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STOCK PURCHASE AGREEMENT
DATED AS OF OCTOBER 3, 1996
By and between
FARMERS AND MERCHANTS INSURANCE COMPANY
and
REASSURE AMERICA LIFE INSURANCE COMPANY
With Respect to all of the
Outstanding Capital Stock of
NEW AMERICAN LIFE INSURANCE COMPANY
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made and entered into
this 3rd day of October, 1996 by and between Farmers and Merchants Insurance
Company, an Oklahoma insurance corporation ("Seller"), and Reassure America
Life Insurance Company, an Illinois insurance corporation ("Purchaser").
WHEREAS, Seller owns 100,000 shares (the "Shares") of common stock,
par value $6.00 per share (the "Common Stock"), of New American Life
Insurance Company, a Missouri insurance corporation (the "Company"); and
WHEREAS, the Shares constitute all of the issued and outstanding
capital stock of the Company; and
WHEREAS, Seller desires to sell the Shares to Purchaser, and Purchaser
desires to purchase the Shares from Seller, on the terms and subject to the
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
The capitalized terms used herein will have the following meanings:
"Affiliate" shall mean, with respect to a specified person or entity,
any person or entity that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with
such specified person or entity.
"Affiliated Group" shall mean the Affiliates which join in filing a
Seller Consolidated Return for the taxable year beginning January 1, 1996.
"Agreement" shall mean this Stock Purchase Agreement, together with
the Disclosure Schedule.
"Annual Statement" shall mean the annual statutory statement of the
specified life insurance company filed with or submitted to the insurance
regulatory authority in the state of domicile of such life insurance
company.
"AVR" shall mean the asset valuation reserve required to be
established under SAP on a specified life insurer's balance sheet.
"Closing" shall mean the closing of the transactions contemplated by
this Agreement as provided in Section 2.4 hereof.
"Closing Balance Sheet" shall mean the balance sheets of the Company
determined in accordance with SAP as of the Closing Date.
"Closing Date" shall mean the later of (a) the end of the month at
least three business days following the date upon which the last remaining
condition set forth in ARTICLES VII and VIII hereof has been satisfied or
waived, or (b) such other date as Purchaser and Seller may agree upon.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended, and the regulations thereunder.
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"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Contract" shall mean any agreement, lease, sublease, license,
sublicense, promissory note, evidence of indebtedness, or other binding
contract.
"Damages" shall mean any and all monetary damages, liabilities, fines,
fees, penalties, interest obligations, deficiencies, losses, costs, and
expenses (including reasonable fees and expenses of attorneys, accountants,
actuaries, and other experts).
"Deficiency Amount" shall mean the amount, if any, by which the Final
Purchase Price exceeds the Initial Purchase Price.
"Disclosure Schedule" shall mean the disclosure schedule dated the
date hereof furnished by Seller to Purchaser and containing all lists,
descriptions, exceptions, and other information and materials as are
required to be included therein pursuant to this Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended (including without limitation any successor act), and the rules
and regulations promulgated thereunder.
"Excess Amount" shall mean the amount, if any, by which the Initial
Purchase Price exceeds the Final Purchase Price.
"Extended Filing Date" shall have the meaning ascribed to it in
Section 12.2 hereof.
"Extension Request" shall have the meaning ascribed to it in
Section 12.2 hereof.
"Final Purchase Price" shall have the meaning ascribed to it in
Section 2.2 hereof.
"HSR Act" shall mean Section 7A of the Xxxxxxx Act (Title II of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976), as amended (including
any successor act), and the rules and regulations promulgated thereunder.
"Indemnifying Party" shall mean the entity against whom claims of
indemnification are being asserted under ARTICLE X hereof.
"Indemnitee" shall mean the entity claiming indemnification under
ARTICLE X hereof.
"Initial Purchase Price" shall have the meaning ascribed to it in
Section 2.2 hereof.
"IRS" shall mean the United States Internal Revenue Service.
"Material Adverse Effect" shall mean any change or effect (or series
of related changes or effects) that individually or in the aggregate is
materially adverse to (i) the business, operations, condition (financial or
otherwise) or results of operations of the Company, (ii) the validity or
enforceability of this Agreement, or (iii) the ability of Seller to execute
and deliver this Agreement or to perform its obligations under this
Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
under ERISA.
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"Permitted Lien" shall mean any (a) mechanic's, carrier's, workmen's,
repairmen's, or other similar lien arising or incurred in the ordinary
course of business, (b) lien for taxes, assessments, and other governmental
charges that are not due and payable, (c) zoning, building or other similar
government restriction, or (d) agreement, covenant, right of way, or other
similar restriction which in the case of clauses (a), (c), and (d) above do
not materially impair any real property.
"Purchaser" shall mean Reassure America Life Insurance Company, an
Illinois insurance corporation, or the entity to which the right to purchase
is assigned under Section 12.16 hereof.
"Quarterly Statement" shall mean the quarterly statutory statement of
the specified life insurance company filed with or submitted to the
insurance regulatory authority in the state of domicile of such life
insurance company.
"SAP" shall mean the accounting practices required or permitted by the
insurance regulatory authority in the state of domicile of the specified
life insurance company, consistently applied throughout the specified period
and in the comparable period in the immediately preceding year.
"Section 338(h)(10) Election" shall have the meaning ascribed to it in
Section 12.2 hereof.
"Seller" shall mean Farmers and Merchants Insurance Company, an
Oklahoma insurance corporation.
"Seller Consolidated Returns" shall mean all consolidated, combined,
affiliated or unitary Tax Returns which include the Company with respect to
the Company's taxable income or loss for periods through the Closing Date.
"Seller Returns" shall have the meaning ascribed to it in Section 12.1
hereof.
"Settlement Auditor" shall mean a nationally recognized accounting or
auditing firm to be agreed upon by Seller and Purchaser.
"Shares" shall have the meaning ascribed to it in the recitals to this
Agreement.
"Tax" or "Taxes" shall mean all taxes, charges, fees, levies, or other
similar assessments or liabilities, including without limitation (a) income,
gross receipts, ad valorem, premium, excise, real property, personal
property, sales, use, transfer, withholding, employment, payroll, medicare,
and franchise taxes imposed by the United States of America, or by any
state, local, or foreign government, or any subdivision, agency, or other
similar person of the United States or any such government; and (b) any
interest, fines, penalties, assessments, or additions to taxes resulting
from, attributable to, or incurred in connection with any Tax or any
contest, dispute, or refund thereof.
"Tax Claim" shall have the meaning ascribed to it in Section 10.5(b)
hereof.
"Tax Returns" shall mean any report, return, or statement, including
any attachment thereto or amendment thereof, required to be supplied to a
taxing authority in connection with Taxes.
"Tax Schedules" shall have the meaning ascribed to it in Section 12.2
hereof.
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"WARN" shall mean the Federal Worker Adjustment and Retraining
Notification Act.
Unless the context of this Agreement otherwise requires, (a) words of
any gender are deemed to include the other gender; (b) words using the
singular or plural number also include the plural or singular number,
respectively; (c) the terms "hereof," "herein," "hereby," "hereto," and
derivative or similar words refer to this entire Agreement; (d) the terms
"ARTICLE" or "Section" refer to the specified ARTICLE or Section of this
Agreement; (e) the phrase "in the ordinary course of business and consistent
with past practice" refers to the business, operations, affairs, and
practice of the Company consistent with past practices of such business,
operations, and affairs; (f) the term "including" and other forms of such
term, with respect to any matter or thing, means "including but not limited
to" such matter or thing; and (g) all references to "dollars" or "$" refer
to currency of the United States of America.
ARTICLE II
SALE OF SHARES AND CLOSING
2.1 PURCHASE AND SALE OF SHARES. Subject to the terms and
conditions, and in reliance upon the representations and warranties, set
forth in this Agreement, Seller agrees to sell the Shares to Purchaser and
Purchaser agrees to purchase the Shares from Seller.
2.2 PURCHASE PRICE. The purchase price (the "Initial Purchase
Price") for the Shares will equal (((a)+(b)) x (c)) + (d) (where (a), (b),
(c), and (d) have the following meanings), subject to adjustment after the
Closing in accordance with Section 2.3 hereof (as adjusted, the "Final
Purchase Price"):
(a) the capital and surplus of the Company determined in accordance
with SAP as of the last day of the month immediately preceding the Closing;
and
(b) the AVR of the Company determined in accordance with SAP as of
the last day of the month immediately preceding the Closing; and
(c) the ratio of the market value of the Company's bond portfolio to
the book value of the Company's bond portfolio determined in accordance with
SAP, (the "Market Value Adjustment") as of the Closing Date; and
(d) $3,555,000 (three million five hundred fifty-five thousand
dollars).
As promptly as practicable (but in no event later than 10 days) prior to the
Closing Date, Seller shall deliver to Purchaser the balance sheet of the
Company determined in accordance with SAP as of the last day of the month
immediately preceding the Closing Date identifying the capital, surplus,
AVR, and Market Value Adjustment determined pursuant to this Section 2.2.
2.3 PURCHASE PRICE ADJUSTMENT.
(a) As promptly as practicable (but in no event more than 60 days)
after the Closing Date, Seller will complete the Closing Balance Sheet. As
promptly as practicable, Seller will deliver to Purchaser the Closing
Balance Sheet.
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(b) Within 60 business days after Purchaser's receipt of the Closing
Balance Sheet, Purchaser will provide Seller with written notice indicating
whether Purchaser agrees or disagrees with the capital, surplus, AVR, and
Market Value Adjustment reflected in the Closing Balance Sheet. If
Purchaser disputes the capital, surplus, AVR, or Market Value Adjustment
reflected in the Closing Balance Sheet, such notice will reflect Purchaser's
calculation of each disputed amount in sufficient detail to permit Seller to
verify the same. If Purchaser agrees with the capital, surplus, AVR, and
Market Value Adjustment reflected in the Closing Balance Sheet or if
Purchaser fails to deliver to Seller such written notice within such 60-day
period, the Closing Balance Sheet will be deemed final.
(c) Within 10 business days after Seller's receipt of any notice of
disagreement with the capital, surplus, AVR, or Market Value Adjustment
reflected in the Closing Balance Sheet, Purchaser and Seller will begin good
faith negotiations to resolve such disagreement. If Purchaser and Seller
are unable to resolve such disagreement within 10 business days after such
negotiations begin, such disagreement will be submitted to the Settlement
Auditor for resolution. Purchaser and Seller will cooperate with the
Settlement Auditor and will proceed in good faith to cause the Settlement
Auditor to resolve such disagreement within 30 days after such disagreement
is submitted to the Settlement Auditor. Purchaser and Seller will each pay
one-half of the fees and expenses of the Settlement Auditor.
(d) The Settlement Auditor, in its sole discretion, will determine
(i) the nature and extent of the participation by Purchaser, Seller, and
their agents in connection with the resolution of any disagreement submitted
to the Settlement Auditor, (ii) the nature and extent of information that
Purchaser and Seller may submit to the Settlement Auditor for consideration
in connection with such resolution, and (iii) the personnel of the
Settlement Auditor who will review such information and resolve such
disagreement. The Settlement Auditor's resolution of any such disagreement
will be reflected in a written report which will be delivered promptly to,
and will be final and binding upon, Purchaser and Seller. The Closing
Balance Sheet will be adjusted accordingly to reflect any such resolution
and, as adjusted, will be deemed final.
(e) Upon the earlier to occur of (i) the parties' agreement with
respect to the capital, surplus, AVR, and Market Value Adjustment reflected
in the Closing Balance Sheet, or (ii) the delivery of the report of the
Settlement Auditor as provided in Section 2.3(d) hereof, Purchaser will pay
to Seller the Deficiency Amount or Seller will pay to Purchaser the Excess
Amount, as the case may be. The payment of the Deficiency Amount or the
Excess Amount, as the case may be, will be made by wire transfer of
immediately available funds to such account as the party entitled to receive
such payment specifies in writing to the party required to make such
payment.
