Document:

exv10w3

 

Exhibit 10.3

STOCK INVESTMENT AGREEMENT

     This STOCK INVESTMENT AGREEMENT (this “Agreement”), dated as of August 27,
2004, between GAINSCO, INC., a Texas corporation (“GNAC”), and First Western
Capital, LLC, an Arizona limited liability company (“Reis LLC”) of which James
R. Reis (“Reis”) is the sole manager and member:

     WHEREAS, Reis LLC desires to purchase shares of Common Stock, and GNAC
desires to issue additional shares of Common Stock to Reis LLC, on the terms
and conditions hereinafter set forth.

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, GNAC
and Reis LLC hereby agree as follows:

ARTICLE I.

DEFINITIONS AND
USAGE

     1.1 Definitions. As used in this Agreement, the following terms have the
following meanings:

     “Affiliate” means, with respect to any Person, any other Person that
directly, or indirectly, through one or more intermediaries controls, is
controlled by or is under common control with such specified Person. For this
purpose the term “control” (including the terms “controlling”, “controlled by”
and “under common control with”) shall mean the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
a Person whether through the ownership of voting securities, by contract, or
otherwise.

     “Agreement” has the meaning set forth in the first paragraph hereof.

     “Applicable Law” means any statute, law, rule, policy, guideline or
regulation or any judgment, order, writ, injunction, or decree of any
Governmental Authority to which a specified Person or property is subject.

     “Associate” means, with respect to any Person, (i) any corporation or
entity (other than GNAC or a Subsidiary of GNAC in the case of Associates of
Reis LLC) of which such Person is an officer or partner or is, directly or
indirectly, the beneficial owner of 10 percent or more of any class of equity
securities, (ii) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves as trustee or
in a similar fiduciary capacity, and (iii) any relative or spouse of such
Person, or any relative of such spouse, who has the same home as such Person or
who is a director or officer of GNAC or any of its Subsidiaries.

     “Board” means the board of directors of GNAC.

     “Breach” means any violation or breach of, any misrepresentation or
inaccuracy in, any default under, or any failure to perform or comply with any
representation, warranty, covenant, obligation, or other provision of this
Agreement.

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     “Business Day” means any day other than a Saturday or Sunday on which
national banks are open for business in Dallas, Texas and New York, New York.

     “Capitalization Date” has the meaning set forth in Section 4.2.

     “Closing” has the meaning set forth in Section 3.1.

     “Closing Date” has the meaning set forth in Section 3.2.

     “Code” means the Internal Revenue Code of 1986, as amended.

     “Common Stock” means the common stock, par value $.10 per share, of GNAC.

     “Compensation Committee” means the Compensation Committee of the Board,
consisting of Sam Rosen, Harden H. Wiedemann and John H. Williams, or any
successor committee comprised of independent directors (within the meaning of
Section 303A of the NYSE Listed Company Manual) of GNAC.

     “Confidential Information” means information received at any time by any
member of the Reis Group from GNAC that is not generally known or which would
logically be considered confidential or proprietary, or which would do GNAC
harm if divulged, or which is marked “Confidential Information.”

     “Damages” has the meaning set forth in Section 10.2.

     “Demand Registration” has the meaning set forth in Section 6.4(a).

     “Encumbrances” means liens, charges, pledges, options, mortgages, deeds of
trust, security interests, claims, restrictions (whether on voting, sale,
transfer, disposition, or otherwise), easements, and other encumbrances of
every type and description, whether imposed by law, agreement, understanding,
or otherwise, other than restrictions imposed under applicable securities laws.

     “Environmental Law” means any law, regulation, decree, judgment, permit or
authorization relating to the environment, including, without limitation,
pollution, contamination, cleanup and protection of the environment.

     “Environmental Liabilities and Costs” means all damages, penalties or
cleanup costs assessed or levied pursuant to any Environmental Law.

     “Equity Securities” means any capital stock of GNAC, any securities
directly or indirectly convertible into, or exercisable or exchangeable for any
capital stock of GNAC, or any right, option, warrant or other security which,
with the payment of additional consideration, the expiration of time or the
occurrence of any event shall give the holder thereof the right to acquire any
capital stock of GNAC or any security convertible into or exercisable or
exchangeable for, any capital stock of GNAC.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended, and all of the rules and regulations promulgated thereunder.

     “ERISA Affiliate” means any trade or business, whether or not
incorporated, which together with a Person and its Subsidiaries would be deemed
a “controlled group” within the meaning of Section 4001(a)(14) of ERISA.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended.

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     “Fairness Opinion” has the meaning set forth in Section 7.3.

     “Final Date” means February 1, 2005.

     “GAAP” means generally accepted accounting principles for financial
reporting in the U.S., consistently applied.

     “GMSP” means Goff Moore Strategic Partners, L.P.

     “GMSP Exchange Agreement” means the Securities Exchange Agreement of even
date herewith between GMSP and GNAC.

     “GNAC” has the meaning set forth in the introductory paragraph of this
Agreement.

     “GNAC Annual Statements” has the meaning set forth in Section 4.9.

     “GNAC Applicable Insurance Department” means as to (i) the GNAC Insurance
Subsidiary located in Oklahoma, the Oklahoma Department of Insurance, and (ii)
the GNAC Insurance Subsidiary located in Texas, the Texas Department of
Insurance.

     “GNAC Authorizations” has the meaning set forth in Section 4.7.

     “GNAC Business” means the business conducted by GNAC and GNAC Subsidiaries
taken as a whole.

     “GNAC Disclosure Letter” means the disclosure letter delivered by GNAC to
Reis LLC concurrently with the execution and delivery of this Agreement.

     “GNAC Employee Benefit Plans” has the meaning set forth in Section
4.20(a).

     “GNAC 2003 Form 10-K Report” means the Form 10-K Report filed by GNAC with
the SEC for GNAC’s fiscal year ended December 31, 2003.

     “GNAC Financial Statements” has the meaning set forth in Section 4.10.

     “GNAC Insurance Subsidiaries” means MGA Insurance Company, Inc., a Texas
corporation; and General Agents Insurance Company of America, Inc., an Oklahoma
corporation.

     “GNAC Material Adverse Effect” means any condition, circumstance or
development having (i) an adverse effect on the ability to conduct business,
the financial condition, reserves, or the results of operations of GNAC and its
Subsidiaries, in each case that is material to GNAC and its Subsidiaries taken
as a whole, or (ii) a material adverse effect on the ability of GNAC to
consummate the Transactions; provided that GNAC Material Adverse Effect does
not include any such condition, circumstance or development which generally
adversely affects the U.S. economy, U.S. securities markets or the insurance
industry or to the extent it is attributable to (x) the accretion of discount,
or the declaration or payment of dividends, on Preferred Stock, (y) expenses
incurred by GNAC in respect of the Transactions, or (z) changes in accumulated
comprehensive income (loss) attributable to realized or unrealized gains or
losses on securities; and provided further that a decrease (excluding amounts
attributable to items referenced in clauses (x), (y) or (z) of the foregoing
proviso) of the total shareholders’ equity of GNAC below the amount thereof at
June 30, 2004 reflected in the GNAC Financial Statements would be material for
the purposes of defining GNAC Material Adverse Effect.

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     “GNAC Material Contracts” means:

	 	(i)	 	any written agreement, contract, lease,
commitment, understanding, instrument or obligation to which
GNAC or any of its Subsidiaries is a party or by which GNAC or
any of its Subsidiaries or any of their respective properties
may be bound upon which any substantial part of the GNAC
Business is dependent or which, if Breached, could reasonably
be expected to have a GNAC Material Adverse Effect;
	 
	 	(ii)	 	any written agreement, contract, lease,
commitment, understanding, instrument or obligation which
provides for the sale or lease after the date hereof of any of
the assets of GNAC or its Subsidiaries other than in the
ordinary course of business; or
	 
	 	(iii)	 	any agreement filed as an exhibit to the GNAC
2003 Form 10-K Report.

     “GNAC Options” means options granted under any of the GNAC Stock Plans and
related option agreements.

     “GNAC Pension Plan” has the meaning set forth in Section 4.20(d).

     “GNAC Quarterly Statement” has the meaning set forth in Section 4.9.

     “GNAC Required Consents” has the meaning set forth in Section 4.6(c).

     “GNAC Required Statutory Approvals” has the meaning set forth in Section
4.5.

     “GNAC SEC Documents” has the meaning set forth in Section 4.10.

     “GNAC Shareholder Approval” means approval of the Sale by (i) the holders
of not less than a majority of the outstanding Voting Stock (including shares
of Voting Stock held by Interested Shareholders) present in person or by proxy
at the Shareholder Meeting and voting for or against, or expressly abstaining
from voting on, the Transactions and (ii) the holders of not less than a
majority of the outstanding Common Stock (excluding all shares of Voting Stock
held by Interested Shareholders) present in person or by proxy at the
Shareholder Meeting and voting for or against the Transactions.

     “GNAC Significant Subsidiaries” means the GNAC Insurance Subsidiaries;
National Specialty Lines, Inc., a Florida corporation; DLT Insurance Adjusters,
Inc., a Florida corporation; and GAINSCO Service Corp., a Texas corporation.

     “GNAC Stock Plans” means GNAC’s 1990 and 1995 Stock Option Plans and
GNAC’s 1998 Long-Term Incentive Plan.

     “GNAC Subsidiaries” means the Subsidiaries of GNAC.

     “GNAC Subsidiary Securities” has the meaning set forth in Section 4.4.

     “good faith”, when used in respect of any action, means that the action
was taken (i) with honesty of intention, (ii) without knowledge of
circumstances which ought to put the Person taking such action on inquiry, and
(iii) without intention to take any improper advantage of another.

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     “Governmental Authority” means any U.S. federal, state, local, foreign,
supernational or supranational court or tribunal, governmental, regulatory or
administrative agency, department, bureau, authority, commission or arbitral
panel.

     “Interested Shareholder” means (i) GMSP, (ii) Stallings, (iii) any
director or executive officer (as defined in Rule 3b-7 under the Exchange Act)
of GNAC, or (iv) any Affiliate or Associate of any Person referenced in clauses
(i), (ii) or (iii).

     “IRS” means the Internal Revenue Service.

     “Material Activity” has the meaning set forth in Section 6.4(d).

     “Material Adverse Market Condition” shall mean the occurrence of any of
the following: (i) a general moratorium in commercial banking activities in
the State of Texas has been declared by either Federal or Texas State
authorities; (ii) a reduction of more than 30% in the Standard & Poor’s 500
Index from the amount thereof at the close of business on the date of this
Agreement; or (iii) the formal declaration by the United States of a national
emergency or war.

     “NYSE” means the New York Stock Exchange.

     “Permitted Assignee” has the meaning set forth in Section 11.3.

     “Permitted Encumbrances” means (i) liens for Taxes not yet due and
payable; (ii) mechanics’, carriers’, workers’, repairers’ and other similar
liens arising or incurred in the ordinary course of business relating to
obligations as to which there is no default on the part of the obligor; (iii)
liens arising in the ordinary course of business incident to the purchase and
sale of securities and other investments or the holding thereof by banks,
brokerage firms, custodians and intermediaries for the benefit of GNAC or its
Subsidiaries; (iv) exceptions which do not materially affect the use or
occupancy of the real property covered thereby; and (v) such other recorded
liens, imperfections in title, charges, easements, restrictions and
encumbrances which do not materially affect the use or occupancy of the
property.

     “Person” means any individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including any
Governmental Authority.

     “Preferred Stock” means the authorized preferred stock, par value $100.00
per share, of GNAC.

     “Preferred Preemptive Rights” means the preemptive rights of the holders
of the Series A Preferred Stock and Series C Preferred Stock under the Prior
Agreements and the rights of Stallings and his assigns under the Prior Series B
Agreement.

     “Prior Agreements” means the Prior Series A Agreements and the Prior
Series C Agreement.

     “Prior Series A Agreements” means (i) the Securities Purchase Agreement
dated June 29, 1999 between GMSP and GNAC; and (ii) the letter dated March 23,
2001 from GNAC to GMSP concerning the redemption of the Series A Preferred
Stock.

     “Prior Series B Agreement” means the Securities Purchase Agreement dated
as of February 26, 2001 between Stallings and GNAC (as amended by the First
Amendment to Securities Purchase Agreement dated as of March 23, 2001)

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     “Prior Series C Agreement” means the Securities Purchase Agreement dated
as of February 26, 2001 between GMSP and GNAC (as amended by the First
Amendment to Securities Purchase Agreement dated as of March 23, 2001).

     “Proceedings” means all complaints, claims, prosecutions, indictments,
proceedings, actions, suits, investigations, and inquiries by or before any
arbitrator or Governmental Authority, whether civil, criminal, administrative,
arbitrative or investigative.

     “Proxy Statement” has the meaning set forth in Section 5.8.

     “Purchased Securities” has the meaning set forth in Section 2.1(a).

     “Registration Expenses” has the meaning set forth in Section 6.4(f).

     “Registration Statement” has the meaning set forth in Section 6.4(b).

     “Reis” means James R. Reis.

     “Reis Group” means Reis and Reis LLC together with their respective
Affiliates, Associates and employees.

     “Reis Investment Agreement” means the Stock Investment Agreement of even
date herewith between GNAC and Reis LLC.

     “Reis LLC” has the meaning set forth in the introductory paragraph of this
Agreement.

     “Reis LLC Material Adverse Effect” means any condition, circumstance or
development having a material adverse effect on the ability of Reis LLC to
consummate the Transactions.

     “Sale” has the meaning set forth in Section 2.1(a).

     “SAP” means the insurance accounting practices required or permitted by
the GNAC Applicable Insurance Department applicable to the specified Person(s)
consistently applied by such Person(s).

     “SEC” means the Securities and Exchange Commission.

     “Securities Act” means the Securities Act of 1933, as amended.

