1
EXHIBIT 10.32
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (hereinafter the "Agreement"), is
made and entered into as of the 6th day of December, 1997, by and among UICI, a
corporation organized under the laws of the State of Delaware ("UICI"), UICI
ACQUISITION CORP., a corporation organized under the laws of the State of
Georgia ("SUBSIDIARY"), ELA CORP., a corporation organized under the laws of the
State of Georgia ("ELA"), and XXXXXX X. XXXX, XXXX X. XXXX, AND XXXX X. XXXX,
individually and as shareholders of ELA, and RK TRUST #2, Xxxx X. Xxxx, Trustee
(collectively, "XXXX").
W I T N E S S E T H:
WHEREAS, SUBSIDIARY is a wholly-owned subsidiary of UICI;
WHEREAS, ELA desires to merge into SUBSIDIARY;
WHEREAS, the Board of Directors of ELA and XXXX, as sole shareholders
of ELA, have approved this Agreement and the merger;
WHEREAS, the Board of Directors of SUBSIDIARY and UICI, as the sole
shareholder of SUBSIDIARY, have approved this Agreement and the merger; and
WHEREAS, UICI, SUBSIDIARY, XXXX and ELA desire that the merger qualify
as a reorganization described in Sections 368(a)(1)(A) and (a)(2)(D) of the
Internal Revenue Code of 1986 (the "Code").
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements hereinafter set forth, the parties hereto do hereby agree as follows:
SECTION I
THE MERGER
1.1 Constituent Corporations. The constituent corporations to the
merger of ELA into SUBSIDIARY ("Merger") are SUBSIDIARY and ELA.
1.2 Effective Date. This Agreement has been submitted to and approved
by the shareholders and Boards of Directors of SUBSIDIARY and ELA (and the Board
of Directors of UICI) as provided by the appropriate statutes of the State of
Georgia. If all of the conditions precedent to the Merger have either been
fulfilled or waived in writing, a Certificate of Merger shall be executed,
delivered, filed and recorded in accordance with the laws of the State of
Georgia as soon as practical thereafter, unless otherwise agreed by the parties
in writing. The Merger will become effective when the Certificate of Merger is
filed with the Secretary of the State of Georgia or as
2
otherwise set forth in the Certificate of Merger. The date on which the Merger
shall become effective is referred to herein as the "Effective Date" or
"Closing."
1.3 Merger of ELA into SUBSIDIARY. Upon the Effective Date, ELA shall
merge into SUBSIDIARY in accordance with the applicable statutes of the State of
Georgia. The separate existence and corporate organization of ELA shall cease on
the Effective Date and SUBSIDIARY, as the surviving corporation ("Surviving
Corporation"), shall succeed to and possess all of the properties, rights,
privileges, powers, franchises, immunities and purposes and be subject to all
the debts, liabilities, obligations, restrictions, disabilities, penalties and
duties of ELA, all without further act or deed.
1.4 Additional Documents. At any time after the Effective Date, upon
request by the Surviving Corporation, the proper officers and directors of ELA
as of the Effective Date shall execute and deliver any and all deeds,
assignments and other instruments, and shall take or cause to be taken such
further or other action as the Surviving Corporation may reasonably deem
necessary or desirable in order to vest, perfect or confirm title to and
possession of all the properties, rights, privileges, powers, franchises,
immunities and purposes in the Surviving Corporation and otherwise to carry out
fully the provisions and purposes of this Agreement.
1.5 Amendment of Articles of Incorporation. From and after the
Effective Date and until thereafter amended as provided by law, the articles of
incorporation of SUBSIDIARY as in effect immediately prior to the Effective Date
shall be the articles of incorporation of the Surviving Corporation, except that
on the Effective Date, Article 1 of the Articles of Incorporation of the
Surviving Corporation shall be amended to read as follows: The name of the
corporation is "UICI Acquisition Corp." and shall do business as the National
Education Loan Center.
1.6 Bylaws. From and after the Effective Date and until thereafter
amended as provided by law, the bylaws of SUBSIDIARY as in effect immediately
prior to the Effective Date, shall be the bylaws of the Surviving Corporation.
1.7 Directors and Officers. From and after the Effective Date, the
directors and officers of the Surviving Corporation shall be the directors and
officers of SUBSIDIARY. Such directors and officers shall hold office for the
time specified in and subject to the provisions contained in the bylaws of the
Surviving Corporation and applicable law.
