UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or Section 15(d) of
The Securities Exchange Act of 1934
Date of Report: September 20, 1997
WASHINGTON NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-7369 36-2663225
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
300 Tower Parkway, Lincolnshire, Illinois 60069
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 793-3000
<PAGE>
ITEM 5. OTHER EVENTS
Washington National Corporation announced on September 22, 1997
it had entered into an Agreement and Plan of Merger Dated as of
September 20, 1997 By and Among Conseco, Inc., Granite Merger
Corp., and Washington National Corporation (the "Merger
Agreement"). Following the consummation of the transaction
contemplated in the Merger Agreement, Washington National
Corporation will become a wholly owned subsidiary of Conseco,
Inc. The transaction, valued at approximately $410 million, is
subject to approval by Washington National shareholders and
certain regulatory agencies. The consideration for the
transaction will be $33.25 in cash per share of Washington
National Corporation common stock. The Merger Agreement is
attached as Exhibit 99.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
Exhibits.
99. Agreement And Plan Of Merger Dated As Of September 20, 1997
By And Among Conseco, Inc., Granite Merger Corp. And
Washington National Corporation.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
WASHINGTON NATIONAL CORPORATION
(Registrant)
Date: September 26, 1997 By: /s/ Craig R. Edwards
Craig R. Edwards, Vice President,
General Counsel and Corporate
Secretary
<PAGE>
INDEX TO EXHIBITS
Exhibit Number
99 Agreement And Plan Of Merger Dated As Of
September 20, 1997 By And Among Conseco,
Inc., Granite Merger Corp. And Washington
National Corporation
EXHIBIT 99
AGREEMENT AND PLAN OF MERGER
DATED AS OF SEPTEMBER 20, 1997
BY AND AMONG
CONSECO, INC.,
GRANITE MERGER CORP.
AND
WASHINGTON NATIONAL CORPORATION
TABLE OF CONTENTS
<PAGE>i
ARTICLE 1 THE MERGER 1
SECTION 1.1 The Merger 1
SECTION 1.2 Closing 1
SECTION 1.3 Effective Time 1
SECTION 1.4 Certificate of Incorporation 2
SECTION 1.5 By-Laws 2
SECTION 1.6 Directors 2
SECTION 1.7 Officers 2
SECTION 1.8 Effect of Merger on Merger Sub Capital Stock 2
SECTION 1.9 Conversion of Common Shares 2
SECTION 1.9.1 Outstanding Common Shares 2
SECTION 1.9.2 Treasury Shares 2
SECTION 1.10 Exchange of Certificates and Related Matters 3
SECTION 1.10.1 Paying Agent 3
SECTION 1.10.2 Exchange Procedures 3
SECTION 1.10.3 Letter of Transmittal 3
SECTION 1.10.4 No Further Ownership Rights in Shares 4
SECTION 1.10.5 Termination of Payment Fund 4
SECTION 1.10.6 No Liability 4
SECTION 1.11 Stock Options and Restricted Stock 4
SECTION 1.12 Dissenting Shares 5
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 5
SECTION 2.1 Organization, Standing and Corporate Power 5
SECTION 2.2 Capital Structure 6
SECTION 2.3 Subsidiaries 6
SECTION 2.4 Authority; Noncontravention 7
SECTION 2.5 SEC Documents 8
SECTION 2.6 Absence of Certain Changes or Events 9
SECTION 2.7 Absence of Undisclosed Liabilities 10
SECTION 2.8 Benefit Plans 10
SECTION 2.9 Taxes 12
SECTION 2.10 Compliance with Applicable Laws 14
SECTION 2.11 Insurance Issued 16
SECTION 2.12 Rating Agencies 17
SECTION 2.13 Opinion of Financial Advisor 17
SECTION 2.14 Brokers 18
SECTION 2.15 Environmental 18
SECTION 2.16 Litigation 18
SECTION 2.17 Labor Relations 18
SECTION 2.18 Health Insurance Transaction 19
SECTION 2.19 Voting Requirements 19
<PAGE>ii
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB 19
SECTION 3.1 Organization, Standing and Corporate Power 19
SECTION 3.2 Authority; Noncontravention 19
SECTION 3.3 Litigation 20
SECTION 3.4 Financing 21
SECTION 3.5 Brokers 21
SECTION 3.6 Voting Requirements 21
ARTICLE 4 ADDITIONAL AGREEMENTS 21
SECTION 4.1 Preparation of Proxy Statement; Information Supplied 21
SECTION 4.1.1 Proxy Statement 21
SECTION 4.1.2 Company Information 21
SECTION 4.1.3 Acquiror Information 21
SECTION 4.2 Meeting of Stockholders 21
SECTION 4.3 Access to Information; Confidentiality 22
SECTION 4.4 Reasonable Best Efforts 22
SECTION 4.5 Public Announcements 22
SECTION 4.6 Acquisition Proposals 23
SECTION 4.7 Fiduciary Duties 23
SECTION 4.8 Filings; Other Action 24
SECTION 4.9 Indemnification 24
SECTION 4.10 Employee Benefits 25
SECTION 4.10.1 Severance 25
SECTION 4.10.2 Retiree Life and Health Plan 26
SECTION 4.10.3 Directors' Retirement Income Plan 26
SECTION 4.10.4 Transition Plan 26
SECTION 4.11 Office Property 26
SECTION 4.12 Letter of the Company's Accountants 26
SECTION 4.13 Litigation 27
SECTION 4.14 Failure to Close 27
ARTICLE 5 COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER 27
SECTION 5.1 Conduct of Business by the Company 27
SECTION 5.2 Management of the Company and Significant Subsidiaries 30
SECTION 5.3 Conduct of Business of Merger Sub 30
SECTION 5.4 Other Actions 30
SECTION 5.5 Employee Benefit Payments 30
SECTION 5.6 United Way Contribution 32
SECTION 5.7 Further Assurances 32
<PAGE>iii
ARTICLE 6 CONDITIONS PRECEDENT 32
SECTION 6.1 Conditions to Each Party's Obligation To Effect
the Merger 32
SECTION 6.1.1 Stockholder Approval 32
SECTION 6.1.2 Governmental and Regulatory Consents 32
SECTION 6.1.3 HSR Act 33
SECTION 6.1.4 No Injunctions or Restraints 33
SECTION 6.2 Conditions to Obligations of Acquiror and Merger Sub 33
SECTION 6.2.1 Representations and Warranties 33
SECTION 6.2.2 Performance of Obligations of the Company 33
SECTION 6.3 Conditions to Obligation of the Company 33
SECTION 6.3.1 Representations and Warranties 33
SECTION 6.3.2 Performance of Obligations of Acquiror
and Merger Sub 34
ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER 34
SECTION 7.1 Termination 34
SECTION 7.2 Effect of Termination 35
SECTION 7.3 Amendment 36
SECTION 7.4 Extension; Waiver 36
SECTION 7.5 Procedure for Termination, Amendment, Extension or Waiver 36
ARTICLE 8 SURVIVAL OF PROVISIONS 36
SECTION 8.1 Survival 36
ARTICLE 9 NOTICES 36
SECTION 9.1 Notices 36
ARTICLE 10 MISCELLANEOUS 37
SECTION 10.1 Entire Agreement 37
SECTION 10.2 Expenses 38
SECTION 10.3 Counterparts 38
SECTION 10.4 No Third Party Beneficiary 38
SECTION 10.5 Governing Law 38
SECTION 10.6 Assignment; Binding Effect 38
SECTION 10.7 Headings, Gender, etc 38
SECTION 10.8 Invalid Provisions 39
<PAGE>1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made
and entered into as of September 20, 1997 by and among Conseco,
Inc., an Indiana corporation ("Acquiror"), Granite Merger Corp.,
a Delaware corporation and a wholly-owned subsidiary of Acquiror
("Merger Sub"), and Washington National Corporation, a Delaware
corporation (the "Company").
PREAMBLE
WHEREAS, the respective Boards of Directors of Acquiror and
the Company have determined that the Merger (as defined in
Section 1.1) is in the best interests of their respective
stockholders and have approved the Merger, upon the terms and
subject to the conditions set forth herein;
WHEREAS, Acquiror, Merger Sub and the Company desire to make
certain representations, warranties, covenants and agreements in
connection with such Merger; and
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.1 The Merger. Subject to the terms and
conditions of this Agreement, at the Effective Time (as is
defined in Section 1.3 hereof), Merger Sub shall be merged with
and into the Company (the "Merger"), in accordance with the
Delaware General Corporation Law (the "Delaware Code"), and the
separate corporate existence of Merger Sub shall cease and the
Company shall continue as the surviving corporation under the
laws of the State of Delaware (the "Surviving Corporation") with
all the rights, privileges, immunities and powers, and subject to
all the duties and liabilities, of a corporation organized under
the Delaware Code. The Merger shall have the effects set forth in
the Delaware Code.
SECTION 1.2 Closing. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have
been abandoned pursuant to Section 7.1, and subject to the
satisfaction or waiver of the conditions set forth in Article 6,
the closing of the Merger (the "Closing") will take place at 9:00
a.m. on the second business day following the date on which the
last of the conditions set forth in Article 6 shall be fulfilled
or waived in accordance with this Agreement (the "Closing Date"),
at the offices of Schiff Hardin & Waite, 7200 Sears Tower, 233
Wacker Drive, Chicago, Illinois 60606, unless another date, time
or place is agreed to in writing by the parties hereto.
SECTION 1.3 Effective Time. The parties hereto will file
with the Secretary of State of the State of Delaware (the
"Delaware Secretary of State") on the date of the Closing
(or on such other date as Acquiror and the Company may
agree) a certificate of merger or other appropriate
<PAGE>2
documents, mutually satisfactory in form and substance to
Acquiror and the Company and executed in accordance with
the relevant provisions of the Delaware Code, and make
all other filings or recordings required under the
Delaware Code in connection with the Merger. The Merger shall
become effective upon the filing of the certificate of merger
with the Delaware Secretary of State, or at such later time as
is specified in the certificate of merger (the "Effective Time").
SECTION 1.4 Certificate of Incorporation. At the Effective
Time, the Certificate of Incorporation of Merger Sub shall be the
Certificate of Incorporation of the Surviving Corporation until
thereafter amended in accordance with its terms and as provided
by applicable law.
SECTION 1.5 By-Laws. The By-Laws of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the By-
Laws of the Surviving Corporation until thereafter amended as
provided by law, the By-Laws or the Certificate of Incorporation
of the Surviving Corporation.
SECTION 1.6 Directors. The directors of Merger Sub at the
Effective Time shall be the directors of the Surviving
Corporation and will hold office from the Effective Time until
their respective successors are duly elected or appointed and
qualify in the manner provided in the Certificate of
Incorporation or By-Laws of the Surviving Corporation, or as
otherwise provided by law.
SECTION 1.7 Officers. The officers of Merger Sub at the
Effective Time shall be the officers of the Surviving Corporation
and will hold office from the Effective Time until their
respective successors are duly elected or appointed and qualify
in the manner provided in the Certificate of Incorporation or By-
Laws of the Surviving Corporation, or as otherwise provided by
law.
SECTION 1.8 Effect of Merger on Merger Sub Capital Stock.
Each share of capital stock of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into
one validly issued, fully paid and nonassessable share of common
stock, par value $.001 per share, of the Surviving Corporation.
SECTION 1.9 Conversion of Common Shares.
SECTION 1.9.1 Outstanding Common Shares. Subject to
the other provisions of this Section 1.9, each share of
common stock, $5.00 par value, of the Company (the "Common
Shares") issued and outstanding immediately prior to the
Effective Time (other than shares held as treasury shares by
the Company and Dissenting Shares (as defined in Section
1.12 below)) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into
the right to receive $33.25 in cash, without interest (the
"Merger Consideration").
SECTION 1.9.2 Treasury Shares. Each Common Share
issued and outstanding immediately prior to the Effective
Time which is then held as a treasury share by the Company
immediately prior to the Effective Time shall, by virtue of
the Merger and without any action
<PAGE>3
on the part of the Company, be cancelled and retired
and cease to exist, without any conversion thereof.
SECTION 1.10 Exchange of Certificates and Related Matters.
SECTION 1.10.1 Paying Agent. As of the Effective Time,
Acquiror shall deposit with its transfer agent and registrar
or another bank selected by Acquiror and reasonably
acceptable to the Company (the "Paying Agent"), for the
benefit of the holders of Common Shares, cash in an
aggregate amount equal to the aggregate Merger Consideration
(such amount being sometimes hereinafter referred to as the
"Payment Fund").
SECTION 1.10.2 Exchange Procedure. Upon surrender to
the Paying Agent of a certificate representing Common Shares
for cancellation, together with a letter of transmittal and
such other customary documents as may be required by the
instructions to the letter of transmittal (collectively, the
"Certificate") and acceptance thereof by the Paying Agent,
the holder of such Certificate shall be entitled to receive
in exchange therefor the amount of cash into which the
number of Common Shares previously represented by such
Certificate shall have been converted pursuant to Section
1.9.1. The Paying Agent shall accept such Certificate upon
compliance with such reasonable terms and conditions as the
Paying Agent may impose to effect an orderly exchange
thereof in accordance with normal exchange practices. If the
Merger Consideration (or any portion thereof) is to be
delivered to any person other than the person in whose name
the Certificate representing Common Shares surrendered in
exchange therefor is registered on the record books of the
Company, it shall be a condition to such exchange that the
Certificate so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the person
requesting such exchange shall pay to the Paying Agent any
transfer or other taxes required by reason of the payment of
such consideration to a person other than the registered
holder of the Certificate surrendered, or shall establish to
the satisfaction of the Paying Agent that such tax has been
paid or is not applicable. After the Effective Time, there
shall be no further transfer on the records of the Company
or its transfer agent of any Certificate representing Common
Shares and if any such Certificate is presented to the
Company for transfer, it shall be cancelled against delivery
of the Merger Consideration as hereinabove provided. Until
surrendered as contemplated by this Section 1.10.2, each
Certificate representing Common Shares (other than a
Certificate representing Common Shares to be cancelled in
accordance with Section 1.9.2), shall be deemed at any time
after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration,
without any interest thereon.