     “Series A Preferred Stock” means the Series A Convertible Preferred Stock,
par value $100.00 per share, of GNAC.

     “Series A Warrant” means the Series A Warrant expiring October 4, 2004 to
purchase an aggregate of 1,550,000 shares of Common Stock at an exercise price
of $2.25 per share.

     “Series B Exchange Value” has the meaning set forth in Section 2.1(a).

     “Series B Preferred Stock” means the Series B Convertible Redeemable
Preferred Stock, par value $100.00 per share, of GNAC.

     “Series B Warrant” means the Series B Warrant expiring October 4, 2006 to
purchase an aggregate of 1,550,000 shares of Common Stock at an exercise price
of $2.5875 per share.

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     “Series C Preferred Stock” means the Series C Redeemable Preferred Stock,
par value $100.00 per share, of GNAC.

     “Shareholder Meeting” means the special meeting of the holders of the
GNAC’s Common Stock at which the Transactions are submitted to shareholders for
their approval.

     “Special Committee” means the Special Committee of the Board, consisting
of Harden H. Wiedemann, John H. Williams and Joel C. Puckett, and of which Sam
Rosen is an advisory member, or any successor committee comprised of
independent and disinterested directors of GNAC.

     “Stallings” means Robert W. Stallings.

     “Stallings Group” means Stallings together with his Affiliates, Associates
and employees.

     “Stallings Investment Agreement” means the Stock Investment Agreement of
even date herewith between Stallings and GNAC.

     “Stallings Warrant” means the Warrant expiring March 23, 2006 to purchase
an aggregate of 1,550,000 shares of Common Stock at an exercise price of $2.25
per share.

     “Subsidiary” means, with respect to any Person, any corporation or other
entity (including partnerships and other business associations) in which the
Person directly or indirectly owns at least a majority of the outstanding
voting securities or other equity interests having the power, under ordinary
circumstances, to elect a majority of the directors, or otherwise to direct the
management and policies, of such corporation or other entity.

     “Superior Proposal” has the meaning set forth in Section 6.6(b).

     “Survival Date” has the meaning set forth in Section 10.1.

     “Taxes” means all federal, state, local and foreign income, franchise,
property, sales, use, excise and other taxes, including without limitation
obligations for withholding taxes from payments due or made to any other Person
and any interest, penalties or additions to taxes.

     “Tax Returns” means all original and amended returns, declarations,
certifications, statements, notices, elections, estimates, reports, claims for
refund and information returns relating to or required to be filed or
maintained in connection with any Tax, together with all schedules and
attachments thereto.

     “TBCA” means the Texas Business Corporation Act, as amended.

     “Third Party Transaction” means any transaction between GNAC or any of its
Subsidiaries and any Person or Persons other than any member of the Reis Group,
the Stallings Group or the GMSP Group (i) that would involve the acquisition,
directly or indirectly, by such Person or Persons in the aggregate of (x)
Equity Securities that would represent 10% or more, or the right to acquire 10%
or more, of the Common Stock of GNAC outstanding on the date hereof, (y) any
other class or classes or series of Equity Securities, or (z) assets of GNAC
(including the capital stock of any Subsidiaries of GNAC) or any of its
Subsidiaries that generate or constitute more than 10% of the revenues, income
or assets of GNAC and its Subsidiaries, or (ii) that by its terms would prevent
the consummation of the Transactions.

     “Transactions” means the Sale and the other transactions contemplated by
this Agreement.

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     “Transaction Proposal” has the meaning set forth in Section 6.6(a).

     “U.S.” means the United States of America.

     “Voting Stock” means the outstanding shares of capital stock entitled to
vote in the election of directors of GNAC, including the Common Stock, the
Series A Preferred Stock and the Series B Preferred Stock. References in this
Agreement to numbers of shares of Voting Stock are references to the combined
number of shares of Common Stock outstanding on the date of determination and
the number of shares of Common Stock then issuable upon conversion of the
Series A Preferred Stock and the Series B Preferred Stock. On the date of this
Agreement there were 28,703,069 shares of Voting Stock outstanding and entitled
to vote generally.

     1.2 Usage. In this Agreement, unless a clear contrary intention appears:

          (a) the singular number includes the plural number and vice versa;

          (b) reference to any Person includes such Person’s successors and assigns
but, if applicable, only if such successors and assigns are not prohibited by
this Agreement, and reference to a Person in a particular capacity excludes
such Person in any other capacity or individually;

          (c) reference to any gender includes each other gender or, in the case of
an entity, the neuter;

          (d) reference to any agreement, document or instrument means such
agreement, document or instrument as amended or modified and in effect from
time to time in accordance with the terms thereof;

          (e) reference to any law means such law as amended, modified, codified,
replaced or reenacted, in whole or in part, and in effect from time to time,
including rules and regulations promulgated thereunder and reference to any
section or other provision of any law means that provision of such law from
time to time in effect and constituting the substantive amendment,
modification, codification, replacement or reenactment of such section or other
provision;

          (f) “hereunder”, “hereof”, “hereto” and words of similar import shall be
deemed references to this Agreement as a whole and not to any particular
Article, Section or other provision thereof;

          (g) “including” (and with correlative meaning “include”) means including
without limiting the generality of any description preceding such term;

          (h) “or” is used in the inclusive sense of “and/or”;

          (i) with respect to the determination of any period of time, “from” means
“from and including” and “to” means “to but excluding”;

          (j) references to documents, instruments or agreements shall be deemed to
refer as well to all addenda, exhibits, schedules or amendments thereto;

          (k) captions in this Agreement are for convenience only and in no way
define, limit or describe the scope or intent of any provisions of this
Agreement, nor in any way affect any such provisions; and

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          (l) all accounting terms not defined in this Agreement shall have the
respective meanings determined under GAAP.

ARTICLE II.

TERMS OF THE TRANSACTION

     2.1 The Sale. At the Closing, and on the terms and subject to the
conditions set forth in this Agreement, (i) GNAC shall issue and deliver to
Reis LLC 6,729,871 shares of Common Stock (the “Purchased Securities”) and (ii)
in exchange for the Purchased Securities Reis LLC shall pay GNAC in immediately
available funds the sum of $4,037,922.60 (the “Sale”).

ARTICLE III.

CLOSING AND CLOSING DATE

     3.1 The Closing. The closing of the Transactions (the “Closing”) shall
take place (i) at the offices of Jackson Walker L.L.P., 901 Main Street, Suite
6000, Dallas, Texas 75202 at 10:00 a.m., local time, on the third Business Day
following the satisfaction or waiver (subject to Applicable Law) of each of the
conditions to the obligations of the parties set forth in Articles VII and VIII
hereof, or (ii) at such other time or place or on such other date as the
parties hereto shall agree.

     3.2 Closing Date. The date on which the Closing is required to take place
is herein referred to as the “Closing Date”. All Closing transactions shall be
deemed to have occurred simultaneously.

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES OF GNAC

     GNAC represents and warrants to Reis LLC the following:

     4.1 Organization and Qualification. Each of GNAC and the GNAC Significant
Subsidiaries is a corporation or other entity duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation or
organization, and has corporate or other power and authority to own all of its
properties and assets and to carry on its business as now being conducted.
Each of GNAC and the GNAC Significant Subsidiaries is duly qualified and in
good standing to transact business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be in good
standing or to be duly qualified would not, individually or in the aggregate,
have or reasonably be expected to have a GNAC Material Adverse Effect.

     4.2 Capitalization. The authorized capital stock of GNAC consists of
250,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock.
As of the close of business on June 30, 2004 (the “Capitalization Date”):
21,169,736 shares of Common Stock were issued and outstanding; 31,620 shares of
Series A Preferred Stock were issued and outstanding; 3,000 shares of Series B
Preferred Stock were issued and outstanding; 3,000 shares of Series C Preferred
Stock were issued and outstanding; 844,094 shares of Common Stock were held in
GNAC’s treasury; there were outstanding GNAC Options with respect to 723,268
shares of Common Stock and (excluding the Stallings Warrant, the Series A
Warrant and the Series B Warrant) there were no warrants outstanding. Since
the Capitalization Date, except as disclosed in Section 4.2 of the GNAC
Disclosure Letter, GNAC (i) has not issued any shares of Common Stock other
than upon the exercise or vesting of GNAC Options outstanding on such date as
set forth in Section 4.2 of the GNAC Disclosure Letter; (ii) has not granted
any options or rights to purchase or acquire shares of Common Stock under the
GNAC Stock Plans or otherwise; and (iii) has not split, combined or
reclassified any of its shares of capital stock. All of the outstanding shares
of Common

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Stock have been duly authorized and validly issued and are fully paid and
nonassessable and, except for the Preferred Preemptive Rights, are free of
preemptive rights. Except as disclosed in this Section 4.2 or in Section 4.2
of the GNAC Disclosure Letter or in the GNAC 2003 Form 10-K Report, there are
no outstanding Equity Securities. Except as (i) provided in this Agreement,
the Stallings Investment Agreement, the GMSP Exchange Agreement, the Prior
Agreements and the respective Statements of Resolution designating the
Preferred Stock, or (ii) disclosed in Section 4.2 of the GNAC Disclosure
Letter, there are no outstanding obligations of GNAC or any Subsidiary to
repurchase, redeem or otherwise acquire any Equity Securities.

     4.3 Authority Relative to This Agreement.

          (a) GNAC has all requisite power and authority to enter into this
Agreement and, subject to the GNAC Shareholder Approval, the GNAC Required
Statutory Approvals and the GNAC Required Consents, to consummate the
Transactions. The execution and delivery of this Agreement and, subject to
GNAC Shareholder Approval, the consummation by GNAC of the Transactions have
been duly authorized by all necessary corporate action on the part of GNAC,
including that the directors of GNAC (other than Hugh M. Balloch, John C. Goff,
and Stallings) have unanimously approved and authorized the consummation of the
Transactions by GNAC. This Agreement has been duly and validly executed and
delivered by GNAC and, assuming the due authorization, execution and delivery
hereof by Reis LLC, constitutes the valid and binding obligation of GNAC,
enforceable against GNAC in accordance with its terms, except as would be
limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or other similar laws affecting the enforcement of creditors’ rights
generally and except that the availability of equitable remedies, including
specific performance, may be subject to the discretion of any court before
which any proceeding therefor may be brought.

          (b) When issued and delivered pursuant to this Agreement against payment
therefor, the Purchased Securities will have been duly authorized, issued and
delivered and will constitute valid and legally binding obligations of GNAC
entitled to the benefits provided therein. When issued and delivered pursuant
to the Agreement against payment therefor, the Purchased Securities will be
fully paid and nonassessable. Except for the Preferred Preemptive Rights
(which have been waived), the issuance of the Purchased Securities will not be
subject to any preemptive or similar rights.

     4.4 Subsidiaries. GNAC owns, directly or indirectly, of record all the
outstanding shares of capital stock of each of its Subsidiaries, free and clear
of any Encumbrance of any kind, and there are no irrevocable proxies with
respect to any such shares. Except for securities owned by GNAC or as
disclosed in this Section or in Section 4.4 of the GNAC Disclosure Letter or
the GNAC SEC Documents, there are no outstanding (i) shares of capital stock or
other voting securities of any Subsidiary of GNAC; (ii) securities of GNAC or
any of its Subsidiaries convertible into or exchangeable for shares of capital
stock or other voting securities or ownership interests in any such Subsidiary;
or (iii) options or other rights to acquire from GNAC or any of its
Subsidiaries, or other obligations of GNAC or any of its Subsidiaries to issue,
any capital stock, voting securities or other ownership interests in, or any
securities convertible into or exchangeable for any capital stock, voting
securities or ownership interests in, any of the Subsidiaries of GNAC, or to
grant, extend or enter into any subscription, warrant, right, convertible or
exchangeable security or other similar agreement or commitment (the items in
clauses (i), (ii) and (iii) being referred to collectively as “GNAC Subsidiary
Securities”). There are no outstanding obligations of GNAC or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any outstanding GNAC
Subsidiary Securities. Except to the extent that any of the GNAC Significant
Subsidiaries is a “significant subsidiary” as such term is used in Rule 1-02(w)
of Regulation S-X as promulgated under the Securities Act, GNAC does not have a
“significant subsidiary” as such term is used in Rule 1-02(w) of Regulation S-X
as promulgated under the Securities Act.

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     4.5 Statutory Approvals. Except for filings under the Exchange Act, with
the GNAC Applicable Insurance Departments and as otherwise set forth in Section
4.5 of the GNAC Disclosure Letter or otherwise contemplated by this Agreement,
no declaration, filing or registration with, or notice to or authorization,
consent or approval of any Governmental Authority is necessary for the
execution and delivery of this Agreement by GNAC or the consummation by GNAC of
the Transactions, the failure to obtain, make or give which could reasonably be
expected to have a GNAC Material Adverse Effect (the “GNAC Required Statutory
Approvals”), it being understood that references in this Agreement to
“obtaining” such GNAC Required Statutory Approvals shall mean making such
declarations, filings or registrations; giving such notice; obtaining such
consents or approvals; and having such waiting periods expire as are necessary
to avoid a violation of law.

     4.6 Non-Contravention. Subject to obtaining the GNAC Required Statutory
Approvals and the receipt of the GNAC Shareholder Approval, the execution and
delivery of this Agreement by GNAC do not, and the consummation of the
Transactions will not, result in any violation by GNAC or any of its
Subsidiaries under any provisions of:

          (a) the Articles of Incorporation, Bylaws or similar governing documents
of GNAC or any of its Subsidiaries;

          (b) any statute, law, ordinance, rule, regulation, judgment, decree,
order, injunction, writ, permit or license of any Governmental Authority
applicable to GNAC or any of its Subsidiaries or any of their respective
properties or assets; or

          (c) subject to obtaining the third-party consents or other approvals set
forth in Section 4.6 of the GNAC Disclosure Letter (the “GNAC Required
Consents”), any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, GNAC Employee Benefit Plan, lease or
other instrument, obligation or agreement of any kind to which GNAC or any of
its Subsidiaries is now a party or by which it or any of its properties or
assets may be bound or affected;

excluding from the foregoing clauses (b) and (c) such violations as could not,
in the aggregate, reasonably be expected to have a GNAC Material Adverse
Effect.