2.4 CLOSING.
(a) The Closing will take place at the offices of Seller, 000 Xxxxxx
Xxxxxx, Xxxxxxxxxxxx Pennsylvania, at 9:00 a.m., local time on the Closing
Date.
(b) At the Closing, Purchaser (i) will pay the Initial Purchase
Price by wire transfer of immediately available funds to such account as
Seller specifies to Purchaser, and (ii) deliver to Seller such other
documents and instruments required to be delivered by Purchaser under the
terms of this Agreement.
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(c) At the Closing, Seller will deliver to Purchaser (i) a
certificate or certificates representing all the Shares, accompanied by duly
executed blank stock powers, and (ii) such other documents and instruments
required to be delivered by Seller under the terms of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as follows:
3.1 ORGANIZATION OF SELLER. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Oklahoma and has full corporate power and authority to enter into this
Agreement and to perform its obligations under this Agreement.
3.2 AUTHORITY. The execution and delivery of this Agreement by
Seller and the performance by Seller of its obligations under this Agreement
have been duly and validly authorized by all necessary corporate action on
the part of Seller. This Agreement has been duly executed and delivered by
Seller and constitutes a legal, valid, and binding obligation of Seller and
is enforceable against Seller in accordance with its terms, except to the
extent that (a) enforcement against Seller may be limited by or subject to
any bankruptcy, insolvency, reorganization, moratorium, or similar laws now
or hereafter in effect relating to or limiting creditors' rights generally
regarding Seller and (b) the remedy of specific performance and injunctive
and other forms of equitable relief are subject to certain equitable
defenses and to the discretion of the court or other similar person or
entity before which any proceeding therefor may be brought.
3.3 ORGANIZATION OF THE COMPANY. The Company is a stock insurance
corporation duly organized, validly existing, and in good standing under the
laws of Missouri, and has all requisite corporate power and authority to
own, lease and operate its assets and properties and to carry on its
business as presently conducted by it. The Company is duly qualified or
admitted to do business and is in good standing as a foreign corporation in
all jurisdictions in which the ownership, use, or leasing of its assets or
properties or the conduct or nature of its business makes such qualification
or admission necessary, except where the failure to be so qualified or
admitted and in good standing does not have or cannot reasonably be expected
to have a Material Adverse Effect. The Company does not own 10% or more of
the voting capital stock of any corporation.
3.4 CAPITAL STOCK; TITLE. The authorized capital stock of the
Company consists solely of the Shares, all of which are issued and
outstanding. The Shares are duly authorized, validly issued, fully paid,
and nonassessable and are owned beneficially and of record by Seller, free
and clear of all liens and encumbrances. Upon delivery of payment for the
Shares as herein provided, Purchaser will acquire good and valid title to
the Shares, free and clear of any lien or encumbrance (other than liens or
encumbrances created by Purchaser). There are no outstanding securities,
rights (preemptive or other), subscriptions, calls, warrants, options, or
other agreements (except for this Agreement) that give any person or entity
the right to (a) purchase or otherwise receive or be issued any shares of
capital stock of the Company (or any interest therein) or any security
convertible into or exchangeable for any shares of capital stock of the
Company (or any interest therein), (b) receive any dividend, voting, or
ownership rights similar to those accruing to a holder of the Shares, or (c)
participate in the equity, income, or election of directors or officers of
the Company.
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3.5 NO CONFLICTS OR VIOLATIONS. The execution and delivery of this
Agreement by Seller and the performance by Seller of its obligations under
this Agreement will not:
(a) subject to obtaining the approvals contemplated by Sections 5.1,
5.2, 6.1 and 6.2 hereof, violate any term or provision of any law or any
writ, judgment, decree, or injunction applicable to Seller or the Company or
their respective assets or properties;
(b) conflict with or result in a violation or breach of any of the
provisions of the articles or certificate of incorporation or bylaws of
Seller or the Company;
(c) conflict with or result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default
under, any Contract to which Seller or the Company is a party or by which
any asset or property of Seller or the Company may be bound;
(d) require Seller or the Company to obtain any consent, approval,
or action of, or make any filing with or give any notice to, any person or
entity, except as set forth in Section 3.5 of the Disclosure Schedule or as
contemplated in Sections 5.1(b) and 5.2 hereof; or
(e) result in the creation or imposition of any lien or encumbrance
upon the Company or any of its assets or properties.
3.6 SAP STATEMENTS. Seller has previously delivered to Purchaser
true and complete copies of the following:
(a) the Annual Statements of the Company for each of the years ended
December 31, 1993, 1994, and 1995 (including the supporting memorandum to
the actuarial opinions given in connection with such Annual Statements);
(b) any annual statutory statements of the Company that were filed
for the year ended December 31, 1995 in any jurisdiction which differ from
the Annual Statement for the year ended December 31, 1995 for the Company;
and
(c) the Quarterly Statements of the Company for each of the calendar
quarters ended March 31, and June 30, 1996.
Each such statement (i) complied in all material respects with all
applicable laws when so filed, (ii) was prepared in accordance with SAP,
(iii) is true and complete in all material respects, and (iv) presents
fairly in all material respects the financial position of the Company as of
the respective dates thereof and the related summary of operations and
changes in capital and surplus and in cash flows of the Company for and
during the respective periods covered thereby. No material deficiency has
been asserted by any insurance regulatory authority with respect to any such
statement.
3.7 RESERVES. All statutory reserves and other similar amounts with
respect to losses, benefits, claims, and expenses in respect of the
Company's insurance business as established or reflected in the December 31,
1995 Annual Statement (a) were determined in accordance with SAP and
generally accepted actuarial assumptions, (b) were in accordance with the
benefits specified in the related insurance or reinsurance Contracts, (c)
meet the requirements of the insurance laws of each applicable jurisdiction
in all material respects, and (d) were adequate along with future premiums,
as of December 31, 1995, based upon then-current information and assumptions
concerning investment income, mortality and morbidity experience,
persistency and expenses, to cover the total amount of all matured and
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reasonably anticipated unmatured benefits, claims, and other liabilities of
the Company under all insurance or reinsurance Contracts which the Company
has or will have any liability. The Company owns assets that qualify as
legal reserve assets under applicable insurance laws in an amount at least
equal to all such statutory reserves and other similar amounts of the
Company.
3.8 ASSETS AND PROPERTIES.
(a) SECTION 3.8(a) of the Disclosure Schedule contains a list of all
purchases, acquisitions, sales or dispositions of all debentures, notes,
stocks, limited partnership interests, other securities, mortgages, and
other investment assets by the Company from December 31, 1995 to the date
hereof. The Company has good and marketable title to all debentures, notes,
stocks, limited partnership interests, other securities, mortgages, and
other investment assets owned by it, free and clear of all liens and
encumbrances.
(b) SECTION 3.8(b) of the Disclosure Schedule contains a true and
complete list and description of all real property in which the Company has
an ownership interest. The Company owns good and indefeasible title to all
such real property, free and clear of all liens and encumbrances, except for
Permitted Liens.
(c) SECTION 3.8(c) of the Disclosure Schedule contains a true and
complete list and description of all real property leased by the Company.
The Company has a valid leasehold interest in all such leased real property.
(d) SECTION 3.8(d) of the Disclosure Schedule contains a true and
complete list and description of (i) all marks, names, trademarks, service
marks, patents, patent rights, assumed names, logos, trade secrets,
copyrights, trade names, and service marks that are used in the conduct of
the business, operations, or affairs of the Company, and (ii) all computer
software, programs, and similar systems owned by or licensed to the Company
that are used in the conduct of its business, operations, or affairs. The
Company is not in conflict with or in violation or infringement of, nor has
Seller or the Company received any notice of any alleged conflict with or
violation or infringement of any asserted rights of any other person or
entity with respect to any such intellectual property or any such computer
software, programs, or similar systems.
3.9 ABSENCE OF CHANGES. Since December 31, 1995, there has not
been, occurred, or arisen any change, event (including without limitation
any damage, destruction, or loss whether or not covered by insurance),
condition, or state of facts of any character with respect to the business
or condition of the Company, except as disclosed in Section 3.9 of the
Disclosure Schedule. Except as disclosed in Section 3.9 of the Disclosure
Schedule, since December 31, 1995, the Company has operated only in the
ordinary course of business and consistent with past practice, and (without
limiting the generality of the foregoing) there has not been, occurred, or
arisen:
(a) any declaration, setting aside, or payment of any dividend or
other distribution in respect of the capital stock of the Company or any
direct or indirect redemption, purchase, or other acquisition by the Company
of any such stock or of any interest in or right to acquire any such stock;
(b) any lien or encumbrance created or assumed on any of the assets
or properties of the Company;
(c) any liability involving the borrowing of money by the Company or
the incurrence by the Company of any deferred purchase price obligation
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(other than trade credit incurred in the ordinary course of business and
consistent with past practice);
(d) any damage, destruction, or loss (whether or not covered by
insurance) affecting any of the assets or properties of the Company, which
damage, destruction, or loss individually or in the aggregate exceeds
$5,000;
(e) any cancellation of any material liability owed to the Company
by any other person or entity;
(f) any write-off or write-down of, or any determination to write-off or
write-down, the assets or properties (other than any statutory write-down of
investment assets) of the Company or any portion thereof;
(g) any amendment, termination, waiver, disposal, or lapse of, or
other failure to preserve, any (i) license, permit, or other form of
authorization of the Company (other than a license to transact insurance
business), the result of which individually or in the aggregate has or may
reasonably be expected to have a Material Adverse Effect, or (ii) license of
the Company to transact insurance business;
(h) any termination, amendment, or execution by the Company of any
reinsurance, coinsurance, or other similar Contract, as ceding or assuming
insurer, except those Contracts which expire in accordance with their terms;
(i) any expenditure or commitment for additions to property, plant,
equipment, or other tangible or intangible capital assets or properties of
the Company which exceeds $5,000 individually or in the aggregate;
(j) any change in any marketing relationship between either the
Company and any person or entity through which the Company sells insurance
policies, which change has or may reasonably be expected to have a Material
Adverse Effect; or
(k) any Contract to take any of the actions prohibited in this
Section 3.9.
3.10 NO UNDISCLOSED LIABILITIES.
(a) There were no liabilities against or relating to the Company as
of December 31, 1995, except as reflected in any of the financial statements
and the notes thereto referenced in Section 3.6 hereof and policyholder
benefits payable in the ordinary course of business and consistent with past
practice. Since December 31, 1995, the Company has not incurred any
liabilities, except policyholder benefits payable in the ordinary course of
business and consistent with past practice.
(b) Except for regular periodic assessments in the ordinary course
of business, no claim or assessment is pending nor, to the knowledge of
Seller or the Company, threatened against the Company by any state insurance
guaranty association in connection with such association's fund relating to
insolvent insurers.
3.11 TAXES. Except as disclosed in Section 3.11 of the Disclosure
Schedule:
(a) All Tax Returns required to be filed by or with respect to the
Company have been duly and timely filed, and all such Tax Returns are true,
correct and complete in all material respects. The Company has duly and
timely paid (or there has been paid on its behalf) (or by the Closing Date
will have paid) all Taxes that are due, or claimed or asserted by any taxing
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authority to be due, from or with respect to it and the Affiliated Group.
With respect to any period for which Taxes are not yet due, the Company has
made or will make due and sufficient current accruals for such Taxes in its
Closing Balance Sheet, including accruals of any amounts that will be paid
to the common parent of the Affiliated Group as a result of Taxes being
allocated to the Company under the consolidated return regulations under
Section 1502 of the Code. Such accruals will include amounts for any Tax
liability incurred by the Company as a result of the Section 338(h)(10)
Election or attributable to an election under state, local, or foreign law
similar to the election available under Section 338(g) of the Code. The
Company and the Affiliated group have made (or there have been made on the
Company's behalf) (or by the Closing Date will have paid) all required
estimated Tax payments sufficient to avoid any underpayment penalties. The
Company and the Affiliated Group have withheld and paid all Taxes required
by all applicable laws to be withheld or paid in connection with any amounts
paid or owing to any employee, creditor, independent contractor or other
third party.