SECTION 1.10.3 Letter of Transmittal. Promptly after
the Effective Time (but in no event more than five business
days thereafter), Acquiror shall require the Paying Agent to
mail to each record holder of Certificates that immediately
prior to the Effective Time represented Common Shares which
have been converted pursuant to Section 1.9, a letter of
transmittal (which shall specify that delivery shall be
effected, and risk of loss and title shall pass, only upon
proper delivery of Certificates representing Common Shares
to the Paying Agent and shall be in such form and have such
provisions as Acquiror reasonably may specify) and
<PAGE>4
instructions for use in surrendering such Certificates and
receiving the Merger Consideration to which such holder
shall be entitled therefor pursuant to Section 1.9.
SECTION 1.10.4 No Further Ownership Rights in Shares.
The Merger Consideration paid upon the surrender for
exchange of Certificates representing Common Shares in
accordance with the terms of this Article I shall be deemed
to have been issued and paid in full satisfaction of all
rights pertaining to the Common Shares theretofore
represented by such Certificates, subject, however, to the
Surviving Corporation's obligation (if any) to pay any
dividends or make any other distributions with a record date
prior to the Effective Time which may have been declared by
the Company on such Common Shares in accordance with the
terms of this Agreement or prior to the date of this
Agreement and which remain unpaid at the Effective Time.
SECTION 1.10.5 Termination of Payment Fund. Any
portion of the Payment Fund which remains undistributed to
the holders of the Certificates representing Common Shares
for 120 days after the Effective Time shall be delivered to
Acquiror, upon demand, and any holders of Common Shares who
have not theretofore complied with this Article I shall
thereafter look only to Acquiror and only as general
creditors thereof for payment, without interest, of their
claim for any Merger Consideration with respect to their
Common Shares.
SECTION 1.10.6 No Liability. None of Acquiror, Merger
Sub, the Surviving Corporation or the Paying Agent shall be
liable to any person in respect of any cash, shares,
dividends or distributions payable from the Payment Fund
delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any
Certificates representing Common Shares shall not have been
surrendered prior to seven years after the Effective Time
(or immediately prior to such earlier date on which any
Merger Consideration in respect of such Certificate would
otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 2.4)), any such
cash, shares, dividends or distributions payable in respect
of such Certificate shall, to the extent permitted by
applicable law, become the property of the Surviving
Corporation free and clear of all claims or interest of any
person previously entitled thereto.
SECTION 1.11 Stock Options and Restricted Stock. The
Company has advised Acquiror and hereby confirms that the
Compensation Committee of the Company's Board of Directors (the
"Compensation Committee"), in administering the "Washington
National Corporation Stock Benefit Plan, as Amended" (the
"Plan"), shall, in accordance with the terms of the Plan and the
agreements entered into thereunder with respect to director and
employee stock options to purchase Common Shares ("Employee
Options"), and Common Shares of restricted stock ("Restricted
Stock"), provide for (i) the acceleration of the exercisability
of Employee Options immediately prior to the Effective Time, (ii)
the ability of certain retirees (all of whom are among the
persons identified on Section 2.2 of the Disclosure Schedule) who
have Employee Options to exercise those Employee Options up to
the Effective Time, (iii) the ability of certain individuals
whose employment with the Company was terminated by the Company
prior to the date of this Agreement or whose employment is
terminated by the Company with the consent of the Acquiror
between the date of this Agreement and the Effective Time to
exercise Employee Options for a period ending on the earlier of
the Effective Time
<PAGE>5
and two years from the date of termination of
employment with the Company, and (iv) the acceleration of the
date to immediately prior to the Effective Time on which
restrictions applicable to Restricted Stock shall lapse.
Notwithstanding anything in this Agreement to the contrary, the
Company shall take all actions necessary to cause each Employee
Option outstanding immediately prior to the Effective Time to be
cancelled by the Company, and each holder of a cancelled Employee
Option shall receive from the Company in consideration for the
cancellation of such Employee Option an amount in cash (less
applicable withholding taxes) equal to the product of (i) the
number of Common Shares previously subject to such Employee
Option and (ii) the excess, if any, of the Merger Consideration
over the exercise price per Common Share previously subject to
such Employee Option. The Company shall take all actions
necessary to cause each share of Restricted Stock outstanding
immediately prior to the Effective Time to be cancelled by the
Company, and each holder of a cancelled share of Restricted Stock
shall receive from the Company in consideration for the
cancellation of such Restricted Stock an amount in cash equal to
125% of the Merger Consideration less applicable withholding
taxes.
SECTION 1.12 Dissenting Shares. Notwithstanding anything
in this Agreement to the contrary, the Common Shares outstanding
immediately prior to the Effective Time and held by a holder who
has not voted in favor of the Merger or consented thereto in
writing and who has demanded properly in writing appraisal for
such Common Shares in accordance with Section 262 of the Delaware
Code and who shall not have withdrawn such demand or otherwise
have forfeited appraisal rights shall not be converted into or
represent the right to receive the Merger Consideration
("Dissenting Shares"). Such stockholders shall be entitled to
receive payment of the appraised value of such Common Shares held
by them in accordance with the provisions of such Section 262,
except that all Dissenting Shares held by stockholders who shall
have failed to perfect or who effectively shall have withdrawn or
lost their rights to appraisal of such Common Shares held by them
under such Section 262 shall thereupon be deemed to have been
converted into and to have become exchangeable, as of the
Effective Time, for the right to receive, without any interest
thereon, the Merger Consideration, upon surrender, in the manner
provided in Section 1.10.2, of the Certificate or Certificates
that formerly evidenced such Common Shares. The Company shall
give Acquiror prompt notice of any demands for appraisal received
by the Company, withdrawals of such demands, and any other
instruments served pursuant to Delaware law and received by the
Company, and Acquiror shall have the right to participate in all
negotiations and proceedings with respect to such demands. Prior
to the Effective Time, the Company shall not, except with the
prior written consent of Acquiror, make any payment with respect
to any demands for appraisal, or settle or offer to settle, any
such demands.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Acquiror and
Merger Sub as follows:
SECTION 2.1 Organization, Standing and Corporate Power.
The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has
the requisite corporate power and authority to carry on its
business as now being conducted. The
<PAGE>6
Company is duly qualified to do business and is in good
standing as a foreign corporation in the states of Illinois
and Indiana, which are the only jurisdictions in which the
nature of its business or the ownership or leasing of its
properties makes such qualification necessary, except where the
failures to be so qualified would not individually or in the
aggregate have a Material Adverse Effect. As used in this
Agreement, the term "Material Adverse Effect" means with respect
to the Company a material adverse effect on the business,
assets, liabilities, results of operations or financial
condition of the Company (including, immediately after the
Merger, the Surviving Corporation) and its subsidiaries taken
as a whole, or on the ability of the Company to consummate the
transactions contemplated by this Agreement. The Company has
delivered to Acquiror complete and correct copies of the
Certificate of Incorporation and By-Laws of the Company and the
comparable documents of the Company's Significant Subsidiaries,
as amended to the date of this Agreement.
SECTION 2.2 Capital Structure. The authorized capital
stock of the Company consists of 60,000,000 Common Shares and
10,000,000 shares of preferred stock, $5.00 par value. At the
close of business on September 19, 1997, (i) 12,048,004 Common
Shares were issued and outstanding; (ii) 3,799,037 Common Shares
were held as treasury stock; (iii) 0 Common Shares were held by
Subsidiaries of the Company; (iv) 869,805 Common Shares were
reserved for issuance upon the exercise of issued options to
purchase Common Shares; (v) 29,118 Common Shares were reserved
for issuance in connection with the Company's dividend
reinvestment plan; and (vi) no shares of preferred stock were
issued or outstanding. All outstanding shares of capital stock
of the Company are duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights. No bonds,
debentures, notes or other indebtedness of the Company having the
right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which the
stockholders of the Company may vote are issued or outstanding.
Section 2.2 of the Disclosure Schedule sets forth the following
information with respect to each Employee Option and Restricted
Stock award outstanding on the date hereof, and each Restricted
Stock award which has been forfeited by an Eligible Employee (as
defined in Section 5.5): (x) the name of the recipient, (y) the
number of Common Shares subject to such Employee Option and
Restricted Stock award, and (z) the applicable exercise price for
each Employee Option. Except as set forth above or in Section 2.2
of the Disclosure Schedule, the Company does not have any
outstanding option, warrant, subscription or other right,
agreement or commitment which either obligates the Company to
issue, sell or transfer, repurchase, redeem or otherwise issue,
acquire or vote any shares of capital stock of the Company, or
which restricts the transfer of Common Shares.
SECTION 2.3 Subsidiaries. (i) Section 2.3 of the
Disclosure Schedule sets forth the name of each subsidiary of the
Company (the "Subsidiaries") and the state or jurisdiction of its
incorporation and indicates which Subsidiaries are insurance
companies. Each Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the corporate power and
authority and all necessary government approvals to own, lease
and operate its properties and to carry on its business as now
being conducted, except where the failure to be so organized,
existing and in good standing or to have such power and authority
or necessary governmental approvals would not individually or in
the aggregate have a Material Adverse Effect. Each Subsidiary is
duly qualified or licensed and in good standing to do business in
each jurisdiction in which the property owned, leased or operated
by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except in such
<PAGE>7
jurisdictions where the failure to be so duly qualified or
licensed and in good standing would not individually or in the
aggregate have a Material Adverse Effect. For purposes of this
Agreement, a "Significant Subsidiary" of the Company means each
of Washington National Insurance Company ("WNIC"), United
Presidential Corporation and United Presidential Life Insurance
Company ("UPLIC"), which are the only Subsidiaries of the Company
that would constitute "significant subsidiaries" within the
meaning of Rule 1-02 of Regulation S-X of the Securities and
Exchange Commission (the "SEC"). Except as disclosed in Section
2.3 of the Disclosure Schedule, each of the Subsidiaries that is
an insurance company is (a) duly licensed or authorized as an
insurance company in its jurisdiction of incorporation and (b)
duly licensed or authorized as an insurance company and in good
standing in each other jurisdiction where it is required to be so
licensed or authorized as set forth in Schedule T to the most
recent Annual Statement (as defined in Section 2.10(iii). The
Subsidiaries of the Company (other than the Significant
Subsidiaries), if considered as a whole, would not constitute a
"significant subsidiary" within the meaning of Rule 1-02 of
Regulation S-X.
(ii) Section 2.3 of the Disclosure Schedule sets forth, as
to each Significant Subsidiary, its authorized capital stock and
the number of its issued and outstanding shares of capital stock.
The Company is, directly or indirectly, the record and beneficial
owner of all of the outstanding shares of capital stock of each
of the Subsidiaries, and no capital stock of any Subsidiary is or
may become required to be issued by reason of any options,
warrants, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights
convertible into or exchangeable or exercisable for, shares of
any capital stock of any Subsidiary, and there are no contracts,
commitments, understandings or arrangements by which the Company
or any Subsidiary is or may be bound to issue, redeem, purchase
or sell additional shares of capital stock of any Subsidiary or
securities convertible into or exchangeable or exercisable for
any such shares. All of such shares so owned by the Company are
validly issued, fully paid and nonassessable and are owned by it
or by another wholly-owned Subsidiary thereof free and clear of
all liens, claims, encumbrances, restraints on alienation, or any
other restrictions with respect to the transferability or
assignability thereof (other than restrictions on transfer
imposed by federal or state securities laws).
SECTION 2.4 Authority; Noncontravention. The Company has
the requisite corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated
hereby have been duly authorized by all necessary corporate
action on the part of the Company, subject, in the case of the
Merger, to the approval of its stockholders as set forth in
Section 4.2. This Agreement has been duly executed and delivered
by the Company and, assuming this Agreement has been duly
executed and delivered by Acquiror and Merger Sub, constitutes a
valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms except that the
enforcement thereof may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in
effect relating to creditor's rights generally and (b) general
principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity). Except as
disclosed in Section 2.4 of the Disclosure Schedule, the
execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement
and compliance with the provisions hereof will not, (i) conflict
with any of the provisions of the Certificate of Incorporation or
By-Laws of the
<PAGE>8
Company or the comparable documents of any of the
Significant Subsidiaries, (ii) subject to the governmental
filings and other matters referred to in the following sentence,
conflict with, result in a breach of or default (with or without
notice or lapse of time, or both) under, or give rise to a right
of termination, cancellation or acceleration of any obligation or
loss of a material benefit under, or require the consent of any
person under, any indenture or other agreement, permit,
concession, franchise, license or similar instrument or
undertaking to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries or any
of their assets is bound or affected or result in the creation or
imposition of any lien, claim or encumbrance on any asset of the
Company or any of its Subsidiaries, or (iii) subject to the
governmental filings and other matters referred to in the
following sentence, contravene any law, rule or regulation of any
state or of the United States or any political subdivision
thereof or therein, or any order, writ, judgment, injunction,
decree, determination or award currently in effect, subject, in
the case of clause (ii), to those conflicts, breaches, defaults
and similar matters, which, individually or in the aggregate,
would not have a Material Adverse Effect nor materially and
adversely affect the Company's ability to consummate the
transactions contemplated hereby. No consent, approval or
authorization of, or declaration or filing with, or notice to,
any governmental agency or regulatory body, court, agency,
commission, division, department, public body or other authority
(a "Governmental Entity") which has not been received or made, is
required by or with respect to the Company or any Significant
Subsidiary in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of
the transactions contemplated hereby, except for (i) the filing
of premerger notification and report forms under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act") with respect to the Merger, (ii) the filings and/or notices
required under the insurance laws of the jurisdictions set forth
in Section 2.3 of the Disclosure Schedule, (iii) the filing with
the SEC of (x) a proxy statement relating to the approval by the
stockholders of the Company of the Merger (the "Proxy
Statement"), and (y) such reports under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), as may be required
in connection with this Agreement and the transactions
contemplated by this Agreement, (iv) the filing of the
certificate of merger with the Delaware Secretary of State and
appropriate documents with the relevant authorities of other
states in which the Company is qualified to do business, and (v)
such other consents, approvals, authorizations, filings or
notices as are set forth in Section 2.4 of the Disclosure
Schedule.
