1
EXHIBIT 10.53
STOCK PURCHASE AGREEMENT
DATED AS OF MAY 12, 2000
By and among
UICI
and
THE MEGA LIFE AND HEALTH INSURANCE COMPANY
With Respect to all of the
Outstanding Capital Stock of
THE CHESAPEAKE LIFE INSURANCE COMPANY
1
2
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made and entered into
this 12th day of May, 2000 by and between The MEGA LIFE and HEALTH INSURANCE
COMPANY, a corporation ("Purchaser"), and UICI, a Delaware corporation
("Seller").
WHEREAS, Seller owns 58 shares (the "Common Shares") of Common Stock,
$46,000.00 par value per share, of The Chesapeake Life Insurance Company, an
Oklahoma corporation (the "Company"); and
WHEREAS, the Common Shares constitute all of the issued and outstanding
capital stock of the Company; and
WHEREAS, Seller desires to sell the Common Shares to Purchaser, and
Purchaser desires to purchase the Common 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.
"Agreement" shall mean this Stock Purchase Agreement, together with the
Disclosure Schedules.
"Annual Statement" shall mean the annual statutory statement of the
Company filed with or submitted to the insurance regulatory authority in the
State of Oklahoma.
2
3
"Closing" shall mean the closing of the transactions contemplated by
this Agreement as provided in Section 2.3 hereof.
"Closing Date" shall mean the later of (a) the end of the month at
least seven 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.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Company" shall mean The Chesapeake Life Insurance Company.
"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).
"Disclosure Schedule" shall mean the disclosure schedule dated the date
hereof furnished by Seller to Purchaser as part of this Agreement and containing
all lists, descriptions, exceptions, and other information and materials as are
required to be included therein pursuant to this Agreement.
"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.
"Insurance Agent Violation" shall mean (i) a violation prior to the
Closing by an Insurance Company insurance agent or general agent of any term or
provision of any law or any writ, judgment, decree, injunction or similar order
applicable to either the Company or (ii) a misrepresentation prior to the
Closing by either the Company or a Company insurance agent or general agent with
respect to the writing, sale or production of business for the Company,
"IRS" shall mean the United States Internal Revenue Service.
"Knowledge" when used in reference to Seller, the Company, or any
Taxpayer shall mean the actual knowledge of the officers and directors of the
Company.
3
4
"Material Adverse Effect" shall mean any change or effect 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; provided that a change in economic conditions
(such as a movement in interest rates or tax law changes) that adversely effects
the insurance industry in general shall not be deemed a Material Adverse Effect.
"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 or which are being contested in good faith through
appropriate proceedings, (c) zoning, building or other similar government
restriction, (d) agreement, covenant, right of way, or other similar restriction
which is recorded in the real property records for the relevant property or in
the case of clauses (a), (c), and (d) above do not materially impair any real
property, and (e) any lien that would not reasonably be expected to have a
material adverse effect on the value, use or operation of the asset subject to
such lien.
"Products" shall have the meaning ascribed to such term in Section 3.14
hereof.
"Purchaser" shall mean The MEGA Life and Health Insurance Company, a
corporation, or the entity to which the right to purchase is assigned under
Section 12.14 hereof.
"Quarterly Statement" shall mean the quarterly statutory statement of
the Company filed with or submitted to the insurance regulatory authority in the
State of Oklahoma.
"SAP" shall mean the accounting practices required or permitted by the
insurance regulatory authority in the State of Oklahoma, consistently applied
throughout the specified period and in the comparable period in the immediately
preceding year.
"Seller" shall mean UICI, a Delaware corporation.
"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.
4
5
"Tax Returns" shall mean any report, return, estimate, declaration of
estimated tax, information statements, or statement, including any attachment
thereto or amendment thereof, required to be supplied to a taxing authority in
connection with Taxes.
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 Companies or the designated
Company, as the case may be, 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 Common Shares to Purchaser and Purchaser
agrees to purchase the Common Shares from Seller.
2.2 Purchase Price. The purchase price (the "Purchase Price") for the
Common Shares will equal: (a) the capital and surplus of the Company determined
in accordance with SAP as of March 31, 2000, adjusted for any subsequent
dividends declared and/or paid prior to closing; (b) the amount of $14,000,000
for the life insurance business inclusive of the Cologne Re/Idealife reinsurance
agreement.