(b) There are no outstanding agreements, waivers, or arrangements
extending the statutory period of limitation applicable to any claim for, or
the period for the collection or assessment of, Taxes due from or with
respect to the Company for any taxable period and for the Affiliated group
for 1996, and no power of attorney granted by or with respect to the Company
with respect to Taxes is currently in force. No closing agreement pursuant
to Section 7121 of the Code (or any predecessor provision) or any similar
provision of any state, local, or foreign law has been entered into by or
with respect to the Company or the Affiliated Group. No audit or other
proceeding by any court, governmental or regulatory authority, or similar
person is pending or, to the knowledge of the Seller, threatened with
respect to any Taxes due from or with respect to the Company or any Tax
Return filed by or with respect to the Company, including Tax Returns of the
Affiliated Group. To Seller's knowledge, no assessment of Taxes is proposed
against the Affiliated Group or the Company or any of its assets. Seller
has provided to Purchaser correct and complete copies of all Tax Returns,
examination reports and statements of deficiencies assessed against, or
agreed to by, the Company, for all years for which the statute of
limitations has not expired.
(c) No election under Sections 108, 338, 441, 1017, 1033 and 4977 of
the Code has been made or filed by or with respect to the Company. No
consent to the application of Section 341(f)(2) of the Code (or any
predecessor provision) has been made or filed by or with respect to the
Company or any of its assets. The Company has not agreed (and no agreement
has been made on the Company's behalf) to make any adjustment pursuant to
Section 481(a) or Section 807(f) of the Code (or any predecessor provision)
by reason of any change in any accounting method or change in basis of
computing reserves or otherwise, and there is no application pending with
any taxing authority requesting permission for any changes in any accounting
method of the Company. None of the assets of the Company is or will be
required to be treated as being owned by any person (other than the Company)
pursuant to the provisions of Section 168(f)(8) of the Internal Revenue Code
of 1954, as amended and in effect immediately before the enactment of the
Tax Reform Act of 1986 or is "tax-exempt use property" within the meaning of
Section 168(h)(1) of the Code.
(d) The Company is not a party to, is not bound by, nor has an
obligation under, any Tax sharing agreement, Tax allocation agreement or
similar contract. Except for liability under Treasury Regulation
Section 1.1502-b of the Affiliated group for 1996, the Company does not have
any liability for Taxes of any person, other than the Company, under
Treasury Regulation paragraph 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor, by contract, or otherwise.
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(e) There is no contract, agreement, plan or arrangement covering
any person that, individually or collectively, could give rise to the
payment by the Company of any amount that would not be deductible by the
Company by reason of Section 280G or Section 162(m) of the Code.
(f) The Seller is not a "foreign person" within the meaning of
Section 1445(b)(2) of the Code.
(g) The Company was taxable as a domestic "life insurance company"
within the meaning of Section 816 of the Code for all taxable periods or
portions thereof ending on or before the Closing Date.
(h) The balance of the policyholders surplus account (as defined in
Section 815 of the Code) of the Company is zero as of December 31, 1995, and
the computation and maintenance of the policyholders surplus account
balances for the taxable years subsequent to 1958 has been computed and
maintained in accordance with Section 815 of the Code and the Treasury
Regulations thereunder.
(i) The insurance reserves with respect to the Company set forth in
all federal income Tax Returns of the Company were determined in all
material respects in accordance with Section 807 of the Code.
(j) The Tax treatment under the Code of all insurance, annuity or
investment policies, plans, or contracts, financial products, employee
benefit plans, individual retirement accounts or annuities, or any similar
or related policy, contract, plan or product, whether individual, group or
otherwise issued or sold by the Company is and at all times has been the
same or not less favorable to the purchaser, policyholder, or beneficiaries
thereof than the Tax treatment under the Code for which such contracts
qualified or purported to qualify or which the Company represented could be
obtained at the time of its issuance, purchase, modification or exchange.
The provisions of the Code relating to the Tax treatment of the plans,
policies, contracts and products referred to in the preceding sentence shall
include, but not be limited to, Sections 72, 79, 101, 104, 105, 106, 125,
130, 264, 401, 402, 403, 404, 408, 412, 415, 419, 419A, 501, 505, 817, 818,
1035, 7702, and 7702A of the Code.
(k) The Company has not, nor will have, on or before the Closing Date
any liability for Taxes resulting from an acceleration of an "intercompany
transaction" within the meaning of Treasury Regulation paragraph 1.1502-13(d)
(or any analogous or similar provision under state, local of foreign law or
any predecessor provision or regulation).
(l) Neither Seller nor any of its Affiliates will make any election
to retain losses from operations, net operating losses or capital loss
carryovers of the Company pursuant to the procedure set forth in Treasury
Regulation paragraph 1.1502-20(g) or any similar or successor provision of
federal, State or local law.
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(m) For each period for which the statute of limitations has not
expired by the Closing Date, except for Tax Returns filed by the Affiliated
Group, the Company has not been a member of an affiliated group which has or
will file a consolidated return under Section 1502 of the Code.
3.12 LITIGATION. Except as disclosed in Section 3.12 of the
Disclosure Schedule:
(a) There are no actions, suits, investigations, arbitrations, or
proceedings pending, or (to the knowledge of Seller) threatened, against
Seller or its assets or properties, at law or in equity, in, before, or by
any person or entity, except such actions, suits, investigations,
arbitrations, or proceedings that individually or in the aggregate do not
have or cannot reasonably be expected to have a Material Adverse Effect.
(b) There are no actions, suits, investigations, arbitrations, or
proceedings pending, or (to the knowledge of Seller) threatened, against the
Company, or any of its assets or properties, at law or in equity, in,
before, or by any person or entity.
(c) There are no writs, judgments, decrees, injunctions, or similar
orders of any person or entity outstanding against the Company.
3.13 COMPLIANCE WITH LAWS. Except as disclosed in Section 3.13 of
the Disclosure Schedule, the Company is not in violation of any law or any
writ, judgment, decree, injunction, or similar order applicable to the
Company, which violation, individually or in the aggregate, has had or may
reasonably be expected to have a Material Adverse Effect.
3.14 PENSION AND BENEFIT PLANS.
(a) Section 3.14(a) of the Disclosure Schedule sets forth a true and
complete list of all Employee Benefit Plans.
(b) Seller has previously delivered to Purchaser true and complete
copies of the following documents with respect to each of the Employee
Benefit Plans (as applicable): (i) any plans and related trust documents,
and all amendments thereto, (ii) the most recent IRS Form 5500 and schedules
thereto, (iii) the most recent IRS determination letter, and (iv) the most
recent summary plan description.
(c) Except as disclosed in Section 3.14(c) of the Disclosure
Schedule, neither the Seller, the Company, nor any ERISA Affiliate has,
during the preceding six years, maintained, contributed to, or been
obligated to contribute to any Title IV Plan.
(d) Neither the Company nor its ERISA Affiliates maintains,
contribute to, or has (or has had during the preceding six years) an
obligation to contribute to any Multiemployer Plan or any Employee Pension
Benefit Plan that is subject to Sections 4063 and 4064 of ERISA.
(e) Except as set forth in Section 3.14(e) of the Disclosure
Schedule, since December 31, 1994, there has been no amendment to any
Employee Benefit Plan, and no Employee Benefit Plan has been established,
which could result or has resulted in a material increase in the accrued or
promised benefits of any employee of the Company.
(f) All contributions required by law or by the terms of any
Employee Benefit Plan have been timely made.
(g) Except as set forth in Section 3.14(g) of the Disclosure
Schedule, neither the execution or delivery of this Agreement nor the
14
performance of the transactions contemplated by this Agreement will
constitute an event under any Employee Benefit Plan that will or may result
in any payment (whether of severance pay or otherwise) becoming due, any
acceleration in the time of payment or any vesting or increase in any
benefits otherwise due under any such Employee Benefit Plan.
(h) The Company does not maintain, contribute to, or have an
obligation to contribute to any employee welfare benefit plan, as defined in
Section 3(1) of ERISA, that provides continuing benefits or coverage to any
participant or any beneficiary of any participant after the termination of
such participant's employment (other than as required by Section 4980B of
the Code and at the sole expense of such participant or beneficiary of such
participant), and except as set forth on Section 3.14(h) of the Disclosure
Schedule, the Company and its ERISA Affiliates have complied in all material
respects with the notice and continuation requirements of Section 4980B of
the Code and the regulations thereunder.
(i) Neither the Company, its ERISA Affiliates, or any organization
to which the Company is a successor or parent corporation has engaged in a
transaction within the meaning of Section 4069 of ERISA during the five-year
period ending on the Closing Date.
(j) There has been no material violation of ERISA with respect to
the filing of applicable returns, reports, documents, and notices regarding
any of the Employee Benefit Plans with the Secretary of Labor or the
Secretary of the Treasury or the furnishing of such notices or documents to
the participants or beneficiaries of the Employee Benefit Plans.
(k) There are no pending legal proceedings that have been asserted
or instituted with respect to the operation of any Employee Benefit Plan
against any of the Employee Benefit Plans, the assets of any of the trusts
under such plans, or of the Company, its ERISA Affiliates, or the plan
administrator or any fiduciary of the Employee Benefit Plans (other than
routine, uncontested benefit claims) and Seller has no knowledge of any
facts or circumstances which could form the basis for any such legal
proceeding.
(l) Each of the Employee Benefit Plans has been maintained, in all
material respects, in accordance with its terms and all provisions of
applicable law. All amendments and actions required to bring each of the
Employee Benefit Plans into conformity in all material respects with all of
the applicable provisions of ERISA and other applicable laws have been made
or taken, except to the extent that such amendments or actions are not
required by law to be made or taken until a date after the Closing Date as
disclosed in Section 3.14(l) of the Disclosure Schedule.
(m) Neither the Seller, the Company, nor any of its ERISA Affiliates
has any contract, plan, or commitment, whether legally binding or not, to
create any additional Employee Benefit Plan or to modify any existing
Employee Benefit Plan in a manner that would materially increase the
benefits of the participants or beneficiaries.
3.15 CONTRACTS. Section 3.15 of the Disclosure Schedule contains a
true and complete list of each of the following Contracts (true and complete
copies of which have been made available to Purchaser), to which the Company
is a party or by which any of its assets or properties is or may be bound:
(a) all employment, agency, consultation, or representation
Contracts or other Contracts of any type (including without limitation loans
or advances) with any present officer, director, employee, agent,
consultant, or other similar representative of the Company (or former
officer, director, employee, agent, consultant or similar representative of
15
the Company if there exists any present or future liability with respect to
such Contract);
(b) all Contracts with any person or entity containing any provision
or covenant (i) limiting the ability of the Company to (A) sell any products
or services of any other person or entity, (B) engage in any line of
business, or (C) compete with or obtain products or services from any person
or entity or (ii) limiting the ability of any person or entity to compete
with or to provide products or services to the Company;
(c) all Contracts relating to the borrowing of money by the Company,
relating to the deferred purchase price for property or services, or
relating to the direct or indirect guarantee by the Company of any
liability;
(d) all Contracts pursuant to which the Company has agreed to
indemnify or hold harmless any person or entity (other than indemnifications
or hold harmless covenants in the ordinary course of business and consistent
with past practice);
(e) all leases or subleases of real property used in the business,
operations, or affairs of the Company;
(f) all Contracts or arrangements (including without limitation
those relating to allocations of expenses, personnel, services, or
facilities) between the Company and Seller or any Affiliate of Seller;
(g) all reinsurance, coinsurance, or other similar Contracts
(including pursuant to which the Company receives or has received surplus
relief); and
(h) all other Contracts (other than insurance Contracts issued,
reinsured, or underwritten by the Company) that involve the payment or
potential payment, pursuant to the terms of such Contracts, by or to the
Company of more than $5,000 individually or in the aggregate or that are
otherwise material to the business or condition of the Company.
