to fund payment of pending disputed insurance claims (including litigation costs and expenses) that arose out of property losses that occurred during Hurricane Marilyn. E. Buyer and Seller have agreed on the amount of the Marilyn Claims Reserve, and the procedure for distributing the Marilyn Claims Reserve. F. The Stock Purchase Agreement provides for the assignment of two lawsuits, the RMS Claim and the Eagle Star Claim. Defendants in the Eagle Star Claim (as defined in the Stock Purchase Agreement) have obtained a judgment for costs and expenses in the amount of Li.206,897.28 against the Corporation, in a lawsuit from the High Court of Justice, Queen's Bench Division, Commercial Court between HIB Limited and Guardian Insurance Company, Inc., et al (1996 Folio No. 1703, April 21, 1997) (the "English Judgment"). In addition, an "Interim Award" against Guardian was made in the course of an Arbitration between Eagle Star Reinsurance Company and Guardian Insurance Company, that reserved a possible award of costs of the arbitration against the Corporation (the "English Arbitration"). G. In view of the existence of the English Judgment and the English Arbitration, Buyer and Seller have agreed on amendments to the provisions of the Stock Purchase Agreement governing the disposition of the Eagle Star Claim and the RMS Claim, including indemnity obligations on the part of Seller and the Shareholders. H. Buyer and Seller have agreed to other amendments to the Stock Purchase Agreement. Capitalized terms used and not otherwise defined herein have the meanings ascribed to them in the Stock Purchase Agreement. Now, therefore, in consideration of the premises and the mutual promises made herein, the Stock Purchase Agreement is hereby amended as follows. I. Section 3B of the Stock Purchase Agreement shall be designated as Section 3 (B) (1), amended as follows, and the following new subparagraphs Section 3 (B) (2) through (B)(8) shall be added: B. Marilyn Claims Adjustment (1) In determining the Acquisition Price, the aggregate stated capital and surplus appearing on the Closing Financial Statements shall be reduced further (the "Marilyn Claims Adjustment") by an amount equal to the reserve (the "Marilyn Claims Reserve") established by agreement of the parties to fund payment of the pending disputed insurance claims (including litigation costs and expenses incurred after the Closing Date) that arose out of property losses that occurred during Hurricane Marilyn. A list of said claims are attached hereto as Exhibit "B"; any such claim is hereinafter/referred to as a "Marilyn Claim". After Closing, during the pendency of the Marilyn Claims Reserve, to the extent that the Corporation shall be able to off-set future net revenues against the net loss carryforwards as defined herein in Section I.B.(5), the Marilyn Claims Reserve shall be reduced by an amount equal to the net income tax benefit of each such offset and the Seller shall receive additional Acquisition Shares (as hereafter defined) determined as provided in Section 3 on the basis of the value of each such off-set. The balance of the aggregate stated capital and surplus appearing on the Closing Financial Statements remaining after the Eagle Star Adjustment (as defined at Subsection 3A), the Marilyn Claims Adjustment and any further adjustment under Section 3(C) hereof is referred to herein as the "Net Aggregate Stated Capital and Surplus." (2) A dollar amount representing an estimate of the cost (including litigation costs and expenses to be incurred after the Closing Date) to resolve each Marilyn Claim has been designated on Exhibit B. (For each Marilyn Claim, the dollar figure assigned to it is hereinafter referred to as a "Claim Reserve".) Buyer and Seller agree that solely for purposes of designating the amount of the Marilyn Claims Reserve, the sum of all the Claim Reserves shall equal the amount of the Marilyn Claims Reserve. Accordingly, the Marilyn Claims Reserve is established as $1,226,618. The amount of each Claim Reserve has been determined by a third party, and does not necessarily represent the amount that either the Buyer or the Seller believes to be the actual cost to resolve any specific Marilyn Claim. (3) The Corporation shall be responsible for negotiating the terms of any settlement of a Marilyn Claim which shall be funded by the Corporation and/or the Buyer to the extent necessary to effect settlement. The Corporation's President, Raymond L. Fournier, will have the final say with respect to the resolution of each Marilyn claim, based upon its merits, and in accordance with his fiduciary duty as an officer and director of the Corporation. (4) If and when the Corporation resolves any Marilyn Claim for an amount less than the Claim Reserve assigned to said claim, the Seller shall be entitled to receive upon notification from Corporation to Buyer, on a case-by-case basis, such number of shares of the Buyer's Class A Common Stock as shall equal 1.5 times the difference between the Claim Reserve and the actual cost of resolution of the Marilyn Claim (including the associated expenses of litigation incurred after the Closing Date). For purpose of this Agreement, the value of each share of Buyer's Class A Common Stock shall at all times be deemed to be $6.50 per share. If a Marilyn Claim is resolved for an amount equal or more than the Claim Reserve assigned to said claim, Seller shall not be entitled to any such stock. (5) The Corporation has a net operating loss carryforward to 1998 of $1,560,071 and a capital loss carryforward to 1998 of $546,196. To the extent that the Corporation realizes net operating income or capital gains during the pendency of the Marilyn Claims Reserve, the Corporation's independent accountants shall determine the net income tax benefit that the Corporation realizes as a result of the aforementioned carryforwards and the Buyer shall upon notification deliver to Seller such number of shares of its Class A Common Stock as shall equal 1.5 times the amount of said income tax benefit attributable to the Corporation's use of such carryforwards, provided, however, that at no time shall Seller be entitled to be credited for or receive Class A Common Stock under this Section 3 that exceeds the value of $1,839,927, whether derived from settlements of Marilyn Claims or from net operating loss and capital loss carryforwards or any combination thereof. (6) Any Class A Common Stock received as a consequence of the Marilyn Claims Adjustment or the income tax benefit resulting from the use of the net operating loss or capital loss carry forward provided under Subsections 3(B)(4) and (5) above shall be redeemable in accordance with Section 4 of the Stock Purchase Agreement, and any dividends declared on such stock after being credited to Seller shall be paid to Seller. (7) Termination. The provisions of Section 3(B)(4) and (5) shall terminate when all of the Marilyn Claims have been resolved. (8) Subject to the terms of this Agreement, the right of Seller to receive additional Class A Common Stock constitutes a contractual right that is not assignable and will not be evidenced by any negotiable certificate of any kind. II. A new Section 3(D) of the Stock Purchase Agreement shall be added as follows: D. Guaranty. Repayment of the reinsurance recovery in the amount of $247,915 owed by Heritage Holdings, Inc. to the Corporation pursuant to certain Auto Share and Excess of Loss policies for claims with a date of occurrence prior to June 30, 1994, shall be unconditionally guaranteed by the Shareholders from and after the Closing, and the Shareholders shall execute an instrument of Guaranty to that effect. III. Subsection 32 is hereby deleted and a new Subsection 32 is inserted in its place as follows: The Corporation currently is the plaintiff in two separate, pending lawsuits, the "RMS Claim" (Guardian Insurance Company v. Risk Management Solutions, Inc. a/k/a RMS) (1997-0073, D.V.I.) and the "Eagle Star Claim" (Guardian Insurance Company v. Bain Hogg International Limited and Eagle Star Reinsurance Company Limited) (Civ. No. 1996/180F, D.V.I.). The Buyer agrees to cause the Corporation to continue to pursue these lawsuits following Closing, under the terms and conditions hereinafter set forth. A. In the event that the Corporation still is pursuing the RMS Claim as of the Closing Date, Buyer agrees to cause the Corporation to continue to pursue the RMS Claim, subject to the conditions set forth herein. The Corporation shall pay the current bill for expenses incurred in pursuing the RMS Claim in the amount of $9,733.26. Thereafter, the Seller shall pay any fees, costs and expenses incurred on or after the Closing Date, except those payable on a contingency basis. All costs, fees, and expenses of the lawsuit that are not payable on a contingency basis will be paid by Seller on a current basis, and the Corporation shall have no liability whatsoever for such fees, costs and expenses. However, if, at any time, the lawsuit causes a materially adverse financial effect on the conduct of the Corporation's business, the Corporation may discontinue pursuing the claim with consent of the Seller. The proceeds of any judgment obtained in favor of the Corporation on the RMS Claim shall be paid to Seller, after deduction for contingent attorney's fees, any expenses incurred by the Corporation in pursuing the RMS Claim after the Closing Date and after allowance for a reserve for any taxes associated with the recovery incurred by the Corporation. B. In the event that the Corporation still is pursuing the Eagle Star Claim as of the Closing Date, Buyer agrees to cause the Corporation to continue to pursue the Eagle Star Claim, subject to the conditions set forth herein. Seller shall present, at Closing, a paid receipt from the law firm of Hodge & Francois, indicating that all attorney's fees, costs and expenses incurred by the Corporation in the pursuit of the Eagle Star Claim have been paid in full, through the month immediately preceding the Closing Date. Following Closing, the Corporation shall continue to pursue the Eagle Star Claim. However, if, at any time, the lawsuit causes a materially adverse effect on the conduct of the Corporation's business, the Corporation may discontinue pursuing the Eagle Star Claim upon delivery by the Buyer to Seller of such number of additional shares of the corporate stock of Buyer as