<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report
February 9, 1996
UNITED COMPANIES FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Louisiana 1-7067 71-0430414
(State or other (Commission File Number) (IRS Employer
jurisdiction of incorporation) Identification No.)
4041 Essen Lane, Baton Rouge, Louisiana 70809
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (504) 924-6007
Not Applicable
(Former name or former address, if changed since last report)
<PAGE> 2
Item 5. Other Events.
On February 2, 1996, United Companies Financial Corporation (the
"Company") signed a Stock Purchase Agreement (the "Agreement") dated as of
January 30, 1996, for the sale of all the stock of its wholly-owned subsidiary,
United Companies Life Insurance Company ("UCLIC"). The Company's Board of
Directors approved the sale to UC Life Holding Corp., an acquisition company
formed by Knightsbridge Capital Fund I, L.P., for an aggregate amount of $164
million plus earnings of UCLIC from January 1, 1996, to the closing of the
transaction. Knightsbridge, which is a private investment partnership with
institutional partners, was formed in 1995 to make equity investments in
companies engaged primarily in the life insurance industry. A copy of the
Agreement is attached hereto as Exhibit 10 and incorporated herein by reference
pursuant to Rule 12b-23 under the Securities Exchange Act of 1934, as amended.
Under the terms of the Agreement, the sales price is comprised of $109
million in cash and $55 million in UCLIC real estate and other assets to be
distributed to the Company prior to the closing. The real estate to be
distributed includes portions of the United Plaza office park, including the
Company's home office. In addition, the Company will purchase a note from an
affiliate of the purchaser for $15 million in cash.
The purchaser also agreed that UCLIC would continue to be a
significant investor in first lien home equity loans originated by the
Company's lending operations and that UCLIC's home office operations would be
maintained in its present location in Baton Rouge, Louisiana following the
closing for at least two years. The Agreement is subject to approval by UCFC's
shareholders and regulatory authorities and the satisfaction of other
conditions, and provides that the closing will occur on or before July 31,
1996.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Businesses Acquired
Not applicable.
(b) Pro Forma Financial Information
Not applicable.
(c) Exhibits
10. Stock Purchase Agreement dated as of January 30, 1996 between
United Companies Financial Corporation and UC Life Holding
Corp. Filed herewith. The exhibits and schedules to this
agreement have been omitted and will be furnished upon
request. Page 5.
-2-
<PAGE> 3
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.
UNITED COMPANIES FINANCIAL CORPORATION
(Registrant)
Date: February 9, 1996 By: /s/ Dale E. Redman
------------------------ --------------------------------------
Dale E. Redman, Executive Vice
President and Chief Financial Officer
-3-
<PAGE> 4
UNITED COMPANIES FINANCIAL CORPORATION
EXHIBIT INDEX
Form 8-K
February 9, 1996
<TABLE>
<CAPTION>
Exhibit Number Description Page No.
-------------- ----------- --------
<S> <C> <C>
10 Stock Purchase Agreement dated as of January 30, 5-115
1996 between United Companies Financial Corporation,
and UC Life Holding Corp.
</TABLE>
-4-
<PAGE> 1
================================================================================
----------------------------
STOCK PURCHASE AGREEMENT
----------------------------
Between
UNITED COMPANIES FINANCIAL CORPORATION
as Seller
and
UC LIFE HOLDING CORP.
as Purchaser
Dated as of January 30, 1996
================================================================================
Purchase of All of the Outstanding Capital Stock of United
Companies Life Insurance Company.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.01. Purchase and Sale of the Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.02. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.03. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.04. Closing Deliveries by the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.05. Closing Deliveries by the
Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.06. Purchase Price Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.01. Organization, Authority and
Qualification of the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.02. Organization, Authority and
Qualification of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.03. Capital Stock of the Company;
Ownership of the Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.04. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.05. Corporate Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.06. No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.07. Governmental and Other
Authorizations; Notices and
Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.08. Financial Information and Books
and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.09. Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.10. No Undisclosed Liabilities or
Capital Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.11. Acquired Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.12. Conduct in the Ordinary Course;
Absence of Certain Changes, Events
and Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.13. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.14. Certain Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.15. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.16. Environmental and Other Permits
and Licenses; Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.17. Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 3.18. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 3.19. Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 3.20. Tangible Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 3.21. Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 3.22. Insurance Issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 3.23. Distributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 3.24. Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 3.25. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 3.26. Key Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 3.27. Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 3.28. Accounts; Lockboxes; Safe Deposit
Boxes; Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 3.29. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 3.30. Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 3.31. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 4.01. Organization and Authority of
the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 4.02. No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 4.03. Governmental and Other
Authorizations; Notices and
Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4.04. Investment Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4.05. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4.06. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4.07. Organization and Authority of
the Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 4.08. Funding and Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE V ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 5.01. Conduct of Business Prior to
the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 5.02. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 5.03. Confidentiality by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 5.04. Governmental and Other
Authorizations; Notices and
Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 5.05. Notice of Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 5.06. Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 5.07. Use of Names and Intellectual
Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 5.08. Non-Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 5.09. Release of Indemnity and other
Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 5.10. Further Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 5.11. Release of Liens on Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 5.12. Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 5.13. Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 5.14. Termination of Inter-Company
Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 5.15. Commercial Real Estate Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 5.16. Master Loan Sale Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 5.17. Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 5.18. Meeting of the Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 5.19. Appraisal Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 5.20. Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 5.21. Rating Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 5.22. Confidentiality by Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 5.23. New Director and Officer Slates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 5.24. Section 338(h)(10) Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE VI EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 6.01. 401(k) Plan and ESOP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 6.02. Supplemental Pension Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 6.03. Other Benefits; Qualified Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 6.04. No Third Party Beneficiary
Rights or Rights to Continued
Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE VII TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 7.01. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 7.02. Section 338(h)(10) Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 7.03. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 7.04. Returns and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 7.05. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 7.06. Contests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 7.07. Time of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 7.08. Cooperation and Exchange of
Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 7.09. Retention of Tax Returns and
Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 7.10. Conveyance Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 7.11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 7.12. Refunds of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 7.13. Tax Cooperation by Successors
and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
ARTICLE VIII CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 8.01. Conditions to Obligations of
the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 8.02. Conditions to Obligations of
the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
ARTICLE IX SURVIVAL AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 9.01. Survival of Representations,
Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 9.02. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
SECTION 9.03. Limits on Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
ARTICLE X TERMINATION AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 10.01. Termination by the Seller or
Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 10.02. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
SECTION 10.03. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
ARTICLE XI GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
SECTION 11.01. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
SECTION 11.02. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
SECTION 11.03. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
SECTION 11.04. Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
SECTION 11.05. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 11.06. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 11.07. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 11.08. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 11.09. No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
SECTION 11.10. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
SECTION 11.11. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
SECTION 11.12. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
SECTION 11.13. Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
SECTION 11.14. Further Clarification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C>
Disclosure Schedule
3.02 Organization, Authority and Qualification of the Company
3.04 Subsidiaries
3.07 Governmental Consents and Approvals
3.10 No Undisclosed Liabilities on Capital Commitments
3.12 Conduct in the Ordinary Course; Absence of Certain Changes, Events and Conditions
3.13 Litigation
3.14 Certain Interests
3.15 Compliance with Laws
3.16 Environmental and Other Permits and Licenses; Related Matters
3.17 Material Contracts
3.18 Intellectual Property
3.19 Real Property
3.20 Tangible Personal Property
3.22 Insurance Issued
3.23 Distributors
3.24 Employee Benefit Matters
3.25 Labor Matters
3.26 Key Employees
3.27 Risk Management
3.28 Accounts; Lockboxes; Safe Deposit Boxes; Powers of Attorney
5.01 Certain Prohibited Actions
5.04 Consents and Approvals
5.12 Excluded Assets
7.01 Tax Matters
Exhibits
Exhibit 1 List of Individuals in connection with Special Knowledge Definition
Exhibit 5.07 (a) Seller's Logo
Exhibit 5.13 (a) Company Services
Exhibit 5.13 (c) Seller Services
Exhibit 5.16 Master Loan Sale Agreement
Exhibit 8.01(f) Dewey Ballantine Legal Opinion
Exhibit 8.02(f) Kantrow, Spaht, Weaver & Blizter (A Professional Law Corporation) Legal Opinion
Exhibit 8.02(v) Term Sheet for Promissory Note
</TABLE>
v
<PAGE> 7
STOCK PURCHASE AGREEMENT, dated as of January 30, 1996, between UNITED
COMPANIES FINANCIAL CORPORATION, a Louisiana company (the "Seller") and UC LIFE
HOLDING CORP., a Delaware corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, Seller owns all the issued and outstanding shares (the
"Shares") of common stock, $2.00 par value per share (the "Common Stock"), of
United Companies Life Insurance Company, a Louisiana stock life insurance
company (the "Company");
WHEREAS, the Seller wishes to sell the Shares to the Purchaser, and
the Purchaser wishes to purchase the Shares from the Seller, upon the terms and
subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, the Seller and the Purchaser
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Accounting Principles" has the meaning specified in Section 2.06.
"Acquisition Documents" has the meaning specified in Section 9.01.
"Acquisition Proposal" has the meaning specified in Section 5.06.
"Action" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"Actual Income Statement" has the meaning specified in Section 2.06.
"Additional Scheduled Information" has the meaning specified in the
definition of "Disclosure Schedule".
"Adjusted Adjustment Amount" has the meaning specified in Section
2.06.
"Adjustment Amount" has the meaning specified in Section 2.06.
<PAGE> 8
"Adjustment Period" has the meaning specified in Section 2.06.
"Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"Agreement" or "this Agreement" means this Stock Purchase Agreement,
dated as of the date set forth in the preamble to this Agreement, between the
Seller and the Purchaser (including the Exhibits hereto and the Disclosure
Schedule) and all amendments hereto made in accordance with the provisions of
Section 11.10.
"Asset" or "Assets" has the meaning specified in Section 3.21.
"Balance Sheet" means the statement of assets and the statement of
liabilities, surplus and other funds included in the annual statement of the
Company filed with, or submitted to, the Louisiana Department for the year
ended December 31, 1994, together with all related notes, exhibits and
schedules thereto, a copy of each of which has been delivered to the Purchaser
by the Seller.
"Balance Sheet Date" means June 30, 1995.
"Best" means A.M. Best Company, Inc.
"Bona Fide Acquisition Proposal" has the meaning set forth in Section
10.01.
"Business" means the life insurance and annuity business and all other
business which are on the date hereof being conducted by the Company and the
Subsidiary.
"Business Day" means any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by law to be closed in The City
of New York or Baton Rouge, Louisiana.
"Calculation Date" has the meaning specified in Section 2.06.
"CERCLA" means the Comprehensive Environmental Response Compensation
and Liability Act, 42 U.S.C. Sections 9601 et seq.
"Cigna Partnership" means CIGNA Mezzanine Partners III, L.P.
<PAGE> 9
"Claim Notice" has the meaning specified in Section 9.02.
"Closing" has the meaning specified in Section 2.03.
"Closing Income Statement" has the meaning specified in Section 2.06.
"Closing Date" has the meaning specified in Section 2.03.
"COBRA" means continuation coverage as set forth in Sections 601 and
602 of ERISA.
"Code" means the Internal Revenue Code of 1986, as amended through the
date hereof.
"Commercial Real Estate Group" has the meaning specified in Section
5.15.
"Commission" has the meaning specified in Section 3.15.
"Common Stock" has the meaning specified in the recitals to this
Agreement.
"Company" has the meaning specified in the recitals to this Agreement.
"Company Annual Statements" has the meaning specified in Section 3.08.
"Company GAAP Statements" has the meaning specified in Section 3.08.
"Company Interim GAAP Statement" has the meaning specified in Section
3.08.
"Company Quarterly Statements" has the meaning specified in Section
3.08.
"Company Separate Accounts Annual Statement" has the meaning specified
in Section 3.08.
"Company Services" has the meaning specified in Section 5.13.
"Consistent With Past Practice" means substantially consistent with
the past applicable practice of the Company or the Subsidiary, as applicable,
but without regard to inconsistencies of practice resulting from changes
3
<PAGE> 10
in the assets, liabilities, business or products of the Company or the
Subsidiary, as applicable.
"Control" (including, without limitation, the terms "controls",
"controlled by" and "under common control with"), with respect to the
relationship between or among two or more Persons, means the possession,
directly or indirectly, or as trustee or executor, of the power to direct or
cause the direction of the affairs or management of a Person, whether through
the ownership of voting securities, as trustee or executor, by contract or
otherwise, including, without limitation, the ownership, directly or
indirectly, of securities having the power to elect a majority of the board of
directors or similar body governing the affairs of such Person.
"Corrected Amount" has the meaning specified in Section 2.06.
"Dewey Ballantine" means Dewey Ballantine, legal counsel to the
Purchaser and the Guarantor in connection with this Agreement and the
transactions contemplated hereby.
"D&P" means Duff & Phelps Credit Rating Co.
"Disclosure Schedule" means the schedules attached hereto and
delivered to the Purchaser by the Seller together with this Agreement, as
amended in writing from time to time during the period commencing on the date
hereof through the date that is 5 Business Days prior to the Closing Date by
delivery by the Seller to the Purchaser (information contained in such
amendments to the Disclosure Schedule shall be referred to as "Additional
Scheduled Information").
"Encumbrance" or "Encumbrances" means any security interest, pledge,
mortgage, lien (including, without limitation, environmental and tax liens),
charge, encumbrance, adverse claim, preferential arrangement or restriction of
any kind, including, without limitation, any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of ownership;
provided, however, that such term does not include the right, if any, imposed
by applicable insurance laws of insurance regulatory authorities to attach such
an encumbrance upon occurrence of certain violations of applicable insurance
laws or regulations; provided, further, that the exercise of such right by any
such authority, or the existence of any such encumbrance due to the exercise of
such regulatory authority, shall be included in the definition of Encumbrance.
4
<PAGE> 11
"Enhanced Special Knowledge" means (subject to Section 11.14 hereof)
(i) Special Knowledge and (ii) those facts, circumstances and information which
the Seller Knowledge Group should have known in the reasonable conduct of the
Business prior to the Closing Date.
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
non-compliance or violation, notices of liability or potential liability,
investigations, proceedings, settlements, consent orders or consent agreements
by any Person relating in any way to, any Environmental Law, Environmental
Permits or Hazardous Materials, or arising from alleged injury or threat of
injury to health, safety or the environment.
"Environmental Law" means any Law, now or hereafter in effect and as
amended, and any judicial or administrative interpretation thereof, including,
without limitation, any judicial or administrative order, consent decree or
judgment, relating to or addressing the environment, health, safety or
Hazardous Materials.
"Environmental Lien" means a lien in favor of any Governmental
Authority for any (a) liability under any Environmental Law, or (b) damages
arising from, or costs incurred by, such Governmental Authority in response to
a Release of a Hazardous Material.
"Environmental Permits" means all Permits required under any
applicable Environmental Law.
"ERISA" has the meaning specified in Section 3.24.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Assets" has the meaning specified in Section 5.12.
"Excluded Assets Value Amount" has the meaning specified in Section
5.12.
"Financial Statements" has the meaning specified in Section 3.08.
"GAAP" means United States generally accepted accounting principles
and practices as in effect at the time of preparation and delivery of the
applicable Financial Statements.
5
<PAGE> 12
"Governmental Authority" means any United States federal, state or
local or any foreign government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal, or judicial or arbitral
body.
"Governmental Order" or "Governmental Orders" means any order, writ,
judgment, injunction, decree, stipulation, determination or award entered by or
with any Governmental Authority.
"Guarantor" has the meaning specified in Section 4.07.
"Hazardous Materials" means any pollutant, hazardous substance,
radioactive substance, toxic substance, hazardous waste, medical waste,
radioactive waste, special waste, petroleum or petroleum-derived substance or
waste, asbestos, polychlorinated biphenyls, or any hazardous or toxic
constituent thereof and includes, but is not limited to, any substance defined
in or regulated under any Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Indebtedness" means, with respect to any Person, (a) all indebtedness
of such Person, whether or not contingent, for borrowed money, (b) all
obligations of such Person for the deferred purchase price of property or
services, (c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (e) all obligations of
such Person as lessee under leases that have been or should be, in accordance
with GAAP, recorded as capital leases, (f) all obligations, contingent or
otherwise, of such Person under acceptance, letter of credit or similar
facilities, (g) all obligations of such Person to purchase, redeem, retire,
defease or otherwise acquire for value any capital stock of such Person or any
warrants, rights or options to acquire such capital stock, valued, in the case
of redeemable preferred stock, at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends, (h) all Indebtedness
of others referred to in clauses (a) through (f) above guaranteed directly or
indirectly in any manner by such Person, or in effect guaranteed directly or
indirectly by such Person
6
<PAGE> 13
through an agreement (i) to pay or purchase such Indebtedness or to advance or
supply funds for the payment or purchase of such Indebtedness, (ii) to
purchase, sell or lease (as lessee or lessor) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor to make payment of
such Indebtedness or to assure the holder of such Indebtedness against loss,
(iii) to supply funds to or in any other manner invest in the debtor
(including, without limitation, any agreement to pay for property or services
irrespective of whether such property is received or such services are
rendered) or (iv) otherwise to assure a creditor against loss, and (i) all
Indebtedness referred to in clauses (a) through (f) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Encumbrance on property (including, without
limitation, accounts and contract rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of such
Indebtedness.
"Indemnified Party" has the meaning specified in Section 9.02.
"Indemnifying Party" has the meaning specified in Section 9.02.
"Indemnity Notice" has the meaning specified in Section 9.02.
"Intellectual Property" means (a) trademarks, service marks, trade
dress, logos, trade names and corporate names, whether or not registered, (b)
copyrights, whether or not registered, (c) registrations of and applications
for registration of any of the foregoing, (d) computer software, including,
without limitation, source code, operating systems and specifications, data,
data bases, files, documentation and other materials related thereto, data and
documentation, (e) trade secrets and confidential, technical and business
information, and (f) whether or not confidential, technology (including,
without limitation, know-how and show-how), research and development
information, drawings, plans, proposals, technical data, copyrightable works,
financial, marketing and business data, pricing information, business and
marketing plans and distributor, policyholder, contractholder and supplier
lists and information.
"Inter-Company Arrangements" has the meaning specified in Section
3.14.
"Investment Advisers Act" means the Investment Advisers Act of 1940,
as amended.
7
<PAGE> 14
"IRS" means the Internal Revenue Service of the United States.
"Law" or "Laws" means any United States federal, state, local or
foreign statute, law, ordinance, regulation, rule, code, order, Permit other
requirement or rule of law.
"Lease" for purposes of Sections 3.17, 3.19 and 3.20 means any and all
leases, subleases, sale/leaseback agreements or similar arrangements, whether
or not capitalized.
"Leased Real Property" means the real property leased by the Company
or the Subsidiary, as tenant, together with, to the extent leased by the
Company or the Subsidiary, all buildings and other structures, facilities or
improvements currently or hereafter located thereon, all fixtures, systems,
equipment and items of personal property of the Company or the Subsidiary
attached or appurtenant thereto, and all easements, licenses, rights and
appurtenances relating to the foregoing.
"Lender MAEs" means those changes in economic conditions, interest
rates or stock or debt markets (such as, without limitation as to other such
changes, suspensions of trading on major stock exchanges, a general moratorium
on commercial banking activities, and an outbreak of hostilities), the absence
of which are customarily included by lenders in standard loan documentation
(including, without limitation, commitment letters) for loans in connection
with leveraged acquisitions as conditions precedent to the lender's or lenders'
requirement to close the lending transaction.
"Liabilities" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable, including, without limitation, those arising under
any Law (including, without limitation, any Environmental Law), Action or
Governmental Order and those arising under any contract, agreement,
arrangement, commitment or undertaking.
"Licensed Intellectual Property" means all Intellectual Property
licensed or sublicensed to the Company or the Subsidiary from a third party.
"Losses" has the meaning specified in Section 9.02.
"Louisiana Department" means the Department of Insurance of the State
of Louisiana.
8
<PAGE> 15
"Louisiana Lease" has the meaning specified in Section 5.20.
"Master Loan Sale Agreement" has the meaning specified in Section
5.16.
"Material Adverse Effect" means any circumstance, change in, or effect
on the Business, the Company and the Subsidiary taken as a whole (other than
changes in market interest rates or general economic conditions (except for any
of the foregoing which are Lender MAEs)) that, individually or in the aggregate
with any other circumstances, changes in, or effects on, the Business, the
Company and the Subsidiary taken as a whole: (a) is or is reasonably likely to
be materially adverse to the business, operations, prospects, results of
operations or financial condition of the Company and the Subsidiary, taken as a
whole, or (b) is reasonably likely to adversely affect the ability of the
Purchaser, the Company or the Subsidiary to operate or conduct the Business in
the manner in which it is currently operated or conducted by the Company and
the Subsidiary.
"Material Contracts" has the meaning specified in Section 3.17.
"Multiemployer Plan" has the meaning specified in Section 3.24.
"Multiple Employer Plan" has the meaning specified in Section 3.24.
"Name" has the meaning specified in Section 5.07.
"Notice Period" has the meaning specified in Section 9.02.
"Other Departments" has the meaning specified in Section 3.08.
"Owned Intellectual Property" means all Intellectual Property in and
to which the Company or the Subsidiary holds, or has a right to hold, right,
title and interest.
"Owned Real Property" means the real property owned by the Company or
the Subsidiary prior to the Closing (including any properties then in the
process of being foreclosed), together with all buildings and other structures,
facilities or improvements currently or hereafter located thereon, all
fixtures, systems, equipment and items of personal property of the Company or
the Subsidiary attached or appurtenant thereto and all
9
<PAGE> 16
easements, licenses, rights and appurtenances relating to the foregoing.
"Permits" has the meaning specified in Section 3.16.
"Permitted Encumbrances" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (a) liens for taxes, assessments and governmental charges or
levies not yet due and payable which are not in excess of $100,000 in the
aggregate or which are being contested in good faith and for which reserves in
accordance with GAAP have been established on the Financial Statements; (b)
Encumbrances imposed by law, such as materialmen's, mechanics', carriers',
workmen's and repairmen's liens and other similar liens arising in the ordinary
course of business securing obligations that (i) are not overdue for a period
of more than 30 days or (ii) are not in excess of $100,000 in the case of a
single property or $250,000 in the aggregate at any time or which are being
contested in good faith and for which reserves in accordance with GAAP have
been established on the Financial Statements; (c) pledges or deposits to secure
obligations under workers' compensation laws or similar legislation or to
secure public or statutory obligations; (d) Liens related to deposits to secure
policyholders' obligations as required by the insurance departments of the
various states; and (e) minor survey exceptions, reciprocal easement agreements
and other customary encumbrances on title to real property that (i) were not
incurred in connection with any Indebtedness, (ii) do not render title to the
property encumbered thereby unmarketable and (iii) do not, individually or in
the aggregate, materially adversely affect the value or use of such property
for its current and reasonably foreseeable purposes.
"Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization, governmental authority or
other entity, as well as any syndicate or group that would be deemed to be a
person under Section 13(d)(3) of the Exchange Act.
"Plans" has the meaning specified in Section 3.24.
"Pooling and Servicing Agreements" has the meaning specified in
Section 5.15.
"Promissory Note" means specified in Section 8.02.
"Proxy Statement" has the meaning specified in Section 3.30.
10
<PAGE> 17
"Purchase Price" has the meaning specified in Section 2.02.
"Purchase Price Bank Account" means a bank account in the United
States of America to be designated by the Seller in a written notice to the
Purchaser at least five Business Days before the Closing.
"Purchaser" has the meaning specified in the preamble to this
Agreement.
"Purchaser Knowledge" means the actual knowledge of the Purchaser
Knowledge Group at or prior to the Closing Date or which the Purchaser
Knowledge Group is conclusively presumed to know, based on facts, circumstances
or information contained or described at any time prior to the Closing Date in
the books, records, files or other documents of the Purchaser Knowledge Group.
For purposes hereof, "Purchaser Knowledge Group" means each of Messrs. David J.
Stone, James P. McDermott, Charles Lubochinski, Michael Prager and Steven W.
Fickes.
"Purchaser Knowledge Group" has the meaning specified in the
definition of "Purchaser Knowledge."
"Real Property" means the Leased Real Property and the Owned Real
Property.
"Regulations" means the Treasury Regulations (including, without
limitation, Temporary Regulations) promulgated by the United States Department
of Treasury with respect to the Code or other federal tax statutes and in
effect as of the date hereof.
"Release" means the release or threatened release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migrating into the indoor or outdoor environment of any Hazardous Material.
"Reserve Liabilities" has the meaning specified in Section 3.09.
"Returns" has the meaning specified in Section 7.01.
"S&P" means Standard & Poor's Corporation.
"SAP" means, with respect to an insurance company, the accounting
practices prescribed or permitted by the National Association of Insurance
Commissioners and the insurance regulatory authority in the state in which such
insurance company is domiciled.
11
<PAGE> 18
"SAP Statements" means the Company Annual Statements and the Company
Quarterly Statements.
"Section 338(h)(10) Election" has the meaning specified in Section
7.02.
"Section 338 Forms" has the meaning specified in Section 7.02.
"Secured Real Property" has the meaning specified in Section 3.16.
"Seller" has the meaning specified in the preamble to this Agreement.
"Seller Group" has the meaning specified in Section 7.01.
"Seller Group Consolidated Returns" has the meaning specified in
Section 7.01.
"Seller Master Loan Sale Parties" has the meaning specified in Section
3.01.
"Seller Services" has the meaning specified in Section 5.13.
"Seller's Accountants" means Deloitte & Touche, LLP independent
accountants of the Seller.
"Seller's Knowledge Group" has the meaning specified in the definition
of "Special Knowledge."
"Shares" has the meaning specified in the recitals to this Agreement.
"Special Knowledge" means (subject to Section 11.14 hereof) the actual
knowledge of the executive officers of the Seller or the subsidiaries of the
Seller (including, without limitation, the Company and the Subsidiary) at or
prior to the Closing Date (collectively, the "Seller's Knowledge Group") or
which the Seller's Knowledge Group is conclusively presumed to know, based on
facts, circumstances or information contained or described at any time prior to
the date hereof in the books, records, files or other documents of Seller, the
Company, the Subsidiary or any other subsidiary of the foregoing. For purposes
hereof, the executive officers of the Seller or the subsidiaries of Seller
shall mean the individuals listed on Exhibit 1 hereto.
"Special Meeting" has the meaning specified in Section 3.30.
12
<PAGE> 19
"Statutory Statements" has the meaning specified in Section 3.08.
"Subsidiary" means United Variable, the only entity which is
controlled by the Company directly or indirectly through one or more
intermediaries.