SECTION 2.5 SEC Documents. The Company has timely filed all
required reports, schedules, forms, statements and other
documents with the SEC since January 1, 1995 (such reports,
schedules, forms, statements and other documents are hereinafter
referred to as the "SEC Documents"). As of their respective
dates, the SEC Documents complied with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), or the
Exchange Act, as the case may be, and the rules and regulations
of the SEC promulgated thereunder applicable to such SEC
Documents, and none of the SEC Documents as of such dates
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
consolidated financial statements of the Company included in the
SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared
in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods
<PAGE>9
involved (except as may be indicated in the notes thereto or, in
the case of unaudited interim financial statements, as permitted
by Rule 10-01 of Regulation S-X) and fairly present, in all
material respects, the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates thereof
and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited
interim financial statements, to normal year-end audit
adjustments) in accordance with GAAP.
SECTION 2.6 Absence of Certain Changes or Events. Except as
disclosed in the SEC Documents filed and publicly available prior
to September 3, 1997 (the "Filed SEC Documents") or in Section
2.6 of the Disclosure Schedule or except as otherwise provided in
this Agreement, since December 31, 1996, the Company and its
Subsidiaries have conducted their business only in the ordinary
course, and except as otherwise expressly permitted by this
Agreement, there has not been (i) any change which has had or
which could reasonably be expected to have a Material Adverse
Effect, (ii) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or
property) with respect to any of the Company's outstanding
capital stock (other than regular quarterly cash dividends of
$.27 per Common Share and $.62 1/2 per share of $2.50 Convertible
Preferred Stock, $5.00 par value (the Preferred Stock) in
accordance with usual record and payment dates and in accordance
with the Company's present dividend policy), (iii) any split,
combination or reclassification of any of its outstanding capital
stock or any issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for
shares of its outstanding capital stock, (iv) (x) any granting by
the Company or any of its Subsidiaries to any director, officer
or other employee of the Company or any of its Subsidiaries of
any increase in compensation, except in the case of employees in
the ordinary course of business consistent with prior practice,
or as was required under employment agreements in effect as of
the date of the most recent audited financial statements included
in the Filed SEC Documents, (y) any granting by the Company or
any of its Subsidiaries to any such director, officer or other
employee of any increase in severance or termination pay, (z) any
entry by the Company or any of its Subsidiaries into any
employment, severance, change of control, termination or similar
agreement with any officer, director or other employee, (v) any
change in the method of accounting or policy used by the Company
or any of its Subsidiaries and disclosed in the financial
statements included in the Filed SEC Documents or in the Annual
Statement or the Quarterly Statement (as those terms are defined
in Section 2.10(iii)) most recently filed and publicly available
prior to the date hereof, other than changes which were required
by GAAP or SAP (as defined in Section 2.10(iii)) or Guideline 22
of the National Association of Insurance Commissioners, (vi) any
material amendment to the insurance policies or annuity contracts
in force of any Significant Subsidiary or any material change in
the methodology used in the determination of the Reserve
Liabilities (as defined in Section 2.10(iv)) of the Significant
Subsidiaries or any reserves contained in the financial
statements included in the Filed SEC Documents or in the Annual
Statement or the Quarterly Statement most recently filed and
publicly available prior to the date hereof with respect to
insurance policies and annuity contracts, (vii) any termination,
amendment, or entrance into as ceding or assuming insurer any
reinsurance, coinsurance or other similar agreement or any trust
agreement or security agreement relating thereto, other than
renewals on substantially the same terms, in the ordinary course
of business, (viii) the introduction of any insurance policy or
annuity contract, (ix) any material changes in their customary
marketing, pricing, underwriting, investing or actuarial
practices and policies or (x) any adoption or amendment in any
material respect by the Company or any of its Subsidiaries
<PAGE>10
of any collective bargaining agreement or any Benefit Plan (as
defined in Section 2.8). Except as disclosed in Section 2.6 of
the Disclosure Schedule, there exist no employment, consulting,
severance, termination or indemnification agreements between the
Company or any of its Subsidiaries and any current or former
employee, officer or director of the Company or any of its
Subsidiaries.
SECTION 2.7 Absence of Undisclosed Liabilities. Except as
disclosed in the Filed SEC Documents or in Section 2.7 of the
Disclosure Schedule or which were incurred after June 30, 1997 in
the ordinary course of business consistent with past practice
(and which, other than liabilities for policy benefits,
individually or in the aggregate, are immaterial in amount), the
Company and its Subsidiaries do not have any material liabilities
or obligations of a nature required by GAAP to be reflected in a
consolidated balance sheet (or reflected in the notes thereto) of
the Company and its Subsidiaries.
SECTION 2.8 Benefit Plans. Section 2.8 of the Disclosure
Schedule sets forth a complete and correct list of all Benefit
Plans (as defined below). Except as disclosed in Section 2.8 of
the Disclosure Schedule:
(i) Each "employee pension benefit plan" (as defined
in Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) (hereinafter a "Pension
Plan"), "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA) (hereinafter a "Welfare Plan"), and
each other plan, program, arrangement or policy (written or
oral) relating to bonuses, deferred compensation,
performance compensation, compensation, stock purchases,
stock options, stock appreciation, severance, salary
continuation, vacation, sick leave, holiday pay, fringe
benefits, personnel policies, reimbursement programs,
incentives, insurance, welfare or other employee benefits,
in each case maintained or contributed to, or required to be
maintained or contributed to, by the Company and its
Subsidiaries for the benefit of any present or former
officers, employees, agents, directors or independent
contractors of the Company or its Subsidiaries (all the
foregoing being herein called "Benefit Plans") has been
administered in accordance with its terms and all applicable
laws and regulations. All required contributions to the
Benefit Plans have been made. The Company, its Subsidiaries
and all the Benefit Plans are in compliance with the
applicable provisions of ERISA, the Internal Revenue Code of
1986, as amended (the "Code"), all other applicable laws and
all applicable collective bargaining agreements. Complete
and correct copies of all current and prior documents,
including all amendments thereto, with respect to each
Benefit Plan have been delivered to Acquiror.
(ii) None of the Company or any other person or entity
that together with the Company is treated as a single
employer under Section 414(b), (c), (m) or (o) of the Code
(each a "Commonly Controlled Entity") has incurred any
liability to a Pension Plan covered by Title IV of ERISA
(other than for contributions not yet due) or to the Pension
Benefit Guaranty Corporation (other than for the payment of
premiums not yet due) which liability has not been fully
paid as of the date hereof.
<PAGE>11
(iii) No Commonly Controlled Entity is required to
contribute to any "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA) or has withdrawn from any
multiemployer plan where such withdrawal has resulted or
would result in any "withdrawal liability" (within the
meaning of Section 4201 of ERISA) that has not been fully
paid.
(iv) There are no pending or threatened claims (other
than routine benefit claims), lawsuits or arbitrations which
have been asserted or instituted against any Benefit Plan,
any of the fiduciaries thereof or the Company or its
Subsidiaries with respect to their duties under the Benefit
Plans.
(v) Neither the Company nor a Commonly Controlled
Entity, nor any of their respective employees or directors,
nor any fiduciary, has engaged in any transaction, including
the execution and delivery of this Agreement and other
agreements, instruments and documents for which execution
and delivery by the Company is contemplated herein, in
violation of Section 406(a) or (b) of ERISA or which is a
"prohibited transaction" (as defined in Section 4975(c)(i)
of the Code) for which no exemption exists under Section
408(b) of ERISA or Section 4975(d) of the Code or for which
no administrative exemption has been granted under Section
408(a) of ERISA.
(vi) The Benefit Plans and their related trusts
intended to qualify under Sections 401 and 501(a) of the
Code, respectively, received favorable determination letters
from the Internal Revenue Service and the Company believes
such Plans and their related trusts continue to qualify and
operate as designed. Any voluntary employee benefit
association which provides benefits to current or former
employees of the Company and its Subsidiaries, or their
beneficiaries received a favorable determination letter from
the Internal Revenue Service and the Company believes such
associations continue to qualify and operate as designed.
(vii) The Company and its Subsidiaries have no
liability (contingent or otherwise) under Section 4069 of
ERISA by reason of a transfer of any underfunded pension
plan.
(viii) Nothing has occurred or is reasonably
expected to occur in connection with the transactions
contemplated by the Reinsurance Agreement dated as of
October 1, 1996, as amended, between WNIC and Trustmark
Insurance Company and the Reinsurance Agreement dated as of
July 31, 1996, as amended, between WNIC and Pioneer Life
Insurance Company which would result in material liabilities
(contingent or otherwise) of the Company and its
Subsidiaries with respect to employees of such discontinued
operations. The amounts of severance pay, pay in lieu of
notice under the Workers Adjustment and Retraining
Notification Act, and other severance benefits incurred or
reasonably expected to be incurred in connection with such
employees is set forth on Section 2.8(viii) of the
Disclosure Schedule.
(ix) Complete and correct copies of the most recent
actuarial reports (including for purposes of Financial
Accounting Standards Board report no. 87, 106 and 112) with
<PAGE>12
respect to each Benefit Plan providing retiree medical or
life insurance coverage for employees of the Company and its
Subsidiaries have been provided to Acquiror. Except as
disclosed in Section 2.8(ix) of the Disclosure Schedule, no
current employee of the Company or its Subsidiaries would be
entitled if his or her employment with the Company and its
Subsidiaries is terminated to any retiree medical or
insurance coverage.
(x) Except as disclosed in Section 2.8(x) of the
Disclosure Schedule any amount that could be received as a
result of any of the transactions contemplated by this
Agreement by any employee, officer or director of the
Company or any of its Subsidiaries under any employment,
severance or termination agreement, other compensation
arrangement or Benefit Plan currently in effect would not be
characterized as an "excess parachute payment" (as such term
is defined in Section 280G of the Code).
(xi) Except as disclosed in Section 2.8(xi) of the
Disclosure Schedule, neither the execution and delivery of
this Agreement nor the consummation of the transactions
contemplated hereby will, as a result of such transactions
or any event occurring thereafter (i) result in any payment
becoming due to any employee (current, former or retired) of
the Company and its Subsidiaries, (ii) increase any benefits
under any Benefit Plan or (iii) result in the acceleration
of the time of payment of, vesting of or other rights with
respect to any such benefits.
(xii) Section 2.8(xii) of the Disclosure Schedule
sets forth the amounts accrued in the financial statements
of the Company for the amounts payable by the Company to any
person covered by the Benefit Plans as of June 30, 1997 and
an accurate computation based on the assumptions set forth
therein of the amounts that will be payable to any such
person for periods thereafter under the Benefit Plans. The
financial statements of the Company include or will include
proper accruals for all applicable benefits and taxes with
respect to the foregoing amounts.
SECTION 2.9 Taxes. Except as disclosed in Section 2.9 of
the Disclosure Schedule:
(i) Each of the Company and its Subsidiaries has duly
filed all tax returns and reports required to be filed by it
or requests for extensions to file such returns or reports
have been timely filed, granted and have not expired, and
all such tax returns are complete and accurate in all
material respects except to the extent that such failures to
file or to have extensions granted that remain in effect or
to be complete and accurate individually and in the
aggregate would not have a Material Adverse Effect. The
Company and each of its Subsidiaries has paid (or the
Company has paid on the Subsidiaries' behalf) all taxes
shown as due on such returns, and the most recent financial
statements contained in the Filed SEC Documents and all SEC
Documents filed prior to the Closing Date reflect an
adequate reserve for all taxes payable by the Company and
the Significant Subsidiaries for all taxable periods and
portions thereof accrued through the date of such financial
statements.
(ii) No deficiencies for any taxes have been proposed,
asserted or assessed against the Company or any of its Sub-
sidiaries that are not adequately reserved for, except for
<PAGE>13
deficiencies that individually and in the aggregate
would not have a Material Adverse Effect, and, except as set
forth on Section 2.9 of the Disclosure Schedule, no requests
for waivers of the time to assess any such taxes have been
granted or are pending. The Federal income tax returns of
the Company and each of its Subsidiaries consolidated in
such returns have been examined by and settled with the
United States Internal Revenue Service, or the statute of
limitations on assessment or collection of any Federal
income taxes due from the Company or the any of its
Subsidiaries has expired, through such taxable years as are
set forth in Section 2.9 of the Disclosure Schedule.