shall equal One Million Three Hundred Fifty Thousand Dollars ($1,350,000.00) at the time of delivery. Subject to reimbursement pursuant to this Subsection 32(B), or Subsection 32 (D), until payment in full of the note of even date herewith to be delivered by Buyer to the Shareholders (the "Note"), the Corporation shall pay, on a current basis, the full cost of the legal fees and other costs incurred pursuing the Eagle Star Claim from the date of Closing. Following payment in full of the Note, fifty percent (50%) of such fees and costs, thereafter incurred shall be reimbursed by the Seller on a current basis upon presentation of evidence of the expenses incurred. Should the Seller exercise its right to have the Buyer redeem the Acquisition shares as provided in Section 4 hereof, from and after the date of said redemption all legal fees and other costs of the litigation shall be borne by the Seller on a current basis. In the event that the Eagle Star Claim is settled, or a judgment in favor of the Corporation is rendered, the "net proceeds" (as hereinafter defined), paid to the Corporation shall be paid to Seller. The "net proceeds" shall be the funds recovered on the case, reduced by (a) all costs and expenses, including, but not limited to, attorney's fees, paid by the Corporation and not reimbursed by Seller from and after the Closing Date; (b) interest, at the prime rate as published in the Wall Street Journal on the Closing Date, on said costs and expenses, from the date the costs and expenses were paid, until the date of payment of the proceeds to the Corporation; (c) any taxes associated with the receipt or disbursement of the funds recovered; and (d) any amounts deducted pursuant to Subsection 32(D) hereof. In the event that the funds recovered are payable in installments over time, the full amount of the expenses, attorney's fees, interest, and taxes shall be reimbursed to the Corporation before any payment is made to the Seller. C. The payment obligations of the Corporation arising pursuant to the foregoing subsections shall be unconditionally guaranteed by the Buyer from and after the Closing. D. The Seller hereby agrees to indemnify and to hold the Corporation and its successors and assigns harmless in respect of any and all liabilities and expenses (including, without limitation, settlement costs and legal, accounting, and other expenses in connection therewith incurred after the Closing Date) incurred by the Corporation in connection with any judgment rendered against the Corporation, or order taxing the costs of the parties against the Corporation, or settlement or other final disposition of claims, with as a result of the Eagle Star Claim, the RMS Claim, the English Judgment, the English Arbitration or any other proceeding involving the claims asserted in said proceedings. Notwithstanding anything in this Section 32 to the contrary, in the event a judgment is rendered against the Corporation in the course of the Eagle Star Claim, any expense incurred therein (whether or not attributable to the defense of a claim against the Corporation), including, but not limited to, any judgment, award, cost or attorney's fee, shall be deducted from the proceeds of any simultaneously rendered judgment in favor of the Corporation, after deduction for the other items set forth in Subsection 32(B); in the event such an expense cannot be deducted in full from the proceeds of a simultaneously rendered judgment in favor of the Corporation, all such undeducted expenses incurred by the Corporation through the earlier of the date the judgment is satisfied or the date upon which the Seller satisfies its indemnity obligations hereunder, shall be paid to the Corporation pursuant to this Subsection 32(D). The indemnity obligations of the Seller arising pursuant to this subsection 32(D) with respect to the English Judgment and the English Arbitration only, shall be conditionally guaranteed by the Shareholders from and after the Closing, and the Shareholders shall execute an instrument of Guaranty to that effect. The indemnity obligations of the Seller arising pursuant to this subsection 32(D) shall be secured by a pledge of all of the Lockhart Caribbean Corporation stock being transferred to Seller pursuant to this Stock Purchase Agreement, and the Seller shall execute a pledge agreement and irrevocable assignment of stock powers to that effect. E. The Corporation shall have the right, with the consent of the Seller which shall not be unreasonably withheld, to pay the English Judgment, or an award in the English Arbitration against the Corporation, at any time, and to be reimbursed therefore pursuant to the provisions of Subsection 32D above, if, in the judgment of the Corporation, failure to do so causes a materially adverse effect on the conduct of the Corporation's business. The Corporation shall, upon request of the Seller, settle the English Judgment, the English Abritration, the Eagle Star Claim or the RMS Claim, upon such terms and conditions as Seller requests, subject to Seller's reimbursement and indemnity obligations set forth in this Section 32. The provisions of this Section 32 shall survive the Closing until the RMS Claim, the Eagle Star Claim, the English Judgment, the English Arbitration and any cross claims, counter claims or other claims asserted in those or related proceedings have been finally determined by an unappealable order of a court or settled, and the Seller has satisfied all its obligations to the Corporation pursuant to the Stock Purchase Agreement to indemnify it with respect to the judgment(s) or settlement(s) reached, and the fees, costs and expenses incurred in pursuing and defending such claims. V. Section 4 of the Stock Purchase Agreement is designated Section 4(A) and a new Section 4(B) is added as follows: 4(B) Recission of Transactions. As provided in Section 8G hereof, Seller's obligation to close is conditioned upon Buyer having simultaneously closed the transaction pursuant to which it acquires the shares of stock (the "Heritage Stock") of Heritage Insurance Company (Caribbean), Ltd. ("Heritage"). The stock purchase agreement for the acquisition of the Heritage Stock (the "Heritage Stock Purchase Agreement") has been amended to provided for the deferred payment of the purchase price of the Heritage Stock. As a result thereof, the parties herein will execute an escrow agreement as of the Closing Date with Paul Hoffman, P.C. acting as escrow agent, whereby the Corporation's Stock and the Heritage Stock are delivered to the escrow agent until payment of the deferred purchase price of the Heritage Stock. The deferred purchase price of the Heritage Stock is evidenced by a promissory note (the "Note"). The parties herein agree as follows: (a) Upon payment of the Note by Buyer, Seller shall provide notice of such fact immediately to the escrow agent and the escrow agent shall immediately transfer the Corporation's stock and the Heritage Stock to Buyer; (b) If Buyer defaults under the Note, Seller shall give written notice of the default to the escrow agent and to Buyer. Buyer shall have thirty (30) days to provide the escrow agent with notice that it disputes the existence of the default, or that the default has been remedied. If Buyer fails to provide such notice, then: (i) the transactions contemplated pursuant to this Stock Purchase Agreement and the Heritage Stock Purchase Agreement shall be deemed rescinded; (ii) the escrow agent will transfer the ownership of the Corporation's Stock to Seller and of the Heritage Stock to the Shareholders; (iii) the pledge agreement concerning Lockhart Caribbean Corporations Stock referred to in Section 32D shall be terminated and the pledged Lockhart Caribbean Corporation's Stock shall be delivered to Buyer; (iv) the Shareholders will retain the $125,000 payment received at closing of the Heritage Stock Purchase Agreement; and (v) the parties herein shall be released of any further liability or obligation of any nature to each other under this Stock Purchase Agreement and/or under the Heritage Stock Purchase Agreement. VI. Except as herein amended, all other terms and conditions of the Stock Purchase Agreement remain in full force and effect according to their terms. IN WITNESS WHEREOF, the parties hereto have executed this First Addendum to Stock Purchase Agreement on the date set forth above. CORPORATION: WITNESSES: GUARDIAN INSURANCE COMPANY, INC. _________________________ By: /s/ Raymond L. Fournier ----------------------------------- Raymond L. Fournier, President _________________________ [Seal] Attest: /s/ Octavio Estrada ----------------------------------- Octavio Estrada , Secretary SELLER: UNLIMITED HOLDINGS, INC. _________________________ By: /s/ Sue Boland ----------------------------------- Sue Boland, President _________________________ [Seal] Attest: /s/ Raymond L. Fournier ----------------------------------- Raymond L. Fournier, Secretary BUYER: LOCKHART CARIBBEAN CORPORATION /s/ William McConnell By: /s/ John P. deJoghn, Jr. - ------------------------- ----------------------------------- John P. de Jongh, Jr., President [Seal] /s/ Thomas C. O'Keefe Attest: /s/ Christine O' Keefe - ------------------------- ----------------------------------- Christine O'Keefe, Secretary SHAREHOLDERS: THE FOURNIER DEL VALLE TRUST _________________________ By: /s/ Alba E. Del Valle ------------------------------------ Alba E. Del Valle, Trustee [Seal] THE FOURNIER RUIZ TRUST _________________________ By: /s/ Walter R. Fournier ----------------------------------- Walter R. Fournier, Trustee EX-10.3 4 EXHIBIT 10.3 Exhibit 10.3 STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT dated as of July 31, 1998 by and between WALTER R. FOURNIER, AS TRUSTEE OF THE FOURNIER RUIZ TRUST AND ALBA E. DEL VALLE, AS TRUSTEE OF THE FOURNIER DEL VALLE TRUST (hereinafter collectively referred to as "Sellers"), LOCKHART CARIBBEAN CORPORATION (hereinafter referred to as "Buyer") and HERITAGE INSURANCE COMPANY (CARIBBEAN), LIMITED (hereinafter referred to as the "Corporation"). WITNESSETH: IN CONSIDERATION of the promises and mutual covenants herein contained, the parties hereto, intending to be legally bound, agree as follows: 1. SUPERSEDING EFFECT This Stock Purchase Agreement (the "Agreement") supersedes all oral or written agreements between the parties and constitutes the entire agreement between the parties, except for paragraphs 6, 7 and 8 of a Preliminary Acquisition Agreement dated June 4, 1998 between the parties hereto respecting this transaction (the "Preliminary Acquisition Agreement"). 