2.3 Closing.
(a) The Closing will take place at the offices of Seller at 9:00
a.m., local time on the Closing Date.
(b) At the Closing, Seller will deliver to Purchaser (i) a
certificate or certificates representing all the Common Shares, accompanied by
duly executed blank stock power, and (ii) such other documents and instruments
required to be delivered by Seller under the terms of this Agreement.
5
6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as follows:
3.1 Organization and Authority of Seller. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to enter into this Agreement
and to perform its obligations under this Agreement. 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 such 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.
3.2 Title to the Common Shares. The Common 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, other than the
liens or encumbrances listed in Section 3.2 of the Disclosure Schedule which
will be released prior to the Closing. Upon delivery of payment for the Common
Shares as herein provided, Purchaser will acquire good and valid title to the
Common Shares, free and clear of any lien, encumbrance (other than liens or
encumbrances created by Purchaser), or claim.
3.3 No Conflicts or Violations. The execution and delivery of this
Agreement by such Seller and the performance by such 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 in any material respect
any term or provision of any law or any writ, judgment, decree, or
injunction applicable to Seller, the Company, or its 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) 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
6
7
Section 3.3 of the Disclosure Schedule or as contemplated in Sections
5.1 and 5.2 hereof; except where the failure to obtain such consent,
approval or action, or to make any filing or to give any notice would
not reasonably be expected to have a Material Adverse Effect;
(b) 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 material Contract to which the Company is a party or by
which any material asset or property of the Company may be bound; or
(e) result in the creation or imposition of any lien or
encumbrance upon the Company or any of its assets or properties.
3.4 Organization of the Company. The Company is a stock corporation
duly organized, validly existing, and in good standing under the laws of
Oklahoma, 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. Except as
disclosed in Section 3.4 of the Disclosure Schedule, the Company does not own
10% or more of the voting capital stock of any corporation.
3.5 Capital Stock; Title. The authorized capital stock of the Company
consists of 80 shares of Common Stock divided into 40 shares of Class A Stock
and 40 shares of Class B Stock, all of the Pan Value of $46,000.00 par value per
share, of which 58 shares are issued and outstanding. Except for the Common
Shares, 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
any of the Company's shares, or (c) participate in the equity, income, or
election of directors or officers of the Company.
3.6 SAP Statements. Seller has previously delivered to Purchaser true
and complete copies of the following:
7
8
(a) the Annual Statements of the Company for each of the years
ended December 31, 1997, 1998, and 1999 (including the supporting
memorandum to the actuarial opinions given in connection with such
Annual Statements); and
(b) any annual statutory statements of the Company that were
filed for the year ended December 31, 1999 in any jurisdiction which
differ from the Annual Statement for the year ended December 31, 1999.
(c) the Quarterly statutory statement of the company for the
quester ending March 31, 2000.
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 Assets and Properties.
(a) Section 3.7(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
March 31, 2000 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, except for Permitted
Liens.
(b) Section 3.7(b) of the Disclosure Schedule contains a true
and complete list of all real property in which the Company currently
has an ownership interest. The Company owns good and insurable title to
all such real property, free and clear of all liens and encumbrances,
except for Permitted Liens.
(c) Section 3.7(c) of the Disclosure Schedule contains a true
and complete list of all real property leased by the Company. The
Company has a valid leasehold interest in all such leased real
property.
(d) Section 3.7(d) of the Disclosure Schedule contains a true
and complete list of (i) all material marks, names, trademarks, service
marks, patents, patent rights, assumed
8
9
names, logos, trade secrets, copyrights, and trade names that are used
in the conduct of the business, operations, or affairs of the Company,
and (ii) all material computer software, programs, and similar systems
owned by or licensed to the Company that are used in the conduct of
each of its business, operations, or affairs. To the Knowledge of
Seller, 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.
