STOCK EXCHANGE AGREEMENT
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THIS STOCK EXCHANGE AGREEMENT is made and entered into the 18th day of
June, 1996 (the "Agreement") by and among PROVIDENT AMERICAN CORPORATION, a
Pennsylvania insurance holding company with an address at 0000 XxXxxx Xxxx,
Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000 ("PAMCO"), XXXXXXX X. FIELD, an individual
residing at 000 Xxxxxxx Xxxxx, Xxxx Xxxx, Xxxxxxxxxxxx 00000 ("Field"), XXXXXX
X. XXXX ("Xxxx"), and XXXXXXX X. FIELD & ASSOCIATES, INC., doing business as REF
& ASSOCIATES, INC., a California corporation, having its principal business
address at 0000 Xxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxx 00000 ("REF"). Field and Xxxx
are hereinafter collectively referred to as "the Shareholders".
BACKGROUND
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A. REF is engaged in the business of marketing certain life and health
insurance products of Provident Indemnity Life Insurance Company ("PILIC").
B. PAMCO is a Pennsylvania state-chartered insurance holding company
which, through PILIC, its wholly-owned subsidiary, markets and underwrites group
life, accident and health coverage and individual life insurance policies.
C. The Shareholders are the owners of all of the issued and outstanding
shares of the common stock of REF (the "REF Shares"), and PAMCO is desirous of
acquiring the REF Shares from the Shareholders in accordance with the terms and
conditions of this Agreement.
NOW THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, and intending to be legally bound hereby, the
parties hereby agree as follows:
ARTICLE I
REPRESENTATIONS, WARRANTIES, AND AGREEMENTS
OF REF AND THE SHAREHOLDERS
As an inducement to PAMCO to enter into this Agreement and to
consummate the transactions contemplated herein, REF, Field, and Xxxx, to the
extent of his knowledge, jointly and severally warrant and represent to PAMCO
and agree as set forth below:
1.1. Organization; Qualification. REF is duly organized, validly
existing, and in good standing under the laws of the State of California, and is
qualified as a foreign corporation in the State of Colorado. REF is qualified to
transact business in all other jurisdictions where such qualification is
necessary and has the corporate power and authority necessary or required to
carry on its business as now conducted.
1.2. Subsidiaries. REF has no subsidiaries.
1.3. Authority. This Agreement and the transactions contemplated herein
have been duly approved by all necessary action on the part of REF. This
Agreement, when executed and delivered by REF, and assuming the due execution
hereof by PAMCO, will constitute the valid, legal, and binding agreement of REF,
enforceable in accordance with its terms. Neither the execution and delivery nor
the consummation of the transactions contemplated in this Agreement, nor
compliance with nor fulfillment of the terms and provisions hereof will (i)
conflict with or result in a breach of the terms, conditions, or provisions of
or constitute a default under the Certificate or Articles of Incorporation or
By-Laws of REF, any instrument to which REF is a party or by which it is bound,
or any statute or regulatory provisions affecting REF, or (ii) require the
approval, consent, or authorization of or any filing with or notification to any
federal, state, or local court, governmental authority or regulatory body. REF
has full power and authority to do and perform all acts and things required to
be done by REF under this Agreement. REF has delivered to PAMCO true and
complete copies of the Certificate or Articles of Incorporation and By-Laws of
REF.
1.4. Capital Structure. The authorized capital stock of REF consists of
100,000 shares of common stock, no par value, of which 1600 shares are issued
and outstanding and owned 400 shares by Xxxx and 1,200 shares by Field, and none
of which are held by REF as treasury shares. Except for this Agreement, there
are no agreements, arrangements, options, warrants, or other rights or
commitments of any character relating to the issuance, sale, purchase, or
redemption of any shares of capital stock of REF, and no such agreements,
arrangements, options, warrants, or other rights or commitments will be entered
into or granted between the date hereof and the Closing Date. All of the
outstanding shares of REF are validly issued, fully paid, and nonassessable with
no liability attaching to the ownership thereof, and are owned of record and
beneficially by Field and Xxxx, free and clear of any liens, claims,
encumbrances, or restrictions of any kind; the transfer and delivery of the REF
Shares by the Shareholders to PAMCO, as contemplated by this Agreement, will be
sufficient to transfer good and marketable record and beneficial title to the
REF Shares, free and clear of liens, claims, encumbrances, and restrictions of
any kind.
1.5. Financial Statements. Prior to the Closing Date, REF agrees to
furnish to PAMCO REF's financial statements for the years ending December 31,
1992, 1993, 1994, and 1995 (the "REF Financial Statements"). All of the REF
Financial Statements are true, correct, and complete in all material respects
and fairly present the financial position of REF as of the date thereof, have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout all periods. Set forth in Exhibit "A" attached
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hereto is a correct and complete list of all (i) accounts, borrowing
resolutions, and deposit boxes maintained by REF at any bank or other financial
institution, and (ii) the names of the persons authorized to sign or otherwise
act with respect thereto.
1.6. Material Changes. Since December 31, 1995, the business of REF has
been operated only in the ordinary course and, whether or not in the ordinary
course of business, other than as disclosed in this Agreement or the schedules
referred to herein there has not been, occurred, or arisen any material adverse
change in the financial condition of REF from that shown on the REF Financial
Statements referred to in Section 1.5 hereof.
1.7. Contracts. Except as set forth in Schedule 1.7 hereto or any other
schedule referred to herein, REF is not a party to (i) any contract for the
lease, purchase or sale of real or personal property to or from any third party;
(ii) any contract involving the borrowing or lending of money or the guarantee
of the obligations of officers, directors, employees or others; (iii) any
agency, agent's, general agents, brokerage or expense allowance agreement or any
other agreements pursuant to which REF has binding authority in the placement of
insurance coverage or its currently obligated to make payments in connection
with the sale of insurance; (iv) any contract with any of the Shareholders; or
(v) any other contract, whether or not made in the ordinary course of business
which is material to the business or assets of REF. Copies of all contracts and
agreements identified in Schedule 1.7 have been made available to PAMCO No
outstanding purchase commitment by REF is in excess of its ordinary business
requirements or at a price in excess of market price at the date hereof.