"Tangible Personal Property" has the meaning specified in Section
3.20.
"Tax" or "Taxes" means any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority, including,
without limitation: taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, premiums, property,
sales, use, capital stock, payroll, employment, social security, workers'
compensation, unemployment compensation, or net worth; taxes or other charges
in the nature of excise, withholding, ad valorem, stamp, transfer, value added,
or gains taxes; license, registration and documentation fees; and customs
duties, tariffs, and similar charges.
"Tax Returns" has the meaning specified in Section 7.01.
"Third Party" has the meaning specified in Section 5.06.
"Third Party Claim" has the meaning specified in Section 9.02.
"United Variable" means United Variable Services, Inc., a Louisiana
corporation which is wholly-owned by the Company.
"401(k) and ESOP Plans" has the meaning specified in Section 6.01.
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Shares. Upon the terms and
subject to the conditions of this Agreement, at the Closing, the Seller shall
sell to the Purchaser, and the Purchaser shall purchase from the Seller, the
Shares.
13
<PAGE> 20
SECTION 2.02. Purchase Price. The aggregate purchase price for the
Shares shall be $164 million in cash (the "Purchase Price"), as adjusted
pursuant to Section 2.06.
SECTION 2.03. Closing. Upon the terms and subject to the conditions
of this Agreement, the sale and purchase of the Shares contemplated by this
Agreement shall take place at a closing (the "Closing") to be held at the
offices of Dewey Ballantine, 1301 Avenue of the Americas, New York, New York at
10:00 A.M. New York time on the last day of the calendar month following the
later to occur of (i) expiration or termination of all applicable waiting
periods under the HSR Act and (ii) receipt of the last required approval or
consent to consummate this Agreement, or at such other place or at such other
time or on such other date as the Seller and the Purchaser may mutually agree
upon in writing (the day on which the Closing takes place being the "Closing
Date"). Immediately prior to the Closing, Seller shall cause the Company to
distribute to Seller the Excluded Assets as set forth in Section 5.12.
SECTION 2.04. Closing Deliveries by the Seller. At the Closing, the
Seller shall deliver or cause to be delivered to the Purchaser:
(a) stock certificates evidencing the Shares duly endorsed in blank,
or accompanied by stock powers duly executed in blank, in form
satisfactory to the Purchaser and with all required stock transfer tax
stamps affixed, if applicable;
(b) a receipt from the Seller for (i) the Purchase Price minus the
Excluded Assets Value Amount, (ii) the Adjustment Amount and (iii) the
Promissory Note; and
(c) the opinions, certificates and other documents required to be
delivered pursuant hereto.
SECTION 2.05. Closing Deliveries by the Purchaser. (a) At the
Closing, the Purchaser shall deliver to the Seller:
(i) the Purchase Price minus the Excluded Assets Value Amount plus
the Adjustment Amount by wire transfer in immediately available funds to
the Purchase Price Bank Account or as requested by Seller; and
(ii) the Promissory Note registered in the name of Seller; and
14
<PAGE> 21
(iii) the opinions, certificates and other documents required to be
delivered pursuant hereto.
(b) At the Closing, the Purchaser shall deliver to the Company the
Excluded Assets Value Amount, as determined in accordance with Section
5.12(b), by wire transfer in immediately available funds to one or more
accounts designated by the Company.
SECTION 2.06. Purchase Price Adjustment. (a) Subject to and in
accordance with the procedures set forth in this Section 2.06, the Cash
Purchase Price shall be increased by an amount (the "Adjustment Amount") equal
to the income of the Company, computed in accordance with GAAP net of all
applicable income Taxes and excluding any capital gains or losses (provided,
however, that capital gains or losses attributable to the Cigna Partnership, to
the extent not otherwise included in income, shall be included), for the period
beginning on January 1, 1996 and ending on the Closing Date (the "Adjustment
Period"), which amount may be adjusted following the Closing in accordance with
this Section 2.06; provided, however, that the Adjustment Amount shall not
include any income or liability for Taxes arising from the Section 338(h)(10)
Election, and for the distribution of the Excluded Assets or transfer of the
Commercial Real Estate Group.
(b) Not less than ten calendar days prior to the Closing Date (the
"Calculation Date"), Seller shall deliver to the Purchaser (i) an unaudited
consolidated income statement of the Company for the Adjustment Period which
shall include a projection of income from the Calculation Date through the
Closing Date (the "Closing Income Statement") and (ii) Seller's calculation of
the Adjustment Amount. Such Closing Income Statement shall be (i) prepared in
accordance with GAAP and on the basis of the same accounting principles,
consistently applied, as used in the preparation of the Company's most recent
annual GAAP financial statements previously provided to the Purchaser, other
than the normal estimation of accruals and normal year end audit adjustments
(the "Accounting Principles") and (iii) certified by the chief financial
officer of the Seller as fairly presenting in all material respects, in
accordance with the Accounting Principles, the Adjustment Amount.
(c) No less than five calendar days prior to the Closing Date, the
Purchaser shall in good faith notify Seller in writing of any objections based
on an indication of manifest error in Seller's calculation of the Adjustment
Amount. If the Purchaser does not so notify Seller, then on the Closing Date,
the Adjustment Amount will be paid by the Purchaser to the Seller in addition
to the Cash Purchase Price, as provided in Section 2.05(a).
15
<PAGE> 22
(d) If the Purchaser shall in good faith give such notice of
objection no less than five calendar days prior to the Closing Date, the
Purchaser and Seller shall negotiate in good faith to resolve all or any part
of such dispute on or prior to the Closing Date, and the amount as so agreed,
if any, will be paid by the Purchaser to the Seller in addition to the Cash
Purchase Price. If, after such good faith negotiations, Purchaser and Seller
are nevertheless unable to agree as to any portion of the Adjustment Amount,
such portion shall not be paid at the Closing, and shall be determined and paid
pursuant to subsections (e) through (h) below.
(e) As promptly as practicable, but in any event within 60 calendar
days following the Closing Date, the Purchaser shall deliver to the Seller a
consolidated income statement of the Company for the Adjustment Period prepared
on the basis of the Accounting Principles consistently applied in accordance
with past practice (the "Actual Income Statement") which will include a
separate calculation of the actual income of the Company completed in
accordance with GAAP, net of all applicable Taxes and excluding any capital
gains or losses (provided, however, that capital gains or losses attributable
to the Cigna Partnership, to the extent not otherwise included in income, shall
be included), during the Adjustment Period (the "Adjusted Adjustment Amount").
(f) Seller (and its advisors) shall be entitled to review, and the
Purchaser shall make available for review at mutually agreeable times and
places, the work papers, schedules, memoranda and other documents used by the
Purchaser and its advisors in the preparation of the Actual Income Statement
and calculation of the Adjusted Adjustment Amount. Such review, and any review
or determination by the independent public accountants referred to below, shall
be only for the limited purposes of calculating the Adjusted Adjustment Amount,
and shall not be used for any other purpose. If Seller shall in good faith
disagree with the Purchaser's calculation of the Adjusted Adjustment Amount, it
shall deliver a notice to the Purchaser, within 20 Business Days after
completion of such review by Seller, which review shall take no longer than 20
Business Days following delivery to Seller of such calculation, setting forth
Seller's disagreement with such calculation and setting forth Seller's
calculation of such amount. A failure to give such notice within such period
shall be deemed to constitute Seller's acceptance of such calculation. If
Seller gives such notice, Seller and the Purchaser shall, during the 20
Business Days after delivery to the Purchaser of such notice, negotiate in good
faith to resolve the disagreement. If at the end of such 20 Business Days
period no resolution is reached, either party may request that the disagreement
be resolved by a firm of
16
<PAGE> 23
independent public accountants of national recognition agreed upon by Seller
and the Purchaser (it being agreed that, in the absence of a further agreement,
the firm of Coopers & Lybrand, L.L.P. will be mutually agreeable to Seller and
the Purchaser). The calculation of the Adjusted Adjustment Amount shall be
made by such firm within the range of the respective calculations of the
Purchaser and the Seller and when so made shall be conclusive, and shall be
binding on, and nonappealable by, the parties. The fees and disbursements of
such firm shall be borne by the party requesting such independent audit, or
equally by the parties requesting such audit.
(g) The difference between the Adjustment Amount, or, if not
previously paid in full, the portion thereof that was paid by the Purchaser to
the Seller at the Closing, and the Adjusted Adjustment Amount (the "Corrected
Amount") shall be paid to Seller by the Purchaser or to the Purchaser by
Seller, as applicable. If the Adjustment Amount, or, if not previously paid in
full, the portion thereof that was paid by the Purchaser to the Seller at the
Closing equals the Adjusted Adjustment Amount, no payment by the Purchaser or
Seller shall be made. If the Purchaser or Seller is required to make a payment
pursuant to this Section, such payment shall be made no later than two Business
Days after (i) the parties agree to the Corrected Amount or (ii) the
independent auditor provided for above calculates the Corrected Amount, as
applicable, and shall be in immediately available funds by wire transfer to an
account designated by the party entitled to receive the Corrected Amount.
(h) The Corrected Amount shall be accompanied by the payment of
interest at the prime rate from the Closing Date to the date of additional
payment or refund, as the case may be. For this purpose, the "prime rate"
shall mean the rate announced by the Bank of New York at its principal office
as its prime commercial lending rate as of the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SELLER
Subject to the terms and conditions of this Agreement, the Seller
hereby represents and warrants to the Purchaser as of the date hereof, except
as may otherwise be set forth on the Disclosure Schedule, as set forth in
Sections 3.01 through 3.32, as follows:
SECTION 3.01. Organization, Authority and Qualification of the
Seller. The Seller is a corporation
17
<PAGE> 24
duly organized, validly existing and in good standing under the laws of the
State of Louisiana and has all necessary power and authority to enter into this
Agreement, to carry out its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Seller, the performance by the Seller of its obligations hereunder and
the consummation by the Seller of the transactions contemplated hereby have
been duly authorized by all requisite action on the part of the Seller other
than approval by its shareholders. This Agreement has been duly executed and
delivered by the Seller, and (assuming due authorization, execution and
delivery by the Purchaser) upon receipt of the requisite approval by its
shareholders, and the necessary approvals by Governmental Authorities, this
Agreement will constitute a legal, valid and binding obligation of the Seller
enforceable against the Seller in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting rights of creditors of
insurance companies, rights of creditors generally or by general principles of
equity. The Affiliates of Seller which are parties to the Master Loan Sale
Agreement (the "Seller Master Loan Sale Parties") shall have at the Closing
each taken all requisite action to authorize the Master Loan Sale Agreement,
and shall have at the Closing all necessary power and authority to enter into
the Master Loan Sale Agreement and to consummate the transactions contemplated
thereby. The Master Loan Sale Agreement, upon its execution and delivery by
Purchaser and the Seller Master Loan Sale Parties, will constitute a legal,
valid and binding obligation of the Seller Master Loan Sale Parties enforceable
against the Seller Master Loan Sale Parties in accordance with its terms except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting rights of creditors of
insurance companies, rights of creditors generally or by general principles of
equity.
SECTION 3.02. Organization, Authority and Qualification of the
Company. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Louisiana and has all necessary
power and authority to own, operate or lease the properties and assets now
owned, operated or leased by it and to conduct the Business. The Company is
duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
its business makes such licensing or qualification necessary, other than those
jurisdictions where the failure to be so licensed or qualified are not
reasonably likely to have a Material Adverse Effect, and all such jurisdictions
are set forth on Section 3.02 of the
18
<PAGE> 25
Disclosure Schedule. The Company is licensed to write life and health
insurance, which includes fixed annuities, and variable products, which include
variable annuities, in each of the jurisdictions listed in Section 3.02 of the
Disclosure Schedule (which also specifies each jurisdiction as to which the
license held by the Company specifically authorizes reinsurance activities).
All of the foregoing registrations, licenses, qualifications and memberships
are in full force and effect and neither the Company nor the Subsidiary has
received any notice of any event, inquiry, investigation or proceeding that is
reasonably likely to result in the suspension, revocation or limitation of any
such registration, license, qualification or membership, and to the best
knowledge of the Seller, there is no sustainable basis for any such suspension,
revocation or limitation. All corporate actions taken by the Company have been
duly authorized, and the Company has not taken any action that in any respect
conflicts with, constitutes a default under or results in a violation of any
provision of its Articles of Incorporation or By-laws except where such actions
taken or not taken are not reasonably likely to have a Material Adverse Effect.
True and correct copies of the Articles of Incorporation and By-laws of the
Company, each as in effect on the date hereof, have been delivered by the
Seller to the Purchaser.
SECTION 3.03. Capital Stock of the Company; Ownership of the Shares.
(a) The authorized capital stock of the Company consists of 4,200,528 shares
of Common Stock. As of the date hereof, 4,200,528 shares of Common Stock are
issued and outstanding, all of which are validly issued, fully paid and
nonassessable. None of the issued and outstanding shares of Common Stock was
issued in violation of any preemptive rights.
(b) There are no options, warrants, convertible securities or other
rights, agreements, arrangements or commitments of any character relating to
the capital stock of the Company or obligating the Seller or the Company to
issue or sell any shares of capital stock of, or any securities or obligations
convertible into or exchangeable for shares of capital stock of the Company, or
any other interest in, the Company.
(c) The Shares constitute all the issued and outstanding capital
stock of the Company and are owned of record and beneficially solely by Seller
and are registered in the name of Seller free and clear of all Encumbrances.
Upon consummation of the transactions contemplated by this Agreement and
registration of the Shares in the name of the Purchaser in the stock records of
the Company, the Purchaser, assuming it shall have purchased the Shares for
value in good faith and without notice of any adverse claim,
19
<PAGE> 26
will own all the issued and outstanding capital stock of the Company free and
clear of all Encumbrances other than those, if any, created by the Purchaser.
(d) There are no voting trusts, stockholder agreements, proxies or
other agreements or understandings in effect with respect to the voting or
transfer of any of the Shares.
SECTION 3.04. Subsidiaries. (a) There are no Subsidiaries other
than United Variable. Section 3.04 of the Disclosure Schedule sets forth, with
respect to the Subsidiary, the jurisdiction and date of its incorporation, its
authorized capital stock, the number and type of its issued and outstanding
shares of capital stock and the current ownership of such shares.
(b) The Company is not a member of (nor is any part of the Business
conducted through) any partnership other than those identified in Section 3.04
of the Disclosure Schedule. The Company is not a participant in any joint
venture or similar arrangement.
(c) The Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the State of Louisiana and has all
necessary power and authority to own, operate or lease the properties and
assets now owned, operated or leased by it and to conduct its business. The
Subsidiary is duly licensed or qualified to do business and is in good standing
in each jurisdiction in which the properties owned or leased by it or the
operation of its business makes such licensing or qualification necessary,
other than those jurisdictions where the failure to be so qualified or licensed
is not reasonably likely to have a Material Adverse Effect, and all such
jurisdictions are set forth on Section 3.04(a) of the Disclosure Schedule. The
Subsidiary is a registered broker-dealer under the Exchange Act and, in
connection with its present business activities, is not required to register as
a broker-dealer in any state. The Subsidiary is a registered investment
adviser under the Investment Advisers Act and, in connection with its present
business activities, is not required to register as an investment adviser in
any state, other than those jurisdictions where the failure to be so registered
is not reasonably likely to have a Material Adverse Effect. All of the
foregoing registrations, licenses, qualifications and memberships are in full
force and effect and the Subsidiary has not received any notice of any event,
inquiry, investigation or proceeding that is reasonably likely to result in the
suspension, revocation or limitation of any such registration, license,
qualification or membership, and to the best knowledge of the Seller,
20
<PAGE> 27
there is no sustainable basis for any such suspension, revocation or
limitation.
(d) All the outstanding shares of capital stock of the Subsidiary are
validly issued, fully paid, nonassessable, free of preemptive rights and owned
by the Company, free and clear of all Encumbrances.
(e) There are no options, warrants, convertible securities, or other
rights, agreements, arrangements or commitments of any character relating to
the capital stock of the Subsidiary or obligating the Seller, the Company or
the Subsidiary to issue or sell any shares of capital stock of, or any other
interest in, the Subsidiary.
(f) All corporate actions taken by the Subsidiary have been duly
authorized and the Subsidiary has not taken any action that in any respect
conflicts with, constitutes a default under or results in a violation of any
provision of, its charter or by-laws (or similar organizational documents)
except where such actions taken or not taken are not reasonably likely to have
a Material Adverse Effect. True and complete copies of the charter and by-laws
(or similar organizational documents), in each case as in effect on the date
hereof, of the Subsidiary have been delivered by the Seller to the Purchaser.
(g) The Subsidiary is not a member of (nor is any part of its
business conducted through) any partnership nor is the Subsidiary a participant
in any joint venture or similar arrangement.
(h) There are no voting trusts, stockholder agreements, proxies or
other agreements or understandings in effect with respect to the voting or
transfer of any shares of capital stock of or any other interests in the
Subsidiary.
SECTION 3.05. Corporate Books and Records. The minute books of the
Company and the Subsidiary contain minutes of all meetings of, and accurately
reflect all material actions taken by, the stockholders, Boards of Directors
and all committees of the Boards of Directors of the Company and the
Subsidiary. Complete and accurate copies of all such minute books of the
Company and the Subsidiary from and after 1979 have been made available to the
Purchaser by the Seller.
SECTION 3.06. No Conflict. Assuming that the requisite approval of
the shareholders of the Seller is obtained and that all consents, approvals,
authorizations and other actions described in Section 3.07 have been obtained
and all filings and notifications listed in Section
21
<PAGE> 28
3.07 of the Disclosure Schedule have been made, the execution, delivery and
performance of this Agreement by the Seller do not and will not (a) violate,
conflict with or result in the breach of any provision of the charter or
by-laws (or similar organizational documents) of the Seller, the Company or the
Subsidiary, (b) conflict with or violate (or cause an event which would be
reasonably likely to have a Material Adverse Effect as a result of) any Law or
Governmental Order applicable to the Seller, the Company, the Subsidiary or any
of their respective assets, properties or businesses, including, without
limitation, the Business, except where such conflict or violation is not
reasonably likely to have a Material Adverse Effect or (c) conflict with,
result in any breach of, constitute a default (or event which with the giving
of notice or the lapse of time, or both, would become a default) under, require
any consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of, or result in the
creation of any Encumbrance on any of the Shares or on any of the assets or
properties of the Seller, the Company or the Subsidiary pursuant to any note,
bond, mortgage or indenture, contract, agreement, lease, sublease, license,
permit, franchise or other instrument or arrangement to which the Seller, the
Company or the Subsidiary is a party or by which any of the Shares or any of
such assets or properties is bound or affected except where such conflict or
breach is not reasonably likely to have a Material Adverse Effect.
SECTION 3.07. Governmental and Other Authorizations; Notices and
Consents. (a) The execution, delivery and performance of this Agreement do
not and will not require any consent, approval, authorization or other order
of, action by, filing with or notification to any Governmental Authority or any
other third party, except (a) as required by the insurance laws of the State of
Louisiana and any other state in which the Company is doing business, (b) the
notification requirements of the HSR Act and (c) as set forth on Section 3.07
of the Disclosure Schedule.
(b) The Seller does not have knowledge of any facts or circumstances
pertaining to the Purchaser which are reasonably likely to prevent the parties
hereto from obtaining the governmental consents and approvals contemplated by
Section 3.07(a).
SECTION 3.08. Financial Information and Books and Records. (a) The
Seller has previously furnished, and for the period ended December 31, 1995
will furnish, to the Purchaser true and complete copies of (i) the audited
consolidated GAAP balance sheet of the Company and its Subsidiary for each of
the fiscal years ended as of December
22
<PAGE> 29
31, 1995, December 31, 1994 and December 31, 1993, and the related audited GAAP
consolidated statements of earnings, stockholder's equity and cash flows for
each of such periods then ended together with all related notes and schedules
thereto, accompanied by the reports thereon of the Company and the Seller's
Accountants, which reports shall be "unqualified" except for references therein
to adoption of new accounting policies agreed to by the auditors (collectively
referred to herein as the "Company GAAP Statements") and (ii) the unaudited
GAAP consolidated balance sheets of the Company and its Subsidiary as of March
31, June 30, September 30 and December 31, 1995, the end of each fiscal quarter
thereafter and the related unaudited GAAP consolidated statements of earnings,
stockholder's equity and cash flows for each three-month period then ended,
together with all related notes and schedules thereto (collectively referred to
herein as the "Company Interim GAAP Statements" and, together with the Company
GAAP Statements, the "Financial Statements"). The Financial Statements (i)
were or will be prepared in accordance with the books of account and other
financial records of the Company and the Subsidiary, (ii) present or will
present fairly in all material respects the consolidated financial condition
and results of operations of the Company and the Subsidiary as of the dates
thereof or for the periods covered thereby in accordance with GAAP, applied on
a basis consistent with the past practices of the Company except as noted
therein and (iii) include or will include all adjustments that are necessary
for a fair presentation of the consolidated financial condition and the results
of the operations of the Company and the Subsidiary as of the dates thereof or
for the periods covered thereby in accordance with GAAP (subject, in the case
of the Company Interim GAAP Statements, to normal estimation of accruals and
normal year-end audit adjustments).
(b) The Seller has previously furnished, and for the period ended
December 31, 1995 will furnish, to the Purchaser true and complete copies of
(i) the statutory annual statement of the Company filed with or submitted to
the Louisiana Department, and any other state department of insurance or
similar regulatory authority with which the Company has filed statutory annual
statements which are different from those filed with the Louisiana Department
(the "Other Departments"), for each of the four years ended as of December 31,
1995, December 31, 1994, December 31, 1993, and December 31, 1992, together
with all related notes, exhibits and schedules thereto (collectively referred
to herein as the "Company Annual Statements") and (ii) the statutory quarterly
statements of the Company filed with or submitted to the Louisiana Department
and any Other Departments for each of the three-month periods ended as of March
31, June 30, and September 30, 1995 and the end of
23
<PAGE> 30
each fiscal quarter thereafter, together with all related notes, exhibits and
schedules thereto (collectively referred to herein as the "Company Quarterly
Statements" and, together with the Company Annual Statements, the "Statutory
Statements"). The Statutory Statements (i) were or will be prepared from the
books of account and other financial records of the Company, (ii) were or will
be filed with or submitted to the Louisiana Department or Other Departments on
forms prescribed or permitted by the Louisiana Department or the Other
Departments, as applicable, (iii) were or will be prepared in accordance with
SAP applied on a basis consistent with the past practices of the Company except
as noted therein and complied on their respective dates of filing or submission
in all material respects with Louisiana Law and with all other applicable Laws;
provided that any such non-compliance is not reasonably likely to have a
Material Adverse Effect and (iv) present or will present fairly in all material
respects the assets, liabilities, capital and surplus, results of operations
and cash flows of the Company as of the dates thereof or for the periods
covered thereby in accordance with SAP (subject, in the case of the Company
Quarterly Statement, to normal estimation of accruals and reserves and normal
year-end audit adjustments).
(c) The Seller for the period ended December 31, 1995 will deliver to
the Purchaser a true and complete copy of the annual statement of the separate
accounts of the Company to be filed with or submitted to the Louisiana
Department for the year ended as of December 31, 1995, together with all
related notes, exhibits and schedules thereto (referred to herein as the
"Company Separate Accounts Annual Statement"). The Company Separate Accounts
Annual Statement (i) was or will be prepared from the books of account and
other financial records of the Company, (ii) was or will be filed with or
submitted to the Louisiana Department on forms prescribed or permitted by the
Louisiana Department, (iii) was or will be prepared in accordance with SAP
applied on a basis consistent with the past practices of the Company (except as
set forth in the notes, exhibits or schedules thereto) and complied on their
respective dates of filing or submission in all material respects with
Louisiana Law and with all other applicable Laws; provided that any such
non-compliance is not reasonably likely to have a Material Adverse Effect and
(iv) present or will presents fairly in all material respects the combined
statutory assets, liabilities and surplus, and results of operations of the
separate accounts of the Company as of the dates thereof or for the periods
covered thereby in accordance with SAP.
(d) The books of account and other financial records of the Company
and the Subsidiary: (i) reflect or
24
<PAGE> 31
will reflect, in all material respects, all items of income and expense and all
assets and liabilities required to be reflected therein in accordance with GAAP
or SAP, as applicable, (ii) are or will be in all material respects complete
and correct, and (iii) have been or will be maintained in accordance with good
business, accounting and, with respect to the Company, actuarial practices.
SECTION 3.09. Reserves. All reserves and other liabilities reflected
in lines 1, 2, 3, and 4 of page 3 of the 1994 and 1995 Company Annual
Statements ("Reserve Liabilities") (i) were and will be, as applicable,
determined in accordance with commonly accepted actuarial standards
consistently applied except as noted therein, (ii) were and will be, as
applicable, fairly stated in accordance with sound actuarial principles, (iii)
were and will be, as applicable, based on actuarial assumptions which were in
accordance with or more conservative than those appropriate for such insurance
policies and annuity contracts, (iv) met or will meet, as applicable, the
requirements of the insurance Laws of the state of domicile and, in the
aggregate, each other jurisdiction in which the Company is licensed to write
life insurance or issue annuities and (v) reflected or will reflect, as
applicable, the related reinsurance, coinsurance and other similar agreements
of the Company. 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, claims and other liabilities of the Company under all insurance
policies and annuity contracts under which the Company has any liability
(including, without limitation, any liability arising under or as a result of
any reinsurance, coinsurance or other similar agreement) on December 31, 1994.
At the time of the Closing, the Reserve Liabilities will be sufficient to
satisfy all cash flow testing requirements applicable thereto under applicable
Law.
SECTION 3.10. No Undisclosed Liabilities or Capital Commitments. To
Seller's Enhanced Special Knowledge: (a) There are no Liabilities of the
Company or the Subsidiary, other than liabilities (i) reflected or reserved
against in the Financial Statements, (ii) under life and health insurance and
annuity policies issued by the Company, (iii) disclosed in Section 3.10 of the
Disclosure Schedule, (iv) relating to post-Closing state insurance guaranty
fund assessments relating to insurance companies that are insolvent or are
taken under conservatorship, placed in receivership or rehabilitation or
subject to similar action prior to the Closing or (v) incurred since the
Balance Sheet Date in the ordinary course of the Business Consistent With Past
Practice and which have not
25
<PAGE> 32
had and are not reasonably likely to have a Material Adverse Effect.