(iii) As used in this Agreement, "taxes" shall
include all Federal, state, local and foreign income,
property, premium, franchise, sales, excise, employment,
payroll, withholding and other taxes, tariffs or
governmental charges of any nature whatsoever and any
interest, penalties and additions to taxes relating thereto.
As used in this Agreement, "tax returns" shall include any
return, report, information return, or other document
(including any related or supporting information) filed or
required to be filed with any governmental agency,
department, commission, board, bureau, or instrumentality in
connection with the determination, assessment, collection,
or administration of any taxes.
(iv) Neither the Company nor any of its Subsidiaries
has made, nor is obligated to make, in connection with the
transactions contemplated by this Agreement or otherwise,
any payments that will not be deductible because of the
application of Section 280G or Section 162(m) of the Code.
(v) Neither the Company nor any of its Subsidiaries
has made any election, filed any consent or entered into any
agreement with respect to taxes that is not reflected on the
federal income tax returns of the Company and its
Subsidiaries for the three years ended December 31, 1996
(copies of which returns have been made available to
Acquiror for review prior to the date of this Agreement) and
that could reasonably be expected to be material to the
Company and the Subsidiaries taken as a whole.
(vi) There will be no subtraction from the policyholder
surplus account of the Significant Subsidiaries under
Section 815 of the Code from December 31, 1996 up to and
including the Effective Time.
(vii) WNIC and UPLIC qualify and will qualify until
the Effective Time as "life insurance companies" within the
meaning of Section 816(a) of the Code and the treasury
regulations thereunder.
(viii) All life insurance contracts issued by any of
the Significant Subsidiaries that are subject to Section
7702 of the Code qualify as "life insurance contracts" under
Section 7702(a) of the Code. Any policies issued by any of
the Significant Subsidiaries that are deemed to be "modified
endowment contracts" under Section 7702(a) of the Code are
being properly monitored by such Significant Subsidiaries.
All annuity contracts issued by any of the Significant
Subsidiaries that are subject to Section 72(s) of the Code
contain all of the necessary provisions of Section 72(s).
All insurance policies issued by any of the Significant
<PAGE>14
Subsidiaries that were represented to policyholders to meet
the requirements of Section 401(a), 403(b), 408(b) or 457 of
the Code are in compliance with such requirements.
(ix) All contracts issued by the Subsidiaries that are
subject to Section 817 of the Code, and the regulations
thereunder, have met the diversification requirements since
the issuance of the contract and will continuously meet
these rules through the Closing Date.
SECTION 2.10 Compliance with Applicable Laws. Except as
disclosed in Section 2.10 of the Disclosure Schedule:
(i) The business of the Company and each of the
Significant Subsidiaries is being conducted in compliance in
all material respects with all applicable laws, including,
without limitation, all insurance laws, ordinances, rules
and regulations, decrees and orders of any Governmental
Entity, and all material notices, reports, documents and
other information required to be filed thereunder within the
last three years were properly filed and were in compliance
in all material respects with such laws.
(ii) Each of the Company and the Significant
Subsidiaries has in effect all Federal, state, local and
foreign government approvals, licenses (including, without
limitation, insurance licenses), permits, certificates,
notices, filings, authorizations, franchises, and rights
("Licenses") which are necessary for it to own, lease or
operate its properties and assets and to conduct its
business as now conducted. The business of each of the
Company and the Significant Subsidiaries has been and is
being conducted in compliance in all material respects with
all such Licenses. All restrictions and limitations on those
Licenses requested or required by any insurance regulator
are disclosed in the Filed SEC Documents or in Section
2.10(ii) of the Disclosure Schedule. All such Licenses are
in full force and effect, and there is no proceeding or
investigation pending or, to the knowledge of the Company,
threatened which could reasonably be expected to lead to the
revocation, amendment, failure to renew, limitation,
suspension or restriction of any such License.
(iii) Each Annual Statement filed by any
Significant Subsidiary of the Company that is an insurance
company with the insurance regulator in its state of
domicile (each, an "Annual Statement") (including without
limitation the Annual Statements of any separate accounts)
for the year ended December 31, 1996, together with all
exhibits and schedules thereto, and financial statements
relating thereto, and any actuarial opinion, affirmation or
certification filed in connection therewith, and each
Quarterly Statement so filed (each, a "Quarterly Statement")
for the quarterly periods ended after January 1, 1997,
together with all exhibits and schedules thereto, with
respect to each Significant Subsidiary that is an insurance
company (including any separate accounts thereof) were
prepared in conformity with the statutory accounting
practices ("SAP") prescribed or permitted by the insurance
regulatory authorities of the applicable state of domicile
applied on a consistent basis, except where disclosed,
present fairly, in all material respects, to the extent
required by and in conformity with SAP, the statutory
financial condition of such Significant Subsidiary
(including any separate accounts thereof) at their
respective dates and the results of operations, changes in
capital and surplus and cash flow of such Significant
Subsidiary
<PAGE>15
(including any separate accounts thereof) for
each of the periods then ended, and were correct in all
material respects when filed and there were no material
omissions therefrom when filed. No deficiencies or
violations material to the financial condition or operations
of any such Significant Subsidiary (including any separate
accounts thereof) have been asserted in writing by any
insurance regulator with respect to the foregoing financial
statements which have not been cured or otherwise resolved
to the satisfaction of such insurance regulator. No
Significant Subsidiary that is an insurance company is
required to file different or supplemental Annual Statements
or Quarterly Statements with the insurance regulators of any
other jurisdiction.
(iv) All reserves and other liabilities reflected in
lines 1, 2, 3 and 4 of page 3 of the 1996 Annual Statement
of each Significant Subsidiary that is an insurance company
("Reserve Liabilities") and all Reserve Liabilities
reflected in the Quarterly Statement or Annual Statement, as
the case may be, filed most recently prior to the Closing
Date (i) were determined in accordance with commonly
accepted actuarial standards consistently applied except as
noted therein, (ii) were fairly stated in accordance with
sound actuarial principles, (iii) were based on actuarial
assumptions which were in accordance with or more
conservative than those appropriate for such insurance
policies and annuity contracts, (iv) met the requirements of
the insurance laws (including laws with respect to cash flow
testing) of the state of domicile and met, in all material
respects, the requirements of the insurance laws (including
laws with respect to cash flow testing) of all other
jurisdictions in which such Significant Subsidiary is
licensed to write insurance or issue annuities and (v)
reflected the related reinsurance, coinsurance and other
similar agreements of such Significant Subsidiary. Adequate
provision for all such Reserve Liabilities has been made
(under commonly accepted actuarial principles consistently
applied) to cover the total amount of all reasonably
anticipated matured and unmatured benefits (including
guaranteed and non-guaranteed benefits), claims and other
liabilities of each Significant Subsidiary under all
insurance policies and annuity contracts under which any
Significant Subsidiary has any liability (including without
limitation, any liability arising under or as a result of
any reinsurance, coinsurance or other similar agreement).
(v) Each Significant Subsidiary that has been or is
required to do so (each such Significant Subsidiary being so
identified on Section 2.10 of the Disclosure Schedule) has
filed all forms, reports, statements and other documents
required by law to be filed by it with the SEC, including,
without limitation, all reports required under the Exchange
Act and all other reports and registration statements,
including, without limitation, in connection with sales of
variable products, and all amendments and supplements to all
such reports and registration statements, and such forms,
reports, statements and other documents including without
limitation those filed after the date hereof, did not at the
time they were filed (at the time they became effective and
remained effective in the case of registration statements
and amendments thereto) contain any untrue statement of a
material fact or omit to state a material fact required to
be stated therein or necessary in order to make the
statements therein, in light of the circumstances under
which they were made, not misleading. Each of the separate
accounts of the Significant Subsidiaries that is required to
be registered as an investment company under the Investment
Company Act of 1940, as amended, is so
<PAGE>16
registered (each of which is listed in Section 2.10(v)
of the Disclosure Schedule). All forms, reports, statements
and other documents required by law to be filed by or on
behalf of such separate accounts with the SEC, including,
without limitation, all registration statements and all
amendments or supplements to all such registration
statements in connection with sales of variable products,
including without limitation those filed after the date
hereof, have been so filed and did not at the time they were
filed (at the time they became effective and remained
effective in the case of registration statements and
amendments thereto) contain any untrue statement of a
material fact or omit to state a material fact required to
be stated therein or necessary in order to make the
statements therein, in light of the circumstances under
which they were made, not misleading.
(vi) Except as set forth in Section 2.10(vi) of the
Disclosure Schedule, (a) the Company and its Significant
Subsidiaries (exclusive of their agents) and, to the
knowledge of the Company (without independent inquiry),
their agents have marketed, sold and issued Company products
in compliance, in all material respects, with all statutes,
laws, ordinances, rules, orders and regulations of any
Governmental Entity applicable to the business of the
Company and its Significant Subsidiaries in the respective
jurisdictions in which such products have been sold
(collectively, "Insurance Laws"), except where the failures
to do so, individually and in the aggregate, have not had
and could not reasonably be expected to have, a Material
Adverse Effect, (b) there are (x) to the knowledge of the
Company, no claims asserted, (y) no actions, suits,
investigations or proceedings by or before any court or
other Governmental Entity or (z) no investigations by or on
behalf of the Company or any Significant Subsidiary (other
than routine investigations in connection with the hiring
practices of the Company or such Significant Subsidiary)
((x), (y) and (z) being collectively referred to as
"Actions") pending or, to the knowledge of the Company,
threatened, against or directly involving the Company,
any of its Significant Subsidiaries or, to the knowledge
of the Company (without independent inquiry), any of
their agents that include allegations that the Company,
any of its Significant Subsidiaries or any of their
agents were in violation of or failed to comply
with such Insurance Laws and, to the knowledge of
the Company, no facts exist which could reasonably be
expected to result in the filing or commencement
of any such Action, which Actions, individually or in
the aggregate, could reasonably be expected to have a
Material Adverse Effect and (c) the Company and its
Significant Subsidiaries are in compliance, in all material
respects, with and have performed, in all material respects,
all obligations required to be performed by each of them
under any cease-and-desist or other order issued by any
insurance regulator or other Governmental Entity to the
Company or any of its Significant Subsidiaries or under any
written agreement, consent agreement, memorandum of
understanding or commitment letter or similar undertaking
entered into between any insurance regulator or other
Governmental Entity and the Company or any of its
Significant Subsidiaries ("Regulatory Agreement"), which
Regulatory Agreement remains in effect on the date hereof,
except where the failure to do so, individually or in the
aggregate, has not had and could not reasonably be expected
to have, a Material Adverse Effect.
SECTION 2.11 Insurance Issued. Except as set forth in
Section 2.11 of the Disclosure Schedule, with respect to all
insurance issued:
<PAGE>17
(i) All insurance policies, annuity contracts and
assumption certificates issued by the Significant
Subsidiaries have been issued, to the extent required by
applicable law, on forms approved by the insurance
regulatory authority of the jurisdiction where issued or
have been filed with and not objected to by such authority
within the period prescribed for such objection, and utilize
premium rates which if required to be filed with or approved
by insurance regulatory authorities have been so filed or
approved and the premiums charged conform thereto.
(ii) All insurance policy and annuity contract benefits
payable by any Significant Subsidiary and, to the knowledge
of the Company, by any another Person that is a party to or
bound by any reinsurance, coinsurance or other similar
agreement with any Significant Subsidiary, have in all
material respects been paid in accordance with the terms of
the insurance policies, annuity contracts and other
contracts under which they arose, except for such benefits
for which there is a reasonable basis to contest payment.
(iii) The Company has not received any information
which would reasonably cause it to believe that the
financial condition of any other party to any reinsurance,
coinsurance or other similar agreement with any Significant
Subsidiary is so impaired as to result in a default
thereunder.
(iv) To the knowledge of the Company, all advertising,
promotional, sales and solicitation materials and product
illustrations used by the Significant Subsidiaries or any
agent of the Significant Subsidiaries have complied and are
in compliance, in all material respects, with all applicable
laws.
(v) To the knowledge of the Company, each insurance
agent, at the time such agent wrote, sold or produced
business for any Significant Subsidiary since January 1,
1993 was duly licensed as an insurance agent (for the type
of business written, sold or produced by such insurance
agent) in the particular jurisdiction in which such agent
wrote, sold or produced such business.
SECTION 2.12 Rating Agencies. Except as disclosed in
Section 2.12 of the Disclosure Schedule, since June 30, 1997,
none of A.M. Best and Company, Standard & Poor's Corporation or
Moody's Investor Services, Inc. (collectively, the "Rating
Agencies") has, other than as a result of the announcement of the
Merger or the transactions contemplated hereby (a) imposed
conditions (financial or otherwise) on retaining any currently
held rating assigned to any of the Significant Subsidiaries that
are insurance companies or (b) indicated to the Company that it
is considering the downgrade of any rating assigned to any of the
Significant Subsidiaries that are insurance companies.
SECTION 2.13 Opinion of Financial Advisor. The Company has
received the written opinion of Morgan Stanley and Co.
Incorporated, dated the date hereof, to the effect that, as of
such date, the Merger Consideration to be received in the Merger
is fair to the Company's stockholders from a financial point of
view.
<PAGE>18
SECTION 2.14 Brokers. Except for Morgan Stanley and Co.
Incorporated, all negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by the
Company directly with Acquiror, without the intervention of any
person on behalf of the Company in such manner as to give rise to
any valid claim by any person against Acquiror, the Company or
any Significant Subsidiary for a finder's fee, brokerage
commission, or similar payment. The Company has provided Acquiror
with true and complete copies of the agreement between the
Company and Morgan Stanley and Co. Incorporated, and the Company
has no other agreements or understandings (written or oral) with
respect to such services.