Each Contract disclosed or required to be disclosed in Section 3.15 of the
Disclosure Schedule is in full force and effect and constitutes a legal,
valid, and binding obligation of each party thereto. Neither the Seller nor
the Company has received from any other party to such Contract any notice,
whether written or oral, of termination or intention to terminate such
Contract. Except as set forth in Section 3.15 of the Disclosure Schedule,
the Company nor, to the knowledge of Seller, any other party to such
Contract is in violation or breach of or default under any such Contract (or
with or without notice or lapse of time or both, would be in violation or
breach of or default under any such Contract), which violation, breach, or
default has or can reasonably be expected to have a Material Adverse Effect.
3.16 INSURANCE ISSUED. Except as required by law or except as
disclosed in Section 3.16 of the Disclosure Schedule:
(a) All outstanding insurance Contracts issued, reinsured, or
underwritten by the Company are, to the extent required under applicable
laws, on forms and at rates approved by the insurance regulatory authority
of the jurisdiction where issued or have been filed with and not objected to
by such authority within the period provided for objection.
(b) All insurance Contract benefits payable by the Company or (to
the knowledge of Seller) by any other person or entity that is a party to or
bound by any reinsurance, coinsurance, or other similar Contract with the
Company have in all material respects been paid in accordance with the terms
16
of the insurance Contracts under which they arose, except for such benefits
for which the Company believes there is a reasonable basis to contest
payment.
(c) No outstanding insurance Contract issued, reinsured, or
underwritten by the Company entitles the holder thereof or any other person
or entity to receive dividends, distributions, or other benefits based on
the revenues or earnings of the Company or any other person or entity.
(d) All amounts to which the Company is entitled under reinsurance,
coinsurance, or other similar Contracts (including without limitation
amounts based on paid and unpaid losses) are fully collectible.
(e) Each insurance agent, at the time such agent wrote, sold, or
produced business for the Company, was duly licensed as an insurance agent
(for the type of business written, sold, or produced by such insurance
agent) in the particular jurisdiction in which such agent wrote, sold, or
produced such business.
3.17 LICENSES AND PERMITS. Except as disclosed in Section 3.17 of
the Disclosure Schedule:
(a) The Company owns or validly holds all (i) licenses, franchises,
permits, approvals, authorizations, exemptions, classifications,
certificates, registrations, and similar documents or instruments (other
than licenses to transact insurance business) that are required for its
business, operations, and affairs and that the failure to so own or hold has
or may reasonably be expected to have a Material Adverse Effect, and (ii)
licenses to transact insurance business. Section 3.17 of the Disclosure
Schedule contains a true and complete list of all jurisdictions in which the
Company is licensed to transact insurance business and the lines of business
for which the Company is licensed in each jurisdiction.
(b) All such licenses, franchises, permits, approvals,
authorizations, exemptions, classifications, certificates, registrations,
and similar documents or instruments are valid and in full force and effect.
No such license to transact insurance business is the subject of a
proceeding for suspension or revocation or any similar proceeding and, to
the knowledge of Seller, there is no pending threat of such suspension or
revocation by any such licensing authority.
3.18 OPERATIONS INSURANCE. Section 3.18 of the Disclosure Schedule
contains a true and complete list and description of all liability,
property, workers compensation, directors and officers liability, and other
similar insurance Contracts that insure the business, operations, or affairs
of the Company or affect or relate to the ownership, use, or operations of
any of the assets or properties of the Company.
17
3.19 INTERCOMPANY LIABILITIES. Except as disclosed in Section 3.19
of the Disclosure Schedule, (a) neither Seller nor any Affiliate of Seller
(other than the Company) provides or causes to be provided to the Company
any products, services, equipment, facilities, or similar items, and
(b) there are no liabilities between Seller or any Affiliate of Seller
(other than the Company), on the one hand, and the Company on the other
hand.
3.20 BANK ACCOUNTS. Section 3.20 of the Disclosure Schedule contains
(a) a true and complete list of the names and locations of all banks, trust
companies, securities brokers, and other financial institutions at which the
Company has an account or safe deposit box or maintains a banking,
custodial, trading, trust, or other similar relationship, (b) a true and
complete list and description of each such account, box, and relationship,
and (c) a list of all signatories for each such account and box.
3.21 CHARTER DOCUMENTS AND BYLAWS. Seller has heretofore made
available to Purchaser true and complete copies of the articles of
incorporation and bylaws of the Company, as in effect on the date hereof.
3.22 MINUTE BOOKS. The minute books of the Company accurately
reflect in all material respects all formal actions taken at all meetings
and all consents in lieu of meetings of the stockholders of the Company and
all formal actions taken at all meetings and all consents in lieu of
meetings of the boards of directors of the Company and all committees
thereof. All of such minute books have previously been made available for
inspection by Purchaser.
3.23 BROKERS AND FINDERS. Neither Seller nor any of its Affiliates
has employed any financial advisor or finder or incurred any liability for
any financial advisory or finders' fees in connection with this Agreement or
the transactions contemplated hereby.
3.24 DISCLOSURE. No representation or warranty made by Seller in
this Agreement or in any certificate furnished by Seller to Purchaser in
connection with this Agreement contains any untrue statement of material
fact or omits to state a material fact necessary to make the statement not
misleading in light of the circumstances in which they were made.
18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
4.1 ORGANIZATION. Purchaser is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
Illinois and has full corporate power and authority to enter into this
Agreement and to perform its obligations under this Agreement.
4.2 AUTHORITY. The execution and delivery of this Agreement by
Purchaser and the performance by Purchaser of its obligations under this
Agreement have been duly and validly authorized by all necessary corporate
action on the part of Purchaser. This Agreement has been duly executed and
delivered by Purchaser and constitutes a legal, valid, and binding
obligation of Purchaser and is enforceable against Purchaser in accordance
with its terms, except to the extent that (a) enforcement may be limited by
or subject to any bankruptcy, insolvency, reorganization, moratorium, or
similar laws now or hereafter in effect relating to or limiting creditors'
rights generally and (b) the remedy of specific performance and injunctive
and other forms of equitable relief are subject to certain equitable
defenses and to the discretion of the court or other similar person or
entity before which any proceeding therefor may be brought.
4.3 NO CONFLICTS OR VIOLATIONS. The execution and delivery of this
Agreement by Purchaser and the performance by Purchaser of its obligations
under this Agreement will not:
(a) subject to obtaining the approvals contemplated by Sections 5.1,
5.2, 6.1 and 6.2 hereof violate any term or provision of any law or any
writ, judgment, decree, or injunction applicable to Purchaser or any of its
assets or properties;
(b) conflict with or result in a violation or breach of any of the
provisions of the certificate of incorporation or bylaws of Purchaser;
(c) conflict with or result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default
under, any Contract to which Purchaser is a party or by which any asset or
property of Purchaser may be bound; or
(d) require Purchaser or any of its subsidiaries to obtain any
consent, approval, or action of, or make any filing with or give any notice
to, any person or entity, except as contemplated in Sections 6.1(a)(ii) and
6.2 hereof.
19
4.4 BROKERS AND FINDERS. Neither Purchaser nor any of its
Affiliates has employed any financial advisor or finder or incurred any
liability for any financial advisory or finders' fees in connection with
this Agreement or the transactions contemplated hereby, other than Xxxxx
Xxxxx & Co., Inc.
4.5 PURCHASE FOR INVESTMENT. The Shares will be acquired by
Purchaser for its own account for the purpose of investment. Purchaser has
sufficient knowledge and experience in financial and business matters to
evaluate the merits and risks of its investment in the Shares. Purchaser
will refrain from transferring or otherwise disposing of any of the Shares,
or any interest therein, in such manner as to violate any registration
provision of the securities laws.
4.6 LITIGATION.
(a) There are no actions, suits, investigations, arbitrations, or
proceedings pending, or (to the knowledge of Purchaser) threatened, against
Purchaser or its assets or properties, at law or in equity, in, before, or
by any person or entity that, if adversely determined, reasonably would be
expected to have a material adverse effect on the enforceability of this
Agreement, on the ability of Purchaser to perform its obligations under this
Agreement, or on the consummation of the transactions contemplated in this
Agreement.
(b) There are no writs, judgments, decrees, injunctions, or similar
orders of any person or entity outstanding against Purchaser that reasonably
would be expected to have a material adverse effect on the enforceability of
this Agreement, on the ability of Purchaser to perform its obligations under
this Agreement, or on the consummation of the transactions contemplated in
this Agreement.
4.7 DISCLOSURE. To Purchaser's knowledge, no representation or
warranty made by Purchaser in this Agreement or in any certificate furnished
by Purchaser to Seller in connection with this Agreement contains any untrue
statement of material fact or omits to state a material fact necessary to
make the statement not misleading in light of the circumstances in which
they were made.
ARTICLE V
COVENANTS OF SELLER
Seller covenants and agrees with Purchaser that, at all times before
the earlier of the Closing or the termination of this Agreement in
accordance with ARTICLE XI hereof, Seller will comply with all covenants and
provisions of this ARTICLE V applicable to it, except to the extent
(i) Purchaser may otherwise consent in writing, (ii) otherwise required by
applicable law, or (iii) otherwise expressly required or permitted by this
Agreement.
5.1 CONTRACT AND REGULATORY APPROVALS. Seller will take (and will
cause the Company to take) all commercially reasonable steps necessary or
desirable, and proceed diligently and in good faith and use commercially
reasonable efforts, to obtain as promptly as practicable (a) all approvals
and consents required of any person or entity under all Contracts to which
Seller or the Company is a party to consummate the transactions contemplated
hereby, and (b) all approvals, authorizations, and clearances of
governmental and regulatory authorities required of each of Seller and the
Company to consummate the transactions contemplated hereby. Seller will,
and will cause the Company to, (i) provide such other information and
20
communications to such governmental and regulatory authorities as Purchaser
or such authorities may reasonably request, and (ii) cooperate with
Purchaser in obtaining, as promptly as practicable, all approvals,
authorizations, and clearances of governmental or regulatory authorities and
other persons or entities required of Purchaser to consummate the
transactions contemplated hereby, including any required approvals of the
insurance regulatory authorities in the States of Missouri and Illinois.
5.2 HSR FILINGS. Seller will (a) take all actions necessary to make
the filings required of it or its Affiliates under the HSR Act with respect
to the transactions contemplated by this Agreement, (b) comply with any
request for additional information received by Seller or its Affiliates from
the Federal Trade Commission or Antitrust Division of the Department of
Justice pursuant to the HSR Act, (c) cooperate with Purchaser in connection
with Purchaser's filings under the HSR Act, and (d) request early
termination of the applicable waiting period.
5.3 INVESTIGATION BY PURCHASER. Seller will provide, and will cause
the Company to provide, Purchaser and its representatives and agents with
reasonable access, upon reasonable prior notice and during normal business
hours, to all facilities, officers, employees, agents, assets or properties,
and books and records of the Company and will furnish Purchaser and such
representatives and agents with all such information and data in their
possession concerning the business, operations, and affairs of the Company
as Purchaser or such representatives and agents may reasonably request.
5.4 CONDUCT OF BUSINESS. Except as otherwise expressly permitted in
this Agreement, Seller will cause the Company to conduct its business only
in the ordinary course and consistent with past practice. Without limiting
the generality of the foregoing and except as expressly provided herein:
(a) Seller will use, and will cause the Company to use, all
commercially reasonable efforts to (i) preserve intact the present business
organization, reputation, and policyholder relations of the Company, (ii)
keep available the services of the present officers, directors, employees,
agents, consultants, and other similar representatives of the Company;
however, Purchaser acknowledges that Seller may change the directors of the
Company between the date hereof and the Closing Date, (iii) maintain in full
force and effect all Contracts referenced in Section 3.15 hereof, except
those Contracts which expire in accordance with their terms or are
terminated by the Company in the ordinary course of business, (iv) maintain
all licenses (including licenses to transact insurance business),
qualifications, and authorizations of the Company to do business in each
jurisdiction in which it is so licensed, qualified, or authorized, and (v)
maintain each rating classification assigned to the Company by all rating
agencies as of the date hereof.