(b) Except as set forth in Section 3.10 of the Disclosure Schedule
and except for purchases and sales of home equity loans and investment assets
in the ordinary course of business Consistent With Past Practice, neither the
Company nor the Subsidiary is subject to any commitment, actual or contingent,
to make any investment or capital contribution, or otherwise expend capital, or
purchase any securities, or supply funds to any Person, in each case in excess
of $100,000 in the aggregate.
SECTION 3.11. Acquired Assets. Each asset of the Company and the
Subsidiary (including, without limitation, the benefit of any licenses, leases
or other agreements or arrangements) acquired since the Balance Sheet Date has
been acquired for consideration, to the Seller's knowledge, of not more than
the fair market value of such asset at the date of such acquisition.
SECTION 3.12. Conduct in the Ordinary Course; Absence of Certain
Changes, Events and Conditions. Since the Balance Sheet Date, except as
disclosed on the Disclosure Schedule or contemplated by this Agreement (a) the
Business has been conducted in the ordinary course and Consistent With Past
Practice and (b) neither the Company nor the Subsidiary has:
(i) permitted or allowed any of the assets or properties
(whether tangible or intangible) of the Company or the Subsidiary to be
subjected to any Encumbrance, other than Permitted Encumbrances and
Encumbrances that will be released at or prior to the Closing;
(ii) except in the ordinary course of business Consistent with
Past Practice, discharged or otherwise obtained the release of any
Encumbrance or paid or otherwise discharged any Liability, other than
current liabilities reflected on the Balance Sheet and current liabilities
incurred in the ordinary course of business Consistent With Past Practice
since the Balance Sheet Date;
(iii) other than loans to policyholders and commercial real estate
loans in the ordinary course of business Consistent With Past Practice,
made any loan to, guaranteed any Indebtedness of, or otherwise incurred
any Indebtedness on behalf of any Person;
(iv) failed to pay any creditor any amount owed to such creditor
when due, except any amounts being
26
<PAGE> 33
contested in good faith and not in excess of $100,000 in the aggregate or
for which reserves in accordance with GAAP have been established on the
Financial Statements;
(v) redeemed any of the capital stock or declared, made or paid
any dividends or distributions with respect to capital (whether in cash,
securities or other property) to the holders of capital stock of the
Company or the Subsidiary or otherwise, other than dividends,
distributions and redemptions declared, made or paid by the Subsidiary
solely to the Company;
(vi) made any material changes in the customary methods of
operations of the Company or the Subsidiary, including, without
limitation, purchasing, marketing, selling, pricing, underwriting,
investing or actuarial practices and policies;
(vii) merged with, entered into a consolidation with or acquired
an interest of 5% or more in any Person or acquired a substantial portion
of the assets or business of any Person or any division or line of
business thereof, or otherwise acquired any material assets other than in
the ordinary course of business Consistent With Past Practice;
(viii) made any capital expenditure or commitment for any capital
expenditure in excess of $100,000 in the aggregate;
(ix) sold, transferred, leased, subleased, licensed or otherwise
disposed of any properties or assets, real, personal or mixed (including,
without limitation, investment assets, leasehold interests and intangible
assets), other than (A) the sale of investment assets (including, without
limitation, home equity loans) in the ordinary course of business
Consistent With Past Practice and (B) the distribution of Excluded Assets
in accordance with Section 5.12;
(x) issued or sold any capital stock, notes, bonds or other
securities, or any option, warrant or other right to acquire the same, of,
or any other interest in, the Company or the Subsidiary, other than the
sale of annuity contracts in the ordinary course of business Consistent
With Past Practice or as contemplated by Section 5.12;
(xi) except as set forth in Section 3.12 of the Disclosure
Schedule and except as disclosed in the Seller's most recent proxy
statement, and except for salary and benefits which are provided
Consistent With
27
<PAGE> 34
Past Practice, entered into any agreement, arrangement or transaction with
any of its directors, officers, employees or shareholders (or with any
relative, beneficiary, spouse or Affiliate of such Person), other than an
insurance policy or annuity contract containing standard terms and
purchased by such Person;
(xii) except as set forth in Section 3.12 of the Disclosure
Schedule, (A) granted any increase, or announced any increase, in the
wages, salaries, compensation, bonuses, incentives, pension or other
benefits payable by the Company or the Subsidiary to any of its employees,
including, without limitation, any increase or change pursuant to any Plan
except for regular salary increases in the ordinary course of business
Consistent With Past Practice or (B) established or increased or promised
to increase any benefits under any Plan;
(xiii) revalued (other than in accordance with SAP or GAAP, as
appropriate) or, except as set forth in Section 3.12 of the Disclosure
Schedule, restructured any assets of the Company or the Subsidiary;
(xiv) amended, terminated, cancelled or compromised any material
claims of the Company or the Subsidiary or waived any other rights of
substantial value to the Company or the Subsidiary;
(xv) made any change in any method of accounting or accounting
practice or policy used by the Company or the Subsidiary and disclosed in
the Financial Statements or the SAP Statements other than changes which
were required by GAAP or SAP or Guideline 33 of the National Association
of Insurance Commissioners;
(xvi) failed to maintain the Assets Consistent With Past
Practices;
(xvii) allowed any material Permit or material Environmental Permit
that was issued or relates to the Company or the Subsidiary or otherwise
relates to any material Asset to lapse or terminate or failed to renew any
such Permit or Environmental Permit or any insurance policy under which
the Company or the Subsidiary is an insured that is scheduled to terminate
or expire on or prior to the Closing Date;
(xviii) incurred any Indebtedness in excess of $100,000 in the
aggregate (other than repurchase agreements and reverse repurchase
agreements entered into in the ordinary course of business Consistent With
Past Practice);
28
<PAGE> 35
(xix) amended, modified or consented to the termination of any
Material Contract or the Company's or the Subsidiary's rights thereunder;
(xx) amended or restated the Articles of Incorporation or the
By-laws (or other organizational documents) of the Company or the
Subsidiary;
(xxi) terminated, discontinued, closed or disposed of any office,
facility or other business operation, or laid off any employees other than
in the ordinary course of business Consistent With Past Practice) or
implemented any early retirement, separation or program providing early
retirement window benefits within the meaning of Section 1.401(a)-4 of the
Regulations or announced or planned any such action or program for the
future;
(xxii) except pursuant to confidentiality agreements, disclosed any
secret or confidential Intellectual Property or permitted to lapse or
abandoned any Intellectual Property (or any registration or grant thereof
or any application relating thereto) to which, or under which, the Company
or the Subsidiary has any right, title, interest or license and which is
material to the Business;
(xxiii) except as set forth in Section 3.12 of the Disclosure
Schedule, settled or compromised any liability, with respect to Taxes of
the Company or the Subsidiary;
(xxiv) suffered any casualty loss or damage with respect to any of
the Assets which in the aggregate have a replacement cost in excess of
$100,000, whether or not such loss or damage shall have been covered by
insurance;
(xxv) except as set forth in Section 3.12 of the Disclosure
Schedule, made any material amendment to the insurance policies or annuity
contracts in force of the Company or made any material change in the
methodology used in the determination of, or destrengthened the Reserve
Liabilities of the Company or any reserves contained in the 1994 Company
GAAP Statements with respect to insurance policies and annuity contracts;
(xxvi) except as set forth in Section 3.12 of the Disclosure
Schedule, terminated, amended or entered into as ceding or assuming
insurer any reinsurance, coinsurance or other similar agreement or any
trust agreement or security agreement related thereto, other
29
<PAGE> 36
than renewals on substantially the same terms, in the ordinary course of
business;
(xxvii) except as set forth in Section 3.12 of the Disclosure
Schedule, amended or introduced any life insurance policy or annuity
contract;
(xxviii) suffered any Material Adverse Effect;
(xxix) agreed, whether in writing or otherwise, to take any of the
actions specified in this Section 3.12 or granted any options to purchase,
rights of first refusal, rights of first offer or any other similar rights
or commitments with respect to any of the actions specified in this
Section 3.12, except as expressly contemplated by this Agreement; or
(xxx) except for the transactions contemplated by this Agreement,
taken or failed to take any action which could cause the Adjustment Amount
to be greater than it would otherwise be in the ordinary course of
business.
SECTION 3.13. Litigation. Set forth in Section 3.13 of the
Disclosure Schedule (with respect to each Action disclosed therein) are the
parties, the nature of the proceeding, the date and method commenced and the
amount of damages (if known) or other relief sought and, if applicable, paid or
granted. Except as set forth in Section 3.13 of the Disclosure Schedule, there
are no Actions by or against the Company or the Subsidiary (or by or against
the Seller or any Affiliate thereof and relating to the Business, the Company
or the Subsidiary), or affecting any of the Assets, pending before any
Governmental Authority (or, to the best knowledge of the Seller, threatened to
be brought by or before any Governmental Authority). No such Action is
reasonably likely to have a Material Adverse Effect or is reasonably likely to
affect the legality, validity or enforceability of this Agreement or the
consummation of the transactions contemplated hereby. None of the Company, the
Subsidiary, any of the Assets or the Seller is subject to any Governmental
Order (nor, to the best knowledge of the Seller, are there any such
Governmental Orders threatened to be imposed by any Governmental Authority)
which is reasonably likely to have a Material Adverse Effect.
SECTION 3.14. Certain Interests. Seller or any Affiliate of Seller
(other than the Company or the Subsidiary) does not have, and no officer or
director of the Seller, the Company or the Subsidiary and no relative or spouse
(or relative of such spouse) who resides with, or is a dependent of, any such
officer or director has
30
<PAGE> 37
(i) outstanding any Indebtedness to the Company or the Subsidiary or (ii)
except as set forth in Section 3.12(a)(xi) and Section 3.14 of the Disclosure
Schedule, entered into any transactions with the Company or the Subsidiary (any
arrangement referred to in (i) or (ii) shall be referred to as an
"Inter-Company Arrangement"). All Inter-Company Arrangements are set forth in
Section 3.14 of the Disclosure Schedule.
SECTION 3.15. Compliance with Laws. To the Seller's Enhanced Special
Knowledge, the Company and the Subsidiary have each conducted and continue to
conduct the Business in accordance with all material Laws and Governmental
Orders applicable to the Company or the Subsidiary or any of the Assets or the
Business, and neither the Company nor the Subsidiary is in violation of any
such Law or Governmental Order, except as set forth in Section 3.15 of the
Disclosure Schedule. The Company and the Subsidiary have duly and validly
filed or caused to be filed all material reports, statements, documents,
registrations, filings or submissions that were required by applicable Laws to
be filed; all such filings complied with all applicable Laws in all material
respects when filed, and no material deficiencies have been asserted with
respect to any such filings which have not been satisfied. All outstanding
insurance policies, annuity contracts and assumption certificates issued by the
Company and now in force are, to the extent required under applicable Laws, 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 provided for 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. The Company and
the Subsidiary, as applicable, have filed all forms, reports, statements and
other documents required by Law to be filed by them with the Securities and
Exchange Commission (the "Commission"), including, without limitation, (a) all
Annual Reports on Form 10-K, (b) all Quarterly Reports on Form 10-Q, (c) all
Current Reports on Form 8-K, (d) all other reports and registration statements,
including, without limitation, in connection with sales of variable annuity or
variable life contracts, and (e) all amendments and supplements to all such
reports and registration statements, and all 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 so long as they remain effective in the case of registration statements and
amendments thereto), or will not at the time they are filed (at the time they
became effective and so long as they remain effective in the case of
registration statements and amendments thereto), contain
31
<PAGE> 38
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 the light of the circumstances under which they were made, not
misleading. Each of the separate accounts of the Company or the Subsidiary
that is required to be registered as an investment company under the Investment
Company Act of 1940 is so registered (each of which is listed in Section 3.15
of the Disclosure Schedule). All forms, reports, statements and other
documents required by Law to be filed with the Commission by or on behalf of
each of the separate accounts of the Company or the Subsidiary, including,
without limitation, all registration statements and all amendments and
supplements to all such registration statements, including, without limitation,
in connection with sales of variable life insurance policies and variable
annuity contracts, have been so filed by or on behalf of such separate
accounts, and all 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 so long as they
remain effective in the case of registration statements and amendments
thereto), or will not at the time they are filed (at the time they became
effective and so long as they remain 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 statement therein, in the light of the
circumstances under which they were made, not misleading.
SECTION 3.16. Environmental and Other Permits and Licenses; Related
Matters. To the Seller's Special Knowledge except as set forth in Section 3.10
or 3.16 of the Disclosure Schedule:
(a) The Seller, the Company and the Subsidiary currently hold all the
permits, licenses, authorizations, certificates, consents, exemptions and
approvals required under any Law (collectively, "Permits"), including, without
limitation, Environmental Permits, necessary for the ownership, use, occupancy
and operation of each Asset of the Company and the Subsidiary and the conduct
of the Business, and all such Permits are in full force and effect, except
where the failure to hold any such Permit is not reasonably likely to have a
Material Adverse Effect.
(b) (i) Each tenant and occupant of the Real Property holds all
Permits, including, without limitation, Environmental Permits, necessary for
the use, occupancy and operation of the Real Property by such tenant or
occupant, and all such Permits are in full force and effect, except where the
failure to hold any such Permit is not reasonably
32
<PAGE> 39
likely to have a Material Adverse Effect; (ii) there is no existing practice,
action or activity of any tenant or occupant of the Real Property, or of any
owner, tenant or occupant of any real property in which the Company or a
Subsidiary or with respect to the Business, the Seller currently holds a
security interest (the "Secured Real Property") which will give rise to any
criminal liability or civil Liability under, or violate or prevent compliance
with, any applicable Law, including, without limitation, any applicable
Environmental Law; (iii) no tenant or occupant of the Real Property has
received any notice from any Governmental Authority revoking, cancelling,
rescinding, materially modifying or refusing to renew any Permit or providing
written notice of violations under any Law, including, without limitation, any
applicable Environmental Law; (iv) each tenant and occupant of the Real
Property is in all respects in compliance with its Permits, including, without
limitation, Environmental Permits, except where the failure to be in compliance
with such Permits is not reasonably likely to have a Material Adverse Effect;
(v) there is no existing practice, action or activity of the Company or the
Subsidiary or, with respect to any portion of the Business, the Seller and no
existing condition of the Assets of the Company or the Subsidiary or the
Business which has given (except to the extent already resolved) or will give
rise to any criminal liability or civil Liability under, or violate or prevent
compliance with, any applicable Law, including, without limitation, any
applicable Environmental Law; (vi) none of the Seller, the Company nor the
Subsidiary has received any notice from any Governmental Authority revoking,
cancelling, rescinding, materially modifying or refusing to renew any Permit;
and (vii) the Company and the Subsidiary are in all respects in compliance with
the Permits, including, without limitation, Environmental Permits, except where
the failure to be in compliance with such Permits is not reasonably likely to
have a Material Adverse Effect. Section 3.16(a) of the Disclosure Schedule
identifies all Permits, including, without limitation, Environmental Permits
and indicates by asterisk those that will require the consent of any
Governmental Authority in the event of the execution of this Agreement or the
consummation of the transactions contemplated by this Agreement.
(c) (i) Neither the Company nor the Subsidiary nor, with respect to
any portion of the Business, the Seller has violated or is violating any
applicable Environmental Law except for any such violation which is not
reasonably likely to have a Material Adverse Effect; (ii) no tenant or occupant
of the Real Property or owner, tenant or occupant of the Secured Real Property
is violating any applicable Environmental Law in connection with the ownership,
use, occupancy or operation of the Real Property or the Secured
33
<PAGE> 40
Real Property except for any such violation which is not reasonably likely to
have a Material Adverse Effect; (iii) there has been no Release of Hazardous
Materials at, to, from, or under any real property currently or formerly owned,
leased, or operated by the Company or the Subsidiary, or, with respect to any
portion of the Business, the Seller, or at, to, from or under any Secured Real
Property, except (x) Releases which individually or collectively do not exceed
the applicable reportable quantity established pursuant to CERCLA, or (y)
Releases of petroleum or its derivatives which individually or collectively do
not exceed ten gallons; (iv) none of the Company or the Subsidiary or, with
respect to any portion of the Business, the Seller, has generated, transported
or arranged for the transport of, or disposed of any Hazardous Materials at any
location, other than amounts and types of Hazardous Materials normally present
in ordinary office trash or household waste; (v) no tenant or occupant of the
Real Property has generated at such Real Property any Hazardous Material, other
than amounts and types of Hazardous Materials normally present in ordinary
office trash or household waste; (vi) none of the Company or the Subsidiary,
or, with respect to any portion of the Business, the Seller, has any
Liabilities in connection with the Release of any Hazardous Material at any
location; (vii) except as set forth in Section 3.16 of the Disclosure Schedule,
there is not present at any of the Real Property any underground storage tanks
or sumps, asbestos, or polychlorinated biphenyls; (viii) no Environmental Lien
has attached to any of the Real Property or the Secured Real Property; and (ix)
there are no past (except to the extent already resolved), pending or
threatened Environmental Claims against the Company or the Subsidiary or, with
respect to the Business, the Seller, nor are there any circumstances that may
form the basis of any such Environmental Claim.
SECTION 3.17. Material Contracts. (a) Section 3.17 of the
Disclosure Schedule lists each of the following contracts and agreements
(including, without limitation, oral agreements) of the Company and the
Subsidiary (such contracts and agreements, together with all contracts,
agreements and Leases concerning the management or operation of any Real
Property (including, without limitation, brokerage contracts) listed or
otherwise disclosed in Section 3.19(a) or 3.19(b) of the Disclosure Schedule to
which the Company or the Subsidiary is a party and all agreements relating to
Intellectual Property set forth in Section 3.18(a) of the Disclosure Schedule,
being "Material Contracts"):
(i) each contract and agreement for the purchase of materials or
personal property with any supplier or for the furnishing of services to
the
34
<PAGE> 41
Company, the Subsidiary or otherwise related to the Business under the
terms of which the Company or the Subsidiary: (A) is likely to pay or
otherwise give consideration of more than $50,000 individually and
$250,000 in the aggregate during the calendar year ending December 31,
1995, (B) is likely to pay or otherwise give consideration of more than
$100,000 in the aggregate over the remaining term of such contract or (C)
cannot be cancelled by the Company or the Subsidiary without penalty or
further payment in an amount more than $50,000 individually and $250,000
in the aggregate and without more than 90 days' notice;
(ii) each contract and agreement for the sale of personal
property or for the furnishing of services by the Company or the
Subsidiary, other than the insurance policies and annuity contracts sold
in the ordinary course of business Consistent With Past Practice, which:
(A) is likely to involve consideration of more than $50,000 in the
aggregate during the calendar year ending December 31, 1995, (B) is likely
to involve consideration of more than $100,000 in the aggregate over the
remaining term of the contract or (C) cannot be cancelled by the Company
or the Subsidiary without penalty or further payment in an amount more
than $50,000 individually and $250,000 in the aggregate and without more
than 90 days' notice;
(iii) all broker, distributor, agency, sales promotion, market
research, marketing consulting and advertising contracts and agreements to
which the Company or the Subsidiary is a party pursuant to which services
were being provided on the Balance Sheet Date in an amount more than
$500,000 in the aggregate;
(iv) all management contracts and contracts with independent
contractors or consultants (or similar arrangements) to which the Company
or the Subsidiary is a party and which are not cancelable without penalty
or further payment in an amount more than $50,000 individually and
$250,000 in the aggregate and without more than 90 days' notice;
(v) all contracts and agreements relating to Indebtedness of the
Company or the Subsidiary including any commitments of the Company for
mortgage loans, other than policy loans, in an amount more than $50,000
individually and $250,000 in the aggregate;
(vi) all contracts and agreements with any Governmental Authority
to which the Company or the Subsidiary is a party;
35
<PAGE> 42
(vii) all contracts and agreements that limit or purport to limit
the ability of the Company or the Subsidiary to compete in any line of
business or with any Person or in any geographic area or during any period
of time;
(viii) all Inter-Company Arrangements;
(ix) all reinsurance, coinsurance or other similar agreements,
and all trust agreements or other security agreements related thereto, to
which the Company is a party that remain in force;
(x) all other contracts and agreements (other than fixed or
variable annuity, life contracts or other insurance policies issued by the
Company or the Subsidiary) whether or not made in the ordinary course of
business, which are material to the Company, the Subsidiary or the conduct
of the Business or the absence of which would have a Material Adverse
Effect; and
(xi) all obligations to pay any amounts or to perform any
obligations owing to, or to indemnify, the Seller or otherwise hold the
Seller harmless pursuant to any agreement or other arrangement entered
into prior to Closing between the Seller or any Affiliate (other than the
Company and the Subsidiary) and the Company or the Subsidiary.
(b) Each Material Contract is legal, valid, binding, enforceable
against the other party(ies) thereto and in full force and effect, and will not
cease to be in full force and effect on terms identical to those currently in
effect as a result of the consummation of the transactions contemplated by this
Agreement, except, in either case, as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting rights of creditors of insurance companies, rights of creditors
generally or by general principles of equity, nor will the consummation of the
transactions contemplated by this Agreement constitute a breach or default
under such Material Contract. Neither the Company nor the Subsidiary is in
breach of, or default under, any Material Contract.
(c) To the best knowledge of the Seller, no other party to any
Material Contract is in breach thereof or default thereunder.
(d) There is no contract, agreement or other arrangement granting any
Person any preferential right to purchase, other than as contemplated hereby
and in the
36
<PAGE> 43
ordinary course of business Consistent With Past Practice, any of the
properties or assets of the Company or the Subsidiary.
SECTION 3.18. Intellectual Property. (a) Section 3.18(a)(i) of the
Disclosure Schedule sets forth a true and complete list and a brief description
of the Owned Intellectual Property consisting of trademarks, service marks,
corporate and assumed names, trade names and copyrights and pending
registrations therefor and Section 3.18(a)(ii) of the Disclosure Schedule sets
forth a true and complete list and a brief description, including, without
limitation, a description of any license or sublicense thereof, of all Licensed
Intellectual Property. In each case where a registration or application for
registration listed in Section 3.18(a)(i) of the Disclosure Schedule is held by
assignment, the assignment has been duly recorded with the United States Patent
and Trademark Office. To Seller's Special Knowledge, the rights of the Company
or the Subsidiary, as the case may be, in or to such Intellectual Property do
not conflict with or infringe on the rights of any other Person, except where
such conflict or infringement is not reasonably likely to have a Material
Adverse Effect, and none of the Seller, the Company or the Subsidiary has
received any claim or written notice of infringement or conflict in respect of
any Intellectual Property.
(b) (i) all the Owned Intellectual Property is owned by either the
Company or the Subsidiary, as the case may be, free and clear of any
Encumbrance other than Permitted Encumbrances, (ii) the Company or the
Subsidiary has the right, pursuant to valid and enforceable licenses, to use
the Licensed Intellectual Property in the manner in which the Licensed
Intellectual Property is currently being used and (iii) no Actions have been
made or asserted or are pending (nor, to the best knowledge of the Seller, has
any such Action been threatened) against the Company or the Subsidiary either
(A) based upon or challenging or seeking to deny or restrict the use by the
Company or the Subsidiary of any of the Intellectual Property or (B) alleging
that any services provided or products sold by the Company or the Subsidiary
are being provided or sold in violation of any trademarks, or any other rights
of any Person except such Actions which, if adversely determined, are not
reasonably likely to have a Material Adverse Effect. To the best knowledge of
the Seller, no Person is using any trademarks, service marks, trade names or
similar property that are confusingly similar to the Owned Intellectual
Property or that infringe upon the Owned Intellectual Property or upon the
rights of the Company or the Subsidiary therein. None of the Seller, the
Company nor the Subsidiary has granted any license or other right to any other
Person with respect to the Owned Intellectual Property. The consummation of
the
37
<PAGE> 44
transactions contemplated by this Agreement will not result in the termination
or impairment of any of the Owned Intellectual Property or any of the rights of
the Company or the Subsidiary in any of the Licensed Intellectual Property.
(c) The Intellectual Property described in Sections 3.18(a)(i) and
3.18(a)(ii) of the Disclosure Schedule constitutes all of the Intellectual
Property used or held or intended to be used by the Company or the Subsidiary
or forming a part of all such Intellectual Property necessary and material in
the conduct of the Business and there are no other items of Intellectual
Property that are material to the Company, the Subsidiary or the Business.
SECTION 3.19. Real Property. (a) Section 3.19(a) of the Disclosure
Schedule lists: (i) the street address of each parcel of Owned Real Property,
(ii) the date on which each parcel of Owned Real Property was acquired, (iii)
the current owner of each such parcel of Owned Real Property, (iv) information
relating to the recordation of the deed pursuant to which each such parcel of
Owned Real Property was acquired and (v) the current use of each such parcel of
Owned Real Property.
(b) Section 3.19(b) of the Disclosure Schedule lists: (i) the street
address of each parcel of Leased Real Property, (ii) the identity of the
lessor, lessee and current occupant (if different from lessee) of each such
parcel of Leased Real Property and (iii) the current use of each such parcel of
Leased Real Property.
(c) The Seller has, or has caused to be, delivered to the Purchaser
true and complete copies of all Leases listed in Section 3.19(b) of the
Disclosure Schedule. Each such Lease is legal, valid, binding, enforceable and
in full force and effect with respect to the Company or the Subsidiary, as
applicable, and, to Seller's knowledge, each such Lease is legal, valid,
binding, enforceable and in full force and effect with respect to the lessor
thereof. Except as set forth in Section 3.19 of the Disclosure Schedule, each
such Lease will not cease to be in full force and effect on terms identical to
those currently in effect as a result of the consummation of the transactions
contemplated by this Agreement, except, in either case, as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting rights of creditors of insurance companies, rights of
creditors generally or by general principles of equity, nor will the
consummation of the transactions contemplated by this Agreement constitute a
breach or default under such Lease or otherwise give the landlord a right to
terminate such Lease in accordance with the terms thereof.
38
<PAGE> 45
(d) There are no condemnation proceedings or eminent domain
proceedings of any kind pending or, to the best knowledge of the Seller,
threatened against the Real Property.
(e) The rental set forth in each Lease of the Leased Real Property is
the actual rental being paid, and there are no separate agreements or
understandings with respect to the same.
SECTION 3.20. Tangible Personal Property. (a) Section 3.20 of the
Disclosure Schedule lists each group of equipment, supplies, furniture,
fixtures, personalty, vehicles and other tangible personal property (the
"Tangible Personal Property") used in the Business or owned or Leased by the
Company or the Subsidiary with a value reasonably estimated by the Seller for
each group to exceed $100,000.
