SECOND AMENDMENT
TO
STOCK PURCHASE AGREEMENT
SECOND AMENDMENT TO STOCK PURCHASE AGREEMENT, dated as of July 23,
1998, by and between STANDARD MANAGEMENT CORPORATION, an Indiana
corporation (the "Buyer") and MC EQUITIES, INC., a Delaware corporation
(the "Seller").
RECITALS
WHEREAS, Seller is the beneficial owner of 1,000 shares of the
issued and outstanding shares of the 11,765 authorized capital and common
stock ("Common Stock"), $1.00 par value per share (the "Shares") of
Midwestern National Life Insurance Company of Ohio, an Ohio corporation
(the "Company'); and
WHEREAS, Seller has agreed to sell, and Buyer has agreed to
purchase, all of the Shares of the Company and executed a Stock Purchase
Agreement dated as of June 4, 1998 (the "Agreement") and the First
Amendment thereto dated July 1, 1998; and
WHEREAS, Buyer and Seller have agreed to adjust the purchase price
to be paid for the Shares; and
WHEREAS, Seller and Buyer have determined that, as part of the
consideration for the transactions contemplated by the Agreement, Buyer
will share up to fifty percent (50%) of the loss, if any, on a certain
deposit in escrow in the sum of $500,000 regarding Consolidare
Enterprises, Inc.;
NOW THEREFORE, pursuant to SECTION 12.8 of the Agreement and in
consideration of the mutual representations, warranties and covenants
made herein and of the mutual benefits to be derived herefrom, the
parties hereto agree to amend the Agreement as follows:
1. PURCHASE PRICE. SECTION 2.2 of the Agreement shall be deleted
in its entirety and the following shall be inserted therefor:
(a) Subject to adjustment pursuant to SECTION 2.3 hereof, the
purchase price (the "Purchase Price") for the Shares payable at
Closing shall be equal to $15,011,000, of which $2,886,000 is
payable by wire transfer in immediately available funds to such bank
and account as the Seller may specify by written notice received by
the Purchaser at least two (2) Business Days prior to the Closing
Date. The balance of the Purchase Price is payable at Closing as
follows (i) Assumption of certain debt due Fleet National Bank in
the sum of $6,000,000 from the Seller (the "Fleet Loan") upon
restructured terms and conditions satisfactory to Purchaser in it
sole discretion; and (ii) The issuance of $6,125,000 in value of
shares of Standard Management Corporation's restricted common stock
("SMC Common Stock") for the ten (10) consecutive trading days
ending on the fifth Business Day prior to the Closing Date; (b) Not
later than two (2) Business Days prior to the Closing Date, the
Seller shall cause the Company to prepare and deliver to the Buyer a
statutory balance sheet of the Company as of the last day of the
most recent calendar month prior to the Closing for which such a
balance sheet is available (the "Closing Balance Sheet"), together
with a list of the investment securities to be held by the Company
at the Closing and the respective Fair Market Value and statutory
carrying value of each such investment security as of the date which
is three (3) Business Days prior to the Closing Date (the "Closing
Asset Statement"). The foregoing documents shall be accompanied by
a certificate of the Company, executed by its chief financial
officer, to the effect that (i) the Closing Balance Sheet has been
prepared in accordance with the books and records of the Company and
SAP, and fairly presents the financial position of the Company as of
the date thereof, and (ii) the Closing Asset Statement has been
prepared in accordance with the books and records of the Company and
this Agreement.
2. CONDUCT OF BUSINESS. SECTION 5.4(D) of the Agreement shall be
deleted in its entirety and the following shall be inserted therefor:
(d) The Company will: (i) cause all reserves and other similar
amounts with respect to insurance and annuity Contracts established
or reflected in the Company's Books and Records to be (A)
established and reflected on a basis consistent with those reserves
and other similar amounts and reserving methods followed by the
Company at December 31, 1997, and (B) good, sufficient and adequate
(under generally accepted actuarial principles consistently applied)
to cover the total amount of all reasonably anticipated matured and
unmatured benefits, dividends, losses, claims, expenses, and other
Liabilities of the Company under all insurance and annuity Contracts
pursuant to which the Company has or will have any Liability
(including, without limitation, any Liability arising under or as a
result of any reinsurance, coinsurance, or other similar Contract);
and (ii) continue to own assets that qualify as legal reserve assets
under all applicable insurance Laws in an amount at least equal to
the required reserves of the Company and other similar amounts.
3. QUARTERLY REPORT AND TAX RETURN. SECTION 5.20 shall be
inserted into the Agreement as follows:
Seller shall cause the Company to:
(a) File its statutory quarterly report for the second quarter
of 1998 no later than August 4, 1998; and
(b) Use its best efforts to provide Buyer with the Company's
fully completed and final federal tax return for the year ending
December 31, 1997 by August 4, 1998.