3.8 Absence of Changes. Except as disclosed in Section 3.8 of the
Disclosure Schedule, since March 31, 2000, 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 any 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, other than Permitted Liens;
(c) any liability involving the borrowing of money by the
Company or the incurrence by the Company of any deferred purchase price
obligation (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 exceeds $25,000 individually or
$100,000 in the aggregate;
(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, in excess of $25,000 for any asset or $100,000 in the
aggregate;
(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
9
10
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 other than as disclosed in Disclosure
Schedule 3.8(h), 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 $25,000 individually or in the
aggregate;
(j) any change in any marketing relationship between 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 3.8.
3.9 No Undisclosed Liabilities.
(a) Since March 31, 2000, the Company has not incurred any
liabilities, except insurance or operational liabilities 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.
3.10 Taxes. Except as disclosed in Section 3.10 of the Disclosure
Schedule:
(a) All Tax Returns for federal or state income Taxes required
to be filed by or with respect to the Company (individually or
collectively, the "Taxpayer") have been duly and timely filed, and to
the Knowledge of Seller all such Tax Returns are true, correct and
complete in all material respects. The Taxpayer has duly and timely
paid all Taxes that are due, or claimed or asserted by any taxing
authority to be due, from or with respect to it, and maintained all of
the required records with respect to Taxes. With respect to any period
for which Taxes are not yet due, the Taxpayer has made due and
sufficient accruals for such Taxes in accordance with SAP. The Taxpayer
has made all required estimated
10
11
Tax payments sufficient to avoid any underpayment penalties. The
Taxpayer has 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 any other
party.
(b) To the Knowledge of Seller, all Tax Returns (other than
returns described in subsection (a)) required to be filed by or with
respect to the Company (the "Taxpayer") which if not filed would result
in a Material Adverse Effect have been duly and timely filed, and all
such Tax Returns are true, correct and complete in all material
respects. The Taxpayer has duly and timely paid all Taxes that are due
and which if not paid would result in a Material Adverse Effect, or
claimed or asserted by any taxing authority to be due, from or with
respect to it, and maintained all of the required records with respect
to Taxes. With respect to any period for which Taxes are not yet due,
the Taxpayer has made due and sufficient accruals for such Taxes in
accordance with SAP. The Taxpayer has made all required estimated Tax
payments sufficient to avoid any underpayment penalties. The Taxpayer
has 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 any other party.
(c) 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 Taxpayer for any taxable period, and no
power of attorney granted by or with respect to any Taxpayer 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 Taxpayer. No audit or other proceeding
by any court, governmental or regulatory authority, or similar person
is pending or, to the Taxpayer's Knowledge, threatened with respect to
any Taxes due from or with respect to the Taxpayer or any Tax Return
filed by or with respect to the Taxpayer. To the Taxpayer's Knowledge,
no assessment of Taxes is proposed against the Taxpayer 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 Taxpayer, for all years for
which the statute of limitations has not expired.
(d) 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
Taxpayer. 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 Taxpayer or any of its assets. The Taxpayer has not
agreed 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
11
12
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 Taxpayer. None of the assets of the
Taxpayer is or will be required to be treated as being owned by any
person (other than the Taxpayer) 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.
(e) 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.
(f) 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.
(g) The Taxpayer 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
Section 1.1502-13(d) (or any analogous or similar provision under
state, local of foreign law or any predecessor provision or
regulation).
(h) 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 not
materially different from what the Company represented 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.
3.11 Litigation. Except as disclosed in Section 3.11 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.
12
13
(b) There are no material 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,
except such writs, judgments, decrees, injunctions or orders that
individually or in the aggregate, do not and cannot reasonably be
expected to have a Material Adverse Effect.
3.12 Compliance With Laws. Except as disclosed in Section 3.12 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.
3.13 Contracts. Section 3.13 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
(excluding standard insurance agent or general agent Contracts),
consultant, or other similar representative of the Company (or former
officer, director, employee, agent, consultant or similar
representative of 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);
13
14
(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 material reinsurance Contracts; 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 $50,000 on an annual basis,
individually or in the aggregate, that may not be terminated in less
than twenty-four months, or that are otherwise material to the business
or condition of the Company.
Each Contract disclosed or required to be disclosed in Section 3.16 of the
Disclosure Schedule is in full force and effect and constitutes a legal, valid,
and binding obligation of the Company, and to Seller's Knowledge, each other
party thereto. Neither the Seller nor the Company has received from any other
party to any such Contract any notice, whether written or oral, of termination
or intention to terminate such Contract. Except as set forth in Section 3.16 of
the Disclosure Schedule, neither 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.