2. STOCK TO BE PURCHASED The Buyer shall purchase from the Sellers all the issued and outstanding capital stock of the Corporation, consisting of two hundred fifty thousand (250,000) shares of common stock, two hundred thousand (200,000) of which are owned by the Fournier Ruiz Trust and forty-nine thousand nine hundred ninety-nine (49,999) of which are owned by the Fournier Del Valle Trust (the "Corporation's Stock"), thus transferring every asset reflected on the Corporation's financial statements and all other off-balance sheet assets, including all of the Corporation's right, title and interest in and to all tangible and intangible assets of the Corporation. Notwithstanding anything to the contrary in this agreement, Buyer shall not assume any liabilities or obligations of the Corporation not disclosed in the Corporation's unaudited financial statements for the quarter ending June 30, 1998, or specifically assumed and provided for in this Agreement. 3. ACQUISITION PRICE The total purchase price for the Corporation's Stock will be equal to 1.5 times the net aggregate stated capital and surplus as appearing on the Closing Financial Statements (as hereinafter defined), subject to adjustment as stated below (the "Acquisition Price"). The "Closing Financial Statements" means those financial statements to be provided by Sellers to Buyer, for the period from January 1, 1997 ending December 31, 1997, and a balance sheet for the Corporation as at December 31, 1997, provided that the Closing (as hereinafter defined) shall occur on or before October 31, 1998. Said Closing Financial Statements shall be certified by a certified public accountant satisfactory to Buyer and shall contain an unqualified expression of opinion that, after an audit conducted by said accountant in accordance with generally accepted United States auditing standards, the financial statements have been prepared in accordance with generally accepted accounting principles consistently applied. The Acquisition Price may be reduced with the consent of the Seller, based on developments or events that have a materially adverse effect on the Corporation or its Business prior to Closing. 4. PAYMENT A. At Closing Buyer shall pay the Sellers One Million Two Hundred Fifty Thousand Dollars ($1,250,000.00) by certified check or other immediately available funds or wire transfer. B. The balance of the Acquisition Price shall be paid by delivery to Sellers at Closing of such number of shares of Class A Common Stock of Buyer valued at $6.50 per share as are necessary to equal the Acquisition Price (the "Acquisition Shares"); provided, however, that in the event Buyer issues Class A Common Stock of Buyer for a price less than $6.50 per share at any time prior to January 1, 2000, the number of Acquisition Shares shall be proportionately increased and provided, further, that Sellers shall have the right for a 180-day period commencing three (3) years from the Closing, to require Buyer to redeem from Sellers the Acquisition Shares at a price of $8.30 per share (prorated by any subsequent increase in the number of shares delivered to Sellers resulting from a reduction in the issue price per share below $6.50). Sellers acknowledge that (i) Buyer is in the process of becoming a publicly held company under the Securities Act of 1933 of the United States, as amended (the "Securities Act"), and as such the Acquisition Shares held by Sellers will be subject to the provisions of Rule 144 of the Securities Act regarding the disposal of such shares to third parties; and (ii) the Class A Common Stock currently is not listed or traded on any stock exchange or other quotation system, and there can be no assurance that the initial public offering will be completed or that an active public market for Buyer's Class A Common Stock will develop or be sustained in the event of a successful completion of the initial public offering. 5. CLOSING The Closing of the transaction contemplated by the Agreement shall occur in accordance with the following (the "Closing"): A. Place The Closing shall take place at the offices of Dudley, Topper and Feuerzeig, 1A Frederiksberg Gade, St. Thomas, U.S. Virgin Islands. The Closing date will be scheduled to coincide with Buyer's acquisition of Guardian Insurance Company, Inc. but only after (i) completion of due diligence to the satisfaction of Buyer and (ii) the receipt of regulatory consents from applicable governmental authorities, including the specific approval of this transaction by the insurance regulatory authorities for the British Virgin Islands (the "Closing Date"); provided, however, that the Closing shall in all events be held by no later than October 31, 1998. If for any reason the Closing shall not take place on or before October 31, 1998, and the deadline date has not been extended by mutual agreement, by written notice to the other party, either party may cancel the transaction after any such deadline date and neither party shall have any further obligation to the other. B. Deliveries and Payment (1) At the Closing the Sellers shall deliver to the Buyer (or to a designated wholly-owned subsidiary of the Buyer) those items set forth in Section 6, and Buyer shall deliver to Sellers the Acquisition Shares as set forth in Section 4. (2) At the Closing the Sellers shall deliver to the Buyer (or to a designated wholly-owned subsidiary of the Buyer) a certificate signed by the President and Secretary of the Corporation and guaranteed by the Sellers to the effect that there has been no material adverse change in the financial condition or business of the Corporation as of the Closing Date. C. Memorandum of Closing On the Closing Date, the parties shall execute a Memorandum of Closing which shall state the events that occurred at the Closing. All transactions at the Closing shall be considered to take place simultaneously. No delivery shall be considered to be made until all transactions are completed. 6. DOCUMENTS TO BE DELIVERED BY SELLERS AT CLOSING The originals of all documents set forth below shall be delivered by the Sellers or the Corporation to Buyer (or to a designated wholly-owned subsidiary of the Buyer) at the Closing except for items B, C, D, G, H, K, O and P, which shall be provided at least ten (10) business days before the Closing: A. The Corporation Stock Certificates, free and clear of all encumbrances, fully paid, non-assessable, and duly endorsed in blank. B. All leases to which the Corporation is a party, together with the written consent of any landlord as may be required under such leases. E. The Corporation's license(s) to do business in the jurisdictions in which it operates. D. Broker/Agent Agreements to which the Corporation is a party. E Contracts requiring performance after the Closing and contracts with warranties which shall remain in effect after the Closing. F. Warranties on the Corporation's equipment assets. G. Opinion letters of the Corporation's counsel and the counsel for the Sellers, as described in Section 14 and Section 15. H. Certificate of good standing of the Corporation (and of any subsidiaries thereof) certified by the Registrar of Companies or any other appropriate official in the British Virgin Islands, as of no more than four weeks prior to the Closing Date. I. Resignations of all present directors and officers of the Corporation effective on the Closing Date. J. Minute book(s), stock transfer book(s), stock certificate book and corporate seal(s) of the Corporation. K. Noncompetition Agreements as described in Section 12 of this Agreement. L. Documentation that the Corporation's insurance contract forms have been filed and approved as required pursuant to British Virgin Islands law. M. Written approval of the sale of the Corporation by the beneficiaries (or their guardians) of the Fournier Ruiz Trust and the Fournier Del Valle Trust in a form satisfactory to Buyer. N. Annual or other reports filed by the Corporation under British Virgin Islands law. O. The Closing Financial Statements (as defined in Section 3). These shall be provided to Buyer as soon as they are available. P. The certificate specified in Subsection 5B(2) above. Q. Any other instruments and documents that are required to fulfill the obligations of the Sellers under this Contract. 7. CONDITIONS TO THE OBLIGATIONS OF THE BUYER The obligations of Buyer to proceed with the Closing are subject to the satisfaction on or before the Closing Date of all of the following conditions: A. Sellers shall have complied with each of their covenants and agreements contained herein, and each of Sellers' representations and warranties contained in Section 9 shall be true on and as of the Closing Date. B. Delivery of the items required to be delivered by Sellers pursuant to Section 6. C. Approval by the insurance authorities for the British Virgin Islands and by any other regulatory authority as may be required for the lawful transfer of ownership or control of the Corporation by any jurisdiction in which the Corporation does business. D. Completion of due diligence to the reasonable satisfaction of Buyer in accordance with the terms of Section 21 of this Agreement. E. No material adverse change in the financial condition of the Corporation from that stated in the Closing Financial Statements, or in the relationships with the insurance agents or reinsurers with whom the Corporation does business. F. No material change in the conduct of the Corporation's business pending Closing, in accordance with the terms of Section 19 of this Agreement. 