     4.7 Authorizations. Except as described in Section 4.7 of the GNAC
Disclosure Letter or the GNAC SEC Documents, GNAC and each of the GNAC
Insurance Subsidiaries have obtained all licenses, certificates of authority,
permits, authorizations, orders and approvals of, and have made all
registrations or filings with, all Governmental Authorities as required in
connection with the conduct of its business as currently conducted, and with
respect to which a failure to so obtain would have a GNAC Material Adverse
Effect (collectively, the “GNAC Authorizations”). All such GNAC Authorizations
are valid and in full force and effect. Except as would not cause a GNAC
Material Adverse Effect, no notice that GNAC or any of the GNAC Insurance
Subsidiaries is in violation of any such GNAC Authorization has been received
by GNAC or any of the GNAC Insurance Subsidiaries, or to the knowledge of GNAC,
recorded or published, and no Proceeding is pending or, to the knowledge of
GNAC threatened, to revoke or limit any of them such as reasonably would be
expected to cause a GNAC Material Adverse Effect.

     4.8 Compliance with Laws. Except as set forth in the GNAC Disclosure
Letter or the GNAC SEC Documents or GNAC Financial Statements, and in addition
to the representations and warranties contained in Section 4.7 relating to GNAC
Authorizations, to the knowledge of GNAC, GNAC and its Subsidiaries are in
compliance with all Applicable Laws applicable to GNAC and its Subsidiaries,
the failure to comply with which, individually or in the aggregate, could
reasonably be expected to have a GNAC Material Adverse Effect. Furthermore,
except as is disclosed in the GNAC Disclosure Letter or the GNAC SEC Documents
or GNAC Financial Statements, or as would not cause a

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GNAC Material Adverse Effect, to the knowledge of GNAC, neither GNAC nor
any of its Subsidiaries has received any notice alleging non-compliance with
any of the aforementioned Applicable Laws.

     4.9 Statutory Financial Statements. GNAC has heretofore made (or will
make prior to Closing) available to Reis LLC copies of the annual statements of
the GNAC Insurance Subsidiaries as filed with the GNAC Applicable Insurance
Department (the “GNAC Annual Statements”) for the years ended December 31,
2001, 2002, and 2003 and copies of the quarterly statement of the GNAC
Insurance Subsidiaries to the GNAC Applicable Insurance Department for the
quarter ended June 30, 2004 (and any subsequent quarterly statements filed
between the date hereof and the Closing Date) (the “GNAC Quarterly Statement”).
The balance sheets of each of the GNAC Insurance Subsidiaries as of December
31, 2003, and the related statements of income and cash flow for the year then
ended, included in the GNAC Annual Statement for the year ended December 31,
2003, were prepared in conformity with SAP, except as otherwise noted therein,
for the period covered thereby and fairly present the statutory financial
position of such GNAC Insurance Subsidiary as at the date thereof and the
results of operations and cash flow of such GNAC Insurance Subsidiary for the
period then ended. The balance sheets of the GNAC Insurance Subsidiaries and
the related statements of income and cash flow included in the GNAC Quarterly
Statements were prepared in conformity with SAP applicable to interim financial
statements consistently applied during the period involved, except as otherwise
noted therein, subject to normal year-end adjustments, and fairly present the
statutory financial position of such GNAC Insurance Subsidiary as at the dates
thereof and the results of operations and cash flow of such GNAC Insurance
Subsidiary for the periods then ended. Without limiting the generality of the
foregoing and subject to the cautionary statements regarding reserves contained
under “BUSINESS—Unpaid Claims and Claim Adjustment Expenses” and elsewhere in
the GNAC 2003 Form 10-K Report, the reserves carried on the GNAC Annual
Statement for the year ended December 31, 2003 and the GNAC Quarterly Statement
for the payment of estimated claims and claim adjustment expenses for both
reported and unreported claims were (i) reported in accordance with SAP and
(ii) believed by GNAC at that time to be adequate to cover the amounts GNAC
expected the GNAC Insurance Subsidiaries to pay on incurred claims based on
facts and circumstances then known. The admitted assets of each GNAC Insurance
Subsidiary as determined under Applicable Laws are in an amount at least equal
to the minimum amounts required by Applicable Laws.

     4.10 GNAC SEC Documents and GNAC Financial Statements. Except as set
forth in Section 4.10 of the GNAC Disclosure Letter or as could not reasonably
be expected to have a GNAC Material Adverse Effect, GNAC and the GNAC Insurance
Subsidiaries have timely filed all reports, registration statements proxy
statements, and other filings, together with any amendments required to be made
with respect thereto, that were required to be filed with the SEC after
December 31, 2000 and prior to the date of this Agreement (collectively, the
“GNAC SEC Documents”). GNAC has or will have made available to Reis LLC prior
to the Closing copies of each registration statement, offering circular,
report, definitive proxy statement, information statement, and correspondence
filed, furnished or submitted by it with or to the SEC with respect to periods
since January 1, 2001 through the date of this Agreement, and will promptly
provide Reis LLC with each such registration statement, offering circular,
report, definitive proxy statement, information statement, and correspondence
filed, furnished or submitted by it with or to the SEC after the date hereof,
each in the form (including exhibits and any amendments thereto) filed with the
SEC.

     As of their respective dates, and except as set forth in Section 4.10 of
the GNAC Disclosure Letter, each of the GNAC SEC Documents, including the
financial statements, exhibits and schedules thereto, filed or circulated prior
to the date hereof complied (and each of the documents filed by GNAC with the
SEC after the date of this Agreement will comply) in all material respects as
to form with applicable federal securities laws and did not (or, in the case of
documents filed after the date of this Agreement, will not) contain any untrue
statement of a material fact or omit to state a material fact

-12-

 

required to be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.

     Each of GNAC’s consolidated statements of condition or balance sheets
included in or incorporated by reference into the GNAC SEC Documents, including
the related notes and schedules, fairly presented in accordance with GAAP the
consolidated financial position of GNAC and its Subsidiaries as of the date of
such statement of condition or balance sheet and each of the consolidated
statements of income, cash flows and shareholders’ equity included in or
incorporated by reference into GNAC SEC Documents, including any related notes
and schedules (collectively, the foregoing financial statements and related
notes and schedules are referred to as the “GNAC Financial Statements”), fairly
presented the consolidated results of operations, cash flows and shareholders’
equity, as the case may be, of GNAC and its Subsidiaries for the periods set
forth therein (subject, in the case of unaudited interim statements, to normal
year-end audit adjustments and the absence of certain notes), in each case in
accordance with GAAP except as may be noted therein or in Section 4.10 of the
GNAC Disclosure Letter.

     4.11 Investments. Except as disclosed in Section 4.11 of the GNAC
Disclosure Letter or the GNAC SEC Documents, GNAC and each of its Subsidiaries
has good and marketable title, free and clear of all Encumbrances other than
Permitted Encumbrances, to all of its investment assets reflected in the GNAC
Quarterly Statement for June 30, 2004, or acquired after June 30, 2004, other
than investment assets that (i) have been sold or disposed of in the normal
course of business or (ii) have been pledged for the benefit of policyholders
in accordance with the requirements of state Governmental Authorities. All such
investments are properly treated and valued as admitted assets in accordance
with the regulations of the GNAC Applicable Insurance Department and the
National Association of Insurance Commissioners.

     4.12 Absence of Changes. Except as contemplated by this Agreement or as
set forth in the GNAC Disclosure Letter or the GNAC SEC Documents, since
December 31, 2003, the GNAC Business has been operated in the ordinary and
usual course and neither GNAC nor any of any of its Subsidiaries has entered
into any agreement that would require GNAC or any of its Subsidiaries to
operate the GNAC Business other than in the ordinary and usual course.

     4.13 No Undisclosed Liabilities. To the knowledge of GNAC, none of GNAC
or any of its Subsidiaries has any liabilities or obligations except (i) as and
to the extent set forth in the GNAC Financial Statements or contemplated in the
notes thereto or in the GNAC SEC Documents, (ii) liabilities and obligations
incurred in the ordinary course of business since the date of the GNAC
Financial Statements, (iii) as would not have a GNAC Material Adverse Effect,
(iv) as part of the transactions contemplated in this Agreement, the GMSP
Exchange Agreement or the Stallings Investment Agreement, or (v) as set forth
in the GNAC Disclosure Letter.

     4.14 Litigation. Except as set forth in Section 4.14 of the GNAC
Disclosure Letter or the GNAC SEC Documents or GNAC Financial Statements, as of
the date of this Agreement there are no Proceedings pending or, to the
knowledge of GNAC, threatened, against GNAC or any of its Subsidiaries, which
(i) have, or, if adversely determined, could reasonably be expected to have a
GNAC Material Adverse Effect, (ii) state a claim against GNAC or its officers
or directors for a violation of securities laws, or (iii) seek specifically to
prevent, restrict or delay consummation of the Transactions or fulfillment of
any of the conditions of this Agreement. Except as set forth in Section 4.14
of the GNAC Disclosure Letter or the GNAC SEC Documents or the GNAC Financial
Statements, there are no orders, writs, injunctions, judgments, and decrees of
any Governmental Authority outstanding against GNAC or any of its Subsidiaries,
except for such orders, writs, injunctions, judgments and decrees as could not
individually or in the aggregate reasonably be expected to have a GNAC Material
Adverse Effect. Except for regular periodic assessments in the ordinary course
of business or assessments based on developments which are publicly known
within the insurance industry, to the knowledge of GNAC, no claim or

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assessment is pending or threatened against any GNAC Insurance Subsidiary
by (i) any state insurance guaranty associations in connection with such
association’s fund relating to insolvent insurers or (ii) any assigned risk
plan or other involuntary market plan which if determined adversely could,
individually or in the aggregate, be reasonably expected to result in a cost to
GNAC or any of its Subsidiaries of an amount in excess of $500,000, which in
either case individually or in the aggregate could reasonably be expected to
have a GNAC Material Adverse Effect.

     4.15 Insurance Business. All policies of insurance issued by the GNAC
Insurance Subsidiaries and in force on the date hereof are, and on the Closing
Date will be, to the extent required by Applicable Law, in all material
respects on forms approved by applicable insurance regulatory authorities or
which have been filed with and not objected to by such authorities within the
period provided for such objection, except as could not reasonably be expected
to have a GNAC Material Adverse Effect. Any premium rates required to be filed
with or approved by insurance regulatory authorities have been so filed or
approved and the premiums charged conform thereto in all material respects,
except as could not reasonably be expected to have a GNAC Material Adverse
Effect.

     4.16 Regulatory Filings. GNAC has heretofore made available to Reis LLC
all material registrations, filings or submissions (other than policy filings
or rate filings) made by or on behalf of GNAC or any of the GNAC Insurance
Subsidiaries with or to any insurance regulatory authority and all reports of
examination issued by any insurance regulatory authority since January 1, 2000.
Except as disclosed in Section 4.16 of the GNAC Disclosure Letter, GNAC and
the GNAC Insurance Subsidiaries have filed all reports, statements, documents,
registrations, filings or submissions required to be filed with any
Governmental Authority, except with respect to which the failure to file
individually or in the aggregate does not adversely affect their respective
licenses or authority as an insurance company in any jurisdiction or does not
otherwise have a GNAC Material Adverse Effect. All such registrations, filings
and submissions were in material compliance with applicable law when filed, and
no material deficiencies have been asserted with respect thereto.

     4.17 Reinsurance, Coinsurance and Underwriting Management.

          (a) Except as set forth in Section 4.17 of the GNAC Disclosure Letter or
the GNAC SEC Documents or GNAC Financial Statements, (i) none of the GNAC
Insurance Subsidiaries, nor to the knowledge of GNAC, any other party thereto,
is in default in any material respect under any material coinsurance,
reinsurance, excess insurance, ceding of insurance, assumption of insurance,
facultative or indemnification insurance treaties, agreements or arrangements,
including any treaty, agreement or arrangement by, with or through a
reinsurance broker or intermediary, (ii) all such treaties, agreements or
arrangements are in full force and effect, (iii) GNAC has no knowledge that any
such treaties, agreements or arrangements will not be renewed on acceptable
terms that are at least as favorable to GNAC as the terms as they exist on the
date of this Agreement, (iv) no such treaty, agreement or arrangement contains
any provision to the effect that the other party thereto may terminate the
treaty or agreement by reason of the Transactions, and (v) to the knowledge of
GNAC there is no reason to believe that the financial condition of any other
party to any such treaty, agreement or arrangement is impaired such that a
default thereunder may reasonably be anticipated.

          (b) Except as set forth in Section 4.17 of the GNAC Disclosure Letter or
the GNAC SEC Documents or GNAC Financial Statements, (i) GNAC has no knowledge
that any other party to any material agreements to which GNAC or any of its
Subsidiaries is or was a party pursuant to which GNAC or any of its
Subsidiaries served or serves as, or received or receives services from, a
managing general agent, underwriting manager, third party administrator or risk
manager or pursuant to which any of them continues to be obligated to provide
any services, intends to terminate or does not intend to renew any such
agreement on substantially the same terms as presently exist, except those
agreements which have

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terminated but for which GNAC or any of its Subsidiaries maintains
servicing obligations, (ii) all such material agreements are in full force and
effect, (iii) neither GNAC nor any of its Subsidiaries, nor to the knowledge of
GNAC, any other party thereto, is in default as to any provision of any such
agreement, (iv) no such agreement contains any provision to the effect that the
other party thereto may terminate the agreement by reason of the Transactions,
and (v), to the knowledge of GNAC, there is no reason to believe that the
financial condition of any other party to any such agreement is impaired such
that a default thereunder may reasonably be anticipated.