SECTION 2.15 Environmental. Except as set forth in Section
2.15 of the Disclosure Schedule:
(i) The operations of the Company and the Significant
Subsidiaries are in compliance in all material respects with
all applicable Environmental Laws (as defined).
(ii) There are no actions, investigations or
proceedings pending or, to the knowledge of the Company,
threatened against the Company or the Significant
Subsidiaries alleging the violation of or seeking to impose
liability pursuant to any Environmental Law or Environmental
Permit (as defined);
(iii) The Company has provided Acquiror with copies
of all environmental audits, assessments, studies, reports,
analyses, investigation results or similar environmentally-
related documents of any real property currently or formerly
owned, operated or leased by the Company or any of its
Subsidiaries that are in the possession, custody or control
of the Company or its Subsidiaries.
(iv) As used in this Section 2.15, each of the
following terms shall have the following meanings: (A)
"Environmental Law" means any federal, state, local, or
foreign law, statute, code, ordinance, rule, regulation or
other requirement relating to the environment, natural
resources, or public or employee health and safety; and (B)
"Environmental Permit" means any permit, approval,
authorization, license, variance, registration, or
permission required under any applicable Environmental Law
or order, writ, injunction or decree.
SECTION 2.16 Litigation. Except as set forth in the Filed
SEC Documents or Section 2.16 of the Disclosure Schedule, there
are no suits, claims, actions, proceedings or investigations
pending or, to the knowledge of the Company, threatened against
the Company or any of its Subsidiaries which, individually or in
the aggregate, could reasonably be expected to have a Material
Adverse Effect or could reasonably be expected to impose any
material liability or restriction on the Surviving Corporation or
any affiliate thereof. Neither the Company nor any of its
Subsidiaries are subject to any outstanding orders, writs,
injunctions or decrees which, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
SECTION 2.17 Labor Relations. Except as set forth in
Section 2.17 of the Disclosure Schedule:
<PAGE>19
(i) Neither the Company nor any Significant Subsidiary
is a party to any collective bargaining agreement or other
labor union contract applicable to persons employed by the
Company or Significant Subsidiaries and there are no known
organizational campaigns, petitions or other unionization
activities seeking recognition of a collective bargaining
unit.
(ii) There are no strikes, slowdowns, work stoppages or
material labor relations controversies pending or, to the
knowledge of the Company, threatened between the Company or
any Significant Subsidiary and any of their respective
employees, and neither the Company nor any Significant
Subsidiary has experienced any such strike, slowdown, work
stoppage or material controversy within the past three
years.
SECTION 2.18 Health Insurance Transaction. The Company's
wholly-owned Subsidiary, WNIC, has entered into a Reinsurance
Agreement dated October 1, 1996, as amended, with Trustmark
Insurance Company ("Trustmark") and has complied in all material
respects with its obligations thereunder.
SECTION 2.19 Voting Requirements. The affirmative vote of
the holders of a majority of the outstanding Common Shares
entitled to vote at the Stockholders Meeting (as defined below in
Section 4.2) is the only vote of the holders of any class or
series of the Company's capital stock necessary to approve this
Agreement and the transactions contemplated by this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB
Acquiror and Merger Sub jointly and severally represent and
warrant to the Company as follows:
SECTION 3.1 Organization, Standing and Corporate Power.
Each of Acquiror and Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of its
jurisdiction of incorporation and has the requisite corporate
power and authority to carry on its business as now being
conducted. Each of Acquiror and Merger Sub is duly qualified or
licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership
or leasing of its properties makes such qualification or
licensing necessary except where the failure to be so qualified
would not individually or in the aggregate have a material
adverse effect on the ability of Acquiror or Merger Sub to
consummate the transactions contemplated hereby. Merger Sub has
not engaged in any business since it was incorporated other than
in connection with its organization and the transactions
contemplated by this Agreement.
SECTION 3.2 Authority; Noncontravention. Acquiror and
Merger Sub have all requisite corporate power and authority to
enter into this Agreement and to carry out their obligations
hereunder. The execution and delivery of this Agreement by
Acquiror and Merger Sub and the consummation by Acquiror and
Merger Sub of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of
Acquiror and Merger Sub and by the sole
<PAGE>20
stockholder of Merger Sub. This Agreement has been duly executed
and delivered by and, assuming this Agreement has been duly
executed and delivered by the Company, constitutes a valid and
binding obligation of each of Acquiror and Merger Sub,
enforceable against each of them in accordance with its
terms except that the enforcement thereof may be
limited by (a) bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to
creditor's rights generally and (b) general principles of equity
(regardless of whether enforceability is considered in a
proceeding at law or in equity). The execution and delivery of
this Agreement do not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions
of this Agreement will not (i) conflict with any of the
provisions of the Certificate of Incorporation or By-Laws of
Acquiror or Merger Sub, (ii) subject to the governmental filings
and other matters referred to in the following sentence, conflict
with, result in a breach of or default (with or without notice or
lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or
loss of a material benefit under, or require the consent of any
person under, any indenture, or other agreement, permit,
concession, franchise, license or similar instrument or
undertaking to which Acquiror or any of its subsidiaries is a
party or by which Acquiror or any of its subsidiaries or any of
their assets is bound or affected or result in the creation or
imposition of any lien, claim or encumbrance on any asset of
Acquiror or any of its subsidiaries, or (iii) subject to the
governmental filings and other matters referred to in the
following sentence, contravene any law, rule or regulation of any
state or of the United States or any political subdivision
thereof or therein, or any order, writ, judgment, injunction,
decree, determination or award currently in effect, subject, in
the case of clauses (ii) and (iii), to those conflicts, breaches,
defaults and similar matters, which, individually or in the
aggregate, would not materially and adversely affect Acquiror's
or Merger Sub's ability to consummate the transactions
contemplated hereby. No consent, approval or authorization of, or
declaration or filing with, or notice to, any Governmental Entity
which has not been received or made is required by or with
respect to Acquiror or Merger Sub in connection with the
execution and delivery of this Agreement by Acquiror and Merger
Sub or the consummation by Acquiror or Merger Sub of any of the
transactions contemplated hereby, except for (i) the filing of
premerger notification and report forms under the HSR Act with
respect to the Merger, (ii) the filings and/or notices required
under the insurance laws of the jurisdictions set forth in
Section 2.3 of the Disclosure Schedule, (iii) the filing with the
SEC of such reports under the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated
by this Agreement, (iv) the filing of the certificate of merger
with the Delaware Secretary of State, and appropriate documents
with the relevant authorities of the other states in which the
Company is qualified to do business, and (v) such other consents,
approvals, authorizations, filings or notices as are set forth in
Section 2.4 of the Disclosure Schedule.
SECTION 3.3 Litigation. Except as set forth in Section 3.3
of the Disclosure Schedule, there is no suit, claim, action,
proceeding or investigation pending or, to the knowledge of
Acquiror, threatened against Acquiror or any of its subsidiaries
which, individually or in the aggregate, could reasonably be
expected to have a material adverse effect on the ability of
Acquiror or Merger Sub to consummate the transactions
contemplated hereby. Neither Acquiror nor any its subsidiaries is
subject to any outstanding order, writ, injunction or decree
which, individually or in the aggregate, could reasonably be
expected to have a material adverse effect on the ability of
Acquiror or Merger Sub to consummate the transactions
contemplated hereby.
<PAGE>21
SECTION 3.4 Financing. Acquiror will have available at the
Closing all funds necessary to pay the Merger Consideration on
the terms and subject to the conditions contemplated by this
Agreement.
SECTION 3.5 Brokers. All negotiations relative to this
Agreement and the transactions contemplated hereby have been
carried out by Acquiror directly with the Company, without the
intervention of any person on behalf of Acquiror in such manner
as to give rise to any valid claim by any person against the
Company or any Significant Subsidiary for a finder's fee,
brokerage commission, or similar payment.
SECTION 3.6 Voting Requirements. No vote of any class or
series of Acquiror capital stock is necessary to approve this
Agreement and to consummate the transactions contemplated by this
Agreement.
ARTICLE 4
ADDITIONAL AGREEMENTS
SECTION 4.1 Preparation of Proxy Statement; Information
Supplied.
SECTION 4.1.1 Proxy Statement. As soon as practicable
following the date of this Agreement, the Company shall
prepare and file with the SEC the Proxy Statement. The
Company will use its reasonable best efforts to cause the
Proxy Statement to be mailed to the Company's stockholders
as promptly as practicable.
SECTION 4.1.2 Company Information. The Company agrees
that none of the information supplied or to be supplied by
the Company specifically for inclusion in the Proxy
Statement will, at the date it is first mailed to the
Company's stockholders or at the time of the Stockholders
Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated
therein or necessary in order to make the statements
therein, in light of the circumstances under which they are
made, not misleading. The Proxy Statement will comply as to
form in all material respect with the requirements of the
Exchange Act and the rules and regulations thereunder.
SECTION 4.1.3 Acquiror Information. Acquiror agrees
that none of the information supplied or to be supplied by
Acquiror specifically for inclusion in the Proxy Statement
will, at the date it is first mailed to the Company's
stockholders or at the time of the Stockholders Meeting,
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary in order to make the statements therein, in light
of the circumstances under which they are made, not
misleading.
SECTION 4.2 Meeting of Stockholders. The Company will take
all action necessary in accordance with applicable law and its
Certificate of Incorporation and By-laws to convene a meeting of
its stockholders (the "Stockholders Meeting") to consider and
vote upon the approval of this Agreement and the Merger. Subject
to Section 4.7 hereof, the Company will, through its Board
<PAGE>22
of Directors, recommend to its stockholders approval of this
Agreement and the Merger. Without limiting the generality of the
foregoing, the Company agrees that, subject to its right to
terminate this Agreement pursuant to Section 4.7, its obligations
pursuant to the first sentence of this Section 4.2 shall not be
affected by (i) the commencement, public proposal, public
disclosure or communication to the Company of any Acquisition
Proposal (as defined in Section 4.6) or (ii) the withdrawal or
modification by the Board of Directors of the Company of its
approval or recommendation of this Agreement or the Merger. The
Company will use its reasonable best efforts to hold the
Stockholders Meeting as soon as practicable after the date
hereof.
SECTION 4.3 Access to Information; Confidentiality. Upon
reasonable notice, the Company shall, and shall cause its
Subsidiaries to, afford to Acquiror and to the officers,
employees, accountants, auditors, actuaries, counsel, financial
advisors and other representatives of the Company, reasonable
access during normal business hours during the period prior to
the Effective Time to all its properties, books, contracts,
commitments, personnel and records. During such period, the
Company will, and will cause its Significant Subsidiaries to,
make a reasonable amount of office space (including standard
office equipment) at its offices in Lincolnshire, Illinois and
Kokomo, Indiana, available to such agents, employees, advisers
and other representatives of Acquiror as Acquiror shall
designate. During such period, the Company shall furnish
promptly to Acquiror, upon request, a copy of (i) each SAP Annual
Statement and SAP Quarterly Statement filed by its Subsidiaries
(including any separate account) during such period pursuant to
the requirements of any applicable law, (ii) each SEC Document
filed by it (including any separate account) during such period,
and (iii) all correspondence or written communication with A.M.
Best and Company, Standard & Poor's Corporation, Moody's Investor
Services, Inc., and with any Governmental Entity or insurance
regulatory authorities which relates to the transactions
contemplated hereby or which is otherwise material to the
financial condition or operations of the Company and its
Subsidiaries taken as a whole. During such period, the Company
shall furnish to Acquiror such other financial, operating and
other data as may be reasonably requested by Acquiror in order to
perform its investigation regarding the representations and
warranties made by the other party pursuant to this Agreement.
Except as required by law, each of the Company and Acquiror will
hold, and will cause its respective directors, officers,
partners, employees, accountants, counsel, financial advisors and
other representatives and affiliates to hold, any nonpublic
information obtained from the other party in confidence to the
extent required by, and in accordance with, the provisions of the
letter dated July 22, 1996 between Acquiror and the Company (the
"Confidentiality Agreement") (in the case of the Company as
though it were the party receiving information thereunder).
SECTION 4.4 Reasonable Best Efforts. Upon the terms and
subject to the conditions and other agreements set forth in this
Agreement, each of the parties agrees to use its reasonable best
efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other
parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated
by this Agreement.
SECTION 4.5 Public Announcements. Acquiror and the
Company will consult with each other before issuing, and
shall provide each other a reasonable opportunity to review
and comment upon, any press release or public statement
with respect to this Agreement or the transactions
<PAGE>23
contemplated hereby, except to the extent disclosure prior to
such consultation, review and comment may be required by
applicable law, court process or obligations pursuant to any
listing agreement with any national securities exchange. The
parties shall also consult with each other before engaging in
any communications with A.M. Best and Company with respect to
this Agreement or the transactions contemplated hereby.