1.8 Conversion of Shares of ELA.
(a) At the Effective Date, by virtue of the Merger and without further
action on the part of UICI, SUBSIDIARY, ELA, XXXX or the Surviving Corporation,
the outstanding shares of ELA ("ELA Shares"), shall be converted into and become
the right to receive an aggregate number of UICI shares of common stock, $0.01
par value having a value equal to $31,177,437.49 ("UICI Shares"). As of the
Effective Date, the number of UICI Shares into which the ELA Shares shall be
converted shall be 922,956 (such number of UICI Shares being based upon the
average of the daily
-2-
3
closing prices of UICI Common Stock on the NASDAQ National Market as reported by
The Wall Street Journal for the number of consecutive full trading days
commencing on September 30, 1997 and ending on December 17, 1997). At Closing,
XXXX shall receive such 922,956 UICI Shares, which shares shall not be
registered under the Securities Act of 1933. Following Closing, UICI shall
expeditiously register such UICI Shares under the Securities Act of 1933 and
cause such registration to remain effective until such UICI Shares can be sold
without restrictions or limitations (including volume limitations), and such
registration shall be deemed initially completed at such time as the Securities
and Exchange Commission declares such registration effective. At such time as
XXXX receives such 922,956 UICI Shares which are registered under the Securities
Act of 1933 and declared effective, the final number of UICI Shares to be
received by XXXX shall be recomputed and based upon the average of the daily
closing prices of UICI Common Stock on the NASDAQ National Market as reported by
the Wall Street Journal for the number of consecutive full trading days
commencing on September 30, 1997 and ending on the business day prior to the day
that such 922,956 UICI Shares received by XXXX are registered under the
Securities Act of 1933. In the event XXXX is entitled (which entitlement shall
not be assignable) to additional UICI Shares as a result of such recomputation,
UICI shall register such additional UICI Shares under the Securities Act of
1933, pursuant to Section VI of this Agreement. If as a result of such
computation, XXXX has received UICI Shares in excess of the recomputed sum, XXXX
shall immediately return such excess shares to UICI. The aggregate number of
UICI Shares to be issued for all ELA Shares shall be distributed as follows: 25%
to Xxxx X. Xxxx, 8% to Xxxx X. Xxxx, 16% to Xxxx Trust 2, (Xxxx X. Xxxx,
Trustee) and 51% to Xxxxxx X. Xxxx. Subject to the receipt by XXXX of UICI
Registered Securities, XXXX shall accept the UICI Shares as the sole
consideration and in full consideration for the ELA Shares converted into UICI
Shares pursuant to this Section 1.8. The number of shares shall also be adjusted
to reflect any stock split, stock dividend, dividend other than in cash and any
other similar transactions hereinafter effected.
(b) Upon the Merger, the transfer agent of UICI will be directed by
UICI to immediately issue and deliver to XXXX as of the Effective Date stock
certificate(s) representing UICI Shares.
(c) The ELA Shares and the UICI Shares shall be free and clear of all
liens, claims, pledges, options, encumbrances, restrictions on transfer (except
those under applicable securities laws) and voting, and rights of others of
every nature whatsoever.
1.9 Conversion of Shares of SUBSIDIARY. Each share of common stock of
SUBSIDIARY which shall be outstanding immediately prior to the Effective Date
shall remain outstanding.
1.10 Dissenter's Rights. SUBSIDIARY and ELA, each, shall have fully
complied with the requirements to provide the shareholders with notice of
dissenter's rights under applicable laws.
-3-
4
1.11 Treasury Shares of ELA. On the Effective Date, all shares of common
stock of ELA then held in the treasury, if any, shall automatically cease to
exist and all certificates representing such shares shall be canceled.
1.12 Rights of Shareholders of ELA after Effective Date. After the
Effective Date and until the surrender of the outstanding share certificates of
ELA Shares, each such outstanding certificate, which prior to the Effective Date
represented shares of common stock of ELA, shall be deemed for all corporate
purposes to evidence the right to receive the UICI Shares into which such shares
shall have been converted.
1.13 Equal Value. ELA, XXXX, SUBSIDIARY and UICI agree that the fair market
value of the aggregate UICI Shares will be approximately equal to the fair
market value of the aggregate ELA Shares.
1.14 No Other Consideration. All parties hereto agree that no other
property, cash or rights to acquire other property or securities shall be
included in this Merger or constitute additional consideration for the Merger.
1.15 Closing. The Merger described herein shall be completed by December
31, 1997. The Closing will be held at such place and time as the parties may
mutually agree in writing. At the Closing the parties to this Agreement will
exchange instruments and documents as specified herein and as reasonably
requested as hereinafter provided in order to determine whether the terms and
conditions of this Agreement have been satisfied, including opinions of counsel
of the parties hereto. At least five (5) days prior to the Closing, each party
shall provide the other party with a list of such exchange instruments and
documents. Upon the determination of each party that its conditions to
consummate the Merger have been satisfied or waived, SUBSIDIARY and ELA shall
execute and file the Certificate of Merger. All acts, deliveries, and
confirmations comprising the Closing regardless of chronological sequence shall
be deemed to occur contemporaneously and simultaneously upon the occurrence of
the last act, delivery, or confirmation of the Closing and none of such acts,
deliveries, or confirmations shall be effective unless and until the last of the
same shall have occurred. The parties shall use their best efforts to cause the
Effective Date to be on or before December 31, 1997.
1.16 Pledge of ELA Shares. The parties acknowledge that the ELA Shares are
pledged by XXXX as additional security for the loans by BAC International Credit
Corporation ("BAC") to ELA and that XXXX have personally guaranteed said loans.
Unless waived by XXXX, UICI and ELA agree to jointly cooperate so that,
simultaneously with the Merger, they will obtain the release of the ELA Shares
from the pledge and the release of the guaranties and any other obligations of
XXXX to BAC (and any subsidiary or affiliate thereof) without any further
obligation or consideration on behalf of XXXX.