8. CONDITIONS TO THE OBLIGATIONS OF SELLER AND THE CORPORATION The conditions of Seller and Corporation to proceed with the Closing are subject to the satisfaction on or before the Closing Date of all of the following conditions: A. Buyer shall have complied with each of their covenants and agreements contained herein, and each of Buyer's representations and warranties contained in Section 11 of this Agreement shall be true on and as of the Closing Date. B. Delivery of the items required to be delivered by Buyer pursuant to Section 5B of the Agreement. C. Approval by the insurance authorities for the British Virgin Islands and by any other regulatory authority as may be required for the lawful transfer of ownership or control of the Corporation by any jurisdiction in which the Corporation does business. D. Buyer shall have executed the employment agreements with Raymond Fournier and Octavio Estrada. E. Buyer shall have delivered to Seller a resolution of the Board of Directors of Buyer approving the purchase of the Corporation's Stock, the issuance and delivery of the Acquisition Shares and the execution and delivery of any other documents required to be delivered by Buyer under this Agreement. F. Buyer shall have simultaneously closed the transaction pursuant to which it acquires the shares of stock of Guardian Insurance Company from Unlimited Holdings, Inc. pursuant to the terms of a stock purchase agreement of even date executed by and between the Buyer and said company. 9. REPRESENTATIONS OF CORPORATION AND SELLERS The Corporation and Sellers warrant and represent as follows, which representations shall survive the Closing for five (5) years except those dealing with taxes that will survive for the applicable statute of limitations period: A. Corporation's Right to Be Sold The Corporation has the full power and right to execute this Contract. The Corporation will present a director's resolution approving the sale of the Corporation's Stock, a certificate of good standing, a certificate of incumbency as to officers and directors and any other corporate documentation reasonably requested by Buyer. B. Stock Ownership Sellers are the owners, free and clear of any lien or encumbrance, of the Corporation's Stock. Said Corporation Stock constitutes all of the issued and outstanding shares of the Corporation. The Sellers have not issued or granted any options or other rights to purchase the Corporation's Stock; neither is there any contract or other obligation on the part of the Sellers or the Corporation to issue any stock of the Corporation to any third party. C. Capitalization The entire authorized capital stock of the Corporation consists of two hundred fifty thousand (250,000) shares of common stock, of which presently two hundred forty-nine thousand nine hundred ninety-nine (249,999) are issued and outstanding, fully paid and non-assessable. D. Subsidiaries, Cross-Guarantees and Inter-Company Transfers The Corporation does not have any subsidiaries. The Corporation has not guaranteed or agreed to guarantee any debts of its shareholders, or of any of its officers, directors or employees, or any other person or entity whatsoever. There are no accounts receivable or transfers between the Sellers and the Corporation that are being questioned from an accounting standpoint or by any regulatory body. Notwithstanding the foregoing, the parties acknowledge that accounts receivable due from Unlimited Holdings in the amount of $36,000.00 appearing on the closing Financial Statements shall, in consideration of the results of operations subsequent to December 31, 1997, be deemed settled at Closing. E. Organization and Standing of the Corporation The Corporation is a corporation duly organized, validly existing and in good standing under the laws of the British Virgin Islands. A copy of the Corporation's Articles of Association and Memorandum of Association and all amendments thereto as of the date of this Agreement, duly certified by the Registrar of Companies, is attached hereto as Exhibit "A". A copy of the Corporation's By-Laws, certified by the Corporation's Secretary, and all amendments thereto as of the date of this Agreement is attached hereto as Exhibit "B". Said copies of the Articles of Association and the Memorandum of Association, and the Bylaws are complete and correct as of the date of this Agreement. The Corporation is qualified to do business and is doing business in the British Virgin Islands, and is qualified to operate and is in good standing in the British Virgin Islands and any other jurisdiction in which the nature of the business conducted by it and the property owned by it makes such qualification necessary. F. Title The Corporation is the owner of and has good and marketable title, free from any and all encumbrances, to all assets of the Corporation except as set forth in Exhibit "C", entitled "Encumbered Assets of the Corporation", dated July 31, 1998. G. Financial Statements The financial statements referenced in Subsections 9G (1) and (2) below which have been delivered to Buyer and attached hereto as Exhibit "D", together with the Closing Financial Statements (as defined in Section 3), once they are delivered to Buyer in accordance with Subsection 6O, (the "Financial Statements") accurately set forth the results of operations of the Corporation for the applicable periods, and such balance sheets present a true and complete statement of the financial condition, assets and liabilities of the Corporation for the applicable periods. There has not been any material adverse change in the financial condition of the Corporation from that stated in the Financial Statements, or in the relationships with the insurance agents or reinsurers with whom the Corporation does business. (1) Statements of profit and loss of the Corporation for the calendar years 1995 through 1997, inclusive, and balance sheets for the Corporation as of December 31 for each of said three (3) years were certified by Price Waterhouse, LLP, a certified public accountant and contain an unqualified expression of opinion that said statements have been prepared in accordance with generally accepted accounting principles consistently applied; and (2) A statement of profit and loss of the Corporation for the calendar quarter ending June 31, 1998, unaudited and verified by the Corporation's President and Treasurer; (3) In the event that Buyer determines that it is required to provide financial statements of the Company in order to comply with federal or state securities law requirements, Seller shall provide, or shall cause the Corporation to provide, to Buyer audited financial statements (including a balance sheet and statements of income and cash flows) for the Corporation for the Corporation's most recent fiscal year and unaudited financial statements for all interim periods specified in Rules 3-01 and 3-02 of Regulation S-X promulgated by the Securities and Exchange Commission (the "SEC"). In addition, Sellers shall direct, or shall cause the Corporation to direct, the Corporation's independent certified public accountants to cooperate with the Buyer for purposes of developing and compiling the financial information desired by Buyer in order to comply with federal or state securities law requirements; H. Compliance with Laws To the best of Seller's knowledge and belief, the Corporation has complied with all applicable laws of the British Virgin Islands and all laws, rules and regulations applicable in the jurisdictions in which it operates and has the following licenses: License dated_____________ issued by the Supervisor of Insurance of the British Virgin Islands with an expiration date of ___________ authorizing the Corporation to engage in the business of an insurance company pursuant to Insurance Business (Special Provisions) Act 1991 of the Laws of the British Virgin Islands, and specific authority to write the following kinds of insurance: ----------------- I. Contracts to Sell or Mortgage Assets or Stock Other than as set forth in the Preliminary Acquisition Agreement, neither the Corporation nor the Sellers have entered into any contract to sell, assign, pledge or mortgage all or any part of the Corporation's Stock or its assets or Sellers' interest in either. J. Contracts (1) All contracts material to the operation of the business of the Corporation -- a full and complete list of which is attached hereto as Exhibit "D.1" -- are in good standing, valid and binding on the parties thereto, free of material default by any party thereto, and will continue to be the valid and binding obligation of the parties thereto in accordance with their respective terms after Closing; (2) prior to the Closing Date Sellers shall have caused the Corporation to deliver to Buyer correct and complete copies of all material contracts; and (3) to the extent that the transaction contemplated by this Agreement shall constitute an assignment of any material contract, which shall require the consent of any party to such contract, such consent shall have been obtained in writing on or before the Closing Date. K. Taxes The Corporation is not and shall not on the Closing Date be in default for the payment of any tax accrued, imposed or assessed by the British Virgin Islands, or any other jurisdiction in which the Corporation does business, including withholding, insurance premium, gross receipts, personal or real property, sales, use, social security and unemployment taxes, fees and obligations. L. Litigation (1) Except as set forth in Exhibit "E" attached hereto, there are no suits, claims, consent decrees or other proceedings in law or equity pending, nor are there regulatory proceedings of any kind pending, or threatened against the Corporation or, with respect to the Corporation's Stock, against the Sellers. (2) Except as set forth in Exhibit "E" attached hereto, there are no suits, claims consent decrees or other proceedings in law or equity pending or contemplated in which the Corporation or, with respect to the Corporation's Stock, in which either of the Sellers is plaintiff or petitioner. M. Judgments There is not now nor shall there be at the time of Closing any judgments, liens or other encumbrances outstanding against the Corporation generally, or, with respect to the Corporation's Stock, against the Sellers. N. Investigations There are no investigations or other regulatory proceedings pending or anticipated against the Corporation in the British Virgin Islands, or in any other jurisdiction in which the Corporation does business, or, with respect to the Corporation's Stock, pending or anticipated against the Sellers. O. Power of Attorney Neither Sellers nor the Corporation have a power of attorney outstanding with respect to the Corporation's Stock or the Corporation's business. P. Directors, Officers and Bank Accounts The Corporation has delivered to the Buyer a true and complete list, attached hereto as Exhibit F as of the date of this Agreement, certified by an authorized officer of the Corporation, setting forth the following: (1) The names and addresses of all the Corporation's directors