EXHIBIT 2.4
PURCHASE AGREEMENT
BY AND AMONG
CONTINENTAL GENERAL INSURANCE COMPANY
CERES GROUP, INC.
PENNSYLVANIA LIFE INSURANCE COMPANY
AND
UNIVERSAL AMERICAN FINANCIAL CORP.
DATED AS OF DECEMBER 20, 2002
TABLE OF CONTENTS
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ARTICLE I PURCHASE AND SALE........................................................................ 1
SECTION 1.1 PURCHASE AND SALE OF SHARES....................................................... 1
SECTION 1.2 PURCHASE AND SALE OF REAL PROPERTY AND EQUIPMENT.................................. 1
SECTION 1.3 PURCHASE PRICE FOR THE SHARES..................................................... 2
SECTION 1.4 PURCHASE PRICE FOR THE ASSETS..................................................... 3
SECTION 1.5 POST-CLOSING PRICE ADJUSTMENT..................................................... 3
SECTION 1.6 CLOSING........................................................................... 4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLER............................................ 5
SECTION 2.1 ORGANIZATION...................................................................... 5
SECTION 2.2 CAPITALIZATION/SUBSIDIARIES....................................................... 5
SECTION 2.3 OWNERSHIP OF STOCK................................................................ 6
SECTION 2.4 AUTHORIZATION; VALIDITY OF AGREEMENT.............................................. 6
SECTION 2.5 CONSENTS AND APPROVALS; NO VIOLATIONS............................................. 6
SECTION 2.6 FINANCIAL STATEMENTS.............................................................. 7
SECTION 2.7 NO UNDISCLOSED LIABILITIES........................................................ 8
SECTION 2.8 ABSENCE OF CERTAIN CHANGES........................................................ 8
SECTION 2.9 EMPLOYEE BENEFIT PLANS; ERISA..................................................... 8
SECTION 2.10 LITIGATION........................................................................ 9
SECTION 2.11 NO DEFAULT; COMPLIANCE WITH APPLICABLE LAWS....................................... 9
SECTION 2.12 TAXES............................................................................. 10
SECTION 2.13 INTELLECTUAL PROPERTY............................................................. 15
SECTION 2.14 CONTRACTS......................................................................... 15
SECTION 2.15 LABOR MATTERS..................................................................... 16
SECTION 2.16 RESERVES.......................................................................... 16
SECTION 2.17 INSURANCE PRODUCERS............................................................... 16
SECTION 2.18 BOOKS AND RECORDS................................................................. 17
SECTION 2.19 RELATED PARTY TRANSACTIONS........................................................ 17
SECTION 2.20 BROKERS OR FINDERS................................................................ 17
SECTION 2.21 INSURANCE; REINSURANCE; CLAIMS AND SERVICE AGREEMENTS............................. 18
SECTION 2.22 ENVIRONMENTAL MATTERS............................................................. 19
SECTION 2.23 INSURANCE COVERAGE................................................................ 19
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER............................................ 19
SECTION 3.1 ORGANIZATION...................................................................... 19
SECTION 3.2 AUTHORIZATION; VALIDITY OF AGREEMENT; NECESSARY ACTION............................ 19
SECTION 3.3 CONSENTS AND APPROVALS; NO VIOLATIONS............................................. 19
SECTION 3.4 ACQUISITION FOR INVESTMENT........................................................ 20
SECTION 3.5 FINANCING......................................................................... 20
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SECTION 3.6 BROKERS OR FINDERS................................................................ 20
SECTION 3.7 EXCLUSIVITY OF SELLER'S AND PARENT'S REPRESENTATIONS.............................. 20
ARTICLE IV COVENANTS .............................................................................. 21
SECTION 4.1 INTERIM OPERATIONS OF PYRAMID..................................................... 21
SECTION 4.2 DUE DILIGENCE; ACCESS TO INFORMATION.............................................. 23
SECTION 4.3 TAX MATTERS....................................................................... 23
SECTION 4.4 EMPLOYEE MATTERS.................................................................. 27
SECTION 4.5 PUBLICITY......................................................................... 28
SECTION 4.6 APPROVALS AND CONSENTS; COOPERATION............................................... 28
SECTION 4.7 UPDATES BY SELLER................................................................. 29
SECTION 4.8 INTERCOMPANY AGREEMENTS AND BALANCES.............................................. 29
SECTION 4.9 GAAP FINANCIAL STATEMENTS......................................................... 29
SECTION 4.10 COVENANT NOT TO NEGOTIATE SALE OF PYRAMID......................................... 30
SECTION 4.11 NON-SOLICITATION.................................................................. 30
SECTION 4.12 [INTENTIONALLY LEFT BLANK]........................................................ 30
SECTION 4.13 COOPERATION ON FINANCING.......................................................... 30
SECTION 4.14 ANCILLARY AGREEMENTS.............................................................. 31
SECTION 4.15 HANDLING OF CERTAIN INSURANCE CLAIMS.............................................. 31
ARTICLE V INDEMNIFICATION ......................................................................... 32
SECTION 5.1 INDEMNIFICATION................................................................... 32
ARTICLE VI CONDITIONS ............................................................................. 34
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE CLOSING....................... 34
SECTION 6.2 CONDITIONS TO THE OBLIGATIONS OF PURCHASER AND UNIVERSAL.......................... 35
SECTION 6.3 CONDITIONS TO THE OBLIGATIONS OF SELLER AND PARENT................................ 36
ARTICLE VII TERMINATION ........................................................................... 37
SECTION 7.1 TERMINATION....................................................................... 37
SECTION 7.2 PROCEDURE FOR AND EFFECT OF TERMINATION........................................... 37
ARTICLE VIII MISCELLANEOUS......................................................................... 38
SECTION 8.1 GOVERNING LAW AND CONSENT TO JURISDICTION......................................... 38
SECTION 8.2 AMENDMENT AND MODIFICATION........................................................ 38
SECTION 8.3 NOTICES........................................................................... 38
SECTION 8.4 INTERPRETATION.................................................................... 39
SECTION 8.5 COUNTERPARTS...................................................................... 40
SECTION 8.6 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES....................................... 40
SECTION 8.7 SEVERABILITY...................................................................... 40
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SECTION 8.8 SERVICE OF PROCESS................................................................ 40
SECTION 8.9 ASSIGNMENT........................................................................ 41
SECTION 8.10 EXPENSES.......................................................................... 41
SECTION 8.11 WAIVERS........................................................................... 41
SECTION 8.12 FURTHER ASSURANCES................................................................ 41
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PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated as of December 20, 2002 (the "Agreement"), by
and among Continental General Insurance Company, a Nebraska insurance company
("Seller"), Ceres Group, Inc., a Delaware corporation ("Parent"), Pennsylvania
Life Insurance Company, a Pennsylvania insurance company ("Purchaser"), and
Universal American Financial Corp., a Delaware corporation ("Universal").
WHEREAS, Seller is the record and beneficial owner of all of the issued
and outstanding shares of capital stock of The Pyramid Life Insurance Company, a
Kansas stock insurance company ("Pyramid"), all of such outstanding shares being
referred to herein as the Shares; and
WHEREAS, Parent is the record and beneficial owner of all of the issued
and outstanding capital stock of Continental General Corporation, a Nebraska
corporation, which owns all of the issued and outstanding capital stock of
Seller; and
WHEREAS, Universal is the record and beneficial owner of all of the issued
and outstanding capital stock of American Exchange Life Insurance Company, a
Texas corporation, which owns all of the issued and outstanding capital stock of
Purchaser; and
WHEREAS, Purchaser desires to purchase, and Seller desires to sell or
cause to be sold to Purchaser, all of the Shares, subject to the terms and
conditions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements set forth herein, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties, intending to be legally bound hereby, agree as
follows:
ARTICLE I
PURCHASE AND SALE
SECTION 1.1 PURCHASE AND SALE OF SHARES. Upon the terms and subject to the
conditions set forth in this Agreement, and in reliance on the representations,
warranties, covenants and agreements of the parties contained herein, at the
Closing (as hereinafter defined), Seller shall sell, assign, transfer and
deliver to Purchaser, and Purchaser shall purchase from Seller, the Shares, and
upon completion of the Closing, Purchaser shall own the Shares.
SECTION 1.2 PURCHASE AND SALE OF REAL PROPERTY AND EQUIPMENT.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, immediately prior to the Closing (as hereinafter defined), Seller
shall cause Pyramid to sell to Seller, and Seller shall buy from Pyramid, all of
Pyramid's right, title and interest in and to, the following assets of Pyramid
(collectively, the "Assets"):
(i) all machinery, equipment, furniture, fixtures and other tangible
personal property of Pyramid, including the items listed on Schedule
1.2(a)(i)-1 and excluding the items listed on Schedule 1.2(a)(i)-2,
(ii) any leases for tangible personal property of Pyramid and
maintenance or service agreements with respect to the tangible personal
property or real property included in the Assets, each of which shall be
duly assigned to Seller, including those listed on Schedule 1.2(a)(ii)-1,
and excluding the items listed on Schedule 1.2(a)(ii)-2,
(iii) the real property owned by Pyramid and located at 0000 Xxxxxxx
Xxxxx, Xxxxxxx, Xxxxxx 00000, as is more fully described on Schedule
1.2(a)(iii), together with all buildings, improvements, rights, tenements,
hereditaments, privileges, appurtenances and fixtures thereon or thereunto
belonging, and
(iv) all computer software owned by or licensed by Pyramid and
service or maintenance agreements with respect to software, information
services or claims processing, including the software and agreements
listed on Schedule 1.2(a)(iv).
(b) Seller acknowledges and agrees that: (i) Seller and its
representatives have the experience and knowledge to evaluate the Assets, (ii)
Seller has made its own investigation into, and based thereon Seller has formed
an independent judgment concerning the Assets, (iii) Seller accepts the
condition of the Assets "AS IS, WHERE IS" and "WITH ALL FAULTS" without any
representation, warranty or guarantee from Pyramid, Purchaser or Universal,
express or implied, as to merchantability, fitness for a particular purpose or
otherwise as to the condition, size, extent, quantity, type or value of such
property.
(c) In connection with the purchase and sale of the Assets, Seller shall
assume, and shall pay, perform and discharge when due, any and all obligations
under the contracts, agreements, leases and software licenses included in the
Assets and all Liabilities directly associated with the ownership (or transfer
pursuant to this Agreement) of the real property, intellectual property and
tangible personal property included in the Assets, it being understood that
periodic payments under the Liabilities in the ordinary course of business (such
as monthly lease expenses) shall be prorated between Seller and Pyramid (with
appropriate payments being made between them) on the basis that Pyramid shall
bear the cost of such Liabilities prior to the Closing Date and Seller shall
bear the cost of such Liabilities on or after the Closing Date. For purposes of
this Agreement, the term "Liabilities" means any and all claims, assessments,
debts, liabilities, commitments and obligations (including environmental
liabilities), whether or not fixed, contingent or absolute, matured or
unmatured, direct or indirect, liquidated or unliquidated, accrued or unaccrued,
known or unknown, whether or not required by GAAP to be reflected in financial
statements or disclosed in the notes thereto.
SECTION 1.3 PURCHASE PRICE FOR THE SHARES. On the Closing Date (as
hereinafter defined) and subject to the terms and conditions set forth in this
Agreement, in reliance on the representations, warranties, covenants and
agreements of the parties contained herein and in consideration of the sale,
assignment, transfer and delivery of the Shares, Purchaser shall pay to Seller
an amount equal to $56,000,000, adjusted by the Capital Adjustment (as
hereinafter defined) as estimated in good faith by Seller (as so adjusted, the
"Shares Purchase
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Price") by wire transfer of immediately available funds to an account or
accounts designated by Seller not later than two (2) business days prior to the
Closing Date. Seller shall provide Purchaser with written notice no later than
five (5) business days prior to the Closing Date setting forth its good faith
estimate in reasonable detail of the Capital Adjustment (the "Estimated
Statement"), which shall be accompanied by the unaudited financial statements of
Pyramid, as determined in accordance with SAP (as hereinafter defined), applied
in accordance with past practice for the prior quarterly statutory financial
statements, for the most recently closed month end for which such statements are
available, which financial statements shall be utilized in computing the Capital
Adjustment set forth in the Estimated Statement. The "Capital Adjustment" shall
be the difference between the aggregate statutory capital and surplus of
Pyramid, as determined in accordance with SAP, applied in accordance with past
practice for the prior quarterly statutory financial statements, as of the
Valuation Date (as hereinafter defined) and the statutory capital and surplus at
June 30, 2002 ($20,657,523).
SECTION 1.4 PURCHASE PRICE FOR THE ASSETS. Immediately prior to the
Closing and subject to the terms and conditions set forth in this Agreement, in
consideration of the sale and transfer of the Assets, Seller shall pay to
Pyramid an amount equal to $1,000,000 (the "Asset Purchase Price") by wire
transfer of immediately available funds to an account or accounts designated no
later than two (2) business days prior to the Closing Date by Pyramid.
SECTION 1.5 POST-CLOSING PRICE ADJUSTMENT. Not later than thirty (30)
business days following the Closing Date, Seller shall deliver to Purchaser a
computation (the "Final Statement") of the aggregate statutory capital and
surplus of Pyramid as of the Closing Date (the "Valuation Date") determined in
accordance with SAP applied in accordance with past practice for the prior
quarterly statutory financial statements (the "Valuation Date Capital and
Surplus"). The computation of the Valuation Date Capital and Surplus for
purposes of the Estimated Statement and the Final Statement shall exclude any
effect thereon from the sale of the Assets pursuant to this Agreement. The Final
Statement shall be accompanied by unaudited financial statements of Pyramid as
determined in accordance with SAP, applied in accordance with past practice for
the prior quarterly statutory financial statements, for the period ending on the
Valuation Date, which financial statements shall be utilized in computing the
Valuation Date Capital and Surplus. Purchaser shall make available to Seller and
Seller shall make available to Purchaser, access to all of their respective
personnel and records (including work papers) necessary for Seller to prepare,
and Purchaser to review, the Final Statement. Within twenty (20) business days
after the delivery of the Final Statement from Seller, Purchaser shall deliver a
notice to Seller indicating whether it accepts the computation in the Final
Statement or, if it has any disagreements, the amount and nature of such
disagreements in reasonable detail. If Purchaser accepts such computation or
fails to give such notice, the Valuation Date Capital and Surplus shall be the
amount as computed by Seller. If Purchaser's notice indicates any disagreement,
Seller and Purchaser shall negotiate in good faith to promptly resolve any
disagreements. If these issues have not been resolved within ten (10) business
days after Purchaser delivers its notice to Seller, Purchaser and Seller shall
submit such disagreements to Deloitte & Touche LLP (the "Accounting Firm") for
resolution of all points of disagreement and determine the Valuation Date
Capital and Surplus based on the Seller's original computation as adjusted for
the resolution of such points of disagreement by the Accounting Firm. The
Accounting Firm shall be directed to deliver to the Purchaser and the Seller, as
promptly as practicable and in any event within 90 days after its appointment, a
written report setting forth
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the resolution of any such disagreement determined in accordance with the terms
of this Agreement. The determination of the Accounting Firm shall be final,
binding and non-appealable. Once the Valuation Date Capital and Surplus is
determined, (i) if the Valuation Date Capital and Surplus is less than the
estimated amount used in computing the Capital Adjustment set forth in the
Estimated Closing Statement, Seller shall within three (3) business days pay the
amount of the difference to Purchaser by wire transfer of immediately available
funds, together with interest thereon computed as the prime rate as reported in
The Wall Street Journal (Eastern Edition) on the Closing Date for the period
from the Closing Date until the date of payment and (ii) if the Valuation Date
Capital and Surplus is greater than such amount used in computing the Capital
Adjustment set forth in the Estimated Closing Statement, Purchaser shall within
three (3) business days pay the amount of such excess to Seller by wire transfer
of immediately available funds, together with interest thereon at such prime
rate for such period.