SECTION 4.6 Acquisition Proposals. The Company shall not,
nor shall it authorize or permit any officer, director or
employee of, or any investment banker, attorney or other advisor
or representative of, the Company or any of its Subsidiaries to,
directly or indirectly, (i) solicit, initiate or encourage the
submission of any Acquisition Proposal (as defined) or (ii)
participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or take
any other action to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead
to, any Acquisition Proposal; provided, however, that nothing
contained in this Section 4.6 shall prohibit the Board of
Directors of the Company from furnishing information to, or
entering into discussions or negotiations with, any person or
entity that makes an unsolicited Acquisition Proposal after the
date hereof if, and only to the extent that, (A) the Board of
Directors of the Company, after consultation with and based upon
the advice of outside counsel, concludes in good faith that such
action is necessary for the Board of Directors of the Company to
comply with its fiduciary duties to stockholders under applicable
law and (B) the Company (x) provides reasonable notice to
Acquiror to the effect that it is taking such action and (y)
receives from such person or entity an executed confidentiality
agreement substantially similar to the Confidentiality Agreement,
except that such confidentiality agreement need not prohibit such
person or entity from making an unsolicited Acquisition Proposal
to the Board of Directors of the Company. Notwithstanding
anything in this Agreement to the contrary, the Company shall
promptly advise Acquiror orally and in writing of the receipt by
it (or by any of the other entities or persons referred to above)
after the date hereof of any Acquisition Proposal, or any inquiry
which could lead to any Acquisition Proposal, the material terms
and conditions of such Acquisition Proposal or inquiry, and the
identity of the person or entity making any such Acquisition
Proposal or inquiry, provided that the Company shall have no
obligation to disclose the identity of such person or entity if
such disclosure would violate the terms of any agreement
outstanding on the date hereof with such person or entity, or the
Board of Directors, after consultation with and based upon the
advice of outside counsel, concludes in good faith that such
disclosure would violate its fiduciary duties or would be
otherwise inconsistent with applicable law. For purposes of this
Agreement, "Acquisition Proposal" means any bona fide proposal
with respect to a merger, consolidation, share exchange or
similar transaction involving the Company or any Significant
Subsidiary, or any purchase (including without limitation by way
of any reinsurance transaction) of all or any significant portion
of the assets of the Company or any Significant Subsidiary, or
any other business combination (including without limitation the
acquisition of an equity interest therein) involving the Company
or any Significant Subsidiary, other than the transactions
contemplated hereby.
SECTION 4.7 Fiduciary Duties. The Board of Directors of
the Company shall not (i) withdraw or modify the approval or
recommendation by such Board of Directors of this Agreement or
the Merger, (ii) approve or recommend an Acquisition Proposal or
(iii) enter into any agreement with respect to any Acquisition
Proposal, unless the Company receives an Acquisition Proposal
and the Board of Directors of the Company concludes
in good faith, after consultation with and based
<PAGE>24
upon the advice of outside counsel, that in order to comply
with its fiduciary duties to stockholders under applicable
law it is necessary for the Board of Directors to
withdraw or modify its approval or recommendation
of this Agreement or the Merger, approve or recommend such
Acquisition Proposal or enter into an agreement with respect to
such Acquisition Proposal. Nothing contained in this Section 4.7
shall prohibit the Company from taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a) promulgated
under the Exchange Act or from making any disclosure to the
Company's stockholders which, in the good faith judgment of the
Board of Directors of the Company based on advice of outside
counsel, is required under applicable law; provided that the
Company does not withdraw or modify its position with respect to
the Merger or approve, recommend or otherwise support an
Acquisition Proposal, except under the circumstances described in
the immediately preceding sentence. Notwithstanding anything
contained in this Agreement to the contrary, any action by the
Board of Directors permitted by this Section 4.7 shall not
constitute a breach of this Agreement by the Company.
SECTION 4.8 Filings; Other Action. As promptly as
practicable, (i) the Company and Acquiror shall make all filings
and submissions under the HSR Act, (ii) Acquiror shall make all
filings required by the insurance regulatory authorities in
Illinois and in Indiana and deliver notices and consents to
jurisdiction to such state insurance departments, each as
reasonably may be required to be made in connection with this
Agreement and the transactions contemplated hereby, and (iii) the
Company and Acquiror shall cooperate in all reasonable respects
with each other in (A) determining if other filings are required
to be made prior to the Effective Time with, or if other material
consents, approvals, permits, notices or authorizations are
required to be obtained prior to the Effective Time from any
Governmental Entity in connection with the execution and delivery
of this Agreement and the consummation of the transactions
contemplated hereby and (B) timely making all such filings and
timely seeking all such consents, approvals, permits, notices or
authorizations. In connection with the foregoing, the Company
will provide Acquiror, and Acquiror will provide the Company,
with copies of correspondence, filings or communications (or
memoranda setting forth the substance thereof) between such party
or any of its representatives, on the one hand, and any
Governmental Entity or members of their respective staffs, on the
other hand, with respect to this Agreement and the transactions
contemplated hereby. Each of Acquiror and the Company acknowledge
that certain actions may be necessary with respect to the
foregoing in making notifications and obtaining clearances,
consents, approvals, waivers or similar third party actions which
are material to the consummation of the transactions contemplated
hereby, and each of Acquiror and the Company agree to take such
action as is reasonably necessary to complete such notifications
and obtain such clearances, approvals, waivers or third party
actions.
SECTION 4.9 Indemnification. (i) From and after the
Effective Time, Acquiror and the Company agree that the Surviving
Corporation will indemnify and hold harmless each present and
former director and officer of the Company and its Subsidiaries,
determined as of the Effective Time (the "Indemnified Parties"),
against any costs or expenses (including reasonable attorneys'
fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of or
pertaining to matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after
the Effective Time, to the fullest extent that the Company or
such Subsidiary would have been permitted under applicable law
and the Certificate
<PAGE>25
of Incorporation or By-Laws of the Company or such
Subsidiary in effect on the date hereof to indemnify such
person (and the Surviving Corporation shall also advance expenses
as incurred to the fullest extent permitted under applicable law
provided the person to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined
that such person is not entitled to indemnification). Acquiror
agrees that all rights to indemnification and exculpation
existing in favor of the Indemnified Parties under the
indemnification agreements currently in place between the Company
and any such Indemnified Party and identified in Section 4.9 of
the Disclosure Schedule shall survive and continue in full force
and effect after the Effective Time.
(ii) Any Indemnified Party wishing to claim indemnification
under Section 4.9(i) or (ii), upon learning of such claim,
action, suit, proceeding or investigation, shall promptly notify
the Surviving Corporation thereof, but the failure to so notify
shall not relieve the Surviving Corporation of any liability it
may have to such Indemnified Party if such failure does not
materially prejudice the Surviving Corporation. In the event of
any such claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time), the
Surviving Corporation shall have the right to assume the defense
thereof and the Surviving Corporation shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or
any other expenses subsequently incurred by such Indemnified
Parties in connection with the defense thereof, except that if
the Surviving Corporation elects not to assume such defense, or
counsel for the Indemnified Parties advises that there are
substantial issues which raise conflicts of interest under
applicable legal codes of ethics between the Surviving
Corporation and the Indemnified Parties, the Indemnified Parties
may retain one firm of counsel reasonably satisfactory to the
Surviving Corporation, and the Surviving Corporation shall pay
all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received.
The Surviving Corporation shall not be liable for any settlement
of such action effected without its prior written consent, which
shall not be unreasonably withheld.
(iii) For a period of three years after the Effective
Time, the Surviving Corporation shall cause to be maintained in
effect the Company's current policies of directors' and officers'
liability insurance, the premiums on which insurance have been
paid in full by the Company, (provided that the Surviving
Corporation may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are no
less advantageous in all material respects to the Indemnified
Parties) with respect to claims arising from facts or events
which occurred before the Effective Time.
(iv) The provisions of this Section 4.9 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified
Party, his heirs and his personal representatives and shall be
binding on all successors and assigns of the Surviving
Corporation.
SECTION 4.10 Employee Benefits.
SECTION 4.10.1 Severance. During the 12-month period
commencing on the Effective Time, the Surviving Corporation
shall provide coverage to individuals employed by the
Company or a Significant Subsidiary at the Effective Time in
accordance with the terms of the Company's Severance Pay
Policy (including outplacement services consistent with the
<PAGE>26
Company's current practices) disclosed in Section 4.10.1 of
the Disclosure Schedule as in effect on the date hereof.
SECTION 4.10.2 Retiree Life and Health Plan. The
Surviving Corporation shall provide retiree life and health
benefits to those employees (and to their eligible
dependents) of the Company or a Significant Subsidiary named
in Section 4.10.2 of the Disclosure Schedule who, upon their
retirement before, at or after the Effective Time are or
would be entitled to benefits in accordance with the terms
of the Company's retiree life and health benefits program
included in the Washington National Group Insurance Plan as
in effect on the date hereof, subject to the right of the
Surviving Corporation to make reasonable adjustments to the
retiree health benefits, including, but not limited to,
amounts of deductible, extent of retirees' obligations to
pay premiums, introduction of managed care options or other
adjustments permitted by law or regulation.
SECTION 4.10.3 Directors' Retirement Income Plan. The
Company intends to terminate the Directors' Retirement
Income Plan prior to the Effective Time. If, however, prior
to the Effective Time, the Company has not terminated and
provided for the funding of benefits under the Directors'
Retirement Income Plan, from and after the Effective Time,
the Surviving Corporation will honor, in accordance with its
terms, the Company's Directors' Retirement Income Plan,
revised as set forth in Section 4.10.3 of the Disclosure
Schedule, and shall pay all benefits that become due under
such Plan to any participant therein or to the beneficiary
of a deceased participant, provided nothing herein shall
limit the Surviving Corporation's right after the Effective
Time to terminate such plan and provide for the funding of
benefits thereunder.
SECTION 4.10.4 Transition Plan. The parties agree
with respect to employee and employee benefit matters that,
between the date of this Agreement and the Effective Time,
(i) except as otherwise provided in Sections 1.11 and 5.5 of
this Agreement, the Company shall not, and shall not permit
its Subsidiaries to, enter into, or modify the terms of any
employment agreement, severance agreement or similar
agreement or any Benefit Plan, or make any bonus payment,
without the prior written consent of Acquiror; and (ii) the
Company shall in its reasonable judgment and after
consulting with Acquiror continue to make all decisions with
respect to employees, including hiring and firing decisions,
in the ordinary course of business, consistent with past
practice.
SECTION 4.11 Office Property. Notwithstanding anything in
this Agreement to the contrary, the parties agree that the
Company shall have the right but not the obligation to enter into
a contract providing for the lease or sublease of office property
by the Company on commercially reasonable terms beginning
October 1, 1997 for a term not to exceed one year, provided,
however, that no such lease or sublease shall be entered into
without Acquiror's consent, which consent shall not be
unreasonably withheld.
SECTION 4.12 Letter of the Company's Accountants. The
Company shall use commercially reasonable efforts to cause to be
delivered to Acquiror a letter of Ernst & Young LLP, the
Company's independent public accountants, dated a date within two
business days before the
<PAGE>27
Closing Date, addressed to Acquiror, in form and substance
reasonably satisfactory to Acquiror and customary in scope
and substance for letters delivered by independent public
accountants in connection with similar transactions.
SECTION 4.13 Litigation. The Company shall give Acquiror
the opportunity to participate in the defense or settlement of
any pending litigation disclosed in the Filed SEC Documents or
any litigation against the Company and its directors relating to
the transactions contemplated by this Agreement; provided,
however, that no such settlement shall be agreed to without
Acquiror's consent, which consent shall not be unreasonably
withheld.
SECTION 4.14 Failure to Close. If this Agreement is
terminated for any reason (other than a termination pursuant to
Section 7.1(d)), for two years after the date of this Agreement,
Acquiror will not, and will cause its subsidiaries not to,
solicit for employment any management employee or member of the
sales force of the Company or its Subsidiaries, it being
understood that the term "solicit" for this purpose shall not
include advertising or other broad-based recruiting methods or
solicitation by an employee search firm so long as such search
firm is not encouraged or directed by Acquiror or its
subsidiaries to solicit such employees of the Company or its
Subsidiaries.