(b) The Seller has, or has caused to be, delivered to the Purchaser
true and complete copies of all Leases for Tangible Personal Property providing
for annual rentals in excess of $50,000 and any and all material ancillary
documents pertaining thereto. Each such Lease is legal, valid, binding,
enforceable and in full force and effect with respect to the Company or the
Subsidiary, as applicable, and, to Seller's knowledge, each such Lease is
legal, valid, binding, enforceable and in full force and effect with respect to
the lessor thereof. Except as set forth in Section 3.20 of the Disclosure
Schedule, each such Lease will not cease to be legal, valid, binding,
enforceable and in full force and effect on terms identical to those currently
in effect as a result of the consummation of the transactions contemplated by
this Agreement except, in either case, as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting rights of creditors of insurance companies, rights of creditors
generally or by general principles of equity, nor will the consummation of the
transactions contemplated by this Agreement constitute a breach or default
under such Lease or otherwise give the lessor a right to terminate such Lease
in accordance with the terms thereof.
SECTION 3.21. Assets. (a) Either the Company or the Subsidiary, as
the case may be, owns, leases or has the legal right to use all the properties
and assets, including, without limitation, the Owned Intellectual Property, the
Licensed Intellectual Property, the Real Property and the Tangible Personal
Property, used in the conduct of the Business or otherwise owned, leased or
used by the Company or the Subsidiary and, with respect to contract rights, is
a party to and enjoys the right to the
39
<PAGE> 46
benefits of all material contracts, agreements and other arrangements used by
the Company or the Subsidiary or in or relating to the conduct of the Business
(all such properties, assets and contract rights being the "Assets"). Either
the Company or the Subsidiary, as the case may be, has good and marketable
title to, or, in the case of leased or subleased Assets, valid and subsisting
leasehold interests in, all the Assets, free and clear of all Encumbrances,
except for Permitted Encumbrances.
(b) All the Assets are in such operating condition and repair as is
Consistent With Past Practice.
(c) Immediately following the Closing, either the Company or the
Subsidiary, as the case may be, will continue to own, pursuant to good and
marketable title, or lease, under valid and subsisting leases, or otherwise
retain its respective interest in the Assets (except the Excluded Assets)
without incurring any material penalty or other materially adverse consequence,
including, without limitation, any increase in rentals, royalties, or licenses
or other fees imposed as a result of, or arising from, the consummation of the
transactions contemplated by this Agreement. Immediately following the
Closing, either the Company or the Subsidiary, as the case may be, shall own
and possess all presently existing documents, books, records, agreements and
financial data of any sort used by the Company or such Subsidiary in the
conduct of the Business or otherwise. The Company owns assets that qualify as
legal reserve assets under applicable insurance Laws in an amount equal to its
Reserve Liabilities.
SECTION 3.22. Insurance Issued. (a) Except as set forth in Section
3.22 of the Disclosure Schedule, with respect to all insurance issued:
(i) All insurance policy and annuity contract benefits payable
by the Company and, to the best knowledge of the Seller, by any other
Person that is a party to or bound by any reinsurance, coinsurance or
other similar agreement with the Company, 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.
(ii) Except as set forth in Section 3.22 of the Disclosure
Schedule, no outstanding insurance policy or annuity contract issued or
assumed by the Company entitles the holder thereof or any other Person to
receive dividends, distributions or other benefits
40
<PAGE> 47
based on the revenues or earnings of the Company or any other Person.
(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 the
Company is so impaired as to result in a default thereunder.
(iv) Except as set forth in Section 3.22 of the Disclosure
Schedule, all advertising, promotional and sales materials and other
marketing practices used by the Company or any agent of the Company have
complied and are currently in compliance with applicable Laws.
(v) Each insurance agent, at the time such agent wrote, sold or
produced business for the Company since January 1, 1991 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.
(vi) The tax treatment under the Code of all insurance or annuity
policies, plans or contracts; all financial products, employee benefit
plans (other than the Plans), individual retirement accounts or annuities;
or any similar or related policy, contract, plan, or product, whether
individual, group, or otherwise, if any, issued or sold by the Company or
the Subsidiary on or before the Closing Date is and at all times has been
in all material respects the same or more favorable to the purchaser,
policyholder or intended beneficiaries thereof as the tax treatment under
the Code for which such contracts qualified or purported to qualify at the
time of their issuance or purchase, except for changes resulting from
changes to the Code which do not apply to such issuance or purchase due to
their effective date and except as set forth in Section 3.22 of the
Disclosure Schedule. For purposes of this Section 3.22(a)(vi), the
provisions of the Code relating to the tax treatment of such contracts
shall include, but not be limited to, Sections 72, 79, 101, 104, 105, 106,
125, 130, 401, 402, 403, 404, 408, 412, 415, 419, 419A, 457, 501, 505,
817, 818, 7702 and 7702A. In addition, except as set forth in Section
3.22 of the Disclosure Schedule, each annuity contract issued by the
Company qualifies as an annuity contract under Section 72 of the Code.
Each life insurance policy issued by the Company qualifies as a life
insurance contract for federal income tax purposes and any such policy
which is a modified
41
<PAGE> 48
endowment contract under Section 7702A of the Code, (each, a "MEC") has
been marketed as such at all relevant times or the policyholder otherwise
has consented to such MEC status.
(vii) Except as set forth in Section 3.22 of the Disclosure
Schedule, each of the employee benefit plans issued or sold by the Company
qualifies under Section 401(a), 403(b) or 457, as applicable, of the Code.
(b) Except as set forth in Section 3.22 of the Disclosure Schedule,
since December 31, 1993, no policyholder, contractholder, group of policyholder
or contractholder Affiliates, or Persons writing, selling or producing
insurance business that individually or in the aggregate for each such
policyholder, contractholder, group or Person, accounted for 5% or more of the
premium or annuity income of the Company for the year ended December 31, 1994,
has terminated, is reasonably likely to terminate or, to the best knowledge of
the Seller, has threatened to terminate its business relationship with the
Company as a result of the transactions contemplated by this Agreement or for
any other reason.
SECTION 3.23. Distributors. Listed in Section 3.23 of the Disclosure
Schedule are the names and addresses of the ten most significant distributors
(by premium and annuity income written, sold or produced) of the Company for
the twelve-month period ended December 31, 1994 and the amount of premium and
annuity income which each such distributor wrote, sold or produced during such
period.
SECTION 3.24. Employee Benefit Matters. (a) Plans and Material
Documents. Section 3.24(a) of the Disclosure Schedule lists (i) all employee
benefit plans (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) and all bonus, stock option, stock
purchase, restricted stock, incentive, deferred compensation, retiree medical
or life insurance, supplemental retirement, severance or other benefit plans,
programs or arrangements, and all employment, termination, severance or other
contracts or agreements, whether legally enforceable or not, covering any
current or former employee, officer or director of the Company or the
Subsidiary, to which the Company or the Subsidiary is a party, with respect to
which the Company or the Subsidiary has any obligation or which are maintained,
contributed to or sponsored by the Company or the Subsidiary, (ii) each
employee benefit plan for which the Company or the Subsidiary could reasonably
be expected to incur liability under Section 4069 of ERISA in the event such
plan has been or were to be terminated, and (iii) any plan in respect of which
the Company or the Subsidiary could reasonably be expected to incur liability
42
<PAGE> 49
under Section 4212(c) of ERISA (collectively, the "Plans"). The Seller has
furnished the Purchaser with a description of each Plan that is not in writing
and, with respect to each Plan that is in writing, with a complete and accurate
copy of each Plan and a complete and accurate copy of each material document
prepared in connection with each such Plan including, where applicable, without
limitation, (i) a copy of each trust or other funding arrangement, (ii) the
most recently distributed summary plan description and summary of material
modifications, (iii) the most recently filed IRS Form 5500, (iv) the most
recently received IRS determination letter for each such Plan, and (v) the most
recently prepared actuarial report and financial statement in connection with
each such Plan. Except as set forth in Section 3.24(a) of the Disclosure
Schedule, neither the Company nor the Subsidiary has any express or implied
commitment (i) to create, incur liability with respect to or cause to exist any
other employee benefit plan, program or arrangement, (ii) to enter into any
contract or agreement to provide compensation or benefits to any individual or
(iii) to modify, change or terminate any Plan, other than with respect to a
modification, change or termination required by ERISA or the Code.
(b) Absence of Certain Types of Plans. None of the Plans is a
multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA)
(a "Multiemployer Plan") or a single employer pension plan (within the meaning
of Section 4001(a)(15) of ERISA) for which the Company or the Subsidiary could
incur liability under Section 4063 or 4064 of ERISA (a "Multiple Employer
Plan"), and no trust maintained or contributed to by the Company or the
Subsidiary is intended to qualify as a voluntary employees' beneficiary
association which is intended to be exempt from taxation pursuant to Section
501(c)(9) of the Code. Except as disclosed in Section 3.24(b) of the
Disclosure Schedule, none of the Plans provides for the payment of separation,
severance, termination or similar-type benefits to any Person or obligates the
Company or the Subsidiary to pay separation, severance, termination or
similar-type benefits solely as a result of any transaction contemplated by
this Agreement or as a result of a "change in control", within the meaning of
such term under Section 280G of the Code. Except as described in Section
3.24(b) of the Disclosure Schedule, none of the Plans provides for the deferral
of compensation (other than any Plan intended to be qualified under Section
401(a) of the Code) or for the grant of stock options, restricted stock, stock
appreciation rights, phantom shares or other equity-based awards or contingent
compensation. Each of the Plans is subject only to the laws of the United
States or a political subdivision thereof.
43
<PAGE> 50
(c) Compliance with Applicable Law. Except as disclosed in Section
3.24(c) of the Disclosure Schedule, each Plan is now and always has been
operated in all material respects in accordance with the requirements of all
applicable Law, including, without limitation, ERISA and the Code, and to
Seller's knowledge all Plan "fiduciaries" (within the meaning of Section 3(21)
of ERISA) have always acted in accordance with the provisions of all applicable
Law, including, without limitation, ERISA and the Code. Each of the Company
and the Subsidiary has performed all material obligations required to be
performed by it under, is not in any material respect in default under or in
violation of, and has no knowledge of any material default or violation by any
party to, any Plan. No legal action, suit or claim is pending or threatened
with respect to any Plan (other than claims for benefits in the ordinary
course) and to Seller's knowledge no fact or event exists that could reasonably
be expected to give rise to any such action, suit or claim which is reasonably
likely to have a Material Adverse Effect.
(d) Qualification of Certain Plans. Except as disclosed in Section
3.24(d) of the Disclosure Schedule, each Plan which is intended to be qualified
under Section 401(a) of the Code or Section 401(k) of the Code has received a
favorable determination letter from the IRS that it is so qualified and each
trust established in connection with any Plan which is intended to be exempt
from federal income taxation under Section 501(a) of the Code has received a
determination letter from the IRS that it is so exempt, and no fact or event
has occurred since the date of such determination letter from the IRS which
could reasonably be expected to materially adversely affect the qualified
status of any such Plan or the exempt status of any such trust.
(e) Absence of Certain Liabilities and Events. There has been no
non-exempt prohibited transaction (within the meaning of Section 406 of ERISA
or Section 4975 of the Code) with respect to any Plan. Except as set forth in
Section 3.24(e) of the Disclosure Schedule, neither the Company nor the
Subsidiary has incurred any liability for any penalty or tax arising under
Section 4971, 4972, 4980, 4980B or 6652 of the Code or any liability under
Section 502 of ERISA, and no fact or event exists which could reasonably be
expected to give rise to any such liability. Neither the Company nor the
Subsidiary has incurred any liability under, arising out of or by operation of
Title IV of ERISA (other than liability for premiums to the Pension Benefit
Guaranty Corporation arising in the ordinary course), including, without
limitation, any liability in connection with (i) the termination or
reorganization of any employee benefit plan subject to Title IV of ERISA or
(ii) the withdrawal from any
44
<PAGE> 51
Multiemployer Plan or Multiple Employer Plan, and no fact or event exists which
could reasonably be expected to give rise to any such liability. Except as set
forth in Section 3.24(e) of the Disclosure Schedule, no complete or partial
termination has occurred within the five years preceding the date hereof with
respect to any Plan. No reportable event (within the meaning of Section 4043
of ERISA) for which the 30 days' notice to the Pension Benefit Guaranty
Corporation is not waived has occurred or is expected to occur with respect to
any Plan subject to Title IV of ERISA. No Plan had an accumulated funding
deficiency (within the meaning of Section 302 of ERISA or Section 412 of the
Code), whether or not waived, as of the most recently ended plan year of such
Plan. None of the assets of the Company or the Subsidiary is the subject of
any lien arising under Section 302(f) of ERISA or Section 412(n) of the Code;
neither the Company nor the Subsidiary has been required to post any security
under Section 307 of ERISA or Section 401(a)(29) of the Code; and no fact or
event exists which could reasonably be expected to give rise to any such lien
or requirement to post any such security.
(f) Plan Contributions and Funding. All contributions, premiums or
payments required to be made with respect to any Plan have been made on or
before their due dates. All such contributions have been fully deducted for
income tax purposes and no such deduction has been challenged or disallowed by
any government entity and no fact or event exists which could reasonably be
expected to give rise to any such challenge or disallowance.
(g) Certain Employee-Benefit Assets. Except as disclosed in Section
3.24(g) of the Disclosure Schedule, each of the guaranteed investment contracts
and other funding contracts with any insurance company that are held by any of
the Plans and any annuity contracts purchased by any of the Plans was issued by
an insurance company which carried the highest rating from each of D&P, S&P,
Best and Moody's Investors Service, Inc., as of the date such contract was
issued, the date hereof and the Closing Date.
(h) Retiree Medical Benefits. No Plan is or includes any plan or
arrangement providing for post-employment health and/or medical benefit
coverage except to the extent required by COBRA.
SECTION 3.25. Labor Matters. (a) Neither the Company nor the
Subsidiary is a party to any collective bargaining agreement or other labor
union contract applicable to persons employed by the Company or the Subsidiary
and currently there are no known organizational campaigns, petitions or other
unionization activities
45
<PAGE> 52
seeking recognition of a collective bargaining unit which is reasonably likely
to have Material Adverse Effect.
(b) there are no strikes, slowdowns, work stoppages or material labor
relations controversies pending or, to the best knowledge of the Seller,
threatened between the Company or the Subsidiary and any of their respective
employees, and neither the Company nor the Subsidiary has experienced any such
strike, slowdown, work stoppage or material controversy within the past three
years;
(c) the Company and the Subsidiary to the knowledge of Seller are in
compliance, in all material respects with all applicable Laws relating to the
employment of labor, including, without limitation, those related to wages,
hours and the payment and withholding of taxes and other sums as required by
the appropriate Governmental Authority, and have withheld and paid to the
appropriate Governmental Authority or is holding for payment not yet due to
such Governmental Authority all amounts required to be withheld from employees
of the Company or the Subsidiary and are not liable for any arrears of wages,
taxes, penalties or other sums for failure to comply with any of the foregoing;
(d) the Company and the Subsidiary have paid in full to all their
respective employees, retired employees and contractors or adequately accrued
for in accordance with GAAP or SAP, as the case may be, all wages, salaries,
commissions, bonuses, benefits and other compensation due to or on behalf of
such employees, retired employees and contractors;
(e) Except as set forth in Section 3.25 of the Disclosure Schedule,
there is no claim against the Company or the Subsidiary with respect to payment
of wages, salary or overtime pay that has been asserted or is now pending or,
to the best knowledge of the Seller, threatened before any Governmental
Authority with respect to any Persons currently or formerly employed by the
Company or the Subsidiary;
(f) Except as set forth in Section 3.25 of the Disclosure Schedule,
neither the Company nor the Subsidiary is a party to, or otherwise bound by,
any consent decree with, or citation by, any Governmental Authority relating to
employees or employment practices;
(g) there is no charge or proceeding with respect to a violation of
any occupational safety or health standards that has been asserted or is now
pending or, to the best knowledge of the Seller, threatened with respect to the
Company or the Subsidiary;
46
<PAGE> 53
(h) Except as set forth in Section 3.25 of the Disclosure Schedule,
there is no charge against the Company or the Subsidiary of discrimination in
employment or employment practices, for any reason, including, without
limitation, age, gender, race, religion or other legally protected category,
which has been asserted or is now pending or, to the best knowledge of the
Seller, threatened before the United States Equal Employment Opportunity
Commission, or any other Governmental Authority in any jurisdiction in which
the Company or the Subsidiary has employed or currently employs any Person.
SECTION 3.26. Key Employees. Section 3.26 of the Disclosure Schedule
lists the name, place of employment, the current annual salary rates, bonuses,
deferred or contingent compensation, pension, accrued vacation, "golden
parachute" and other like benefits paid or payable (in cash or otherwise) in
1995, 1994, 1993 and 1992, the date of employment and a brief description of
position and job function of each current salaried employee exempt from
overtime, officer or director of the Company or the Subsidiary whose current
base salary exceeded (or, in 1995, is expected to exceed) $100,000.
SECTION 3.27. Risk Management. (a) Section 3.27(a) of the
Disclosure Schedule sets forth the following information with respect to each
insurance policy (including, without limitation, policies providing property,
casualty, liability, workers' compensation, and bond and surety arrangements)
under which the Company or the Subsidiary is an insured, a named insured or
otherwise the principal beneficiary of coverage: (i) the name of the agent or
broker; (ii) the name of the insurer and the names of the principal insured and
each named insured; (iii) the policy number and the period of coverage; (iv)
the type, scope (including an indication of whether the coverage was on a
claims made, occurrence or other basis) and amount of coverage; and (v) the
premium charged for the policy, including, without limitation, a description of
any retroactive premium adjustments or other loss-sharing arrangements.
(b) With respect to each such material insurance policy: (i) to
Seller's knowledge, the policy is in full force and effect; (ii) neither the
Company nor the Subsidiary is in breach or default (including any breach or
default with respect to the payment of premiums or the giving of notice), and,
to the best knowledge of the Seller, no event has occurred which, with the
giving of notice or the lapse of time or both, would constitute such a breach
or default or permit termination or modification, under the policy; (iii) no
party to the policy has repudiated in writing, or given written notice of an
intent to repudiate,
47
<PAGE> 54
any provision thereof; and (iv) to the best knowledge of the Seller, no insurer
on the policy has been declared insolvent or placed in receivership,
conservatorship or liquidation or currently has a rating of "B+" or below from
Best or a claims paying ability rating of "BBB" or below from S&P.
(c) Section 3.27(c) of the Disclosure Schedule sets forth all risks
of the Company or the Subsidiary which are covered under any material risk
retention program in which the Company or the Subsidiary participates, together
with details for the two years ended December 31, 1994 and the six months ended
June 30, 1995 of the Company's and the Subsidiary's loss experience with
respect to such risks.
(d) Since January 1, 1993, the Company and the Subsidiary have been
covered by insurance policies or binders of insurance in such types and
covering such risks deemed reasonable by the Company or the Subsidiary, as the
case may be.
(e) Except as set forth in Section 3.27(e) of the Disclosure
Schedule, at no time subsequent to January 1, 1993 has the Company or the
Subsidiary (i) been denied any insurance or indemnity bond coverage which it
has requested, (ii) made any material reduction in the scope or amount of its
insurance coverage, or received notice from any of its insurance carriers that
any insurance coverage listed in Section 3.27(a) of the Disclosure Schedule
will not be available in the future substantially on the same terms as are now
in effect or (iii) suffered any extraordinary increase in premium for renewed
coverage. Except as set forth in Section 3.27 of the Disclosure Schedule,
since January 1, 1993, no insurance carrier has cancelled, failed to renew or
materially reduced any insurance coverage for the Company or the Subsidiary or
given any notice or other indication of its intention to cancel, not renew or
reduce any such coverage.
(f) The Seller is not aware of any facts pertaining to the Company,
the Subsidiary or the Business which are reasonably likely to prevent the
Purchaser from obtaining insurance following the consummation of the
transactions contemplated by this Agreement on terms substantially similar to
the terms currently in effect.
SECTION 3.28. Accounts; Lockboxes; Safe Deposit Boxes; Powers of
Attorney. Section 3.28 of the Disclosure Schedule is a true and complete list
of (a) the names of each bank, savings and loan association, securities or
commodities broker or other financial institution in which the Company or the
Subsidiary has an account, including, without limitation, cash contribution
accounts, and the names of all persons authorized to draw thereon or have
48
<PAGE> 55
access thereto, (b) the location of all lockboxes and safe deposit boxes of the
Company and the Subsidiary and the names of all Persons authorized to draw
thereon or have access thereto and (c) the names of all Persons, if any,
holding powers of attorney from the Seller relating to the Company, the
Subsidiary or the Business, or from the Company or the Subsidiary. At the time
of the Closing, without the prior written consent of the Purchaser, neither the
Company nor the Subsidiary shall have any such account, lockbox or safe deposit
box other than those listed in Section 3.28 of the Disclosure Schedule, nor
shall any additional Person have been authorized, from the date of this
Agreement, to draw thereon or have access thereto or to hold any such power of
attorney relating to the Company, the Subsidiary or the Business or from the
Company or the Subsidiary. There are no commingled monies or accounts of the
Company or the Subsidiary with other monies or accounts of the Seller or
relating to the other businesses of the Seller (other than servicing accounts
established by Seller's subsidiary United Companies Lending Corporation in
connection with its servicing activities for home equity and commercial loans,
and certain pass-through certificates issued under the Pooling and Servicing
Agreements (as hereinafter defined) and owned by the Company or the Subsidiary)
nor has the Seller transferred monies or accounts of the Company or the
Subsidiary other than to an account of the Company or such Subsidiary. At the
time of the Closing, all monies and accounts of the Company and the Subsidiary
shall be held by, and be accessible only to, the Company or such Subsidiary.
Each of the investment assets held in the investment account of the Company
will be an admissible asset under the Laws of the State of Louisiana.
SECTION 3.29. Full Disclosure. (a) To Seller's Enhanced Special
Knowledge there are no facts pertaining to the Company, the Subsidiary or the
Business which are reasonably likely to have a Material Adverse Effect and
which have not been disclosed in this Agreement, the Disclosure Schedule, the
Financial Statements or the Statutory Statements.
(b) To the extent limited by Seller's knowledge as provided in this
Agreement, no representation or warranty of the Seller in this Agreement, nor
any statement or certificate furnished or to be furnished by the Seller to the
Purchaser pursuant to this Agreement, or in connection with the transactions
contemplated by this Agreement, contains or will contain any untrue statement
of a material fact, or omits or will omit to state a material fact necessary to
make the statements contained herein or therein not misleading.
49
<PAGE> 56
SECTION 3.30. Proxy Statement. The proxy statement to be mailed to
the stockholders of the Seller (the "Proxy Statement") in connection with the
meeting of the stockholders of the Seller called to consider and vote upon the
transactions contemplated hereby (the "Special Meeting", which may be the
Seller's 1996 Annual Meeting of Stockholders) and any amendment thereof or
supplement thereto, when mailed and at the time of the Special Meeting, shall
not contain any untrue statement of material fact, or omit to state any
material fact necessary in order to make the statements therein, in light of
the circumstances in which they were made, not false or misleading, and shall
comply as to form in all material respects with all requirements of the
Exchange Act.
SECTION 3.31. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement from the Company or the
Subsidiary based upon arrangements made by or on behalf of the Seller, the
Company or the Subsidiary.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
The Purchaser hereby represents and warrants to the Seller as follows:
SECTION 4.01. Organization and Authority of the Purchaser. The
Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all necessary power
and authority to enter into this Agreement, to carry out its obligations
hereunder and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by the Purchaser, the performance by
the Purchaser of obligations hereunder and the consummation by the Purchaser of
the transactions contemplated hereby have been duly authorized by all requisite
action on the part of the Purchaser. This Agreement has been duly executed and
delivered by the Purchaser, and (assuming due authorization, execution and
delivery by the Seller) upon receipt of the necessary approvals by Governmental
Authorities, this Agreement will constitute a legal, valid and binding
obligation of the Purchaser enforceable against the Purchaser in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
rights of creditors or by general principles of equity. Purchaser has engaged
in no activity since its formation other than in connection
50
<PAGE> 57
with the transactions contemplated hereby and the financing thereof. At the
Closing, the Company shall have taken all requisite action to authorize the
Master Loan Sale Agreement, and shall have all necessary power and authority to
enter into the Master Loan Sale Agreement, and to consummate the transactions
contemplated thereby. The Master Loan Sale Agreement, upon its execution and
delivery by the Company and the Seller Master Loan Sale Parties, will
constitute a legal, valid and binding obligation of the Company enforceable in
accordance with its terms except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
rights of creditors of insurance companies, rights of creditors generally or by
general principles of equity.
SECTION 4.02. No Conflict. Assuming compliance with the notification
requirements of the HSR Act and the making and obtaining of all filings,
notifications, consents, approvals, authorizations and other actions referred
to in Section 4.03, except as may result from any facts or circumstances
relating solely to the Seller, the execution, delivery and performance of this
Agreement do not and will not (a) violate, conflict with or result in the
breach of any provision of the Certificate of Incorporation or By-laws or other
organizational documents, as applicable, of the Purchaser, (b) conflict with or
violate any Law or Governmental Order applicable to the Purchaser which would
have a material adverse effect on the ability of the Purchaser to consummate
the transactions contemplated by this Agreement or (c) conflict with, or result
in any breach of, constitute a default (or event which with the giving of
notice or the lapse of time, or both, would become a default) under, require
any consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation, or cancellation of, or result in the
creation of any Encumbrance on any of the assets or properties of the Purchaser
pursuant to, any note, bond, mortgage or indenture, contract, agreement, lease,
sublease, license, permit, franchise or other instrument or arrangement to
which the Purchaser is a party or by which any of such assets or properties are
bound or affected which would have a material adverse effect on the ability of
the Purchaser to consummate the transactions contemplated by this Agreement.
SECTION 4.03. Governmental and Other Authorizations; Notices and
Consents. (a) The execution, delivery and performance of this Agreement do
not and will not require any consent, approval, authorization or other order
of, action by, filing with, or notification to, any Governmental Authority or
any other third party, except (a) as required by the insurance Laws of the
State of Louisiana and any other state in which the Company is doing
51
<PAGE> 58
business, (b) the notification requirements of the HSR Act and (c) as set forth
in Section 3.07 of the Disclosure Schedule.
(b) The Purchaser does not have knowledge of any facts or
circumstances pertaining to the Purchaser which are reasonably likely to
prevent the parties hereto from obtaining the governmental consents and
approvals contemplated by Section 4.03(a).