1.8. Availability of Assets and Legality of Use. The assets owned or
leased by REF constitute all of the assets which are being used in its business,
and such assets are in good and serviceable condition, normal wear and tear
excepted.
1.9. Title to Property. REF has good and marketable title to all of its
assets, including the assets reflected on the December 31, 1995 REF Financial
Statements referred to in Section 1.5 hereto and all of the assets thereafter
acquired by it except to the extent that such assets have thereafter been
disposed of for fair value in the ordinary course of business.
1.10. Accounts Receivable. All accounts receivable reflected on the
December 31, 1995 REF Financial Statements referred to in Section 1.5 hereto
arising prior to the date hereof, and not collected at the date hereof, have
arisen from bona fide transactions in the ordinary course of REF's business.
1.11. Notes Receivable - Stockholders and Officers. Attached hereto as
Schedule 1.11 is an itemized list of all amounts due from stockholders and
officers of REF as reflected on the December 31, 1995 REF Financial Statements.
No changes will have occurred in the balances prior to the Closing Date, except
for the normal accrual of earned interest.
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1.12. Liabilities.
(a) All liabilities of REF as of December 31, 1995 are reflected
in the December 31, 1995 REF Financial Statements referred to in Section 1.5
hereto, which shall be updated from time-to-time through the Closing Date.
(b) As of the Closing Date, REF will either have no liabilities of
any kind whatsoever, or the liabilities shall be equal to cash or cash
equivalent.
(c) As of the Closing Date, the Shareholders' Equity Net of REF,
determined in accordance with generally accepted accounting principles
consistently applied using the accrual method of accounting, shall not be less
than zero.
1.13. Governmental Permits. REF possesses all licenses, permits and
other authorizations necessary to own or lease and operate its properties and to
conduct its business as now conducted. All of such licenses, permits and
authorizations of REF are hereinafter collectively called (the "Permits").
Attached hereto as Schedule 1.13 is a list of all of the Permits. All Permits
are in full force and effect and will continue in effect after the date hereof
and the Closing Date without the consent, approval or act of, or the making of
any filing with, any governmental or regulatory agency, commission or authority.
REF is not in violation of the terms of any Permit, and REF has not received
notice of any violation or claimed violation thereunder.
1.14. Insurance. REF maintains policies of fire and casualty, product
and other liability and other forms of insurance in such amounts and against
such risks and losses as are adequate and reasonable for its business and
properties.
1.15. Conduct of Business. There are no claims, suits, proceedings, or
actions now pending or threatened against REF, and there are no claims, suits,
proceedings, or actions now pending or threatened against the Shareholders which
relate to the transactions contemplated by this Agreement.
1.16. No Undisclosed Liabilities. To the knowledge of REF, REF is not
subject to any material liability (including unasserted claims), absolute or
contingent, which is not shown or which is in excess of amounts shown or
reserved for in the December 31, 1995 balance sheet referred to in Section 1.5
hereof, other than liabilities of the same nature as those set forth in the
Financial Statements and reasonably incurred in the ordinary course of its
business after December 31, 1995.
1.17. No Default, Violation or Litigation. REF is not in default in any
material respect under any agreement, lease or other document to which it is a
party, or in violation of any law, rule, order, writ, injunction or decree of
any court or federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality. There are no lawsuits,
proceedings, claims or governmental investigations pending or, to the best
knowledge of REF, threatened against REF or against the properties or business
thereof, and REF knows of no factual basis for any such lawsuits, proceedings,
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claims or investigations and there is no action, suit, proceeding or
investigation pending, threatened or contemplated which questions the legality,
validity or propriety of the transactions contemplated by this Agreement.
1.18. Tax Liabilities. To the knowledge of REF, the amounts reflected as
liabilities for taxes on the December 31, 1995 REF Financial Statements referred
to in Section 1.5 hereof are sufficient for the payment of all unpaid federal,
state, county, local and foreign taxes of REF accrued for or applicable to the
period ended on such REF Financial Statements' date and all years prior thereto.
Attached hereto as Schedule 1.18 is a complete list of all tax obligations, as
reflected on the December 31, 1995 REF Financial Statements referred to in
Section 1.5 hereto, itemized by jurisdiction, obligation type and taxing period.
Except as set forth on Schedule 1.18, all federal, state, county, local and
foreign income, use, excise, property, sales, business activity and other tax
returns which are required to be filed by or in respect of REF up to and
including the date hereto have been filed and all taxes, including any interest
and penalties thereon, which have become due pursuant to such returns or
pursuant to any assessment have been paid, and no extension of the time for
filing of any such return is presently in effect. To the knowledge of REF, all
such returns which have been filed or are under extension or will be filed by or
in respect of REF for any period ending on or before the Closing Date are or
will be true and correct. The federal tax returns for REF have not been examined
by the Internal Revenue Service.
1.19. Employees.
(a) On the Closing Date, REF will not be a party to any oral or
written agreement for employment of any officers, employers, agents, or
consultants, including but not limited to union contracts and employee benefit
plans.
(b) As of the Closing Date, REF will not have any employees.
1.20. Employee Retirement Income Security Act. REF does not maintain any
employee benefit plans within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended, ("ERISA") and has no
liability with respect to any employee benefit plans. REF is not required, and
was not required within the immediately preceding five years, to make any
contribution to any "multiemployer plan" within the meaning of Section 3(37) of
ERISA REF has no liability in respect of any employee benefit plans established
or maintained or to which contributions are or were made by it to the Pension
Benefit Guaranty Corporation ("PBGC") or to any beneficiary of such plans.
