SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Three Months Ended March 31, 1995 Commission File Number 0-3296
DIXIE NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
MISSISSIPPI 64-0440887
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3760 I-55 North 39211-6323
P.O. Box 22587, Jackson, Mississippi 39225-2587
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (601)982-8210
NONE
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS Outstanding at May 10, 1995
Common Stock, $1.00 par value 8,394,973
<PAGE>
DIXIE NATIONAL CORPORATION
INDEX
PART I: FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1995 and
December 31, 1994 3
Consolidated Statements of Operations for the Three
Months ended March 31, 1995 and 1994 5
Consolidated Statements of Cash Flows for the Three
Months ended March 31, 1995 and 1994 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
<PAGE>
DIXIE NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31 December 31
1995 1994
------------ --------------
(Unaudited)
ASSETS
NON-LIFE
Investments
Common stock $ 2,000,000 $ 2,000,000
Cash and cash equivalets 388,343 218,258
Other 26,200 26,200
------------- --------------
TOTAL NON-LIFE INVESTMENTS 2,414,543 2,244,458
Property and equipment 409,526 419,292
------------- --------------
TOTAL NON-LIFE ASSETS 2,824,069 2,663,750
LIFE
Investments
Fixed Maturities, at market 17,647,294 17,332,660
Policy loans 3,063,394 3,060,185
Government guaranteed student loans,
less allowance for uncollectible
loans of $464,603 at March 31, 1995
and December 31, 1994 5,741,268 5,978,288
Short-term investments 563,057 4,860,347
Equipment leases 531,567
Cash and cash equivalents 3,877,773 240,851
------------- --------------
TOTAL LIFE INVESTMENTS 31,424,353 31,472,331
Accounts receivable, less allowance for
doubtful accounts of $195,885 at
March 31, 1995 and December 31, 1994 821,967 761,219
Accrued investment income 470,413 412,705
Deferred policy acquisition costs, net 6,573,528 6,626,230
Value of life insurance purchased, net 1,549,356 1,589,356
Property and equipment, less accumulated
depreciation of $670,326 at March 31, 1995
and $652,748 at December 31, 1994 147,823 165,402
Other assets 837,684 886,459
Unallocated loss on sale of subsidiary (4,161,313)
------------- --------------
TOTAL LIFE ASSETS 37,663,811 41,913,702
------------- --------------
TOTAL ASSETS $ 40,487,880 $ 44,577,452
============= ==============
See accompanying notes to consolidated financial statements
3
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March 31 December 31
1995 1994
----------- -------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
NON-LIFE
Notes payable and other debt $ 500,940 $ 524,304
Accrued liabilities and expenses 3,500 3,475
------------- -------------
TOTAL NON-LIFE LIABILITIES 504,440 527,779
LIFE
Policy liabilities
Future policy benefits 27,481,172 27,538,803
Other policy claims and benefits payable 311,519 240,766
Other policyholders' funds 827,955 826,055
------------- -------------
TOTAL POLICY LIABILITIES 28,620,646 28,605,624
Notes payable and other debt 5,557,566 5,579,535
Income taxes 21,443 3,599
Accrued liabilities and expenses 485,642 679,460
------------- -------------
TOTAL LIFE LIABILITIES 34,685,297 34,868,218
STOCKHOLDERS' EQUITY
Common stock 8,394,973 8,394,973
Retained earnings (deficit) (3,096,830) 1,711,493
Unrealized holding losses on investments available
for sale (925,011)
------------- -------------
TOTAL STOCKHOLDER'S EQUITY 5,298,143 9,181,455
-------------- -------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 40,487,880 $ 44,577,452
============== =============
4
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DIXIE NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND
RETAINED EARNINGS (DEFICIT) (Unaudited)
Three Months
Ended March 31
--------------------------
1995 1994
REVENUES ------------ ------------
Premiums $ 810,697 $ 4,083,248
Net investment income 617,412 537,085
Realized investment gains 36,757 11,594
------------ ------------
TOTAL REVENUES 1,464,866 4,631,927
BENEFITS AND EXPENSES
Benefits and claims to policyholders 392,703 2,640,373
Amortization of deferred policy acquisition costs 225,728 1,340,259
Commissions, net 132,014 736,646
General expenses, net 659,220 644,957
Interest expense 145,776 118,288
Insurance taxes, licenses and fees 82,748 240,733
------------ ------------
TOTAL BENEFITS AND EXPENSES 1,638,189 5,721,256
LOSS BEFORE INCOME TAXES AND
ESTIMATED LOSS ON SALE OF SUBSIDIARY (173,323) (1,089,329)
Income tax benefit 180,000
------------ ------------
LOSS BEFORE ESTIMATED
LOSS ON SALE OF SUBSIDIARY (173,323) (909,329)
Estimated loss on sale of subsidiary (4,635,000)
------------ ------------
NET LOSS (4,808,323) (909,329)
Retained earnings at beginning of period 1,711,493 4,266,272
------------ ------------
RETAINED EARNINGS (DEFICIT)
AT END OF PERIOD $(3,096,830) $ 3,356,943
============ ============
Primary and fully diluted
per share amounts:
Loss before estimated loss on sale of subsidiary $ (0.02) $ (0.02)
============ ============
Net loss $ (0.57) $ (0.14)
============ ============
See accompanying notes to consolidated financial statements.