(b) Seller will cause the Company to (i) maintain all assets and
properties of the Company in good working order and condition (ordinary wear
and tear excepted), and (ii) continue all current marketing and selling
activities relating to the business, operations, and affairs of the Company.
(c) Seller will cause the Company to maintain its books and records
in the usual manner and consistent with past practice and will not permit a
material change in any underwriting, investment, actuarial, financial
reporting, tax, or accounting practice or policy of the Company or in any
assumption underlying such a practice or policy, or in any method of
calculating any bad debt, contingency, insurance, or other reserve for
financial reporting purposes or for other accounting purposes (including any
practice, policy, assumption, or method relating to or affecting the
determination of the Company's insurance in force, premium or investment
21
income, reserves or other similar amounts, or operating ratios with respect
to expenses, losses or lapses).
(d) Seller will cause all statutory reserves and other similar
amounts with respect to losses, benefits, claims, and expenses in respect of
the Company's insurance business to be (i) determined in accordance with SAP
and generally accepted actuarial assumptions, (ii) determined in accordance
with the benefits specified in the related insurance or reinsurance
Contracts, (iii) calculated, established and reflected on a basis consistent
with those reserves and other similar amounts and reserving methods followed
by the Company at December 31, 1995, (iv) determined in conformity with the
requirements of the insurance laws of each applicable jurisdiction in all
material respects, and (v) adequate, based upon then-current information and
assumptions concerning investment income, mortality and morbidity
experience, persistency, and expenses, to cover the total amount of all
matured and reasonably anticipated unmatured benefits, dividends, losses,
claims, expenses, and other liabilities of the Company under all insurance
or reinsurance Contracts which the Company has or will have any liability.
Seller will cause the Company to continue to own assets and properties that
qualify as legal reserve assets under all applicable insurance laws in an
amount at least equal to all of the Company's required reserves and other
similar amounts.
(e) Seller will cause the Company to use all commercially reasonable
efforts to maintain in full force and effect substantially the same levels
of coverage as the insurance afforded under the insurance Contracts
described in Section 3.18 hereof.
(f) Seller will cause the Company to refrain from entering into any
reinsurance, coinsurance, or other similar Contract, whether as reinsurer or
reinsured, including without limitation any surplus relief or financial
reinsurance contract.
(g) Seller will cause the Company to continue to comply, in all
material respects, with all laws applicable to the business, operations, or
affairs of the Company.
5.5 NO CHARTER AMENDMENTS. Seller will cause the Company to refrain
from amending its articles of incorporation or bylaws and from taking any
action with respect to any such amendment.
5.6 NO ISSUANCE OF SECURITIES. Seller will cause the Company to
refrain from authorizing or issuing any shares of its capital stock (or any
interest therein) or entering into any Contract or granting any option,
warrant, or right calling for the authorization or issuance of any shares of
capital stock of the Company (or any interest therein), or creating or
issuing any securities directly or indirectly convertible into or
exchangeable for any such shares (or any interest therein), or issuing any
options, warrants, or rights to purchase any such convertible securities (or
any interest therein).
5.7 DIVIDENDS. Seller will cause the Company to declare and pay, on
or before the Closing Date, a dividend of the assets listed on Schedule 5.7
to Seller. Seller will cause the Company to refrain from directly or
indirectly redeeming or purchasing any of its capital stock or any interest
in or right to acquire any such stock.
5.8 RESIGNATIONS OF DIRECTORS AND OFFICERS. Seller will cause such
directors and officers of the Company as are designated by Purchaser at
least two days prior to the Closing Date to tender their resignations
effective at, and subject to, the Closing.
22
5.9 BOOKS AND RECORDS. On the Closing Date, Seller will deliver to
Purchaser or will make available to Purchaser all books and records of the
Company. Seller will, and will cause its Affiliates (other than the
Company) to deliver, any books and records of the Company if at any time
after the Closing, Seller or its Affiliates (other than the Company)
discovers any such books or records.
5.10 NO NEGOTIATION, ETC. Seller will refrain and will cause each
Affiliate and any other person or entity acting for or on behalf of Seller
or its Affiliates to refrain from taking, directly or indirectly, any action
(a) to seek or encourage any offer or proposal from any person or entity to
acquire any assets or properties or shares of capital stock or other
securities of the Company (or any interest in any of the foregoing), (b) to
merge, consolidate, or combine the Company with any other corporation, or to
permit any other corporation to merge, consolidate, or combine into the
Company, (c) to liquidate, dissolve, or reorganize the Company in any
manner, (d) to acquire or transfer any assets or properties of the Company
(or any interest in any of the foregoing), (e) to reach any agreement or
understanding (whether or not such agreement or understanding is absolute,
revocable, contingent, or conditional) for, or otherwise to attempt to
consummate any such acquisition, transfer, merger, consolidation,
combination, or reorganization, or (f) to furnish or cause to be furnished
any information with respect to the Company to any person or entity (other
than Purchaser and its Affiliates, employees, and agents) except to the
extent otherwise required by applicable law. If Seller or any Affiliate of
Seller receives, directly or indirectly, from any person or entity (other
than Purchaser) any offer, proposal, or informational request that is
subject to this Section 5.10, Seller will promptly advise such person or
entity, by written notice, of the terms of this Section 5.10 and will
promptly deliver a copy of such notice to Purchaser.
5.11 FINANCIAL STATEMENTS AND REPORTS.
(a) As promptly as practicable, Seller will deliver to Purchaser
true and complete copies of the Quarterly Statements filed by the Company
for each calendar quarter ending after June 30, 1996. The Quarterly
Statements will (i) comply in all material respects with all applicable laws
when so filed, (ii) be prepared in accordance with SAP, (iii) be true and
complete in all material respects, and (iv) will present fairly in all
material respects the financial position of the Company as of the respective
dates thereof and the related summary of operations and changes in capital
and surplus and in cash flows of the Company for and during the respective
periods covered thereby.
(b) Seller will deliver to Purchaser true and complete copies of
such other material financial statements, reports, or analyses as may be
prepared or received by Seller or any Affiliate of Seller and as relate to
the business, operations, or affairs of the Company.
5.12 INVESTMENTS.
(a) Seller will cause the Company to invest its future cash flow,
any cash from matured and maturing investments, any cash proceeds from the
sale of assets or properties, and any cash funds currently held by the
Company exclusively in United States Treasury obligations with a maturity of
less than one year, except as otherwise required by law or except as
required to provide cash (in the ordinary course of business and consistent
with past practice) to meet the Company's reasonably anticipated current
obligations. Seller will use commercially reasonable efforts to ensure that
the assets and properties of the Company that are classified as nonadmitted
under SAP do not at any time exceed the amount of nonadmitted assets for the
Company as of December 31, 1995. Notwithstanding the foregoing, Seller will
23
cause the Company to refrain from any investment transactions without the
approval of Purchaser.
5.13 EMPLOYEE MATTERS.
(a) Except as may be required by law, Seller will refrain, and will
cause the Company to refrain, from directly or indirectly:
(i) hiring any officer, director, employee, agent,
consultant, or other similar representative of the Company;
(ii) entering into any Contract with any officer, director,
employee, agent, consultant, or other similar representative of the
Company; or
(iii) adopting or entering into any pension, welfare, bonus,
deferred compensation, incentive compensation, profit sharing, stock,
retirement, or other benefit plan or arrangement.
5.14 NO DISPOSAL OF PROPERTY. Except as otherwise expressly
permitted by this Agreement, Seller will cause the Company to refrain from
(a) disposing of any assets or properties of the Company and from permitting
any of such assets or properties to be subjected to any liens or
encumbrances, except for Permitted Liens, (b) selling any material part of
its insurance Contracts in force, operations, or business to any third
party, (c) entering into any Contracts obligating the Company to administer
the operations of any person or entity other than the Company, and
(d) entering into any Contracts permitting any person or entity other than
the Company to administer the operations of the Company.
5.15 NO BREACH OR DEFAULT. Seller will cause the Company to refrain
from violating, breaching, or defaulting, and from taking or failing to take
any action that (with or without notice or lapse of time or both) would
constitute a violation, breach, or default, under any term or provision of
any Contract to which the Company is a party or by which any of its assets
or properties is or may be bound, except for such violations, breaches,
defaults, actions, or failures that individually or in the aggregate do not
have and cannot reasonably be expected to have a Material Adverse Effect.
5.16 INDEBTEDNESS. Seller will cause the Company to refrain from (a)
creating, incurring, assuming, guaranteeing, or otherwise becoming liable
for any liability (except in the ordinary course of business and consistent
with past practice), (b) canceling, paying, agreeing to cancel or pay, or
otherwise providing for a complete or partial discharge, in each case in
advance of a scheduled payment date with respect to any monetary liability,
and (c) waiving any right to receive any direct or indirect payment or other
benefit under any liability owing to it.
5.17 NO ACQUISITIONS. Seller will cause the Company to refrain from
(a) merging, consolidating, or otherwise combining or agreeing to merge,
consolidate, or otherwise combine with any other entity, (b) acquiring or
agreeing to acquire blocks of business or all or substantially all assets or
capital stock or other equity securities of any other entity, or
(c) otherwise acquiring or agreeing to acquire control or ownership of any
other entity.
5.18 INTERCOMPANY LIABILITIES AND AFFILIATE TRANSACTIONS. Except as
otherwise expressly provided for in this Agreement, the Company will not
enter into any Contract or engage in any transaction with Seller or any
Affiliate of Seller. The parties agree that all intercompany accounts and
balances payable or receivable, whether or not currently due, between the
Company, on the one hand, and Seller and its Affiliates, on the other hand,
24
shall be settled at Closing. Except as otherwise expressly provided in this
Agreement, on the Closing Date Seller will terminate, and will cause the
Affiliates of Seller to terminate, each Contract between the Company and
Seller or any such Affiliate.
5.19 SOFTWARE AGREEMENTS. Seller shall use commercially reasonable
efforts to ensure that the Company will have the right to use the computer
software currently used in the conduct of its business, including the
software listed in Section 3.8(d) of the Disclosure Schedule, after the
Closing. Seller shall transfer to the Company any software or license not
currently owned by or licensed to the Company and shall obtain from software
licensors any approvals needed for continuation of software licenses after a
change in control of the Company; provided, however, that the purchased
software numbered 3, 4, 5, and 6 in Section 3.8(d) of the Disclosure
Schedule shall not be transferred to the Company.
5.20 NOTICE AND CURE. Seller will notify Purchaser promptly in
writing of, and contemporaneously will provide Purchaser with true and
complete copies of any and all information or documents relating to, and
will use all commercially reasonable efforts to cure before the Closing, any
event, transaction, or circumstance occurring after the date of this
Agreement that causes or will cause any covenant or agreement of Seller
under this Agreement to be breached, or that renders or will render untrue
any representation or warranty of Seller contained in this Agreement as if
the same were made on or as of the date of such event, transaction, or
circumstance. Seller also will use all commercially reasonable efforts to
cure, before the Closing, any violation or breach of any representation,
warranty, covenant, or agreement made by it in this Agreement, whether
occurring or arising before or after the date of this Agreement.
ARTICLE VI
COVENANTS OF PURCHASER
Purchaser covenants and agrees with Seller that, at all times before
the earlier of the Closing or the termination of this Agreement in
accordance with ARTICLE XI hereof, Purchaser will comply with all covenants
and provisions of this ARTICLE VI, except to the extent (i) Seller may
otherwise consent in writing, (ii) otherwise required by applicable law, or
(iii) otherwise expressly required or permitted by this Agreement.