1.21. Corporate Name. To the knowledge of REF, REF owns and possesses
all rights to the use of the names "Xxxxxxx X. Field & Associates, Inc." and
"REF & Associates, Inc."
1.22. Trademarks and Proprietary Rights. REF has no trademarks,
tradenames, copyrights or applications therefor which are owned or used or
registered in the name of or licensed to REF, and no proceedings have been
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instituted or are pending or threatened or, to the best knowledge of REF,
contemplated with regard to any trademarks, trade names, copyrights or
applications involving REF.
1.23. No Omissions. None of the representations or warranties of REF
contained herein, none of the information contained in the schedules referred to
in this Article I, and none of the other information or documents furnished to
PAMCO or its representatives by REF in connection with this Agreement is false
or misleading in any material respect or omits to state a fact herein or therein
necessary to make the statements herein or therein not misleading in any
material respect. To the best knowledge of REF, there is no fact which adversely
affects, or in the future is likely to adversely affect, the business or assets
of REF in any material respect which has not been disclosed in writing to PAMCO.
ARTICLE II
REPRESENTATIONS, WARRANTIES, AND AGREEMENTS
OF PAMCO
As an inducement to the Shareholders and REF to enter into this
Agreement and to consummate the transactions contemplated herein, PAMCO
represents and warrants to the Shareholders and REF and agrees as set forth
below:
2.1. Organization. PAMCO is duly organized, validly existing, and in
good standing under the laws of the Commonwealth of Pennsylvania. PAMCO has the
corporate power and authority necessary or required to carry on its business as
now conducted.
2.2. Authority. This Agreement and the transactions contemplated herein
have been duly approved by all necessary action on the part of PAMCO. This
Agreement, when executed and delivered by PAMCO, and assuming the due execution
hereof by the Shareholders and REF, will constitute the valid, legal, and
binding agreement of PAMCO, enforceable in accordance with its terms. Neither
the execution and delivery nor the consummation of the transactions contemplated
in this Agreement, nor compliance with nor fulfillment of the terms and
provisions hereof will (i) conflict with or result in a breach of the terms,
conditions, or provisions of or constitute a default under the Certificate or
Articles of Incorporation or By-Laws of PAMCO, any instrument to which PAMCO is
a party or by which it is bound, or any statute or regulatory provisions
affecting PAMCO, or (ii) require the approval, consent, or authorization of or
any filing with or notification to any federal, state, or local court,
governmental authority or regulatory body. PAMCO has full power and authority to
do and perform all acts and things required to be done by PAMCO under this
Agreement.
2.3. Capital Structure. The authorized capital stock of PAMCO consists
of 25,000,000 shares of common stock, $.10 par value ("PAMCO Common Stock"), of
which approximately 9,711,931 shares have been issued and are outstanding,
2,500,000 shares of Class A common voting stock, $.10 par value per share, and
5,000,000 shares of preferred stock, $1.00 par value, of which 580,250 shares of
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Series A Cumulative Convertible Preferred Stock are issued and outstanding. All
of such issued and outstanding shares have been validly issued and are fully
paid and non-assessable.
2.4. Financial Statement. PAMCO has furnish to Field and REF the PAMCO
consolidated audited financial statements for the period ending December 31,
1995 (the "PAMCO Financial Statement"). The PAMCO Financial Statement is true,
correct, and complete in all material respects and fairly presents the financial
position of PAMCO as of the date thereof, has been prepared in accordance with
generally accepted accounting principles consistently applied throughout all
periods.
2.5. No Default, Violation or Litigation. To the knowledge of PAMCO,
PAMCO is not in default in any material respect under any agreement, lease or
other document to which it is a party, or in violation of any law, rule, order,
writ, injunction or decree of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality.
2.6. No Omissions. None of the representations or warranties of PAMCO
contained herein, none of the information contained in the schedules referred to
in this Article II, and none of the other information or documents furnished to
Field and REF or their representatives by PILIC in connection with this
Agreement is false or misleading in any material respect or omits to state a
fact herein or therein necessary to make the statements herein or therein not
misleading in any material respect.
ARTICLE III
ACTIONS PRIOR TO CLOSING
3.1. Investigation.
(a) REF shall afford to the officers, employees and authorized
representatives of PAMCO including, without limitation, independent public
accountants and attorneys of PAMCO such access during normal working hours to
the offices, properties, business and financial and other records of REF as
PAMCO shall reasonably deem necessary or desirable, and shall furnish to PAMCO
or its authorized representatives such additional financial and operating and
other data as shall be reasonably requested, including all such information and
data as shall be necessary in order to enable PAMCO or its representatives to
verify to their satisfaction the accuracy of the Financial Statements of REF and
the representations and warranties contained in Article I of this Agreement. No
investigation made by PAMCO or its representatives, except to the extent of
actual knowledge by PAMCO of any inaccuracy or breach contained herein, shall
affect the representations and warranties of REF hereunder or the liability of
REF with respect thereto.
(b) PAMCO shall afford REF and its authorized representatives,
including, without limitation, its independent public accountants and attorneys
such access during normal working hours to the offices, properties, business and
financial and other records of PAMCO as REF shall reasonably deem necessary or
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desirable, and shall furnish to REF or its authorized representatives such
additional financial and operating and other data as shall be reasonably
requested, including all such information and data as shall be necessary to
enable REF or its representatives to verify to their satisfaction the accuracy
of the Financial Statements of PAMCO and the representations and warranties
contained in Article II of this Agreement. No investigation made by REF or its
representatives, except to the extent of actual knowledge by REF of any
inaccuracy or breach of the representations and warranties of PAMCO contained
herein, shall affect the representations and warranties of PAMCO hereunder or
the liability of PAMCO with respect thereto.