SECTION 1.6 CLOSING.
(a) The closing of the sale and purchase of the Shares contemplated by
this Agreement (the "Closing") and the sale and purchase of the Assets
contemplated by this Agreement shall take place at the offices of Weil, Gotshal
& Xxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, xx the last day of the first
month in which all conditions to the obligations of the parties set forth in
Article VI hereof have been satisfied or waived or at such other place or at
such other time or on such other date as Seller and Purchaser may mutually agree
upon in writing (the day on which the Closing takes place being the "Closing
Date").
(b) At the Closing, Seller shall deliver or cause to be delivered to
Purchaser (i) stock certificates evidencing all Shares duly endorsed in blank or
accompanied by stock powers duly executed in blank, free of all Encumbrances (as
hereinafter defined), other than restrictions imposed by the United States
federal or state securities laws and the insurance laws of the State of Kansas
and Nebraska, and (ii) all other previously undelivered certificates and other
documents required to be delivered by Seller to Purchaser at or prior to the
Closing Date in connection with the transactions contemplated hereby.
(c) At the Closing, Purchaser shall deliver to Seller (i) the Shares
Purchase Price by wire transfer in immediately available funds to an account or
accounts designated by Seller, and (ii) all other previously undelivered
certificates and other documents required to be delivered by Purchaser to Seller
at or prior to the Closing Date in connection with the transactions contemplated
hereby.
(d) Immediately prior to the Closing, Pyramid shall deliver or cause to be
delivered to Seller such bills of sale, lease and contract assignments, deeds
and other documents or instruments as Seller may reasonably request to transfer
to Seller all right, title and interest in and to the Assets; PROVIDED, HOWEVER,
that it is understood by the parties hereto that the sale of the Assets is on an
"as, is, where is" basis and "with all faults." In furtherance of the
immediately preceding proviso, Seller shall execute and deliver to Pyramid
immediately prior to the Closing an assumption agreement and other instruments
of assumption (in form and substance reasonably satisfactory to Purchaser and
Seller) pursuant to which Seller assumes the Liabilities and agrees to indemnify
the Purchaser and Universal against any failure to discharge the Liabilities.
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(e) Immediately prior to the Closing, Seller shall deliver to Pyramid the
Asset Purchase Price by wire transfer in immediately available funds to an
account or accounts designated by Pyramid.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Seller and Parent, jointly and severally, represent and warrant to
Purchaser, at and as of the date hereof and again at and as of the Closing Date,
as follows, subject to the disclosure schedules referenced herein (the
"Disclosure Schedule").
SECTION 2.1 ORGANIZATION.
(a) Pyramid is a stock insurance corporation duly organized, validly
existing and in good standing under the laws of the State of Kansas and has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted. Pyramid is duly qualified or
licensed to do business and is in good standing in each jurisdiction listed in
Section 2.1 of the Disclosure Schedule. Pyramid transacts no business directly
or indirectly in any jurisdiction other than those enumerated in Section 2.1 of
the Disclosure Schedule, except in such jurisdictions where the failures to be
so licensed or qualified could not reasonably be expected to have, individually
and in the aggregate, a Pyramid Material Adverse Effect (as hereinafter
defined). As used in this Agreement, "Pyramid Material Adverse Effect" means any
material adverse change in, or material adverse effect on, the business, assets,
financial condition or results of operations of Pyramid, taken as a whole;
PROVIDED, HOWEVER, that, the effects of changes that are generally applicable to
the life and health insurance markets in which Pyramid operates shall be
excluded from the determination of a Pyramid Material Adverse Effect; and
PROVIDED, FURTHER, that any adverse effect on Pyramid resulting from the
execution of this Agreement and the announcement of this Agreement and the
transactions contemplated hereby shall also be excluded from the determination
of a Pyramid Material Adverse Effect.
(b) Each of Seller and Parent is a corporation duly organized, validly
existing and in good standing under the laws of its state of organization. Each
of Seller and Parent has all corporate power and authority to own the Shares (in
the case of Seller), to carry on its business as it is now being conducted, and
to enter into and carry out its obligations under this Agreement.
SECTION 2.2 CAPITALIZATION/SUBSIDIARIES.
(a) Section 2.2 of the Disclosure Schedule sets forth the authorized,
issued and outstanding capital stock of Pyramid. Each of the outstanding shares
of capital stock of Pyramid is duly authorized, validly issued, fully paid,
non-assessable and free of preemptive rights. The Shares constitute all of the
issued and outstanding capital stock of Pyramid. There are no existing (i)
options, warrants, calls, subscriptions or other rights, convertible securities,
agreements or commitments of any character obligating Seller or Pyramid to
issue, transfer or sell any shares of capital stock or other equity interest in
Pyramid or securities convertible into or exchangeable for such shares or equity
interests, (ii) contractual obligations of Pyramid to repurchase, redeem or
otherwise acquire any capital stock of Pyramid, or (iii) voting trusts or
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similar agreements to which Seller or Pyramid is a party with respect to the
voting of the capital stock of Pyramid.
(b) Pyramid has no subsidiaries. Pyramid is not a partner, shareholder or
joint venturer in any Person, except to the extent related to the investment
activities of Pyramid in the ordinary course of business; PROVIDED, HOWEVER,
that Pyramid does not own directly or indirectly, 3% or more of the outstanding
voting securities of or otherwise possesses, directly or indirectly, the power
to direct or cause the direction of the management or policies of any Person.
For purposes of this Agreement, the term "Person" means an individual,
corporation, limited liability company, partnership, joint venture, association,
trust, unincorporated organization or, as applicable, any other entity.
SECTION 2.3 OWNERSHIP OF STOCK. Seller has all corporate power, right and
authority to own the Shares. Seller has good title to the Shares. The Shares are
owned by Seller free and clear of all Encumbrances, other than restrictions
imposed by United States federal and state securities laws and the insurance
laws of the States of Kansas and Nebraska. Upon the consummation of the
transactions contemplated hereby, Seller will deliver to Purchaser title to the
Shares, free and clear of all liens, charges, security interests, mortgages,
pledges, options, encumbrances and restrictions ("Encumbrances"), other than
restrictions noted in the preceding sentence. The certificates representing the
Shares do not contain any restrictive legend or reference to any agreement.
SECTION 2.4 AUTHORIZATION; VALIDITY OF AGREEMENT. Each of Seller and
Parent has full power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance by Seller and Parent of this Agreement, and the consummation by each
of them of the transactions contemplated hereby, has been duly authorized by all
necessary corporate action, and no other corporate action on the part of Seller
or Parent is necessary to authorize the execution and delivery by Seller or
Parent of this Agreement and the consummation by either of them of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Seller and Parent and (assuming due and valid authorization,
execution and delivery hereof by Purchaser and Universal) is a valid and binding
obligation of Seller and Parent enforceable against Seller and Parent in
accordance with its terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws, now or hereafter in effect, affecting creditors' rights generally, and
(ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
SECTION 2.5 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for: (a) filings
pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and (b) matters specifically described in Section 2.5 of the
Disclosure Schedule, neither the execution, delivery or performance of this
Agreement by Seller or Parent nor the consummation by Seller or Parent of the
transactions contemplated hereby will require on the part of Seller, Parent or
Pyramid any filing or registration with, notification to, or authorization,
consent or approval of, any court, legislative, executive or regulatory
authority or government agency (a "Governmental Entity"); except for such
filings, registrations, notifications, authorizations, consents or approvals
(other than under applicable insurance laws)
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the failure of which to obtain could not reasonably be expected to have,
individually or in the aggregate, a Pyramid Material Adverse Effect and would
not materially adversely affect the ability of Seller or Parent to perform their
respective obligations under this Agreement. Except as disclosed in Section 2.5
of the Disclosure Schedule, neither the execution, delivery or performance of
this Agreement by Seller or Parent nor the consummation by Seller or Parent of
the transactions contemplated hereby will: (i) violate any provision of the
charter or by-laws of Seller, Parent or Pyramid, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which Seller, Parent or Pyramid is a party or by which their properties or
assets may be bound, or (iii) violate any order, writ, judgment, injunction,
decree, law, statute, rule or regulation applicable to Seller, Parent or Pyramid
or any of their properties or assets, except in each case for such violations,
breaches or defaults under clauses (ii) or (iii) as could not reasonably be
expected to have, individually or in the aggregate, a Pyramid Material Adverse
Effect or materially adversely affect the ability of Seller or Parent to perform
their respective obligations under this Agreement.
SECTION 2.6 FINANCIAL STATEMENTS.
(a) Seller has delivered to Purchaser true and correct copies of (i)
audited statutory financial statements of Pyramid as of and for the years ended
December 31, 2000 and 2001, including all exhibits, interrogatories, notes and
schedules thereto and any actuarial opinion, affirmation or certification filed
in connection therewith, and (ii) unaudited statutory financial statements as of
and for the quarters ended March 31, 2002, June 30, 2002, and September 30,
2002, including all exhibits, interrogatories, notes and schedules thereto, in
each case as filed with the Kansas Insurance Department (the financial
statements referenced in clauses (i) and (ii) of this subsection (a) are
collectively referred to as the "SAP Financial Statements"). The SAP Financial
Statements were prepared in conformity with accounting practices prescribed or
permitted by the State of Kansas as reflected in its laws, rules, regulations
and administrative requirements ("SAP"). Each of the balance sheets included in
the SAP Financial Statements fairly presents in all material respects the
financial position of Pyramid as of its date, and each of the statements of
operations included in the SAP Financial Statements fairly presents in all
material respects the results of operations and changes in capital and surplus
and in cash flow of Pyramid for and during the respective periods covered
thereby, in each case in accordance with SAP and consistently applied.
(b) Each of the SAP Financial Statements (i) was timely filed with the
insurance regulatory authorities in each of the jurisdictions listed in Section
2.1 of the Disclosure Schedule, and (ii) was true, complete and correct in all
material respects when and as filed. All Assessments (as hereinafter defined)
against Pyramid that relate to events occurring or business done prior to the
Closing Date have been paid or properly reserved on the books and records of
Pyramid. The amounts reserved by Pyramid for any estimated Assessments that have
not been finalized and satisfied have been computed in all material respects in
accordance with SAP and sound actuarial practices, consistently applied; it
being understood that the foregoing representation relates to the practices used
in computing reserves and does not and is not intended to constitute in any way
a representation, warranty or guaranty as to the ultimate adequacy or
sufficiency of such reserves. For purposes of this Agreement, the term
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"Assessments" means all guaranty fund and other residual market assessments
required by any Governmental Entity to be paid by Pyramid. To the knowledge of
Seller, Parent and Pyramid, no Assessment in excess of $25,000 is pending or
threatened against Pyramid as of the date hereof.
(c) It is understood that the provisions of this Agreement (including
Sections 2.6, 2.7, 2.12 and 2.16), do not constitute a representation, warranty
or guaranty that the insurance reserves of Pyramid for future insurance policy
benefits, losses, claims and expenses as shown in the SAP Financial Statements
ultimately will be adequate or sufficient.
SECTION 2.7 NO UNDISCLOSED LIABILITIES. As of September 30, 2002 (the
"Balance Sheet Date"), Pyramid had no material liabilities or obligations
except: (a) as disclosed in Section 2.7 of the Disclosure Schedule, (b)
liabilities and obligations reflected in the interim unaudited balance sheet of
Pyramid as of September 30, 2002 included in the SAP Financial Statement for the
quarter then ended, and (c) liabilities and obligations incurred in the ordinary
course of business that are not required to be reflected in a balance sheet
prepared in accordance with SAP (assuming the same application of SAP as was
used in preparing the SAP Financial Statements) and that could not reasonably be
expected to have, individually or in the aggregate, a Pyramid Material Adverse
Effect.
SECTION 2.8 ABSENCE OF CERTAIN CHANGES. Except as: (a) disclosed in the
SAP Financial Statements, (b) disclosed in Section 2.8 of the Disclosure
Schedule, or (c) permitted by this Agreement, since the Balance Sheet Date,
Pyramid has not: (i) suffered any change constituting a Pyramid Material Adverse
Effect; (ii) amended its articles of incorporation or by-laws; (iii) split,
combined or reclassified the Shares or issued additional Shares; (iv) declared
or set aside or paid any dividend or other distribution with respect to the
Shares, (v) made any material changes in the compensation or benefits of
Pyramid's employees other than changes made in the ordinary course of business;
(vi) materially changed its accounting principles, practices or methods, except
as required by SAP or applicable law, or (vii) taken any action of the type
referred to in subsections (f), (i), (k) or (l)(ii) of Section 4.1.
SECTION 2.9 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Pyramid does not employ, and since January 1, 2001 has not employed,
any employees. All employees of the Pyramid business are employees of Ceres
Administrators LLC ("Ceres Administrators").
(b) Section 2.9(b) of the Disclosure Schedule sets forth a list of all
"employee benefit plans", as defined in Section 3(3) of ERISA, and each other
material plan in which Employees participated immediately prior to the Closing
Date ("Benefit Plans"). Except as set forth in Section 2.9(b) of the Disclosure
Schedule, no Benefit Plan is maintained at the Pyramid level. The Ceres
Administrators 401(k) Plan has been maintained and operated in substantial
compliance with the applicable requirements of the Code and ERISA and the
regulations issued thereunder. A complete and correct copy of the most recent
summary plan description (or other summary, in the case of a plan which is not
subject to ERISA) for each Benefit Plan has been provided to Purchaser. Neither
Pyramid nor any trade or business, whether or not incorporated, which together
with Pyramid would be deemed a single employer within the meaning of Section
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4001(b)(1) of ERISA (an "ERISA Affiliate"), has since July 26, 2000 contributed
to, maintained, or had any liability with respect to any pension plan within the
meaning of Section 3(2) of ERISA which is subject to Title IV of ERISA,
including but not limited to any "multiemployer plan," as defined in Section
3(37) of ERISA. To the knowledge of Seller, Parent and Pyramid has no liability
of any kind whatsoever, whether direct, indirect, contingent or otherwise, under
Section 302 of ERISA, Section 412 of the Code or Title IV of ERISA.
SECTION 2.10 LITIGATION. Any and all litigation, actions, suits and
proceedings involving Pyramid as of the date of this Agreement are listed in
Section 2.10 of the Disclosure Schedule. Except as disclosed in Section 2.10 of
the Disclosure Schedule, as of the date of this Agreement there is no action,
suit or proceeding pending or, to the knowledge of Seller, Parent or Pyramid,
threatened, involving Seller or any of Seller's affiliates (as hereinafter
defined) by or before any arbitrator or Governmental Entity or by any third
party that (i) challenges the validity of or seeks to prevent, enjoin, alter or
materially delay any of the transactions contemplated by this Agreement or (ii)
could reasonably be expected to have, individually or in the aggregate, a
Pyramid Material Adverse Effect. As used in this Agreement, an "affiliate" of,
or a Person "affiliated" with, a specified Person, is a Person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, the Person specified. For purposes of the
foregoing definition, the term "control" (including the terms "controlling,"
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise.