and officers; and (2) The name, address and account number of each bank in which the Corporation has an account or safe deposit box and the names and addresses of all persons authorized to draw thereon or to have access thereto. Q. Government and Other Consents No consent, authorization, license, permit, registration or approval of, or exemption or other action by, any governmental or public body, commission or authority is required in connection with (a) the execution, delivery and performance by the Corporation or Sellers of this Agreement, or (b) the sale and delivery of the Corporation's Stock to the Buyer. R. Maintain Business as a Going Concern The Sellers and the Corporation will use their best efforts to maintain the Corporation as a going concern operating in its normal course of business as a licensed British Virgin Islands insurance company . S. Minute Books The minute books of the Corporation accurately reflect all material corporate action of its shareholders and Board of Directors. T. Disclosures The Buyer has been informed of all matters concerning or relating to the Corporation or its affairs, assets, and business which are or could be deemed material to making an informed judgment as to whether to enter into and, at Closing, to consummate this Agreement. U. Employee Benefit Plans The Corporation is not bound by or liable under any "employee benefit plan" or "pension plan" as such terms are defined in the United States Employment Retirement Income Security Act of 1974 ("ERISA"), as amended, or under any similar law in any jurisdiction in which the Corporation does business. V. Business Records The books and records of the Corporation, including but not limited to all of the books and records made available to Buyer for inspection during the course of its due diligence investigation pursuant to Section 21 of this Agreement, are maintained at the Corporation's principal place of business located at Heritage Insurance Company, Jackson Building, P.O. Box 3442, Roadtown, Tortola, BVI, and are intact, complete, true and accurate. W. Year 2000 Compliance The status of the Corporation's software and related hardware used in connection with the Corporation's business with respect to their ability to handle date information before, during, and after January 1, 2000, including, but not limited to accepting date-sensitive input, performing date-sensitive calculations, and providing date-sensitive output is reflected in the letter attached hereto as Exhibit H. 10. THE TRUSTS The Sellers warrant and represent as follows, which representations shall survive the Closing for five (5) years: A. Each Seller is a validly formed and existing inter vivos trust under the laws of the Commonwealth of Puerto Rico. B. Walter R. Fournier is the duly appointed, qualified and serving trustee of the Fournier Ruiz Trust, and Alba E. del Valle is the duly appointed, qualified and serving trustee of the Fournier del Valle Trust. C. Each trustee has full authority to act in his/her individual capacity as trustee and to bind his/her respective trust to this Agreement. D. Each trustee has full power and authority under their respective trust instruments to sell the Corporation's Stock and to execute and deliver on behalf of the trust and the beneficiaries thereof all documents and instruments necessary in connection therewith. 11. REPRESENTATION OF BUYER Buyer warrants and represents as follows, which representations shall survive the Closing for five (5) years: A. Right to Buy Buyer has the full power and right to execute this Agreement and has the full right and power to acquire the Corporation's Stock and to issue the Acquisition Shares provided herein. Buyer will present directors' resolutions approving the purchase of the Corporation's Stock and any other corporate documentation reasonably requested by Seller. B. Organization and Standing of the Buyer Buyer is a corporation duly organized, validly existing and in good standing under the laws of the British Virgin Islands. The execution of this Agreement and Buyer's performance thereunder has been duly authorized under the terms of its corporate charter and governing documents and the Closing shall not result in the breach of any contract or other obligations by which the Buyer is bound. 12. COVENANT NOT TO COMPETE A. At Closing the Sellers shall cause Walter R. Fournier, Raymond L. Fournier, Octavio Estrada and W. Ricardo Fournier to enter into appropriate covenants not to compete with the Corporation, which covenants not to compete shall provide that the individual executing said agreement will not directly or indirectly, either as an employee, partner, stockholder, officer, director, proprietor, owner or otherwise, engage or become interested financially or otherwise in any business in competition with the Corporation for five (5) years in jurisdictions in which the Corporation is licensed or qualified or otherwise conducts the business of insurance, specifically excepting, however, from the scope of the agreement the Commonwealth of Puerto Rico. B. If the Buyer sells the Corporation, its stock or all of its assets, the Buyer shall have the right to assign the covenants set forth above. The individuals executing said covenants shall remain bound by the terms of said covenants to any and all subsequent purchasers of the Corporation, its stock or all of its assets. 13. DAMAGE OR DESTRUCTION OF CORPORATION'S ASSETS A. The Corporation shall maintain its assets in the condition as they existed at the time of Buyer's inspection, ordinary wear and tear excepted. B. However, if the Corporation's assets are damaged or destroyed, to the extent of Twenty Percent (20%) or more of the value of such assets as set forth in the Closing Financial Statements, or the Corporation loses insurance accounts to the extent of Fifty Percent (50%) or more of such accounts prior to Closing, Buyer's sole remedy shall be the right to terminate this Agreement without any liability on either Buyer or Sellers. 14. OPINION OF CORPORATION'S COUNSEL On the Closing Date, the Corporation shall deliver an opinion of the Corporation's counsel dated the Closing Date, which shall opine that: A. The Corporation's existence, good standing and authorized and issued stock are as stated in Section 9. B. This Agreement has been duly and validly authorized, executed and delivered by the Corporation and constitutes the valid, binding and enforceable obligation of the Corporation. C. The Corporation has good and marketable title to all of its property and assets covered by this Agreement. D. Counsel does not know or have reasonable cause to know of any claim, litigation, administrative proceeding, regulatory proceeding or governmental investigation pending or threatened against the Corporation or its assets other than those disclosed on Exhibit E. 15. OPINION OF SELLERS' COUNSEL On the Closing Date, the Sellers shall deliver an opinion of the Sellers' counsel dated the Closing Date, which shall opine that: A. Each Seller is a validly formed and existing inter vivos trust under the laws of the Commonwealth of Puerto Rico. B. Walter R. Fournier has full authority to act in his/her individual capacity as trustee of the Fournier Ruiz Trust, and to bind the trust to this Agreement. C. Alba E. del Valle has full authority to act in his/her individual capacity as trustee of the Fournier Del Valle Trust, and to bind the trust to this Agreement. D. The trustees have been duly authorized, and have the legal capacity, to convey the Corporation's Stock and otherwise to perform according to the terms of this Agreement. 16. INDEMNIFICATION OF BUYER BY THE PARTIES A. Indemnification by Seller The Seller hereby agrees to indemnify and hold the Buyer and its successors and assigns harmless in respect of any and all liabilities and expenses (including, without limitation, settlement costs and legal, accounting, and other expenses in connection therewith) incurred by the Buyer and its successors and assigns in connection with any breach of the representations and warranties by Seller set forth in Section 9, of this Agreement, notice of which have been received by Seller within a period of three (3) years from the Closing date. These provisions shall survive the Closing. B. Indemnification by Buyer Buyer hereby agrees to indemnify and hold the Seller and its successors and assigns harmless in respect of any and all liabilities and expenses (including, without limitation settlement costs and legal, accounting and other expenses in connection therewith) incurred by the Seller and its successors and assigns in connection with any breach of the representations and warranties of Buyer set forth in Section 10 of this Agreement, notice of which have been received by Buyer within a period of three (3) years from the Closing Date. These provisions shall survive the Closing. C. Procedure for Indemnification (i) The party claiming indemnification (the "Claimant"), shall give reasonably prompt notice to the party from whom identification is claimed (the "Indemnifying Party") of any claim whether between the parties or brought by a third party, specifying: (a) the factual basis for such claim and (b) the amount of the claim. If the claim relates to an action, suit or proceeding filed by a third party against Claimant, such notice shall be given by Claimant within ten (10) days after written notice of such action, suit or proceeding is received by Claimant. (ii) Following receipt of notice from the Claimant of a claim, the Indemnifying Party shall have 20 days (or such shorter period of time as it required to respond to the subject litigation or proceeding) to make such investigation of the claim as the Indemnifying Party deems necessary or desirable. For the purposes of such investigation, the Claimant agrees to make available to the Indemnifying Party or its authorized representative(s) the information relied upon the Claimant to substantiate the claim. If the Claimant and the Indemnifying Party agree at or prior to the expiration of said 20-day period (or any mutually agreed upon extension thereof) to the validity and amount of such claim, the Indemnifying Party shall immediately pay tot he Claimant the full amount of the claim. If the Claimant and the Indemnifying Party do not agree, the parties shall use their reasonable efforts to negotiate a resolution of such dispute within said period (or any