ARTICLE 5
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER
SECTION 5.1 Conduct of Business by the Company. Except as
contemplated by this Agreement or as set forth in Section 5.1 of
the Disclosure Schedule, during the period from the date of this
Agreement to the Effective Time, the Company shall, and shall
cause its Subsidiaries to, act and carry on their respective
businesses in the ordinary course of business and, to the extent
consistent therewith, use reasonable best efforts to preserve
intact their current business organizations, keep in full force
and effect their insurance licenses, permits and franchises, keep
available the services of their current key officers, employees,
agents, and field representatives, and preserve the goodwill of
regulators, policyholders or those engaged in material business
relationships with them. In addition, the Company agrees to
allow representatives of Acquiror to have access to the
management and other personnel of the Company and its
Subsidiaries so that Acquiror can be fully informed at all times
as to significant executive, legal, financial, investment,
marketing and other operational matters involving the Company,
its Subsidiaries and their businesses. Without limiting the
generality of the foregoing, during the period from the date of
this Agreement to the Effective Time, the Company shall not, and
shall not permit any of the Subsidiaries to, without the prior
consent of Acquiror:
(i) adopt or propose any change to its Certificate of
Incorporation or By-Laws;
(ii) (x) declare, set aside or pay any dividends on, or
make any other distributions with respect to, any of the
Company's or its Subsidiaries' outstanding capital stock,
other than regular quarterly cash dividends by the Company
and such Subsidiaries, and, in the case of the Company's
regular quarterly cash dividends not in excess of $.27 per
Common Share so long as the Common Shares remain
outstanding, in accordance with usual record and
<PAGE>28
payment dates and in accordance with the Company's present
dividend policy, (y) split, combine or reclassify any
of its outstanding capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of
or in substitution for shares of its outstanding capital
stock or (z) purchase, redeem or otherwise acquire any
shares of capital stock or other securities of, or other
ownership interests of the Company other than the Employee
Options and Restricted Stock to be purchased as contemplated
by Section 1.11 above;
(iii) issue, sell, grant, pledge or otherwise
encumber any shares of its capital stock, any other voting
securities or any securities convertible into, or any
rights, warrants or options to acquire, any such shares,
voting securities or convertible securities other than upon
the exercise of Employee Options outstanding on the date of
this Agreement or the issuance of shares under the Company's
dividend reinvestment plan or issue or make any awards under
any phantom stock plan;
(iv) acquire, form or commence the operations of any
business or any corporation, partnership, joint venture,
association or other business organization or division or
block of in-force business thereof;
(v) take any action that, if taken prior to the date
of this Agreement, would have been required to be disclosed
in Section 2.6 of the Disclosure Schedule or that would
otherwise cause any of the representations and warranties
contained in Article 2 not to be true and correct in all
material respects;
(vi) sell, mortgage or otherwise encumber or subject to
any lien or otherwise dispose of any of its properties or
assets that are material to the Company and the Significant
Subsidiaries taken as a whole, except for the sale of
investments in the ordinary course of business consistent
with past practice;
(vii) (x) except for the dollar amount required to
cancel and cash out the Employee Options and the Restricted
Stock as contemplated by Section 1.11 above, incur any
indebtedness for borrowed money (other than short-term
indebtedness for general corporate purposes not to exceed
$5,000,000 at any time) or guarantee any such indebtedness
of another person, other than indebtedness owing to or
guarantees of indebtedness owing to the Company or any
direct or indirect wholly-owned Subsidiary of the Company or
(y) make any loans or advances to any other person, other
than to the Company, or to any direct or indirect wholly-
owned Subsidiary of the Company and other than routine
advances in the ordinary course of business to employees or
agents, or policyholder loans;
(viii) make any tax election or settle or compromise
any income tax liability that would reasonably be expected
to be material to the Company and the Significant
Subsidiaries taken as a whole;
(ix) pay, discharge, settle or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction, in the ordinary course
of business consistent with past practice or in
<PAGE>29
accordance with their terms of liabilities reflected or
reserved against in, or contemplated by, the most recent
consolidated financial statements (or the notes thereto) of
the Company included in the Filed SEC Documents or incurred
since the date of such financial statements in the ordinary
course of business consistent with past practice;
(x) except in the ordinary course of business, modify,
amend or terminate, or waive, release or assign any material
rights or claims under or enter into or obtain any material
agreement, permit, concession, franchise, license or similar
instrument to which the Company or any Significant
Subsidiary is a party, other than those contracts,
agreements or licenses modified, amended or terminated in
accordance with the terms of the Reinsurance Agreement
between WNIC and Trustmark;
(xi) invest its future cash flow, any cash from matured
and maturing investments, any cash proceeds from the sale of
its assets and properties, and any cash funds currently held
by it, in any investments other than cash equivalent assets
or in short-term investments (consisting of United States
government issued or guaranteed securities, or commercial
paper rated A-1 or P-1), except (i) as otherwise required by
law, (ii) as required to provide cash (in the ordinary
course of business and consistent with past practice) to
meet its actual or anticipated obligations or (iii) publicly-
traded corporate bonds that are rated investment grade by at
least two nationally recognized statistical rating
organizations;
(xii) except as may be required by law,
(i) make any representation or promise, oral or
written, to any employee or former director, officer or
employee of the Company or any Subsidiary which is
inconsistent with the terms of any Benefit Plan;
(ii) make any change to, or amend in any way, the
contracts, salaries, wages, or other compensation of
any employee or any agent or consultant of the Company
or any Subsidiary other than (a) changes or amendments
that are required under existing contracts, (b) changes
after January 1, 1998 with respect to employees whose
current annual salary is less than $50,000 that are
made in the ordinary course of business and consistent
with past practice and that do not exceed 5% for any
such employee, or (c) changes with respect to agents or
consultants that are made in the ordinary course of
business and consistent with past practice; or
(iii) adopt, enter into, amend, alter or
terminate, partially or completely, any Benefit Plan or
any election made pursuant to the provisions of any
Benefit Plan, to accelerate any payments, obligations
or vesting schedules under any Benefit Plan;
(xiii) fail to pay any Taxes or file any Tax Return
on a timely basis or fail to make any estimated payment of
Taxes on a timely basis;
<PAGE>30
(xiv) lease or purchase any property, except for
such leases or purchases of property that do not in the
aggregate exceed $50,000, or enter into any transitional
services agreement; or
(xv) authorize any of, or commit or agree to take any
of the foregoing actions.
SECTION 5.2 Management of the Company and Significant
Subsidiaries. The Company shall, from the date of this Agreement
through the Effective Time, cause its management and that of the
Significant Subsidiaries to consult on a regular basis and in
good faith with the employees and representatives of Acquiror
concerning the management of the Company and its Significant
Subsidiaries' businesses, including without limitation the
policies and practices of the Company and its Significant
Subsidiaries with respect to (i) the ceding or assumption of
reinsurance or coinsurance or the termination or modification of
existing reinsurance or coinsurance agreements, (ii) significant
underwriting, actuarial, tax, accounting, legal and investment
issues (including matters related to tax audits or the
establishment, review and modification of insurance and other
reserves), (iii) significant matters relating to the conditions,
forms and pricing of new kinds of insurance policies and annuity
contracts and (iv) significant matters relating to the agency
force, product distribution, commissions and similar matters.
SECTION 5.3 Conduct of Business of Merger Sub. Except as
contemplated by this Agreement, during the period from the date
of this Agreement to the Effective Time, Merger Sub shall not
engage in any activities of any nature.
SECTION 5.4 Other Actions. The Company and Acquiror shall
not, and shall not permit any of their respective subsidiaries
to, take any action that would, or that could reasonably be
expected to, result in (i) any of the representations and
warranties of such party set forth in this Agreement becoming
untrue in any material respect or (ii) any of the conditions of
the Merger set forth in Article VI not being satisfied.
SECTION 5.5 Employee Benefit Payments. During the period
from the date of this Agreement to the Closing Date, the Company,
by action and at the discretion of its Compensation Committee,
shall have the right but not the obligation to make the following
payments and allocations with respect to all individuals employed
by the Company or any of its Subsidiaries on or after July 1,
1996, including the employees identified on Section 5.5 of the
Disclosure Schedule whose employment with the Company or any of
its Subsidiaries terminated with the Company's approval prior to
the date of this Agreement and any employee whose employment may
be terminated by the Company with the consent of the Acquiror
prior to the Closing Date (collectively, the "Eligible
Employees"):
(i) The Company's profit sharing contribution to the
Washington National Corporation Profit Sharing Plan for
calendar year 1997, in the amount of 5% of compensation as
defined in the Plan (which Plan shall be amended prior to
the Closing Date to permit contributions to be made on
behalf of any Eligible Employee who is not a current
employee of the Company or any of its Subsidiaries), may, in
the discretion of the Compensation Committee and to the
extent permitted by such Plan, be allocated to the
<PAGE>31
accounts maintained under such Plan for the Eligible
Employees on the earlier of the Closing Date and
March 15, 1998.
(ii) Each Eligible Employee may be paid lump sum
payments under the Washington National Corporation Annual
Pay At Risk Plan for the periods that such Eligible Employee
was employed by the Company or any of its Subsidiaries in
calendar year 1997 and calendar year 1998, (i) with such
payments for calendar year 1997 to be made on the earlier of
the Closing Date and March 15, 1998 in an aggregate amount
not in excess of $310,000 per month for the entire 1997
calendar year, regardless of the Closing Date, and (ii) with
such payments for calendar year 1998 to be made on the
Closing Date in an aggregate amount not in excess of
$240,000 per month, including a prorated amount based upon
the number of days elapsed in the month in which the Closing
Date occurs.
(iii) Each Eligible Employee may be paid lump sum
payments under the Washington National Corporation Long Term
Pay At Risk Plan for the 1995-1997, 1996-1998 and 1997-1999
performance periods, for the period that such Eligible
Employee was employed by the Company or any of its
Subsidiaries during the 1995-1997 performance period, the
1996-1998 performance period and/or the 1997-1999
performance period, as applicable (i) with such payments for
the 1995-1997 performance period to be made on the earlier
of the Closing Date and March 15, 1998 in an aggregate
amount not in excess of $445,000 for the period through
December 31, 1996 and $19,000 per month for each month in
1997, including a prorated amount based upon the number of
days elapsed in the month in which the Closing Date occurs
(if the Closing Date occurs in 1997), (ii) with such
payments for the 1996-1998 performance period to be made on
the Closing Date in an aggregate amount not in excess of
$235,000 for the period through December 31, 1996 and
$19,500 per month for each month in 1997 and 1998, including
a prorated amount based upon the number of days elapsed in
the month in which the Closing Date occurs, and (iii) with
such payments for the 1997-1999 performance period to be
made on the Closing Date in an aggregate amount not in
excess of $19,000 per month for each month in the period,
including a prorated amount based upon the number of days
elapsed in the month in which the Closing Date occurs.
(iv) The Company shall make all required contributions
under the terms of the Washington National Employee Savings
Plan and the Washington National Pension Plan Plus (which
Plans shall be amended prior to the Closing Date to permit
contributions to be made on behalf of any Eligible Employee
who is not a current employee of the Company or any of its
Subsidiaries and to permit contributions to be made on a
date other than the end of the calendar quarter in the event
the Closing Date falls on such date) for the period
commencing on the date hereof and ending on the Closing
Date, with contributions to be made on the Closing Date.
(v) The Company shall continue to credit participants
under the terms of the Washington National Corporation
Supplemental Executive Retirement Plan ("SERP") (which shall
be amended prior to the Closing Date to permit credits to be
determined on the earlier to occur of the Closing Date and
the participant's date of termination of employment)
<PAGE>32
with respect to all compensation (excluding severance,
change of control or similar benefits) earned by such
participants through the Closing Date or their earlier
date of termination of employment. The Company shall
terminate the SERP immediately prior to the Effective Time.
(vi) Each Eligible Employee who held any shares of
Restricted Stock as of July 1, 1996 and whose Restricted
Stock has been forfeited as of the date of this Agreement,
may be paid a lump sum payment in consideration for such
forfeited Restricted Stock in an amount in cash equal to
125% of the Merger Consideration less applicable withholding
taxes, with such payments to be made on the earlier of the
Closing Date and March 15, 1998, provided that such payments
shall not in the aggregate exceed $322,109.
(vii) In lieu of granting stock options to certain
Eligible Employees and the directors of the Company in 1997,
the Company may, by action and at the discretion of its
Compensation Committee, pay a bonus to such persons in an
aggregate amount not in excess of $565,950 representing the
difference between the Merger Consideration and the price of
the Common Shares on March 14, 1997 (the designated stock
option grant date in 1997).
SECTION 5.6 United Way Contribution. Prior to the
Effective Time, the Company shall make a corporate contribution
to the United Way in an amount not greater than $50,000. In
addition, the Company shall, in connection with its employee
matching contribution program, make a corporate matching
contribution in the same manner and in accordance with the same
procedures followed during the 1995 United Way campaign to United
Way in an amount not to exceed $150,000.
SECTION 5.7 Further Assurances. The Company and Acquiror,
at the reasonable request of the other, will execute and deliver,
or cause to be executed and delivered, such other instruments and
do and perform, or cause to be done and performed, such other
acts and things as may be necessary or desirable to effect the
consummation of the transactions contemplated hereby.
ARTICLE 6
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligation To Effect
the Merger. The respective obligation of each party to effect
the Merger is subject to the satisfaction or waiver on or prior
to the Closing Date of the following conditions:
SECTION 6.1.1 Stockholder Approval. This Agreement and
the Merger shall have been approved and adopted by an
affirmative vote of the holders of the requisite number of
shares present, in person or by proxy, and entitled to vote
on the Merger at the Stockholders Meeting.
SECTION 6.1.2 Governmental and Regulatory Consents. All
required consents, approvals, permits and authorizations to
the consummation of the transactions contemplated hereby by
<PAGE>33
the Company, Acquiror and Merger Sub shall be obtained,
in each case without any condition that could reasonably be
expected to have a Material Adverse Effect, from (i) the
insurance regulators in the jurisdictions set forth in
Section 2.4 of the Disclosure Schedule, and (ii) any other
Governmental Entity whose consent, approval, permission or
authorization is required by reason of a change in law after
the date of this Agreement, unless the failures to obtain
such consent, approval, permission or authorization would
not reasonably be expected to have a Material Adverse Effect
nor materially and adversely affect the validity or
enforceability of this Agreement. Notwithstanding anything
to the contrary in this Agreement, the parties agree that no
consent or approval of any proposed dividend payable by the
Company or any of its Significant Subsidiaries shall be
required as a condition to Acquiror's obligation to effect
the Merger.
SECTION 6.1.3 HSR Act. The waiting period (and any
extension thereof) applicable to the Merger under the HSR
Act shall have been terminated or shall have otherwise
expired.
SECTION 6.1.4 No Injunctions or Restraints. No
temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in
effect; provided, however, that the party invoking this
condition shall use its reasonable best efforts to have any
such order or injunction vacated.
SECTION 6.2 Conditions to Obligations of Acquiror and
Merger Sub. The obligations of Acquiror and Merger Sub to effect
the Merger are further subject to the following conditions:
SECTION 6.2.1 Representations and Warranties. The
representations and warranties of the Company contained in
this Agreement shall be true and correct in all material
respects (but as to any representation qualified as to
materiality disregarding for this purpose such materiality
qualification) on the date hereof and (except to the extent
specifically given as of an earlier date) on and as of the
Closing Date as though made on the Closing Date, and the
Company shall have delivered to Acquiror and Merger Sub a
certificate dated as of the Closing Date signed by an
executive officer to the effect set forth in this Section
6.2.1.