3.2. Confidential Nature of Information. Each party agrees that in the
event that the transactions contemplated herein shall not be consummated, each
will treat in confidence all documents, materials and other information which
either shall have obtained during the course of the negotiations leading to this
Agreement, the investigation of the other party hereto and the preparation of
this Agreement and other documents relating to this Agreement, and shall return
to the other party all copies of non-public documents and materials which have
been furnished in connection therewith.
3.3. Preserve Accuracy of Representations and Warranties.
(a) REF shall refrain from taking any action which would render
any representation and/or warranty contained in Article I of this Agreement
inaccurate as of the Closing Date hereunder, except to the extent that REF deems
such action to be necessary or appropriate to conduct the business of REF in the
ordinary course. REF will promptly notify PAMCO of any lawsuits, claims,
proceedings or investigations that, to the knowledge of REF or the Shareholders,
may be threatened, brought, asserted or commenced against REF or its officers or
directors (i) involving in any way the transactions contemplated by this
Agreement or (ii) which would, if determined adversely, have a material adverse
impact on the business, properties or assets of REF.
(b) PAMCO shall refrain from taking any action which would render
any representation and/or warranty contained in Article II of this Agreement
inaccurate as of the Closing Date. PAMCO will promptly notify REF of any
lawsuits, claims, proceedings or investigations that, to the knowledge of PAMCO,
may be threatened, brought, asserted or commenced against PAMCO or its
respective officers and directors (i) involving in any way the transactions
contemplated by this Agreement or (ii) which would, if determined adversely,
have a material adverse impact on the business, properties or assets of PAMCO.
3.4. Maintain REF as a Going Concern.
(a) REF shall conduct its business in accordance with past
practices and to use its best efforts to maintain the business organization of
REF intact and preserve the good will of its employees, clients and others
having business relations with it. REF shall provide PAMCO promptly with interim
monthly financial information and any other management reports, as and when they
shall become available.
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(b) PAMCO shall conduct its business in accordance with past
practices and use its best efforts to maintain the business organization of
PAMCO intact and preserve the good will of its employees, clients and others
having business relations with it. PAMCO shall provide REF promptly with interim
monthly financial information and any other management reports, as and when they
shall become available.
3.5. Make No Material Change in REF. Prior to the Closing Date, REF
shall not, without the prior written approval of PAMCO, cause or permit REF to
(i) make any material change in the business or operations of REF; (ii) make any
material change in the accounting policies applied in the preparation of the
Financial Statements referred to in Section 1.5 hereof; (iii) declare any
dividends on its issued and outstanding shares of capital stock or make any
other distribution of any kind in respect thereof; (iv) issue, sell or otherwise
distribute any authorized but unissued shares of its capital stock or effect any
stock split or reclassification of any such shares or grant or commit to grant
any option, warrant or other rights to subscribe for or purchase or otherwise
acquire any shares of capital stock of REF or any security convertible or
exchangeable for any such shares; (v) purchase or redeem any of the capital
stock of REF; (vi) incur or be liable for indebtedness to REF or any of its
affiliates; (vii) make any material change in the compensation of officers or
key employees of REF; (viii) enter into any contract, license, franchise or
commitment other than in the ordinary course of business or waive any rights of
substantial value; (ix) make any donation to any charitable, civic, educational
or other eleemosynary institution in excess of donations made in comparable past
periods or (x) enter into any other transaction affecting in any material
respect the business of REF other than in the ordinary course of business and in
conformity with past practices or as contemplated by this Agreement.
3.6. No Public Announcement. REF shall not, without the prior approval
of PAMCO, make any press release. PAMCO shall be permitted to release and make a
public announcement or filing with respect to the transactions contemplated by
this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT TO OBLIGATIONS OF PAMCO
The obligations of PAMCO under this Agreement to acquire the REF Shares
in exchange for the PAMCO Shares (as hereinafter defined) shall, at the option
of PAMCO, be subject to the satisfaction, on or prior to the Closing Date, of
the following conditions:
4.1. No Misrepresentations or Breach of Covenants and Warranties.
Subject to changes incurred in the normal course of business, there shall have
been no breach by REF in the performance of any of its covenants and agreements
herein, each of the representations and warranties of REF contained or referred
to in this Agreement shall be true and correct in all material respects on the
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Closing Date as though made on the Closing Date, and there shall have been
delivered to PAMCO a certificate or certificates to that effect, dated the
Closing Date and signed on behalf of REF.
4.2. No Changes in Assets. Since the date of this Agreement, there has
been no material adverse change in the condition, financial or otherwise, of
REF.
4.3. Opinion of Counsel for REF. PAMCO shall have received from counsel
for REF, an opinion dated the Closing Date, in form and substance satisfactory
to PAMCO and its counsel, to the effect that:
(a) REF is a corporation duly organized, validly existing, and in
good standing under the laws of the State of California, and is qualified as a
foreign corporation in the State of Colorado. REF is qualified to transact
business in all other jurisdictions where such qualification is necessary, and
has full corporate power and authority to carry on its business as now
conducted. REF has no subsidiaries.
(b) The authorized capital stock of REF consists of 100,000
shares of common stock, no par value, of which 1600 shares are issued and
outstanding and owned by the Shareholders, and none of which are held by REF as
treasury shares. Except for this Agreement, there are no agreements,
arrangements, options, warrants, or other rights or commitments of any character
relating to the issuance, sale, purchase or redemption of any shares of capital
stock of REF, and all of the issued and outstanding shares of common stock of
REF on the Closing Date are validly issued, fully paid, and nonassessable with
no liability attaching to the ownership thereof.