1.17 Regulatory Approvals. ELA and UICI, each, covenants and agrees that
it will take all reasonable steps necessary or desirable, and will use all
commercially reasonable efforts
-4-
5
to cooperate with the other in obtaining, as promptly as possible, all necessary
approvals, authorizations and clearances of governmental and regulatory bodies
and officials required to consummate the transactions contemplated hereby.
1.18 HSR Filing. If applicable, the parties will promptly file the
pre-merger notification and report required under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvement Act of 1976.
1.19 Pooling of Interests. The parties intend that the transaction will be
treated as a pooling of interests for accounting purposes and agree to abide by
the restrictions contained in Accounting Series Release 135. Notwithstanding the
foregoing, the parties agree that such accounting treatment is not a
pre-condition to the Merger. UICI agrees that it shall publicly issue financial
statements of UICI, SUBSIDIARY, and ELA within seventy-five (75) days following
Closing, which financial statements shall include at least thirty (30) days of
combined operations of UICI, SUBSIDIARY, and ELA.
1.20 Income Tax Treatment. The parties intend that the transaction will be
treated as a tax free reorganization under IRC Sections 368 (a) (1) (A) and 368
(a) (2)(D) and will take no actions which will violate applicable requirements.
SECTION II
REPRESENTATIONS OF XXXX AND ELA
2.1 Warranties and Representations of XXXX and ELA. XXXX and ELA warrant
and represent to SUBSIDIARY and UICI that:
(a) Organization and Corporate Power. ELA is duly incorporated and
validly existing under the laws of the State of Georgia and is qualified to do
business in every jurisdiction in which its ownership of property or conduct of
business requires it to qualify and where the failure to be so qualified could
have a material adverse effect on its business, operations, prospects, assets or
financial condition. ELA has all requisite corporate power and authority and all
material licenses, permits, and authorizations necessary to own and operate its
properties and to carry on its business as now conducted. The copies of ELA's
charter documents and Bylaws have been furnished to UICI's counsel and reflect
all amendments made thereto at any time prior to the date of this Agreement are
correct and complete.
(b) Authorization. The execution, delivery, and performance by ELA of
this Agreement and all other agreements contemplated hereby to which ELA is a
party have been duly and validly authorized by all necessary corporate action of
ELA, and this Agreement and each such other agreement, when executed and
delivered by the parties thereto, will constitute the legal, valid and binding
obligation of ELA enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, and similar
statutes affecting creditors' rights generally and judicial limits on equitable
remedies.
-5-
6
(c) No Conflict with Other Instruments or Agreements. The execution,
delivery, and performance by ELA of this Agreement and all other agreements
contemplated hereby to which ELA is a party will not result in a breach or
violation of, or constitute a default under, its Articles of Incorporation or
Bylaws or any material agreement to which ELA is a party or by which ELA is
bound.
(d) Capital Stock and Related Matters. The authorized capital stock of
ELA consists of 10,000 shares of common stock, no par value, of which 2,422
shares are issued and outstanding.
(e) Fully-Paid, Non-Assessable Shares. All ELA Shares shall, upon
delivery, be duly and validly authorized and issued, fully-paid and
non-assessable, and free from all stamp-taxes, liens, and charges with respect
to the exchange thereof. Neither XXXX nor ELA have violated or will violate any
applicable securities laws in connection with the exchange of the ELA Shares to
UICI hereunder.
(f) No Additional Securities or Rights. ELA is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its stock and shall not issue additional shares of stock
immediately before the Merger. ELA has no outstanding subscriptions, warrants,
options, "phantom" stock rights, convertible securities, or any other type of
right pursuant to which a person could acquire stock of ELA that, if exercised
or converted, would result in XXXX owning less than 100 percentage of issued and
outstanding capital stock of ELA set forth herein.
(g) Subsidiaries. ELA does not own or hold any rights to acquire any
shares of stock or any other equity security or interest in any other
corporation or entity.
(h) Required Approval. The Board of Directors of ELA and XXXX have
approved this Agreement as may be required by state law, and any and all
approvals required to be obtained by ELA of state regulatory agencies shall have
been obtained prior to Closing.
(i) Capable of Evaluating UICI Shares. XXXX has experience in
financial and business affairs and is capable of evaluating the merits and risks
of an investment in the UICI Shares.
(j) No Dissenters. There will be no shareholders of ELA dissenting or
objecting to the Merger contemplated by this Agreement.
(k) Litigation. Except as set forth in Section 2.1(k), of the
Disclosure Schedule, there are no material actions, suits, proceedings, orders,
investigations, or claims pending or, to the best of the knowledge of the
responsible officers of ELA, overtly threatened against ELA or any property of
ELA, at law or in equity, or before or by any governmental department,
commission, board, bureau, agency or instrumentality; ELA is not subject to any
arbitration proceedings under collective bargaining agreements or otherwise; or,
to the best of the knowledge of the responsible
-6-
7
officers of ELA, any governmental investigations or inquiries; and, to the best
knowledge of XXXX, directors and responsible officers of ELA, there is no basis
for any material action, suit, proceeding, order, investigation or claim against
ELA.
(l) Employment Contracts. There are no written or oral employment or
consulting agreements, deferred compensation agreements, contracts or
commitments with any employee, officer or director of ELA, or agents or
consultants, other than agreements entered into in the ordinary course of
business and listed in Schedule 2.1(l) of the Disclosure Schedule.