5
<PAGE>
DIXIE NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months
Ended March 31
--------------------------
1995 1994
--------------------------
Net cash provided by operations $ (410,468) $ 239,784
Cash flows from investing activities
Proceeds from investments sold or matured
Fixed maturities
Maturities 523,163 346,708
Calls 33,000 18,301
Sales 242,000
Repayment of policy, student loans 402,801 489,214
Costs of investments acquired
Fixed maturities (508,689) (2,235,087)
Equipment leases (531,567)
Policy and student loans (168,990) (253,673)
Temporary investments, net 4,271,090 (34,347)
Additions to property and equipment 0 (19,693)
------------- ------------
Net cash provided (used) by investing activities 4,262,808 (1,688,577)
Cash flows from financing activities
Payments on debt (45,333) (35,689)
------------- ------------
Net cash provided (used) by financing activities (45,333) (35,689)
------------- ------------
Net increase in cash and cash equivalents 3,807,007 (1,484,482)
Cash and cash equivalents - beginning of period 459,109 4,655,458
------------- ------------
Cash and cash equivalents - end of period 4,266,116 3,170,976
============= ============
Supplemental cash flow information:
Cash payments for income taxes 127,040 600,000
============= ============
Cash payments for interest 39,356 52,678
============= ============
See accompanying notes to consolidated financial statements.
6
<PAGE>
DIXIE NATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 1995
Note 1-Basis of Presentation
The accompanying unaudited consolidated financial statements include
the financial statements of Dixie National Corporation (Corporation); Dixie
National Life Insurance Company, a 99% owned subsidiary (Dixie Life); Vanguard,
Inc. a wholly-owned subsidiary (Vanguard); and two inactive wholly-owned
subsidiaries and have been prepared in accordance with generally accepted
accounting principles for interim financial information and with instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the detail and disclosures required by generally accepted accounting
principles for complete financial statements. Operating results for the three
month period ended March 31, 1995 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1995. More detailed
information is contained in the Form 10-K Annual Report filed by the Corporation
for the year ended December 31, 1994.
All adjustments which, in the opinion of management, are necessary for
a fair presentation of such financial statements are included.
Note 2-Incentive Stock Option Plans
Options to purchase common stock of the Corporation previously have
been granted under two incentive stock option plans. Both of these plans have
expired. At March 31, 1995, options to purchase 395,768 shares were outstanding,
including (at per share exercise prices): 92,061 at $1.23; 87,816 at $1.69;
16,991 at $1.77; 34,496 at $1.41; 45,161 at $1.38; 48,548 at $1.50 and 70,695
at $1.00.
As part of a compensation program for members of the Corporation's
Board of Directors, the Board approved granting options to purchase 5,000 shares
of the Corporation's Common Stock to each of the Corporation's nine directors
at such time as a stock option plan has been formally adopted. It is expected
that such a plan will be adopted in May 1995. The options will be exercisable
at any time prior to their expiration five years from the grant date.