(c) This Agreement and the transactions contemplated herein have
been duly approved by all necessary action on the part of REF and the
Shareholders. This Agreement has been duly and validly executed and delivered by
REF and Field, and the Agreement, assuming due execution by PAMCO, is the valid
and binding agreement of REF and the Shareholders and enforceable against them
in accordance with its terms, except as enforcement of such agreement may be
limited by bankruptcy, insolvency, or other similar laws affecting creditors'
rights generally and that the remedy of specific performance is subject to the
discretion of the court before which proceedings therefor are brought.
(d) REF has full power and authority to execute and deliver the
Agreement and to perform its obligations thereunder. Neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated herein, nor compliance with and fulfillment of the terms and
provisions hereof (i) conflicts with or results in the breach of the terms,
conditions, or provisions of, or constitutes a default under, the Certificate or
Articles of Incorporation or the By-Laws of REF or any agreement or instrument
known to counsel to which REF is a party or by which any of them is bound; (ii)
gives any party to or with rights under any such agreement or instrument the
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right to terminate, modify, or otherwise change the rights or obligations of REF
under any such agreement or instrument, or (iii) requires the consent, approval,
or authorization of or any filing with or notification to any federal, state, or
local court, governmental authority, or regulatory body not already obtained or
made, as the case may be.
(e) Counsel does not know of any action, suit, proceeding, or
investigation pending or threatened against REF which might result in a material
adverse change in the business or assets or in the condition, financial or
otherwise, of REF, or that any action, suit, proceeding, or investigation is
pending, or to their knowledge threatened which questions the legality,
validity, or propriety of this Agreement or of any action taken or to be taken
by REF pursuant to or in connection with this Agreement.
(f) The Shareholders, to the best of counsel's knowledge and
after due investigation, are the lawful owner of the REF Shares, free and clear
of all adverse claims, with unrestricted right and power to transfer and deliver
the REF Shares to PAMCO. Field has executed and delivered to PAMCO the
instruments sufficient to vest good and marketable title to the REF Shares.
(g) To such further effect, with respect to legal matters
relating to this Agreement, as PAMCO or its counsel may reasonably request.
In giving this opinion, counsel for REF may rely as to matters of
fact upon certificates of officers of REF, and as to matters relating to the law
of any state other than the State of California upon opinions of other counsel
satisfactory to them, provided that such other counsel shall state that they
believe they are justified in relying upon such certificates and opinions, and
deliver copies thereof to PAMCO prior to the Closing Date.
4.4. Approval by Counsel. All matters, proceedings, instruments, and
documents required to carry out this Agreement or incidental thereto, and all
other relevant legal matters shall have been approved at or prior to the Closing
Date by Butera, Beausang, Xxxxx & Xxxxxxx, which approval shall not be
unreasonably withheld.
4.5. Investment Representation. The Shareholders acknowledge that the
PAMCO Shares (as hereinafter defined) which are to be received hereunder have
not and will not be registered under the Securities Act of 1933, as amended (the
"Act"), and the Shareholders agree that they are acquiring the REF Shares for
investment purposes only and not with a view to any sale or other distribution
thereof in a manner that would violate the Act. The Shareholders consent to the
placement of the following legends (or legends substantially similar thereto) on
the certificate or certificates representing the PAMCO Shares issued pursuant
hereto:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR AN EXEMPTION FROM SUCH REQUIREMENTS."
"THESE SECURITIES ARE SUBJECT TO THE TERMS AND CONDITIONS
SET FORTH IN A CERTAIN STOCK EXCHANGE AGREEMENT BETWEEN
THE HOLDER HEREOF AND PAMCO, AND SHALL BE TRANSFERRABLE
ONLY IN ACCORDANCE WITH THE TERMS AND CONDITIONS THEREOF."
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4.7. Restrictions on Transfer. The certificate(s) representing the PAMCO
Shares shall be transferrable only in accordance with the provisions of the Act
or an exemption therefrom.
4.8. Net Worth - Shareholders' Equity of REF. On the Closing Date, the
Shareholders' Equity - Net (as hereinafter defined) of REF shall not be less
than zero. For the purposes of this Agreement, the term "Shareholders' Equity -
Net" shall mean the shareholder's equity determined in accordance with generally
accepted accounting principles consistently applied.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF REF
The obligations of REF under this Agreement shall, at the option of REF,
be subject to the satisfaction, on or prior to the Closing, of the following
conditions:
5.1. No Misrepresentations or Breach of Covenants and Warranties. There
shall have been no breach by PAMCO in the performance of any of its covenants
and agreements herein, each of the representations and warranties of PAMCO
contained or referred to in this Agreement shall be true and correct in all
material respects on the Closing Date as though made on the Closing Date, and
there shall have been delivered to REF certificate or certificates to that
effect, dated the Closing Date and signed by the President of PAMCO.
5.2. Opinion of Counsel for PAMCO. REF shall have received from Butera,
Beausang, Xxxxx & Xxxxxxx, counsel for PAMCO, an opinion dated the Closing Date,
in form and substance satisfactory to REF and its counsel, to the effect that:
(a) PAMCO is a corporation duly organized, validly existing, and
in good standing under the laws of the Commonwealth of Pennsylvania, and PAMCO
has full corporate power and authority to carry on its business as now
conducted.
(b) The authorized capital stock of PAMCO consists of 25,000,000
shares of Common Stock, $.10 par value, of which approximately 9,711,931 shares
have been issued and are outstanding, 2,000,000 shares of Class A common voting
stock, $.10 par value per share, and 5,000,000 shares of preferred stock, $1.00
par value, of which 580,250 shares of Series A Cumulative Convertible Preferred
Stock are issued and outstanding. All of the outstanding shares of PAMCO are
validly issued, fully paid, and nonassessable with no liability attaching to the
ownership thereof.