     4.18 Labor Matters.

          (a) There are no labor unions or other organizations representing,
purporting to represent or attempting to represent any employees of GNAC or its
Subsidiaries.

          (b) Except as set forth in Section 4.18 of the GNAC Disclosure Letter or
the GNAC SEC Documents or GNAC Financial Statements, there are no controversies
pending or, to the knowledge of GNAC, threatened between GNAC or any of its
Subsidiaries and any of its employees, except as could not be reasonably be
expected to have a GNAC Material Adverse Effect.

     4.19 Environmental Compliance. Except as disclosed in Section 4.19 of the
GNAC Disclosure Letter or the GNAC SEC Documents, to the knowledge of GNAC, (i)
the assets, properties, businesses and operations of GNAC and its Subsidiaries
are in compliance with applicable Environmental Laws, except for such instances
of non-compliance as would not individually or in the aggregate have a GNAC
Material Adverse Effect; (ii) GNAC and its Subsidiaries have obtained and, as
currently operating are in compliance with, all permits necessary for any
Environmental Law for the conduct of the business and operations of GNAC and
its Subsidiaries in the manner now conducted, except for such instances of
non-compliance as would not individually or in the aggregate have a GNAC
Material Adverse Effect; and (iii) neither GNAC nor any of its Subsidiaries nor
any of their respective assets, properties, businesses or operations has
received or is subject to any outstanding order, decree, judgment, complaint,
agreement, claim, citation, notice, or proceeding indicating that GNAC or any
of its Subsidiaries is or may be liable for (A) a violation of any
Environmental Law or (B) any Environmental Liabilities and Costs, except, in
each case, for such liabilities as would not individually or in the aggregate
have a GNAC Material Adverse Effect.

     4.20 Employee Benefit Plans.

          (a) Section 4.20(a) of the GNAC Disclosure Letter includes a complete list
of all material employee benefit plans, contracts, programs, policies,
practices, and other arrangements providing benefits to any employee or former
employee or beneficiary or dependent thereof, sponsored or maintained by GNAC
or its Subsidiaries or to which GNAC or its Subsidiaries contribute or are
obligated to contribute (collectively, “GNAC Employee Benefit Plans”). “GNAC
Employee Benefit Plans” includes all employee welfare benefit plans within the
meaning of Section 3(1) of ERISA and all employee pension benefit plans within
the meaning of Section 3(2) of ERISA. Except as set forth in Section 4.20(a)
of the GNAC Disclosure Letter, GNAC or its Subsidiaries may amend or terminate
any GNAC Employee Benefit Plan without incurring any material liability
thereunder.

          (b) With respect to each GNAC Employee Benefit Plan, there has been made
(or will be made prior to the Closing) available to Reis LLC a true, correct
and complete copy of: (i) all plan documents, trust agreements, and insurance
contracts and other agreements relating to funding vehicles; (ii) the three
most recent annual reports on Form 5500 and accompanying schedules, if any,
filed with the IRS; (iii) the current summary plan description, if any; (iv)
the most recent annual financial report, if any, filed with the IRS; and (v)
the most recent determination letter, if any, issued by the IRS. All
financial

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statements for each GNAC Employee Benefit Plan have been prepared in all
material respects in compliance with applicable regulations under ERISA.

          (c) All GNAC Employee Benefit Plans which are “employee benefit plans,” as
defined in Section 3(3) of ERISA, in all material respects are in compliance
with and have been administered in compliance with all applicable requirements
of law, including the Code and ERISA, and all unpaid contributions required to
be made to each such plan under the terms of such plan, ERISA or the Code as of
the date hereof have been fully reflected in the appropriate GNAC Financial
Statements except where the failure to do so could not reasonably be expected
to have a GNAC Material Adverse Effect. There is no lien arising under ERISA
against any of the assets of GNAC or any of its Subsidiaries. There are no
threatened or pending claims by or on behalf of the GNAC Employee Benefit
Plans, or by any participant therein, alleging a breach or breaches of
fiduciary duties or violations of Applicable Laws which could result in
liability on the part of GNAC, its officers or directors, or such GNAC Employee
Benefit Plans under ERISA or any other Applicable Law, and to the knowledge of
GNAC, there is no basis for any such claim.

          (d) Section 4.20(d) of the GNAC Disclosure Letter identifies each GNAC
Employee Benefit Plan that is intended to be a “qualified plan” satisfying the
requirements of Section 401(a) of the Code (a “GNAC Pension Plan”). A
favorable IRS determination letter as to the qualification of each GNAC Pension
Plan under Section 401(a) of the Code has been issued and remains in effect and
the related trust has been determined to be exempt from taxation under Section
501(a) of the Code and any amendment made or event relating to such GNAC
Pension Plan subsequent to the date of such determination letter has not
adversely affected the qualified status of such GNAC Pension Plan. No issue
concerning qualification of any GNAC Pension Plan is pending before or, to the
knowledge of GNAC, threatened by, the IRS. Each GNAC Pension Plan has been
administered in accordance with its terms, except for those terms which are
inconsistent with the changes required by the Code and any regulations and
rulings promulgated thereunder for which changes are not yet required to be
made, in which case each GNAC Pension Plan has been administered in accordance
with the provisions of the Code and such regulations and rulings, and neither
GNAC and its Subsidiaries, nor any fiduciary of any GNAC Pension Plan has done
anything which would adversely affect the qualified status of any GNAC Pension
Plan or related trust. GNAC and its Subsidiaries have performed all obligations
required to be performed by them under, and are not in default under or in
violation of, the terms of any of the GNAC Employee Benefit Plans in any manner
that could reasonably be expected to have a GNAC Material Adverse Effect. None
of GNAC or its Subsidiaries or any other “disqualified person” (as defined in
Section 4975 of the Code) or “party-in-interest” (as defined in Section 3(14)
of ERISA) has engaged in any “prohibited transaction” (as such term is defined
in Section 4975 of the Code or Section 406 of ERISA), which could subject any
GNAC Employee Benefit Plan (or its related trust), GNAC or its Subsidiaries or
any officer, director or employee of GNAC or its Subsidiaries to the tax or
penalty imposed under Section 4975 of the Code or Section 502(i) of ERISA; and,
to the knowledge of GNAC, all “fiduciaries,” as defined in Section 3(21) of
ERISA, with respect to the GNAC Employee Benefit Plans have complied in all
material respects with the requirements of Section 404 of ERISA.

          (e) None of the GNAC Employee Benefit Plans is subject to Section 412 of
the Code. None of GNAC, its Subsidiaries or ERISA Affiliates maintains, or has
any liability with respect to, a GNAC Pension Plan that is subject to Title IV
of ERISA.

          (f) GNAC and its Subsidiaries have no liability for life, health, medical
or other welfare benefits to former employees or beneficiaries or dependents
thereof, except for health continuation coverage as required by Section 4980B
of the Code or Part 6 of Title I of ERISA, and at no expense to GNAC or its
Subsidiaries.

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     4.21 Tax Matters. GNAC and each of its Subsidiaries has filed all Tax
Returns required to be filed by it, or requests for extensions to file such Tax
Returns have been timely filed and granted and have not expired, except for
such failures to file as would not individually or in the aggregate have a GNAC
Material Adverse Effect. GNAC and each of its Subsidiaries has paid (or GNAC
has paid on its behalf) or made provision for all Taxes shown as due on such
Tax Returns. The most recent GNAC Financial Statements contained in the GNAC
SEC Documents reflect adequate reserves for all Taxes payable by GNAC and its
Subsidiaries for all taxable periods and portions thereof accrued through the
date of such financial statements. To the knowledge of GNAC, no material
deficiencies or adjustments exist or have been asserted with respect to Taxes
of GNAC or any of its Subsidiaries and neither GNAC nor any of its Subsidiaries
has received notice that it has not filed a Tax Return or paid any Taxes
required to be filed or paid which could reasonably be expected to have a GNAC
Material Adverse Effect. No audit, examination, investigation, action, suit,
claim or proceeding relating to the determination, assessment or collection of
any Tax of GNAC or any of its Subsidiaries is currently in process or pending,
except as disclosed in Section 4.21 of the GNAC Disclosure Letter. No waiver
or extension of any statute of limitations relating to the assessment or
collection of any Tax of GNAC or any of its Subsidiaries is in effect.

     4.22 Brokers. Except for such Persons as set forth in Section 4.22 of the
GNAC Disclosure Letter, no broker, finder, or other investment banker or other
Person is or will be entitled to receive any brokerage, finder’s or other fee
or commission (any such fees or commissions shall be borne by GNAC) in
connection with this Agreement or the Transactions based upon agreements made
by or on behalf of GNAC or any of its Subsidiaries.

     4.23 Prior Private Offerings. Since December 31, 2000: (i) all
securities offered or sold by GNAC which were not registered pursuant to the
Securities Act and applicable state securities laws, were offered or sold
pursuant to valid exemptions from the Securities Act and applicable state
securities laws and (ii) no private offering memorandum or other information
furnished (whether in writing or orally) to any offeree or purchaser of such
securities, at the time of delivery of such private offering memorandum or
other information, contained any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary in order
to make the statements contained therein, in light of the circumstances under
which they were made, not misleading.

     4.24 Private Offering of the Securities. GNAC has not offered, and will
not offer, the Purchased Securities or any part thereof or any similar
securities for issue or sale to, or has solicited or will solicit any offer to
acquire any of the same from, any person so as to bring the issuance and sale
of the Purchased Securities within the provisions of Section 5 of the
Securities Act.

     4.25 Disclosure Controls; Reports of Evidence of a Material Violation.

          (a) The management of GNAC has (x) implemented disclosure controls and
procedures (as defined in Rule 13a-15(e) of the Exchange Act) to ensure that
material information relating to GNAC, including its consolidated Subsidiaries,
is made known to the management of GNAC by others within those entities, and
(y) has disclosed, based on its most recent evaluation, to GNAC’s outside
auditors and the audit committee of the Board (A) all significant deficiencies
and material weaknesses in the design or operation of internal control over
financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which
are reasonably likely to adversely affect GNAC’s ability to record, process,
summarize and report financial data and (B) any fraud, whether or not material,
that involves management or other employees who have a significant role in
GNAC’s internal control over financial reporting. A summary of any of those
disclosures made by management to GNAC’s auditors and audit committee is set
forth in Section 4.25(a) of the GNAC Disclosure Letter.

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          (b) Since December 31, 2001 and except as set forth in the GNAC Disclosure
Letter, the GNAC SEC Documents or the GNAC Financial Statements, (x) neither
GNAC nor any of its Subsidiaries nor, to the knowledge of the officers of GNAC,
any director, officer, employee, auditor, accountant or representative of GNAC
or any of its Subsidiaries has received or otherwise had or obtained knowledge
of any material complaint, allegation, assertion or claim, whether written or
oral, regarding the accounting or auditing practices, procedures, methodologies
or methods of GNAC or any of its Subsidiaries or their respective internal
accounting controls, including any material complaint, allegation, assertion or
claim that GNAC or any of its Subsidiaries has engaged in questionable
accounting or auditing practices, and (y) no attorney representing GNAC or any
of its Subsidiaries, whether or not employed by GNAC or any of its
Subsidiaries, has reported evidence of a material violation of U.S. securities
laws or regulations, breach of fiduciary duty or similar violation by GNAC or
any of its officers, directors, employees or agents to the Board of GNAC or any
committee thereof or to any director or officer of GNAC.

ARTICLE V.

REPRESENTATIONS AND WARRANTIES OF REIS LLC

     Reis LLC represents and warrants to GNAC that:

     5.1 Authority Relative to This Agreement. Reis LLC has all requisite
power and authority to enter into this Agreement and to consummate the
Transactions. This Agreement has been duly and validly executed and delivered
by Reis LLC and, assuming the due authorization, execution and delivery hereof
by GNAC, constitutes the valid and binding obligation of Reis LLC, enforceable
against Reis LLC in accordance with its terms, except as would be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or
other similar laws affecting the enforcement of creditors’ rights generally and
except that the availability of equitable remedies, including specific
performance, may be subject to the discretion of any court before which any
proceeding therefor may be brought.

     5.2 Statutory Approvals. Except for (i) filings under the Exchange Act
and with the GNAC Applicable Insurance Departments, and (ii) as otherwise
contemplated by this Agreement, no declaration, filing or registration with, or
notice to or authorization, consent or approval of any Governmental Authority
is necessary for the execution and delivery of this Agreement by Reis LLC or
the consummation by Reis LLC of the Transactions, the failure to obtain, make
or give which could reasonably be expected to have a Reis LLC Material Adverse
Effect.

     5.3 Non-Contravention. The execution and delivery of this Agreement by
Reis LLC does not, and the consummation of the Transactions will not, result in
any violation by Reis LLC under any provisions of:

          (i) the articles of organization, operating agreement or
regulations, or similar governing documents of Reis LLC;

          (ii) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any
Governmental Authority applicable to Reis LLC or any of its
properties or assets; or

          (iii) any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which Reis LLC
is now a party or by which it or any of its properties or assets
may be bound or affected;

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excluding from the foregoing clauses (ii) and (iii) such violations as could
not, in the aggregate, reasonably be expected to have a Reis LLC Material
Adverse Effect.

     5.4 Litigation. There is no Proceeding pending or, to the knowledge of
Reis LLC, threatened against Reis LLC that questions the validity of this
Agreement or any action to be taken by Reis LLC in connection with this
Agreement.

     5.5 Brokers. Except for such Persons as set forth in Section 4.22 of the
GNAC Disclosure Letter (the expenses of which shall be borne by GNAC), all
negotiations relative to this Agreement and the Transactions have been carried
out by Reis LLC directly with GNAC, without the intervention of any Person on
behalf of Reis LLC or its Affiliates in such manner as to give rise to any
valid claim by any Person against Reis LLC or GNAC or any of their respective
Subsidiaries or Affiliates for a finder’s fee, brokerage commission, or similar
payment.