Note 3--Proposed Sale of Dixie Life
On April 18, 1995, the Corporation entered into a Stock Purchase
Agreement with Standard Life Insurance Company of Indiana (Standard) to sell to
Standard all of the capital stock of Dixie Life which the Corporation owns
(Standard Transaction). The Stock Purchase Agreement implements a Letter of
Intent between Standard's parent, Standard Management Corporation, and the
Corporation dated March 6, 1995. Dixie Life represents 94% of the consolidated
assets and substantially all of the consolidated operations of the Corporation.
7
<PAGE>
At closing Standard will cancel the Corporation's $3,689,000 Term
Loan obligation, assume indebtedness of $1,720,000 under Convertible Notes of
the Corporation and pay the Corporation $3,000,000 in cash. The Corporation will
also receive the first $175,000 of agent advances that Dixie Life collects after
closing. The selling price will be adjusted by the change in Dixie Life's
capital and surplus and asset valuation reserve between December 31, 1994 and
closing. At March 31, 1995, statutory capital and surplus and asset valuation
reserve was $318,200 less than at December 31, 1994. It is expected that there
will be little change from the March 31, 1995 level prior to closing. Certain
other adjustments may be made based on the resolution of pending litigation to
which Dixie Life is a party. In addition, Dixie Life will continue to pay
$15,000 per month rent to Vanguard, Inc. (Vanguard), a wholly-owned subsidiary
of the Corporation, through the December 31, 1996, expiration of an existing
lease on the office building occupied by the Corporation and Dixie Life.
The proposed sale, if completed, will result in a loss of $4,635,000
($.55 per share) which has been recorded in the first quarter of 1995. The
sale of Dixie Life constitutes discontinuance of the life insurance business
by the Corporation. The loss on the sale is reported in a manner substantially
the same as discontinued operations. The Corporation continues to report
insurance operations in the same manner as prior to the measurement date of
March 6, 1995. Accounting Principles Board Opinion No. 30 (APB 30) calls for
reporting the operations of discontinued operations as a single net amount in
the statement of operations but, in management's opinion, reducing virtually
all of the Corporation's operations to a single amount in the statement of
operations would not be meaningful to readers of the Corporation's financial
statements. The Corporation anticipates entry into the health care business
or some other line of business in 1995. When the Corporation enters another
line of business, but no later than 1996, insurance operations will be
reported as discontinued operations in accordance with APB 30.
The Stock Purchase Agreement confirms an extension, included in the
Letter of Intent, of the due date of the Term Loan to the latter of closing or
90 days after either party informs the other that the transaction cannot be
closed under its terms. Certain covenants contained in the Term Loan agreement
are waived by the Stock Purchase Agreement, including all financial covenants
and certain covenants restricting the Corporation from entering into certain
transactions. The Stock Purchase Agreement also contains usual and customary
conditions, including, among others, the receipt of all required regulatory
approvals and approval of the transaction by the shareholders of the Corporation
at a meeting to be held on or before August 1, 1995. The Stock Purchase
Agreement may be terminated by either party after August 1, 1995, provided the
terminating party has not breached the Stock Purchase Agreement.
Note 4--Sale of Common Stock
As previously reported in its 1994 Form 10-K Annual Report, the
Corporation entered into an agreement with Universal Management Services, a
Nevada corporation (UMS), as of October 27, 1994 (UMS Agreement). The
Corporation and UMS, on April 20, 1995, entered
8
<PAGE>
into an amended and restated agreement effective as of March 24, 1995 (Second
Amended and Restated UMS Agreement) which provides that UMS has the right to use
its best efforts to assist the Corporation in placing up to 12,500,000
additional shares of the Corporation's Common Stock in non-U.S. markets,
pursuant to Regulation S, or otherwise in private placements. In connection with
the UMS Agreement, the Corporation expects to issue 2,000,000 shares of its
Common Stock in exchange for 16% of the outstanding common shares of Phoenix
Medical Management, Inc. (PMM), an Arizona corporation. If the acquisition of
the 16% interest is completed, the Corporation plans to issue 100,000 of its
Common Stock for an option to acquire the remaining 84% of the common shares of
PMM for 10,400,000 additional shares of the Corporation's Common Stock.