(c) This Agreement and the transactions contemplated herein have
been duly approved by all necessary action of PAMCO. This Agreement has been
duly and validly executed and delivered by PAMCO, and the Agreement, assuming
due execution by REF and the Shareholders, is the valid and binding agreement of
PAMCO, enforceable against PAMCO in accordance with its terms, except as
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enforcement of such agreement may be limited by bankruptcy, insolvency, or other
similar laws affecting creditors' rights generally and that the remedy of
specific performance is subject to the discretion of the court before which
proceedings therefor are brought.
(d) PAMCO has full power and authority to execute and deliver the
Agreement and to perform its obligations thereunder. Neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated herein, nor compliance with and fulfillment of the terms and
provisions hereof (i) conflicts with or results in the breach of the terms,
conditions, or provisions of, or constitutes a default under, the Certificate or
Articles of Incorporation or the By-Laws of PAMCO or any agreement or instrument
known to counsel to which PAMCO is a party or by which it is bound; (ii) gives
any party to or with rights under any such agreement or instrument the right to
terminate, modify, or otherwise change the rights or obligations of PAMCO under
any such agreement or instrument, or (iii) requires the consent, approval, or
authorization of or any filing with or notification to any federal, state, or
local court, governmental authority, or regulatory body not already obtained or
made, as the case may be.
(e) Counsel does not know of any action, suit, proceeding, or
investigation pending or threatened against PAMCO which might result in a
material adverse change in the business or assets or in the condition, financial
or otherwise, of PAMCO, or that any action, suit, proceeding, or investigation
is pending, or to their knowledge threatened which questions the legality,
validity, or propriety of this Agreement or of any action taken or to be taken
by PAMCO pursuant to or in connection with this Agreement.
(f) To such further effect, with respect to legal matters
relating to this Agreement, as REF or its counsel may reasonably request.
In giving this opinion, Butera, Beausang, Xxxxx & Xxxxxxx may
rely, as to matters of fact upon certificates of officers of PAMCO, and as to
matters relating to the law of any state other than the Commonwealth of
Pennsylvania, upon opinions of other counsel satisfactory to them, provided that
such other counsel shall state that they believe they are justified in relying
upon such certificates and opinions, and deliver copies thereof to REF prior to
the Closing Date.
5.3. Approval be Counsel. All matters, proceedings, instruments, and
documents required to carry out this Agreement or incidental thereto, and all
other relevant legal matters shall have been approved at or prior to the Closing
Date by counsel for REF, which approval shall not be unreasonably withheld.
5.4. No Changes in Assets. Since the date of this Agreement, there has
been no material adverse change in the condition, financial or otherwise, of
PAMCO.
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ARTICLE VI
EXCHANGE OF STOCK AND CLOSING
6.1. Closing Date. Subject to the fulfillment of the conditions
precedent specified in this Agreement and as soon as practicable following such
fulfillment, but in no event later than June 25, 1996 the transactions
contemplated by this Agreement shall be consummated (the "Closing") at such
place as shall be agreed upon between the parties, or in the absence thereof at
the offices of Butera, Beausang, Xxxxx & Xxxxxxx, 000 Xxxxxxx Xxxxxxxx Xxxxxx,
Xxxxx 000, Xxxx xx Xxxxxxx, Xxxxxxxxxxxx 00000, or such other place as shall be
agreeable between the parties. The date on which the Closing is to take place is
sometimes referred to herein as the "Closing Date."
6.2. Exchange of Shares. On the Closing Date, PILIC shall receive from
the Shareholders and the Shareholders shall transfer to PILIC the shares of REF
in exchange for the issuance by PAMCO to the Shareholders of 610,000 shares of
the common stock of PAMCO, $.10 par value (the "PAMCO Shares"), to be
distributable 457,500 PAMCO Shares to Field and 152,500 PAMCO Shares to Xxxx,
and subject to adjustment as set forth herein.
6.3. Delivery by REF. At the Closing, the Shareholders shall deliver to
PAMCO certificated representing all of the REF Shares, together with fully
executed and witnessed stock powers in blank attached thereto with signatures
guaranteed by a bank or trust company or a New York Stock Exchange Medallion
Signature Program participant.
6.4. Delivery by PAMCO. On the Closing Date, in exchange for the REF
Shares, PAMCO shall deliver to the Shareholders a certificate or certificates
representing the PAMCO Shares, which shall be issued in accordance with the
Shareholders' instructions. The Shareholders acknowledge that the PAMCO Shares
will not have been registered under the Securities Act of 1933, as amended, and
accordingly, shall bear a restrictive legend similar to that set forth in
Section 4.5 hereof.
6.5. Resignations of Officers and Directors of REF. At the Closing,
Field shall deliver to PAMCO the resignations of all of the Officers, Directors
and employees of REF, effective as of the Closing Date.
ARTICLE VII
TERMINATION
7.1. Termination Prior to the Closing Date.
(a) Notwithstanding anything to the contrary contained in this
Agreement or elsewhere, this Agreement may be terminated, and the transactions
contemplated hereby may be abandoned, at any time prior to the Closing Date:
(i) By mutual consent of PAMCO and REF;
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(ii) By REF if any of the conditions to its obligations to
consummate this Agreement set forth in Article V shall not have been fulfilled
in all respects on or prior to the Closing Date and shall not have been waived,
if permitted to be waived, or by PAMCO if any of the conditions to its
obligations to consummate this Agreement set forth in Article IV shall not have
been fulfilled in all respects on or prior to the Closing Date and shall not
have been waived, if permitted to be waived;
(iii) Upon ten (10) days' prior written notice by either
party if the Closing date shall not have occurred on or before April 30, 1996.