     5.6 Securities Matters.

          (a) Reis LLC understands and acknowledges that the Purchased Securities
have not been registered under the Securities Act, or the securities laws of
any state or foreign jurisdiction and, unless so registered, may not be
offered, sold, transferred, or otherwise disposed of except pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and any applicable securities laws of any
state or foreign jurisdiction.

          (b) Each of Reis LLC and Reis is an “accredited investor” (as defined in
Rule 501(a) of the Regulation D under the Securities Act). Reis is the sole
manager and member of Reis LLC, and is the beneficial owner of all of the
outstanding limited liability company interests of Reis LLC. Reis LLC was
formed on May 4, 2001.

          (c) Each of Reis LLC and Reis (i) has knowledge and experience in
financial and business matters such that it is capable of evaluating the merits
and risks of acquiring the Purchased Securities and (ii) is able to bear the
economic risk of an investment in the Purchased Securities for an indefinite
period of time, including the risk of a complete loss of any such investment.

          (d) Reis LLC is acquiring the Purchased Securities for its own account for
investment purposes and not with a view to, or for offer or sale for GNAC in
connection with, the distribution or resale thereof.

          (e) Reis LLC understands and agrees that the Purchased Securities are
being sold in a transaction not involving any public offering within the
meaning of the Securities Act, and that the Purchased Securities may not be
offered, sold, or otherwise transferred to, or for the account or benefit of,
any Person except as permitted in the following sentence. Reis LLC agrees that
if Reis LLC should sell or otherwise transfer any Purchased Securities, it will
do so only (i) pursuant to an exemption from the registration requirements of
the Securities Act (if available) or if the Securities Act does not apply or
(ii) pursuant to an effective registration statement under the Securities Act,
and Reis LLC further agrees to provide to any Person purchasing any of the
Purchased Securities from it a notice advising such purchaser that resales of
the Purchased Securities are restricted as stated herein.

          (f) Reis LLC understands that the certificates for the Purchased
Securities purchased pursuant to this Agreement will bear a legend
substantially to the following effect:

          THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED PURSUANT TO A STOCK INVESTMENT AGREEMENT DATED AS OF

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AUGUST 27, 2004, BETWEEN GAINSCO, INC. AND FIRST WESTERN CAPITAL, LLC SUCH
SHARES OF COMMON STOCK HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAW, AND
SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED,
OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS.

     5.7 Information to Be Supplied. The information supplied by Reis LLC in
writing for inclusion in GNAC’s proxy statement related to the Shareholder
Meeting (the “Proxy Statement”) will, at the time of the mailing thereof and at
the time of the Shareholder Meeting, not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The representations
and warranties contained in this Section 5.7 shall not apply to statements or
omissions in the information furnished pursuant to Section 6.11 to the extent
such information is based upon information furnished to Reis LLC by GNAC.

     5.8 True and Complete Disclosure. Taken in the aggregate and to the
knowledge of Reis LLC, the factual information furnished by Reis LLC to GNAC
for purposes of this Agreement or the Transaction did not contain untrue
statements of material facts, or omit to state material facts necessary to make
the statements made not misleading in the light of the circumstances under
which they were made, as of the date as of which such information is dated.

ARTICLE VI.

ADDITIONAL COVENANTS AND AGREEMENTS

     6.1 Public Announcement. GNAC shall, on or before 12:00 noon, Central
Time, on the first Business Day following the date of this Agreement, issue a
press release disclosing all material terms of the Transactions. On or before
the close of business on the fourth Business Day following the date of this
Agreement, GNAC shall file with the SEC a Current Report on Form 8-K disclosing
all material terms of the Transactions. Such press release and Form 8-K shall
be submitted to Reis LLC for its prior approval prior to their respective
public release and filing, and may not be released or filed by GNAC without the
prior approval of Reis LLC, which approval shall not be withheld or delayed
unreasonably.

     6.2 Delivery of Information. GNAC will deliver to Reis LLC promptly upon
the filing thereof, copies of all registration statements (including the
exhibits thereto) and all reports on Forms 10-K, 10-Q or 8-K (or their
equivalents) and proxy statements which GNAC shall have filed with the SEC or
any similar reports filed with any state securities or insurance commission or
office.

     6.3 Filings under the Exchange Act; Compliance with NYSE Criteria. At
least until the second anniversary of the Closing Date, GNAC shall (and neither
Reis LLC nor any member of the Reis Group shall take any action, or omit to
take any legally required action, or vote or fail to vote any of his shares of
Voting Stock in any way, that could reasonably be expected to prevent GNAC to)
(i) continue to be registered under Section 12(g) of the Exchange Act and to
file reports on Forms 10-K, 10-Q and 8-K (or their equivalents) and proxy
statements with the SEC and (ii) observe and comply with (as the same may be
amended, modified or supplemented in the future) NYSE Rules 203.01 to 203.02
(Annual and Interim Reporting Requirements), 302 (Annual Meetings), 303A.01 to
303A.10 (Corporate Governance Standards), 304 (Classified Boards of Directors),
307 (Related Party Transactions), 308 (Defensive Tactics), 309 (Purchases of
Company Stock by Directors and Officers), 311 (Redemption of Listed Securities,
Tender Offers), 312.03 to 312.05 (Shareholder Approval Policy), 313 (Voting
Rights), 401.01,

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 401.03 to 401.04 (Shareholders’ Meetings), and 402.04 (Proxies) as if (A)the Common Stock were listed on the NYSE and without taking advantage of any
exception for controlled companies, as the same shall be in effect from time to
time; and (B) GNAC were applying to list additional shares of Common Stock on
the NYSE; in each case without regard as to whether any class of GNAC’s
securities are listed on or otherwise would qualify for listing on the NYSE;
provided that nothing contained herein shall be construed to require (x) GNAC
to make any filing with, or give any notice to, the NYSE where such filing or
notice otherwise would be required under NYSE Rules or (y) Reis LLC or any
member of the Reis Group to make any filing on behalf of GNAC with the SEC or
the NYSE or make any additional investment in GNAC.

     6.4 Registration Rights.

          (a) Demand Registration. Commencing on the first anniversary of the
Closing Date and continuing until Reis LLC or members of the Reis Group do not
beneficially own more than 10% of the Voting Stock and none of them is an
Affiliate of GNAC, Reis LLC shall have the right to require GNAC, through
written notice delivered to GNAC, to prepare and file one registration
statement under the Securities Act with respect to an underwritten public
offering of Purchased Securities constituting not less than 7% of the then
outstanding Common Stock (the “Demand Registration”) and cause such
registration statement to become effective as promptly as possible. It is
specifically agreed that the Demand Registration rights set forth in this
subsection (a) shall be assignable to any transferee of Purchased Securities
who is a member of the Reis Group, but not otherwise; provided, however, that
only Reis LLC, or such Person duly designated by Reis LLC by written notice to
GNAC as Reis LLC’s agent or successor (the “Reis Representative”) for the
purposes of the giving and receipt of demands, requests and other
communications pursuant to Section 6.4, shall be entitled to request GNAC to
effect the Demand Registration.

          (b) Registration Procedures. With respect to the registration statement
filed in accordance with this Section 6.4 (the “Registration Statement”), GNAC
shall:

          (i) cause the Registration Statement and the related
prospectus and any amendment or supplement (A) to comply in all
material respects with the applicable requirements of the
Securities Act and under the rules and regulations promulgated
thereunder and (B) not to contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading;

          (ii) prepare and file with the SEC such amendments and
supplements to the Registration Statement and the prospectus used
in connection therewith as may be necessary to keep the
Registration Statement effective on a continual basis for so long
as Reis LLC or members of the Reis Group beneficially own more than
10% of the Voting Stock or is an Affiliate of GNAC (or until the
earlier distribution of all the Purchased Securities of Reis LLC
included in the Registration Statement);

          (iii) furnish, upon written request, to Reis LLC a copy of any
amendment or supplement to the Registration Statement or prospectus
prior to filing it after effectiveness and not file any such
amendment or supplement to which Reis LLC shall have reasonably
objected on the grounds that such amendment or supplement does not
comply in all material respects with the requirements of the
Securities Act or of the rules or regulations promulgated
thereunder;

-21-

 

          (iv) furnish to Reis LLC such number of copies of the
Registration Statement, each amendment and supplement thereto, the
prospectus used in connection therewith (including, without
limitation, each preliminary prospectus and final prospectus) and
such other document as Reis LLC may reasonably request in order to
facilitate the disposition of the Purchased Securities owned by
Reis LLC;

          (v) use its best efforts to register or qualify all Purchased
Securities covered by the Registration Statement under such other
securities or blue sky laws of the states of the United States as
may be required for the issuance and sale of the Purchased
Securities, to keep such registration or qualification in effect
for so long as the Registration Statement remains in effect, except
that GNAC shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any
jurisdiction in which it is not and would not, but for the
requirements of this Section 6.4, be obligated to be so qualified,
or to subject itself to taxation in any such jurisdiction, or to
consent to general service of process in any such jurisdiction;

          (vi) upon discovery that, or upon the happening of any event
as a result of which, the prospectus included in the Registration
Statement, as then in effect, includes or in the judgment of GNAC
may include an untrue statement of a material fact or omits or may
omit to state any material fact required to be stated in such
prospectus or necessary to make the statements in such prospectus
not misleading in the light of the circumstances in which they were
made, which circumstance requires amendment of the Registration
Statement or supplementation of the prospectus, prepare and file as
promptly as reasonably possible a supplement to or an amendment of
such prospectus as may be necessary so that, as when delivered (if
required by the Securities Act) to a purchaser of Purchased
Securities, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be
stated in such prospectus or necessary to make the statements in
such prospectus not misleading in the light of the circumstances in
which they were made;

          (vii) otherwise use its best efforts to comply with all
applicable rules and regulations under the Securities Act and, in
its discretion, to make available to its securities holders, as
soon as reasonably practicable, an earnings statement covering the
period of at least twelve months, but not more than eighteen
months, beginning with the first month of the first fiscal quarter
after the effective date of the Registration Statement, which
earnings statement shall satisfy the provisions of Section 11(a) of
the Securities Act;

          (viii) provide and cause to be maintained a transfer agent and
registrar for all Purchased Securities covered by the Registration
Statement from and after a date not later than the effective date
of the Registration Statement;

          (ix) after any sale of the Purchased Securities pursuant to
this Section 6.4 to the extent not needed to comply with Applicable
Law, cause any restrictive legends to be removed and any transfer
restrictions to be rescinded with respect to the Purchased
Securities;

          (x) enter into such customary agreements (including, without
limitation, underwriting agreements in customary form, substance,
and scope) and take all such other actions as Reis LLC or the
underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Purchased Securities;

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          (xi) in the event of the issuance of any stop order suspending
the effectiveness of the Registration Statement, or of any order
suspending or preventing the use of any related prospectus or
suspending the qualification of any Common Stock included in the
Registration Statement for sale in any jurisdiction, GNAC will use
its best efforts promptly to obtain the withdrawal of such order;
and

          (xii) use its best efforts to cause such Purchased Securities
covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may
be necessary to enable the disposition of such Purchased
Securities.

          (c) Obligations of Reis LLC. Reis LLC shall furnish to GNAC such
information regarding Reis LLC as GNAC may from time to time reasonably request
in writing (and will notify GNAC of any changes in such information) and as
shall be required by the Securities Act in connection with such registration.
Reis LLC shall enter into such customary agreements (including, without
limitation, underwriting agreements, custody agreements and powers of attorney
in customary form, substance and scope) and take all such other actions as GNAC
or the underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of the Purchased Securities.

          (d) Delay of Sales. During any period in which GNAC is required to file
or maintain the effectiveness of a Registration Statement for the Purchased
Securities pursuant to this Section 6.4, GNAC shall have the right exercisable
on no more than one occasion during any twelve month period), upon giving
notice to Reis LLC of the exercise of such right, to postpone the filing or
suspend the availability of the Registration Statement, or require Reis LLC not
to sell any Purchased Securities pursuant to the Registration Statement, for a
period of time GNAC deems reasonably necessary, which time shall be specified
in such notice but in no event longer than a period of 90 days, if (i) GNAC is
engaged in an offering of shares by GNAC for its own account or is engaged in
or proposes to engage in discussions or negotiations with respect to, or has
proposed or taken a substantial step to commence, or there otherwise is
pending, any merger, acquisition, other form of business combination,
divestiture, tender offer, financing or other transaction, or there is an event
or state of facts relating to GNAC, in each case which is material to GNAC (any
such negotiation, step, event or state of facts being herein called a “Material
Activity”), (ii) such Material Activity would, in the opinion of counsel for
GNAC, require disclosure so as to permit the Purchased Securities to be sold in
compliance with Applicable Law, and (iii) such disclosure would, in the
reasonable judgment of GNAC, be adverse to its interests. GNAC shall have no
obligation to include in any notice contemplated by this subsection (d) any
reference to or description of the facts based upon which GNAC is delivering
such notice.

          (e) Indemnification.

          (i) GNAC shall indemnify and hold harmless Reis LLC, members
of the Reis Group and each other Person, if any, who controls Reis
LLC within the meaning of the Securities Act against any losses,
claims, damages, liabilities or expenses (including reasonable fees
and expenses of counsel), joint or several, to which Reis LLC or
any such Affiliate or controlling Person may become subject under
the Securities Act or otherwise in connection with or as a result
of a sale by Reis LLC of the Purchased Securities, insofar as such
losses, claims, damages, liabilities or expenses (or related
actions or proceedings) arise out of or are based upon (i) any
untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any preliminary
prospectus, final prospectus or summary prospectus contained in the
Registration Statement, or any amendment or supplement to the
Registration Statement, or any document incorporated by reference
in the Registration Statement, or (ii) any omission or

-23-

 

alleged omission to state in any such document a material fact
required to be stated in any such document or necessary to make the
statements in any such document not misleading, and GNAC will
reimburse such member and each such Affiliate and controlling
Person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss,
claim, damage, liability or expense (or action or proceeding in
respect of any such loss, claim, damage, liability or expense)
which arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in the
Registration Statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement other than
in reliance upon and in conformity with written information
furnished to GNAC by Reis LLC or any such Affiliate or controlling
Person for use in the preparation of the Registration Statement.
Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of Reis LLC or any such
Affiliate or controlling Person.