6.1 CONTRACT AND REGULATORY APPROVALS. Purchaser will (a) take all
commercially reasonable steps necessary or desirable, and proceed diligently
and in good faith and use commercially reasonable efforts, to obtain as
promptly as practicable (i) all approvals and consents required of any
person or entity under all Contracts to which Purchaser is a party to
consummate the transactions contemplated hereby, and (ii) all approvals,
authorizations, and clearances of governmental and regulatory authorities
required of Purchaser to consummate the transactions contemplated hereby,
including any required approvals of the insurance regulatory authorities in
the States of Missouri and Illinois, (b) provide such information and
communications to such governmental and regulatory authorities as such
authorities may reasonably request, and (c) cooperate with Seller in
obtaining, as promptly as practicable, all approvals, authorizations, and
clearances of governmental or regulatory authorities and other persons or
entities required of Seller to consummate the transactions contemplated
hereby.
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6.2 HSR FILINGS. Purchaser will (a) take all actions necessary to
make the filings required of it or its Affiliates under the HSR Act with
respect to the transactions contemplated by this Agreement, (b) comply with
any request for additional information received by Purchaser or its
Affiliates from the Federal Trade Commission or Antitrust Division of the
Department of Justice pursuant to the HSR Act, (c) cooperate with Seller in
connection with Seller's filings under the HSR Act, and (d) request early
termination of the applicable waiting period.
6.3 NOTICE AND CURE. Purchaser will notify Seller promptly in
writing of, and contemporaneously will provide Seller with true and complete
copies of any and all information or documents relating to, and will use all
commercially reasonable efforts to cure before the Closing, any event,
transaction, or circumstance occurring after the date of this Agreement that
causes or will cause any covenant or agreement of Purchaser under this
Agreement to be breached, or that renders or will render untrue any
representation or warranty of Purchaser contained in this Agreement as if
the same were made on or as of the date of such event, transaction, or
circumstance. Purchaser also will use all commercially reasonable efforts
to cure, before the Closing, any violation or breach of any representation,
warranty, covenant, or agreement made by it in this Agreement, whether
occurring or arising before or after the date of this Agreement.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder are subject to the fulfillment,
at or before the Closing, of each of the following conditions (all or any of
which may be waived in whole or in part by Purchaser). Seller shall use all
commercially reasonable efforts to fulfill, at or before the Closing, such
of the following conditions (or portions thereof) over which it has control.
7.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by Seller in this Agreement, in the certificates delivered
by Seller pursuant to this Agreement, and in the Disclosure Schedule shall
be true in all material respects as of the Closing as though such
representations and warranties were made at and as of the Closing.
7.2 PERFORMANCE. Seller shall have performed and complied with, in
all material respects, all agreements and covenants required by this
Agreement to be so performed or complied with by Seller at or before the
Closing.
7.3 OFFICER'S CERTIFICATES. Seller shall have delivered to
Purchaser a certificate, dated the Closing Date and executed by an executive
officer of Seller, certifying as to the fulfillment by Seller of the
conditions set forth in Sections 7.1, 7.2, 7.5, 7.6, 7.7, and 7.8 hereof.
In addition, Seller shall have delivered to Purchaser a certificate, dated
the Closing Date and executed by the secretary or any assistant secretary of
Seller, certifying that Seller has duly and validly taken all corporate or
other action necessary to authorize its execution and delivery of this
Agreement and the performance of its obligations under this Agreement.
7.4 HSR ACT APPROVAL. All waiting periods applicable to this
Agreement and the transactions contemplated hereby under the HSR Act shall
have expired or been waived.
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7.5 NO INJUNCTION. There shall not be in effect on the Closing Date
any writ, judgment, injunction, decree, or similar order of any court or
governmental authority restraining, enjoining, or otherwise preventing
consummation of any of the transactions contemplated by this Agreement.
7.6 NO PROCEEDING OR LITIGATION. There shall not be instituted,
pending, or (to Purchaser's knowledge or Seller's knowledge) threatened, any
action, suit, investigation, or other proceeding in, before, or by any
court, governmental or regulatory authority, or other person or entity to
restrain, enjoin, or otherwise prevent consummation of any of the
transactions contemplated by this Agreement.
7.7 CONTRACT AND REGULATORY APPROVALS. All approvals,
authorizations, and clearances contemplated by Sections 5.1 and 6.1 hereof
and necessary to permit Seller and Purchaser to perform their obligations
under this Agreement and to consummate the transactions contemplated hereby
(including, without limitation, any requisite action of the insurance
regulatory authorities in the States of Missouri and Illinois) shall have
been obtained and shall be in full force and effect.
7.8 NO ADVERSE CHANGE. There shall not have occurred since December
31, 1995 any change in the business, licenses, insurance in force, or
condition (financial or otherwise) of the Company, except for such changes
that, individually or in the aggregate, do not have and cannot reasonably be
expected to have a Material Adverse Effect.
7.9 OPINION OF COUNSEL TO SELLER. Purchaser shall have received an
opinion of counsel in form and substance reasonably satisfactory to
Purchaser.
7.10 DIVIDENDS. Prior to or upon Closing, the assets of the Company
described on Schedule 5.7 hereto shall be dividended to Seller in accordance
with Section 5.7 hereof.
7.11 CERTIFICATES OF COMPLIANCE. Seller shall have delivered to
Purchaser certificates of compliance as of a recent date to the effect that
the Company is duly licensed to transact insurance business in, and is in
compliance with the laws of, each jurisdiction in which the Company is
licensed to transact insurance business.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller hereunder are subject to the fulfillment, at
or before the Closing, of each of the following conditions (all or any of
which may be waived in whole or in part by Seller). Purchaser will use all
commercially reasonable efforts to fulfill, at or before the Closing, such
of the following conditions (or portions thereof) over which it has control.
8.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by Purchaser in this Agreement and in the certificates
delivered by Purchaser pursuant to this Agreement shall be true in all
material respects as of the Closing as though such representations and
warranties were made as of the Closing.
8.2 PERFORMANCE. Purchaser shall have performed and complied with,
in all material respects, all agreements and covenants required by this
Agreement to be so performed or complied with by Purchaser at or before the
Closing.
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8.3 OFFICER'S CERTIFICATES. Purchaser shall have delivered to
Seller a certificate, dated the Closing Date and executed by an executive
officer of Purchaser, certifying as to the fulfillment of the conditions set
forth in Sections 8.1, 8.2, 8.5, 8.6, and 8.7 hereof. In addition,
Purchaser shall have delivered to Seller a certificate, dated the Closing
Date and executed by the secretary or any assistant secretary of Purchaser,
certifying that Purchaser has duly and validly taken all corporate action
necessary to authorize its execution and delivery of this Agreement and the
performance of its obligations under this Agreement.
8.4 HSR ACT APPROVAL. All waiting periods applicable to this
Agreement and the transactions contemplated hereby under the HSR Act shall
have expired or been waived.
8.5 NO INJUNCTION. There shall not be in effect on the Closing Date
any writ, judgment, injunction, decree, or similar order of any court or
governmental authority restraining, enjoining, or otherwise preventing
consummation of any of the transactions contemplated by this Agreement.
8.6 NO PROCEEDING OR LITIGATION. There shall not be instituted,
pending, or (to Purchaser's knowledge or Seller's knowledge) threatened any
action, suit, investigation, or other proceeding in, before, or by any
court, governmental or regulatory authority, or other person or entity to
restrain, enjoin, or otherwise prevent consummation of any of the
transactions contemplated by this Agreement.
8.7 CONTRACT OR REGULATORY APPROVALS. All approvals,
authorizations, and clearances contemplated by Sections 5.1 and 6.1 hereof
and necessary to permit Seller and Purchaser to perform their obligations
under this Agreement and to consummate the transactions contemplated hereby
(including, without limitation, any requisite action of the insurance
regulatory authorities in the States Missouri and Illinois) shall have been
obtained and shall be in full force and effect.
8.8 OPINION OF COUNSEL TO PURCHASER. Seller shall have received an
opinion of counsel in form and substance reasonably satisfactory to Seller.
ARTICLE IX
SURVIVAL OF PROVISIONS
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Subject to Section
9.2 hereof and ARTICLE X hereof, the representations and warranties
respectively made by Seller and Purchaser in this Agreement, in the
Disclosure Schedule, or in any certificate required to be delivered pursuant
to this Agreement will survive the Closing (i) until the expiration of all
applicable statutes of limitations (including all periods of extension,
whether automatic or permissive) in the case of the representations and
warranties of Seller set forth in Sections 3.4, 3.11, 3.14, 12.1, and 12.2
hereof, and (ii) until June 30, 1997 in the case of all other
representations and warranties.
9.2 PURSUIT OF CLAIMS. Any breach of any representation or warranty
as to which a bona fide claim for indemnification has been asserted in
accordance with ARTICLE X hereof during the applicable survival period set
forth in Section 9.1 hereof may be pursued beyond the expiration of such
survival period until such claim is resolved by final, nonappealable
judgment or by settlement.
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ARTICLE X
INDEMNIFICATION
10.1 INDEMNIFICATION BY SELLER. Subject to the provisions of
Sections 10.3 and ARTICLE IX hereof, Seller will indemnify and hold harmless
each of Purchaser and its Affiliates from and against any and all Damages
resulting from or relating to each of the following:
(a) any breach by Seller of any representation, warranty, covenant
or agreement made by Seller in this Agreement, in the Disclosure Schedule,
or in any certificate required to be delivered pursuant to this Agreement;
(b) any liability of the Seller, the Company, or any ERISA Affiliate
related to any Employee Benefit Plan, including without limitation any
Multiemployer Plan or Multiple Employer Plan, maintained by, contributed to,
or obligated to be contributed to, at any time, by the Seller, the Company,
or any ERISA Affiliate, including without limitation:
(i) any liability to the PBGC under Title IV of ERISA;
(ii) any liability relating to a Multiemployer Plan;
(iii) any liability with respect to noncompliance with ERISA and other
applicable laws and the notice and benefit continuation
requirements of COBRA;
(iv) any liability with respect to any action, suit, claim, or
proceeding by any person against Purchaser, the company, any
Employee Benefit Plan, or any fiduciary or former fiduciary of
any Employee Benefit Plan; and
(v) any liability arising under or with respect to the severance of
any employees of the Company on or before the Closing Date
(including without limitation liabilities under or with respect
to WARN); and
(c) the employment or termination of employment (including
constructive termination) by either Seller, the Company, or any Affiliate of
Seller of any individual (including without limitation any employee of the
Company or Affiliate of the Company) attributable to any action or inaction
occurring before the Closing Date.
10.2 INDEMNIFICATION BY PURCHASER. Subject to the provisions of
Section 10.3 and ARTICLE IX hereof, Purchaser will indemnify and hold
harmless each of Seller and its Affiliates from and against any and all
Damages resulting from or relating to any breach by Purchaser of any
representation, warranty, covenant, or agreement made by Purchaser in this
Agreement or in any certificate required to be delivered pursuant to this
Agreement.
10.3 INDEMNIFICATION PROCEDURES.
(a) If an Indemnitee becomes aware of any matter that it believes is
indemnifiable pursuant to Section 10.1 or 10.2 hereof and such matter
involves (i) any claim made against the Indemnitee by any person or entity
other than Purchaser or Seller or (ii) the commencement of any action, suit,
investigation, arbitration, or similar proceeding against the Indemnitee by
any person or entity other than Purchaser or Seller, the Indemnitee will
give the Indemnifying Party prompt written notice of such claim or the
commencement of such action, suit, investigation, arbitration, or similar
proceeding, which notice must (A) provide (with reasonable specificity) the
basis on which indemnification is being asserted, (B) set forth the actual
29
or good-faith estimated amount of Damages for which indemnification is being
asserted, if known, and (C) be accompanied by copies of all relevant
pleadings, demands, and other papers served on the Indemnitee.
(b) The Indemnifying Party will have a period of 10 days after the
delivery of each notice required by Section 10.3(a) hereof during which to
respond to such notice. If the Indemnifying Party elects to defend the
claim described in such notice or does not respond within such 10-day
period, the Indemnifying Party will be obligated to compromise or defend
(and will control the defense of) such claim, at its own expense and by
counsel chosen by the Indemnifying Party. The Indemnitee will cooperate
fully with the Indemnifying Party and counsel for the Indemnifying Party in
the defense against any such claim, and the Indemnitee will have the right
to participate at its own expense in the defense of any such claim. If the
Indemnifying Party responds within such 10-day period and elects not to
defend such claim, the Indemnitee will be free to compromise or defend (and
control the defense of) such claim and to pursue such remedies as may be
available to the Indemnitee under applicable law.