(b) In the event that REF breaches any material term or
condition of this Agreement prior to the Closing Date, which breach is not cured
within five (5) days after notice thereof, this Agreement may be terminated by
PAMCO upon written notice to such effect.
(c) In the event that PAMCO breaches any material term or
condition of this Agreement prior to the Closing Date, which breach is not cured
within five (5) days after notice thereof, this Agreement may be terminated by
REF upon written notice to such effect.
(d) In the event of a termination of this Agreement pursuant to
Section 7.1(a) hereof, each party shall pay the costs and expenses incurred by
it in connection with this Agreement, this Agreement shall be of no further
force or effect, and no party shall have any liability to any other party
hereunder.
(e) In the event of a termination of this Agreement pursuant to
Section 7.1(c) hereof, PAMCO shall pay to REF all reasonable costs and expenses,
including attorney's fees, incurred by REF through the date of termination.
(f) Upon termination of this Agreement pursuant to this Section
7.1 and except as expressly set forth herein, no party shall have any liability
to any other party hereunder.
ARTICLE VIII
SURVIVAL OF OBLIGATIONS, INDEMNIFICATION
8.1. Survival of Obligations. In the event that this Agreement is not
rescinded, the terms and conditions of this Agreement, and all certifications,
representations, and warranties respectively made herein by REF, the
Shareholders and PAMCO, and their respective obligations to be performed
pursuant to the terms hereof, shall survive the Closing Date hereunder for a
period of two (2) years thereafter with respect to the representations an
warranties, except with respect to the representations and warranties regarding
taxes, which will survive for a period of three (3) years thereafter.
- 15 -
8.2. Indemnification.
(a) REF, Field and Xxxx jointly and severally agree to indemnify
and hold harmless PAMCO, its subsidiaries, affiliates, successors and assigns
from and against any and all liabilities, losses, costs, deficiencies, or
damages ("Loss"), and reasonable attorneys' and accountants' fees and expenses,
court costs, and all other reasonable out-of-pocket expenses ("Expenses")
incurred by PAMCO, in each case net of any insurance proceeds received and
retained by PAMCO in connection with or arising from (i) any claim that REF did
not convey to PAMCO good and marketable title to all of the Shares pursuant to
this Agreement, (ii) any breach by REF of any of its covenants in, or failure of
REF to perform any of its obligations under, this Agreement, or (iii) any
material breach of any warranty or the inaccuracy of any representation of REF
or the Shareholders contained or referred to in this Agreement or in any
certificate delivered by or on behalf of REF pursuant hereto.
(b) PAMCO agrees to indemnify and hold harmless REF, Field, and
Xxxx, their successors and assigns from and against any and all Loss and Expense
incurred by REF, in each case net of any insurance received and retained by REF,
in connection with or arising from (j) any claim that PAMCO failed to deliver
the PAMCO Shares in exchange for the REF Shares as set forth in this Agreement,
(ii) any breach by PAMCO to perform any of its obligations under this Agreement,
or (iii) any material breach of any warranty of the inaccuracy of any
representation of PAMCO contained or referred to in this Agreement or in any
certificate delivered by or on behalf of PAMCO pursuant hereto.
(c) No claim shall be made for indemnity pursuant to Paragraphs
8.2(a) and (b) until the aggregate amount of Loss and Expense exceeds $50,000,
but if the aggregate amount of the Loss and Expense exceeds such amount, the
person responsible therefor (an "Indemnifying Person") shall be liable for all
Loss and Expense in excess of the initial $50,000 amount, to the person
incurring the Loss or Expense (an "Indemnified Person").
(d) Each indemnified Person shall give notice to the
Indemnifying Person promptly after such Indemnified Person has actual knowledge
of any claim as to which indemnity may be sought, and shall permit the
Indemnifying Person to assume the defense of any such claim or any litigation
resulting therefrom, provided that counsel for the Indemnifying Person, who
shall conduct the defense of such claim or litigation, shall be approved by the
Indemnified Person (whose approval shall not unreasonably be withheld), and the
Indemnified Person may participate in such defense at such party's expense, and
provided further that the failure of any Indemnified Person to give notice as
provided herein shall not relieve the Indemnifying Person of its obligations
under this Agreement unless the failure to give such notice is materially
prejudicial to an Indemnifying Person's ability to defend such action and
provided further that the Indemnifying Person shall not assume the defense for
matters as to which there is a conflict of interest or separate and different
- 16 -
defenses. No Indemnifying Person, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Person, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
(e) The liability of Xxxx for any claim for indemnification shall
be enforceable only out of the PAMCO Shares acquired by Xxxx as set forth
herein, or shall be limited to the fair market value thereof as of the Closing
Date in the event that Xxxx disposes of the PAMCO Shares during the period set
forth in Paragraph 8.1 hereof.
ARTICLE IX
MISCELLANEOUS
9.1. Effective Date. The Effective Date for the purposes of the
transactions set forth herein or contemplated hereby shall be January 1, 1996.
9.2. Governing Law/Consent to Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania. All employment or lease agreements contemplated hereunder shall be
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania. The parties hereto agree to consent to the jurisdiction and venue
of the United States District Court for the Eastern District of Pennsylvania,
and agree that all disputes between the parties shall be litigated only therein.
9.3. Successors and Assigns. This Agreement shall not be assignable by
any party without the prior written consent of all parties. The Agreement shall
be binding upon the inure to the benefit of the parties hereto and their
respective heirs, administrators, successors and assigns.