SECTION 2.11 NO DEFAULT; COMPLIANCE WITH APPLICABLE LAWS.
(a) Pyramid is not in default or violation of any term, condition or
provision of: (i) its articles of incorporation or by-laws; (ii) any contract,
agreement, note, loan, evidence of indebtedness, or other instrument or
agreement to which it is a party or by which it is bound; (iii) any statute,
law, rule, regulation, judgment, decree, order, arbitration award, or Required
Permit (as hereinafter defined) applicable to Pyramid including, without
limitation, laws, rules and regulations relating to the environment,
occupational health and safety, employee benefits, wages, workplace safety,
equal employment opportunity and race, religious or sex discrimination,
excluding from the foregoing clauses (ii) and (iii), defaults or violations
which could not reasonably be expected to have, individually or in the
aggregate, a Pyramid Material Adverse Effect. Except as set forth in Section
2.11(a) of the Disclosure Schedule, Pyramid has not received any written notice
from any Governmental Entity alleging any violation of the type described in
clause (iii) above or directing Pyramid to take any remedial action, in any case
which has not been settled or otherwise finally resolved or which could
reasonably be expected to have, individually or in the aggregate, a Pyramid
Material Adverse Effect.
(b) Pyramid owns or validly holds all licenses, franchises, permits,
approvals, authorizations, exemptions, classifications, certificates,
registrations and similar documents or instruments that are required for its
business and operations, except for those the failure of which to have has not
had or could not reasonably be expected to have, individually or in the
aggregate, a Pyramid Material Adverse Effect (the "Required Permits"). The
Required Permits are valid and in full force and effect and, except as disclosed
in Section 2.11(b) of the Xxxxxxxxxx
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Xxxxxxxx, xxxx of Seller, Parent or Pyramid has received any notice of any
inquiry or proceeding that could reasonably be expected to result in the
suspension, revocation or material limitation of any such permit. Pyramid is not
currently the subject of any supervision, conservation, rehabilitation,
liquidation, receivership, insolvency or other similar proceeding nor, other
than as described in Section 2.11(b) of the Disclosure Schedule, nor is it
operating under any agreement or understanding with the licensing authority of
any State which materially restricts its authority to do business as presently
contemplated.
(c) Section 2.11(c) of the Disclosure Schedule lists all active licenses
(including, without limitation, licenses and Certificates of Authority from
insurance regulatory authorities), permits or authorizations to transact the
business of insurance (the "Certificates of Authority," and each a "Certificate
of Authority"), and sets forth the lines of insurance which are permitted to be
written with respect to each such Certificate of Authority. Except as otherwise
described in Section 2.11(c) of the Disclosure Schedule, no Certificate of
Authority identified in such Schedule has been revoked, restricted, suspended,
limited or modified nor is any Certificate of Authority the subject of, nor to
the knowledge of Seller, Parent or Pyramid is there a reasonable basis for, a
proceeding for revocation, restriction, suspension, limitation or modification,
nor, to the knowledge of Seller, Parent or Pyramid, has any such proceeding been
threatened by any licensing authority, nor is Pyramid operating under any formal
or informal agreement or understanding with any insurance regulatory authority
which restricts its authority to do business or to take, or refrain from taking,
any action.
(d) Pyramid has previously delivered or made available to Purchaser true
and complete copies of the reports (or the most recent draft thereof, to the
extent any final report is not available) reflecting the results of the two most
recent financial examinations of Pyramid and market conduct examinations issued
since January 1, 2000 of Pyramid by any insurance regulator. Pyramid has taken
steps believed by Seller to be reasonable to respond to the issues raised in
such examinations.
SECTION 2.12 TAXES. Except as disclosed in Section 2.12 of the Disclosure
Schedule:
(a) Pyramid has: (i) timely filed or caused to be filed, or there has been
filed on its behalf, all Tax Returns (as hereinafter defined) required to be
filed by it or any Affiliated Group (as hereinafter defined) of which it is or
has been a member after July 26, 2002 for all fiscal periods ended before the
Closing Date, and all such returns are true, correct and complete in all
material respects and (ii) paid all Taxes (as hereinafter defined) due with
respect to the periods covered by such Tax Returns.
(b) There are no ongoing United States federal, state, local or foreign
audits or examinations of any Tax Return of Pyramid or any consolidated,
combined or unitary Tax Return in which Pyramid has joined.
(c) There are no outstanding written requests, agreements, consents or
waivers to extend the statutory period of limitations applicable to the
assessment of any Taxes or deficiencies against Pyramid or the filing of any
state or local Tax Return and no written notice
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of any Claim for Taxes, whether pending or threatened, has been received.
"Claim" means any actions, causes of action, suits, claims, complaints, demands,
litigations, or legal, administrative or arbitral proceedings or investigations.
(d) Pyramid is not a party to any agreement providing for the allocation
or sharing of Taxes and is not otherwise liable or obligated to indemnify any
Person with respect to any Taxes, other than the Tax Sharing Agreement, dated as
of July 26, 2000, by and among Pyramid and Seller and its Affiliates.
(e) There are no liens for Taxes upon the assets of Pyramid which are not
provided for in the SAP Financial Statements.
(f) Pyramid has recorded (or will record on or prior to the Closing Date)
on its books adequate charges, accruals and reserves for all Taxes payable by,
or in respect of, Pyramid, including on the SAP Financial Statements, the
Estimated Statement and the Final Statement, for any Pre-Closing Tax Period for
which no Tax Return has yet been filed or for which Taxes are not yet due and
owing. Pyramid has made (or there has been made on its behalf) all required
current estimated Tax payments sufficient to avoid any understatement penalties.
(g) The Seller has previously delivered to Purchaser true and complete
copies of (i) any audit reports issued in the five years prior to the date of
this Agreement relating to Taxes due from or with respect to Pyramid; and (ii)
all federal, state, local and foreign income or franchise Tax Returns of Pyramid
(or, in the case of Tax Returns filed for an Affiliated Group, the portion of
such Tax Returns relating to Pyramid) relating to the taxable periods ending in
1999, 2000 and 2001.
(h) Since July 26, 2000, no claim has been made by a Taxing Authority in a
jurisdiction where Pyramid does not file Tax Returns to the effect that Pyramid
is or may be subject to taxation by that jurisdiction.
(i) Since July 26, 2000, Pyramid is not subject to any private letter
ruling of the Internal Revenue Service or comparable rulings of other Taxing
Authorities.
(j) All Taxes that Pyramid has been or is required by Law to withhold or
to collect for payment have been duly withheld and collected, and have been paid
over to the appropriate Taxing Authority.
(k) Since July 26, 2000, neither Pyramid nor any other Person on behalf of
Pyramid has (i) agreed to, is required to make, or has any application pending
requesting permission for, any changes in accounting methods or adjustments
pursuant to Section 446(e), 481(a), 807(f) of the Code (or any predecessor
provision) or any similar provision of state, local or foreign Law, nor has any
knowledge that any Taxing Authority has proposed in writing any such change in
accounting method or an adjustment, (ii) executed or entered into a closing
agreement pursuant to Section 7121 of the Code (or any predecessor provision) or
any similar provision of state, local or foreign Law with respect to Pyramid,
(iii) filed a consent pursuant to Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as such term is defined in Section 341(f)(4) of the Code) owned by Pyramid, or
(iv)
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granted to any Person any power of attorney that is currently in force with
respect to any Tax matter relating to Pyramid.
(l) No property owned by Pyramid is (i) property required to be treated as
being owned by another person pursuant to the provisions of Section 168(f)(8) of
the Internal Revenue Code of 1954, as amended and in effect immediately prior to
the enactment of the Tax Reform Act of 1986, (ii) "tax-exempt use property"
within the meaning of Section 168(h)(1) of the Code, (iii) "tax-exempt bond
financed property" within the meaning of Section 168(g) of the Code, (iv)
subject to Section 168(g)(1)(A) of the Code; (v) "limited use property" within
the meaning of Rev. Proc. 76-30, or (vi) subject to any provision of state,
local or foreign Law comparable to any of the provisions listed above.
(m) There are no employment, severance or termination agreements, other
compensation arrangements or Employee Benefit Plans currently in effect which
provide for the payment of any amount (whether in cash or property or the
vesting of property) as a result of any of the transactions contemplated by this
Agreement that would give rise to a payment that is nondeductible by reason of
Section 280G or would be subject to withholding under Section 4999 of the Code.
(n) Since January 1, 1996, Pyramid is not, nor has it ever been, a member
of an Affiliated Group for federal, state, local or foreign tax purposes that
filed or was required to file an affiliated, consolidated, combined or unitary
Tax Return (other than an Affiliated Group, the common parent of which is either
Seller or Unitrin, Inc), or has any liability for the Taxes of any person under
Treasury Regulation Section 1.1502-6, 1.1502-78 or any comparable provision of
state, local, or foreign Law (other than in respect of such Taxes relating to an
Affiliated Group, the common parent of which is either Seller or Unitrin, Inc.).
(o) Pyramid has not constituted either a "distributing corporation" or a
"controlled corporation" (within the meaning of Section 355(a)(1)(A) of the
Code) in a distribution of stock qualifying for tax-free treatment under Section
355 of the Code in (i) the two years prior to the date of this Agreement or (ii)
a distribution which could otherwise constitute part of a "plan" or "series of
related transaction" (which the meaning of Section 355(e) of the Code) in
conjunction with the transactions contemplated by this Agreement.
(p) The Seller is a "United States Person" within the meaning of Section
7701(a)(30) of the Code.
(q) Since July 26, 2000, Pyramid has not participated in, or cooperated
with, an international boycott within the meaning of Section 999 of the Code.
(r) Since July 26, 2000, Pyramid neither has nor has had a permanent
establishment in any foreign country, or has engaged in a trade or business in
any foreign country that subjected it to Tax in such foreign country.
(s) Section 2.12(s) of the Disclosure Schedule accurately sets forth , as
of December 31, 2001, the amount of the shareholder surplus account and existing
policyholders surplus account (as defined in Section 815 of the Code).
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(t) Pyramid is and has been taxable as a life insurance company within the
meaning of Section 816 of the Code for the taxable period ending on or including
the Closing Date and for all prior taxable periods for which the statute of
limitations has not expired.
(u) All life insurance contracts issued by Pyramid (whether developed or
administered by or reinsured with any unrelated party) that are subject to
Section 7702 of the Code qualify as "life insurance contracts" within the
meaning of Section 7702(a) of the Code.
(v) All contracts issued by Pyramid (whether developed or administered by
or reinsured with any unrelated party) that are subject to Section 817 of the
Code and the Treasury Regulations promulgated thereunder have met the
diversification requirements applicable thereof since the issuance of the
contracts.
(w) All annuity contracts issued by Pyramid (whether developed or
administered by or reinsured with any unrelated party) that are subject to
Section 72(s) of the Code contain all of the necessary provisions of Section
72(s) of the Code.
(x) Since July 26, 2002, the Tax treatment under the Code of all insurance
or annuity policies, plans or contracts; all financial products, employee
benefit plans (other than the Benefit Plans), individual retirement accounts or
annuities; or any similar or related policy, contract, plan, or product, whether
individual, group, or otherwise, if any, issued or sold by Pyramid on or before
the Closing Date is and at all times has been in all material respects the same
as or more favorable to the purchaser, policyholder or intended beneficiaries
thereof than the Tax treatment under the Code for which such policies, plans or
contracts qualified or purported to qualify at the time of their issuance or
purchase, except for changes resulting from changes to the Code which do not
affect policies, plans or contracts due to the effective date thereof. For
purposes of this Section 2.12(x), the provisions of the Code relating to the Tax
treatment of such contracts shall include, but not limited to, Sections 72, 79,
101, 104, 105, 106, 125, 130, 264, 401, 403, 404, 408, 408A, 412, 415, 419,
419A, 457, 501, 505, 817, 818, 1035, 7702, 7702A and 7702B. Pyramid is and at
all times has been the owner for federal income Tax purposes of the assets in
any segregated asset account underlying or supporting each variable annuity
contract and each variable insurance policy.
(y) Any life insurance contracts issued by Pyramid (whether developed or
administered or reinsured with any unrelated party) which is a modified
endowment contract under Section 7702A of the Code (each, a "MEC") has been
marketed as such at all relevant times or the policyholder otherwise has
consented to such MEC status.
(z) Each reserve item with respect to Pyramid as set forth in the Tax
Returns for the taxable periods ended December 31, 2000 and December 31, 2001
was determined correctly in accordance with the requirements of Sections 807,
811 and 846 of the Code, and has been consistently and corrected applied with
respect to the filing of all Returns of or which include Pyramid for all taxable
years for which the applicable statute of limitations has not expired and will
be consistently and correctly applied with respect to Pyramid in the 2002
Returns when such Returns are filed.
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(aa) All annuity contracts issued by Pyramid (whether developed or
administered by or reinsured with any unrelated party) that are provided under
or connected with a plan described in Section 401(a), 403(a) or 403(b) of the
Code or that is an individual retirement annuity or provided under an individual
retirement account or annuity, satisfies the federal income Tax laws applicable
to such annuity contract.
(bb) There are no currently pending or, to the knowledge of Seller,
threatened federal, state, provincial, local or foreign audits or other
administrative or judicial proceedings with regard to the Tax treatment of any
policy, contract, product or plan sold, issued or administered by Pyramid
(whether developed by or reinsured with any unrelated third party).
(cc) Pyramid is not a party to any hold harmless, sharing, allocation or
indemnification agreement with respect to the Tax qualification or treatment of
any policy, contract, product or plan sold, issued or administered by any
insurance company (whether developed by or reinsured with any unrelated third
party).
(dd) Pyramid is a calendar-year taxpayer for federal income Tax purposes.
(ee) To Seller's knowledge, Schedule 2.12(ee) of the Disclosure Schedule
accurately sets forth any and all Tax Returns of or which include Pyramid (i)
for which the Seller is responsible for the preparation and filing thereof and
(ii) for which the Purchaser is responsible for the preparation and filing
thereof pursuant to Section 4.3(a) of this Agreement
(ff) For purposes of this Section 2.12 and Section 4.3, unless otherwise
provided, the following terms are defined as set forth below.
"Affiliated Group" means any affiliated group within the meaning of Section
1504 of the Code or any comparable or analogous group under state, local or
foreign Law.
"Code" means the United States Internal Revenue Code of 1986, as amended.
(gg) "Tax" or "Taxes" shall mean (i) any and all taxes, charges, fees,
levies or other assessments, including, without limitation, those on or measured
by gross income, net income, gross receipts, premium, privilege, excise,
estimated, real or personal property, sales, withholding, employment,
unemployment, social security, occupation, use, service, service use, value
added, license, net worth, payroll, franchise, transfer and recording taxes,
fees and charges, imposed by the United States Internal Revenue Service or any
taxing authority (including, without limitation, any state or local government
or any subdivision or taxing agency thereof), whether computed on a separate,
consolidated, unitary, combined or any other basis; and such term shall include
any interest, fines, penalties or additional amounts attributable to, or imposed
upon, or with respect to, any such taxes, charges, fees, levies or other
assessments and (ii) any liability for the payment of any amount of the type
described in the immediately preceding clause as a result of Pyramid being a
member of an affiliated, consolidated, combined or unitary group with any other
corporation at any time on or prior to the Closing Date or by reason of being
transferee or successor. "Tax Return" shall mean any report, return, document,
declaration or other information or filing required to be supplied to any taxing
authority or jurisdiction
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(foreign or domestic) with respect to Taxes. "Taxing Authority" shall mean any
governmental authority (domestic or foreign) responsible for the imposition of
Tax.