(c) Any compromise or settlement of any claim (whether defended by
the Indemnitee or by the Indemnifying Party) will require the prior written
consent of the Indemnitee and the Indemnifying Party (which consent will not
be unreasonably withheld).
(d) If an Indemnitee becomes aware of any matter that it believes is
indemnifiable pursuant to Section 10.1 or 10.2 hereof and such matter
involves a claim made by Purchaser or Seller, the Indemnitee will give the
Indemnifying Party prompt written notice of such claim, which notice must
(i) provide (with reasonable specificity) the bases for which
indemnification is being asserted, and (ii) set forth the actual or good-faith
estimated amount of Damages for which indemnification is being
asserted. The Indemnifying Party will have a period of 10 days after the
delivery of each notice required by this Section 10.3(d) during which to
respond to such notice. If the Indemnifying Party accepts (in writing) full
responsibility for the claim described in such notice or does not respond
within such 10-day period, the Indemnifying Party will pay upon demand to
the Indemnitee the actual or estimated amount of Damages reflected in such
notice. If the Indemnifying Party disputes such claim, the Indemnifying
Party and the Indemnitee agree to proceed in good faith to negotiate a
resolution of such dispute. If all such disputes are not resolved through
negotiations within 10 days after such negotiations begin or if such
negotiations are not initiated within 10 days after notice is given, either
the Indemnifying Party or the Indemnitee may initiate litigation to resolve
such disputes.
(e) Any claim for indemnification must be made prior to the
expiration of the applicable representation, warranty or covenant as set
forth in Section 9.1.
10.4 TREATMENT OF INDEMNIFICATION PAYMENTS. Seller and Purchaser
agree that any payment made under ARTICLE X hereof will be treated by the
parties on their tax returns as an adjustment to the aggregate consideration
for the Shares. If, notwithstanding such treatment by the parties, any
indemnity payment is determined to be taxable to Purchaser or the Company by
any taxing authority, Seller shall indemnify Purchaser and the Company for
any Taxes payable by Purchaser or the Company by reason of the receipt or
accrual of such indemnity payment (including any payments under this
Section 10.4), determined at a Tax rate equal to 35%.
30
10.5 TAX INDEMNIFICATION.
(a) Seller will be responsible for, will pay or cause to be paid,
and will indemnify and hold harmless Purchaser and the Company from and
against, any and all Damages for or in respect of each of the following:
(i) any and all Taxes with respect to any taxable period
(or portions thereof) of the Company (or any predecessor) ending on or
before the Closing Date (including, without limitation, any liability
for Taxes incurred as a result of the Section 338(h)(10) Election as
described in Section 12.2 hereof or as a result of any dividends
described in Section 5.7 hereof, or resulting from an acceleration of
an "intercompany transaction," within the meaning of Treasury
Regulation Section 1.1502-13(d) (or any analogous or similar provision
under state, local or foreign law or any predecessor provision or
regulation), that occurred on or before the Closing Date), but only to
the extent such Taxes were not accrued by the Company in the Closing
Balance Sheet;
(ii) any and all Taxes of any member of an affiliated,
consolidated, combined, or unitary group including the Affiliated
Group (other than the Company) of which the Company (or any
predecessor) is or was a member on or prior to the Closing Date by
reason of the liability of the Company pursuant to Treasury Regulation
Section 1.1502-6(a) or any analogous or similar state, local or
foreign law; and
(iii) any breach by Seller of any representation, warranty,
covenant, or agreement contained in Section 3.11, Section 10.5,
Section 12.1, or Section 12.2 hereof.
(b) The Company will promptly notify Seller of the commencement of
any claim, audit, examination, or other proposed change or adjustment by any
taxing authority concerning any Taxes or other Damages covered by Section
10.5(a) hereof ("Tax Claim"). Seller shall control the defense and
settlement of any Tax audit or administrative or court proceeding relating
to taxable periods of the Company ending on or prior to the Closing Date,
provided, however, that if the results of any such Tax audit or
administrative or court proceeding could reasonably be expected to be
material to Purchaser or the Company, then Seller and Purchaser shall
jointly control the defense and settlement of any such Tax audit or
proceeding. Seller shall promptly notify the Company if it decides not to
participate in the defense or settlement of any such Tax audit or
administrative or court proceeding and the Company thereupon shall be
permitted to defend and settle such Tax audit or proceeding. Seller will
promptly notify the Company of the commencement of any claim, audit,
examination, or other proposed change or adjustment by any taxing authority
which may affect the liability of the Company for Taxes and Seller shall
keep the Company duly informed of the progress thereof.
(c) The Seller shall be responsible for, shall pay or cause to be
paid, and shall indemnify and hold harmless Purchaser and the Company from
and against any liability arising under any Tax sharing, Tax indemnity, Tax
allocation or other similar contract to which the Company, any predecessor
to the Company or any transferor to the Company is a party or is obligated
thereunder, in each case on or prior to the Closing Date.
(d) Any claim for indemnity hereunder may be made at any time prior
to sixty days after the expiration of the applicable Tax statute of
limitations with respect to the relevant taxable period (including all
periods of extension, whether automatic or permissive).
31
(e) Seller shall have no liability for indemnification for any
Damages under this Section 10.5 until and unless the cumulative total of
such Damages exceeds in the aggregate $2,000, it being understood that if
such threshold for Damages is reached, Seller shall be liable to Purchaser
for all Damages.
10.6 OBLIGATIONS OF SELLER. If Seller is sold or is no longer an
indirect wholly owned subsidiary of General Accident Insurance Company of
America, then the indemnification obligations of Seller under this Agreement
shall be assumed by General Accident Insurance Company of America.
10.7 CLAIMS LIMITATION. Notwithstanding the foregoing provisions of
this Article X:
(a) Seller shall have no liability for indemnification for any
Damages under Section 10.1 hereof, except for Damages resulting from or
relating to any misrepresentation or breach of warranty contained in
Sections 3.4 or 3.14 or Damages subject to indemnification under
Section 10.5, until and unless the cumulative total of such Damages exceeds
in the aggregate $50,000, it being understood that if such threshold for
Damages is reached, Seller shall be liable to Purchaser for all Damages.
(b) the aggregate amount which Seller may be required to pay for
indemnification pursuant to Section 10.1 shall not exceed the Final Purchase
Price.
(c) Seller is not responsible for any future payments of assessments
against the Company related to guaranty or insolvency funds for insolvencies
of life insurance companies occurring in periods prior or subsequent to the
Closing Date.
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ARTICLE XI
TERMINATION
11.1 TERMINATION. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing by written agreement of Seller
and Purchaser; or
(b) at any time after November 30, 1996, by Seller or Purchaser 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 by the party electing to terminate pursuant to this
Section 11.1(b).
11.2 EFFECT OF TERMINATION. If this Agreement is validly terminated
pursuant to Section 11.1 hereof, this Agreement will become null and void
except that (a) the provisions of this Section 11.2 hereof will continue to
apply following any such termination, and (b) no party hereto will be
relieved of any liability for Damages that such party may have to the other
parties by reason of such party's breach of this Agreement (or any
representation, warranty, covenant, or agreement included herein).
ARTICLE XII
MISCELLANEOUS
12.1 TAX MATTERS.
(a) Seller shall cause the Company to properly prepare, and timely
file or cause to be timely filed, (i) all Tax Returns of or which include
the Company or its assets or operations with respect to taxable periods
ending on or before the Closing Date and (ii) all Seller Consolidated
Returns which include the Company with respect to taxable periods ending on
or before the Closing Date (the "Seller Returns"). The Seller Returns shall
be prepared in a manner consistent with past practices. Subject to
Section 10.5, the Company shall timely pay (or reimburse the common parent
for) all Taxes which are due with respect to the Seller Returns to the
extent the Taxes are attributable to the Company under the consolidated
return regulations under Section 1502 of the Code. The Company shall be
responsible for filing all other Tax Returns required to be filed by or on
behalf of the Company with respect to periods ending after the Closing Date.
Subject to Section 10.5, the Company shall timely pay all Taxes due on the
Tax Returns described in the preceding sentence. Seller and its Affiliates
shall not file any amended Tax Return which affects the Company without the
prior written consent of Purchaser, which shall not be unreasonably
withheld.
(b) The Seller and the Company will provide to each other full
access, at any reasonable time and from time to time, at the business
location at which the books and records are maintained, after the Closing
Date, to such Tax data relating to the Company as the Seller or the Company,
as the case may be, may from time to time reasonably request (including the
relevant portions of consolidated, combined, affiliated and unitary Tax
Returns which include the Company).
(c) Tax refunds that are received by Purchaser or the Company, and
any amounts credited against Tax and interest thereon to which Purchaser or
the Company become entitled, that relate to the Company for Tax periods or
portions thereof ending on or before the Closing Date, shall be for the
33
account of Seller, and Purchaser shall pay over to Seller any such refund or
the amount of any such credit within fifteen (15) days after receipt or
entitlement thereto. In addition, to the extent that a claim for refund or
a proceeding results in a payment or credit against Tax and interest thereon
by a taxing authority to Purchaser or the Company of any amount accrued on
the Closing Balance Sheet, the Purchaser shall pay such amount to Seller
within fifteen (15) days after receipt or entitlement thereto.
12.2 SECTION 338 MATTERS.
(a) With respect to the purchase and sale of the Shares, (i) Seller
and Purchaser agree to jointly make a timely election under Section
338(h)(10) of the Code (and any comparable election under state or local tax
law) (the "Section 338(h)(10) Election"), and (ii) Seller and Purchaser agree
to take all actions necessary to timely effectuate and preserve the Section
338(h)(10) Election, including the joint filing by Purchaser and Seller of
IRS Form 8023-A and related schedules, in accordance with the provisions of
Section 338 of the Code and the Treasury Regulations promulgated thereunder
(and any comparable provisions of state or local tax law). In addition to
the foregoing, upon the Purchaser's request, Seller and Purchaser shall
fully cooperate to cause the IRS to extend the time to make the Section
338(h)(10) Election to a date after the deadline set forth in Treasury
Regulation paragraph 1.338(h)(10)-1(d) (such extended date, the "Extended
Filing Date").
(b) (i) In connection with the Section 338(h)(10) Election, and no
later than sixty (60) Business Days prior to the later of the deadline
set forth in Treasury Regulation paragraph 1.338(h)(10)-1(d)(2) or the
Extended Filing Date if agreed to by the IRS, Seller shall provide to
Purchaser a draft of IRS Form 8023-A complete with any related attachments
and schedules setting forth (A) the "Modified Aggregate Demand Sale Price"
(as such term is defined in Treasury Regulation Section 1.338(h)(10)-
1(f)), but not reduced by items described in Treasury Regulation
Section 1.338(h)(10)-1(f)(4), (B) the fair market value of the assets
of the Company on the Closing Date, and (C) an allocation of the
Modified Aggregate Deemed Sale Price as determined above among such
assets pursuant to the Treasury regulation Section 1.338(b)-2T (the
IRS Form 8023-A with related attachments and schedules set forth in
clauses (A)-(C) hereof, the "Tax Schedules").
(ii) Within twenty (20) Business Days after receipt of the Tax
Schedules, Purchaser shall notify Seller in writing of any objections
to Seller's computation of the Tax Schedules, including an explanation
of the basis for such objections. If Purchaser fails to so object in
writing to the Tax Schedules within such time, the Tax Schedules shall
be deemed to be final and controlling. If Purchaser makes such a
timely written objection to the Tax Schedules, however, then Seller
and Purchaser shall negotiate in good faith to resolve any matters in
dispute with respect thereto. If Seller and Purchaser are unable to
resolve any such matters in dispute within ten (10) Business Days
after the Seller's receipt of Purchaser's written objections to the
Tax Schedules, then Seller and Buyer shall submit any such disputed
matter to the Settlement Auditor for resolution.