SECTION 4.04. Investment Purpose. The Purchaser is acquiring the
Shares solely for the purpose of investment and not with a view to, or for
offer or sale in connection with, any distribution thereof. The Purchaser is
aware and understands that the Shares have not been registered under the
Securities Act of 1933 or under the securities laws of any state, that any
transfer of the Shares by the Purchaser shall be restricted under the
provisions of such act and such state laws, and that the certificates
representing the Shares will bear legends to such effect. The Purchaser
possesses such knowledge and experience in financial and business matters
generally and with respect to the Business so as to enable it to evaluate the
risks and merits of its purchase of the Shares.
SECTION 4.05. Litigation. Except as disclosed in a writing given to
the Seller by the Purchaser on a date prior to the execution of this Agreement,
no claim, action, proceeding or investigation is pending or, to the best
knowledge of the Purchaser after due inquiry, threatened, which seeks to delay
or prevent the consummation of, or which could reasonably be expected to
materially adversely affect the Purchaser's ability to consummate, or which
could otherwise affect the legality, validity or enforceability of, the
transactions contemplated by this Agreement.
SECTION 4.06. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Purchaser, except for the fee arrangement between
the Purchaser and (i) ING Capital Corporation and (ii) Knightsbridge
Management, L.L.C.
SECTION 4.07. Organization and Authority of the Guarantor.
Knightsbridge Capital Fund I, L.P. (the "Guarantor" is a duly formed Delaware
limited partnership and is validly existing in good standing as a limited
partnership under the Delaware Revised Uniform Limited Partnership Act. The
Guarantor has all necessary power and authority to enter into this Agreement
for the limited purpose of carrying out its obligations under Section 11.01
hereof. The execution and delivery of the Agreement and the
52
<PAGE> 59
performance by the Guarantor of its guarantee obligations under Section 11.01
hereof have been duly authorized by all requisite action on the part of the
Guarantor and such guarantee constitutes a legal, valid and binding obligation
of the Guarantor, enforceable against the Guarantor in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting rights of
creditors or by general principles of equity.
SECTION 4.08. Funding and Assets. (a) The Purchaser has, and will
continue to have at the time of Closing, financing commitments from third
parties to the extent necessary to enable the Purchaser to consummate the
transactions contemplated by this Agreement.
(b) The Guarantor has total gross assets in excess of $68.6 million
under its management and control which are available for commitment hereunder.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Closing. (a) The
Seller covenants and agrees that from the date hereof through the earlier of
the Closing Date or the termination of this Agreement, neither the Company nor
the Subsidiary shall conduct its business other than in the ordinary course and
Consistent With Past Practice. Without limiting the generality of the
foregoing, Seller shall cause the Company and the Subsidiary to (i) continue
their advertising and promotional activities, pricing and purchasing policies,
operations, and business plan implementation, Consistent With Past Practice;
(ii) not materially shorten or lengthen the customary payment cycles for any of
their payables or receivables; (iii) use reasonable efforts to attempt to (A)
keep available to the Purchaser the services of the employees of the Company,
(B) continue in full force and effect without material modification all
existing policies or binders of insurance currently maintained in respect of
the Company and the Business except as required by applicable law and (C)
preserve their current relationships with their employees, distributors,
policyholders, contractholders, regulators, rating agencies and other persons
with which they have significant business relationships; (iv) exercise, but
only after notice to the Purchaser and receipt of the Purchaser's prior written
approval, any rights of renewal pursuant to the terms of any of the leases or
subleases set forth in Section 3.19(b) or Leases for Tangible Personal Property
set forth in Section 3.20(a) of the Disclosure
53
<PAGE> 60
Schedule which by their terms would otherwise expire; (v) maintain all material
licenses, qualifications, registrations and authorizations to do business in
each jurisdiction in which they are so licensed, qualified, registered or
authorized; and (vi) not engage in any practice, take any action, fail to take
any action or enter into any transaction, in each case outside the normal
course of business or not Consistent With Past Practice, which is reasonably
likely to cause any representation or warranty of the Seller to be untrue as of
the date made and as of the Closing Date, other than such representations and
warranties as are made as of another date (in which case to be untrue as of
such date), or result in a breach of any covenant made by the Seller in this
Agreement where, in each case, the consequences thereof are reasonably likely
to have a Material Adverse Effect.
(b) Seller covenants and agrees that, prior to the Closing, except as
the Purchaser may otherwise consent in writing, the Company and the Subsidiary
(i) will conduct their investment activities (including without limitation
commercial real estate loans) only in the ordinary course of business
Consistent With Past Practice and (ii) will not permit the Company to take any
of the actions set forth on Section 5.01 of the Disclosure Schedule.
(c) Seller covenants and agrees that, prior to the Closing, without
the prior written consent of the Purchaser, which consent will not be
unreasonably withheld, neither the Company nor the Subsidiary will make any
commitment, actual or contingent, to make any investment or capital
contribution, or otherwise expend capital, or purchase any securities, or
supply funds to any Person, in each case in excess of $100,000 in the
aggregate, except for purchases and sales of home equity loans, investment
assets and the making of home equity loans in the ordinary course of business
Consistent With Past Practice.
(d) Seller covenants and agrees to, and shall cause the Company to,
use reasonable efforts Consistent With Past Practice to minimize the
termination, withdrawal or nonrenewal of in force insurance policies and
annuity contracts issued by the Company whether as a result of "twisting" or
otherwise.
(e) The Seller covenants and agrees to cause (i) all Reserve
Liabilities with respect to insurance policies and annuity contracts
established or reflected in the books and records of the Company to be (A)
established and reflected on a basis consistent with the Reserve Liabilities
and reserving methods followed in the preparation of the 1995 and 1994 Company
Annual Statements unless otherwise required by applicable Law, in which event
54
<PAGE> 61
Seller shall promptly notify the Purchaser thereof, (B) adequate (under
commonly accepted actuarial principles consistently applied) to cover the total
amount of all reasonably anticipated matured and unmatured benefits, dividends,
claims and other liabilities of the Company under all insurance policies and
annuity contracts under which the Company has or will have any liability
(including, without limitation, any liability arising under or as a result of
any reinsurance, coinsurance or other similar agreement) and (C) in material
compliance with the insurance Laws of Louisiana and in material compliance with
the insurance Laws of all other jurisdictions in which it is licensed to write
life insurance or issue annuities; and (ii) the Company to continue to own
assets that qualify as legal reserve assets under applicable insurance Laws in
an amount equal to its respective Reserve Liabilities.
(f) The Seller covenants and agrees to cause all reserve liabilities
calculated in accordance with GAAP, established or reflected in the books and
records of the Company to be established and reflected on a basis consistent
with the reserve liabilities and reserving methods followed in the preparation
of the December 31, 1994 Company GAAP Statement unless otherwise required by
GAAP, in which event Seller shall promptly notify the Purchaser thereof.
SECTION 5.02. Access to Information. (a) From the date hereof until
the earlier of the Closing or the termination of this Agreement, and subject to
the provisions of Section 5.22, upon reasonable prior notice and at mutually
agreeable times and places, the Seller shall and shall cause each of its
officers, employees, agents, representatives, accountants and counsel to: (i)
afford the officers, employees and authorized agents, accountants, counsel,
financing sources, prospective financing sources, equity investors, potential
equity investors and representatives of the Purchaser reasonable access to the
offices, properties, other facilities, books and records of the Company and the
Subsidiary and to those officers, employees, agents, accountants and counsel of
the Seller who have any knowledge relating to, and to the books and records of
the Seller and its subsidiaries relating to, the Company, the Subsidiary or the
Business, (ii) furnish to the Purchaser monthly financial and management
statements of the Company and the Subsidiary as prepared in the ordinary course
of business and (iii) furnish to the officers, employees and authorized agents,
accountants, counsel, financing sources, prospective financing sources and
representatives of the Purchaser such additional financial and operating data
and other information regarding the assets, properties and good will of the
Company, the Subsidiary and the Business (or legible copies thereof) as
55
<PAGE> 62
the Purchaser or any of its officers, employees, authorized agents,
accountants, counsel, financing sources, prospective financing sources or
representatives may from time to time reasonably request.
(b) Subject to Section 7.09, in order to facilitate the resolution of
any claims made by or against or incurred by the Seller prior to the Closing
and claims which are the subject of Article IX hereof, for a period of seven
years after the Closing, or for such longer period as may be required so as to
extend to the end of the applicable statute of limitations, the Purchaser shall
(i) retain or cause to be retained the books and records (or copies thereof) of
the Company and the Subsidiary relating to periods prior to the Closing in a
manner reasonably Consistent With Past Practice and (ii) upon reasonable
notice, afford or cause to be afforded the officers, employees and authorized
agents and representatives of the Seller reasonable access (including, without
limitation, the right to make, at the Seller's expense, photocopies), during
normal business hours, to such books and records.
(c) Subject to Section 7.09, in order to facilitate the resolution of
any claims made by or against or incurred by the Purchaser and claims which are
the subject of Article IX hereof, any Affiliate of the Purchaser, the Company
or the Subsidiary after the Closing, for a period of seven years following the
Closing, or for such longer period as may be required so as to extend to the
end of the applicable statute of limitations, the Seller shall (i) retain the
books and records (or copies thereof) of the Seller which relate to the Company
and the Subsidiary and their operations for periods prior to the Closing and
which shall not otherwise have been delivered to the Purchaser, the Company or
the Subsidiary and (ii) upon reasonable notice, afford the officers, employees
and authorized agents and representatives of the Purchaser, any Affiliate of
the Purchaser, the Company or the Subsidiary reasonable access (including,
without limitation, the right to make photocopies, at the expense of the
Purchaser, such Affiliate of the Purchaser, the Company or such Subsidiary),
during normal business hours, to such books and records.
(d) The Seller covenants and agrees to provide to the Purchaser the
quarterly and annual statements of the Company filed with or submitted to the
Louisiana Department for each calendar quarter ending between the date hereof
and the Closing Date and for the year ended December 31, 1995, together with
all related notes, exhibits and schedules thereto, prior to the filing or
submission thereof and to consult with the Purchaser in respect thereof prior
to such filing or submission.
56
<PAGE> 63
SECTION 5.03. Confidentiality by Seller. The Seller agrees to, and
shall instruct its agents, representatives, employees, officers and directors
to: (i) treat and hold as confidential all non-public information relating to
trade secrets, trademark applications, product development, price, distributor,
policyholder and contract holder lists, pricing and marketing plans, policies
and strategies, details of client and consultant contracts, operations methods,
product development techniques, business acquisition plans, new personnel
acquisition plans and all other confidential information with respect to the
Business, the Company and its Subsidiary, except as Seller reasonably believes,
based on the advice of counsel, is otherwise required to be disclosed by
applicable Law, in which event the Seller agrees to, and shall instruct its
agents, representatives, employees, officers and directors to, furnish only
that portion of such confidential information which the Seller reasonably
believes is legally required to be provided and exercise its reasonable efforts
to obtain assurances that confidential treatment will be accorded such
information, and (ii) in the event that the Seller or any such agent,
representative, employee, officer or director is served with a subpoena, order
or other legal process to disclose any such information, provide the Purchaser
with reasonably prompt written notice of such requirement so that the
Purchaser, the Company or the Subsidiary may, at the expense of the Purchaser,
seek a protective order or other remedy. This Section 5.03 shall not apply to
any information that, at the time of disclosure, is available publicly or was
not disclosed in breach of this Agreement by the Seller or its agents,
representatives, Affiliates, employees, officers or directors. This Section
5.03 shall also not apply to any of the foregoing non-public information
heretofore or hereafter provided by the Seller, in accordance with Section
5.06, prior to the Closing, to third parties who have expressed an interest in
acquiring the Company and who have signed a confidentiality agreement
satisfactory to the Seller. The provisions of this Section 5.03 shall not
survive the termination of this Agreement. The Seller agrees and acknowledges
that remedies at law for any breach of its obligations under this Section 5.03
are inadequate and that in addition thereto the Purchaser shall be entitled to
seek equitable relief, including injunction and specific performance, in the
event of any such breach. Seller shall assure compliance with the provisions
of this Section by all of its officers, employees and authorized agents,
accountants, counsel and representatives and shall be responsible for any
breach hereof by any of them. The provisions of this Section 5.03 do not
supersede that certain Confidentiality Agreement dated August 14, 1995 between
an Affiliate of the Purchaser and Seller which shall remain in full force and
effect.
57
<PAGE> 64
SECTION 5.04. Governmental and Other Authorizations; Notices and
Consents. (a) Each of the Seller and the Purchaser shall use all reasonable
efforts to obtain (or cause the Company and the Subsidiary to obtain) all
authorizations, consents, orders and approvals of all Governmental Authorities
and officials that are or become necessary for their execution and delivery of,
and the performance of their obligations pursuant to, this Agreement,
including, without limitation, any required approvals of the Louisiana
Department, and will cooperate fully with each other in promptly seeking to
obtain all such authorizations, consents, orders and approvals. Each party
hereto agrees to make an appropriate filing, if necessary, pursuant to the HSR
Act with respect to the transactions contemplated by this Agreement within
twenty Business Days of the date hereof and to supply as promptly as
practicable to the appropriate Governmental Authorities any additional
information and documentary material that may be requested pursuant to the HSR
Act.
(b) The Seller shall cause the Company and the Subsidiary to give
promptly such notices to third parties and use all reasonable efforts to obtain
such third party consents and estoppel certificates as are set forth on Section
3.07 of the Disclosure Schedule and noted with an asterisk (*) thereon in
connection with the transactions contemplated by this Agreement.
(c) The Purchaser shall cooperate and use all reasonable efforts to
assist the Seller in giving such notices and obtaining such consents and
estoppel certificates; provided, however, that neither the Seller nor the
Purchaser shall have any obligation to give any guarantee or other
consideration of any nature in connection with any such notice, consent or
estoppel certificate or to consent to any change in the terms of any agreement
or arrangement which would be adverse to the interests of the Seller, the
Purchaser, the Company, the Subsidiary or the Business.
(d) The Seller and the Purchaser agree that, in the event any such
consent, approval or authorization is not obtained prior to the Closing, the
Seller will, subsequent to the Closing, cooperate with the Purchaser and the
Company in attempting to obtain such consent, approval or authorization as
promptly thereafter as practicable and, in the case of contracts and
agreements, so as to provide for the Purchaser the benefits under such
contracts and agreements; provided, however, that the Seller has no obligation
to give any guarantee or other consideration of any nature in connection with
any such consent, approval or authorization or to consent to any change in
terms of any
58
<PAGE> 65
agreement which would be materially adverse to the interests of the Seller.
(e) The Seller's obligations under this Section 5.04 shall terminate
upon termination of this Agreement.
SECTION 5.05. Notice of Developments. (a) Prior to the earlier of
the Closing or termination of this Agreement, the Seller shall notify promptly,
and in any event within five Business Days, the Purchaser in writing, to the
extent of the best knowledge of the Seller, of (i) all events, circumstances,
facts and occurrences arising subsequent to the date of this Agreement which
are reasonably likely to result in any breach of a representation or warranty
or covenant of the Seller in this Agreement or which are reasonably likely to
have the effect of making any representation or warranty of the Seller in this
Agreement untrue or incorrect in any respect and (ii) all other material
developments, other than general economic or market changes and changes in tax
Law or the life insurance industry as a whole, affecting the assets,
Liabilities, business, financial condition, operations, results of operations,
distributor, policyholder, contractholder or employee relations or prospects of
the Company, the Subsidiary or the Business.
(b) Prior to the earlier of the Closing or termination of this
Agreement, the Purchaser shall promptly, and in any event within five Business
Days, notify the Seller in writing, to the extent of the best knowledge of the
Purchaser, of all events, circumstances, facts and occurrences arising
subsequent to the date of this Agreement which are reasonably likely to result
in any breach of a representation or warranty or covenant of the Purchaser in
this Agreement or which are reasonably likely to have the effect of making any
representation or warranty of the Purchaser in this Agreement untrue or
incorrect in any respect.
SECTION 5.06. Acquisition Proposals. (a) The Seller and the Company
and their respective officers, directors, employees, representatives and agents
shall immediately cease any existing discussions or negotiations with any
parties conducted heretofore with respect to any Acquisition Proposal except to
the extent permitted hereby. Until the earlier of the Closing or the
termination of this Agreement, neither the Seller, the Company, nor their
respective officers, directors, employees or investment bankers, attorneys,
accountants or other agents retained by either of them will (i) initiate or
solicit, directly or indirectly, any inquiries regarding the making of any
Acquisition Proposal, or (ii) except as permitted below, engage in negotiations
or discussions with, or furnish any
59
<PAGE> 66
information or data (other than publicly available information or data) to any
third party relating to an Acquisition Proposal (other than the transactions
contemplated hereby). Notwithstanding anything to the contrary contained in
this Section, or in any other provision of this Agreement, the Seller, its
Board of Directors and its officers, representatives and agents may furnish
information to, and participate in discussions or negotiations (including,
without limitation, as a part thereof, making any counterproposals) with, any
third party (the "Third Party") which submits a written Acquisition Proposal if
the Seller's Board of Directors or the executive committee thereof determines
in good faith, after consulting with legal counsel, that such furnishing of
information and participating in discussions are required in the exercise of
the Board's fiduciary duties under applicable law. The Seller and the Company
shall promptly advise the Purchaser when they determine that they will have (or
when they continue to have, in the case of Third Parties with whom discussions
are currently ongoing) negotiations with a Third Party, including providing to
the Purchaser such information concerning the Third Party as shall be not
inconsistent with the terms of any agreement with the Third Party with respect
to the subject of discussions or negotiations. To the extent this Agreement
has not otherwise been terminated, the Seller and the Company shall be entitled
to execute a definitive agreement with a Third Party relating to the
Acquisition Proposal of such Third Party so long as the Board of Directors of
Seller exercises, prior to or concurrently with such execution, the right under
Section 10.01(b)(v) to terminate this Agreement, and pays the fee contemplated
by Section 10.02(b)(iii)(B).
(b) For purposes of this Agreement, the term "Acquisition Proposal"
shall mean any good faith purchase offer made by a third party and which was
not directly or indirectly solicited after the date of this Agreement by the
Seller, the Company or any of their respective affiliates to acquire (i)
beneficial ownership (as defined pursuant to Section 13(d) of the Exchange Act)
of a majority or greater equity interest in the Company or the Assets or
Business pursuant to a merger, consolidation or other business combination,
sale of shares of capital stock or similar transaction involving the Company,
including, without limitation, any single or multi-step transaction or series
of related transactions which is structured in good faith to permit such third
party to acquire beneficial ownership of a majority or greater equity interest
in the Company or the Assets or Business or (ii) all or substantially all of
the business or assets of the Company or the Business (other than the
transactions contemplated by this Agreement).
60
<PAGE> 67
SECTION 5.07. Use of Names and Intellectual Property. (a) The
Seller covenants and agrees that following the Closing, the Purchaser shall
have the exclusive (as provided in subclause (D) below and to the extent Seller
can so grant), and royalty-free right to use the name "United" (the "Name") in
connection with the Business; provided, however, that (A) (i) the Purchaser
shall, in conjunction with use of the Name, use the words "Life Insurance
Company" and at least one additional word other than "Companies" or "Title"
between the Name and the words "Life Insurance Company"; (ii) the Purchaser
will not be permitted any use of the logo of the Seller which was used by the
Company or the Subsidiary prior to the Closing and which is attached hereto as
Exhibit 5.07 (except as provided in subclause (B) below) and (iii) the
Purchaser will, in connection with the permitted use of the Name, add a
descriptive indication of the Company's affiliation with Knightsbridge
Management, L.L.C.; (B) the Purchaser may continue to utilize the Company's
existing name or the logo, including but not limited to, on stationery,
invoices, purchase orders or other clerical or similar supplies until March 31,
1997 or such later date as the Seller may agree; (C) any such use of the Name
or logo shall not be reasonably likely to cause confusion, mistake or deception
as to the affiliation, connection or association between Seller, on the one
hand, and Purchaser or its Affiliates (including, without limitation, the
Company and the Subsidiary after the acquisition thereof pursuant to this
Agreement), on the other hand, or as to the origin, sponsorship or approval of
the Purchaser's or its Affiliates' (including, without limitation, the Company
and the Subsidiary after the acquisition thereof pursuant to this Agreement)
goods or services and (D) Purchaser's exclusive rights described in this
Section 5.07(a) shall not limit the right of the Seller and its Affiliates to
use the Name in connection with its business as conducted following the
Closing.
(b) From and after the Closing and except as contemplated hereof,
neither the Seller nor any of its Affiliates shall use any of the Owned
Intellectual Property or any of the Licensed Intellectual Property to the
extent and for the period that the Company or the Subsidiary have exclusive
rights (as determined pursuant to Section 5.07(a)(D)).
SECTION 5.08. Non-Competition. (a) For a period of two years
following the Closing, the Seller shall not, and shall not permit any of its
Affiliates to engage in any annuity business, whether directly or indirectly,
nor hold any interest in any entity that engages in any such annuity business,
except that Seller and its Affiliates may, collectively, (i) acquire and hold
such amount that is not a substantial portion, on a fully diluted basis, of the
issued
61
<PAGE> 68
and outstanding shares of equity voting securities of such an entity or (ii)
acquire and hold any or all of the outstanding capital stock of such entity so
long as the revenue and net income of such entity from its annuity business
does not constitute a substantial portion of the total consolidated revenues
and net income of the Seller and its Affiliates (at the time of the acquisition
or at any time thereafter) as reflected on any regularly prepared financial
statement of the Seller and its Affiliates; provided, however, that Sections
5.08(a) and (c) shall not apply to the acquisition of any or all of the
outstanding capital stock, assets or businesses of Seller or any of its
subsidiaries by any entity that engages, directly or through subsidiaries or
Affiliates, in the annuity business or the merger, consolidation or other
business combination of the Seller or any of its subsidiaries with or into any
such entity.
(b) For a period of two years following the Closing, the Seller shall
not, and shall not permit any of its Affiliates to, solicit or induce or
attempt to induce any entities or persons, including, without limitation,
customers, employees, agents, suppliers and financial institutions that
conducted business with or were employed by the Company or the Subsidiary on or
prior to the Closing Date, to purchase annuities from any Person other than the
Company or terminate employment by the Company or the Subsidiary at any time
following the Closing Date.
(c) The Seller acknowledges that the Purchaser has informed it that
the covenants of the Seller set forth in Section 5.08 are an essential element
of this Agreement and that, but for the agreement of the Seller to comply with
these covenants, the Purchaser represents to the Seller that it would not have
entered into this Agreement.
SECTION 5.09. Release of Indemnity and other Obligations. The Seller
covenants and agrees, on or prior to the Closing, to execute and deliver to the
Purchaser, for the benefit of the Company and the Subsidiary, a general release
and discharge, in form and substance reasonably satisfactory to the Purchaser,
releasing and discharging the Company and the Subsidiary from any and all
obligations accruing on or after the Closing Date to pay any amounts to or
perform any obligations owing to, or indemnify, the Seller or otherwise hold
the Seller harmless pursuant to the agreements listed in Section 3.14 and
Section 3.17 of the Disclosure Schedule which are noted with an asterisk (*).
SECTION 5.10. Further Action. (a) Each of the parties hereto shall
use all reasonable efforts to take, or cause to be taken, all appropriate
action, do or cause to be done all things necessary, proper or advisable under
62
<PAGE> 69
applicable Law, and execute and deliver such documents and other papers, as may
be required to carry out the provisions of this Agreement and consummate and
make effective the transactions contemplated by this Agreement.
SECTION 5.11. Release of Liens on Assets. The Seller covenants and
agrees to cause all Encumbrances on the Assets except the Excluded Assets
(other than Permitted Encumbrances), to be removed at or prior to the Closing.
The Purchaser shall cooperate and use all reasonable efforts to assist the
Seller in obtaining the removal of such Encumbrances; provided, however, that
the Purchaser shall have no obligation to give any guarantee or other
consideration of any nature in connection with the removal of any such
Encumbrance. The parties hereto agree that, in the event the Seller is unable
to cause the removal of any Encumbrance on any such Asset (other than Permitted
Encumbrances) prior to the Closing, the Seller shall, following the Closing,
use reasonable efforts to cooperate with the Purchaser and the Company in
attempting to remove such Encumbrance as promptly as practicable.
SECTION 5.12. Excluded Assets. (a) At the Closing, the Seller shall
cause the following assets of the Company or the Subsidiary (the "Excluded
Assets"), if not previously sold or transferred, to be distributed from the
Company to the Seller:
(i) The Company's real property described on Section 5.12(a)(i)
of the Disclosure Schedule plus any additional real estate acquired by the
Company (by foreclosure or otherwise) on or prior to the Closing Date; and
(ii) The Company's interest in the Cigna Partnership (the parties
hereby agreeing that the Company will retain its interest in and ownership
of CIGNA Mezzanine Partners II, L.P.).
(b) Section 5.12 of the Disclosure Schedule shall set forth the
methodology used for determining the fair market value of each of the
categories of Excluded Assets as of the time immediately prior to the Closing.
Purchaser and Seller shall jointly compute, using such methodology, the
aggregate of the fair market values of the Excluded Assets, which aggregate as
so agreed is herein referred to as the "Excluded Assets Value Amount."
(c) The Excluded Assets will be transferred pursuant to conveyance
instruments reasonably acceptable to the Seller and the Purchaser and shall
include all of the Company's and the Subsidiary's right, title and interest
63
<PAGE> 70
therein, all leases and related agreements, with full subrogation and
substitution against all prior owners.
SECTION 5.13. Services. In order to allow for an orderly transition
of the business following the Closing:
(a) The Purchaser covenants and agrees to cause the Company to
provide post-Closing transitional services for an interim period of time,
commencing at the Closing Date and continuing until December 31, 1996 or such
other date as is mutually agreed by Purchaser and Seller, to the Seller or an
affiliate of Seller, as appropriate, at the same level and type as such
Services have historically been provided to Seller and its Affiliates (the
"Company Services," which services shall be those set forth on Exhibit 5.13(a)
hereto; provided, however, that the Company shall not be required to provide
any Company Services to the extent that the performance of such Company
Services becomes more expensive for the Company as a result of organizational
or operational change by Seller. The Company shall be required to provide
Company Services only as reasonably appropriate to conduct Seller's business
and shall not be required to provide a level of service which is higher than
that provided immediately prior to the date hereof, including normal
fluctuations.
(b) The Purchaser covenants and agrees to reimburse the Seller for
all actual costs incurred by the Seller in connection with providing the
required Seller Services to the Company pursuant to Section 5.13(c). The
Purchaser further covenants to use its best efforts to obtain a replacement
source to provide such services as promptly as practicable following the
Closing Date.