(hh) For purposes of this Section any reference to Pyramid shall be deemed
to include any Person which merged with or was liquidated into Pyramid or any
other predecessor thereof.
SECTION 2.13 INTELLECTUAL PROPERTY. Pyramid did not and does not utilize
any patent, trademark, tradename, service xxxx, copyright, trade secret,
know-how, or software material to Pyramid's operations as currently conducted
except for those listed on Section 2.13 of the Disclosure Schedule (the "Pyramid
Intellectual Property"), all of which are either owned or properly licensed by
Pyramid and, in the case of Pyramid Intellectual Property owned by Pyramid, such
ownership is free and clear of any and all Encumbrances. To the knowledge of
Seller and Pyramid, Pyramid does not infringe upon or unlawfully or wrongfully
use any patent, trademark, tradename, service xxxx, copyright or trade secret
owned or claimed by another. Pyramid is not in default under, and has not
received any notice of any claim of infringement or any other Claim or
proceeding relating to any such patent, trademark, tradename, service xxxx,
copyright, or trade secret. To the knowledge of Seller and Pyramid, no present
or former employee of Pyramid and no other Person owns or has any proprietary,
financial or other interest, direct or indirect, in whole or in part, in any
patent, trademark, tradename, service xxxx or copyright, or in any application
therefor, or in any trade secret, which Pyramid owns, possesses or uses in its
operations as now or heretofore conducted. Section 2.13 of the Disclosure
Schedule lists all material confidentiality or non-disclosure agreements to
which Pyramid or any of Pyramid's employees is a party that relates to the
business or operations of Pyramid. Pyramid has such ownership of or such rights
by license, lease or other agreement to the Pyramid Intellectual Property as is
necessary to permit it to conduct its business as currently conducted, except
where the failure to have such rights could not reasonably be expected to have,
individually or in the aggregate, a Pyramid Material Adverse Effect.
Notwithstanding the foregoing, no representation or warranty is made under this
Section 2.13 with respect to software or agreements included in the Assets or
any intellectual property relating thereto.
SECTION 2.14 CONTRACTS. Seller has delivered or made available to Purchaser
copies of all written Material Agreements (as hereinafter defined). Each
Material Agreement is in full force and effect and, to the knowledge of Seller
and Pyramid, is valid and enforceable by Pyramid in accordance with its terms.
All Material Agreements as of the date hereof are listed in Section 2.14 of the
Disclosure Schedule. Pyramid is not in default in the observance or the
performance of any term or obligation to be performed by it under any Material
Agreement except for such defaults the effect of which could not reasonably be
expected to have, individually or in the aggregate, a Pyramid Material Adverse
Effect. To the knowledge of Seller, Parent and Pyramid, no other Person is in
default in the observance or the performance of any term or obligation to be
performed by it under any Material Agreement except for such defaults the effect
of which could not reasonably be expected to have, individually or in the
aggregate, a Pyramid Material Adverse Effect. As used in this Agreement,
"Material Agreement" shall mean each agreement, arrangement, instrument, bond,
commitment, franchise, indemnity, indenture, lease, license or understanding to
which Pyramid is a party or to which any of its properties is subject, that: (i)
obligates Pyramid to pay an amount in excess of $75,000 in any twelve-month
period beginning after December 31, 2001; (ii) provides for the extension of
credit by or to Pyramid in excess of $75,000; (iii) provides for a guaranty by
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Pyramid of obligations of others in excess of $75,000; (iv) constitutes an
employment agreement, severance agreement or personal service contract not
terminable on less than sixty (60) days' notice without penalty; (v) constitutes
a reinsurance agreement or treaty under which Pyramid is a reinsured or is the
reinsurer; (vi) involves a compensation agreement with an insurance producer of
the type described in Section 2.17 that contains deviations from the standard
form disclosed in Section 2.17(a) of the Disclosure Schedule; or (vii) expressly
limits, in any material respect, the ability of Pyramid to engage in any line of
business, compete with any Person or expand the nature or geographic scope of
its business. Notwithstanding the foregoing, the term "Material Agreement" does
not include insurance policies issued by, or agreements with insurance agents
and brokers entered into by, Pyramid in the ordinary course of business (other
than the agreements referred to in clause (vi) above) or any agreements being
transferred to, and assumed by Seller or its affiliates, pursuant to Section
1.2. Except as set forth in Section 2.14 of the Disclosure Schedule, no consent
is required under any Material Agreement in connection with the consummation of
the transactions contemplated by this Agreement. Notwithstanding the foregoing,
no representation or warranty is made under this Section 2.14 with respect to
any agreements included in the Assets.
SECTION 2.15 LABOR MATTERS.
(a) Pyramid is not a party to, or bound by, any labor or collective
bargaining agreement and no employees of Ceres Administrators primarily involved
in the Pyramid business are represented by any labor organization. Within the
preceding two years, there have been no representation or certification
proceedings, or petitions seeking a representation proceeding, pending or, to
the knowledge of Seller, Parent and Pyramid, threatened in writing to be brought
or filed with the National Labor Relations Board or any other labor relations
tribunal or authority with respect to the Employees.
(b) There are no strikes, work stoppages, slowdowns, lockouts, material
arbitrations or material grievances or other material labor disputes pending or
threatened in writing against Pyramid. There are no unfair labor practice
charges, grievances or complaints pending, or to the knowledge of Seller, Parent
or Pyramid, threatened in writing against Pyramid.
(c) There has been no "mass layoff" or "plant closing" as defined by the
Worker Adjustment Retraining Notification Act ("WARN") with respect to the
Employees within the six (6) months prior to Closing.
SECTION 2.16 RESERVES. All insurance reserves reflected in the SAP
Financial Statements have been computed in all material respects in accordance
with SAP and in accordance with sound actuarial practices, consistently applied;
it being understood that the foregoing representation relates to the practices
used in computing reserves and does not and is not intended to constitute in any
way a representation, warranty or guaranty as to the ultimate adequacy or
sufficiency of the insurance reserves of Pyramid.
SECTION 2.17 INSURANCE PRODUCERS.
(a) Section 2.17(a) of the Disclosure Schedule sets forth a summary
description of the standard form compensation arrangements in place on the date
of this Agreement with classes of
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Pyramid's insurance agents, managers, brokers and other producers. Seller has
provided to Purchaser copies of each standard form of agreement referred to in
such summary description.
(b) Except as set forth in Section 2.17(b) of the Disclosure Schedule,
Pyramid (exclusive of its independent agents) and, to the knowledge of Seller,
Parent and Pyramid, Pyramid's independent agents, have marketed, sold and issued
products of Pyramid in compliance with the insurance laws applicable to the
business of Pyramid in the respective jurisdictions in which such products have
been sold other than such failures to comply that could not reasonably be
expected to have, individually or in the aggregate, a Pyramid Material Adverse
Effect. Except as set forth in Section 2.17(b) of the Disclosure Schedule,
Pyramid has not received written notice as of the date of this Agreement of any
review or investigation from any Governmental Entity of any marketing conduct
and/or selling practices of Pyramid or its independent agents, other than
periodic market conduct examinations arising in the ordinary course of business
and Attorney General inquiries under such insurance laws arising in the ordinary
course of business, and such other reviews or investigations which could not
reasonably be expected to have, individually or in the aggregate, a Pyramid
Material Adverse Effect.
(c) Pyramid is not in default in the observance or performance of any term
or obligation to be performed under its agency agreements except for such
defaults the effect of which could not reasonably be expected to have,
individually or in the aggregate, a Pyramid Material Adverse Effect. To the
knowledge of Seller, Parent and Pyramid, no agent is in default in the
observance of any term or obligation to be performed under the relevant agency
agreement with Pyramid (other than ordinary course of business defaults in
obligation with respect to normal commission advances), except for such defaults
the effect of which could not reasonably be expected to have, individually or in
the aggregate, a Pyramid Material Adverse Effect. Except as set forth in Section
2.17(c) of the Disclosure Schedule, to the knowledge of Seller, Parent and
Pyramid no agent of Pyramid has asserted any material Claim against Pyramid for
any compensation or other amounts (the "Agent Compensation") (other than sales
commissions and advances in the ordinary course of business).
SECTION 2.18 BOOKS AND RECORDS. Copies of all the minute books and stock
record books have been delivered or made available to Purchaser for inspection
and contain accurate records of all meetings of, and written consents by, the
boards of directors (and any committees thereof) and shareholders of Pyramid
from July 26, 2000 to the date hereof.
SECTION 2.19 RELATED PARTY TRANSACTIONS. Section 2.19 of the Disclosure
Schedule lists all contracts, agreements, obligations, commitments and
liabilities between or among Pyramid and or/any of its affiliates, other than
the agreements contemplated to be entered into in connection with this
Agreement.
SECTION 2.20 BROKERS OR FINDERS. None of Seller, Parent or Pyramid has
retained or engaged any agent, broker, finder, investment banker, financial
advisor or other similar firm or Person in connection with any of the
transactions contemplated by this Agreement; provided, that Parent has entered
into agreements with Xxxxxxx, Xxxxxxx & Co. and Xxxxxxxx Xxxxxxxx Xxxxxx & Co.,
Inc. in connection with the transactions contemplated by this Agreement and
these fees and expenses will be paid by Seller or Parent in accordance with
Parent's agreements with such firms. The Board of Directors of Parent has
received a financial
- 17 -
advisor opinion that the consideration to be received for the sale of the Shares
is fair, from a financial point of view, to Parent.
SECTION 2.21 INSURANCE; REINSURANCE; CLAIMS AND SERVICE AGREEMENTS.
(a) Section 2.21(a) of the Disclosure Schedule contains a complete and
correct list of all types of insurance policy products issued by Pyramid on or
after January 1, 1998 and currently in force or currently issuable by Pyramid.
Seller has made or will make available to Purchaser complete and correct copies
of all forms of insurance policy products material to Pyramid's current
operations together with all forms of endorsements used in connection with such
forms.
(b) Section 2.21(b) of the Disclosure Schedule contains a complete and
correct list of all reinsurance agreements to which Pyramid is a party. Copies
of all such reinsurance agreements have been or will be made available to
Purchaser.
(c) Section 2.21(c) of the Disclosure Schedule contains a complete
and correct list of all claims and service administration agreements to which
Pyramid is a party. Copies of all such claims and service administration
agreements have been or will be made available to Purchaser.
(d) No default of or breach by Pyramid or, to the knowledge of Seller,
Parent and Pyramid, by any other party under any such reinsurance agreement or
claims and service administration agreement has occurred and, to the knowledge
of Seller, Parent and Pyramid, no basis currently exists for the declaration of
any default or termination right thereunder, except for agreements that, prior
to the Closing Date, have or will have expired by their terms or have been
terminated in accordance with this Agreement, and, to the knowledge of Seller,
Parent and Pyramid, each party to such reinsurance agreement was, at the date
each reinsurance agreement was executed and delivered, and is currently solvent
and financially capable of fulfilling its obligation thereunder. Pyramid has not
received any written notice that any such reinsurer will not pay, or has a valid
defense to the payment of, any of its material payments under any such
reinsurance agreement.
(e) Pyramid has not written any insurance policy or coverage that does not
comply in all material respects with any terms and conditions set forth for such
insurance in the reinsurance agreement or agreements, if any, pursuant to which
such policy or coverage is reinsured.
SECTION 2.22 ENVIRONMENTAL MATTERS. Except as disclosed in Section 2.22 of
the Disclosure Schedule, Pyramid has conducted and is conducting its business in
compliance in all material respects with all applicable United States federal,
state and local laws, regulations and requirements currently in force relating
to the protection of the environment ("Environmental Laws") and there is no
pending, or to the knowledge of Seller, Parent and Pyramid, threatened, civil or
criminal litigation, written notice of violation, or administrative proceeding
relating to such Environmental Laws involving Pyramid which could reasonably be
expected to have, individually or in the aggregate, a Pyramid Material Adverse
Effect. There is no condition existing with respect to the release, emission,
discharge or presence of hazardous substances in connection with the business of
Pyramid or any of the properties currently or
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previously owned by Pyramid which could reasonably be expected to have,
individually or in the aggregate, a Pyramid Material Adverse Effect. Pyramid has
received all approvals, consents, licenses, and permits with respect to
environmental matters necessary to carry on its business substantially as
currently conducted, other than any such approvals, consents, licenses or
permits the failure of which to receive could not reasonably be expected to
have, individually or in the aggregate, a Pyramid Material Adverse Effect.
SECTION 2.23 INSURANCE COVERAGE. Section 2.23 of the Disclosure Schedule
summarizes the amount and scope of the insurance in force on the date hereof as
to which Pyramid is a named insured insuring it against loss or liability. To
the knowledge of Seller, Parent and Pyramid, no notice of cancellation or
termination of any such insurance policy has been given and such insurance
policies are in full force and effect in each case as of the date hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser and Universal, jointly and severally, represent and warrant to
Seller, at and as of the date hereof and again at and as of the Closing Date, as
follows:
SECTION 3.1 ORGANIZATION. Each of Purchaser and Universal is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
SECTION 3.2 AUTHORIZATION; VALIDITY OF AGREEMENT; NECESSARY ACTION.
Purchaser and Universal have full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution, delivery and performance by Purchaser and Universal of this
Agreement, and the consummation of the transactions contemplated hereby by each
of them, have been duly authorized by all necessary corporate proceedings, and
no other corporate action on the part of Purchaser or Universal or their
respective shareholders is necessary to authorize the execution and delivery by
Purchaser or Universal of this Agreement and the consummation by either of them
of the transactions contemplated hereby. This Agreement has been duly executed
and delivered by Purchaser and Universal (and assuming due and valid
authorization, execution and delivery hereof by Seller and Parent) is a valid
and binding obligation of Purchaser and Universal enforceable against Purchaser
and Universal in accordance with its terms, except that: (i) such enforcement
may be subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws, now or hereafter in effect, affecting creditors' rights
generally, and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
SECTION 3.3 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for: (a) filings
pursuant to the HSR Act, (b) approvals or consents of Governmental Entities
under insurance holding company laws of the State of Kansas, (c) filings of such
pre-acquisition notifications as may be required in certain states, and (d)
matters specifically described in the written schedule delivered by Purchaser to
Seller at or prior to the execution of this Agreement
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and attached hereto (the "Purchaser's Consent Schedule"), neither the execution,
delivery or performance of this Agreement by Purchaser or Universal nor the
consummation by Purchaser or Universal of the transactions contemplated hereby
will require on the part of Purchaser or Universal any filing or registration
with, notification to, or authorization, consent or approval of, any
Governmental Entity. Except as described in Purchaser's Consent Schedule,
neither the execution, delivery or performance of this Agreement by Purchaser or
Universal nor the consummation by Purchaser or Universal of the transactions
contemplated hereby will: (i) violate any provision of the charter or by-laws of
Purchaser or Universal; (ii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation that is material to
Purchaser or Universal and to which Purchaser or Universal is a party or by
which its properties or assets may be bound; (iii) violate any order, writ,
judgment, injunction, decree, law, statute, rule or regulation applicable to
Purchaser or Universal or any of its properties or assets; or (iv) except in the
case of clauses (ii) and (iii) for such violations, breaches or defaults which,
or filings, registrations, notifications, authorizations, consents or approvals
the failure of which to obtain which could not reasonably be expect to have,
individually or in the aggregate, a material adverse affect on the ability of
Purchaser or Universal to perform their respective obligations under this
Agreement.