          (ii) Reis LLC shall indemnify and hold harmless (in the same
manner and to the same extent as set forth in clause (i) of this
subsection (e)) GNAC, each director of GNAC, each officer of GNAC
who shall sign the Registration Statement and each other Person, if
any, who controls GNAC within the meaning of the Securities Act,
with respect to any untrue statement in or omission from the
Registration Statement, any preliminary prospectus, final
prospectus or summary prospectus included in the Registration
Statement, or any amendment or supplement to the Registration
Statement, but only to the extent that such statement or omission
was made in direct reliance upon and in conformity with written
information furnished to GNAC by any member of the Reis Group for
use in the preparation of the Registration Statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or
supplement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of GNAC or any
such director, officer or controlling Person.

          (iii) Indemnification under this Section 6.4 shall be made as
set forth in Article X hereof.

          (f) Registration Expenses. All expenses incident to GNAC’s registration
of the Purchased Securities pursuant to the provisions of this Section 6.4,
including, without limitation, all registration and filing fees, fees and
expenses of compliance with securities or blue sky laws, printing and engraving
expenses, messenger and delivery expenses and fees and disbursements of counsel
for GNAC and all independent certified public accountants, underwriters
(excluding underwriting discounts and any selling commissions) and any Persons
retained by GNAC (all such expenses being herein called “Registration
Expenses”) will be paid by GNAC, provided, that all expenses incurred by Reis
LLC to retain any counsel, accountant or other advisor will not be deemed to be
Registration Expenses and will be paid by Reis LLC. The underwriting discounts
or commissions and any selling commissions together with any stock transfer or
similar taxes attributable to sales of the Purchased Securities will be paid by
Reis LLC.

     6.5 Prior Agreements. All rights and obligations of General Agents
Insurance Company of America, Inc., an Oklahoma insurance corporation, and Reis
LLC in and under the Consulting Agreement dated as of February 1, 2003 shall be
terminated automatically as of the Effective Date; and as of the Effective
Date, each of the parties to such Consulting Agreement shall release the other
from any and all present and future payment obligations, adjustments,
executions, offsets, actions, causes of action, suits, debts, sums of money,
accounts, covenants, controversies, promises, damages, judgments, claims,
demands, liabilities or losses whatsoever, all whether known or unknown, which
any of them, and their

-24-

 

respective successors and assigns ever had, now have, or hereafter may
have, whether grounded in law or in equity, in contract or in tort, against the
other, by reason of any matter whatsoever arising out of such Consulting
Agreement.

     6.6 No Solicitation.

          (a) GNAC shall not, at any time prior to the Closing, solicit, initiate,
encourage the initiation of, induce, negotiate or discuss any inquiries or
proposals regarding a Third Party Transaction (any of the foregoing inquiries
or proposals being referred to herein as a “Transaction Proposal”).
Notwithstanding the foregoing, GNAC may negotiate or discuss a Transaction
Proposal with, and may provide any nonpublic information regarding GNAC to, any
Person or Persons making, or participating or involved in, an unsolicited bona
fide Transaction Proposal if (i) the Special Committee determines in good faith
(based on, among other things, the advice of its independent financial advisors
and independent outside legal counsel to the Board or the Special Committee)
that either (A) doing so would be required or advisable in order for the Board
or the Special Committee to fulfill its fiduciary obligations to the
shareholders of GNAC (other than Interested Shareholders) under Applicable Law
or (B) such Transaction Proposal, if consummated, could constitute a Superior
Proposal and (ii) GNAC provides comparable information to Reis LLC concurrently
therewith.

          (b) Except as set forth in this Section 6.6(b), neither the Board nor the
Special Committee shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Reis LLC, the approval or recommendation of the
Board or the Special Committee of this Agreement or the Sale, (ii) approve or
recommend, or propose to approve or recommend, any Third Party Transaction, or
(iii) cause GNAC to enter into any definitive agreement with respect to any
Third Party Transaction. Notwithstanding the foregoing, nothing contained in
this Section 6.6(b) or any other provision of this Agreement shall prevent the
Board or the Special Committee from considering, negotiating, approving and
recommending to the shareholders of GNAC, or entering into an agreement or
agreements on behalf of GNAC to effect, all transactions contemplated by a
Transaction Proposal if (A) the Board or the Special Committee determines in
good faith, based upon (among other things) the advice of independent outside
financial advisors and independent outside legal counsel to the Board or the
Special Committee, that a Transaction Proposal constitutes a Superior Proposal
and that the consideration, negotiation, approval or recommendation of such
Transaction Proposal would be required or advisable in order for the Board or
the Special Committee to fulfill its fiduciary obligations to the shareholders
of GNAC (other than Interested Shareholders) under Applicable Law, (B) GNAC, at
the direction of the Board or the Special Committee, notifies Reis LLC in
writing that, after any such consideration or negotiation, it intends to enter
into an agreement or agreements with respect to such Transaction Proposal,
which notification identifies the Person or Persons making, or participating or
involved in, the Transaction Proposal and attaches the most current version of
such agreement or agreements (or a complete and accurate description of all
material terms and conditions thereof), and (C) Reis LLC does not make, within
five Business Days of receipt of GNAC’s written notification of its intention
to enter into a binding agreement or agreements for a Transaction Proposal
pursuant to Clause (B) of this sentence, a binding and unqualified offer that
the Special Committee determines, in good faith after consultation with its
financial advisors, is more favorable to the shareholders of GNAC (excluding
the holders of Series A, Series B and Series C Preferred Stock) than such
Transaction Proposal, it being understood that GNAC shall not enter into any
such binding agreement during such five-Business Day period. GNAC agrees to
notify Reis LLC promptly if its intention to enter into a written agreement or
agreements, as referred to in its notification pursuant to Clause B of the
immediately preceding sentence, shall change at any time after giving such
notification.

          For purposes of this Agreement, “Superior Proposal” means any Transaction
Proposal by any Person or Persons that the Special Committee determines in good
faith (based on, among other

-25-

 

things, the advice of its independent financial advisors and independent
outside legal counsel), taking into account legal, financial, regulatory and
other aspects of the proposal (including, among other things, any conditions to
such proposal, the expected timing of the closing thereof, the degree of risk
of nonconsummation, available information as to the ability of the Person or
Persons making such proposal to finance the transaction contemplated thereby
and any known required consents, filings and approvals of any Governmental
Authority or other Person and such other factors as the Special Committee deems
required or advisable for its consideration), (x) would, if consummated, be
more favorable, from a financial point of view, to all shareholders of GNAC
(other than the Interested Shareholders) than the Transactions, (y) is
reasonably likely to be consummated and (z) could (singularly or in combination
with any other transaction or transactions, including any proposed debt
financing or financings) be reasonably calculated to provide GNAC with the
financial means to effect the deposit with a trustee of an amount of U.S.
treasury securities which would be sufficient to pay the redemption price
(including accrued dividends) of each series of the Preferred Stock at the
earliest date on which GNAC may elect to redeem each such series of Preferred
Stock pursuant to its terms.

     6.7 Board Representation. Until the second anniversary of the Closing
Date and for so long as members of the Reis Group beneficially own in the
aggregate at least 10% of the outstanding Voting Stock and solely in the event
of Stallings ceasing to serve on the Board for any reason, Reis LLC may
designate another individual (including Reis) to be nominated by the Board for
election to the Board, provided that any such nominee shall be approved by the
Nominating Committee of the Board, such approval not to be unreasonably
withheld.

     6.8 Amendment of GNAC Disclosure Letter. GNAC agrees that, with respect
to the representations and warranties of GNAC contained in this Agreement, GNAC
shall have the continuing right until the Closing to supplement or amend
promptly the GNAC Disclosure Letter with respect to any matter hereafter
arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the GNAC
Disclosure Letter. For all purposes of this Agreement, including without
limitation for purposes of determining whether the conditions set forth in
Sections 7.1 and 8.1 have been fulfilled, the GNAC Disclosure Letter shall be
deemed to include only that information contained therein on the date of this
Agreement and shall be deemed to exclude all information contained in any
supplement or amendment thereto; provided, however, that if the Closing shall
occur, then all matters disclosed pursuant to any such supplement or amendment
at or prior to the Closing shall be waived and Reis LLC shall not be entitled
to make a claim thereon pursuant to the terms of this Agreement.

     6.9 Access to Information. Between the date hereof and the Closing, GNAC
(i) shall give Reis LLC and its authorized representatives reasonable access to
GNAC’s employees, offices and other facilities, and all books and records of
GNAC and the Subsidiaries, (ii) shall permit Reis LLC and its authorized
representatives to make such inspections as they may reasonably require to
verify the accuracy of any representation or warranty contained in Article IV,
and (iii) shall cause GNAC’s officers to furnish Reis LLC and its authorized
representatives with such financial, business, and operating data and other
information with respect to GNAC and the Subsidiaries as Reis LLC may from time
to time reasonably request; provided, however, that no investigation pursuant
to this Section shall affect any representation or warranty of GNAC contained
in this Agreement or in any agreement, instrument, or document delivered
pursuant hereto or in connection herewith.

     6.10 Private Offering of the Purchased Securities. GNAC agrees that
neither GNAC nor anyone acting on its behalf has offered or will offer the
Purchased Securities or any part thereof or any similar securities for issuance
or sale to, or has solicited or will solicit any offer to acquire any of the
same from, anyone so as to bring the issuance and sale of the Purchased
Securities within the provisions of Section 5 of the Securities Act.

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     6.11 Shareholder Meeting; Proxy Statement.

          (a) GNAC shall take all action necessary in accordance with Applicable Law
and the GNAC’s Articles of Incorporation and Bylaws to duly call, give notice
of, convene and hold the Shareholder Meeting as promptly as practicable after
the date hereof in order to obtain the GNAC Shareholder Approval. The Special
Committee shall, subject to its fiduciary obligations to GNAC’s shareholders
(other than the Interested Shareholders) under Applicable Law, taking into
account the advice of counsel, (i) recommend to the shareholders of GNAC that
they vote in favor of the adoption and approval of all matters necessary to
effectuate the Transaction, (ii) use its reasonable best efforts to solicit
from the shareholders of GNAC proxies in favor of such adoption and approval,
and (iii) take all other action reasonably necessary to secure the GNAC
Shareholder Approval.

          (b) As promptly as practicable after the date hereof, GNAC shall prepare,
shall file with the SEC under the Exchange Act, shall use all reasonable best
efforts to have cleared by the SEC, and promptly thereafter shall mail to its
shareholders, a proxy statement with respect to the Special Meeting. The term
“Proxy Statement”, as used herein, means such proxy statement and all related
proxy materials and all amendments and supplements thereto, if any. Except to
the extent otherwise determined in good faith by the Special Committee in the
exercise of its fiduciary duties, taking into account the advice of counsel,
the Proxy Statement shall contain the recommendation of the Special Committee
that shareholders of GNAC vote in favor of the adoption and approval of all
matters necessary to effectuate the Transaction. GNAC shall notify Reis LLC
promptly of the receipt of any comments on, or any requests for amendments or
supplements to, the Proxy Statement by the SEC, and GNAC shall supply Reis LLC
with copies of all correspondence between it and its representatives, on the
one hand, and the SEC or members of its staff, on the other, with respect to
the Proxy Statement. GNAC, after consultation with Reis LLC, shall use its
reasonable best efforts to respond promptly to any comments made by the SEC
with respect to the Proxy Statement. GNAC and Reis LLC shall cooperate with
each other in preparing the Proxy Statement, and GNAC and Reis LLC shall each
use its reasonable best efforts to obtain and furnish the information required
to be included in the Proxy Statement. GNAC and Reis LLC each agrees promptly
to correct any information provided by it for use in the Proxy Statement if and
to the extent that such information shall have become false or misleading in
any material respect, and GNAC further agrees to take all steps necessary to
cause the Proxy Statement as so corrected to be filed with the SEC and to be
disseminated promptly to holders of shares of the Common Stock, in each case as
and to the extent required by Applicable Law.

     6.12 Confidentiality. Reis LLC shall keep all Confidential Information in
confidence, and shall not disclose said information to any other party other
than Reis LLC’s advisors, attorneys and accountants, who will be advised of the
confidential nature of information. Reis LLC shall protect the Confidential
Information with the same degree of care as Reis LLC normally uses in the
protection of its confidential and proprietary information. Reis LLC further
agrees not to use Confidential Information for any purpose except in connection
with this Agreement. The restrictions set forth herein shall not apply with
respect to Confidential Information which (i) is already generally available to
the public when received by Reis LLC; (ii) becomes available to the public
through no fault of any member of the Reis Group; or (iii) is required to be
disclosed by Applicable Law or a Governmental Authority.

     6.13 Commercially Reasonable Best Efforts. Except as contemplated by
Section 6.6, each party hereto agrees that it will not voluntarily undertake
any course of action inconsistent with the provisions or intent of this
Agreement and will use its commercially reasonable best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
commercially reasonably necessary, proper, or advisable under Applicable Laws
to consummate the Transaction, including obtaining all GNAC Required Consents
and GNAC Required Statutory Approvals.

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     6.14 Standstill.