(c) Purchaser and Seller agree to report the sale of the Shares
consistently with any Section 338(h)(10) Election and the Tax Schedules and
not take any position inconsistent therewith in any Tax Return, before any
taxing authority or in any judicial proceeding.
12.3 TRANSITION. Seller shall arrange to provide for the
administration of the Company in the ordinary course of business, and
consistent with past practice, from the Closing Date through November 30,
34
1996, unless an earlier termination date is requested by Purchaser. The
operations shall include without limitation the provision of policyholder
services, including the distribution of policyholder statements, premium
bills, and the payment of claims. Seller shall not be responsible for
providing marketing, underwriting, or policy issuance services for policy
applications dated after the Closing Date. Seller shall be responsible
for the preparation of the Company's SAP Quarterly Statement for the quarter
ended September 30, 1996 and for the preparation of the Company's final SAP
Annual Statement, dated as of the Closing Date. Seller will assist
Purchaser in obtaining, at Purchaser's expense, the actuarial memorandum for
the Company's final SAP Annual Statement and the completed audit of the
Company's final SAP Annual Statement.
12.4 NOTICES. Any notice or other communication given pursuant to
this Agreement must be in writing and (a) delivered personally, (b) sent by
telefacsimile or other similar facsimile transmission, (c) delivered by
overnight express, or (d) sent by registered or certified mail, postage
prepaid, as follows:
(i) If to Seller:
General Accident Insurance
000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: Xxxxxxx X. XxXxxxx
Facsimile Number: 215/625-2122
(ii) If to Purchaser:
Life Re Corporation
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: W. Xxxxxx Xxxxxx
Facsimile Number: 203/968-0920
All notices and other communications required or permitted under this
Agreement that are addressed as provided in this Section 12.4 will (A) if
delivered personally or by overnight express, be deemed given upon delivery;
(B) if delivered by telefacsimile or similar facsimile transmission, be
deemed given when electronically confirmed; and (C) if sent by registered or
certified mail, be deemed given when received. Any party from time to time
may change its address for the purpose of notices to that party by giving a
similar notice specifying a new address, but no such notice will be deemed
to have been given until it is actually received by the party sought to be
charged with the contents thereof.
12.5 ENTIRE AGREEMENT. Except for documents executed by Seller and
Purchaser pursuant hereto, this Agreement supersedes all prior discussions
and agreements between the parties with respect to the subject matter of
this Agreement, and this Agreement, including the Disclosure Schedules
attached hereto, contains the sole and entire agreement between the parties
hereto with respect to the subject matter hereof.
12.6 EXPENSES. Except as otherwise expressly provided in this
Agreement, each party hereto will pay its own costs and expenses in con-
nection with this Agreement and the transactions contemplated hereby.
12.7 PUBLIC ANNOUNCEMENTS. At all times at or before the Closing,
Seller and Purchaser will each consult with the other before issuing or
making any reports, statements, or releases to the public with respect to
this Agreement or the transactions contemplated hereby and will use good
faith efforts to agree on the text of a joint public report, statement, or
35
release or will use good faith efforts to obtain the other party's approval
of the text of any public report, statement, release to be made solely on
behalf of a party. If Seller and Purchaser are unable to agree on or
approve any such public report, statement, or release and such report,
statement, or release is, in the opinion of legal counsel to a party,
required by law or appropriate to discharge such party's disclosure
obligations, then such party may make or issue the legally required or
appropriate report, statement, or release. Any such report, statement, or
release approved or permitted to be made pursuant to this Section 12.7 may
be disclosed or otherwise provided by Seller or Purchaser to any person or
entity, including to any employee or customer of either party hereto and to
any governmental or regulatory authority.
12.8 CONFIDENTIALITY.
(a) From the date hereof until the earlier to occur of the second
anniversary of the Closing Date or the second anniversary of the termination
of this Agreement pursuant to Section 11.1 hereof, each of Purchaser and
Seller will refrain, and will cause its respective Affiliates, officers,
directors, employees, agents, and other representatives to refrain, from
disclosing to any other person or entity any documents or information
concerning the other party hereto acquired by it in connection with this
Agreement or the transactions contemplated hereby unless (i) such disclosure
is compelled by judicial or administrative process or by other requirements
of law (including in connection with obtaining necessary insurance
regulatory approvals) and notice of such disclosure is furnished to such
other party hereto; (ii) either party hereto deems it advisable (upon advice
of such party's legal counsel) to disclose any such documents or information
in connection with the requirements of any securities law; or (iii) such
documents or information can be shown to have been (A) previously known by
the party hereto receiving such documents or information, (B) in the public
domain through no fault of such receiving party, or (C) later acquired by
such receiving party from other public sources.
(b) If this Agreement is terminated pursuant to Section 11.1 hereof,
for a period of two years after such termination, Purchaser will refrain,
and will cause its respective officers, directors, employees, agents, and
other representatives to refrain, from disclosing to any other person or
entity any documents or information concerning the Company acquired by
Purchaser in connection with this Agreement or the transactions contemplated
hereby unless (i) such disclosure is compelled by judicial or administrative
process or by other requirements of law and notice of such disclosure is
furnished to Seller; (ii) Purchaser deems it advisable (upon advice of legal
counsel to Purchaser) to disclose any such documents or information in
connection with the requirements of any securities law; or (iii) such
documents or information can be shown to have been (A) previously known by
Purchaser, (B) in the public domain through no fault of Purchaser, or
(C) later acquired by Purchaser from other public sources.
(c) For a period of two years following the Closing Date, Seller
will refrain, and will cause its Affiliates, officers, directors, employees,
agents, and other representatives to refrain, from disclosing, to any person
or entity any information regarding the Company or the transactions
contemplated hereby unless (i) such disclosure is compelled by judicial or
administrative process or by other requirements of law and notice of such
disclosure is furnished to Purchaser; (ii) the Seller deems it advisable
(upon advice of legal counsel to Seller) to disclose any such documents or
information in connection with the requirements of any securities law; or
(iii) such documents or information can be shown to have been (A) in the
public domain through no fault of Seller, or (B) later acquired by Seller
from other public sources.
36
(d) The parties hereto acknowledge and agree that (i) a breach of
any of the terms or provisions of this Section 12.8 would cause irreparable
damage to the non-breaching party for which adequate remedy at law is not
available; and (ii) the non-breaching party will be entitled as a matter of
right to obtain, without posting any bond whatsoever, an injunction,
restraining order, or other equitable relief to restrain any threatened or
further breach of this Section 12.8, which right will not be exclusive but
will be cumulative and in addition to any other rights and remedies
available at law or in equity.
(e) At the Closing, Seller will assign to Purchaser the non-exclusive
right to enforce the rights of Seller and its Affiliates under
each of the confidentiality agreements between Seller or its Affiliates and
prospective purchasers of the Company.
12.9 FURTHER ASSURANCES. Seller and Purchaser agree that, from time
to time after the Closing, upon the reasonable request of the other, they
will cooperate and will cause their respective Affiliates to cooperate with
each other to effect the orderly transition of the business, operations, and
affairs of the Company to Purchaser. Without limiting the generality of the
foregoing, (a) Seller will provide, and will cause its Affiliates to
provide, representatives of Purchaser reasonable access to all books and
records of Seller and its Affiliates reasonably requested by Purchaser in
the preparation of any post-Closing financial statements, reports, tax
returns, or tax filings of the Company; (b) Purchaser will provide
representatives of Seller reasonable access to all pre-Closing books and
records of the Company reasonably requested by Seller in the preparation of
any post-Closing financial statements, reports, tax returns, or tax filings
of Seller; and (c) each party hereto will execute such documents and
instruments as the other party hereto may reasonably request containing
terms and conditions mutually satisfactory to each party hereto to further
effectuate the terms hereof.
12.10 WAIVER. Any term or condition of this Agreement may be waived
at any time by the party that is entitled to the benefit thereof. Such
waiver must be in writing and must be executed by an executive officer of
such party. A waiver on one occasion will not be deemed to be a waiver of
the same or any other breach or nonfulfillment on a future occasion. All
remedies, either under this Agreement, or by law or otherwise afforded, will
be cumulative and not alternative.
12.11 AMENDMENT. This Agreement may be modified or amended only by a
writing duly executed by Seller and Purchaser.
12.12 COUNTERPARTS. This Agreement may be executed simultaneously in
any number of counterparts, each of which will be deemed an original, but
all of which will constitute one and the same instrument.
12.13 NO THIRD PARTY BENEFICIARY. The terms and provisions of this
Agreement are intended solely for the benefit of Seller, Purchaser, and
their respective successors and permitted assigns, and it is not the
intention of the parties to confer third-party beneficiary rights upon any
other person or entity.
12.14 GOVERNING LAW. This Agreement will be governed by and construed
and enforced in accordance with the laws of the State of Missouri (without
regard to the principles of conflicts of law) applicable to a Contract
executed and performable in such state.
12.15 BINDING EFFECT. This Agreement is binding upon and will inure
to the benefit of the parties and their respective successors and permitted
assigns.
37
12.16 NO ASSIGNMENT. Neither this Agreement nor any right or
obligation hereunder or part hereof may be assigned by any parties hereto
without the prior written consent of the other party hereto (and any attempt
to do so will be void); provided that Purchaser may assign any or all of its
rights and obligations under this Agreement to any wholly owned subsidiary
or parent of Purchaser without the consent of Seller.
12.17 INVALID PROVISIONS. If any provision of this Agreement is held
to be illegal, invalid, or unenforceable under any present or future law,
and if the rights or obligations under this Agreement of Seller and
Purchaser will not be materially and adversely affected thereby, (a) such
provision will be fully severable; (b) this Agreement will be construed and
enforced as if such illegal, invalid, or unenforceable provision had never
comprised a part hereof; and (c) the remaining provisions of this Agreement
will remain in full force and effect and will not be affected by the
illegal, invalid, or unenforceable provision or by its severance from this
Agreement.
12.18 TABLE OF CONTENTS; HEADINGS. The table of contents and headings
of the Articles and Sections of this Agreement (including the Disclosure
Schedule) have been inserted for convenience of reference only, are not
intended to be considered a part hereof, and will not modify or restrict any
term or provision hereof.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered as of the date first written above by the duly authorized officers
of Seller and Purchaser.
REASSURE AMERICA LIFE INSURANCE COMPANY
By: /s/ Xxxxxxx X. Xxxxxx
Name: Xxxxxxx X. Xxxxxx
Title: Chief Executive Officer
FARMERS AND MERCHANTS INSURANCE COMPANY
By: /s/ Xxxxxxx X. Xxxx
Name: Xxxxxxx X. Xxxx
Title: Attorney-in-Fact
For the purpose of Section 10.6 of this Agreement only:
GENERAL ACCIDENT INSURANCE COMPANY OF
AMERICA
By: /s/ Xxxxxxx X. Xxxx
Name: Xxxxxxx X. Xxxx
Title: Senior Vice President, General
Counsel & Corporate Secretary
38
List of Omitted Schedules and Exhibits
to
Stock Purchase Agreement, dated as of October 3, 1996,
by and between Farmers and Merchants Insurance Company
and Reassure America Life Insurance Company
with respect to all of the Outstanding Capital Stock Of
New American Life Insurance Company (the "Agreement")
1. Seller's Disclosure Schedule - Schedules required by
Sections 3.5, 3.8(a)-(c), 3.8(d)(i)and (ii), 3.9, 3.11,
3.12, 3.13, 3.14(a), (c), (e), (g), (h) and (l), 3.15(a)-(h),
3.16, 3.17, 3.18, 3.19, and 3.20 of the Agreement.
2. Schedule 5.7 - List of assets to be dividended per Section
5.7 of the Agreement.
The registrant hereby agrees to furnish supplementally a
copy of any omitted schedule to the Commission upon request in
accordance with Item 601(b)(2) of Regulation S-K.