(c) The Seller covenants and agrees to provide certain post-Closing
transitional services for an interim period of time commencing at the Closing
Date and continuing until December 31, 1996 or such other date as is mutually
agreed by Purchaser and Seller to the Company or an affiliate of the Company,
at the same level and type as such services have historically been provided to
the Company and the Subsidiary (the "Seller Services," which services shall be
those set forth on Exhibit 5.13(c) hereto; provided, however, that the Seller
shall not be required to provide any Seller Services to the extent that the
performance of such Seller Services becomes more expensive for the Seller as a
result of an organizational or operational change by the Company. The Seller
shall be required to provide Seller Services only as reasonably appropriate to
conduct the Company's business and shall not be required to provide a level of
service which is higher than that provided immediately prior to the date
hereof, including normal fluctuations.
64
<PAGE> 71
(d) The Seller covenants and agrees to reimburse the Company or
Purchaser for all actual costs incurred by the Company or the Purchaser in
connection with providing the required Company Services to the Seller pursuant
to Section 5.13(a). Seller further covenants to use its best efforts to obtain
a replacement source to provide such services as promptly as practicable
following the Closing Date.
SECTION 5.14. Termination of Inter-Company Arrangements. At or prior
to the Closing, the Seller shall cause the Inter-Company Arrangements
identified with two asterisks (**) on Section 3.14 and Section 3.17 of the
Disclosure Schedule to be terminated or amended on terms reasonably
satisfactory to the Purchaser and the Seller.
SECTION 5.15. Commercial Real Estate Group. On or prior to the
Closing, the Seller will transfer to the Company Seller's commercial real
estate servicing business (the "Commercial Real Estate Group") including (i)
the transfer of all employees of the Commercial Real Estate Group on the date
of transfer, (ii) the purchase and sale of the fixed assets used solely by such
Commercial Real Estate Group and (iii) the assignment of the real property
leases for the space occupied by the Commercial Real Estate Group, all on terms
and conditions mutually acceptable to Purchaser and Seller. At the Closing,
the Seller will appoint the Company as agent to service the commercial mortgage
pass-through certificates, Series 1990-1 and 1990-2, issued pursuant to the
Pooling and Servicing Agreements dated as of March 1, 1990, and December 1,
1990, respectively, each among the Company (as seller), the Seller (as
servicer), and Security Pacific National Bank (now Bank of America), as trustee
(the "Pooling and Servicing Agreements") in accordance with the terms and
provisions of the related Pooling and Servicing Agreements as in existence as
of the date hereof, and the Purchaser shall cause the Company to accept such
appointment. By accepting such appointment as agent, the Company shall assume
all obligations of the Seller under the Pooling and Servicing Agreements and
shall defend, indemnify and hold harmless the Seller from its failure to
perform any such obligations. At the Closing, the Seller shall cause the
servicing of the commercial mortgage loans owned by the Company to be
transferred from the United Companies Lending Corporation to the Company. In
connection with the servicing of the foregoing commercial mortgage pass-through
certificates and commercial mortgage loans, the Company shall pay monthly to
the Seller, on the tenth day of each month, a dollar amount equal to the
product of (i) the aggregate principal amount (measured as of the first day of
the preceding month) of such commercial mortgage pass-through certificates in
existence on the Closing Date (the parties hereto acknowledging that no fee
65
<PAGE> 72
shall be paid with respect to any such commercial mortgage pass-through
certificates coming into existence after the Closing Date), times (ii)
one-twelfth of one-eighth per cent.
SECTION 5.16. Master Loan Sale Agreement. On or prior to the
Closing, the Purchaser agrees to cause the Company and/or other Affiliates of
the Purchaser reasonably acceptable to the Seller, and the Seller agrees to
cause the Seller Master Loan Sale Parties, which shall be the Seller's mortgage
lender subsidiaries existing on the date hereof, to enter into a Master Loan
Sale Agreement and Servicing Agreement, substantially in the form of Exhibit
5.16 (the "Master Loan Sale Agreement").
SECTION 5.17. Proxy Statement. Promptly after the date hereof, the
Seller shall prepare the Proxy Statement. Seller shall send Purchaser and its
attorneys drafts of the Proxy Statement, and afford them reasonable opportunity
to comment thereon. Seller shall file the Proxy Statement with the Commission.
In connection with the foregoing, (a) the Seller will comply with the
requirements of the Exchange Act and the rules and regulations of the
Commission thereunder applicable to the solicitation of proxies for the Special
Meeting (including any requirement to amend or supplement the Proxy Statement)
and (b) each of Seller and Purchaser shall furnish such information for
inclusion in the Proxy Statement relating to it and its Affiliates and the
transactions contemplated by this Agreement and such further and supplemental
information as may be necessary to ensure that the statements regarding each of
Seller and Purchaser and their respective Affiliates, as applicable, and such
transactions contained in the Proxy Statement (as it may be amended or
supplemented) will not on the date such Proxy Statement is mailed or on the
date of the Special Meeting or on the Closing Date, contain any untrue
statement of material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances in which
they were made, not misleading. The Proxy Statement shall include the
recommendation of the Seller's Board of Directors in favor of the sale and
purchase of the Shares and the transactions provided for herein, unless
otherwise required by the fiduciary duties of the directors under applicable
law as determined by the Seller's Board of Directors and in accordance with the
procedures for termination set forth in Section 10.01(b)(v) hereof.
SECTION 5.18. Meeting of the Stockholders. The Seller shall take all
action necessary in accordance with applicable law and its articles of
incorporation and by-laws to convene the Special Meeting as promptly as
practicable to consider and vote upon the approval and adoption of this
66
<PAGE> 73
Agreement and to consider and vote upon such other matters as may be necessary
to effectuate the transactions provided for herein. The Board of Directors of
the Seller has resolved to recommend, and, subject only to the final sentence
of Section 5.17, the Board of Directors of the Seller shall continue to
recommend, and shall take all lawful action to solicit proxies for and
otherwise obtain, such approval and adoption.
SECTION 5.19. Appraisal Rights. (a) The Seller covenants and agrees
to comply with LA. REV. STAT. ANN. Section 12:121B which provides that notice
of the Special Meeting shall specifically state that the purpose of the Special
Meeting is to approve consummation of the transactions contemplated herein, and
shall also contain the following statement: "Dissenting shareholders who comply
with the procedural requirements of the Business Corporation Law of Louisiana
will be entitled to receive payment of the fair cash value of their shares if
the transaction to be considered is effected upon approval by less than eighty
per cent of the corporation's total voting power."
(b) The Seller covenants and agrees to comply with the rights of
dissenting shareholders at set forth in LA. REV. STAT. ANN. Section 12:131
(WEST 1994).
SECTION 5.20. Location. The Purchaser agrees that it will use
commercially reasonable efforts to cause the Company to maintain a presence
substantially comparable to that presently maintained by the Company in Baton
Rouge, Louisiana for not less than 2 years from the Closing Date. On or prior
to the Closing, the Seller agrees to cause that certain lease for the premises
located at Three United Plaza, Baton Rouge, Louisiana 70809, by and among
United Companies Realty and Development Company, Inc., as lessor, and the
Company, as lessee, dated June 15, 1995 (the "Louisiana Lease"), to be amended
such that the Louisiana Lease shall provide for a termination date 2 1/2 years
from the Closing Date, with such renewal rights as are provided in the existing
lease.
SECTION 5.21. Rating Agencies. Until the earlier of the Closing or
the termination of this Agreement, each party shall keep the other informed on
a current basis of any and all discussions with or review by any rating agency
relating to the Company.
SECTION 5.22. Confidentiality by Purchaser. The Purchaser agrees
that any information regarding the Seller, the Company, the Subsidiary or any
other subsidiary of the Seller heretofore obtained from the Seller, the
Company, the Subsidiary or their representatives or agents, obtained by the
Purchaser by virtue of the execution and delivery of
67
<PAGE> 74
this Agreement, or obtained by the Purchaser pursuant to Section 5.02 and
Section 7.03 hereof, shall be used and held by the Purchaser in accordance with
the Confidentiality Agreement, except to the extent that the Purchaser is
served with a subpoena, order or other legal process to disclose any such
information. In the event that the Purchaser or any such agent,
representative, employee, officer or director is served with a subpoena, order
or other legal process, to disclose any such information, the Purchaser shall
provide the Seller with reasonably prompt written notice of such requirement so
that the Seller may, at the expense of the Seller, seek a protective order or
other remedy. This Section 5.22 shall not apply to any information that, at
the time of disclosure, is available publicly or was not disclosed in breach of
this Agreement by the Purchaser or its agents, representative, Affiliates,
employees, officers or directors. The Purchaser shall instruct all officers,
employees and authorized agents, accountants, counsel, financing sources,
prospective financing sources and representatives of the Purchaser who are
provided access to such information as to the provisions of this Section and
shall assure their compliance therewith and shall be responsible for any breach
thereof by any of them.
SECTION 5.23. New Director and Officer Slates. The Purchaser shall
cause directors and officers of the Company to be elected at the Closing so
that the Company shall be authorized to execute and deliver the agreements
described in Sections 5.15 and 5.16.
SECTION 5.24. Section 338(h)(10) Election. As soon as practicable
following the Closing Date, Seller shall make a timely, effective and
irrevocable Section 338(h)(10) Election as set forth in Section 7.02.
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.01. 401(k) Plan and ESOP. (a) Effective as of the Closing
Date, all employees of the Company and the Subsidiary shall cease to
participate in the Seller's 401(k) savings plan and employee stock ownership
plan (the "401(k) and ESOP Plans") except to the extent former employees of the
Company and the Subsidiary are otherwise permitted to participate in the 401(k)
and ESOP Plans. On or before the Closing Date, the Seller shall take all
actions necessary to cause the Company to cease to be a participating employer
in the 401(k) Plan as of the Closing Date.
68
<PAGE> 75
(b) From and after the Closing Date, the Seller shall indemnify and
hold the Purchaser, the Company and the Subsidiary harmless against any claims
of participants, beneficiaries or governmental agencies made against them in
connection with the 401(k) and ESOP Plans including any claims, penalties,
losses, fees, expenses or other costs or liabilities incurred by them as a
consequence of, or in order to avoid, a failure by either of the plans to
qualify under Section 401(a) of the Code for any period prior to Closing.
SECTION 6.02. Supplemental Pension Benefits. From and after the
Closing Date, the Company and the Subsidiary shall be responsible for, and
shall indemnify and hold the Seller harmless from, the payment of all
supplemental retirement benefits or other nonqualified deferred compensation,
to the extent related to periods prior to the Closing Date and accrued or
reflected on the Closing Balance Sheet.
SECTION 6.03. Other Benefits; Qualified Plans. (a) From and after
the Closing Date, the Seller shall indemnify and hold the Purchaser, the
Company and the Subsidiary harmless against any claims made against them by
employees or former employees of the Company or the Subsidiary (i) for
severance pay relating to any termination of employment which occurred prior to
the Closing, (ii) for nonqualified deferred compensation or incentive or
contingent compensation relating to any Plan as in effect, or commitment made,
prior to the Closing Date (to the extent related to periods prior to the
Closing Date), except to the extent described in Section 6.02 or (iii) for
health, medical, disability or Workman's Compensation claims incurred prior to
the Closing Date, regardless of whether such claims are reported prior to the
Closing Date or are not so reported.
(b) As of the Closing Date, Seller shall "vest" employees of the
Company and the Subsidiary, as well as Seller's employees who are part of the
Commercial Real Estate Group and who are transferred to the Company pursuant to
Section 5.15 hereof, who have been granted stock options under the Seller's
1993 Stock Incentive Plan but who have not yet exercised such options. For
purposes of this Section, "vest" shall mean granting the right to exercise such
stock options during the 90 day period beginning July 22, 1996, or such earlier
date on or after the Closing Date that the employment by the Company or the
Subsidiary of the employee is terminated by death, retirement, disability or
involuntary severance by the Company or the Subsidiary.
(c) From and after the Closing Date, the Purchaser, the Company and
the Subsidiary shall indemnify
69
<PAGE> 76
and hold the Seller harmless against any claims or liability relating to any
termination of employment of any employee of the Company or the Subsidiary, if
such termination occurs on or after the Closing.
SECTION 6.04. No Third Party Beneficiary Rights or Rights to
Continued Employment. Nothing contained herein, express or implied, is
intended to or shall confer upon any employee or former employee of the Company
or the Subsidiary any right or remedy of any nature or kind whatsoever under or
by reason of this Agreement, including any rights of continued employment for
any period.
ARTICLE VII
TAX MATTERS
SECTION 7.01. Representations and Warranties. The Seller hereby
represents and warrants as follows:
(i) The Seller is the parent corporation of an affiliated group
of corporations, as defined in Section 1504(a) of the Code, that files
consolidated federal income tax returns (the "Seller Group"). Since
[1982] the Company has been included in consolidated federal
non-life/life income tax returns filed by the Seller Group ("Seller Group
Consolidated Returns"), and will continue to be included in the Seller
Group Consolidated Returns for 1995 and the taxable year of the Seller
Group ending on or after the Closing Date, which taxable year shall
include the Closing Date.
(ii) Except as set forth in Section 7.01 of the Disclosure
Schedule, (A) all material returns and reports in respect of Taxes ("Tax
Returns" or "Returns") required to be filed with respect to the Company
and the Subsidiary (including the Seller Group Consolidated Returns and
state income or franchise Tax Returns that include the Company or the
Subsidiary on a consolidated, combined, or unitary basis) have been timely
filed except where the failure to file involved would not have a Material
Adverse Effect; (B) all Taxes shown to be payable on such Returns and all
assessments of Tax made against the Company and the Subsidiary with
respect to such Returns have been paid or adequately provided for; (C) all
such Returns are true, correct, and complete in all material respects; and
(D) no adjustment relating to such Returns has been proposed formally or
informally by any Tax authority.
(iii) Except as set forth in Section 7.01 of the Disclosure
Schedule, there are no pending or to the
70
<PAGE> 77
best knowledge of Seller threatened actions or proceedings for the
assessment or collection of Taxes against the Company or the Subsidiary.
(iv) Except as set forth in Section 7.01 of the Disclosure
Schedule, there are no Tax liens on any assets of the Company or the
Subsidiary, except liens for Taxes that are not yet due and payable.
(v) Except as set forth in Section 7.01 of the Disclosure
Schedule, neither the Company nor the Subsidiary is or has been doing
business in, is or has been engaged in a trade or business, or has
business in force in any jurisdiction in which it has not filed all
required material income, franchise, or gross premium tax returns or other
applicable Returns.
(vi) Except as set forth in Section 7.01 of the Disclosure
Schedule, there are no outstanding waivers or agreements extending the
statute of limitations for any tax period with respect to any Tax to which
the Company or the Subsidiary may be subject.
(vii) Except as set forth in Section 7.01 of the Disclosure
Schedule, there are no outstanding written requests for information made
by a taxing authority to the Company or the Subsidiary.
(viii) Except as set forth in Section 7.01 of the Disclosure
Schedule, neither the Company nor the Subsidiary is obligated under any
agreement with respect to industrial development bonds or other
obligations, with respect to which, the excludability from gross income of
the holder for federal income tax purposes could be affected by the
transactions contemplated hereunder.
(ix) Except as set forth in Section 7.01 of the Disclosure
Schedule, no power of attorney is currently in force with respect to any
matter relating to Taxes that could affect the Company or the Subsidiary.
(x) Except as set forth in Section 7.01 of the Disclosure
Schedule, neither the Company nor the Subsidiary has been a member of any
partnership or joint venture or the holder of a beneficial interest in any
trust for any period for which the statute of limitations for any Tax has
not expired.
(xi) Each reserve item with respect to the Company or the
Subsidiary set forth in the 1994 Seller Group Consolidated Return was
determined in accordance with Sections 807 and 846 of the code, or other
71
<PAGE> 78
applicable Code sections, and has been consistently applied with respect
to the filing of the Seller Group Consolidated Returns for the years ended
December 31, 1991 through December 31, 1994, and will be consistently
applied with respect to the Company or the Subsidiary in the 1995 and 1996
Seller Group Consolidated Returns when such Returns are filed.
(xii) There have not been any changes in the $5,239,860 balance in
the policyholder surplus account reported in the 1994 Seller Group
Consolidated Return for the Company. The computation and maintenance of
those account balances for the tax years subsequent to 1958 have been in
accordance with Section 815 of the Code and the regulations thereunder.
There will be no subtraction from the Company's policyholder surplus
account under Section 815 of the Code from December 31, 1994 up to and
including the Closing Date, exclusive of any effect of the Section 338
Election and the transfer of the Excluded Assets.
(xiii) For 1995 and for the taxable year including the Closing
Date, the Company will qualify as a "life insurance company" within the
meaning of Section 816(a) of the Code and the Treasury Regulations
thereunder except for any change in such qualification resulting from the
Section 338 Election.
SECTION 7.02. Section 338(h)(10) Election. (a) Seller will join with
the Purchaser in making an election under Section 338(g) and Section 338(h)(10)
of the Code (and, to the extent requested by purchaser any comparable election
under state, local, or foreign tax law) (collectively, the "Section 338(h)(10)
Election") with respect to the purchase and sale of the stock of the Company
and, if requested by Purchaser, the indirect purchase of the stock of
Subsidiary hereunder. Any liability for Taxes, including Phase III taxes, for
the taxable year that includes the Section 338(h)(10) Election is the liability
of Seller. Any liability for Taxes related to the distribution of the Excluded
Assets is the liability of the Seller.
(b) Seller and the Purchaser will cooperate with one another and with
their respective representatives with regard to the timely preparation and
filing of a Section 338(h)(10) Election under the laws of each appropriate
jurisdiction for which such election is to be made. In particular, and without
limiting the generality of the foregoing, (i) no later than thirty (30)
calendar days prior to the Closing Date, the Purchaser shall notify Seller of
any request to make a Section 338(h)(10) Election under the laws of any state
or local jurisdiction in which election is not automatic if an election is made
for federal income tax
72
<PAGE> 79
purposes, and of whether to make such an election with respect to the
Subsidiary for federal income tax purposes; and (ii) the Seller shall deliver
to Purchaser a duly executed and completed Internal Revenue Service Form 8023A
and any similar state or local form to be filed, as well as drafts of any
required attachments (collectively, the "Section 338 Forms") no later than
ninety (90) calendar days prior to the date each such form is required to be
filed. In the event of any dispute with regard to the content of any Section
338 Form, the parties shall diligently attempt to resolve such dispute; but if
the parties have been unable to resolve such dispute by the sixtieth day prior
to the date any such return is to be filed, such dispute shall be resolved in a
manner consistent with Section 2.06(f). Once finalized, each party shall
promptly cause such Section 338 Forms to be executed by an authorized person,
and (subject to the receipt of the other party's signature) the party
responsible for filing such forms with its returns will duly and timely do so,
providing written evidence to the other party that it has done so.
SECTION 7.03. Access to Information. Subject to Section 5.22, from
the date hereof until the Closing, Seller shall and shall cause the Company and
the Subsidiary to make available to the Purchaser: (i) all federal, state, and
foreign income, franchise, gross premium, and similar Tax Returns for such
taxable periods as Purchaser shall reasonably request and any examination
reports and statements of deficiencies assessed against, proposed to be
assessed against, or agreed to by the Company or the Company or the Subsidiary
for such taxable periods and (ii) any pro forma federal income Tax Returns of
the Company or the Subsidiary, together with any schedule reconciling the items
in the pro forma Tax Return to the items as included in the consolidated Tax
Return, for all taxable years ended after December 31, 1994.
SECTION 7.04. Returns and Payments. (a) Seller shall prepare and
file in proper form with the appropriate governmental authority (or cause to be
prepared and filed in a timely manner (with extensions) (i) all Tax Returns of
the Company or the Subsidiary that are required to be filed on or before the
Closing Date, taking into account all available extensions, and (ii) all
Returns in which the Company or the Subsidiary joins with Seller or any of its
Affiliates (including, without limitation, any Seller Group Consolidated Return
and any state or local consolidated or combined income tax return), and shall
pay the Taxes required to be paid with such Returns (subject to any right of
reimbursement or indemnification hereunder). All other Returns of the Company
or the Subsidiary shall be timely filed by or at the instruction of the
Purchaser, which shall pay any Taxes required to be paid with such Returns
(subject
73
<PAGE> 80
to any right of reimbursement or indemnification hereunder). In order to
assist the Seller in the preparation of all Returns that Seller is required to
prepare hereunder, Purchaser shall act in good faith to provide Seller with the
information within the knowledge or control of Purchaser, the Company, or the
Subsidiary which may be necessary or appropriate for the preparation of each
such Return within a reasonable period after request therefor and prior to the
date for filing such Return (taking into account available extensions).
(b) Returns of the Company and the Subsidiary for any taxable period
that begins before the Closing Date shall be prepared in a manner Consistent
With Past Practices (except to the extent counsel for the Seller or the Company
renders a legal opinion that there is no reasonable basis in law therefor or
determines that a Return cannot be so prepared and filed without being subject
to penalties). With respect to any Return required to be filed by a party with
respect to the Company and the Subsidiary and as to which an amount of Tax is
allocable to another party under Section 7.05, the preparer of such return
shall provide the other party with a copy of such completed Return and a
statement certifying the amount of Tax shown on such Return that is allocable
to such other party pursuant to Section 7.05(b), together with appropriate
supporting information and schedules at least 20 Business Days prior to the due
date (including any extension thereof) for the filing of such Return, and such
other party shall have the right to review and comment on such Return and
statement prior to the filing of such Return. Such other party shall have the
right to dispute the amount of Taxes allocated to such party by the filing
party, and any dispute that cannot be resolved between the parties shall be
resolved in accordance with the principles set forth in Section 2.06(f).
SECTION 7.05. Indemnity. (a) Subject to Section (b) of this Section
7.05, the Seller agrees to indemnify and hold the Purchaser, the Company, and
the Subsidiary harmless against any breach of a representation, warranty or
covenant contained in this Article VII and the following Taxes and, except as
otherwise provided in Section 7.06, against any loss, damage, liability, or
expense, including reasonable fees for attorneys and consultants, incurred in
contesting or otherwise in connection with any such Taxes, but only to the
extent such Taxes or other costs have not been adequately provided for by
reserve for current taxes on the Company's books on a balance sheet provided to
the Purchaser and prepared in the ordinary course of business for the period
for which liability for such Tax was incurred or a later period: (i) Taxes
imposed on the Company or the Subsidiary with respect to taxable periods of
such corporation ending on or before the Closing Date; (ii) with
74
<PAGE> 81
respect to taxable periods beginning before the Closing Date and ending after
the Closing Date, (A) Taxes imposed on the Company or the Subsidiary which are
allocable, pursuant to Section 7.05(b), to the portion of such period ending on
the Closing Date, and (B) Taxes imposed on the Company or the Subsidiary by
reason of such corporation's distributive share of income or loss from, or
otherwise in respect of, any partnership in which the Company or the Subsidiary
was a member on or prior to the Closing Date that are allocable, pursuant to
Section 7.05(b), to the portion of such period ending on the Closing Date;
(iii) Taxes imposed on the Company or the Subsidiary by reason of being a
member of any affiliated group (other than any group for which the Company was
the common parent) with which any of the Company and the Subsidiary file or
have filed a Return on a consolidated or combined basis for a taxable period
ending on or before the Closing Date and; (iv) Taxes imposed on the Purchaser
or the Company or the Subsidiary as a result of any breach of warranty or
misrepresentation under Section 7.01.
(b) In the case of Taxes that are payable with respect to a taxable
period that begins before the Closing Date and ends after the Closing Date, the
portion of any such Tax that is allocable to the portion of the period ending
on the Closing Date shall be:
(i) in the case of Taxes that are either (x) based upon or
related to income or receipts, or (y) imposed in connection with any sale
or other transfer or assignment of property (real or personal, tangible or
intangible) (other than conveyances pursuant to this Agreement, as
provided under Section 7.11), deemed equal to the amount which would be
payable if the taxable year ended with the Closing Date (except that,
solely for purposes of determining the marginal tax rate applicable to
income or receipts during such period in a jurisdiction in which such tax
rate depends upon the level of income or receipts, annualized income or
receipts may be taken into account if appropriate for an equitable sharing
of such Taxes); and
(ii) in the case of Taxes not described in subparagraph (i) that
are imposed on a periodic basis and measured by the level of any item,
deemed to be the amount of such Taxes for the entire period (or, in the
case of such Taxes determined on an arrears basis, the amount of such
Taxes for the immediately preceding period) multiplied by a fraction the
numerator of which is the number of calendar days in the period ending on
the Closing Date and the denominator of which is the number of calendar
days in the entire period.
75
<PAGE> 82
For purposes of this Section 7.05, the Taxes attributable to the Company or the
Subsidiary by reason of such corporation's distributive share of income, gain,
or loss from, or otherwise in respect of, any partnership in which the Company
or the Subsidiary is a member on the Closing Date shall be determined as if
such partnership's taxable year ended on the Closing Date.
(c) The Purchaser shall indemnify and hold harmless Seller and its
Affiliates from and against (i) all Taxes for which the Company or the
Subsidiary may be liable for periods beginning after the Closing Date, (ii) all
Taxes for periods beginning before the Closing Date to the extent the Seller or
its Affiliates are not responsible for such Taxes under Section 7.05(a) and are
not indemnifying the Purchaser or the Company under other provisions of this
Agreement, and (iii) all costs and expenses (including reasonable attorneys'
and accountants' fees) attributable to any contest or dispute involving the
foregoing.
SECTION 7.06. Contests. (a) After the Closing, the Purchaser shall
promptly notify the Seller in writing by telecopier of any notice of a proposed
assessment or claim in an audit or administrative or judicial proceeding of the
Purchaser or the Company or the Subsidiary which, if determined adversely to
the taxpayer, would be grounds for indemnification under this Article VII;
provided, however, that a failure to give such notice will not affect the
Purchasers' rights to indemnification under this Article VII except that (i) if
notice is not timely given, Seller shall not be liable for any legal or
accounting costs incurred before such notice is actually given, or any interest
or similar charge accruing between the time notice should have been given and
the time notice is actually given, and (ii) Seller shall not be liable to the
extent that, but for such failure, the Seller could have avoided all or a
portion of the taxes or other costs indemnifiable hereunder in question.