(m) Absence of Changes. As of the date of this Agreement, there are no
material adverse changes in, or any event, condition or state of facts of any
character peculiar to ELA or its operations which in the aggregate materially
and adversely affects, or, to the knowledge of XXXX or the responsible officers
of ELA threatens to materially and adversely affect the business, prospects,
properties, assets, financial condition or results of operations of ELA as a
going concern or which could affect the validity and enforceability of this
Agreement.
(n) No Change in Business: Employees. Except as may be specifically
requested in writing by UICI, XXXX and ELA will use commercially reasonable
efforts to cause ELA to (i) continue to operate its business as such business is
presently operated; (ii) take no action other than in the ordinary course of its
business as such business is presently conducted, (iii) preserve intact its
present business organization, and (iv) keep available the services of its
present key officers, key employees and key agency personnel.
(o) Employee Benefits. The representatives, directors and officers of
ELA will not (i) make any change to, or amend in any way, the contracts or
salaries of employees of ELA, or (ii) enter into, or amend or alter materially,
any plan or any material employment, agency, brokerage or consulting agreement
except as required by law or directed at UICI's request.
(p) Indebtedness and Financial Statement. XXXX will not allow ELA to
create, incur, assume, guarantee or otherwise become liable with respect to any
indebtedness for borrowed money, except for amounts shown on the financial
statements described in Disclosure Schedule 2.1(p)(1) and the other disclosures
set forth in Section 2.1(p) of such Disclosure Schedule. Furthermore, ELA and
XXXX warrant that these financials present fairly, in all material respects, the
financial condition of ELA as of the dates set forth therein and that no
material adverse change has occurred since that date up to and including the
Closing.
(q) Tax Matters. (i) ELA has prepared in a substantially correct
manner and has filed all federal, state, local and foreign tax returns and
reports heretofore required to be filed by it and has paid all taxes shown as
due thereon; and (ii) no taxing authority has asserted any deficiency in the
payment of any tax or informed any responsible officer of ELA that it intends to
assert any such deficiency or to make any audit or other investigation of ELA
for the purpose of determining whether such a deficiency should be asserted
against ELA.
-7-
8
(r) Compliance with Laws. To the best of the knowledge of the
responsible officers of ELA and XXXX, XXX is, in the conduct of its business, in
substantial compliance with all laws, statutes, ordinances, regulations, orders,
judgments or decrees applicable to them, the enforcement of which, if ELA were
not in compliance therewith, would have a materially adverse effect on the
business of ELA, taken as a whole. ELA has not received any notice of any
asserted present or past failure by ELA to comply with such laws, statutes,
ordinances, regulations, orders, judgments or decrees.
(s) Certificates of Existence. Prior to Closing, ELA shall have
delivered to UICI certificates or letters of the appropriate regulatory
officials to the effect that it is an existing entity and where applicable, in
good standing, in all states in which it is registered to do business.
(t) Records. The minute books of ELA contain a general record of all
the official action of its board of directors, each committee of such board of
directors and its shareholders; and the books and records of ELA are complete
and correct in all material respects and have been maintained in accordance with
good business and bookkeeping practices and fairly reflect the business and
affairs of ELA.
(u) Information Provided. During the course of the negotiation of this
Agreement, ELA and XXXX have reviewed all information provided to them by UICI
and have had the opportunity to ask questions of and receive answers from
representatives of UICI concerning UICI, the securities being delivered to XXXX
pursuant to this Agreement upon the Merger, and to obtain certain additional
information requested by them.
(v) Additional Disclosure. From the date of this Agreement, to and
including the Closing, ELA and XXXX will, promptly upon the occurrence thereof,
advise UICI of each event subsequent to the date hereof which would have had to
be disclosed to UICI by ELA and XXXX under this Agreement had it occurred prior
to the date hereof or which causes any representation or warranty of ELA or XXXX
contained herein to no longer be true, correct or complete or causes any
covenant to be breached. Further, ELA and XXXX acknowledge that the Marketing
and Administrative Services Agreement and the Loan Purchase Agreement
(hereinafter referred to as "BAC Agreements") between ELA and BAC, set forth in
Section 2.1(v)(1) of the Disclosure Schedule, and the loans which ELA have the
right to acquire thereunder are an integral part of the consideration for UICI
entering into this Agreement. The BAC Agreements are valid, existing and
enforceable contracts according to their terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, and similar statutes affecting
creditors' rights generally and judicial limits on equitable remedies. The
responsible officers of ELA and XXXX are not aware of any event that has
occurred which would be construed as a breach by ELA of the BAC Agreements and
further warrant that the execution of this Agreement will not cause a breach of
the BAC Agreements. Additionally, ELA and XXXX represent that the terms
expressed in the BAC Agreements accurately reflect their terms.
-8-
9
(w) Notification by ELA and XXXX of Misrepresentation. ELA and XXXX
agree to notify UICI promptly in writing of any material inaccuracy or
misrepresentation made by ELA or XXXX in this Agreement of which the responsible
officers of ELA or XXXX become aware prior to the Closing.
SECTION III
REPRESENTATIONS OF XXXX
3.1 Investment Representations by XXXX.
XXXX warrants and represents and covenants to SUBSIDIARY and UICI that:
(a) Each is acquiring the UICI Shares for his own account (and not for
others) and for investment purposes only and not with a view to distribution, as
such is defined by the Securities Act of 1933, as amended ("Act"), or any rule
or regulation thereunder, in violation of such act or any of said rules.