3.14 Licenses and Permits. Section 3.14 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. Except as disclosed in Section 3.14 of
the Disclosure Schedule. The Company owns or validly holds all 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 their 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. All such licenses,
franchises, permits, approvals, authorizations, exemptions, classifications,
certificates, registrations, and similar documents or instruments are valid and
in full force and effect. The Company owns or validly holds all licenses
reasonably necessary to transact insurance business.
14
15
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 Oklahoma 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 in any material respect
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 material Contract to which Purchaser is a party or by which
any material 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
and 6.2 hereof, except where the failure to obtain such consent,
approval or action, or to make any filing or to give any notice would
not reasonably be expected to have a material adverse effect.
15
16
4.4 Purchase for Investment. The Common Shares will be acquired by
Purchaser for its own account for the purpose of investment and not as a nominee
or agent for any other person and not with a view to, or for sale in connection
with, any distribution of the Common Shares. Purchaser has sufficient knowledge
and experience in financial and business matters to evaluate the merits and
risks of its investment in the Common Shares. Purchaser will refrain from
transferring or otherwise disposing of any of the Common Shares, or any interest
therein, in such manner as to violate any registration provision of the
securities laws.
4.5 Litigation.
(a) There are no actions, suits, investigations, arbitrations,
or proceedings pending, or (to the knowledge of Purchaser) threatened,
against Purchaser or its Affiliates 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 or
its Affiliates 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.
4.6 Financial Ability. Purchaser has, and as of the Closing Date will
have, the financial capability and sufficient cash and other resources available
to complete the purchase of the Common Shares on the terms and conditions
contemplated by this Agreement.
16
17
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 material 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 Seller and the Company to consummate the transactions
contemplated hereby. Seller will, and will cause the Company to, (i) provide
such other information and 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 State of Oklahoma. Subject to the terms
and conditions of this Agreement and applicable law, Seller shall act in good
faith and use commercially reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated hereby
as soon as reasonably practicable, including such actions or things as Purchaser
may reasonably request in order to cause any of the conditions to such other
party's obligation to consummate the transactions contemplated hereby to be
satisfied.
5.2 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 its 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.
17
18
5.3 Conduct of Business. Except as otherwise expressly permitted in or
contemplated by 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 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, (iii) maintain in full force and effect all Contracts
referenced in Section 3.16 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 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 income, reserves or other
similar amounts, or operating ratios with respect to expenses, losses
or lapses).
(c) 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
consistently applied, (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 March 31, 2000, and (iv) determined in conformity with
the requirements of the insurance laws of each applicable jurisdiction
in all material respects.
(d) 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.
18
19
5.4 No Charter Amendments. Seller will cause the Company to refrain
from amending their respective certificate or articles of incorporation or
bylaws and from taking any action with respect to any such amendment.
5.5 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 any
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).
5.6 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 their 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.
5.7 Indebtedness. Without the prior written approval of Purchaser,
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 other than in the ordinary course of business
and consistent with past practice, and (c) waiving any right to receive any
direct or indirect payment or other benefit under any liability owing to it
other than in the ordinary course of business and consistent with past practice.
5.8 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.
5.9 Intercompany Liabilities and Affiliate Transactions. Except as
otherwise expressly provided for or disclosed in this Agreement, Seller will
cause the Company to refrain from entering into any Contract or engaging in any
new transaction with Seller or any Affiliate of Seller.
19
20
5.10 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 such Seller under this
Agreement to be breached, or that renders or will render untrue any
representation or warranty of such 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 Seller 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 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;
provided, however, that the covenants and agreements of Purchaser set forth in
Sections 6.1, 6.2, and 6.3 hereof shall expire upon the earlier of the Closing
or the termination of this Agreement in accordance with ARTICLE XI hereof.
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 State of Oklahoma, (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.
Subject to the terms and conditions of this Agreement and applicable law,
Purchaser shall act in good faith and use commercially reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective the
transactions contemplated hereby as soon as reasonably practicable, including
such actions or things as Seller may reasonably
20
21
request in order to cause any of the conditions to such other party's obligation
to consummate the transactions contemplated hereby to be satisfied.