9.4. Notice. Any notice hereunder, if mailed, shall be effective upon
receipt, and shall be by professional express service, registered mail (return
receipt requested) or by personal service. Notices shall be given to the
following addresses, or such other addresses as the parties shall designate in
writing from time to time:
If to PAMCO: Provident Indemnity Life Insurance Company
0000 XxXxxx Xxxx
X.X. Xxx 000
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxxx, President
with a copy to: Butera, Beausang, Xxxxx & Xxxxxxx
000 Xxxxxxx Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxx xx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx, Xx., Esq.
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If to REF: Xxxxxxx X. Field & Associates, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxxx X. Field, President
with a copy to: Posternak, Xxxxxxxxxx & Xxxx
000 Xxxxxxx Xxxxx Xxxxx
Xxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
If to Shareholders: Xx. Xxxxxxx X. Field
000 Xxxxxxx Xxxxx
Xxxx Xxxx, XX 00000
Xx. Xxxxxx X. Xxxx
Heritage on the Garden
000 Xxxxxxxx Xxxxxx, Xxxx 000
Xxxxxx, XX 00000
with a copy to: Posternak, Xxxxxxxxxx & Xxxx
000 Xxxxxxx Xxxxx Xxxxx
Xxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
9.5. Expenses; Income Tax Matters. Each of REF and PAMCO shall pay their
own expenses including, without limitation, legal and accounting fees and
expenses, incident to the negotiation and preparation of this Agreement and to
its performance and compliance with the provisions contained herein. Each party
hereto shall determine the manner in which the transactions set forth herein
shall be treated for federal and state income tax purposes, and no party shall
be deemed to have made any representation or warranty to any other party as to
the income tax treatment of any transaction described herein.
9.6. Entire Agreement; Amendments. This Agreement constitutes the entire
understanding and agreement among the parties hereto relative to the subject
matter hereof. Any amendments to the Agreement must be in writing, signed by
each party hereto.
9.7. Partial Invalidity. In case any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal,
or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision hereof, and this Agreement
shall be construed as if such invalid, illegal, or unenforceable provision had
never been contained herein, unless the deletion of the provision or provisions
would result in such a material change as to cause completion of the
transactions contemplated herein to be unreasonable.
9.8. Execution in Counterparts. This Agreement may be executed by the
parties hereto signing the same instrument, or by each party hereto signing a
separate counterpart or counterparts, each of which shall be deemed to be an
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original, but all of which together shall constitute one and the same
instrument. The parties agree that documents executed by facsimile shall be
acceptable in this transaction, and the signatures thereof shall have the same
force and effect as original signatures.
9.9. Waivers. REF and the Shareholders and PAMCO may, by written
instrument, extend the time for the performance of any of the obligations or
other acts of the other party and with respect to this Agreement (a) waive any
inaccuracies in the representations and warranties of the other parties in this
Agreement or in any document delivered pursuant to this Agreement, (b) waive
compliance with any of the covenants of the other parties contained in this
Agreement, and (c) waive any other party's performance of any of its obligations
set forth in this Agreement.
9.10. Titles and Headlines. Titles and headings to Paragraphs herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
9.11. Exhibits. The Exhibits and Schedules to this Agreement 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.
- 19 -
IN WITNESS WHEREOF, the parties hereto have set their hands and seals
the day and year first above-written.
PROVIDENT AMERICAN CORPORATION
Attest:
By:
----------------------------------- -------------------------------------
Xxxxxxx X. Xxxxxxxx, Xx., Secretary Xxxxx X. Xxxxxxx, President
XXXXXXX X. FIELD & ASSOCIATES, INC.
Attest:
By:
----------------------------------- -------------------------------------
Secretary Xxxxxxx X. Field, President
THE SHAREHOLDERS:
Witness:
(SEAL)
----------------------------------- ----------------------------------
Xxxxxxx X. Field
(SEAL)
----------------------------------- ----------------------------------
Xxxxxx X. Xxxx
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LIST OF EXHIBITS
EXHIBIT "A" Correct and complete list of all (i) accounts,
borrowing resolutions, and deposit boxes maintained by REF
at any bank or other financial institutions, and (ii) the
names of the persons authorized to sign or otherwise act
with respect thereto.
Stock Exchange Agreement
Exhibit A
Bank Accounts
First Interstate Bank of Denver, N.A.
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
REF & Associates
Account No. 0000000
Authorized Signatory: Xxxxxxx X. Field
LIST OF SCHEDULES
Schedule 1.7 - Contracts and Agreements to which REF is a Party
Schedule 1.11 - List of all amounts due from stockholders and officers of
REF a reflected on the REF Financial Statements.
Schedule 1.13 - List of all REF Licenses, Permits and Other Authorizations
Schedule 1.18 - List of REF Tax Obligations as reflected on the December
31, 1995 REF Financial Statements itemized by
jurisdiction, obligation type, and taxing period
Stock Exchange Agreement
Schedule 1.7
Contracts
1. ORAL CONTRACTS
Listed below are companies that REF currently receives
commissions from:
TrustMark Life Ins. Co.
American Brokerage Corporation/NIA Corporation
Combined Insurance
Xxxxxx & Company
Managed Health Fund
Midland
Union Bankers
AFLAC
California Organized Producers
Guarantee Mutual
Healthplan Services
Mid-Continent
National Insurance Service
Zavidow-Shows
2. WRITTEN CONTRACTS
Agreement dated February 2, 1995 and between Concerned Health Care
Users of America Association ("CHUA"), Xxxxxxx X. Field & Associates, Inc., t/a
REF & Associates, Inc., and Xxxxxxx X. Field.
Stock Exchange Agreement
Schedule 1.11
Amounts Due From Stockholders and Officers
NONE
Stock Exchange Agreement
Schedule 1.13
Permits
REF is incorporated in California and is qualified to do business
as a foreign corporation in the State of Colorado.
Stock Exchange Agreement
Schedule 1.18
Tax Liabilities
1. California Corporation tax.
2. Colorado Corporation tax.