4. REGULATORY APPROVALS. SECTION 6.1 of the Agreement shall be
deleted in its entirety and the following shall be inserted therefor:
The Buyer will (a) take all commercially reasonable steps
necessary or desirable, and proceed diligently and in good faith and
use all commercially reasonable efforts to obtain, as promptly as
practicable, all approvals, authorizations, and clearances of
governmental and regulatory authorities required of the Buyer to
consummate the transactions contemplated hereby, including without
limitation all filings required under Xxxx-Xxxxx and any required
approvals of the insurance regulatory authorities in the States of
Ohio and Indiana, including the filing by the Buyer of a Form A with
such regulatory authorities within twenty (20) Business Days after
the effective date of this Agreement; (b) provide such other
information and communications to such governmental and regulatory
authorities as the Seller or such authorities may reasonably
request; (c) cooperate with the Seller in obtaining, as promptly as
practicable, all approvals, authorizations, and clearances of
governmental or regulatory authorities required of the Seller to
consummate the transactions contemplated hereby; and (d) use its
best efforts to schedule a meeting with the insurance regulatory
authority of the State of Ohio during the week of July 27, 1998
wherein representatives of Buyer and Seller will use their best
efforts to expedite the approval of the Form A filed with such
authority.
5. SHARING OF LOSS. SECTION 6.4 shall be inserted into the
Agreement as follows:
For a period of ninety (90) days from the Closing Date, Buyer
will share up to fifty percent (50%) of the loss, if any, on a
certain deposit in escrow in the sum of $500,000 regarding
Consolidare Enterprises, Inc.
6. ASSIGNMENT OF MARKETING AGREEMENT BETWEEN SELLER AND LEAD
AMERICA. SECTION 7.15 of the Agreement shall be deleted in its entirety.
7. TERMINATION. SECTION 11.1(E) shall be deleted in its entirety
and the following shall be inserted therefor:
(e) at any time after September 15, 1998, by the Seller or the
Buyer, if the transactions contemplated by this Agreement have not
been consummated on or before such date and such failure to
consummate is not caused by a breach of this Agreement (or any
representation, warranty, covenant, or agreement included herein) by
the party electing to terminate pursuant to this clause (e).
8. REPURCHASE OF SMC COMMON STOCK. SECTION 12.17 shall be deleted
in its entirety.
9. DEFINITIONS OF TERMS. The definition of "Closing Date" in
EXHIBIT A to the Agreement shall be deleted in its entirety and the
following shall be inserted therefor:
"Closing Date" shall mean the earlier of (a) the fifth Business
Day next following the date upon which the last of the orders or
approvals described in SECTIONS 5.1, 5.2, 6.1, and 6.2 has been
obtained, including without limitation the approvals under all
applicable insurance holding company Laws, (b) September 15, 1998,
or (c) such other date as the Buyer and Seller may mutually agree
upon in writing.
10. FORMULA FOR DETERMINING ADJUSTED CAPITAL AND SURPLUS OF COMPANY
AS OF THE CLOSING DATE PURSUANT TO SECTION 2.3(B). EXHIBIT B to the
Agreement shall be deleted in its entirety and the following shall be
inserted therefor:
In accordance with SECTION 5.4, the Adjusted Capital and
Surplus of the Company on the Closing Date shall be determined as
follows (the "Formula"):
1. SAP Capital and Surplus as of the month end prior to the
Closing Date.
2. Notwithstanding the provisions of SECTION 1 of this EXHIBIT
B, any adjustments to the statutory surplus which result from the
writing down of a certain convertible debenture in the amount of
$2,250,000 dated March 11, 1998 of Lead America, LLC held by the
Company shall be added back for purposes of calculating Adjusted
Capital and Surplus of the Company on the Closing Date.
11. BUYER'S COUNSEL OPINION. SECTION 4 of EXHIBIT G to the
Agreement shall be deleted in its entirety and the following shall be
inserted therefor:
4. Any consent, approval, order or authorization of, or any
waiting period imposed by any regulatory authority under federal or
state law, including the laws of the State of Ohio and the State of
Indiana, which require the Buyer (and, with respect to an Option to
Purchase Convertible Debenture dated as of the Closing Date granted
by the Company to the Seller [the "Lead Option"], the Company) to
obtain any consent, approval or action of, or make any filing with
or give any notice to, any Person except those which the failure to
obtain, make, or give individually or in the aggregate with any
other such failures has or may be expected to have no material
adverse effect on the validity or enforceability of the Agreement
against the Buyer or on the ability of the Buyer (and, with respect
to the Lead Option, the Company) to perform its obligations
thereunder in connection with the execution and delivery of the
Agreement and the Lead Option and the performance by the Buyer (and
with respect to the Lead Option, the Company) of its obligations
thereunder, including without limitation the transfer of the Lead
Debenture (as defined in the Lead Option) to the Seller upon
exercise of the Lead Option pursuant to the terms and provisions of
the Lead Option, has been obtained or, in the case of any such
waiting period, has expired.
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IN WITNESS THEREOF, this SECOND AMENDMENT TO STOCK PURCHASE
AGREEMENT has been duly executed and delivered by the parties hereto,
effective as of the date first written above.
MC EQUITIES, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
Name: Xxxxxxx X. Xxxxxxx
Title: Secretary and General Counsel
STANDARD MANAGEMENT CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: Chairman, President and CEO
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