SECTION 3.4 ACQUISITION FOR INVESTMENT. Purchaser is acquiring the Shares
solely for its own account and not with a view to any distribution or other
disposition of such Shares, and the Shares will not be transferred except in a
transaction registered or exempt from registration under the Securities Act of
1933, as amended.
SECTION 3.5 FINANCING. On the Closing Date, Purchaser and Universal will
have sufficient funds and credit facilities available to them to finance the
purchase of the Shares as contemplated by this Agreement, subject to the
satisfaction of the closing conditions specified in Sections 6.1 and 6.2.
SECTION 3.6 BROKERS OR FINDERS. None of Purchaser, Universal or any of
their affiliates has retained or engaged any agent, broker, finder, investment
banker, financial advisor or other similar firm or Person in connection with any
of the transactions contemplated by this Agreement; PROVIDED, that Universal has
entered into agreements with Banc of America Securities LLC and Xxxxxxx Xxxxx
and Associates, Inc. in connection with the transactions contemplated by this
Agreement and those fees and expenses will be paid by Universal in accordance
with its agreement with such firm. A special committee of the Board of Directors
of Universal has received an opinion from Xxxxxxx Xxxxx and Associates, Inc.
that the consideration to be paid by Purchaser and Universal pursuant to this
Agreement is fair to Universal from a financial point of view.
SECTION 3.7 EXCLUSIVITY OF SELLER'S AND PARENT'S REPRESENTATIONS. In
entering into this Agreement, each of Purchaser and Universal acknowledges and
agrees that: (i) Seller and Parent make no representations or warranties
relating in any way to Pyramid or the Shares except as specifically set forth in
Article II and the related Disclosure Schedule and none of Seller, Parent,
Pyramid or any of their affiliates, or any persons acting on their behalf, have
made or are authorized to make any other representations or
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warranties; and (ii) none of Seller, Parent, Pyramid or any of their affiliates
shall be liable to Purchaser or Universal in contract, tort or otherwise for any
information supplied to Purchaser or Universal or any statements made to
Purchaser or Universal except for information or statements contained in Article
II and the Disclosure Schedule subject, in each case, to the limitations and
requirements for indemnification contained in this Agreement.
ARTICLE IV
COVENANTS
SECTION 4.1 INTERIM OPERATIONS OF PYRAMID. Seller covenants and agrees
that, except: (i) as contemplated by this Agreement, (ii) as disclosed in the
Disclosure Schedule, or (iii) with the prior written consent of Purchaser
(which, in the case of subsections (j), (k), (l) and in the case of subsection
(n), to the extent it relates to subsection (j), (k), or (l)(i) and does not
relate to a reinsurance agreement, may not be unreasonably withheld, delayed or
conditioned, and it being understood that in connection with any request for a
consent with respect to any subsection of this Section 4.1, Seller will provide
Purchaser with information in reasonable detail and with reasonable advance
notice with respect to the matters relating to such request), after the date
hereof and prior to the Closing Date:
(a) the business of Pyramid shall be conducted only in the ordinary and
usual course;
(b) Pyramid will not amend its articles of incorporation or by-laws;
(c) Pyramid will not: (i) split, combine or re-classify the Shares; (ii)
declare, set aside or pay any dividend or other distribution payable in cash,
stock or property with respect to the Shares; (iii) issue or sell any additional
shares of, or securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, the Shares; or
(iv) redeem, purchase or otherwise acquire directly or indirectly any of its
capital stock;
(d) Pyramid will not: (i) adopt any new employee benefit plan (including
any stock option, stock benefit or stock purchase plan) or amend in any material
respect any existing employee benefit plan sponsored by it, except as may be
required by applicable law, or (ii) with respect to the Pyramid employees
referred to in Schedule 4.4 hereto, increase any compensation, award or pay any
bonuses or enter into or amend any employment, severance, termination or similar
agreement with any of its present or future officers, directors or employees,
except for normal compensation increases in the ordinary and usual course of
business and the payment of cash bonuses to employees pursuant to and consistent
with existing plans or practices;
(e) except as may be required or contemplated by this Agreement or in the
ordinary and usual course of business, Pyramid will not acquire, sell, lease or
dispose of any assets which in the aggregate are material to Pyramid;
(f) Pyramid will not: (i) incur or assume any long-term or short-term debt
or issue any debt securities; (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the material obligations of any other Person except in the ordinary and usual
course of business consistent with past practice in an amount not material to
Pyramid; (iii) make any material loans, advances or capital contributions to, or
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investments in, any other Person other than in the ordinary and usual course of
business consistent with past practice; (iv) pledge or otherwise encumber the
Shares; or (v) mortgage or pledge any of its material assets, tangible or
intangible, or create any material Encumbrance of any kind with respect to any
such asset (other than the pledge of securities, instruments or accounts with
respect to the ordinary course of investment activities);
(g) Pyramid will not: (i) acquire (by merger, consolidation or acquisition
of stock or assets) any corporation, partnership or other business organization
or any material assets thereof or any equity interest therein (other than
purchases of marketable securities in the ordinary course of business); (ii)
enter into any partnership, joint venture or similar business arrangement (other
than purchases of marketable securities in the ordinary course of business);
(iii) authorize or make any new capital expenditures in excess of $50,000 in the
aggregate except for those capital expenditures already planned or committed to
on the date of this Agreement and which are listed in Section 4.1(g) of the
Disclosure Agreement; or (iv) enter into or amend any contract, agreement,
commitment or arrangement providing for the taking of any action which would be
prohibited hereunder;
(h) Pyramid will not adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such liquidation or a dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization;
(i) Pyramid will not materially change its tax or financial accounting
principles or methods used by it unless required by GAAP (as hereinafter
defined), SAP or applicable law;
(j) except in the ordinary course consistent with past practices, Pyramid
will not sell, transfer or otherwise dispose of any investment securities in its
investment portfolios;
(k) Pyramid will not make or change any Tax election, seek any ruling or
determination from any Taxing Authority or file any amended tax return or settle
or compromise any Claim relating to Taxes;
(l) Pyramid will not enter into or amend the terms of or terminate any (i)
Material Agreement (other than an extension of the terms, or termination in
accordance with the scheduled termination, of such Material Agreement) or (ii)
contracts, agreements or arrangements with any affiliate, other than as
specifically contemplated by this Agreement;
(m) except for the settlement in the ordinary course of its business of
claims made under insurance policies issued or assumed by Pyramid, Pyramid will
not settle or compromise any claim or litigation, which after insurance
reimbursement is material to Pyramid, without the prior written consent of
Purchaser, which consent will not be unreasonably withheld;
(n) Pyramid will not amend its standard forms of agency agreements or make
any widespread changes in its existing agent agreements;
(o) Pyramid will not materially change its underwriting or actuarial
methods;
(p) neither Seller nor Pyramid will authorize or enter into an agreement to
do any of the foregoing; and
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(q) Seller shall use, and shall cause Pyramid to use, all commercially
reasonable efforts to preserve intact the present business organization
(including its agency force generally), reputation, and policyholder relations
of Pyramid.
SECTION 4.2 DUE DILIGENCE; ACCESS TO INFORMATION.
(a) Each of Purchaser and Universal acknowledges that it has performed a
due diligence review of Pyramid based on documents and other information
supplied by or on behalf of Seller, Parent or Pyramid. Without limiting the
generality of the foregoing, Purchaser and Universal acknowledge that it: (i)
has been afforded reasonable access to the books, records, personnel, facilities
and other things reasonably related to the Shares and the business and affairs
of Pyramid; and (ii) has been given a reasonable opportunity to ask questions
relating to the Shares and the business and affairs of Pyramid and to receive
answers thereto. Each of Purchaser and Universal will hold any such information
and all information it receives pursuant to Section 4.2(b) which is nonpublic in
confidence in accordance with the provisions of the Non-Disclosure and
Confidentiality Agreement between Parent and Universal, as amended (the
"Confidentiality Agreement"). It is understood that the diligence review
conducted by Purchaser and Universal shall not constitute a waiver of or affect
their rights to seek relief under this Agreement.
(b) Between the date hereof and the Closing Date, Seller shall cause
Pyramid to give to Purchaser and its counsel, accountants and other authorized
representatives and agents, full access, during regular business hours and upon
reasonable advance notice, to Pyramid's premises, properties, contracts, books
and records, and will cause Pyramid's officers and employees to furnish to
Purchaser and its representatives, except where prohibited by law, any data and
information pertaining, directly or indirectly, to Pyramid that Purchaser shall
from time to time reasonably request, and shall permit Purchaser and its
representatives to make extracts and copies thereof. Purchaser shall not
exercise its rights under this Section 4.2 in such a manner as to unreasonably
interfere with the ordinary operations of Pyramid.
SECTION 4.3 TAX MATTERS.
(a) Tax Returns. Seller shall prepare and file, or cause to be prepared and
filed, on a timely basis and in a manner consistent with prior returns, all Tax
Returns (and any amendments thereto) of or which include Pyramid for taxable
periods ending on or before the Closing Date. The Seller shall remit (or cause
to be remitted) any Taxes due with respect to such Returns. Purchaser shall
prepare and file, or cause Pyramid to prepare and file, all Tax Returns (and any
amendments thereto) for taxable periods ending after the Closing Date. Seller
shall pay to Purchaser an amount equal to the Taxes for which Seller is liable
pursuant to Section 4.3(d) but which are payable with Tax Returns to be filed by
Purchaser at least 10 days prior to the earlier of (i) the date of filing of
such Tax Return or (ii) the due date for the payment of Taxes with respect to
which such Tax Return is filed.
(b) All transfer, documentary, sales, use, stamp, registration and other
such Taxes and fees (including any penalties and interest) incurred in
connection with transactions contemplated by this Agreement ("Transactional
Taxes") shall be split equally between the Seller and the Buyer to the extent of
$10,000 but shall be borne entirely by Seller to the extent they exceed
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$10,000. The Seller and Buyer shall provide each other with appropriate
exemption certificates or direct pay certificates where possible, in the event
that either the Seller or the Buyer shall pay any Transactional Taxes in excess
of their share. The Seller or the Buyer shall reimburse the other party, no
later than five (5) days from receipt by Seller or the Buyer, as the case may
be, of notice of such payment, for any Transactional Taxes paid by the other
party that should have been for the account of such party.
(c) Tax Sharing. Any and all existing tax sharing agreements between
Pyramid and any other Person, including any member of the Seller Group (as
hereinafter defined) shall be terminated as of the Closing Date. After such date
Pyramid, Seller and any affiliate of the Seller shall have no further rights or
liabilities thereunder. This Agreement shall be the sole Tax Sharing Agreement
relating to Pyramid and any other Person for all taxable periods ending on,
prior to or which include the Closing Date.
(d) Parent and Seller Indemnification. Parent and Seller shall be liable
for, and shall indemnify and hold Purchaser and/or Pyramid and its respective
officers, directors, agents and affiliates harmless from and in respect of any
and all Losses (as hereinafter defined) in respect of (i) any and all Taxes of
Pyramid payable for any taxable year or taxable period ending on or before the
Closing Date and, in the case of a Straddle Period (as hereinafter defined), the
portion of such Taxes that relates to the period ending on or before the Closing
Date, but only to the extent such Taxes exceed the amount of Taxes recorded on
the Final Statement as agreed to by the Purchaser or as determined by the Tax
Accounting Firm, as the case may be; (ii) any and all Taxes imposed on Pyramid
by reason of the liability of Pyramid pursuant to Treasury Regulations Sections
1.1502-6, 1.1502-78 (or any predecessor or successor thereof) or any analogous
or similar provision under state, local or foreign Law; (iii) any tax sharing
agreement in effect on or prior to the Closing Date; (iv) any and all
Transactional Taxes for which Seller is responsible under Section 4.3(b); (v)
any Tax of Pyramid by reason of being a successor in interest or transferee of
another entity; and (vi) any Taxes that may arise as a result of the sale of
Assets or the entering into of the Reinsurance Agreement as contemplated in
Sections 1.2 or 4.14(c) of this Agreement. To appropriately apportion any income
Taxes relating to any Straddle Period, the parties hereto shall apportion such
income Taxes to the taxable period ending on or before the Closing Date by a
closing of Pyramid's books at the close of business on the Closing Date, except
that exemptions, allowances or deductions that are calculated on a time basis,
such as the deduction for depreciation, shall be apportioned on a time basis and
(ii) all income Taxes relating to actions outside the ordinary course of
business after the Closing on the Closing Date shall be apportioned to the
period ending after the Closing Date. To appropriately apportion any non-income
taxes relating to any Straddle Period, the parties hereto shall apportion such
non-income taxes to the taxable period ending on or before the Closing Date as
follows: (w) premium taxes shall be accrued based on statutory premium recorded
in the SAP books and records of Pyramid, (x) AD VALOREM Taxes (including,
without limitation, real and personal property taxes) shall be accrued on a
monthly basis over the period for which such Taxes are levied, or if it cannot
be determined over the period such Taxes are being levied, over the fiscal
period of the relevant Taxing Authority, in each case irrespective of the lien
or assessment date of such Taxes, (y) all Taxes relating to actions outside the
ordinary course of business after the Closing on the Closing Date shall be
apportioned to the period ending after the Closing Date, and (z) franchise and
other privilege Taxes not measured by income shall be accrued on a monthly basis
over the period to which the privilege relates.
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(e) Purchaser Indemnification. Except as otherwise provided in (a) above,
the Purchaser and Pyramid shall be liable for, and shall indemnify and hold
Seller and its affiliates and their respective officers, directors and agents
harmless against (i) any and all Taxes imposed on Pyramid relating or
apportioned to any taxable year or portion thereof ending after the Closing
Date, (ii) any and all Transactional Taxes for which Buyer is responsible under
Section 4.3(b) and (iii) any Tax arising from any election by the Buyer or the
Buyer's affiliates under Section 338 of the Code (or any similar provision of
state, local or foreign Law) with respect to the transactions contemplated by
this Agreement.
(f) Refunds or Credits. Purchaser or Pyramid shall promptly pay to Seller
any refunds or credits (including interest thereon) relating to Taxes for
taxable periods ending on or prior to the Closing Date net of any Taxes payable
with respect thereto, but only to the extent any such refund or credit exceeds
the amount of Taxes that have been recorded on the Final Statement as agreed to
by the Purchaser or as determined by the Tax Accounting Firm, as the case may
be. For purposes of this Section (f), the terms "refund" and "credit" shall
include a reduction in Taxes and the use of an overpayment of Taxes as an audit
or other Tax offset. Receipt of a refund shall occur upon the filing of a return
or an adjustment thereto using such reduction, overpayment or offset, or upon
the receipt of cash. Upon the reasonable request of Seller, Purchaser shall
prepare and file, or cause to be prepared and filed, all claims for refunds
relating to such Taxes; PROVIDED, HOWEVER, that any claim for refund shall be
prepared and filed in a manner consistent with past practice and Tax Return
filings of Pyramid; and, PROVIDED, FURTHER, that Purchaser shall not be required
to file such claims for refund to the extent such claims for refund could
reasonably be expected to have, individually or in the aggregate, a Pyramid
Material Adverse Effect in future periods or to the extent the claims for refund
relate to a carryback of an item. Purchaser shall be entitled to all other
refunds and credits of Taxes; PROVIDED, HOWEVER, it will not allow the amendment
of any Tax Return relating to any Taxes for a period (or portion thereof) ending
on or prior to the Closing Date or the carryback of an item to a period ending
prior to Closing without Seller's prior written consent.