mutually agreed upon extension thereof.) If the parties fail to agree within said period (or any mutually agreed upon extension thereof), the Claimant may seek appropriate legal remedy. (iii) With respect to any claim by a third party as to which the Claimant is entitled to indemnification hereunder, the Indemnifying Party shall have the right at its own expense, to participate in or assume control of the defense of such claim, and the Claimant shall cooperate fully with the Indemnifying Party. If the Indemnifying Party elects to assume control of the defense of any third party claim, the Claimant shall have the right to participate in the defense of such claim and retain separate co-counsel at its own expense; provided (a) if requested to participate at Indemnifying Party's request, (b) if the Claimant reasonably believes that a conflict of interest exists between Claimant and the Indemnifying Party, (c) if the Indemnifying Party does not admit to Claimant right to reimbursement or (d) if the Indemnifying Party fails to promptly assume and prosecute the defense of such third party claim, then the Claimant will be reimbursed for reasonable expenses of its own counsel. The indemnifying Party will select counsel reasonably satisfactory to the Claimant. The Indemnifying Party will not consent to an entry of judgment or settlement without release of liability and, with respect to nonmonetary terms, the Claimant's consent (not to be unreasonably withheld or delayed). (iv) If a claim, whether between the parties or by a third party, requires immediate action the parties will make every effort to reach a decision with respect thereto as expeditiously as possible. (v) If the Indemnifying party does not elect control or otherwise participate in the defense of any third party claim, it shall be bound by the results obtained by the Claimant with respect to such claim. 17. FURTHER ASSURANCES Buyer and Sellers shall execute any and all documents, prior to and after the Closing Date, that are required to implement or confirm the terms and intent of this Agreement. 18. DEFAULT BY THE SELLERS If either Seller shall fail, refuse or be incapable of delivering any of the Corporation's Stock to be sold hereunder, such failure, refusal or incapacity shall not relieve either Seller of any obligation under this Agreement. In such event, the Buyer, at its option, may either purchase the remaining stock which it is entitled to purchase hereunder, or refuse to make such purchase and terminate all of its obligations under this Agreement. 19. CONDUCT OF THE CORPORATION'S BUSINESS PENDING CLOSING The Corporation and Sellers warrant and represent that, until the Closing: A. The business of the Corporation shall be conducted in its ordinary course. B. Without the written consent of the Buyer, the Corporation shall not enter into any contract -- other than insurance contracts issued in the ordinary course of business -- that shall (i) commit the Corporation to an expenditure in excess of Two Thousand Five Hundred ($2,500.00) Dollars, or (ii) be for a term lasting more than ninety (90) days after the Closing Date . C. The Corporation shall comply with all laws, rules and regulations of British Virgin Islands and federal, state, territorial, commonwealth, city, and local governments applicable in any jurisdiction in which it operates. D. The Corporation shall not knowingly violate or default under the terms of any lease or contract used or useful in the conduct of the business of the Corporation. E. The Corporation shall not sell, exchange or otherwise encumber any of the assets of the Corporation in any way whatsoever. F. The Corporation shall not dispose of any of its assets except those consumed in the regular conduct of the business. G. The Corporation shall not increase the compensation payable to any of the employees, officers, directors or consultants of the business, except those specifically agreed by the Buyer to take effect August 1, 1998. H. The Corporation shall not hire additional permanent employees for use in the business or discharge any present employees of the business without prior written notification to the Buyer. I. The Sellers and Corporation shall preserve the goodwill of the Corporation's customers and accounts and others having business relations with the Corporation. J. There shall be no modifications in the financial condition of the Corporation as set forth in the Closing Financial Statements, except as will occur in the ordinary and regular conduct of the Corporation's business. K. There will not be any changes in the legal structure of the Corporation, or its Articles of Association, Memorandum of Association or By-Laws. L. No dividends will be declared or paid on the stock of the Corporation. M. The Corporation shall not enter into or renew any employment contracts without the Buyer' s prior written consent (which shall not be unreasonably withheld). N. The Corporation shall not modify the fringe benefits offered to its employees without the Buyer's prior written consent (which shall not be unreasonably withheld). O. The Corporation shall not grant any bonuses other than routine cash bonuses to employees in accordance with past practice and in a commensurate amount. DC01/210351-1 P. The Corporation shall not engage in any transaction regarding its stock or options with respect thereto different in character or scale than those in which it has customarily engaged without the Buyer's prior written consent (which shall not be unreasonably withheld). Q. The Corporation shall not issue stock or cash dividends on the Corporation's shares. 20. EMPLOYEES OF THE CORPORATION The Sellers and Corporation warrant and represent that: A. The employees of the Corporation do not have any interest in any of the Corporation's property, real or personal or tangible or intangible. B. The attached Exhibit G, entitled, "Employees of the Corporation", dated July 31, 1998 sets forth all employees of the Corporation, their compensation, vacations, holidays and other fringe benefits, and attaches a true and complete copy of any employment contract with respect to said employees (or any of them) by which the Corporation is bound. 21. DUE DILIGENCE AND INSPECTION OF RECORDS The Buyer has the right to inspect, or have inspected by a Certified Public Accountant or other appropriately qualified consultant or advisor appointed by the Buyer and at Buyer's expense, the books and records of the Corporation and the operations of the Corporation. Sellers and the Corporation will make available to Buyer, Buyer's counsel, accountants, and other representatives access to such information and documents regarding the Corporation's business operations and financial records as Buyer may reasonably request including a review of all insurance contracts, accounts, material contracts, licenses, bonds, reports to regulatory authorities, agency agreements, reinsurance agreements, litigation files (including environmental cases, and other run-offs on previous property and casualty coverages) and all regulatory files as to administrative proceedings involving the Corporation and the status of any orders or consent decrees issued in connection therewith, and any audit or other review of the Corporation's financial records. Sellers and the Corporation will authorize the Corporation's attorneys and accountants to discuss freely the affairs of the Corporation with the Buyer and its counsel, accountants or other representatives. In accordance with the Preliminary Acquisition Agreement, Buyer shall keep confidential and cause its agents, attorneys and accountants to keep confidential the information reviewed during due diligence. 22. LABOR RELATIONS The Corporation warrants and represents that there is no employment discrimination, wrongful discharge or other employment complaint or litigation pending and no work stoppage pending or threatened with respect to the business of the Corporation and no applications for certification of a collective bargaining agent or other union organization activity with respect to the Corporation or its employees are pending or anticipated. 23. SURVIVAL OF REPRESENTATIONS AND WARRANTIES The representations and warranties of the Buyer, Sellers and the Corporation herein shall survive the Closing. 24. BINDING ON SUCCESSORS Subject to Section 32, this Agreement shall be binding upon the heirs, executors, administrators, successors and assigns of the Buyer and Sellers. 25. BROKERS AND EXPENSES A. Buyer, Sellers and the Corporation warrant and represent to each other that neither has employed any broker, finder or other person or entity in connection with matters contemplated by this Agreement. B. Buyer and Sellers shall indemnify each other from any claim and any costs associated therewith by any such broker, finder, person or entity. C. Each of the parties hereto shall pay all expenses and disbursements incurred by it, its officers, employees, attorneys, accountants, financial advisers and other agents and representatives in connection with this Agreement and the performance of its obligations hereunder. 26. CHANGES TO SELLERS' WARRANTIES AND REPRESENTATIONS If there are any changes to the Sellers' and the Corporation's warranties or representations set forth in this Agreement, the Sellers or the Corporation, as the case may be, shall notify the Buyer immediately in writing of such changes by certified or registered mail, return receipt requested or by delivery to Buyer's President in person of such writing. 27. SECTION HEADINGS The heading or subheadings of sections contained herein are used for convenience and ease of reference and shall not limit the scope or intent of the section. 28. ARBITRATION AND APPLICABLE LAW Any controversy or claim arising out of or relating to this Agreement or the breach thereof, shall be settled by arbitration to be held in St. Thomas, U.S. Virgin Islands in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Judgment upon the award rendered by the arbitrators shall be final and may be entered in any court having jurisdiction thereof. This Agreement shall be governed by the laws of the U.S. Virgin Islands. 