6.2 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 Seller 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 Seller's Certificate. Seller shall have delivered to Purchaser a
certificate, dated the Closing Date and executed by Seller, certifying as to the
fulfillment by Seller of the conditions set forth in Sections 7.1, 7.2, and 7.5
through 7.8 hereof.
7.4 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.
21
22
7.5 No Proceeding or Litigation. There shall not be instituted, or
pending any material 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.
7.6 Contract and Regulatory Approvals. All approvals, authorizations,
and clearances contemplated by Sections 5.1 and 6.1(a)(ii) 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
State of Oklahoma) shall have been obtained and shall be in full force and
effect.
7.7 Material Adverse Effect. Since the date of this Agreement, there
shall not have occurred any Material Adverse Effect.
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.
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, and 8.5 through 8.7 hereof.
8.4 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.
22
23
8.5 No Proceeding or Litigation. There shall not be instituted or
pending any material 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.
8.6 Contract or Regulatory Approvals. All approvals, authorizations,
and clearances contemplated by Sections 5.1(b) 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
State of Oklahoma) shall have been obtained and shall be in full force and
effect.
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 3.1, 3.2, 3.4, 3.5, 3.10, 3.11, and 3.15 hereof, and (ii)
until June 30, 2001 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.
23
24
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
any breach by such Seller of any representation, warranty, covenant or agreement
made by such Seller in this Agreement, in the Disclosure Schedule, or in any
certificate required to be delivered pursuant to this Agreement.
10.2 Indemnification by Purchaser. Subject to the provisions of Section
10.3 and ARTICLE IX hereof, Purchaser will indemnify and hold harmless 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, audit, 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, audit, or similar proceeding,
which notice must (A) provide (with reasonable specificity) the basis
on which indemnification is being asserted, (B) set forth the actual 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.
If the Indemnitee does not give notice to the Indemnifying Party of any
matter that is indemnifiable pursuant to Section 10.1 or 10.2 hereof,
the Indemnifying Party shall not be liable for such indemnification;
provided that no delay on the part of the Indemnitee in notifying the
Indemnifying Party will relieve the Indemnifying Party from any
obligation hereunder unless, and then solely to the extent that, the
Indemnifying Party is prejudiced thereby.
(b) Once the Indemnitee has given notice of the matter to the
indemnifying Party, the Indemnifying Party may defend against the
matter in a manner which it reasonably deems to be appropriate. If the
Indemnifying Party elects to defend the claim
24
25
described in such notice, 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 does not
respond within 30 days or does not elect to defend such claim, the
Indemnitee will be free to defend (and control the defense of) such
claim and to pursue such remedies as may be available to the Indemnitee
under applicable law; provided, however, that (i) the Indemnifying
Party may take control of the defense of such claim at any time by
giving written notice to the Indemnitee and (ii) the Indemnitee may not
enter into any settlement or consent to the entry of any judgment
without the prior written consent of the Indemnifying Party, which
consent will not be unreasonably withheld. Any reasonable legal and
other professional fees of the Indemnitee in defending such a claim
shall be paid by the Indemnifying Party.
(c) The Indemnifying Party will not consent to the entry of a
judgment with respect to any claim or enter into any settlement which
does not include a provision whereby the plaintiff or claimant in the
matter releases the Indemnitee from all liability with respect thereto,
without the written consent of the Indemnitee (not to be withheld or
delayed unreasonably).
(d) The Indemnifying Party shall have no obligation to
indemnify or hold harmless the Indemnitee for any Damages to the extent
that the Indemnitee has actually recovered such Damages (net of
expenses of recovery) from any person other than the Indemnifying
Party. The Indemnitee hereby assigns to the Indemnifying Party any
right the Indemnitee may have against any person (other than the
Indemnifying Party) to recover any amounts that the Indemnifying Party
has paid to the Indemnitee.
(e) 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 15 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, 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
or does not respond within such 15-day period, the Indemnifying Party
and the Indemnitee agree
25
26
to proceed in good faith to negotiate a resolution of such dispute. If
all such disputes are not resolved through negotiations within 30 days
after such negotiations begin or if such negotiations are not initiated
within 30 days after initial notice is given by the Indemnitee, either
the Indemnifying Party or the Indemnitee may initiate litigation to
resolve such disputes.