Note 5--Extension of Maturity of Convertible Notes
On May 1, 1995 (original due date), the Corporation completed obtaining
from each holder of its Convertible Notes an extension until the earliest of
(1) closing of the Standard Transaction, (2) 90 days after either party informs
the other that the transaction cannot be closed under its terms or (3) December
27, 1995. In this connection, the Corporation has placed in escrow, as
additional collateral for the Convertible Notes, 762,106 shares of Alanco
Environmental Resources, Inc. common stock owned by the Corporation.
9
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Liquidity Requirements. Most of the liquidity requirements for the day
to day operations of the Company arise from the insurance operations of
Dixie Life and generally are met through funds generated by Dixie Life's
operations. Premium income and net investment income provide funds that are used
to pay claims to policyholders; make policy loans; pay costs of obtaining new
business, principally first year commissions; and pay operating expenses. Dixie
Life's operations generated positive (negative) cash flow of ($546,000) and
$67,000 in the three months ended March 31, 1995 and 1994, respectively.
Dixie Life pays a monthly management fee of $154,000 to the
Corporation. Funds provided by the management fee are sufficient to pay
operating and interest expenses of the Corporation.
The Corporation's significant liquidity need at this time is for debt
service. The Corporation owes Standard $3,689,000 under a Term Loan. The
Term Loan (originally due March 31, 1995) is now due at the latter of closing of
the Standard Transaction or 90 days after the cancellation of the Standard
Transaction by either party. Also, as discussed in Note 5 to the consolidated
financial statements, the Corporation's Convertible Notes, in the amount of
$1,720,000, (originally due May 1, 1995) are now due at the earliest of closing
of the Standard Transaction, 90 days after the cancellation of the Standard
Transaction by either party or December 27, 1995. Thus, these significant
liquidity needs of the Corporation will be satisfied if the Standard Transaction
is closed. There is no assurance that the Standard Transaction will be
consummated.
All of the shares of Dixie Life owned by the Corporation are pledged to
secure payment of the Term Loan and the Convertible Notes. Additionally, the
Corporation has placed in escrow, as additional collateral for the Convertible
Notes, 762,106 shares of Alanco Environmental Resources, Inc. common stock as a
result of negotiations to obtain extensions from the Convertible Note holders.
The additional collateral placed in escrow must have an aggregate market value
of not less than $1,810,000 and may consist of other marketable securities. If
the Convertible Notes have not been paid by October 28, 1995, the escrow agent
must begin the liquidation of the escrowed securities and complete such
liquidation by December 27, 1995.
At March 31, 1995, Vanguard owed a bank $501,000 under a mortgage loan
secured by the home office building of Dixie Life. Under a lease agreement
expiring December 31, 1996, Dixie Life pays Vanguard rent sufficient to cover
the debt service under the mortgage.
10
<PAGE>
Proposed Sale of Dixie Life. On April 18, 1995, the Corporation entered
into a Stock Purchase Agreement with Standard to sell to Standard all of the
capital stock of Dixie Life which the Corporation owns. The Stock Purchase
Agreement implements a Letter of Intent between Standard's parent, Standard
Management Corporation and the Corporation dated March 6, 1995. Dixie Life
represents 94% of the consolidated assets and substantially all of the
consolidated operations of the Corporation.
At closing Standard will cancel the Term Loan obligation, assume the
Corporation's indebtedness of $1,720,000 under the Convertible Notes and pay the
Corporation $3,000,000 in cash. The Corporation will also receive the first
$175,000 of agent advances that Dixie Life collects after closing. The selling
price will be adjusted by the change in Dixie Life's capital and surplus and
asset valuation reserve between December 31, 1994 and closing. At March 31,
1995, statutory capital and surplus and asset valuation reserve was $318,200
less than at December 31, 1994. It is expected that there will be little change
from the March 31, 1995 level prior to closing. Certain other adjustments may be
made based on the resolution of pending litigation to which Dixie Life is a
party. In addition, Dixie Life will continue to pay $15,000 per month rent to
Vanguard through the December 31, 1996, expiration of an existing lease on the
office building occupied by the Corporation and Dixie Life.
The proposed sale will result in a loss of approximately $4,635,000
($.55 per share) which has been recorded in the first quarter of 1995.