          (a) At least until the second anniversary of the Closing Date, Reis LLC
agrees that it will not, and it will cause the other members of the Reis Group
not to, purchase or otherwise acquire additional shares of Common Stock if
thereafter the Reis Group and the Stallings Group would in the aggregate
beneficially own more than 37.5% of the Voting Stock based on the amount of
Voting Stock set forth in the most recent report containing such information
filed by GNAC with the SEC at the time such measurement takes place; provided,
however, that Common Stock acquired (i) by Reis or Stallings pursuant to any of
the GNAC Stock Plans or (ii) pursuant to any stock incentive plans adopted in
the future and under which Reis or Stallings is granted awards commensurate
with awards granted to other directors or officers shall not be taken into
account for the purposes of this Section.

          (b) Additional Standstill Obligations. Reis LLC further agrees that, at
least until the second anniversary of the Closing Date, Reis LLC will not, and
he will cause the other members of the Reis Group (excluding Reis acting in his
capacity as a member of the Board in the deliberations of, or pursuant to the
authorization of, the Board) not to, without the prior written consent of the
Board, (i) effect or cause to be effected any (A) “solicitation” of “proxies”
(as such terms are used in the proxy rules of the SEC) with respect to GNAC or
any action resulting in such Person becoming a “participant” in any “election
contest” (as such terms are used in the proxy rules of the SEC) with respect to
GNAC, or (B) any tender or exchange offer or offer for a merger, consolidation,
share exchange or business combination involving GNAC or substantially all of
its assets, or (ii) propose any matter for submission to a vote of the
shareholders of GNAC.

          (c) Expanded Reis Group. For purposes of this Section 6.14 only, the term
“Reis Group” shall be deemed to include all Persons that, together with Reis
LLC, Reis or one or more of any Affiliate, Associate or employee of Reis LLC,
would constitute a “group” within the meaning of Section 13(d) of the Exchange
Act that would be required to file a Schedule 13D or 13G with respect to its
beneficial ownership of Common Stock.

     6.15 Survival of Covenants. Except for any covenant or agreement which by
its terms expressly terminates as of a specific date, the covenants and
agreements of the parties hereto contained in this Agreement shall survive the
Closing without contractual limitation.

ARTICLE VII.

CONDITIONS TO OBLIGATIONS OF GNAC

     The obligations of GNAC to consummate the Transactions shall be subject to
the satisfaction or, if permitted by Applicable Law, waiver on or prior to the
Closing Date of each of the following conditions:

     7.1 Representations and Warranties True. All the representations and
warranties of Reis LLC contained in this Agreement shall be true and correct on
and as of the Closing Date, except to the extent contemplated by this Agreement
or the Ancillary Documents; provided, however, that to the extent that any such
representation or warranty is made as of a specified date, such representation
or warranty shall have been true and correct in all material respects as of
such specified date, and (ii) with respect to each representation and warranty
that is not otherwise qualified by its terms by a materiality standard (such as
a qualification that a future condition not have a Reis LLC Material Adverse
Effect), this condition shall be satisfied if such representation or warranty
shall be true and correct in all material respects.

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     7.2 Covenants and Agreements Performed. Reis LLC shall have performed and
complied with in all material respects all covenants and agreements required by
this Agreement, if any, to be performed or complied with by him or prior to the
Closing Date.

     7.3 Fairness Opinion. The Special Committee and the Board shall have
received the written opinion in form and substance acceptable to it from
Sanders Morris Harris, Inc. (or such other reputable independent investment
banking firm that is selected by the Special Committee and approved by Reis
LLC, which approval shall not be withheld or delayed unreasonably) opining that
the Sale is fair to the shareholders of GNAC (other than the Interested
Shareholders) from a financial point of view (the “Fairness Opinion”), and the
Fairness Opinion shall not have been withdrawn or materially and adversely
modified prior to Closing.

     7.4 Legal Proceedings. No court of competent jurisdiction in the U.S. or
other Governmental Authority shall have issued an order, decree or ruling, or
taken any other action restraining, enjoining or otherwise prohibiting the
Transactions, and such order, decree, ruling or other action shall have become
final and non-appealable. No Proceedings shall have been filed, or authorized
for filing, by any Governmental Authority against GNAC or any of its
Subsidiaries that could reasonably be expected to have a GNAC Material Adverse
Effect, which Proceedings or the authorization thereof have not been dismissed,
withdrawn or otherwise similarly disposed of.

     7.5 Consents and Approvals. All GNAC Required Consents (the non-receipt
of which would have a GNAC Material Adverse Effect), the GNAC Shareholder
Approval and all GNAC Required Statutory Approvals shall have been obtained or
waived. The holders of the Series A Preferred Stock and the Series C Preferred
Stock shall have approved the Transactions.

     7.6 Certificate. GNAC shall have received a certificate executed by Reis
LLC dated the Closing Date, representing and certifying, in such detail as GNAC
may reasonably request, that the conditions set forth in Sections 7.1 and 7.2
have been fulfilled.

ARTICLE VIII.

CONDITIONS TO OBLIGATIONS OF REIS LLC

     The obligations of Reis LLC to consummate the Transactions shall be
subject to the satisfaction or, if permitted by Applicable Law, waiver on or
prior to the Closing Date of each of the following conditions:

     8.1 Representations and Warranties True. All the representations and
warranties of GNAC contained in this Agreement shall be true and correct on and
as of the date of this Agreement and on and as of the Closing Date, except to
the extent contemplated by this Agreement or the Ancillary Documents; provided,
however, that (i) to the extent that any such representation or warranty is
made as of any other specified date, such representation or warranty shall have
been true and correct in all material respects as of such specified date, and
(ii) with respect to each representation and warranty that is not otherwise
qualified by its terms by a materiality standard (such as a qualification that
a future condition have a GNAC Material Adverse Effect), this condition shall
be satisfied if such representation or warranty shall be true and correct in
all material respects.

     8.2 Covenants and Agreements Performed. GNAC shall have performed and
complied in all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by it on or prior to the
Closing Date.

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     8.3 Fairness Opinion. The Special Committee and the Board shall have
received the Fairness Opinion in form and substance acceptable to Reis LLC, and
such Fairness Opinion shall not have been withdrawn or materially and adversely
modified prior to the Closing.

     8.4 Board Approval. The entire Board of GNAC, excluding John Goff, Hugh
Balloch and Reis LLC, shall have approved this Agreement, the Sale and the
Transactions.

     8.5 Legal Proceedings. No court of competent jurisdiction in the U.S. or
other Governmental Authority shall have issued an order, decree or ruling, or
taken any other action restraining, enjoining or otherwise prohibiting the
Transactions, and such order, decree, ruling or other action shall have become
final and non-appealable. No Proceedings shall have been filed, or authorized
for filing, by any Governmental Authority against GNAC, any of its Subsidiaries
or Reis LLC that could reasonably be expected to (a) have a GNAC Material
Adverse Effect or (b) materially and adversely affect Reis LLC if the
Transactions were consummated, which Proceedings or the authorization thereof
have not been dismissed, withdrawn or otherwise similarly disposed of.

     8.6 Certificates. Reis LLC shall have received a certificate or
certificates representing the Purchased Securities, registered in the name of
Reis LLC and duly executed by GNAC.

     8.7 Consents and Approvals. All GNAC Required Consents (the non-receipt
of which would have a GNAC Material Adverse Effect), the GNAC Shareholder
Approval and all GNAC Required Statutory Approvals shall have been obtained or
waived. The holders of the Series A Preferred Stock and the Series C Preferred
Stock shall have approved the Transactions.

     8.8 Officer Certificate. Reis LLC shall have received a certificate
executed on behalf of GNAC by the chief executive officer or the chief
financial officer of GNAC, dated the Closing Date, representing and certifying,
in such detail as Reis LLC may reasonably request, that the conditions set
forth in Sections 8.1 and 8.2 have been fulfilled.

     8.9 No Material Adverse Changes. No event which has a GNAC Material
Adverse Effect shall have occurred since June 30, 2004 and be continuing at
Closing and no Material Adverse Market Condition shall have occurred and be
continuing at Closing.

     8.10 Waivers of Rights Under Change of Control Agreements. Except as set
forth in Section 8.10 of the GNAC Disclosure Letter, GNAC shall have received
valid and written waivers of any and all rights of any Person to receive any
benefits pursuant to a “change of control” or similar provision under any
Employee Benefit Plan.

     8.11 Stallings Investment Agreement. The investment in Common Stock
contemplated by the Stallings Investment Agreement shall have been consummated.

ARTICLE IX.

TERMINATION, AMENDMENT, AND WAIVER

     9.1 Termination. This Agreement may be terminated and the Transactions
may be abandoned at any time prior to the Closing (notwithstanding any approval
of the Transactions by the shareholders of GNAC):

          (a) by GNAC or Reis LLC if

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          (i) the GNAC Shareholder Approval is not obtained at the
Shareholder Meeting or any adjournment thereof;

          (ii) the Closing does not occur prior to the Final Date;

          (iii) any court of competent jurisdiction in the U.S. or other
Governmental Authority shall have issued an order, decree or
ruling, or taken any other action restraining, enjoining or
otherwise prohibiting the Transactions, and such order, decree,
ruling or other action shall have become final and non-appealable;
or

          (iv) GNAC and Reis LLC agree in writing to terminate this
Agreement;provided that the right to terminate this Agreement under this
subsection (a) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of
or resulted in the failure of the Closing to occur on or before
such date.

          (b) by GNAC if:

          (i) there has been a Breach (which Breach is not cured or not
capable of being cured prior to the earlier of (A) 10 days
following notice to Reis LLC by GNAC of such Breach or (B) two
Business Days prior to the Final Date) of any representation or
warranty on the part of Reis LLC (1) in any material respect such
that such representation or warranty is not true and correct, or if
such representation or warranty is not otherwise qualified by its
terms by a materiality standard (such as a qualification that a
future condition have a Reis LLC Material Adverse Effect), such
representation or warranty is not true and correct in all material
respects, or (2) such that Closing would result in a violation by
GNAC of applicable federal securities laws;

          (ii) there has been a Breach (which Breach is not cured or not
capable of being cured prior to the earlier of (A) 10 days
following notice to Reis LLC by GNAC of such Breach or (B) two
Business Days prior to the Final Date) of any covenant or agreement
on the part of Reis LLC (1) resulting in a Reis LLC Material
Adverse Effect, or (2) such that Closing would result in a
violation by GNAC of applicable federal securities laws; or

          (iii) a Person or group has made a Superior Proposal and GNAC
has complied with its obligations under Section 6.6(b).

          (c) by Reis LLC, if:

          (i) the Fairness Opinion is withdrawn or materially and
adversely modified prior to the time of Closing;

          (ii) there has been a Breach (which Breach is not cured or not
capable of being cured prior to the earlier of (A) 10 days
following notice to GNAC by Reis LLC of such Breach or (B) two
Business Days prior to the Final Date) of any representation or
warranty on the part of GNAC (1) (i) such that such representation
or warranty is not true and correct, or if such representation or
warranty is not otherwise qualified by its terms by a materiality
standard (such as a qualification that a future condition have a
GNAC Material Adverse Effect), such representation or warranty is
not true and correct in all

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material respects, or (2) such that Closing would result in a
violation by Reis LLC of applicable federal securities laws;

          (iii) there has been a Breach (which Breach is not cured or
not capable of being cured prior to the earlier of (A) 10 days
following notice to GNAC by Reis LLC of such Breach or (B) two
Business Days prior to the Final Date) of any covenant or agreement
on the part of GNAC (1) resulting in a GNAC Material Adverse Effect
or a material diminution of the benefits to be received by Reis LLC
under this Agreement or (2) such that Closing would result in a
violation by Reis LLC of applicable federal securities laws;

          (iv) GNAC enters into a definitive agreement to effect a Third
Party Transaction;

          (v) the Special Committee withdraws or modifies in a manner
adverse to Reis LLC its approval or recommendation of the
Transactions or this Agreement; or

          (vi) GNAC shall have mailed the Proxy Statement to its
shareholders without obtaining the approval of Reis LLC, which
approval shall not be withheld or delayed unreasonably.

     9.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 9.1, this Agreement will
become void and have no effect, without any liability on the part of any party
to this Agreement or its affiliates, directors, officers, or shareholders,
other than the provisions of Section 6.5(a), Section 6.6(c), this Section 9.2,
Section 9.3 and Article X. Nothing contained in this Section 9.2 will relieve
any party from liability for any Breach of this Agreement.

     9.3 Fees and Expenses.

          (a) GNAC shall pay to Reis LLC a fee of $26,333.34 within two (2) Business
Days after the execution of this Agreement; provided that Reis LLC shall repay
such fee forthwith and without interest in the event that this Agreement is
terminated pursuant to Section 9.1(b)(i) or (ii). At and conditioned upon the
Closing, GNAC shall pay to Reis LLC an additional fee of $26,333.34.

          (b) If (i) GNAC terminates this Agreement pursuant to Section 9.1(b)(iii)
or Reis LLC terminates this Agreement pursuant to Section 9.1(c)(ii), (iii) or
(iv); (ii) within 180 days following the date of such a termination, GNAC
enters into a binding agreement to effect a Third Party Transaction with a
Person from whom GNAC received a written Transaction Proposal prior to the date
of termination; and (iii) within 360 days following the date of such
termination, GNAC consummates such Third Party Transaction, then GNAC will pay
to Reis LLC in immediately available funds within five Business Days after the
consummation of such Third Party Transaction a fee equal to $116,666.67.

          (c) Except as provided in Sections 9.3(a) and (b), each party will bear
its own expenses in connection with this Agreement and the Transactions,
whether or not the Transactions are consummated.

     9.4 Amendment. This Agreement may not be amended except by an instrument
in writing signed by or on behalf of all the parties hereto.

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     9.5 Waiver. No failure or delay by a party hereto in exercising any
right, power, or privilege hereunder shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power, or privilege. The
provisions of this Agreement may not be waived except by an instrument in
writing signed by or on behalf of the party against whom such waiver is sought
to be enforced.