(g) Mutual Cooperation. As soon as practicable, but in any event within 30
days after either Seller's or Purchaser's request, as the case may be, Purchaser
shall deliver to Seller or Seller shall deliver to Purchaser, as the case may
be, such information and other data relating to the Tax Returns and Taxes of
Pyramid and shall provide such other assistance as may reasonably be requested,
to cause the completion and filing of all Tax Returns or to respond to audits by
any Taxing Authorities with respect to any Tax Returns or taxable periods or to
otherwise enable Seller, Purchaser or Pyramid to satisfy their accounting or Tax
requirements. From and after the Closing until the applicable statute of
limitations has expired, Purchaser and Seller shall, and shall cause their
affiliates to, maintain and make available to the other party, on such other
party's reasonable request, copies of any and all information, books and records
referred to in this Section 4.3(g). After the applicable statute of limitations
has expired (taking into account any agreements with any Taxing Authorities to
extend said period), Purchaser or Seller may dispose of such information, books
and records, provided that prior to such disposition, Purchaser or Seller shall
give the other party prior written notice of its intent to dispose and the
opportunity to take possession of such information, books and records. If Seller
is responsible for filing an income Tax Return that requires the signature of an
officer of Pyramid, Seller shall present a completed version of such return for
the signature of the officer and shall supply any support for
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such return the officer may reasonably request. Such officer shall sign the
return and deliver it to Seller not later than five (5) days after Seller's
delivery to such officer of the completed return and any requested support for
such return.
(h) Contests. Whenever any Taxing Authority asserts a Claim, makes an
assessment, or otherwise disputes the amount of Taxes for which Seller is or may
be liable under this Agreement, Purchaser shall, if informed of such an
assertion, promptly inform Seller, and Seller shall have the right to control
any resulting proceedings (at its sole expense) and to determine whether and
when to settle any such Claim, assessment or dispute to the extent such
proceedings or determinations affect the amount of Taxes for which Seller may be
liable under the Agreement, PROVIDED, HOWEVER, should a settlement increase or
could be reasonably expected to increase the amount of Taxes owed by Pyramid or
its affiliates for taxable periods ending after the Closing Date or for which
Purchaser is liable under this Agreement, then Seller must receive the consent
of Purchaser prior to consummating any such settlement, which consent shall not
be unreasonably withheld. Whenever any Taxing Authority asserts a Claim, makes
an assessment or otherwise disputes the amount of Taxes for which Purchaser is
liable under this Agreement, Purchaser shall have the right to control any
resulting proceedings and to determine whether and when to settle any such
Claim, assessment or dispute, PROVIDED, HOWEVER, should a settlement increase or
could be reasonably expected to increase the amount of Taxes for which Seller is
liable under this Agreement, then Purchaser must receive the consent of Seller
prior to consummating any such settlement, which consent shall not be
unreasonably withheld, conditioned or delayed.
(i) Resolution of Disagreements Between Seller and Purchaser. If either
Seller or Purchaser disagrees as to the amount of Taxes for which it may be
liable under this Agreement, it shall promptly consult the other party to
resolve such dispute. If any such point of disagreement cannot be resolved
within 60 days of the date of the initial consultation, Seller and Purchaser
shall within 10 days after such 60-day period jointly select a nationally
recognized independent public accounting firm other than KPMG LLP, Ernst & Young
or any other such firm then serving as the principal auditing firm for either
Seller or Purchaser (the "Tax Accounting Firm"), to act as an arbitrator to
resolve, within 60 days after its selection, all points of disagreement
concerning Tax matters with respect to this Agreement and presented to such Tax
Accounting Firm at the time of its selection. If the parties cannot agree on the
selection of the Tax Accounting Firm within such ten-day period, then the
parties shall request the American Arbitration Association to select a Tax
Accounting Firm that so far as possible otherwise satisfies the requirements set
out in this paragraph. All fees and expenses of the Tax Accounting Firm (and, if
necessary, the fees and expenses of the American Arbitration Association) in
rendering a decision hereunder shall be borne equally by the parties.
(j) For purposes of this Section 4.3, unless otherwise provided, the
following terms are defined as set forth below.
"Seller Group" means the Affiliated Group of which Pyramid is a member and,
with respect to any income or franchise Taxes, the consolidated, combined or
unitary group of which Pyramid or any of its Affiliates is a member.
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"Straddle Period" means any taxable year or period beginning before and
ending after the Closing Date.
(k) Survival of Obligations. The obligations of the parties set forth in
this Section 4.3 shall be unconditional and absolute, and shall remain in effect
indefinitely subject to applicable statutes of limitation.
SECTION 4.4 EMPLOYEE MATTERS.
(a) Seller, through its affiliate Ceres Administrators, will retain all
employees and employee benefit plans used in the business of Pyramid, with the
exception of the Employees listed on Schedule 4.4 hereto ("Employees") who shall
be offered employment by Purchaser on the Closing Date at the same current base
salary and benefits comparable in the aggregate to their benefits immediately
prior to Closing.
(b) With respect to any employee benefits that are provided after the
Closing Date by Purchaser to Employees under any of the employee benefit plans,
programs, policies and arrangements, including vacation policies, of Purchaser
or its affiliates ("Purchaser Plans"), service accrued by the Employees during
their employment by Pyramid or Ceres Administrators prior to the Closing Date
shall be recognized by Purchaser for purposes of determining eligibility and
vesting in Purchaser Plans, but not for purposes of benefit accruals thereunder.
Purchaser shall cause each Purchaser Plan to waive: (i) any preexisting
condition restriction which was waived under the terms of any analogous benefit
plan immediately prior to the Closing, or (ii) waiting period limitation which
would otherwise be applicable to an Employee on or after the Closing to the
extent such Employee had satisfied any similar waiting period limitation under
an analogous Benefit Plan prior to the Closing. Such Employees shall also be
given credit for any deductible or co-payment amounts paid in respect of the
Benefit Plan year in which the Closing occurs, to the extent that, following the
Closing, they participate in any Purchaser Plan for which deductibles or
co-payments are required. For purposes of this Agreement, Employees shall
include those persons who, as of immediately prior to the Closing Date, are on
lay-off, disability or leave of absence, paid or unpaid but would otherwise
constitute Employees.
(c) Effective immediately prior to the Closing, Seller shall cause Pyramid
to terminate its participation in all employee benefit plans sponsored or
maintained by any affiliate of Pyramid, including Parent's 401k Savings Plan and
appropriate welfare benefit plans, and will terminate or transfer to Seller or
an affiliate, any employee benefit plan maintained by Pyramid.
(d) Following the Closing: (i) Seller shall indemnify and hold Purchaser
and its ERISA Affiliates harmless against all Losses (as defined in Section
5.1(a)) arising under or with respect to any Benefit Plan, including Losses
arising out of or due to any inaccuracy of any representation or the breach of
any warranty arising under Section 2.9, for any failure to comply with the
notice and healthcare continuation coverage requirements of Section 4980B of the
Code and Part 6 of Subtitle B of Title I of ERISA with respect to any Benefit
Plan, failure to comply with WARN and for any failure to make any required
severance payment, in each case to the extent such Losses arise out of events or
circumstances that occur on or prior to the Closing Date; and (ii) Purchaser
shall indemnify and hold Seller and its ERISA Affiliates harmless against all
Losses arising under or with respect to any Purchaser Plan, and for any failure
to
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comply with the notice and healthcare continuation coverage requirements of
Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA with
respect to any Purchaser Plan, in each case to the extent such Losses arise out
of events or circumstances that occur after the Closing Date with respect to all
Employees. For purposes of clause (ii) of the preceding sentence, ERISA
Affiliate shall be determined by taking into account the change in ownership of
Pyramid resulting from the transactions contemplated by this Agreement.
(e) The obligations of the parties set forth in this Section 4.4 shall be
unconditional and absolute, and shall remain in effect indefinitely subject to
applicable statutes of limitation.
SECTION 4.5 PUBLICITY. Purchaser and Seller will agree on mutually
acceptable press releases with respect to the announcement of this Agreement and
the transactions contemplated hereby. With respect to any other announcement, no
party hereto nor any of their respective affiliates shall issue or cause the
publication of any press release or other public announcement with respect to
this Agreement or the transactions contemplated hereby without the prior
agreement of the other party, except as may be required by law (in which case
such party shall use reasonable efforts to inform the other parties hereto prior
to such announcement).
SECTION 4.6 APPROVALS AND CONSENTS; COOPERATION.
(a) The parties hereto shall use all reasonable best efforts, and cooperate
with each other, to obtain as promptly as practicable all governmental approvals
(including the Kansas Approval Order, the Nebraska Approval Order and the
Pennsylvania Approval Order (each as hereinafter defined)) and third-party
consents necessary or advisable to consummate the transactions contemplated by
this Agreement, (it being understood that each party shall consult with the
other in connection with any material modifications to the relevant regulatory
filing to obtain the Kansas Approval Order, Pennsylvania Approval Order or the
Nebraska Approval Order, and shall not modify such filings in any manner that
would contravene such party's obligation to use reasonable best efforts to
obtain such regulatory approvals as promptly as practicable). Purchaser and
Seller shall have the right to review in advance, and shall consult with the
other on, in each case subject to applicable laws relating to the exchange of
information, all the information relating to Seller, Pyramid or Purchaser, as
the case may be, and any of their respective affiliates, which appear in any
filing made with, or written materials submitted to, any third party or any
Governmental Entity in connection with the transactions contemplated by this
Agreement, PROVIDED, HOWEVER, that nothing contained herein shall be deemed to
provide either party with a right to review any information provided to any
Governmental Entity on a confidential basis in connection with the transactions
contemplated hereby. The party responsible for any such filing shall promptly
deliver to the other party evidence of the filing of all applications, filings,
registrations and notifications relating thereto (except for any confidential
portions thereof), and any supplement, amendment or item of additional
information in connection therewith (except for any confidential portions
thereof). The party responsible for a filing shall also promptly deliver to the
other party a copy of each material notice, order, opinion and other item or
correspondence received by such filing party from any Governmental Entity in
respect of any such application (except for any confidential portions thereof).
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(b) Seller and Purchaser shall take all actions necessary to file as soon
as practicable all notifications, filings and other documents required to obtain
all governmental authorizations, approvals, consents or waivers, including,
without limitation, under the HSR Act, and to respond as promptly as practicable
to any inquiries received from the Federal Trade Commission, the Antitrust
Division of the Department of Justice and any other Governmental Entity for
additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any other Governmental
Entity in connection therewith.
(c) Without limiting the generality of the foregoing, within five business
days after the date hereof, Purchaser shall make a Form A filing with the Kansas
Insurance Department with respect to the transactions contemplated hereby.
Purchaser shall promptly make any and all other filings and submissions of
information with state insurance departments which are required or requested by
such insurance departments to obtain the approvals required by such insurance
departments to consummate the transactions contemplated hereby. Seller agrees to
furnish or to cause Pyramid to furnish Purchaser with such information and
reasonable assistance as Purchaser may reasonably request in connection with its
preparation of such Form A filing and other filings or submissions. Purchaser
shall keep Seller apprised on a timely basis in reasonable detail of its actions
with respect to all such filings and submissions and shall provide Seller with
copies of such Form A filing and other filings or submissions in connection with
the transactions contemplated by this Agreement, provided that Seller shall keep
confidential any portions of such filings indicated by Purchaser as
confidential.
(d) Purchaser and Seller shall promptly advise each other upon receiving
any communication from any Governmental Entity whose consent or approval is
required for consummation of the transactions contemplated by this Agreement
which causes such party to believe that there is a reasonable likelihood that
any requisite regulatory approval will not be obtained or that the receipt of
any such approval will be materially delayed.
SECTION 4.7 UPDATES BY SELLER. Prior to Closing, Seller shall give prompt
notice to Purchaser of: (i) the occurrence of any event or circumstance that
constitutes a Pyramid Material Adverse Effect, (ii) the occurrence or failure to
occur of an event that would cause any condition to the consummation of the
transactions contemplated by this Agreement not to be satisfied, (iii) any
notice or other communication received by Seller or Pyramid relating to a
default or event which, with notice or lapse of time or both, would become a
default under any Material Agreement, and (iv) any matter which, if it had
occurred prior to the date of this Agreement, would have been required to be
included in the Disclosure Schedule.
SECTION 4.8 INTERCOMPANY AGREEMENTS AND BALANCES. Except as otherwise
expressly provided in this Section 4.8, as of or prior to the Closing, other
than with respect to Taxes (which is governed by Section 4.3), Seller shall (i)
settle, or cause to be settled, all intercompany balances between Pyramid, on
the one hand, and Seller and any of Seller's other affiliates, on the other
hand, and (ii) terminate, or cause to be terminated, each contract between
Pyramid, on the one hand, and Seller and any of Seller's other affiliates, on
the other hand.
SECTION 4.9 GAAP FINANCIAL STATEMENTS. Within thirty (30) business days
after the Closing Date, Seller shall cause to be prepared and delivered to
Purchaser annual financial statements for Pyramid based upon generally accepted
accounting principles ("GAAP")
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for the year ended December 31, 2002 (the "GAAP Financial Statements") and the
independent auditors' report issued by Ernst & Young LLP relating to such GAAP
Financial Statements. Within five (5) business days of Seller's delivery of the
GAAP Financial Statements and auditors' report to Purchaser, Purchaser shall
reimburse Seller for all costs and expenses reasonably incurred by Seller in
connection with the preparation of the GAAP Financial Statements and auditors'
report, including, without limitation, the fees and expenses charged by Ernst &
Young LLP. Such reimbursement obligation shall survive any termination of this
Agreement. Notwithstanding anything contained in this Section 4.9, Purchaser
acknowledges and agrees that no representation or warranty is or shall be made
by Seller with respect to the GAAP Financial Statements or any auditors' report
or any information contained therein whatsoever.
SECTION 4.10 COVENANT NOT TO NEGOTIATE SALE OF PYRAMID. During the period
between the date of this Agreement and the Closing Date, unless the Agreement is
otherwise terminated pursuant to Section 7.1 below, Seller and Parent shall not,
and shall cause Pyramid and its and their respective officers, directors,
employees, investment bankers, attorneys or other advisors or representatives
not to, directly or indirectly, (i) solicit, initiate, encourage or accept the
submission of any proposal or offer from any Person or party relating to (X) the
acquisition of Pyramid or a material portion of the assets of Pyramid (whether
by reinsurance or otherwise) or the Shares or (Y) any recapitalization,
refinancing merger, consolidation, business combination or similar transaction
involving Pyramid or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any Person or party to
do or seek any of the foregoing. During such period, unless this Agreement is
otherwise terminated, Seller will notify Purchaser immediately if any Person or
party makes any proposal, offer, inquiry, or contact with respect to any of the
foregoing. Parent and Seller agree to immediately terminate, and to cause
Pyramid and its and their respective advisors and representatives to terminate,
all discussions and negotiations with any party other than Purchaser or its
affiliates that relate to, or may reasonably be expected to lead to any such
offer or proposal.