The Stock Purchase Agreement confirms an extension, included in the
Letter of Intent of the due date of the Term Loan to the latter of closing or 90
days after either party informs the other that the transaction cannot be closed
under its terms. Certain covenants contained in the Term Loan agreement are
waived by the Stock Purchase Agreement, including all financial covenants and
certain covenants restricting the Corporation from entering into certain
transactions. The Stock Purchase Agreement also contains usual and customary
conditions, including, among others, the receipt of all required regulatory
approvals and approval of the transaction by the shareholders of the Corporation
at a meeting to be held on or before August 1, 1995. The Stock Purchase
Agreement may be terminated by either party after August 1, 1995, provided the
terminating party has not breached the Stock Purchase Agreement.
Sale of Common Stock. As previously reported in its 1994 Form 10-K
Annual Report, the Corporation entered into the UMS Agreement as of October 27,
1994. The Corporation and UMS, on April 20, 1995, entered into the Second
Amended and Restated UMS Agreement, effective as of March 24, 1995, which
provides that UMS has the right to use its best efforts to assist the
Corporation in placing up to 12,500,000 additional shares of the Corporation's
Common Stock in non-U.S. markets, pursuant to Regulation S, or otherwise in
private placements. The Corporation expects to:
11
<PAGE>
1. Issue 2,000,000 shares of its Common Stock in exchange for 16%
of the outstanding common shares of Phoenix Medical Management, Inc. (PMM), an
Arizona corporation.
2. If the acquisition of the 16% interest is completed, issue 100,000
shares of its Common Stock for an option to acquire the remaining 84% of the
common shares of PMM for 10,400,000 shares of the Corporation's Common Stock.
The Corporation believes that PMM offers an attractive opportunity for
entry into the health care market and that the investment is a logical strategic
move. With the proposed sale of Dixie Life to SMC, the Corporation will have
divested itself of its remaining insurance operations. Assuming that the PMM
transactions take place, the Corporation expects that a principal part of its
business in the future would be in the health care industry.
Results of Operations
In the three month period ended March 31, 1995, the Corporation
incurred a net loss of $4,808,000 ($.57 per share) compared to a net loss
of $909,000 ($.14 per share) in the comparable period of 1994. The 1995 loss
included an estimated loss of $4,635,000 ($.55 per share) from the proposed sale
of Dixie Life discussed in Note 3 to the consolidated financial statements. The
sale of Dixie Life constitutes discontinuance of the life insurance business by
the Corporation. The loss on the sale is reported in a manner substantially the
same as discontinued operations. The Corporation continues to report insurance
operations in the same manner as prior to the measurement date of March 6, 1995.
Accounting Principles Board Opinion No. 30 (APB 30) calls for reporting the
operations of discontinued operations as a single net amount in the statement of
operations but, in management's opinion, reducing virtually all of the
Corporation's operations to a single amount in the statement of operations would
not be meaningful to readers of the Corporation's financial statements. As
discussed above, the Corporation anticipates entry into the health care
business. When the Corporation enters some other line of business but no later
than 1996, insurance operations will be reported as discontinued operations in
accordance with APB 30.
Total revenues decreased $3,167,000 in the three month period ended
March 31, 1995 compared to the same period in 1994. Premiums for the period
decreased $3,273,000 in 1995, primarily as a result of the sale of Dixie Life's
accident and health business effective July 1, 1994.
Benefits and expenses decreased $4,083,000 in the three month period
ended March 31, 1995 compared to the same period in 1994, primarily as a result
of the sale of Dixie Life's accident and health business effective July 1, 1994.
12
<PAGE>
Benefits and claims to policyholders decreased $2,248,000 in the three
month period ended March 31, 1995 compared to the same period in 1994.
Amortization of deferred policy acquisition costs decreased $1,115,000 in the
three month period ended March 31, 1995 compared to the same period in 1994.
Commissions decreased $605,000 in the three month period ended March 31 compared
to 1994. Each of these decreases was driven by the sale of Dixie Life's accident
and health business effective July 1, 1994.
The Corporation recognized no income tax benefit on the loss before
income taxes and estimated loss on sale of subsidiary because it is more likely
than not that the resultant deferred tax assets would not be realized.