29. DOCUMENTS INCORPORATED BY REFERENCE The following documents are hereby incorporated by reference: A. Exhibit A entitled, "Articles of Association of the Corporation", dated July 31, 1998. B. Exhibit B entitled, "Bylaws of the Corporation", dated July 31, 1998. C. Exhibit C entitled "Encumbered Assets of the Corporation", dated July 31, 1998. D. Exhibit D entitled "Financial Statements of the Corporation", dated July 31, 1998. E. Exhibit D.1 entitled "Material Contracts of the Corporation", dated July 31, 1998. F. Exhibit E entitled, "Litigation of the Corporation and/or Sellers", dated July 31, 1998. G. Exhibit F entitled "Officers, Directors, Bank Accounts and Safe Deposit Boxes of the Corporation," dated July 31, 1998. H. Exhibit G entitled "Employees of the Corporation," dated July 31, 1998. I. Exhibit H entitled "Status of Corporation's Software and Related Hardware", dated July 31, 1998. 30. NOTICES AND CORRESPONDENCE All notices and correspondence shall be sent by either party to the other in all matters dealing with this Agreement to the following addresses: (a) To the Sellers: FOURNIER RUIZ TRUST c/o Walter R. Fournier P.O. Box 9022992 Old San Juan Station San Juan, PR 00902 FOURNIER DEL VALLE TRUST c/o Alba E. Del Valle P.O. Box 9021342 Old San Juan Station San Juan, PR 00902 (b) To the Corporation: Raymond L. Fournier President HERITAGE INSURANCE COMPANY (CARIBBEAN), LIMITED P.O. Box 3442 Roadtown, Tortola British Virgin Islands with a copy to: Maria T. Hodge HODGE & FRANCOIS 1340 Taarneberg St. Thomas, U.S. Virgin Islands 00802 (c) To the Buyer: John P. de Jongh, Jr., President LOCKHART CARIBBEAN CORPORATION No. 44 Estate Thomas P.O. Box 7020 Charlotte Amalie St. Thomas U.S. Virgin Islands 00801 with a copy to: Thomas C. O'Keefe DUDLEY, TOPPER AND FEUERZEIG 1A Frederiksberg Gade St. Thomas, U.S. Virgin Islands 00802 or any other address provided prior written notice is given to the other party. 31. INDEPENDENT COUNSEL The Sellers acknowledge that they have used as their counsel for the negotiation of this Agreement the attorneys also used by the Corporation in the conduct of the Corporation's U.S. Virgin Islands business nevertheless, Sellers are satisfied that they have received proper legal advice in connection with the execution of this Agreement. 32. ASSIGNMENT This Agreement is personal in nature and none of the parties hereto shall, without the written consent of the others, assign or transfer its rights or obligations hereunder to another company or person, except that the Buyer may transfer all or any portion of its rights or obligations hereunder to any of its wholly-owned subsidiaries without such prior written consent. 33. TERMINATION This Agreement may be terminated by either Seller of Buyer, if the terminating party is not then in breach of any material obligation under this Agreement, on written notice to the other at any time prior to Closing as follows: (i) By Buyer or Seller, as the case may be, if the other shall be in material breach of any of the provisions applicable to it hereunder and provided that such material breach shall not have been cured within 30 days of receipt of the breaching party of written notice describing in detail such breach; (ii) By mutual agreement of Buyer and Seller at any time, set forth in writing executed by other party; (iii) By Buyer or Seller, if any of the conditions to their respective performance obligations under Section 7 and 8 are not satisfied on or before October 31, 1998; or (iv) By Buyer or Seller by written notice to the other, if a court of competent jurisdiction or other governmental authority shall have issued an order, decree or ruling or taken any other action (which order, decree or ruling the parties hereto shall use their best efforts to lift), in each case permanently restraining, permanently enjoining or otherwise such order, decree, ruling or other action shall have become final and nonappealable. In the case of termination of this Agreement pursuant to this Section 33, each party will pay all of its costs and expenses and neither will have any further liability or obligation of any nature to the other. IN WITNESS WHEREOF, the parties hereto have executed this Agreement which is effective as of July 31, 1998. CORPORATION: WITNESSES: HERITAGE INSURANCE COMPANY (CARIBBEAN), LIMITED /s/ J. Summer Westman By: /s/ Raymond L. Fournier - ------------------------- ---------------------------------- Raymond L. Fournier, President [Seal] /s/ Lisa N. Sweet _________________________ Attest: _________________________________, Secretary SELLERS: THE FOURNIER DEL VALLE TRUST _________________________ By: /s/ Alba E. Del Valle ---------------------------------- Alba E. Del Valle, Trustee _________________________ [Seal] THE FOURNIER RUIZ TRUST _________________________ By: /s/ Walter R. Fournier --------------------------------- Walter R. Fournier, Trustee - ------------------------- BUYER: LOCKHART CARIBBEAN CORPORATION /s/ J. Summer Westman By: /s/ John P. de Jongh, Jr. - ------------------------- -------------------------------- John P. de Jongh, Jr., President [Seal] /s/ Lisa N. Sweet Attest: /s/ Christine O'Keefe - ------------------------- -------------------------------- Christine O'Keefe, Secretary EX-10.4 5 EXHIBIT 10.4 Exhibit 10.4 FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT dated December 31, 1998 by and between WALTER R. FOURNIER, AS TRUSTEE OF THE FOURNIER RUIZ TRUST, and ALBA E. DEL VALLE, AS TRUSTEE OF THE FOURNIER DEL VALLE TRUST (hereinafter referred to as "Seller"), LOCKHART CARIBBEAN CORPORATION (hereinafter referred to as "Buyer") and HERITAGE INSURANCE COMPANY(CARIBBEAN), LIMITED (hereinafter referred to as the "Corporation"). In consideration of the mutual promises made herein, and other good and valuable consideration, receipt whereof is hereby acknowledged, the Stock Purchase Agreement dated as of July 31, 1998 among the aforesaid parties is hereby amended as follows. I. Subsection 4(A) is hereby deleted and a new Subsection 4(A) and 4(B) is nserted in its place as follows: A. Buyer shall pay the Sellers One Million Two Hundred Fifty Thousand Dollars ($1,250,000.00) as follows: (a) One Hundred Twenty-five Thousand Dollars ($125,000.00) to be paid by certified check or other immediately available funds or wire transfer, at Closing; and (b) One Million One Hundred Twenty-five Thousand Dollars ($1,125,000.00) to be paid no later than March 31, 1999, , with interest thereon at the prime rate published in the Wall Street Journal on the Closing Date. The payment due March 31, 1999 shall be evidenced by a note made payable to Seller, dated the Closing Date, and shall be secured by a security interest in favor of the Seller on all of the stock of the Corporation and Guardian Insurance Company, Inc. The stock of the Corporation shall be held in escrow by Paul Hoffman, Esq. pursuant to the terms of an escrow agreement satisfactory to Buyer and Seller, until payment in full of the note. II. Subsection 5(B)(1) is hereby deleted and a new Subsection 5(B)(1) is inserted in its place as follows: (1) At the Closing the Seller shall deliver to Paul Hoffman, Esq., the Corporation Stock Certificates, and to the Buyer (or to the designated wholly-owned subsidiary of the Buyer) all other items set forth in Section 6 and Buyer shall deliver to Seller the Acquisition Shares as set forth in Section 4. III. The first sentence of Section 6 is hereby deleted and a new first sentence of Section 6 is inserted in its place as follows: The originals of all documents set forth below shall be delivered by the Sellers or the Corporation to Buyer (or to a designated wholly-owned subsidiary of Buyer) at the Closing except for items B, C, D, G, H, K, O, and P, which shall be provided to Buyer at least ten (10) business days before the Closing, and except for item A which shall be delivered in escrow to Paul Hoffman, Esq. at the Closing. IV. Except as herein amended, all other terms and conditions of the Stock Purchase Agreement remain in full force and effect according to their terms. B. Recission of Transactions. As provided in Section 8F hereof, Seller's obligation to close is conditioned upon Buyer having simultaneously closed the transaction pursuant to which it acquires the shares of stock (the "Guardian Stock") of Guardian Insurance Company, Inc . ("Guardian"). The parties herein agree as follows: (a) Upon payment of the Note by Buyer, Seller shall provide notice of such fact immediately to the escrow agent and the escrow agent shall immediately transfer the Corporation's stock and the Guardian Stock to Buyer; (b) If Buyer defaults under the Note, Seller shall give written notice of the default to the escrow agent and to Buyer. Buyer shall have thirty (30) days to provide the escrow agent with notice that it disputes the existence of the default, or that the default has been remedied. If Buyer fails to provide such notice, then: (i) the transactions contemplated pursuant to this Stock Purchase Agreement and the Guardian Stock Purchase Agreement shall be deemed rescinded; (ii) the escrow agent will transfer the ownership of the Corporation's Stock to Seller and of the Guardian Stock to Unlimited Holdings, Inc.; (iii) the pledge agreement concerning Lockhart Caribbean Corporations Stock referred to in Section 32D of the Guardian Stock Purchase Agreement shall be terminated and the pledged Lockhart Caribbean Corporation's Stock shall be delivered to Buyer; (iv) the Shareholders will retain the $125,000 payment received at closing of the Heritage Stock Purchase Agreement; and (v) the parties herein shall be released of any further liability or obligation of any nature to each other under this Stock Purchase Agreement and/or under the Heritage Stock Purchase Agreement. IN WITNESS WHEREOF, the parties hereto have executed this First Amendment to Stock Purchase Agreement on the date set forth above. CORPORATION: WITNESSES: HERITAGE INSURANCE COMPANY (CARIBBEAN), LIMITED /s/ Thomas C. O'Keefe By: /s/ Raymond L. Fournier - ------------------------- -------------------------------- Raymond L. Fournier, President [Seal] /s/ William McConnell Attest: /s/ Ocavid Estrada, _________________________ Secretary SELLERS: THE FOURNIER DEL VALLE TRUST /s/ Angela Hoban By: /s/ Alba E. Del Valle - ------------------------- --------------------------------- Alba E. Del Valle, Trustee /s/ Barbara Mignon Weatherly [Seal] - ------------------------- THE FOURNIER RUIZ TRUST /s/ Angela Hoban By: /s/ Walter R. Fournier - ------------------------- -------------------------------- Walter R. Fournier, Trustee /s/ Barbara Mignon Weatherly - ------------------------- BUYER: LOCKHART