(b) Each has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and economic risks of this
particular investment.
(c) Each is an "accredited investor" as such term is defined in Rule
501 promulgated under the Act.
(d) Each acknowledges that XXXX must continue to bear the economic
risk of the investment in the UICI Shares for an indefinite period and
recognizes that the UICI Shares will be transfered at Closing without
registration under any state of Federal law relating to the registration of
securities for sale in reliance on exemptions therefrom;
(e) Each agrees that the UICI Shares will not, and may not, be offered
for sale, sold or transferred other than (i) pursuant to an effective
registration under applicable state securities laws or in a transaction which is
otherwise in compliance with such laws; (ii) pursuant to an effective
registration under the Act or in a transaction otherwise in compliance with the
Act; and (iii) upon evidence, satisfactory to UICI, of compliance with the
applicable securities laws of other jurisdictions. UICI shall be entitled to
rely upon an opinion of counsel satisfactory to it with respect to compliance
with the above laws;
(f) A legend indicating the UICI Shares have not been registered under
such laws and referring to the restrictions on transferability and sale of the
UICI Shares may be placed on the certificate or certificates delivered to XXXX
or any substitute therefor and any transfer agent of UICI may be instructed to
require compliance therewith.
-9-
10
SECTION IV
REPRESENTATIONS OF UICI
4.1 Warranties and Representations of UICI. UICI warrants and represents to
XXXX that:
(a) Organization: Power. UICI is a corporation duly incorporated and
validly existing under the laws of the State of Delaware, and SUBSIDIARY is a
corporation duly incorporated and validly existing under the laws of Georgia.
UICI and SUBSIDIARY each has all requisite corporate power and authority to
enter into this Agreement and perform its obligations hereunder.
(b) Authorization. The execution, delivery, and performance by UICI
and SUBSIDIARY of this Agreement and all other agreements contemplated hereby to
which UICI or SUBSIDIARY is a party have been duly and validly authorized by all
necessary corporate action of UICI and SUBSIDIARY, and this Agreement and each
such other agreement, when executed and delivered by the parties thereto, will
constitute the legal, valid and binding obligation of UICI or SUBSIDIARY, as the
case may be, enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency and similar
statutes affecting creditors' rights generally and judicial limits on equitable
remedies.
(c) No Conflict with Other Instruments or Agreements. The execution,
delivery and performance by UICI or SUBSIDIARY of this Agreement and all other
agreements contemplated hereby to which UICI or SUBSIDIARY is a party will not
result in a breach or violation of, or constitute a default under, its Articles
of Incorporation or Bylaws or any material agreement to which UICI or SUBSIDIARY
is a party or by which UICI or SUBSIDIARY is bound.
(d) Litigation. There are no actions, suits, proceedings or
governmental investigations or inquiries pending or, to the knowledge of UICI,
threatened against UICI, SUBSIDIARY or their properties, assets, operations, or
businesses that might delay, prevent or hinder the consummation of the Merger.
(e) Investment Representations. UICI acquired the capital stock of
SUBSIDIARY for its own account, for purposes of investment and without
expectation, desire, or need for resale and not with the view toward
distribution, resale, subdivision or fractionalization of the shares of the
SUBSIDIARY.
(f) Fully-Paid, Non-Assessable Shares. The UICI Shares shall, upon
delivery to XXXX upon the Merger, be duly and validly authorized and issued,
fully-paid and non-assessable, and be free and clear of all liens, claims,
pledges, options, encumbrances, restrictions on transfer (except those under
applicable securities laws) and voting, preemptive rights of others, and rights
of others of every nature whatsoever.
-10-
11
(g) No Intent to Reacquire. UICI has no intention of reacquiring any of
the UICI Shares issued pursuant to this Agreement upon the Merger.
(h) Information Provided by ELA. During the course of the negotiation of
this Agreement, UICI has reviewed all information provided to it by ELA and has
had the opportunity to ask questions of and receive answers from representatives
of ELA concerning ELA and to obtain certain additional information requested by
UICI.
(i) Information Provided by UICI. UICI has provided XXXX and ELA with
correct and complete copies of its report on Form 10-K and Form 10-K/A for the
fiscal year ended December 31, 1996, its reports on Form 10-Q for the three
month periods ended March 31, 1997 and June 30, 1997, the proxy statement for
the 1997 annual meeting of the shareholders of UICI and UICI's 1996 Prospectus
with regard to the sale of shares of UICI Common Stock, in connection with a
secondary stock offering. The financial statements contained in such reports and
documents present fairly, in all material respects, the consolidated financial
position of UICI and its subsidiaries at the applicable dates and for the
applicable periods as set forth therein in conformity with generally accepted
accounting principles. The reports and documents do not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to the make the statements therein not misleading.
Since June 30, 1997 to the Effective Date, there has not been and there will not
have been, any material adverse change in the financial condition or prospects
of UICI and its subsidiaries, taken as a whole.
(j) Reorganization Representations.