SECTION 4.11 NON-SOLICITATION. From the Closing Date through the second
anniversary thereof (the "Restricted Period"), each of Seller and Parent agrees
that it will not, and will use all reasonable efforts to cause its affiliates
not to, without the prior written consent of Purchaser, (i) solicit or hire any
of the Employees (so long as they remain employed by Purchaser) or (ii) seek to
induce any of the agents of Pyramid as of the Closing Date to terminate or
materially reduce their activities in this capacity with Pyramid. During the
Restricted Period, each of Purchaser and Parent agrees that it will not, and
will use reasonable efforts to cause its affiliates not to, without the prior
written consent of Seller, solicit or hire any employees of Ceres Administrators
(other than the Employees hired pursuant to Section 4.4) who spend a material
part of their time on activities relating to Pyramid (including the provision of
services under the agreement referred to in Section 6.1(d)(i)).
SECTION 4.12 [INTENTIONALLY LEFT BLANK]
SECTION 4.13 COOPERATION ON FINANCING. Seller and Parent will, and will
cause Pyramid to, cooperate as reasonably requested with Purchaser and Universal
in connection with their proposed debt financing in connection with the
transactions contemplated
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hereby, including providing information with respect to any offering memorandum
or similar disclosure document and attendance at one or more investor meetings.
Purchaser and Universal will promptly reimburse Seller, Parent and Pyramid for
all reasonable out-of-pocket expenses incurred by any of them pursuant to this
Section 4.13.
SECTION 4.14 ANCILLARY AGREEMENTS.
(a) On the Closing Date, Pyramid and Seller shall enter into an agreement
pursuant to which Seller shall administer all of the in-force policies of
Pyramid as of the Closing Date and shall grant Pyramid the access to office
space and equipment and the right to retain certain telephone numbers (the
"TPA"). The TPA shall reflect the terms contained in Schedule 4.14(a) and shall
contain such other customary, commercially reasonable terms and conditions for
an agreement of this type.
(b) On the Closing Date, Seller shall grant to Pyramid a non-exclusive,
perpetual license to the proprietary administrative and claims processing
software owned by Seller that is used in the administration of Pyramid's
business (the "Software License"), which shall reflect the terms contained in
Schedule 4.14(b) and shall contain such other customary, commercially reasonable
terms and conditions for a license of this type.
(c) Immediately prior to the Closing Date, Pyramid and Seller shall enter
into a reinsurance agreement (the "Reinsurance Agreement") pursuant to which
Seller will reinsure on a 100% co-insurance basis (with subsequent conversion to
assumption reinsurance, subject to receiving approvals), the insurance policies
described in Schedule 4.14(c). Such co-insurance agreement will reflect the
terms contained in Schedule 4.14(c) and shall contain such other customary,
commercially reasonable terms for a reinsurance agreement of this type.
SECTION 4.15 HANDLING OF CERTAIN INSURANCE CLAIMS. The parties contemplate
that as of the Closing Date Pyramid will be removed as an insured from all
insurance policies described in Section 2.23 of the Disclosure Schedule. With
respect to any claim of Pyramid under such policies as of the Closing Date,
Parent shall, if requested by Pyramid; submit any such claims to the relevant
insurance companies and shall manage the claims process; PROVIDED, HOWEVER, that
(i) Pyramid will promptly notify Seller and Parent of all such claims and
provide all information and support in connection therewith as reasonably
requested by Parent, (ii) Pyramid shall promptly reimburse Parent for all
reasonable out-of-pocket expenses incurred in connection with this Section 4.15,
and (iii) Parent shall obtain the consent of Pyramid (which consent shall not be
unreasonably withheld, conditioned or delayed). If any limits apply to amounts
payable under any applicable insurance, payments thereunder shall be allocated
among Pyramid, Parent and other affiliates of Parent on a first-come,
first-served basis. Notwithstanding the foregoing, the parties recognize that
any insurance claims relating to the Assets shall be for the benefit of Seller
and deemed part of the Assets transferred to Seller.
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ARTICLE V
INDEMNIFICATION
SECTION 5.1 INDEMNIFICATION. Except as specifically provided in Section
5.1(g) hereof, none of the provisions of this Section 5.1 shall apply to the
claims, obligations, liabilities, covenants, representations and warranties
under Sections 1.2, 4.3, 4.4 or 2.12 (in the case of Section 2.12, to the extent
indemnification with respect to the Losses relating to such claim may be sought
under Section 4.3), which shall be governed solely by the terms of Sections 1.2,
4.3 or 4.4, as applicable.
(a) Indemnification by Seller and Parent. Subject to the limits and other
requirements set forth in this Section 5.1, Seller and Parent, jointly and
severally, agree to indemnify, defend and hold Purchaser and Pyramid, and their
respective officers, directors, agents and affiliates, harmless from and in
respect of any and all liabilities, obligations, losses, damages, judgments,
assessments, fines, settlements, costs and reasonable expenses including,
without limitation, reasonable expenses of investigation and defense fees and
disbursements of counsel and other professionals (collectively, "Losses"), that
they may incur arising out of or due to any inaccuracy of any representation or
the breach of any warranty, covenant, undertaking or other agreement of Seller
contained in this Agreement or the Disclosure Schedule.
(b) Indemnification by Purchaser and Universal. Subject to the limits and
other requirements set forth in this Section 5.1, Purchaser and Universal,
jointly and severally, agree to indemnify, defend and hold Seller, its officers,
directors, agents and affiliates, harmless from and in respect of any and all
Losses that they may incur arising out of or due to any inaccuracy of any
representation or the breach of any warranty, covenant, undertaking or other
agreement of Purchaser contained in this Agreement.
(c) Survival of Representations, Warranties, Covenants and Agreements. The
representations and warranties contained in Article II and Article III shall
survive the Closing Date and will remain in full force and effect thereafter
until May 31, 2004 except that the representations and warranties of Seller and
Parent contained in (i) Section 2.12 shall survive until the date which is 30
days after the date upon which any related Claim is barred by all applicable
statutes of limitations (including all periods of extension, whether automatic
or permissive), except that the representations and warranties contained in
subsection (x) of Section 2.12 shall not survive the Closing Date; (ii) Section
2.9 shall survive until the date upon which any related Claim is barred by all
applicable statutes of limitations (including all periods of extension, whether
automatic or permissive), and (iii) Section 2.3, which shall survive the Closing
Date indefinitely. The covenants contained in Article IV shall survive the
Closing Date and will remain in full force and effect until May 31, 2004 except
as otherwise specifically provided in Article IV. All other agreements and
undertakings in this Agreement shall survive the Closing Date indefinitely.
(d) Limitations. Regardless of anything to the contrary contained in this
Agreement: (i) Purchaser, Pyramid and any other Persons referred to in Section
5.1(a) shall not be entitled to recover from Seller or Parent under this Section
5.1 unless and until the total of all claims for Losses with respect to any
inaccuracy of any representations or the breach of any warranties, covenants,
undertakings or other agreements exceeds $2,000,000 and then only for the amount
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by which such claims for Losses exceed $2,000,000; and (ii) Purchaser, Pyramid
and such other Persons shall not be entitled to recover from Seller or Parent
more than the Shares Purchase Price in the aggregate from Seller and Parent
combined pursuant to this Section 5.1. For purposes of this Section 5.1 a breach
of a representation or warranty contained in this Agreement shall be deemed to
exist either if such representation or warranty is actually breached or (except
in the case of any representation or warranty set forth in Sections 2.6, 2.7,
2.12 or 2.16) if such representation or warranty would have been breached if
such representation or warranty had not contained any limitation or
qualification as to materiality or Pyramid Material Adverse Effect.
(e) Notice and Opportunity to Defend. If there occurs an event that a party
asserts is an indemnifiable Loss pursuant to Section 5.1(a) or 5.1(b), the party
seeking indemnification (the "Indemnitee") shall notify each other party
obligated to provide indemnification (collectively, the "Indemnifying Party")
promptly but in all cases within the applicable survival period specified in
Section 5.1(c). If such event involves any Claim or the commencement of any
action or proceeding by a third Person, the Indemnitee will permit the
Indemnifying Party to participate therein and, to the extent that it shall wish,
to assume the defense thereof, PROVIDED, that the Indemnifying Party so notifies
the Indemnitee not later than ten (10) business days after its receipt of such
action or proceeding, with counsel reasonably satisfactory to the Indemnitee
and, after notice to the Indemnitee of the Indemnifying Party's election to
assume the defense thereof, the Indemnifying Party shall not be liable to the
Indemnitee hereunder for any legal expenses of other counsel or any other
expenses subsequently incurred by Indemnitee in connection with the defense
thereof. The Indemnitee will cooperate fully with the Indemnifying Party and its
counsel in the defense against any such Claim, action or proceeding. The
Indemnitee shall have the right to participate at its own expense in the defense
thereof but in no event shall an Indemnifying Party be liable for any settlement
effected by the Indemnitee without its consent.
(f) Adjustment for Insurance and Taxes. The amount which an Indemnifying
Party is required to pay to, for or on behalf of an Indemnitee pursuant to this
Section 5.1 shall be adjusted (including, without limitation, retroactively):
(i) by any insurance proceeds actually recovered by or on behalf of such
Indemnitee or any of its affiliates in reduction of the related indemnifiable
Loss (the "Indemnifiable Loss"), and (ii) to take account of any tax benefit
actually recognized as a result of any Indemnifiable Loss. If an Indemnitee or
any of its affiliates shall have been indemnified under this Section 5.1 in
respect of an Indemnifiable Loss and shall subsequently receive insurance
proceeds or actually recognize any tax benefit in connection with such
Indemnifiable Loss, then the Indemnitee shall promptly notify the Indemnifying
Party of the amount and nature of such proceeds and benefits and pay to the
Indemnifying Party the amount of such insurance proceeds or tax benefit but in
no event more than the amount previously received by the Indemnitee under this
Section 5.1 in respect of the Indemnifiable Loss.
(g) The Purchaser and Seller agree that any payments made under Section 4.3
or under Section 5.1 shall be treated by the parties hereto for federal, state
and local income Tax purposes (whether foreign or domestic) as a nontaxable
reimbursement or purchase, price adjustment, except to the extent that contrary
treatment is required by Law. If, notwithstanding the foregoing treatment by the
parties, any indemnity payment is determined to be taxable to the indemnified
party by any Taxing Authority, the indemnifying party shall also indemnify the
- 33 -
indemnified party for any increase in Tax liability by reason of receipt of the
indemnity payment (including any payment made under this Section 5.1(g)).
(h) Upon making any indemnification payment, the Indemnifying Party will,
to the extent of such payment, be subrogated to all rights of the Indemnitee
against any third party in respect of the Loss to which the payment relates;
provided, however, that until the Indemnitee recovers full payment of its Loss,
any and all Claims of the Indemnifying Party against any such third party on
account of such payment are hereby made expressly subordinated and subjected in
right of payment of the Indemnitee's rights against such third party. Without
limiting the generality of any other provision hereof, each Indemnitee and
Indemnifying Party will duly execute upon request all instruments reasonably
necessary to evidence and perfect the above described subrogation and
subordination rights.
(i) No party hereto shall have any right to set-off any Losses against any
payments to be made by such party or parties pursuant to this Agreement, except
as otherwise expressly provided herein.
(j) Following the Closing, the indemnification provided for in Section 5.1
hereof shall be the sole and exclusive remedies of the parties and their
respective officers, directors, employees, affiliates, agents, representatives,
successors and assigns for any inaccuracy of any representation or any breach of
any warranty, covenant, undertaking or other agreement contained in this
Agreement (except for the covenants contained in Sections 4.3 and 4.4, which are
separately governed by the terms thereof) and no party shall be entitled to a
recission of this Agreement or to any further rights or remedies of any nature
whatsoever in respect thereof (whether by contract, common law, statute, law,
regulation or otherwise) all of which the parties hereto hereby waive; PROVIDED
nothing herein is intended to waive any Claims for intentional fraud.
ARTICLE VI
CONDITIONS
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE CLOSING.
The obligations of the parties to consummate the Closing are subject to the
satisfaction (or, if permissible, waiver by the party for whose benefit such
conditions exist) of the following conditions:
(a) no arbitrator or Governmental Entity shall have issued any order,
decree or ruling, and there shall not be any statute, rule or regulation,
restraining, enjoining or prohibiting the sale and transfer of the Shares by
Seller to Purchaser under this Agreement;
(b) any waiting period applicable to the transactions contemplated hereby
under the HSR Act shall have expired or been terminated;
(c) all authorizations, approvals or consents required to permit the
consummation of the transactions contemplated hereby (including an order of the
Kansas Insurance Department approving the acquisition of control of Pyramid as
contemplated hereby, the "Kansas Approval Order") shall have been obtained and
be in full force and effect, except where the failure to have
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obtained any such authorizations, approvals or consents would not have a Pyramid
Material Adverse Effect; and
(d) each of Pyramid and Seller shall have duly executed and delivered the
Transition Agreement, the Software License and the Reinsurance Agreement.
SECTION 6.2 CONDITIONS TO THE OBLIGATIONS OF PURCHASER AND UNIVERSAL. The
obligations of Purchaser and Universal to consummate the transactions
contemplated hereby are subject to the satisfaction (or waiver by Purchaser) of
the following further conditions:
(a) the representations and warranties of Seller and Parent in this
Agreement that are not qualified as to materiality shall be true in all material
respects as of the Closing Date as if made at and as of such time (except for
representations and warranties that address matters only as of a particular date
or only with respect to a specific period of time, which need to be true in all
material respects only as of such date or with respect to such period);
(b) the representations and warranties of Seller and Parent in this
Agreement that are qualified as to materiality shall be true in all respects as
of the Closing Date as if made at and as of such time (except for
representations and warranties that address matters only as of a particular date
or only with respect to a specific period of time, which need to be true in all
respects only as of such date or with respect to such period);
(c) Seller and Parent shall have performed in all material respects the
obligations hereunder required to be performed by them at or prior to the
Closing Date;
(d) Pyramid shall not have suffered any Pyramid Material Adverse Effect;
(e) Each member of Pyramid's board of directors shall have tendered his
resignation as a director in writing, effective as of the Closing;
(f) Purchaser and Universal shall have received a certificate signed by the
President or a Vice President of each of Seller and Parent, dated as of the
Closing Date, to the effect that the conditions set forth in paragraphs (a),
(b), (c) and (d) of this Section 6.2 have been satisfied, PROVIDED THAT, the
officer signing such certificate shall not be personally liable for its
contents; and
(g) Pyramid shall have secured written consents or waivers under, or
amendments of, all Material Agreements requiring any such consents, waivers or
amendments as the result of the transfer of the Shares pursuant to this
Agreement, all in a manner reasonably satisfactory in form and substance to
Purchaser in order to permit the consummation of the transactions contemplated
by this Agreement without adversely affecting the rights of Pyramid under any
such Material Agreement unless, in the reasonable opinion of Purchaser, any such
adverse effects, considered in the aggregate, would not result in a Pyramid
Material Adverse Effect; and
(h) The capital and surplus (excluding AVR and IMR) of Pyramid estimated at
Closing (excluding any effect thereon from the sale of the Assets pursuant to
this Agreement) shall equal or exceed $17,657,523. The term "AVR" means the
Asset Valuation Reserve set
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forth in the balance sheet of Pyramid in accordance with SAP. The term "IMR"
means the Interest Maintenance Reserve set forth on the balance sheet of Pyramid
in accordance with SAP.