ARTICLE X.

SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION

     10.1 Survival. The representations and warranties of the parties hereto
contained in this Agreement or in any certificate, instrument or document
delivered pursuant hereto shall survive the Closing, regardless of any
investigation made by or on behalf of any party, until the second anniversary
of the Closing Date (the “Survival Date”). No action may be brought with
respect to a Breach of any representation after the Survival Date unless, prior
to such time, the party seeking to bring such an action has notified the other
parties of such claim, specifying in reasonable detail the nature of the loss
suffered. The provisions of this Section 10.1 shall have no effect upon any of
the covenants or agreements of the parties set forth in Article VI or any of
the other obligations of the parties hereto under the Agreement, whether to be
performed later, at or after the Closing.

     10.2 Indemnification by GNAC for Breaches. GNAC shall indemnify, defend,
and hold harmless Reis LLC and the members of the Reis Group from and against
any and all claims, actions, causes of action, demands, losses, damages,
liabilities, costs and expenses (including reasonable attorneys’ fees and
expenses) (collectively, “Damages”), asserted against, resulting to, imposed
upon, or incurred by any of them, directly or indirectly, by reason of or
resulting from any Breach by GNAC of any of its representations, warranties,
covenants or agreements contained in this Agreement or in any certificate,
instrument or document delivered pursuant hereto; provided that GNAC’s
obligation to indemnify, defend and hold harmless as provided in this Section
10.2 shall not apply to (x) the first $750,000 in the aggregate of claims
hereunder (other than claims based on Article II, Section 6.4(e) or Section
9.3) or (y) any Breach of any of GNAC’s representations or warranties of which
Reis LLC had knowledge prior to Closing.

     10.3 Indemnification by GNAC for Certain Proceedings. To the maximum
extent permitted by Applicable Law, GNAC shall indemnify, defend, and hold
harmless Reis LLC and the members of the Reis Group from and against any and
all Damages asserted against, resulting to, imposed upon, or incurred by any of
them, directly or indirectly, by reason of or resulting from (i) any Proceeding
brought against any of them by a Person other than GNAC or any of its
Affiliates, Associates or shareholders arising out of or relating to the
Transactions or the actual or proposed execution, delivery, enforcement or
performance of this Agreement or any certificate, instrument or document
delivered pursuant hereto, or (ii) any Proceeding brought against any of them
by GNAC or any of its Affiliates, Associates or shareholders arising out of or
relating to the Transactions or the actual or proposed execution, delivery,
enforcement or performance of this Agreement or any certificate, instrument or
document delivered pursuant hereto; provided, that (a) GNAC shall not be
obligated to make any indemnification pursuant to this Section 10.3 to the
extent it is ultimately determined by a final non-appealable judgment of a
court of competent jurisdiction that such Damages were caused by the gross
negligence, willful misconduct or material breach of this Agreement by Reis LLC
or the members of the Reis Group and (b) GNAC’s obligation to indemnify, defend
and hold harmless any member of the Reis Group who is also a director of GNAC
as provided in Section 10.3(ii) shall only apply with respect to the
advancement of such director’s reasonable expenses incurred in connection with
defending any such Proceeding, provided that such director shall be required to
repay any such expenses so advanced by GNAC hereunder in the event that it is
ultimately determined by a final non-appealable judgment of a

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court of competent jurisdiction that such director has not met the
appropriate standard of care required of such director pursuant to the Bylaws
of GNAC.

     10.4 Indemnification by Reis LLC. Reis LLC shall indemnify, defend, and
hold harmless GNAC and its Affiliates, Associates, directors, officers and
employees from and against any and all Damages asserted against, resulting to,
imposed upon, or incurred by any of them, directly or indirectly, by reason of
or resulting from any Breach by Reis LLC of any of his representations,
warranties, covenants, or agreements contained in this Agreement or in any
certificate, instrument, or document delivered pursuant hereto, provided,
however, that such obligation to indemnify, defend and hold harmless shall not
apply to (x) the first $750,000 in the aggregate of claims hereunder (other
than claims based on Article II or Section 6.4(e)) or (y) any Breach of Reis
LLC’s representations or warranties of which GNAC had knowledge prior to
Closing.

     10.5 Procedure for Indemnification. Promptly after receipt by an
indemnified party under Section 10.2, 10.3 or 10.4 of notice of the
commencement of any action, such indemnified party shall, if a claim for
indemnification in respect thereof is to be made against an indemnifying party
under such Section, give written notice to the indemnifying party of the
commencement thereof, but the failure so to notify the indemnifying party shall
not relieve it of any liability that it may have to any indemnified party
except to the extent the indemnifying party demonstrates that the defense of
such action is prejudiced thereby. In case any such action shall be brought
against an indemnified party and it shall give written notice to the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it may wish, to assume
the defense thereof with counsel reasonably satisfactory to such indemnified
party. If the indemnifying party elects to assume the defense of such action,
the indemnified party shall have the right to employ separate counsel at its
own expense and to participate in the defense thereof. If the indemnifying
party elects not to assume (or fails to assume) the defense of such action, the
indemnified party shall be entitled to assume the defense of such action with
counsel of its own choice, at the expense of the indemnifying party. If the
action is asserted against both the indemnifying party and the indemnified
party and there is a conflict of interests which renders it inappropriate for
the same counsel to represent both the indemnifying party and the indemnified
party, the indemnifying party shall be responsible for paying for separate
counsel for the indemnified party; provided, however, that if there is more
than one indemnified party, the indemnifying party shall not be responsible for
paying for more than one separate firm of attorneys to represent the
indemnified parties, regardless of the number of indemnified parties. The
indemnifying party shall have no liability with respect to any compromise or
settlement of any action effected without its written consent (which shall not
be unreasonably withheld).

     10.6 Indemnification if Negligence of Indemnitee. THE INDEMNIFICATION
PROVIDED IN THIS ARTICLE 10 SHALL BE APPLICABLE WHETHER OR NOT THE SOLE OR
CONCURRENT NEGLIGENCE OR GROSS NEGLIGENCE OF THE INDEMNIFIED PARTY, OR THE SOLE
OR CONCURRENT STRICT LIABILITY IMPOSED ON THE INDEMNIFIED PARTY, OR THE SOLE OR
CONCURRENT LIABILITY IMPOSED VICARIOUSLY ON THE INDEMNIFIED PARTY, IS ALLEGED
OR PROVEN.

ARTICLE XI.

MISCELLANEOUS

     11.1 Notices. All notices required to be given in writing hereunder shall
be deemed to have been given if (i) delivered personally or by documented
courier or delivery service, (ii) transmitted by facsimile or (iii) mailed by
registered or certified mail (return receipt requested and postage prepaid) to
the following listed persons at the addresses and facsimile numbers specified
below, or to such other

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persons, addresses or facsimile numbers as a party entitled to notice
shall give, in the manner hereinabove described, to the others entitled to
notice:

	 	 	 	 	 	 	 
	If to Reis LLC:	 	5311 Nakoma Drive
	 	 	Dallas, TX 75209
	 
	 	 	 	 	 	 
	with a copy to:	 	John S. Daniels
	 	 	6440 North Central Expressway, Suite 503
	 	 	Dallas, Texas 75206
	 	 	Fax: (214) 889-5196
	

	 	 	 	Counsel for Reis LLC	 	 
	 
	 	 	 	 	 	 
	If to GNAC:	 	1445 Ross Avenue, Suite 5300
	 	 	Dallas, Texas 75202
	 	 	Attention: Chief Executive Officer
	 	 	Fax: (214) 647-0430
	 
	 	 	 	 	 	 
	with a copy to:	 	Jackson Walker L.L.P.
	 	 	901 Main Street, Suite 6000
	 	 	Dallas, Texas 75202
	 	 	Attention: Byron F. Egan
	 	 	Fax: (214) 953-5733
	

	 	 	 	Counsel for GNAC	 	 
	 
	 	 	 	 	 	 
	

	 	 	 	and	 	 
	 
	 	 	 	 	 	 
	 	 	Fulbright & Jaworski L.L.P.
	 	 	1301 McKinney, Suite 5100
	 	 	Houston, Texas 77010
	 	 	Attention: Charles H. Still
	 	 	Fax: (713) 651-5246
	

	 	 	 	Counsel for the Special Committee	 	 

If given personally or by documented courier or delivery service, a notice
shall be deemed to have been given when it is received. If transmitted by
facsimile, a notice shall be deemed to have been given on the date received, if
electronic confirmation of receipt occurs during normal business hours, and
otherwise, on the first Business Day following electronic confirmation of
receipt. If given by mail, it shall be deemed to have been given on the third
Business Day following the day on which it was posted.

     11.2 Entire Agreement. This Agreement, together with the Ancillary
Documents, constitutes the entire agreement between the parties hereto with
respect to the Sale and supersedes all prior agreements and understandings,
both written and oral, between the parties with respect to the Sale.

     11.3 Binding Effect; Assignment; No Third Party Benefit. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors, and permitted assigns.
Except as otherwise expressly provided in this Agreement, neither this
Agreement nor any of the rights, interests, or obligations hereunder may be
assigned by either of the parties hereto without the prior written consent of
the other party; provided, however, that upon written notice to GNAC, Reis LLC
may assign all or any portion of Reis LLC’s rights and obligations under this
Agreement to (i) Reis, (ii) GMSP, or (iii) a legal entity controlled by Reis
and in which he holds a majority of the economic interest (each, “Permitted
Assignee”), provided that (i) such Permitted Assignee

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shall assume in writing all of Reis LLC’s obligations to GNAC, and (ii)
notwithstanding such assumption, neither Reis LLC nor Reis shall be released
from any liabilities or obligations hereunder. Nothing in this Agreement,
express or implied, is intended to or shall confer upon any Person other than
the parties hereto, and their respective heirs, legal representatives,
successors, and permitted assigns, any rights, benefits, or remedies of any
nature whatsoever under or by reason of this Agreement.

     11.4 Severability. In the event that this Agreement, or any of its
provisions, or the performance of any provision, is found to be illegal or
unenforceable under applicable law now or hereafter in effect, the parties
shall be excused from performance of such portions of this Agreement as shall
be found to be illegal or unenforceable under the applicable laws or
regulations without affecting the validity of the remaining provisions of the
Agreement, provided that the remaining provisions of the Agreement shall in
their totality constitute a commercially reasonable agreement. Nothing herein
shall be construed as a waiver of any party’s right to challenge the validity
of such law.

     11.5 Time of Essence. With regard to all dates and time periods set forth
in this Agreement, time is of the essence.

     11.6 No Waiver of Privilege. Neither GNAC, Reis LLC nor any of their
respective Subsidiaries, Affiliates or Associates waives any attorney-client,
work product or other privilege with respect to any information furnished
pursuant to this Agreement.

     11.7 GNAC Disclosure Letter. Any disclosure under any Section of the GNAC
Disclosure Letter shall be deemed disclosure under all Sections of the GNAC
Disclosure Letter and this Agreement. To the extent that any representation or
warranty set forth in this Agreement is qualified by the materiality of the
matter(s) to which the representation or warranty relates, the inclusion of any
matter in the GNAC Disclosure Letter does not constitute a determination by
GNAC that any such matter is material or required to be disclosed for purposes
of this Agreement. The disclosure of any information concerning a matter in
the GNAC Disclosure Letter does not imply that any other or undisclosed matter
which has a greater significance or value is material.

     11.8 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.

     11.9 Counterparts. This Agreement may be executed by the parties hereto
in any number of counterparts, each of which shall be deemed an original, but
all of which shall constitute one and the same agreement. Each counterpart may
consist of a number of copies hereof each signed by less than all, but together
signed by all, the parties hereto.

-36-

 

     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives all as of the day and year first above
written.

	 	 	 	 	 	 	 	 	 	 	 
	 	 	GAINSCO, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Glenn W. Anderson
	 	 	 	 	
 
	

	 	 	 	 	 	Glenn W. Anderson	 	 	 	 
	

	 	 	 	 	 	President and Chief Executive Officer	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	FIRST WESTERN CAPITAL, LLC	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ James R. Reis
	 	 	 	 	
 
	

	 	 	 	 	 	James R. Reis	 	 	 	 
	

	 	 	 	 	 	Sole Manager and Member	 	 	 	 

-37-exv10w4

 

Exhibit 10.4

James R. Reis

5311 Nakoma Drive

Dallas, Texas 75209

August 27, 2004

GAINSCO, INC.

1445 Ross Avenue, Suite 5300

Dallas, Texas 75202

Attention: Special Committee of the Board of Directors

Gentlemen:

     In order to induce the Special Committee to approve the Stock Investment
Agreement of even date herewith between GAINSCO, INC. and First Western
Capital, LLC, an Arizona limited liability company of which I am the beneficial
owner and the sole manager and member, I hereby personally agree to the
following commitments:

          (i) On the Closing Date, I will cause First Western Capital, LLC to
have sufficient capital and liquidity with which to fund its obligations
at the Closing, assuming that the conditions to its obligations shall
have been satisfied;

          (ii) I will cause First Western Capital, LLC to comply with its
obligations as set forth in Sections 6.13 and 6.14 of the Agreement; and

          (iii) I acknowledge that I am individually bound by the provisions
of Section 6.14 of the Agreement, and I agree not to take any action in
contravention of such provisions.

     Please execute and return to me one copy of this letter to evidence the
agreement of GAINSCO, INC. to the terms hereof.

	 	 	 
	

	 	Very truly yours,
	 
	 	 
	

	 	/s/ James R. Reis
	 
	 	 
	

	 	James R. Reis

Accepted and agreed to:

GAINSCO, INC.

	 	 	 
	By:

	 	/s/ Glenn W. Anderson

Glenn W. Anderson
	ITS:

	 	PRESIDENT AND CHIEF EXECUTIVE OFFICER

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