13
<PAGE>
PART II. OTHER INFORMATION
Item 5. Other Information
Proposed Sale of Dixie National Life Insurance Company and Satisfaction
of Indebtedness
As more fully discussed in Note 3 to the consolidated financial
statements and under "Liquidity and Capital Resources - Proposed Sale of
Dixie Life" of Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations, on April 18, 1995, the Corporation entered
into the Stock Purchase Agreement with Standard to sell to Standard all of the
capital stock of Dixie Life which the Corporation owns. A copy of the Stock
Purchase Agreement is filed as Exhibit 2(c) hereto.
Sale of Common Stock
As more fully discussed in Note 4 to the consolidated financial
statements and under "Liquidity and Capital Resources - Sale of Common
Stock" of Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations, the Corporation, on April 20, 1995, entered into the
Second Amended and Restated UMS Agreement which provides that UMS has the right
to use its best efforts to assist the Corporation in placing up to 12,500,000
additional shares of the Corporation's Common Stock in non-U.S. markets,
pursuant to Regulation S, or otherwise in private placements. A copy of the
Second Amended and Restated UMS Agreement is filed as Exhibit 2(d) hereto.
Extension of Maturity of Convertible Notes
As more fully discussed in Note 5 to the consolidated financial
statements and under "Liquidity and Capital Resources - Liquidity Requirements"
of Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations, on May 1, 1995, the Corporation completed obtaining,
through execution of an Extension of Maturity agreement by each holder, an
extension of the May 1, 1995 maturity date of its Convertible Notes. A copy of
the form of Extension of Maturity is filed as Exhibit 4(b)(2) hereto.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2(c) Stock Purchase Agreement among Standard Life Insurance Company
of Indiana, Dixie National Life Insurance Company and Dixie
National Corporation dated April 18, 1995
14
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2(d) Second Amended and Restated Agreement Between Dixie National
Corporation and Universal Management Services effective March
24, 1995 and executed on April 20, 1995
4(b)(2) Form of Extension of Maturity of Convertible Notes of the
Corporation
(b) Reports on Form 8-K
The Corporation filed the following Form 8-K Current Reports during the
first quarter of 1995:
Date of Item
Report Reported Subject
------- -------- -------
March 6, 1995 5.Other Events Letter of Intent to sell Dixie
National Life Insurance Company to
Standard Life Insurance Company of
Indiana
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 thereunto duly authorized.
Dixie National Corporation
(Registrant)
/s/ S. L Reed, Jr.
Date: May 12, 1995 S. L. Reed, Jr.
Chairman and Chief Executive
Officer
(Principal Executive Officer)
/s/ Monroe M. Wright
Date: May 12, 1995 Monroe M. Wright
Senior Vice President and Treasurer
(Principal Financial Officer)
15
STOCK PURCHASE AGREEMENT
DATED AS OF APRIL 18, 1995
Among
STANDARD LIFE INSURANCE COMPANY OF INDIANA,
DIXIE NATIONAL LIFE INSURANCE COMPANY
and
DIXIE NATIONAL CORPORATION
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS . . . . . . . . . . . . 1
1.1 Terms Defined . . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions . . . . . . . . . . . 1
ARTICLE II
SALE OF SHARES AND CLOSING. . . . . . . . . 2
2.1 Purchase and Sale . . . . . . . . . . . . . . . . . 2
2.2 Purchase Price. . . . . . . . . . . . . . . . . . . 2
2.3 Adjustment. . . . . . . . . . . . . . . . . . . . . 2