(b) In the case of an audit or administrative or judicial proceeding
that relates to periods ending on or before the Closing Date, the Seller shall
have the right at its expense to participate in and control the conduct of such
audit or proceeding but only to the extent that such audit or proceeding
relates solely to a potential adjustment for which the Seller may have
liability. The Purchaser shall also have the right at its expense to
participate in such audit or proceeding, but the Purchaser shall have no right
to control any portion of such audit or proceeding permitted to be controlled
by the Seller under the immediately preceding sentence. If the Seller assumes
the defense of any such audit or proceeding, and the Seller and the relevant
taxing authority are thereafter willing to
76
<PAGE> 83
settle such audit or proceeding for the payment by the Seller of a fixed amount
of Tax but the Purchaser rejects such settlement, then the Seller's liability
under this sentence for Taxes with respect to such audit or proceeding shall be
limited to the aggregate amount of the proposed settlement and the Seller shall
not be liable for any expenses incurred by the Purchaser with respect to such
audit or proceeding. If the Seller does not assume the defense of any such
audit or proceeding, the Purchaser may defend the same at the reasonable
expense of the Seller in such manner as it may deem appropriate, including, but
not limited to, settling such audit or proceeding with the consent of the
Seller, which consent shall not be unreasonably withheld. In the event that
issues relating to a potential adjustment for which the Seller has acknowledged
its liability are required to be dealt with in the same proceeding as separate
issues relating to a potential adjustment for which the Purchaser would be
liable, the Seller shall have the right, at its expense, to control the audit
or proceeding with respect to the issues for which it is liable and the
Purchaser shall have the right, at its expense, to control the audit or
proceeding with respect to the issues for which it is liable.
(c) With respect to issues relating to a potential adjustment for
which the Seller, on the one hand, and the Purchaser or the Company or the
Subsidiary, on the other hand, could be liable, or which recur for any period
ending after the Closing Date, (i) each party (either the Seller, on the one
hand, or the Purchaser, the Company, or the Subsidiary, on the other hand) may
participate at its own expense in the audit or proceeding, and (ii) the audit
or proceeding with respect to such issues shall be controlled by that party
which would bear the burden of the greater portion of the present value of the
Tax attributable to the adjustments and any corresponding adjustments that may
reasonably be anticipated for future Tax periods. The principle set forth in
the immediately preceding sentence shall govern also for purposes of deciding
any issue that must be decided jointly (including, without limitation, choice
of judicial forum) in situations in which separate issues are otherwise
controlled under this Article VII by the Purchaser, on the one hand, and the
Seller, on the other hand.
(d) Except as provided in Section 7.06(b) above, neither the
Purchaser nor the Seller shall enter into any compromise or agree to settle any
claim pursuant to any Tax audit or proceeding which would adversely affect the
other parties for such year or a subsequent year without the written consent of
the other parties, which consent may not be unreasonably withheld. The
Purchaser and the Seller agree to cooperate, and the Purchaser agrees to cause
the
77
<PAGE> 84
Company and the Subsidiary to cooperate, in the defense against or compromise
of any claim in any audit or proceeding.
SECTION 7.07. Time of Payment. Payment by the Seller of any amounts
due under this Article VII in respect of Taxes shall be made as follows:
(a) at least three Business Days before the due date of any Return
required to be filed by the Purchaser on which are required to be reported
income for a period ending after the Closing Date for which the Seller is
responsible under Sections 7.05(a) and 7.05(b) without regard to whether
the Returns shows overall net income or loss for such period;
(b) within ten Business Days following an agreement between the
Seller and the Purchaser that an indemnity amount is payable; and
(c) within five Business Days before the due date for the payment of
any Tax pursuant to an assessment of such Tax by either a taxing authority
or a "determination" as defined in Section 1313(a) of the Code.
If liability under this Article VII is in respect of costs or expenses other
than Taxes, payment by the Seller or the Purchaser of any amounts due under
this Article VII shall be made within twenty Business Days after the date when
the party required to make such payment has been notified by the party entitled
to receive such payment that such party has a liability for a determinable
amount under this Article VII and is provided with calculations or other
materials supporting such liability.
SECTION 7.08. Cooperation and Exchange of Information. After the
Closing, pursuant to the terms set forth in Section 5.02 of this Agreement, the
Seller, on the one hand, and the Purchaser, the Company and the Subsidiary, on
the other hand, will provide or cause to be provided to the other parties such
cooperation and information as any of them reasonably may request of the others
in filing any Return, amended Return or claim for refund, determining a
liability for Taxes or a right to a refund of Taxes, participating in or
conducting any audit or other proceeding in respect of Taxes. Such cooperation
and information shall include providing copies of relevant Returns or portions
thereof, together with accompanying schedules, related work papers and
documents relating to rulings or other determinations by Tax authorities. Each
party shall make its employees available, or cause employees to be made
available, to another party on a basis mutually convenient
78
<PAGE> 85
to provide explanations of any documents or information provided hereunder.
All costs and expenses reasonably incurred by a party in responding to a
request for information or assistance, including the costs incurred by the
Seller in connection with the cooperation described in the preceding sentence,
pursuant to this Section 7.08 shall be paid by the party requesting such
information or assistance.
SECTION 7.09. Retention of Tax Returns and Records. Each of the
Seller, the Purchaser, the Company, and the Subsidiary shall retain or cause to
be retained all Returns, schedules and work papers, records and other documents
in its possession relating to Tax matters of the Company and the Subsidiary for
each taxable period first ending after the Closing Date and for all prior
taxable periods until the later of (i) the expiration of the statute of
limitations of the taxable periods to which such Returns and other documents
relate, without regard to extensions except to the extent notified by the other
party in writing of such extensions for the respective Tax periods, or (ii) six
years following the due date (without extension) for such Returns; provided,
however, that Returns, schedules, work papers, records and other documents
relating to the determination of the basis of any asset or the tax
classification of any insurance policy, plan or contract shall be retained for
six years following the disposition of such asset or payment or cancellation of
such insurance policy, plan or contract, respectively; and provided, further,
that the Seller shall not dispose of any such documents without first notifying
the Purchaser and providing the Purchaser a reasonable period of time in which
to assume possession of such documents. Any information obtained under this
Section 7.09 shall be kept confidential except as may be otherwise necessary in
connection with the filing of Returns or claims for refund or in conducting an
audit or other proceeding.
SECTION 7.10. Conveyance Taxes. Any real property transfer or gains,
sales, use, transfer, value added, stock transfer, stamp, recording,
registration, and any similar Tax or fee that becomes payable in connection
with the transactions contemplated by this Agreement (other than the transfer
of the Excluded Assets) shall be shared equally by the Seller and Purchaser.
Any such Tax or fee that becomes payable in connection with the transfer of the
Excluded Assets shall be paid by Seller. Seller shall file such applications
and documents as shall permit any such Tax to be assessed and paid on or prior
to the Closing Date in accordance with any available pre-sale filing procedure.
Each party hereto shall execute and deliver all instruments and certificates
necessary to enable the other to comply with the foregoing.
79
<PAGE> 86
SECTION 7.11. Miscellaneous. (a) The Seller and the Purchaser agree
to treat all payments made by any of them to or for the benefit of the other
(including any payments to the Company or the Subsidiary) under this Article
VII, under other indemnity provisions of this Agreement and for any
misrepresentations or breaches of warranties or covenants as adjustments to the
Purchase Price or as capital contributions for Tax purposes and that such
treatment shall govern for purposes hereof except to the extent that the laws
of a particular jurisdiction provide otherwise, in which case such payments
shall be made in an amount sufficient to indemnify the relevant party on an
after-Tax basis.
(b) Within a reasonable period after Closing and prior to the time
required by relevant Tax laws, Purchaser and Seller will act in good faith to
agree upon an allocation of the Purchase Price in the manner and with the
degree of detail required by such Tax laws. If Purchaser and Seller cannot so
agree, such allocation shall be determined in a manner consistent with the
approach of Section 2.06(f). None of the Seller, the Company or the Purchaser
shall file any Return, or take a position with a Tax authority, that is
inconsistent with the Purchase Price allocation thus determined.
(c) Except as otherwise specifically provided in Sections 7.05 and
7.06, each party shall bear its own expenses, including expenses for attorneys
and other outside consultants, in contesting any Tax for which such party is
liable under this Article VII.
(d) This Agreement represents and subsumes any prior agreement
between the Company and the Seller relating to liability for Taxes and any
agreement or arrangement between the Company or the Subsidiary and any other
person shall be or have been terminated on or prior to the Closing, and no
payments shall be permitted or required to be made thereunder by the Seller,
the Company, or the Subsidiary before or after the Closing except to the extent
that such amount is shown as a proper current tax liability of the Company for
accrued but unpaid Taxes on the Company's statutory statements for 1995 and/or
on actual or pro forma statutory statements for the short period ending on the
Closing Date to be prepared by the Company; provided, however, that no payment
shall be permitted or required in any event for any Taxes resulting from the
Section 338(h)(10) Election or relating to any net gain arising from the
disposition of the Excluded Assets pursuant to this Agreement.
(e) The obligations of the Seller to indemnify and hold harmless the
Purchaser, the Company and the
80
<PAGE> 87
Subsidiary pursuant to this Article VII, and the representations and warranties
contained in Section 7.01, shall terminate at the close of business on the 30th
day following the expiration of the applicable statute of limitations with
respect to the Tax liabilities in question, giving effect to any waiver,
mitigation or extension thereof.
(f) From and after the date hereof, neither the Company nor the
Subsidiary shall, and the Seller shall not permit the Company or the Subsidiary
to, make or revoke, or cause or permit to be made or revoked, any Tax election,
or adopt or change any method of accounting, that would have a Material Adverse
Effect for any taxable year ending after the Closing Date without the prior
written consent of the Purchaser, which consent shall not be unreasonably
withheld.
(g) Each of the Purchaser and Seller shall be entitled to recover
professional fees and related costs that each may reasonably incur to enforce
the provisions of this Article VII.
SECTION 7.12. Refunds of Taxes. Purchaser, the Company and the
Subsidiary shall pay or cause to be paid to Seller all refunds or credits of
Taxes or similar benefit (including any interest or similar benefit received
from or credited thereon by the applicable tax authority) received by the
Purchaser or the Company or the Subsidiary (or their respective successors and
assigns) after the Closing to the extent attributable to (i) Taxes paid prior
to Closing by the Seller, the Company, the Subsidiary or their respective
Affiliates or (ii) Taxes for which the Seller has indemnified the Purchaser,
the Company or the Subsidiary pursuant to Section 7.05.
SECTION 7.13. Tax Cooperation by Successors and Assigns. If there is
a disposition of all or part of the Company and/or the Subsidiary, their
assets, or their businesses, Purchaser agrees to use its best efforts to ensure
that the purchaser of or successor to such company, asset or business is
contractually obligated to and in fact does comply with the provisions of this
Article VII and the provisions for access to and retention of records.
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to Obligations of the Seller. The
obligations of the Seller to consummate the transactions contemplated by this
Agreement shall be subject
81
<PAGE> 88
to the fulfillment, at or prior to the Closing, of each of the following
conditions:
(a) Representations, Warranties and Covenants. The representations
and warranties of the Purchaser and the Guarantor contained in this
Agreement shall have been true and correct as of the date they were made
and shall be true and correct as of the Closing, with the same force and
effect as if made as of the Closing, except for such changes as are
permitted or contemplated by this Agreement, and other than such
representations and warranties as are made as of another date. The
covenants and agreements contained in this Agreement to be complied with
by the Purchaser on or before the Closing shall have been complied with,
and the Seller shall have received certificates from the Purchaser and the
Guarantor, as applicable, to such effect signed by duly authorized
representatives thereof;
(b) HSR Act. Any waiting period (and any extension thereof) under
the HSR Act applicable to the purchase of the Shares contemplated hereby
shall have expired or shall have been terminated;
(c) No Proceeding or Litigation. No Action shall have been commenced
or threatened by or before any Governmental Authority against either the
Seller or the Purchaser, seeking to restrain or materially and adversely
alter the transactions contemplated by this Agreement which is likely to
render it impossible or unlawful to consummate such transactions;
provided, however, that the provisions of this Section 8.01(c) shall not
apply if the Seller has directly or indirectly solicited or encouraged any
such Action;
(d) Resolutions. The Seller shall have received a true and complete
copy, certified by the Secretary or an Assistant Secretary of the
Purchaser and the Guarantor, of the resolutions duly and validly adopted
by the Board of Directors of the Purchaser and the Guarantor evidencing
its authorization of the execution and delivery of this Agreement and the
other agreements to be executed by the Purchaser as contemplated hereby
and the consummation of the transactions contemplated hereby;
(e) Incumbency Certificate. The Seller shall have received a
certificate of the Secretary or an Assistant Secretary of the Purchaser
and the Guarantor certifying the names and signatures of the officers of
the Purchaser and the Guarantor authorized to sign this
82
<PAGE> 89
Agreement and the other documents to be delivered hereunder;
(f) Legal Opinion. The Seller shall have received from Dewey
Ballantine a legal opinion, addressed to the Seller and dated the Closing
Date, substantially in the form of Exhibit 8.01(f);
(g) Consents and Approvals. The Seller and the Purchaser shall have
received (i) all authorizations, consents, orders and approvals listed in
Section 3.07 of the Disclosure Schedule and noted with an asterisk (*)
thereon which, in each case, shall not contain any material conditions or
limitations which are reasonably unacceptable to the Seller, (ii) all
third-party consents and estoppel certificates listed in Section 5.04 of
the Disclosure Schedule and not waived by the Purchaser and (iii) all
authorizations, consents, orders and approvals required in connection with
the transfer of the Excluded Assets; and
(h) Master Loan Sale Agreement. The Purchaser, the Company or an
Affiliate(s) of the Purchaser reasonably acceptable to the Seller shall
have executed and delivered the Master Loan Sale Agreement.
(i) Approval and Adoption. This Agreement and all other matters
necessary to effectuate the transactions provided for herein shall have
been approved and adopted at the Special Meeting by the affirmative vote
of at least two-thirds of the voting power present.
(j) Appraisal Rights. On or prior to the Closing Date, the Seller
shall deliver to the Purchaser a list certified by its Secretary or
Assistant Secretary of all stockholders entitled to vote at the Special
Meeting who shall not have voted all their shares in favor of the approval
and adoption of this Agreement and setting forth the number of shares of
Seller's common stock owned by each such stockholder which were not voted
in favor of the approval and adoption of this Agreement. The total number
of such shares of Seller's common stock as to which dissenter's rights may
be exercised pursuant to LA. REV. STAT. ANN. Section 12:131 shall not
exceed 2% of the total number of shares of Seller's common stock
outstanding on the Closing Date.
(k) Closing Items. Seller or the Company, as applicable, shall have
received the items contemplated by Section 2.05 hereof.
83
<PAGE> 90
(l) Commercial Real Estate Group. The Commercial Real Estate Group
shall have been transferred to the Company.
(m) Excluded Assets. The Company shall have received the Excluded
Assets Value Amount.
(n) Appraisals. The Seller's Board of Directors shall have received,
no later than March 1, 1996, appraisals or other evaluations that show
that the aggregate fair market value of the Excluded Assets is not
materially different from the Excluded Assets Value Amount, each of which
shall be in form and substance reasonably acceptable to the Seller's Board
of Directors.
SECTION 8.02. Conditions to Obligations of the Purchaser. The
obligations of the Purchaser to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment, at or prior to the Closing,
of each of the following conditions:
(a) Representations, Warranties and Covenants. The representations
and warranties of the Seller contained in this Agreement shall have been
true and correct as of the date as of which they were made and shall be
true and correct as of the Closing, with the same force and effect as if
made as of the Closing except for such changes as are permitted or
contemplated by this Agreement, other than such representations and
warranties as are made as of another date, in each case without giving any
effect to any Additional Scheduled Information. The covenants and
agreements contained in this Agreement to be complied with by the Seller
on or before the Closing shall have been complied with, and the Purchaser
shall have received a certificate from the Seller to such effect signed by
a duly authorized officer thereof;
(b) HSR Act. Any waiting period (and any extension thereof) under
the HSR Act applicable to the purchase of the Shares contemplated hereby
shall have expired or shall have been terminated;
(c) No Proceeding or Litigation. No Action shall have been commenced
or threatened by or before any Governmental Authority against either the
Seller or the Purchaser, seeking to restrain or materially and adversely
alter the transactions contemplated hereby which is likely to render it
impossible or unlawful to consummate the transactions contemplated by this
Agreement or which would have a Material Adverse Effect; provided,
however, that the provisions of this
84
<PAGE> 91
Section 8.02(c) shall not apply if the Purchaser has directly or
indirectly solicited or encouraged any such Action;
(d) Resolutions of the Seller. The Purchaser shall have received a
true and complete copy, certified by the Secretary or an Assistant
Secretary of the Seller, of the resolutions duly and validly adopted by
the Board of Directors of the Seller evidencing its authorization of the
execution and delivery of this Agreement and the other agreements to be
executed by the Seller as contemplated hereby and the consummation of the
transactions contemplated hereby;
(e) Incumbency Certificate of the Seller. The Purchaser shall have
received a certificate of the Secretary or an Assistant Secretary of the
Seller certifying the names and signatures of the officers of the Seller
authorized to sign this Agreement and the other documents to be delivered
hereunder;
(f) Legal Opinions. The Purchaser shall have received from Kantrow,
Spaht, Weaver & Blitzer (a Professional Law Corporation) a legal opinion,
addressed to the Purchaser and dated the Closing Date, substantially in
the form of Exhibit 8.02(f) (except that the opinion as to enforceability
of this Agreement may be given by the firm of Jones, Day, Reavis & Pogue),
which opinions shall each state that Purchaser's lenders and other
financing sources identified therein may rely upon such opinion as if it
were addressed to them;
(g) Consents and Approvals. The Purchaser and the Seller shall have
received, each in form and substance reasonably satisfactory to the
Purchaser, (i) all authorizations, consents, orders and approvals listed
in Section 3.07 of the Disclosure Schedule and noted with an asterisk (*)
thereon which, in each case, shall not contain any material conditions or
limitations which are reasonably unacceptable to Purchaser and (ii) all
authorizations, consents, orders and approvals required in connection with
the transfer of the Excluded Assets;
(h) Resignations of Directors and Officers. The Purchaser shall have
received the resignations, effective as of the Closing, or evidence of
removal as of the Closing, of all the directors and officers of the
Company and the Subsidiary;
(i) Organizational Documents. The Purchaser shall have received a
copy of (i) the Articles of
85
<PAGE> 92
Incorporation, as amended (or similar organizational documents), of the
Company and of the Subsidiary, certified by the Louisiana Department, with
respect to the Company, and the secretary of state of Louisiana with
respect to the Subsidiary, as of a date not earlier than ten Business Days
prior to the Closing Date and accompanied by a certificate of the
Secretary or Assistant Secretary of each such entity, dated as of the
Closing Date, stating that no amendments have been made to such Articles
of Incorporation (or similar organizational documents) since such date and
(ii) the By-laws (or similar organizational documents) of the Company and
of the Subsidiary, certified by the Secretary or Assistant Secretary of
each such entity;
(j) Minute Books. The Purchaser shall have received a copy of the
minute books of the Company and the Subsidiary, certified by their
respective Secretaries or Assistant Secretaries as of the Closing Date;
(k) Compliance with FIRPTA. The Company shall have provided the
Purchaser with a statement, in a form reasonably satisfactory to the
Purchaser, pursuant to Section 1.897-2(h) of the Treasury Regulations
certifying that the Common Stock is not a U.S. real property interest
within the meaning of Section 897(c)(1) of the Code and dated not more
that 30 days prior to the Closing Date;
(l) Good Standing; Qualification to Do Business. The Purchaser shall
have received good standing certificates or Certificates of Compliance or
Certificates of Existence, as applicable, for the Company and for the
Subsidiary from the secretary of state, the department of insurance or the
applicable Governmental Authority, of (i) the jurisdiction in which each
such entity is incorporated or organized, and (ii) each other jurisdiction
in which each such entity does business requiring it to qualify in such
jurisdiction, in each case dated as of a date not earlier than ten
Business Days prior to the Closing Date and accompanied by bring-down
telegrams or facsimiles (to the extent available in the relevant
jurisdictions) dated the Closing Date;
(m) Release of Indemnity Obligations. The Purchaser shall have
received the general releases and discharges from the Seller referred to
in Section 5.09 in form and substance reasonably satisfactory to the
Purchaser;
86
<PAGE> 93
(n) Master Loan Sale Agreement. The Seller Master Loan Sale Parties
shall have executed and delivered the Master Loan Sale Agreement;
(o) No Material Adverse Effect. No event or events shall have
occurred which, individually or in the aggregate, have a Material Adverse
Effect;
(p) Commercial Real Estate Group. The Commercial Real Estate Group
shall have been transferred to the Company;
(q) No Regulatory Restrictions. Neither the Company nor the
Subsidiary shall be subject to any restriction (whether on its business,
operations, ability to pay dividends or incur indebtedness, or otherwise)
imposed or proposed to be imposed as a result of the transactions
contemplated by this Agreement by any Governmental Authority except
restrictions generally applicable to companies engaging in businesses
substantially similar to the Business and restrictions which result
primarily from any action or inaction of the Purchaser or the fact that
the Purchaser is a participant in the transactions contemplated by this
Agreement;
(r) Excluded Assets. The Seller shall have caused to be distributed
from the Company the Excluded Assets.
(s) Inter-Company Arrangements. Seller and the Company or
Subsidiary, as applicable, shall have terminated the Inter-Company
Arrangements in accordance with Section 5.14 and delivered to the
Purchaser evidence thereof which is reasonably acceptable to Purchaser.
(t) Approval and Adoption. This Agreement and all other matters
necessary to effectuate the transactions provided for herein shall have
been approved and adopted at the Special Meeting by the affirmative vote
of at least two-thirds of the voting power present.
(u) Closing Items. Purchaser shall have received the items
contemplated by Section 2.04 hereof.
(v) Promissory Note. Seller shall have purchased the promissory note
of an Affiliate of Purchaser, with terms substantially identical to those
set forth on the term sheet included as Exhibit 8.02(v) hereof, pursuant
to a subscription or note purchase agreement mutually
87
<PAGE> 94
agreeable to Purchaser and Seller (the "Promissory Note").
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
SECTION 9.01. Survival of Representations, Warranties and Covenants.
(a) Subject to Section 9.01(b), the representations and warranties contained
in this Agreement, the Exhibits to this Agreement, the Disclosure Schedule and
any certificate, statement or report or other document delivered pursuant to
this Agreement (collectively, the "Acquisition Documents"), shall survive the
Closing until April 30, 1997; provided, however, that all representations and
warranties made by Seller in Section 3.03, 3.16, 3.22(a)(vi), 3.22(a)(vii),
3.30 and 7.01 shall survive until the expiration of the applicable statute of
limitations or any extension thereof. No covenants shall survive after the
Closing Date except for those contained in Sections 5.03, 5.07, 5.08, 5.09,
5.10, 5.11, 5.13, 5.15, 5.19, 5.20, 5.22, 5.24, Article VI, Article VII and
such other Sections, if any, as so expressly provided. Neither the period of
survival nor the liability of the Seller or the Purchaser with respect to the
Seller's or the Purchaser's representations and warranties shall be reduced by
any investigation made at any time by or on behalf of the Purchaser or the
Seller, as the case may be, except as provided in Section 9.01(b). If written
notice of a claim has been properly given in the manner required by Section
9.02(d) prior to the expiration of the applicable representations and
warranties, then the relevant representations and warranties shall survive as
to such claim until such claim has been finally resolved.
(b) In respect of any inaccuracy in any representation and warranty
of the Seller or any breach of any covenant or agreement of the Seller set
forth in this Agreement with respect to which the Purchaser has Purchaser
Knowledge, whether or not disclosed by the Purchaser to the Seller, the
Purchaser shall have no right, after the Closing, under the terms of this
Agreement or otherwise, to make any claims against the Seller in respect of
such inaccuracies or breaches except for any claims for indemnity by Purchaser
pursuant to Sections 9.02(a)(iii) - (vii) (and Sections 9.02(a)(i) and (ii)
insofar as any Losses arise out of or relate to matters set forth in
9.02(a)(iii) - (vii)). Nothing in this 9.01(b) limits the effect of the
condition contained in Section 8.02(a), or the Purchaser's ability not to
consummate the transactions contemplated herein if such condition is not met.
88
<PAGE> 95
SECTION 9.02. Indemnification. (a) Subject to Sections 9.01 and
9.03, the Purchaser and its Affiliates, officers, directors, employees, agents,
consultants, successors and assigns shall be indemnified and held harmless on
an after-tax basis (as defined below) and, in each case, net of any and all
amounts received from insurance, guarantees, indemnification and other
contractual and legal rights, by the Seller for any and all Liabilities,
losses, damages, claims, costs and expenses, interest, awards, judgments,
damages (including punitive damages), fines, fees and penalties (including,
without limitation, attorneys', experts and consultants' fees and expenses)
(collectively, "Losses") actually suffered or incurred by them (including,
without limitation, any Action brought or otherwise initiated by any of them),
arising out of or resulting from:
(i) the inaccuracy of any representation or warranty made or
deemed to be made by the Seller contained in this Agreement;
(ii) the breach of any covenant or agreement made or deemed to be
made by the Seller in this Agreement;
(iii) the inaccuracy of the representation and warranty contained
in the final two sentences of Section 3.22(a)(vi) (without regard to and
notwithstanding, any item set forth on the Disclosure Schedule, and
without regard to any Purchaser Knowledge);
(iv) without regard to, and notwithstanding any item set forth on
the Disclosure Schedule, and without regard to any Purchaser Knowledge,
liabilities of the Company or the Subsidiary, any Affiliate of the Company
or the Subsidiary or, with respect to the Business, the Seller, arising
out of, or related to events occurring or circumstances or conditions
existing at or prior to the Closing in connection with the Excluded Assets
as to which Seller has Enhanced Special Knowledge with respect thereto
(excluding, however, those liabilities contemplated by Section
9.02(a)(vi)(B);
(v) as expressly provided by Articles VI and VII hereof (without
regard to, and notwithstanding, any item set forth on the Disclosure
Schedule, and without regard to any Purchaser Knowledge);
(vi) without regard to, and notwithstanding, any item set forth
on the Disclosure Schedule, and without regard to any Purchaser Knowledge,
liabilities of the Company or the Subsidiary, any Affiliate of the Company
89
<PAGE> 96
or the Subsidiary or, with respect to the Business, the Seller, as
follows:
(A) with respect to the current Assets, operations and Business
of the Company or the Subsidiary, any Affiliate of the Company or the
Subsidiary or, with respect to the Business, the Seller (including,
without limitation, the Secured Real Property), including the Excluded
Assets, (x) as to which the Seller has Special Knowledge and (y) which
arise out of or relate to events occurring or circumstances or
conditions existing at or prior to the Closing concerning any
Environmental Law or Hazardous Materials,
(B) with respect to the Excluded Assets, regardless of whether
Seller has or comes to have knowledge of any kind, which arise out of
or relate to events occurring or circumstances or conditions arising
after the Closing, and
(C) with respect to any former assets, operations or business of
the Company or the Subsidiary or any affiliate of the Company or the
Subsidiary, or any former assets, operations or business of any former
subsidiary or Affiliate of the Company or the Subsidiary, (x) as to
which the Seller has Special Knowledge and which arise out of or
relate to events occurring or circumstances or conditions existing at
or prior to the Closing concerning any Environmental Law or Hazardous
Materials, and (y) regardless of whether Seller has or comes to have
knowledge of any kind, which arise out of or relate to events
occurring or circumstances or conditions arising after the Closing
concerning any Environmental Law or Hazardous Materials; and
(vii) the inaccuracy of the representation and warranty contained
in Section 3.22(a)(vii) (without regard to, and notwithstanding, any item
set forth on the Disclosure Schedule, and without regard to any Purchaser
Knowledge).