(i) There shall not have occurred (1) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange or
in the over-the-counter market in the United States, (2) the declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (3) the commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving the United
States, or (4) any limitation (whether or not mandatory) by any governmental or
regulatory authority on, or any other event which has a material adverse effect
on the extension of credit by banks or other lending institutions in the United
States, as a result of which Bank of America, N.A. ("Bank of America") has
declined to provide financing under clause (f) of the third full paragraph on
Page 2 of its commitment letter dated December 20, 2002 among Universal, Bank of
America and Banc of America Securities LLC.
(j) Purchaser shall have received an approval from the Pennsylvania
Insurance Department reasonably satisfactory to it (the "Pennsylvania Approval
Order") of a permitted accounting practice previously disclosed to Seller in
connection with the transactions contemplated this Agreement (it being
understood that Purchaser has described to Seller its current intentions as to
what such approval should cover).
SECTION 6.3 CONDITIONS TO THE OBLIGATIONS OF SELLER AND PARENT. The
obligations of Seller and Parent to consummate the transactions contemplated
hereby are subject to the satisfaction (or waiver by Seller) of the following
further conditions:
(a) the representations and warranties of Purchaser and Universal in this
Agreement that are not qualified as to materiality shall be true in all material
respects as of the Closing Date as if made at and as of such time (except for
representations and warranties that address matters only as of a particular date
or only with respect to a specific period of time, which need to be true in all
material respects only as of such date or with respect to such period);
(b) the representations and warranties of Purchaser and Universal in this
Agreement that are qualified as to materiality shall be true in all respects as
of the Closing Date as if made at and as of such time (except for
representations and warranties that address matters only as of a particular date
or only with respect to a specific period of time, which need to be true in all
respects only as of such date or with respect to such period);
(c) Purchaser and Universal shall have performed in all material respects
all of the obligations hereunder required to be performed by them, at or prior
to the Closing Date;
(d) Seller and Parent shall have received a certificate signed by the
President or a Vice President of each of Purchaser and Universal, dated as of
the Closing Date, to the effect that the conditions set forth in paragraphs (a),
(b) and (c) of this Section 6.3 have been satisfied, PROVIDED THAT, the officer
signing such certificate shall not be personally liable for its contents; and
(e) Seller and Parent shall have received (i) an approval from the Nebraska
Insurance Department reasonably satisfactory to Seller and Parent of a special
dividend of a portion of the
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proceeds from the sale of the Shares, the Reinsurance Agreement and the sale of
the Assets (the "Nebraska Approval Order"), and (ii) necessary waivers or
amendments under Parent's bank lending agreements reasonably satisfactory to
them to permit the transactions contemplated by this Agreement (it being
understood that Seller has described to Purchaser its current intentions as to
what such approvals, waivers or amendments should cover).
ARTICLE VII
TERMINATION
SECTION 7.1 TERMINATION. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the transactions
contemplated herein may be abandoned at any time prior to the Closing Date:
(a) by the mutual consent of Seller and Purchaser;
(b) by Seller or Purchaser;
(i) if the Closing shall not have occurred on or prior to March 31,
2003; (the "Termination Date"); PROVIDED, HOWEVER, that the right to
terminate this Agreement under this Section 7.l(b)(i) shall not be
available to any party whose intentional failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of
the Closing to occur on or prior to such date; or
(ii) if any Governmental Entity shall have issued an order, decree or
ruling or taken any other action (which order, decree, ruling or other
action the parties hereto shall use their best efforts to lift), in each
case permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling
or other action shall have become final and non-appealable;
(c) by Seller if Purchaser: (i) breaches or fails in any material respect
to perform or comply with any of its material covenants and agreements contained
herein, or (ii) breaches its representations and warranties in any material
respect such that the conditions set forth in Section 6.1 or Section 6.3 would
not be satisfied, and any such breach is not curable or has not been cured by
Purchaser within 20 days following receipt by Purchaser of notice of such
breach; or
(d) by Purchaser if Seller: (i) breaches or fails in any material respect
to perform or comply with any of their material covenants and agreements
contained herein, or (ii) breaches its representations and warranties in any
material respect and such breach would have a Pyramid Material Adverse Effect,
in each case such that the conditions set forth in Section 6.1 or Section 6.2
would not be satisfied, and any such breach is not curable or has not been cured
by Seller within 20 days following receipt by Seller of notice of such breach.
SECTION 7.2 PROCEDURE FOR AND EFFECT OF TERMINATION. In the event of the
termination and abandonment of this Agreement by Seller or Purchaser pursuant to
Section 7.1 hereof, written notice thereof shall forthwith be given to the other
party. If the transactions contemplated by this Agreement are terminated as
provided herein:
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(a) each party will return all documents, work papers and other material of
any other party relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to the party furnishing the same;
(b) all confidential information received by any party hereto with respect
to the business of any other party or its subsidiaries or affiliates shall be
treated in accordance with the provisions of the Confidentiality Agreement,
which shall survive the termination of this Agreement; and
(c) neither party to this Agreement will have any liability under this
Agreement to the other except: (i) as stated in subparagraphs (a) and (b) of
this Section 7.2, (ii) as stated in Section 4.9 above, (iii) for any willful
breach of any provision of this Agreement, and (iv) as provided in the
Confidentiality Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 GOVERNING LAW AND CONSENT TO JURISDICTION. The laws of the
State of New York (irrespective of its choice of law principles) shall govern
all issues concerning the validity of this Agreement, the construction of its
terms, and the interpretation and enforcement of the rights and duties of the
parties. Each of the parties hereto irrevocably submits to the nonexclusive
jurisdiction of the courts of the State of New York and the federal courts of
the United States of America located in the State of New York (and the New York
State and federal courts having jurisdiction over appeals therefrom) in respect
of the transactions contemplated by this Agreement, the other agreements and
documents referred to herein and the transactions contemplated by this Agreement
and such other documents and agreements.
SECTION 8.2 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified and supplemented in any and all respects by
written agreement of the parties hereto at any time prior to the Closing Date
with respect to any of the terms contained herein.
SECTION 8.3 NOTICES. All notices, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered: (a) by hand or by Federal Express or a similar overnight courier, (b)
by United States certified mail as evidenced by a signed return receipt, or (c)
by facsimile transmission as evidenced by a machine-generated printout
indicating successful transmission of the entire document (with a confirming
copy of such communication to be sent as provided in clauses (a) or (b) above),
to the party for whom intended at the address or fax number set forth below (or
at such other address or fax number for a party as shall be specified by like
notice, PROVIDED, HOWEVER, that any notice of change of address or fax number
shall be effective only upon receipt):
(a) if to Purchaser or Universal, to:
[Pennsylvania Life Insurance Company or
Universal American Financial Corp.]
Xxx Xxxxxxxxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxx Xxxx 000000
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Telephone: 000-000-0000
Fax: 000-000-0000
Attention: Xxxxxx X. Xxxxxxxxx
With a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Fax: 000-000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
(b) if Seller or Parent, to:
[Continental General Insurance Company
or Ceres Group, Inc.]
Ceres Group, Inc.
00000 Xxxxxxxx Xxxx
Xxxxxxxxxxxx, Xxxx 00000
Telephone (000) 000-0000
Fax: (000) 000-0000
Attention: General Counsel
With a copy to:
Sidley Xxxxxx Xxxxx & Xxxx
Bank One Plaza
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Telephone: (312) 83-7437
Fax: (000) 000-0000
Attention: Xxxx X. Xxxx, Esq.
SECTION 8.4 INTERPRETATION.
(a) The words "hereof," "herein" and "herewith" and words of similar import
shall, unless otherwise stated, be construed to refer to this Agreement as a
whole and not to any particular provision of this Agreement, and article,
section, paragraph, exhibit and schedule references are to the articles,
sections, paragraphs, exhibits and schedules of this Agreement unless otherwise
specified. The words describing the singular number shall include the plural and
vice versa, and words denoting any gender shall include all genders. The phrase
"to the knowledge of" or any similar phrase shall mean such facts and other
information which as of the
- 39 -
date of determination are actually known to any vice president or chief
financial officer and any officer superior to any of the foregoing, of the
referenced party. The phrase "made available" in this Agreement shall mean that
the information referred to has been made available if requested by the party to
whom such information is to be made available. The phrases "the date of this
Agreement," "the date hereof" and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to December 20, 2002. As used in
this Agreement, the term "business day" means a day, other than a Saturday or a
Sunday, on which banking institutions in New York City are required to be open.
The word "including" in this Agreement shall mean "including, without
limitation." The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
(b) The Disclosure Schedule shall be construed with and as an integral part
of this Agreement to the same extent as if the same had been set forth verbatim
herein. Any matter disclosed pursuant to the Disclosure Schedule shall be deemed
to be disclosed for all purposes under this Agreement, but such disclosure shall
not be deemed to be an admission or representation as to the materiality of the
item so disclosed.
(c) Headings are for convenience of the parties only and shall be given no
substantive or interpretative effect whatsoever.
SECTION 8.5 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, all of which shall together be considered one and the same
agreement.
SECTION 8.6 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES. This Agreement
(including the documents and the instruments referred to herein), the
Confidentiality Agreement and the Disclosure Schedule (i) constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof, and (ii)
except as expressly provided herein, are not intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder.
SECTION 8.7 SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void, unenforceable or against its regulatory policy,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
SECTION 8.8 SERVICE OF PROCESS. Each party irrevocably consents to the
service of process outside the territorial jurisdiction of the courts referred
to in Section 8.1 hereof in any such action or proceeding by mailing copies
thereof by certified United States mail, postage prepaid, return receipt
requested, to its address as specified in or pursuant to Section 8.3 hereof.
However, the foregoing shall not limit the right of a party to effect service of
process on the other party by any other legally available method.
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SECTION 8.9 ASSIGNMENT. Except as otherwise expressly provided in this
Section, neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by either party hereto (whether by operation of law
or otherwise) without the prior written consent of the other party. Purchaser
may assign its right to acquire the Shares to a wholly-owned subsidiary of
Purchaser, but Purchaser shall remain liable for all of its obligations under
this Agreement. In addition, Seller may assign its rights to acquire all or part
of the Assets and assume all or part of the Liabilities, to an affiliate
thereof, but Seller shall remain liable for all of its obligations under this
Agreement with respect to such Assets and Liabilities. Subject to the preceding
sentences, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective permitted successors and
assigns.
SECTION 8.10 EXPENSES. Except as otherwise provided herein, all costs and
expenses incurred in connection with the transactions contemplated hereby, this
Agreement and the consummation of the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses, whether or not the
transactions contemplated hereby is consummated.
SECTION 8.11 WAIVERS. Except as otherwise provided in this Agreement, any
failure of either party to comply with any obligation, covenant, agreement or
condition herein may be waived by the other party only by a written instrument
signed by such other party, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
SECTION 8.12 FURTHER ASSURANCES. Seller and Purchaser agree that, from time
to time after Closing, upon reasonable request of the other, they shall
cooperate, and shall cause their respective affiliates to cooperate, with each
other to effect the orderly transition of the transfer of the business and
operations of Pyramid to Purchaser and the transfer of the Assets from Pyramid
to Seller. Without limiting the generality of the foregoing, (a) Seller shall
give, and shall cause its affiliates to give, representatives of Purchaser
reasonable access to all books and records of Seller and its affiliates
reasonably requested by Purchaser in the preparation of post-Closing financial
statements, reports or Tax Returns of Pyramid or necessary for Purchaser to make
required filings or to respond to any audit or inquiry of any governmental or
regulatory body; and (b) Purchaser shall give, and shall cause its affiliates to
give, representatives of Seller reasonable access to all pre-Closing books and
records of Pyramid reasonably requested by Seller in preparation of any
post-Closing financial statements, reports or Tax Returns of Seller or necessary
for Seller to make any required filings or to respond to any audit or inquiry of
any governmental or regulatory body. After the Closing, Seller and Purchaser
shall use commercially reasonable efforts to cooperate with the other in
connection with any proceeding, investigation, examination, audit, action or
other similar matter relating to Pyramid or its business or operations; provided
that the party requesting such cooperation shall reimburse the other for any
out-of-pocket expenses incurred in connection therewith.
- 41 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.
CONTINENTAL GENERAL INSURANCE COMPANY
By: /s/ Xxxxxx X. Xxxxxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
--------------------------------------
Title: President
-------------------------------------
CERES GROUP, INC.
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxx
--------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
UNIVERSAL AMERICAN FINANCIAL CORP.
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxxx
--------------------------------------
Title: CEO
-------------------------------------
PENNSYLVANIA LIFE INSURANCE COMPANY
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxxx
--------------------------------------
Title: CEO
-------------------------------------
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ANNEX A -- INDEX OF DEFINED TERMS (NOT PART OF AGREEMENT)
Term Section
---- -------
Accounting Firm.................................................... 1.5
Affiliate.......................................................... 2.10
Agent Compensation................................................. 2.17(c)
Agreement.......................................................... Preamble
Assessments........................................................ 2.6(b)
Asset Purchase Price............................................... 1.4
Assets............................................................. 1.2(a)
AVR................................................................ 6.2(h)
Balance Sheet Date................................................. 2.7
Benefit Plans...................................................... 2.9(b)
Bank of America.................................................... 6.2(i)
Capital Adjustment................................................. 1.3
Ceres Administrators............................................... 2.9(a)
Certificate of Authority........................................... 2.11(c)
Claim.............................................................. 2.12(c)
Closing............................................................ 1.6
Closing Date....................................................... 1.6(a)
Confidentiality Agreement.......................................... 4.2(a)
Control............................................................ 2.10
Disclosure Schedule................................................ 1st P. of
Article II
Employees.......................................................... 4.4(a)
Encumbrances....................................................... 2.3
Environmental Laws................................................. 2.22
ERISA Affiliate.................................................... 2.9(b)
Estimated Closing Statement........................................ 1.3
Final Statement.................................................... 1.5
GAAP............................................................... 4.9
GAAP Financial Statements.......................................... 4.9
Governmental Entity................................................ 2.5
HSR Act............................................................ 2.5
IMR................................................................ 6.2(h)
Indemnifiable Loss................................................. 5.1(f)
Indemnifying Party................................................. 5.1(e)
Indemnitee......................................................... 5.1(e)
Kansas Approval Order.............................................. 6.1(c)
Liabilities........................................................ 1.2(c)
Losses............................................................. 5.1(a)
Material Agreement................................................. 2.14
Nebraska Approval Order............................................ 6.3(e)
Parent............................................................. Preamble
Person............................................................. 2.2(b)
Term Section
---- -------
Purchaser.......................................................... Preamble
Pennsylvania Approval Order........................................ 6.2(j)
Purchaser Plans.................................................... 4.4(b)
Purchaser's Consent Schedule....................................... 3.3
Pyramid............................................................ Preamble
Pyramid Intellectual Property...................................... 2.13
Pyramid Material Adverse Effect.................................... 2.1(a)
Reinsurance Agreement.............................................. 4.14
Required Permits................................................... 2.11(b)
Restricted Period.................................................. 4.11
SAP................................................................ 2.6(a)
SAP Financial Statements........................................... 2.6(a)
Seller............................................................. Preamble
Shares Purchase Price.............................................. 1.3
Software License................................................... 4.14
Surplus Valuation Date............................................. 1.5
Tax Accounting Firm ............................................... 4.3(i)
Tax or Taxes....................................................... 2.12(f)
Tax Return......................................................... 2.12(f)
Termination Date................................................... 7.1(b)(i)
TPA................................................................ 4.14
Universal.......................................................... Preamble
Valuation Date Capital and Surplus................................. 1.3
WARN............................................................... 2.15(c)
- 2 -