1. The Merger was negotiated through arm's length bargaining. Accordingly,
the fair market value of the UICI Shares and other consideration
received by each ELA shareholder will be approximately equal to the
fair market value of the ELA Shares surrendered in the exchange.
2. Prior to the transaction, UICI will be in control of SUBSIDIARY within
the meaning of section 368(c)(1) of the Code.
3. At Closing, neither the Surviving Corporation, nor UICI will have the
present intent to issue additional shares of its stock that would
result in UICI losing control of the Surviving Corporation within the
meaning of section 368(c)(1) of the Code.
4. UICI has no plan or intention to reacquire any of its stock issued in
the transaction.
5. UICI has no present plan or intention to liquidate the Surviving
Corporation; to merge the Surviving Corporation with and into another
corporation; to sell or otherwise dispose of the stock of the Surviving
Corporation; or to cause the Surviving Corporation to sell or otherwise
dispose of any of the assets of ELA acquired in the transaction, except
for dispositions made in the ordinary course of business or transfers
described in section 368(a)(2)(C) of the Code.
-11-
12
6. Following the transaction, the Surviving Corporation will continue the
historic business of ELA or use a significant portion of ELA's business
assets in a business.
7. Neither UICI nor SUBSIDIARY is an investment company as defined in
section 368(a)(2)(f)(iii) and (iv) of the Code.
8. No stock of SUBSIDIARY will be issued in the transaction.
9. None of the compensation to be received by any ELA shareholder who is,
or will be, an employee of UICI, SUBSIDIARY or the Surviving
Corporation pursuant to any employment, consulting or similar
arrangement is or will be separate consideration for, or allocable to,
any of the ELA Shares. The compensation to be paid any ELA shareholder
who is, or will be, an employee of UICI or SUBSIDIARY pursuant to any
such employment, consulting or similar arrangement is or will be for
services actually rendered and will be commensurate with amounts paid
to third parties bargaining at arm's length for similar services.
SECTION V
Indemnification
5.1 Indemnification.
(a) XXXX agrees to indemnify in respect of, and hold UICI harmless from
and against, any and all damages, claims, deficiencies, losses, including taxes,
and all reasonable expenses, including interest, penalties, reasonable
attorneys' and accountants' fees and disbursements, but reduced by any offsets
to which any party shall be entitled directly or indirectly by reason thereof
(collectively "Damages"), resulting from the breach of any warranty or
representation or nonfulfillment or failure to perform any covenant or agreement
to be performed by ELA before the Merger or by XXXX contained in this Agreement,
including in the Disclosure Schedule, or in any certificate executed and
delivered pursuant to this Agreement.
(b) UICI agrees to indemnify in respect of, and hold XXXX harmless from
and against, any and all damages, claims, deficiencies, losses, including taxes,
and all reasonable expenses, including interest, penalties, reasonable
attorneys' and accountants' fees and disbursements, but reduced by any offsets
to which any party shall be entitled directly or indirectly by reason thereof
(collectively "Damages"), resulting from the breach of any warranty or
representation or nonfulfillment or failure to perform any covenant or agreement
on the part of UICI or SUBSIDIARY contained in this Agreement including in the
Disclosure Schedule, or in any certificate executed and delivered pursuant to
this Agreement.
(c) The party claiming indemnification hereunder is hereinafter
referred to as the "Indemnified Party" and the party against whom such claims
are asserted is hereinafter referred to as the "Indemnifying Party." Any claim
by XXXX or UICI for indemnification under this Section may only be made if and
to the extent that (i) Damages have been sustained by an Indemnified Party and
such Indemnified Party shall have given written notice of a claim for
indemnification for such Damages prior to the date of the completion of the
first audit of financial statements of ELA
-12-
13
containing combined operations for those matters reasonably expected to be
encountered in the audit process, provided the audit is completed prior to the
first anniversary of the Closing, and prior to the first anniversary of the
Closing with respect to all other matters or all matters, as the case may be,
and (ii) the Indemnified Party shall have incurred Damages for which a claim of
indemnity is assertable hereunder against the other party in an aggregate amount
in excess of $50,000 (the "Indemnification Deductible") and, only for amounts
above such Indemnification Deductible. All indemnification by the parties shall
be made by the issuing of additional shares of UICI Common Stock by UICI, or
XXXX surrendering UICI Shares (which shall be valued at the market value on
September 30, 1997); provided however, that the number of additional UICI stock
issued or UICI Shares surrendered will not exceed 10% of the UICI Shares issued
as set forth in Section 1.8(a).
5.2 Notification of Claims. Indemnified Party agrees to notify Indemnifying
Party promptly in writing of any occurrence, event, transaction or circumstance
occurring subsequent to the date of this Agreement that could give rise to a
claim for indemnification against Indemnifying Party under this Section
("Indemnification Event"). Additionally, Indemnified Party, together with such
written notice and thereafter promptly after receipt or the obtaining thereof,
will deliver to Indemnifying Party all information and documents relating to
such Indemnification Event and will use all commercially reasonable efforts to
cooperate with Indemnifying Party in the defense of any litigation brought by
third parties or other efforts by Indemnifying Party to mitigate Damages
resulting from the Indemnification Event. Without limiting in any way UICI's
agreement to cooperate, UICI agrees to maintain and retain all books and records
delivered to it and to provide the Surviving Corporation and XXXX reasonable
access thereto, until the later of (i) expiration of the survival period for the
representations and warranties of ELA and XXXX, at which time ELA's and XXXX'x
indemnification responsibilities with respect thereto under this Section 5 shall
terminate, or (ii) the final disposition of any lawsuit or other proceeding
involving an Indemnification Event.