CARIBBEAN CORPORATION /s/ Willaim McConnell By: /s / John P. de Jongh, Jr. - ------------------------- ------------------------------ John P. de Jongh, Jr., President /s/ Thomas C. O'Keefe [Seal] _________________________ Attest: /s/ Christine O'Keefe -------------------------------- Christine O'Keefe, Secretary EX-99.1 6 EXHIBIT 99.1 PRESS RELEASE Exhibit 99.1 January 4, 1999 LOCKHART CARIBBEAN CORPORATION No. 44 Estate Thomas, P.O. Box 7020 St. Thomas, U.S. Virgin Islands 00801 phone (340) 776-1900 fax (340) 776-1940 www.lockhart.com Contact: Christine O'Keefe email: okeefe@lockhart.com FOR IMMEDIATE RELEASE: LOCKHART CARIBBEAN EXPANDS ITS FINANCIAL SERVICES BY ACQUIRING TWO INSURANCE COMPANIES (St. Thomas, USVI) John P. de Jongh, Jr., President and Chief Operating Officer of Lockhart Caribbean Corporation ("Lockhart Caribbean"), announced today that Lockhart Caribbean completed its acquisitions of all the outstanding common stock of Guardian Insurance Company, Inc. ("Guardian"), a U.S. Virgin Islands-based insurance company, and of Heritage Insurance (Caribbean) Limited ("Heritage"), a British Virgin Islands incorporated company, on December 31, 1998. The two companies were acquired for a combination of cash and stock of Lockhart Caribbean. "The purchase of Guardian and Heritage is another important step in Lockhart Caribbean's diversification into the financial services business in the U.S.V.I. and throughout the Eastern Caribbean" stated John P. de Jongh, Jr. "These acquisitions achieve several objectives for Lockhart Caribbean. First and most important, Lockhart Caribbean has substantially increased its financial services arm, supplementing its historic real estate business. This addition, from the start, is expected to more than double our revenues on an annualized basis, with a significant contribution to net income as well. Second, the acquisition of Heritage significantly advances our geographic diversification into the Eastern Caribbean, which continues to be a key part of Lockhart Caribbean's long-term strategy. Third, Guardian and Heritage, as part of Lockhart Caribbean, will work in tandem with Premium Finance Company (Caribbean) Limited and Premium Finance Company (E.C.) Limited, the insurance premium finance companies we acquired in 1998, serving the U.S. Virgin Islands, the British Virgin Islands and various other islands in the Eastern Caribbean," continued Mr. de Jongh. Mr. de Jongh noted that Guardian and Heritage are now wholly-owned subsidiaries of Lockhart Caribbean Insurance Corporation, the newly formed insurance division of Lockhart Caribbean. "Lockhart Caribbean is one of the oldest and largest real estate owner/developer businesses in the U.S. Virgin Islands. Joining our company's 115 year old history and success with the impressive records of Guardian and Heritage firmly establishes Lockhart Caribbean as what we, its management team, envision it to be in the 21st century," stated Wesley S. Williams, Jr., Esq., Co- Chairman of the Board and Co-Chief Executive Officer of Lockhart Caribbean. "We plan to grow Guardian and Heritage, to expand the range of insurance products that they offer, and to increase significantly the number of markets in which they operate. In this way, Lockhart Caribbean will continue in the next century as a strong diversified company, with large and valuable holdings of real estate, with strong revenue growth generated through its financial services businesses," continued Mr. Williams. George H. T. Dudley, Esq., Co-Chairman of the Board and Co-Chief Executive Officer of Lockhart Caribbean, stated that Lockhart Caribbean will continue to maintain its commercial property ownership and development business in the U.S. Virgin Islands. Mr. Dudley noted that the management of the two insurance companies would remain in place following the acquisitions: "We look forward to working with the senior management of Guardian and Heritage - Raymond L. Fournier, Octavio Estrada, Warner Bowers, Karen John and Celso Vargas. We see great potential in the merging of the Lockhart Caribbean management team's expertise in law, banking and insurance, and our real property assets, with the lifelong careers and expertise of Guardian's and Heritage's team in the insurance field, including their potential for addressing the large, under-served markets of the U.S. Virgin Islands and beyond - markets encompassing both English and Spanish speaking populations," continued Mr. Dudley. The Board of Directors of Lockhart Caribbean Insurance Corporation will be comprised of Messrs. Williams, Dudley, and de Jongh, as well as Mr. Raymond L. Fournier, Ms. Nancy S. Brodie, and Mr. Donald R. Weisberg, Executive Vice President of Lockhart Caribbean since 1998. Mr. Williams, a partner in Covington and Burling in Washington, D.C., has an advanced degree in insurance law from Columbia University in New York City, was an adjunct professor of finance and financial services at Georgetown Law, and is senior member of the Board of Penn Mutual Life Insurance Company, for which he has served as trustee and consultant for 20 years. Mr. Dudley is the founder of the U.S. Virgin Islands' largest law firm, Dudley, Topper and Feuerzeig, and his personal practice focuses on consumer finance and banking. Prior to joining Lockhart Caribbean, Mr. de Jongh served as Commissioner of Finance for the Government of the Virgin Islands, as Executive Assistant to the Governor of the U.S. Virgin Islands and was a Vice President with Chase Manhattan Bank. Mr. Raymond L. Fournier has been President of Guardian since 1996, and has been President and Chairman of the Board of Directors of Heritage since 1993, and has served as a member of the board of Directors of Unlimited Holdings, Inc. since 1994. Mr. Fournier, who is a native of Puerto Rico, received a BA Degree in economics and finance from Clark University, and trained in reinsurance at Cologne Reinsurance Company, Cologne, Germany, and D.G. Durham Ltd., at Lloyd's of London. Ms. Brodie has been employed by Penn Mutual Life Insurance Company since 1975, and has served as its Executive Vice President and Chief Financial Officer since 1994. Ms. Brodie is a Certified Public Accountant, a Member of the Pennsylvania Institute of Certified Public Accountants, a Series 7 licensed NYSE General Securities Representative, a Fellow of Life Insurance Management Institute (FLMI), and is currently enrolled in Certified Life Underwriter (CLU) studies at The American College. Ms. Brodie holds a BBA degree in accounting, having attended the University of Dayton and Cleveland State University, and also an MBA degree earned in the Executive MBA program of Columbia University. Mr. Weisberg has specialized in investing, investment banking and capital markets, with extensive experience in financial services and real estate. Mr. Weisberg has served as a Director of Salomon Brothers Inc and a Vice President of Goldman, Sachs & Co. He has been a member of the boards of GMM Investors, Petroleum Industry Research Foundation, Inc., Presidio Capital Corp., Rhode Island Investment Acquisition Corporation, Inc. and Sovlink-American Corporation and has been a member of the Investment Committee of New York UJA Federation. Mr. Weisberg received an A.B. degree from Wesleyan University and a J.D. degree from Harvard University. Guardian was formed in 1984, and is authorized to write personal and commercial lines of insurance in the U.S. Virgin Islands. "This is an exciting time for our companies, and we couldn't be more pleased or optimistic about the futures of Guardian and Heritage" noted Mr. Fournier. "We believe that now we can become a greater asset to the Virgin Islands' community, offering better and more comprehensive insurance products, and more choice and competitive prices to the people of these islands," continued Mr. Fournier. Guardian's primary lines of business include automobile physical damage and automobile liability coverage. Guardian has offices in St. Thomas and St. Croix, and is one of the oldest domestic insurance companies in the U.S. Virgin Islands. Heritage was formed in 1992, and is organized under the laws of the British Virgin Islands, as a property and casualty insurer authorized to originate risks located in the British Virgin Islands, the Turks and Caicos Islands, and Anguilla, W.I. Heritage has offices in the British Virgin Islands and the Turks and Caicos Islands. Guardian and Heritage have 27 employees in the aggregate. * * * * Lockhart Caribbean, headquartered on St. Thomas, is the largest owner of shopping centers in the U.S. Virgin Islands, and is one of the largest owners of undeveloped land on St. Thomas, variously zoned for commercial and residential development. Lockhart Caribbean, through various wholly-owned subsidiaries, owns, operates, and develops shopping centers and other commercial real estate, primarily on the islands of St. Thomas and St. Croix. Lockhart Caribbean currently owns and operates seven shopping centers and three commercial parks, and has additional projects in various stages of development. Lockhart Caribbean also owns Premium Finance Company (Caribbean) Limited and its wholly-owned subsidiary, PFC-EC, which, together, engage in insurance premium financing in the U.S. and British Virgin Islands and throughout the Eastern Caribbean. Information about Lockhart Caribbean - its history, properties, current operations, plans for the future, and its management team - can be found on the company's website: www.lockhart.com. Inquiries can be made directly to Lockhart Caribbean's Vice President for Investor Relations, Christine O'Keefe, at Lockhart Caribbean's offices, telephone no. 340-776-1900, facsimile no. 340- 776-1940, email lockhart@lockhart. com. * * * * This press release contains forward-looking statements that are subject to risks and uncertainties. Lockhart Caribbean's actual results could differ materially from those discussed in such forward- looking statements, due to various factors which are outside the company's control. Factors that could affect performance include our ability to successfully integrate Guardian and Heritage into Lockhart Caribbean, our ability to finance growth and expansion, risks associated with operations and investments outside the United States and its territories and the risk of unforeseen adverse economic developments generally. -----END PRIVACY-ENHANCED MESSAGE-----