2.4 Closing . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . 4
3.1 Organization. . . . . . . . . . . . . . . . . . . . 4
3.2 Authority.. . . . . . . . . . . . . . . . . . . . . 5
3.3 Capital Stock . . . . . . . . . . . . . . . . . . . 5
3.4 No Subsidiaries . . . . . . . . . . . . . . . . . . 5
3.5 No Conflicts or Violations. . . . . . . . . . . . . 5
3.6 Books and Records . . . . . . . . . . . . . . . . . 6
3.7 SAP Statements. . . . . . . . . . . . . . . . . . . 6
3.8 No Other Financial Statements . . . . . . . . . . . 7
3.9 Reserves. . . . . . . . . . . . . . . . . . . . . . 7
3.10 Absence of Changes. . . . . . . . . . . . . . . . . 7
3.11 No Undisclosed Liabilities. . . . . . . . . . . . . 11
3.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . 11
3.13 Litigation. . . . . . . . . . . . . . . . . . . . . 14
3.14 Compliance With Laws. . . . . . . . . . . . . . . . 15
3.15 Benefit Plans, ERISA. . . . . . . . . . . . . . . . 16
3.16 Properties. . . . . . . . . . . . . . . . . . . . . 18
3.17 Contracts . . . . . . . . . . . . . . . . . . . . . 19
3.18 Insurance Issued by the Company . . . . . . . . . . 22
3.19 Threats of Cancellation . . . . . . . . . . . . . . 23
3.20 Licenses and Permits. . . . . . . . . . . . . . . . 23
3.21 Operations Insurance. . . . . . . . . . . . . . . . 23
3.22 Intercompany Accounts . . . . . . . . . . . . . . . 24
3.23 Bank Accounts . . . . . . . . . . . . . . . . . . . 24
3.24 Brokers . . . . . . . . . . . . . . . . . . . . . . 24
3.25 Disclosure. . . . . . . . . . . . . . . . . . . . . 24
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . 24
4.1 Organization. . . . . . . . . . . . . . . . . . . . 25
4.2 Authority . . . . . . . . . . . . . . . . . . . . . 25
4.3 No Conflicts or Violations. . . . . . . . . . . . . 25
4.4 Litigation. . . . . . . . . . . . . . . . . . . . . 26
4.5 Purchase for Investment . . . . . . . . . . . . . . 26
4.6 Brokers . . . . . . . . . . . . . . . . . . . . . . 26
4.7 Disclosure. . . . . . . . . . . . . . . . . . . . . 26
ARTICLE V
COVENANTS OF SELLER AND COMPANY . . . . . . . 27
5.1 Regulatory Approvals. . . . . . . . . . . . . . . . 27
5.2 Investigation by the Purchaser. . . . . . . . . . . 27
5.3 No Negotiations, etc. . . . . . . . . . . . . . . . 27
5.4 Conduct of Business . . . . . . . . . . . . . . . . 28
5.5 Financial Statements and Reports. . . . . . . . . . 30
5.6 Investments . . . . . . . . . . . . . . . . . . . . 30
5.7 Employee Matters. . . . . . . . . . . . . . . . . . 30
5.8 No Charter Amendments . . . . . . . . . . . . . . . 31
5.9 No Issuance of Securities . . . . . . . . . . . . . 31
5.10 No Dividends. . . . . . . . . . . . . . . . . . . . 32
5.11 No Disposal of Property . . . . . . . . . . . . . . 32
5.12 No Breach or Default. . . . . . . . . . . . . . . . 32
5.13 No Indebtedness . . . . . . . . . . . . . . . . . . 32
5.14 No Acquisitions . . . . . . . . . . . . . . . . . . 32
5.15 Intercompany Liabilities. . . . . . . . . . . . . . 32
5.16 Resignations of Officers and Directors. . . . . . . 33
5.17 Tax Matters . . . . . . . . . . . . . . . . . . . . 33
5.18 Dismissal of Pending Litigation . . . . . . . . . . 33
5.19 Disclosure Schedule . . . . . . . . . . . . . . . . 33
5.20 Shareholder Meeting . . . . . . . . . . . . . . . . 33
5.21 Notice and Cure . . . . . . . . . . . . . . . . . . 33
5.22 Triennial Report. . . . . . . . . . . . . . . . . . 33
ARTICLE VI
COVENANTS OF PURCHASER. . . . . . . . . . 34
6.1 Regulatory Approvals. . . . . . . . . . . . . . . . 34
6.2 Home Office Lease . . . . . . . . . . . . . . . . . 34