SECTION VI
Registration of UICI Shares
6.1 Registration.
(a) Subject to the provisions of subparagraph (b) below, XXXX may
request UICI to file, from time to time, registration statements with the
Securities and Exchange Commission for public offerings covering such number of
UICI Shares owned by XXXX and acquired hereunder which are not registered under
the Securities Act of 1933 ("Registerable Shares"). The requests may be made at
any time commencing on the date financial results covering at least thirty (30)
days of post Merger, combined operations, has been published. In no event shall
the Registerable Shares requested to be registered have a market value at the
time the request is made of less than $1,000,000, unless all of the Registerable
Shares owed by XXXX are less then $1,000,000, in which case all of such shares
shall be registered by UICI. Upon receipt of such written request, UICI will use
its best efforts to file promptly and to have declared effective the
registration under the Act of all Registerable Shares requested to be registered
so as to permit fully such sale of the Registerable Shares without restrictions.
UICI agrees to file on a timely basis all reports required under the Act.
-13-
14
(b) UICI will also:
(i) Promptly prepare and file with the Commission a registration
statement on the applicable form with respect to the Registerable Shares and use
its best efforts to cause such registration statement to promptly become and
remain effective, including but not limited to, filing on a timely basis all
reports required under the Securities Act of 1933.
(ii) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
current and to comply with the provisions of the Securities Act of 1933 with
respect to the sale or other disposition of all shares covered by such
registration statement by XXXX, including amendments and supplements as may be
necessary to reflect the method of disposition by XXXX;
(iii) Furnish to XXXX such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act of 1933, and such other documents, as XXXX may reasonably request
in order to facilitate the public sale or other disposition of such Registerable
Shares; and
(iv) Use its best efforts to register or qualify the
Registerable Shares covered by such registration statement under such other
securities, Blue Sky or other applicable laws of such jurisdictions (not
exceeding ten) within the United States as XXXX may reasonably request.
(c) UICI will pay all registration and filing fees, printing and other
reproduction costs and fees and disbursements of counsel and accountants and
listing fees. XXXX shall pay all underwriting discounts and selling commissions
attributable to such Registerable Shares.
(d) At the time of the registration of such Registerable Shares, XXXX and
UICI shall enter into indemnity agreements and such other agreements as are
customary with respect to such offerings.
6.2 Incidental Registration Rights. If UICI at any time intends to file an
underwritten registration statement under the Act for an underwritten offering
of its common stock, UICI will notify XXXX prior to the filing of the
preliminary registration statement and xxxxx XXXX the right to include some or
all of the Registerable Shares in such registration statement. At least thirty
(30) days prior to written notice of any such filing shall be given to XXXX.
XXXX shall advise UICI within fifteen (15) days of receipt of the notice as to
whether they wish to sell any or all of the Registerable Shares pursuant to such
registration statement.
6.3 Expiration of Registration Rights. As such time as XXXX is able to sell
without restrictions or limitations the Registerable Shares received by XXXX
from UICI, XXXX'x right to demand registration of the Registerable Shares as set
forth in this Section VI shall expire.
-14-
15
SECTION VII
Termination
7.1 Termination. This Agreement may be terminated and abandoned at any time
without further obligation or liability on the part of any party in favor of any
other by mutual written consent of XXXX, XXX, SUBSIDIARY and UICI.
SECTION VIII
Miscellaneous Provisions
8.1 Delivery of Books and Records. On the Closing, ELA shall deliver to
UICI all books, records and files.
8.2 Entire Contract. This Agreement and the Disclosure Schedule contains
the entire contract and supersedes any and all other agreements, oral or
written, between the parties hereto with respect to the matter hereof and
contains all of the covenants and agreements between the parties with respect to
such matters. Each party to this Agreement acknowledges that no representations,
inducements, promises or agreements, orally or otherwise, have been made by any
party, or any one acting on behalf of any party, which are not embodied herein,
and that no other agreement, statement or promise not contained in this
Agreement shall be valid or binding. The term "responsible officers of ELA"
shall only include XXXX.
8.3 Amendments. This Agreement may not be modified, changed or amended in
any respect unless agreed upon in writing and signed by the duly authorized
representatives of the respective parties hereto.
8.4 Titles and Captions. All section titles or captions contained in this
Agreement are for convenience only and shall not be deemed part of the context
nor affect the interpretation of this Agreement.
8.5 Pronouns and Plurals. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural, as the
identity of the person or persons may require.
8.6 Agreement Binding. This Agreement shall be binding upon and inure to
the benefit of the heirs, executors, administrators, successors and assigns of
the parties hereto.
8.7 Severability. If any term, provision, covenant or condition of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the provisions shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
8.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
-15-
16
8.9 Counterparts. This Agreement may be executed in several copies or
counterparts, each of which shall have the same force and effect of an original.
8.10 Survival of Representations. The representations and warranties of the
parties herein shall survive for a period of one (1) year following the Closing.
All other agreements and covenants of the parties herein shall survive the
Closing until such agreements and covenants are fully performed.