(b) Subject to Sections 9.01 and 9.03, the Seller and its
Affiliates, officers, directors, employees, agents, consultants, successors and
assigns shall be indemnified and held harmless on an after-tax basis (as
defined below) and, in each case, net of any and all amounts received from
insurance, guarantees, indemnification and other contractual and legal rights,
by the Purchaser for any and all Losses actually suffered or incurred by any of
them (including, without limitation, any Action brought or
90
<PAGE> 97
otherwise initiated by any of them), arising out of or resulting from:
(i) the inaccuracy of any representation or warranty made by the
Purchaser contained in this Agreement; and
(ii) the breach of any covenant or agreement made or deemed made
by the Purchaser contained in this Agreement.
(c) To the extent that an Indemnifying Party's undertakings set forth
in this Section 9.02 may be unenforceable, such Indemnifying Party shall
contribute the maximum amount that it is permitted to contribute under
applicable law to the payment and satisfaction of all Losses incurred by an
Indemnified Party.
(d) All claims for indemnification against the Seller or the
Purchaser, as the case may be (an "Indemnifying Party"), under any provision
of this Article IX shall be asserted and resolved as follows:
(i) In the event of any claim or demand for which an
Indemnifying Party would be liable for Losses to the other party (an
"Indemnified Party") which is asserted against or sought to be collected
from such Indemnified Party by a Person other than the Purchaser or the
Seller ("Third Party Claim"), the Indemnified Party shall deliver a Claim
Notice (as defined below) with reasonable promptness to the Indemnifying
Party after the Indemnified Party has actual notice of the Third Party
Claim. The failure by any Indemnified Party to provide the Indemnifying
Party with the Claim Notice required by the preceding sentence shall not
impair the Indemnified Party's rights hereunder except to the extent that
an Indemnifying Party demonstrates that it has been materially prejudiced
thereby. The Indemnifying Party shall notify the Indemnified Party within
thirty (30) days of receipt of the Claim Notice ("Notice Period") whether
the Indemnifying Party desires, at the sole cost and expense of the
Indemnifying Party, to defend the Indemnified Party against such Third
Party Claim.
(ii) If the Indemnifying Party notifies the Indemnified Party
within the Notice Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to this
Section 9.02(d), then the Indemnifying Party shall have the right to
defend, at its sole cost and expense, and, except as provided in the
following sentence, through counsel of its choice reasonably acceptable to
91
<PAGE> 98
the Indemnified Party such Third party Claim by all appropriate
proceedings, which proceedings shall be diligently defended by the
Indemnifying Party to a final conclusion or shall be settled at the
discretion of the Indemnifying Party (with the prior written consent of
the Indemnified Party, which consent shall not be unreasonably withheld),
so long as the Indemnified Party is fully released with respect to such
Third Party Claim. If there exists or is reasonably likely to exist a
conflict of interest that would make it inappropriate in the reasonable
judgment of the Indemnified Party for the same counsel to represent both
the Indemnified Party and the Indemnifying Party and the Indemnifying
Party does not provide separate counsel reasonably acceptable to the
Indemnified Party, then the Indemnified Party shall be entitled to retain
its own counsel, in each jurisdiction for which the Indemnified Party
reasonably determines counsel is required, at the expense of the
Indemnifying Party. Assumption by the Indemnifying Party of the defense
of such Third Party Claim will not constitute an admission by the
Indemnifying Party that the claim or litigation is one for which the
Indemnifying Party is required to indemnify the Indemnifying Party under
this Article IX. The Indemnifying Party shall have full control of such
defense and proceedings; provided, however, that the Indemnified Party may
at the sole cost and expense of the Indemnifying Party, file during the
Notice Period any motion, answer, or other pleadings that the Indemnified
Party may deem necessary or appropriate to protect its interests and not
irrevocably prejudicial to the Indemnifying Party (it being understood and
agreed that, except as provided in Section 9.02(d)(iii) hereof, if an
Indemnified Party takes any such action that is irrevocably prejudicial
and conclusively causes a final adjudication that is materially adverse to
the Indemnifying Party, the Indemnifying Party will be relieved of its
obligations hereunder with respect to the portion of such Third Party
Claim prejudiced by the Indemnified Party's action); and provided,
further, however, that if requested by the Indemnifying Party, the
Indemnified Party agrees, at the sole cost and expense of the Indemnifying
Party, to cooperate with the Indemnifying Party and its counsel in
contesting any Third Party Claim that the Indemnifying Party elects to
contest, or, if appropriate in the judgment of the Indemnified Party and
related to the Third Party Claim in question, in making any counterclaim
against the person asserting the Third Party Claim or any cross-complaint
against any Person (other than the Indemnified Party). The Indemnified
Party may, at its sole cost and expense, participate in, but not control,
92
<PAGE> 99
any defense or settlement of any Third Party Claim controlled by the
Indemnifying Party pursuant to this Section 9.02(d)(ii).
(iii) If the Indemnifying Party fails to notify the Indemnified
Party within the Notice Period that the Indemnifying Party desires to
defend the Indemnified Party pursuant to Section 9.03(d)(i), or if the
Indemnifying Party gives such notice but fails to defend the Third Party
Claim, then the Indemnified Party will have the right (but not the
obligation) to defend, at the sole cost and expense of the Indemnifying
Party, the Third Party Claim by all appropriate proceedings, which
proceedings will be vigorously defended by the Indemnified Party or will
be settled at the discretion of the Indemnified Party. The Indemnified
Party shall have full control of such defense and proceedings, including
any compromise or settlement thereof; provided, however, that if requested
by the Indemnified Party, the Indemnifying Party agrees, at the sole cost
and expense of the Indemnifying Party, to cooperate with the Indemnified
Party and its counsel in contesting any Third Party Claim which the
Indemnified Party is contesting, or, if appropriate and relating to the
Third Party Claim in question, in making any counterclaim against the
person asserting the Third Party Claim, or any cross-complaint against any
person (other than the Indemnifying Party or any of its Affiliates).
Notwithstanding the forgoing provisions of this Section 9.02(d)(iii), if
the Indemnifying Party has notified the Indemnified Party with reasonable
promptness that the Indemnifying Party disputes, or reserves its rights to
dispute, its liability to the Indemnified Party with respect to such Third
Party Claim and if such dispute is resolved in favor of the Indemnifying
Party, the Indemnifying Party will not be required to bear the costs and
expenses of the Indemnified Party's defense pursuant to this Section
9.02(d)(iii) or of the Indemnifying Party's participation therein at the
Indemnified Party's request, and the Indemnified Party will reimburse the
Indemnifying Party in full for all costs and expenses incurred by the
Indemnifying Party in connection with such litigation. The Indemnifying
Party may participate in, but not control, any defense or settlement
controlled by the Indemnified Party pursuant to this Section 9.02(d)(iii),
but the Indemnifying Party will bear its own costs and expenses with
respect to such participation. Regardless of whether the Indemnifying
Party defends a Third Party Claim on behalf of the Indemnified Party or
participates in the defense thereof, the Indemnified Party and the
Indemnifying Party shall reasonably cooperate with each
93
<PAGE> 100
other in all material respects in connection with the defense for such
Third Party Claim. Each Indemnified Party shall furnish such information
regarding itself and the Third Party Claim as the Indemnifying Party may
reasonably request in writing and as shall be reasonably required in
connection with the defends thereof. No Third Party Claim may be settled
by the Indemnifying Party without the prior written consent of the
Indemnified Party (which consent shall not be unreasonably withheld),
unless such settlement provides a full and unconditional release of the
Indemnified Party for such claim.
(iv) In the event any Indemnified Party should have a claim for
Losses against any Indemnifying Party hereunder that does not involve a
Third Party Claim being asserted against or sought to be collected from
the Indemnified Party, the Indemnified Party shall deliver an Indemnity
Notice (as defined below) with reasonable promptness to the Indemnifying
Party after the Indemnified Party has actual notice of such claim. The
failure by any Indemnified Party to give the notice referred to in the
preceding sentence shall not impair such party's rights hereunder except
to the extent that an Indemnifying Party demonstrates that it has been
irreparably prejudiced thereby. The Indemnifying Party and the
Indemnified Party agree to proceed in good faith to negotiate a resolution
of any dispute relating to such a claim for Losses within sixty (60) days
following receipt of any Indemnity Notice. If any such claim is not
resolved within the foregoing period, the parties may pursue any available
remedies.
(v) The term "Claim Notice" shall mean written notification of a
Third Party Claim by an Indemnified Party to an Indemnifying Party
pursuant to Section 9.02(d)(i), enclosing a copy of all papers served, if
any, and specifying the nature of and alleged basis for such Third Party
Claim and, to the extent then feasible, the alleged amount or the
estimated amount of such Third Party Claim.
(vi) The term "Indemnity Notice" shall mean written notification
of a claim for indemnity (which claim does not involve a Third Party
Claim) by an Indemnified Party to an Indemnifying Party pursuant to
Section 9.02(d)(iv) hereof, specifying the nature of and specific basis
for such claim and, to the extent then feasible, the amount or the
estimated amount of such claim.
94
<PAGE> 101
(vii) Any estimated amount of a claim submitted in a Claim Notice
or an Indemnity Notice shall not be conclusive of the final amount of such
claim.
(viii) Subject to Section 11.15 hereof, except as provided in
Section 10.02(b), the terms and conditions set forth in this Article IX
shall constitute the sole rights and remedies of the parties for money
damages in respect of any inaccuracies of representations or warranties or
any breaches of covenants or agreements contained in this Agreement.
Notwithstanding any other provision hereof, however, any contest or claim
for indemnification under Article VII shall be governed by the procedure
of such Article VII and not by the provisions of this Section 9.02.
(ix) The Indemnifying Party shall be responsible for the fees and
expenses of only one counsel for all Indemnified Parties in each
applicable jurisdiction, such counsel to be selected by Purchaser with
respect to it and its Affiliates which are Indemnified Parties, and by
Seller with respect to it and its Affiliates which are Indemnified
Parties.
SECTION 9.03. Limits on Indemnification. (a) No amount shall be
payable by any Indemnifying Party pursuant to Section 9.02(a) or (b) except to
the extent that the aggregate amount of Losses indemnifiable under Section
9.02(a) or (b) exceeds $2,500,000 and then the Indemnifying Party shall
indemnify the Indemnified Party to the full extent of the aggregate amount of
Losses, less $2,500,000.
(b) The limitations set forth in Section 9.03(a) shall not apply with
respect to any Losses suffered or incurred by the Purchaser in connection with
(i) the representations contained in Sections 3.03 and 3.30, (ii) the covenant
contained in Section 5.19, (iii) indemnity pursuant to Section 9.02(a)(iii),
(iv) the representations, covenants and indemnities contained in Articles VI
and VII hereof (in the case of Article VII hereof, with respect to Claims
relating to federal income taxation only, but not state Tax Claims), and Seller
shall fully indemnify the Purchaser for any such Losses from the first dollar
of such Losses to the full extent of such Losses, subject to compliance by the
Purchaser with and subject to the terms of Section 9.02.
(c) Any Loss which is indemnifiable pursuant to Article VI or VII
hereof which also constitutes a breach of a representation or warranty pursuant
to Article III hereof shall, for purposes of this Article IX, be deemed to be
indemnifiable under Article VI or VII, as applicable, and accordingly the
Purchaser, subject to compliance by the
95
<PAGE> 102
Purchaser with and subject to the terms of Section 9.02, may demand
indemnification for such Losses, and Seller shall indemnify the Purchaser for
such Losses, as such Losses are incurred and the Purchaser need not wait until
such Losses exceed the threshold of $2,500,000 prior to demanding
indemnification.
(d) In the event that, notwithstanding the limitations contained in
this Section 9.03, any Indemnifying Party nevertheless becomes liable to any
Indemnified Party hereunder, the Indemnifying Party shall be entitled to a
credit or offset against any such liability of an amount equal to the value of
any net Tax benefit actually realized, and actually used to reduce otherwise
payable Taxes, by the Indemnified Party. For purposes of determining the net
Tax benefit of any payment by Seller, such payment shall be presumed to be a
Purchase Price adjustment rather than constituting taxable income to the
Seller, unless the Purchaser provides to Seller an opinion of Dewey Ballantine
or other nationally recognized tax counsel that such payment should not be so
treated for federal income tax purposes. Any dispute as to the proper
adjustment for net Tax Benefit shall be resolved under procedures similar to
those of Section 2.06(f). No Indemnified Party shall take any action or omit
to take any action the primary purpose of which is to avoid the application of
this subsection 9.03(d); provided, however, that each Indemnified Party shall
be permitted to engage in its own tax planning, notwithstanding that the effect
of such tax planning is to cause this subsection 9.03(d) to be inapplicable.
ARTICLE X
TERMINATION AND WAIVER
SECTION 10.01. Termination by the Seller or Purchaser. This
Agreement may be terminated at any time prior to the Closing:
(a) by the Purchaser if, between the date hereof and the time
scheduled for the Closing: (i) an event or condition occurs that has
resulted in a Material Adverse Effect, and, in the case of a Material
Adverse Effect reasonably susceptible to cure, shall not have been cured
within 30 calendar days after written notice by the Purchaser specifying
such Material Adverse Effect has been received by the Seller, (ii) any
representation or warranty of the Seller contained in this Agreement shall
not have been true and correct when made and, in the case of a breach
reasonably susceptible to cure, shall not have been cured within 30
calendar days after written notice by the Purchaser
96
<PAGE> 103
specifying such breach has been received by the Seller, (iii) the Seller
shall not have complied with any covenant or agreement to be complied with
by it and contained in this Agreement and, in the case of a breach
reasonably susceptible to cure, shall not have been cured within 30
calendar days after written notice by the Purchaser specifying such breach
has been received by the Seller, (iv) the Seller, the Company or the
Subsidiary makes a general assignment for the benefit of creditors, or any
proceeding shall be instituted by or against, the Seller, the Company or
the Subsidiary seeking to adjudicate any of them a bankrupt or insolvent,
or seeking liquidation, winding up or reorganization, arrangement,
adjustment, protection, relief or composition of its debts under any Law
relating to bankruptcy, insolvency or reorganization or (v) the
stockholders of the Seller entitled to vote on and approve the
consummation of the transactions contemplated herein at the Special
Meeting do not so approve by the requisite amounts pursuant to applicable
law and the Seller's articles of incorporation and by-laws; or
(b) by the Seller if, between the date hereof and the time scheduled
for the Closing: (i) any representation or warranty of the Purchaser or
the Guarantor contained in this Agreement shall not have been true and
correct when made and, in the case of a breach reasonably susceptible to
cure, shall not have been cured within 30 calendar days after written
notice by the Seller specifying such breach has been received by the
Purchaser or the Guarantor, (ii) the Purchaser or the Guarantor shall not
have complied with any covenant or agreement to be complied with by them
and contained in this Agreement, and, in the case of a breach reasonably
susceptible to cure, shall not have been cured within 30 calendar days
after written notice by the Seller specifying such breach has been
received by the Purchaser or the Guarantor, as applicable, (iii) the
Purchaser or the Guarantor makes a general assignment for the benefit of
creditors, or any proceeding shall be instituted by or against the
Purchaser seeking to adjudicate it bankrupt or insolvent, or seeking
liquidation, winding up or reorganization, arrangement, adjustment,
protection, relief or composition of its debts under any Law relating to
bankruptcy, insolvency or reorganization, (iv) the stockholders of the
Seller entitled to vote on and approve the consummation of the
transactions contemplated herein at the Special Meeting do not so approve
by the requisite amounts pursuant to applicable law and the Seller's
articles of incorporation and by-laws, or (v) a Third Party shall have
entered into a
97
<PAGE> 104
definitive agreement with Seller or the Company with respect to an
Acquisition Proposal which the Board of Directors of Seller in good faith
has determined, after receipt by it of a fairness opinion of a nationally
recognized investment bank to the effect that the Third Party's
Acquisition Proposal is more favorable to Seller than the transactions
contemplated herein, [which opinion shall take into account the financing
terms and contingencies of such Acquisition Proposal; provided, however,
that such requirement as to the fairness opinion shall not in any way
limit or restrict the other material facts which such investment bank
shall or shall not take into account in rendering its opinion] (a "Bona
Fide Acquisition Proposal"); provided, however, that neither Seller nor
the Company shall enter into any acquisition agreement with respect to any
Bona Fide Acquisition Proposal except concurrently with or after the
termination of this Agreement; or
(c) by either the Seller or the Purchaser if the Closing shall not
have occurred by May 31, 1996; provided, however, that (i) if the
provisions of Section 8.01(g) have not been satisfied by May 31, 1996, and
the Purchaser are diligently seeking to satisfy such condition, or (ii) if
the provisions of Section 8.02(g) have not been satisfied by May 31, 1996,
and the Seller is diligently seeking to satisfy such condition, then, in
each case (subject to the proviso below) the obligations of the parties to
proceed toward Closing shall be extended until July 31, 1996; and
provided, further, that the right to terminate this Agreement under this
Section 10.01(c) shall not be available to any party whose intentional
failure to fulfill any obligation under this Agreement shall have been the
cause of, or shall have resulted in, the failure of the Closing to occur
on or prior to such date; or
(d) by either the Purchaser or the Seller in the event that any
Governmental Authority shall have issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement or in the reasonable
determination of the Purchaser or the Seller, otherwise render inadvisable
the consummation of the transaction contemplated by this Agreement and
such order, decree, ruling or other action shall have become final and
nonappealable; or
(e) by the mutual written consent of the Seller and the Purchaser.
98
<PAGE> 105
SECTION 10.02. Effect of Termination. (a) In the event of
termination of this Agreement as provided in Section 10.01, this Agreement
shall forthwith become void and there shall be no liability on the part of any
party hereto except (a) as set forth in Sections 10.02(b) and 11.02 and (b)
that nothing herein shall relieve any party from liability for any willful
breach of this Agreement.
(b) Notwithstanding the foregoing, if the Closing does not occur
solely because of (i) the failure to satisfy the conditions to the Purchaser's
obligation to effect the Closing contained in Sections 8.02(a), (d), (e), (h),
(i) (except insofar as such condition relates to the delivery of documents
required to be obtained from any Governmental Authority), (j), (k), (l), (m),
(n), (p), (r), (s), (t), (u) or (v), then the Seller shall reimburse the
Purchaser for its reasonable costs and expenses, including, without limitation,
reasonable fees and disbursements of counsel, financial advisors, financing
sources and accountants, incurred by the Purchaser in connection with the
preparation, negotiation and performance of this Agreement and the transactions
contemplated hereby up to $1 million (as supported by itemized invoices
delivered to Seller), (ii) the failure to satisfy the conditions to the
Seller's obligation to effect the Closing contained in Sections 8.01(a), (d),
(e), (h), (i), (k), (l) or (m) then the Purchaser shall reimburse the Seller
for its reasonable costs and expenses, including, without limitation,
reasonable fees and disbursements of counsel, financial advisors and
accountants, incurred by the Seller in connection with the negotiation and
performance of this Agreement and the transactions contemplated hereby up to $1
million (as supported by itemized invoices delivered to the Purchaser) or (iii)
(A) the Seller's termination of this Agreement pursuant to Section 10.01(b)(iv)
if the Board of Directors of the Seller, prior to or simultaneously with the
stockholder vote contemplated in such Section, withdrew its recommendation to
the Seller's stockholders to approve the consummation of the transactions
contemplated herein or (B) the Seller's termination of this Agreement pursuant
to Section 10.01(b)(v), then the Seller shall, simultaneously with such
termination, pay by wire transfer to the Purchaser a fee, in cash, equal to $2
million.
SECTION 10.03. Waiver. Any party to this Agreement may (a) extend
the time for the performance of any of the obligations or other acts of the
other party, (b) waive any inaccuracies in the representations and warranties
of the other party contained herein or in any document delivered by the other
party pursuant hereto or (c) waive compliance with any of the agreements or
conditions of the other party contained herein. Any such extension or waiver
shall be valid only if set forth in an
99
<PAGE> 106
instrument in writing signed by the party to be bound thereby. Any waiver of
any term or condition shall not be construed as a waiver of any subsequent
breach or a subsequent waiver of the same term or condition, or a waiver of any
other term or condition, of this Agreement. The failure of any party to assert
any of its rights hereunder shall not constitute a waiver of any of such
rights.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Guarantee. Subject to the terms and conditions of
this Agreement, the Guarantor will cause the Purchaser (and any assignee of the
Purchaser) to consummate the purchase of the Shares and pay the Purchase Price
and the Adjustment Amount.
SECTION 11.02. Expenses. Except as otherwise specified in Section
10.02(b), all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs and expenses, whether or not the
Closing shall have occurred.
SECTION 11.03. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by telecopy (confirmed by telephone within 24
hours following receipt thereof), or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 11.03):
(a) if to the Seller:
United Companies Financial Corporation
P.O. Box 1591(70821)
4041 Essen Lane
Baton Rouge, Louisiana 70809
Telephone: (504) 924-6007 (ext. 2282)
Telecopy: (504) 924-4324
Attention: Dale E. Redman
100
<PAGE> 107
with a copy to:
Kantrow, Spaht, Weaver & Blitzer
(A Professional Law Corporation)
Suite 300, City Plaza
445 North Boulevard
P.O. Box 2997
Baton Rouge, Louisiana 70821-2997
Telephone: (504) 383-4703
Telecopy: (504) 343-0637
Attention: Lee C. Kantrow, Esq.
and:
Jones, Day, Reavis & Pogue
2300 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Telephone: (214) 220-3939
Telecopy: (214) 969-5100
Attention: Richard K. Kneipper, Esq.
(b) if to the Purchaser:
UC Life Holding Corp.
c/o Knightsbridge Management, L.L.C.
745 Fifth Avenue
New York, New York 10151
Telephone: (212) 832-0700
Telecopy: (212) 758-5442
Attention: David J. Stone
with a copy to:
Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10019
Telephone: (212) 259-8000
Telecopy: (212) 259-6333
Attention: Jonathan L. Freedman
and
William W. Rosenblatt
SECTION 11.04. Public Announcements. Except to the extent that
Seller or Purchaser believes on the advice of counsel that public disclosure is
required by Law, no party to this Agreement shall make, or cause to be made,
any press release or public announcement in respect of this Agreement or the
transactions contemplated hereby or otherwise communicate with any news media
without prior notification to the other parties, and the parties shall
cooperate as to the timing and contents of any such press release or public
announcement.
101
<PAGE> 108
SECTION 11.05. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 11.06. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.
SECTION 11.07. Entire Agreement. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter
hereof and thereof and supersede all prior agreements and undertakings, both
written and oral, between the Seller and the Purchaser with respect to the
subject matter hereof.
SECTION 11.08. Assignment. This Agreement may not be assigned by any
party hereto by operation of law or otherwise without the express written
consent of the other party hereto (which consent may be granted or withheld in
the sole discretion of such other parties); provided, however, that the
Purchaser may assign any or all of its rights under this Agreement, after prior
written notice to the Seller identifying the assignee and including a photocopy
of the assignment agreement, (i) to a direct or indirect wholly-owned
subsidiary of the Purchaser without the consent of the Seller, (ii) at the
Closing, to any lender or other provider of financing to the Purchaser for the
Purchase Price as collateral security without the consent of the Seller and
(iii) to any Affiliate of Purchaser, with the written consent of Seller (which
consent shall not be withheld if Purchaser provides to Seller evidence
reasonably satisfactory to Seller of such Affiliate's financial ability to
assume and perform the Purchaser's obligations hereunder and the acceptability
of such Affiliate to Governmental Authorities where consent is required
hereunder); and in no event shall any such assignment release Purchaser or the
Guarantor from their respective obligations hereunder.
102
<PAGE> 109
SECTION 11.09. No Third Party Beneficiaries. Except for the
provisions of Article IX relating to Indemnified Parties, this Agreement shall
be binding upon and inure solely to the benefit of the parties hereto and their
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 11.10. Amendment. This Agreement may not be amended or
modified except (a) by an instrument in writing signed by, or on behalf of, the
parties hereto or (b) by a waiver in accordance with Section 10.03.
SECTION 11.11. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York, applicable
to contracts executed in and to be performed entirely within that state.
SECTION 11.12. Counterparts. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 11.13. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 11.14. Further Clarification. The parties hereto acknowledge
that the phrases "Special Knowledge" and "Enhanced Special Knowledge", as
defined in Section 1.01 hereof and as used herein, shall each be deemed to
include knowledge of any facts, circumstances or information which arise out of
or are related to any item listed or described in any manner in (i) those 20
certain Environmental Audit Reports dated January 19, 1996 of Tampa Bay
Engineering, Inc. or (ii) in any other environmental report, audit or similar
work contained in the books, records, files or other documents of any member of
the Seller's Knowledge Group, including, without limitation, any of such which
are so listed or described in any such work as "Issues", "Findings", "Potential
Risks", or otherwise.
103
<PAGE> 110
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
UNITED COMPANIES FINANCIAL
CORPORATION
By /s/ Dale E. Redman
----------------------------------
Name: Dale E. Redman
Title: Executive Vice President
and Chief Financial
Officer
UC LIFE HOLDING CORP.
By /s/ David J. Stone
----------------------------------
Name: David J. Stone
Title: President
SOLELY WITH RESPECT TO
SECTION 11.01 HEREOF:
KNIGHTSBRIDGE CAPITAL FUND I, L.P.
By: Knightsbridge Capital, L.L.C.
As General Partner
By: /s/ David J. Stone
---------------------------
David J. Stone
104