(f) 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 Threshold for Claims. Notwithstanding the foregoing provisions of
this Article X, (i) Seller shall have no liability for indemnification for any
Damages under Section 10.1(a) or Section 10.1(c) hereof until and unless the
cumulative total of such Damages exceeds in the aggregate $100,000, it being
understood that if such threshold for Damages is reached, Seller shall be liable
to Purchaser for all Damages, and (ii) in no event shall Seller's aggregate
liability in respect of indemnification claims exceed the purchase price,
provided, however, that the limitations of this Section 10.4 shall not apply to
any Damages resulting from (i) any tax liabilities, fines or penalties assessed
against the Company resulting from actions or positions taken by the Company or
any predecessor prior to the Closing Date or (ii) Seller's willful
misrepresentations or willful breaches of covenants or agreements made as a part
of or contained in this Agreement.
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;
(b) at any time after June 30, 2000, 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);
(c) at any time before the Closing if any governmental entity
shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the
transactions contemplated hereby and such order, decree or ruling or
other action shall have become final and nonappealable; provided,
however, that the party seeking to terminate the Agreement pursuant to
this Section shall have used
26
27
commercially reasonable efforts for a period of not less than 60 days
to remove such order, decree or ruling;
(d) by Purchaser at any time before the Closing if (i) any of
the conditions set forth in Article VII that (A) are required to occur
prior to the Closing shall have become incapable of occurring, or (B)
are not permitted to occur prior to the Closing shall have occurred
prior to the Closing and are incapable of being cured or reversed, and,
in either case (A) or (B), shall not have been, on or before the date
of such termination, permanently waived by Purchaser, or (ii) Seller
shall have breached any of its respective covenants or other agreements
contained in this Agreement which breach is incapable of being cured or
has not been cured within 15 days after the giving of written notice to
Seller; and
(e) by Seller at any time before the Closing if (i) any of the
conditions set forth in Article VIII that (A) are required to occur
prior to the Closing shall have become incapable of occurring, or (B)
are not permitted to occur prior to the Closing shall have occurred
prior to the Closing and are incapable of being cured or reversed, and,
in either case (A) or (B), shall not have been, on or before the date
of such termination, permanently waived by Seller, or (ii) Purchaser
shall have breached any of its respective covenants or other agreements
contained in this Agreement which breach is incapable of being cured or
has not been cured within 15 days after the giving of written notice to
Purchaser.
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 Sections 11.2, 12.6, and 12.12 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
party by reason of such party's breach of any covenant set forth in this
Agreement.
27
28
ARTICLE XII
MISCELLANEOUS
12.1 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:
UICI
0000 XxXxxx
Xxxxxx, Xxxxx 00000
Attn: General Counsel
Telefacsimile:
(ii) If to Purchaser:
The MEGA Life and Health Insurance Company
0000 XxXxxx
Xxxxxx, Xxxxx 00000
Attention: General Counsel
Telefacsimile: 203/968-0920
All notices and other communications required or permitted under this Agreement
that are addressed as provided in this Section 12.2 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.
12.2 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.
28
29
12.3 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.
12.4 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.
12.5 Amendment. This Agreement may be modified or amended only by a
writing duly executed by Seller and Purchaser.
12.6 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.
12.7 Governing Law. This Agreement will be governed by and construed
and enforced in accordance with the laws of the State of Oklahoma (without
regard to the principles of conflicts of law) applicable to a Contract executed
and performable in such state.
12.8 Binding Effect. This Agreement is binding upon and will inure to
the benefit of the parties and their respective successors and permitted
assigns.
12.9 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 Affiliate of Purchaser without the
consent of Seller, provided that any such assignment will not relieve Purchaser
of any of its obligations under this Agreement.
12.10 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.
12.11 Headings. The 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.
29
30
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered as of
the date first written above by the duly authorized officers of Purchaser and
Seller.
PURCHASER:
THE MEGA LIFE AND HEALTH
INSURANCE COMPANY
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
SELLER:
UICI
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
30