8.11 Notices. All notices, requests, demands and other communications
required or permitted hereunder will be in writing and will be deemed to have
been duly given when delivered by hand, or upon receipt if delivered by
overnight courier, or five (5) business days after being mailed by certified or
registered mail, return receipt requested, with postage prepaid:
If to UICI, or to the Surviving Corporation, after the Closing, to:
Xxxxxxx X. Xxxxxx, President
Education Funding Group
000 Xxxxx Xxxxxx
Xxx Xxxxxxxxx Xxxxx
Xxxxx 0-0
Xxxxxxx, Xxxxxxxxxxxxx 00000
Copy to:
Xxxxxx X. Xxxxx, Esq.
General Counsel
UICI
0000 XxXxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
or to such other person or address as UICI furnished to XXXX pursuant to the
below.
-16-
17
If to XXXX, or to ELA prior to the Closing:
Xxxxxx X. Xxxx
ELA Corp.
0000 Xxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Copy to:
Xxxxxxx X. Xxxxxxxxx, Esq.
Glass, XxXxxxxxxx, Xxxxxxxx & Xxxxxxx
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
or to such other address as XXXX or ELA furnished to UICI or to the Surviving
Corporation pursuant to the above.
8.12 Attorney Fees. In the event an arbitration, suit or action is brought
by any party under this Agreement to enforce any of its terms, or in any appeal
therefrom, it is agreed that the prevailing party shall be entitled to
reasonable attorneys' fees to be fixed by the arbitrator, trial court or
appellate court.
8.13 Expenses. Subject to the other provisions of this Agreement, each
party shall bear its own costs and expenses, including attorneys' fees, incurred
in connection with this transaction. It is agreed that the fees and expenses of
ELA's and XXXX'x attorney, prior to the Closing, shall be borne by ELA.
8.14 Arbitration. If at any time during the term of this Agreement any
dispute, difference or disagreement shall arise upon or in respect of this
Agreement or the meaning and construction hereof, every such dispute, difference
or disagreement shall be referred to a single arbiter agreed upon by the
parties, or if no single arbiter can be agreed upon, an arbiter or arbiters
shall be selected in accordance with the rules of the American Arbitration
Association, Atlanta, Georgia, and such dispute, difference or disagreement
shall be settled by binding and nonappealable arbitration in accordance with the
then prevailing commercial rules of the American Arbitration Association, and
judgment upon the award rendered by the arbiter may be entered in any court
having jurisdiction thereof.
8.15 Presumption. This Agreement or any section thereof shall not be
construed against any party due to the fact that said Agreement or any section
thereof was drafted by said party.
8.16 Treatment of Transaction. Although the parties intend this transaction
to be a "reorganization" within the meaning of Sections 386(a)(1)(A) and
(a)(2)(D) of the Internal Revenue
-17-
18
Code of 1986, such treatment is not a condition to Closing and no Internal
Revenue Service Ruling or opinion of counsel is being obtained or requested for
such treatment. The parties will account and report such transaction for tax
purposes as such a reorganization unless advised by their respective accountants
or tax advisors that such treatment is not proper.
8.17 Waiver. Any term or condition of this Agreement may be waived at any
time by the party which is entitled to the benefit thereof, such waiver shall be
in writing and shall be executed by XXXX and ELA's or by SUBSIDIARY's and UICI's
President or Vice President or authorized representative of such party. A waiver
of one occasion shall not be deemed to be a waiver of the same or any other
breach on a future occasion.
8.18 Assignment. The rights and obligations of the parties under this
Agreement may not be assigned in whole or in part without the prior written
consent of the other party, which consent shall not be unreasonably withheld.
8.19 Further Action. The parties hereto shall execute and deliver all
documents, provide all information and take or forbear from all such action as
may be necessary or appropriate to achieve the purposes of the Agreement.
IN WITNESS WHEREOF, the parties hereto have executed, or by their
respective duly authorized officers, have caused this Agreement to be executed,
under seal, as of the date first written above.
ELA CORPORATION UICI
By: /s/ Xxxx X. Xxxx By: /s/ Xxxxxx X. Xxxxxx
------------------------------- --------------------------------
Xxxx X. Xxxx, Vice President Xxxxxx X. Xxxxxx, Vice President
and Treasurer
[CORPORATE SEAL] [CORPORATE SEAL]
(SIGNATURES CONTINUED ON THE FOLLOWING PAGE)
-18-
19
(SIGNATURES CONTINUED FROM THE PREVIOUS PAGE)
Individually:
/s/ Xxxxxx X. Xxxx
-----------------------------(SEAL) CI ACQUISITION CORP.
Xxxxxx X. Xxxx
/s/ Xxxxxx X. Xxxxxx
/s/ Xxxx X. Xxxx :--------------------------------
-----------------------------(SEAL) Xxxxxx X. Xxxxxx, Vice President
Xxxx X. Xxxx and Treasurer
/s/ Xxxx X. Xxxx
-----------------------------(SEAL) [CORPORATE SEAL]
Xxxx X. Xxxx
XX TRUST #2
/s/ Xxxx X. Xxxx
-----------------------------(SEAL)
Xxxx X. Xxxx, not individually, but
solely as Trustee thereof
-19-