SECTION 6.2.2 Performance of Obligations of the
Company. The Company shall have performed in all material
respects all obligations required to be performed by it
under this Agreement at or prior to the Closing Date, and
the Company shall have delivered to Acquiror and Merger Sub
a certificate dated as of the Closing Date signed by an
executive officer to the effect set forth in this Section
6.2.2.
SECTION 6.3 Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger is further subject
to the following conditions:
SECTION 6.3.1 Representations and Warranties. The
representations and warranties of Acquiror and Merger Sub
contained in this Agreement shall be true and correct in all
material respects (but as to any representation qualified as
to materiality disregarding for this purpose such
materiality qualification) on the date hereof and (except to
the extent
<PAGE>34
specifically given as of an earlier date) on and as
of the Closing Date as though made on the Closing Date,
and Acquiror and Merger Sub shall have delivered to the
Company a certificate dated as of the Closing Date, signed
by an executive officer and to the effect set forth in this
Section 6.3.1.
SECTION 6.3.2 Performance of Obligations of Acquiror
and Merger Sub. Acquiror and Merger Sub shall have
performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to
the Closing Date, and Acquiror and Merger Sub shall have
delivered to the Company a certificate dated as of the
Closing Date, signed by an executive officer and to the
effect set forth in this Section 6.3.2.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated
and abandoned at any time prior to the Effective Time, whether
before or after approval of matters presented in connection with
the Merger by the stockholders of the Company:
(a) by mutual written consent of Acquiror and the
Company; or
(b) by either Acquiror or the Company:
(i) if, upon a vote at a duly held Stockholders
Meeting, this Agreement and the Merger shall fail to receive
the requisite vote for approval and adoption by the
stockholders of the Company at the Stockholders Meeting;
(ii) if the Merger shall not have been consummated on
or before January 31, 1998 (subject to the right of the
Company or Acquiror to extend such date by not more than 60
days if such party believes in good faith that all
conditions to Closing can be satisfied within such 60-day
period); provided, that either party may terminate this
Agreement on or after such earlier date on which it can be
reasonably determined that it will be impossible to
consummate the Merger by January 31, 1998 (or by such later
date to which it has been extended); and provided, further,
that the party seeking to terminate this Agreement pursuant
to this Section 7.1(b)(ii) shall not have breached in any
material respect its obligations under this Agreement in any
manner that shall have proximately contributed in a material
way to the failure to consummate the Merger by January 31,
1998;
(iii) if any Governmental Entity shall have issued
an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting
the Merger and such order, decree, ruling or other action
shall have become final and nonappealable;
(iv) if the Board of Directors of the Company shall
have exercised any of its rights set forth in Section 4.7 of
this Agreement; or
<PAGE>35
(c) by the Company upon a material breach of any
representation or warranty of Acquiror or Merger Sub or Acquiror
or Merger Sub fails to comply in any material respect with any of
its covenants or agreements, or if any representation or warranty
of Acquiror or Merger Sub shall be or become untrue in any
material respect, in either case such that the conditions set
forth in Sections 6.3.1 and 6.3.2 would be incapable of being
satisfied by January 31, 1998 (or by such later date to which it
has been extended pursuant to Section 7.1(b)(ii)), provided that
a willful breach shall be deemed to cause such conditions to be
incapable of being satisfied by such date; or
(d) by Acquiror, upon a material breach of any
representation, or warranty of the Company or the Company fails
to comply in any material respect with any of its covenants or
agreements, or if any representation or warranty of the Company
shall be or become untrue in any material respect, in either case
such that the conditions set forth in Sections 6.2.1 and 6.2.2
would be incapable of being satisfied by January 31, 1998 (or as
otherwise extended pursuant to Section 7.1(b)(ii), provided that
a willful breach shall be deemed to cause such conditions to be
incapable of being satisfied by such date.
SECTION 7.2 Effect of Termination. (a) In the event of
termination of this Agreement by either the Company or Acquiror
as provided in Section 7.1, except as provided below in Section
7.2(b), this Agreement shall forthwith become void and have no
effect, without any liability or obligation on the part of
Acquiror or the Company, other than the last sentence of Section
4.3 and Sections 7.2 and 10.2. Nothing contained in this Section
shall relieve any party from any liability resulting from any
material breach of the representations, warranties, covenants or
agreements set forth in this Agreement.
(b) In the event of termination of this Agreement by either
the Company or Acquiror pursuant to Section 7.1(b)(iv), the
Company shall pay Acquiror $10,000,000 in cash, as liquidated
damages and not as a penalty, immediately upon such termination,
in same-day funds, provided that Acquiror shall not be in
material breach of its obligations under this Agreement (the
"Termination Payment"). Moreover, the Company shall pay the
Termination Payment if all of the following shall occur: (i) this
Agreement is terminated pursuant to Section 7.1(b)(i), and (ii)
the Company, within fifteen (15) months from the date of this
Agreement, enters into a written agreement or arrangement to
effect an Acquisition Proposal with a party other than Acquiror
or any of its subsidiaries, which Acquisition Proposal provides
consideration with an economic value equal to or greater than the
consideration that would have been received in the Merger had it
been consummated on the date on which the Agreement was
terminated, and (iii) the stockholders of the Company approve
such Acquisition Proposal or the transaction which is the subject
of such Acquisition Proposal is consummated. The Termination
Payment contemplated by the prior sentence shall be paid on the
earlier of (x) the consummation of such Acquisition Proposal or
(y) within sixty (60) days after the meeting at which the
stockholders of the Company approve such Acquisition Proposal.
Notwithstanding anything in this Agreement to the contrary, the
Termination Payment, if payable, shall be paid only once and
shall be Acquiror's sole and exclusive remedy hereunder for the
termination of the Agreement under the circumstances in which the
Termination Payment is paid (regardless of any breach of this
Agreement), and upon such delivery of the Termination Payment to
Acquiror, no person shall have any further claim or rights
against the Company under this Agreement.
<PAGE>36
SECTION 7.3 Amendment. Subject to the applicable
provisions of the Delaware Code, at any time prior to the
Effective Time, the parties hereto may modify or amend this
Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties; provided, however,
that after approval of the Merger by the stockholders of the
Company, no amendment shall be made which reduces the amount of
the Merger Consideration payable in the Merger or adversely
affects the rights of the Company's stockholders hereunder
without the approval of such stockholders. This Agreement may not
be amended except by an instrument in writing signed on behalf of
each of the parties.
SECTION 7.4 Extension; Waiver. At any time prior to the
Effective Time, the parties may (a) extend the time for the
performance of any of the obligations or other acts of the other
parties, (b) waive any inaccuracies in the representations and
warranties of the other parties contained in this Agreement or in
any document delivered pursuant to this Agreement or (c) subject
to Section 7.3, waive compliance with any of the agreements or
conditions of the other parties contained in this Agreement. Any
agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
SECTION 7.5 Procedure for Termination, Amendment, Extension
or Waiver. A termination of this Agreement pursuant to Section
7.1, an amendment of this Agreement pursuant to Section 7.3 or an
extension or waiver pursuant to Section 7.4 shall, in order to be
effective, require in the case of Acquiror or the Company, action
by its Board of Directors or the duly authorized designee of its
Board of Directors.
ARTICLE 8
SURVIVAL OF PROVISIONS
SECTION 8.1 Survival. The representations and warranties
respectively made by the Company, Acquiror and Merger Sub in this
Agreement, or in any certificate, respectively, delivered by the
Company, Acquiror or Merger Sub pursuant to Section 6.2 or
Section 6.3 hereof will terminate upon the Closing and be of no
further force or effect.
ARTICLE 9
NOTICES
SECTION 9.1 Notices. Any notice or communication given
pursuant to this Agreement must be in writing and will be deemed
to have been duly given if mailed (by registered or certified
mail, postage prepaid, return receipt requested), or, if
transmitted by facsimile, or if delivered by courier, as follows:
<PAGE>37
If to the Company, to:
Washington National Corporation
300 Tower Parkway
Lincolnshire, Illinois 60069-3665
Attention: Craig R. Edwards, Esq.
Telephone: (847) 793-3273
Telecopy: (847) 793-3511
with a copy to:
Schiff Hardin & Waite
7200 Sears Tower
Chicago, Illinois 60606
Attention: Stuart L. Goodman, Esq.
Telephone: (312) 258-5711
Telecopy: (312) 258-5600
If to Acquiror, to:
Conseco, Inc.
11825 N. Pennsylvania Street
Carmel, Indiana 46032
Attention: John J. Sabl, Executive
Vice President and General Counsel
Telephone: (317) 817-6163
Telecopy: (317) 817-6327
All notices and other communications required or permitted under
this agreement that are addressed as provided in this Section 9.1
will, whether sent by mail, facsimile, or courier, be deemed
given upon the first Business Day after actual delivery to the
party to whom such notice or other communication is sent (as
evidenced by the return receipt or shipping invoice signed by a
representative of such party or by facsimile confirmation). Any
party from time to time may change its address for the purpose of
notices to that party by giving a similar notice specifying a new
address, but no such notice will be deemed to have been given
until it is actually received by the party sought to be charged
with the contents thereof. For purposes of this Section 9.1,
"Business Day" shall mean a day other than Saturday, Sunday or
any day on which the principal commercial banks located in
Chicago, Illinois are authorized or obligated to close under the
laws of Illinois.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1 Entire Agreement. This Agreement and the
Confidentiality Agreement constitute the entire agreement between
the parties hereto with respect to the subject matter hereof
<PAGE>38
and supersede all prior communications, agreements,
understandings, representations, and warranties whether oral or
written between the parties hereto. There are no oral or written
agreements, understandings, representations, or warranties
between the parties hereto with respect to the subject hereof
other than those set forth in this Agreement and the
Confidentiality Agreement. In the event of any conflict between
the terms of this Agreement and the terms of the Confidentiality
Agreement, the terms of this Agreement shall control.
SECTION 10.2 Expenses. The Company and Acquiror each will
pay its own costs and expenses incident to preparing for,
entering into and carrying out this Agreement and the
consummation of the transactions contemplated hereby except that
(i) the filing fee in respect of the notification and report
under the HSR Act and (ii) the expenses incurred in connection
with the printing, mailing and distribution of the Proxy
Statement shall be borne equally by the Company and Acquiror.
SECTION 10.3 Counterparts. This Agreement may be executed
in one or more counterparts, each of which will be deemed an
original, but all of which will constitute one and the same
instrument and shall become effective when one or more
counterparts have been signed by each of the parties and
delivered to the other parties.
SECTION 10.4 No Third Party Beneficiary. Except as
otherwise specifically provided in Section 4.9, this Agreement is
not intended and may not be construed to create any rights in any
parties other than the Company and Acquiror and their respective
successors or assigns, and it is not the intention of the parties
to confer third-party beneficiary rights upon any other person.
SECTION 10.5 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of Delaware (without regard to the principles of conflicts
of law) applicable to a contract executed and to be performed in
such State.
SECTION 10.6 Assignment; Binding Effect. Neither this
Agreement nor any of the rights, interests or obligations under
this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise by any of the parties without the
prior written consent of the other parties, such consent not to
be unreasonably withheld and any such assignment that is not
consented to shall be null and void. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by, the parties and their
respective successors and assigns.
SECTION 10.7 Headings, Gender, etc. The headings used in
this Agreement have been inserted for convenience and do not
constitute matter to be construed or interpreted in connection
with this Agreement. Unless the context of this Agreement
otherwise requires, (a) words of any gender are deemed to include
each other gender; (b) words using the singular or plural number
also include the plural or singular number, respectively; (c) the
terms "hereof," "herein," "hereby," "hereto," and derivative or
similar words refer to this entire Agreement; (d) the terms
"Article" or "Section" refer to the specified Article or Section
of this Agreement; (e) all references to "dollars" or "$" refer
to currency of the United States of America; (f) the term
"person" shall include any natural person, corporation, limited
liability company, general partnership, limited partnership, or
other entity, enterprise, authority or business organization; and
<PAGE>39
(g) the term "or" is disjunctive but not necessarily exclusive.
SECTION 10.8 Invalid Provisions. If any provision of this
Agreement is held to be illegal, invalid, or unenforceable under
any present or future law, and if the rights or obligations of
the Company or Acquiror under this Agreement will not be
materially and adversely affected thereby, (a) such provision
will be fully severable; (b) this Agreement will be construed and
enforced as if such illegal, invalid, or unenforceable provision
had never comprised a part hereof; and (c) the remaining
provisions of this Agreement will remain in full force and effect
and will not be affected by the illegal, invalid, or
unenforceable provision or by its severance herefrom.
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IN WITNESS WHEREOF, this Agreement has been duly executed
and delivered by the duly authorized officers of the Company,
Merger Sub and Acquiror effective as of the date first written
above.
CONSECO, INC.
By: /s/ Stephen C. Hilbert
Name: Stephen C. Hilbert
Its: Chairman of the Board, President
and Chief Executive Officer
GRANITE MERGER CORP.
By: /s/ Stephen C. Hilbert
Name: Stephen C. Hilbert
Its: President
WASHINGTON NATIONAL CORPORATION
By: /s/ Robert W. Patin
Name: Robert W. Patin
Its: Chairman of the Board, President
and Chief Executive Officer