6.3 Assignment of Certain Agent Debit Balances. . . . . 34
6.4 Notice and Cure . . . . . . . . . . . . . . . . . . 35
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ARTICLE VII
CONDITIONS TO OBLIGATIONS OF PURCHASER. . . . . . 35
7.1 Representations and Warranties. . . . . . . . . . . 35
7.2 Performance . . . . . . . . . . . . . . . . . . . . 35
7.3 Certificates of Officer of Seller . . . . . . . . . 35
7.4 No Injunction . . . . . . . . . . . . . . . . . . . 36
7.5 No Proceeding or Litigation . . . . . . . . . . . . 36
7.6 Consents, Authorizations, etc.. . . . . . . . . . . 36
7.7 No Adverse Change . . . . . . . . . . . . . . . . . 36
7.8 Opinion of Counsel. . . . . . . . . . . . . . . . . 37
7.9 Resignation of Officers and Directors . . . . . . . 37
7.10 Shareholder Approval. . . . . . . . . . . . . . . . 37
7.11 Hart-Scott. . . . . . . . . . . . . . . . . . . . . 37
7.12 Management Agreement. . . . . . . . . . . . . . . . 37
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLER . . . . . . 37
8.1 Representations and Warranties. . . . . . . . . . . 37
8.2 Performance . . . . . . . . . . . . . . . . . . . . 38
8.3 Officer's Certificates. . . . . . . . . . . . . . . 38
8.4 No Injunction . . . . . . . . . . . . . . . . . . . 38
8.5 No Proceeding or Litigation . . . . . . . . . . . . 38
8.6 Consents, Authorizations, etc.. . . . . . . . . . . 38
8.7 Opinion of Counsel. . . . . . . . . . . . . . . . . 39
ARTICLE IX
SURVIVAL OF PROVISIONS; REMEDIES . . . . . . . 39
9.1 Survival. . . . . . . . . . . . . . . . . . . . . . 39
9.2 Available Remedies. . . . . . . . . . . . . . . . . 39
ARTICLE X
INDEMNIFICATION . . . . . . . . . . . 40
10.1 Tax Indemnification . . . . . . . . . . . . . . . . 40
10.2 Other Indemnification . . . . . . . . . . . . . . . 41
10.3 Method of Asserting Claims. . . . . . . . . . . . . 42
10.4 After-Tax Damages . . . . . . . . . . . . . . . . . 44
10.5 Assignment of Indemnification . . . . . . . . . . . 44
ARTICLE XI
WAIVER. . . . . . . . . . . . . . 45
11.1 Senior Debt of Seller . . . . . . . . . . . . . . . 45
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ARTICLE XII
TERMINATION . . . . . . . . . . . . 45
12.1 Termination . . . . . . . . . . . . . . . . . . . . 45
12.2 Effect of Termination . . . . . . . . . . . . . . . 46
ARTICLE XIII
MISCELLANEOUS. . . . . . . . . . . . 47
13.1 . . . . . . . . . . . . . . . . . . . . . . . . . . 47
13.2 Notices . . . . . . . . . . . . . . . . . . . . . . 47
13.3 Entire Agreement. . . . . . . . . . . . . . . . . . 48
13.4 Expenses. . . . . . . . . . . . . . . . . . . . . . 49
13.5 Public Announcements. . . . . . . . . . . . . . . . 49
13.6 Confidentiality . . . . . . . . . . . . . . . . . . 49
13.7 Further Assurances. . . . . . . . . . . . . . . . . 50
13.8 Waiver. . . . . . . . . . . . . . . . . . . . . . . 50
13.9 Amendment . . . . . . . . . . . . . . . . . . . . . 50
13.10 Counterparts. . . . . . . . . . . . . . . . . . . . 50
13.11 No Third Party Beneficiary. . . . . . . . . . . . . 50
13.12 Governing Law . . . . . . . . . . . . . . . . . . . 50
13.13 Binding Effect. . . . . . . . . . . . . . . . . . . 50
13.14 Assignment. . . . . . . . . . . . . . . . . . . . . 51
13.15 Headings, etc.. . . . . . . . . . . . . . . . . . . 51
13.16 Invalid Provisions. . . . . . . . . . . . . . . . . 51
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into as of
April 18, 1995 by and among Dixie National Corporation, a Mississippi
corporation (the "Seller"); Dixie National Life Insurance Company, a Mississippi
corporation (the "Company"); and Standard Life Insurance Company of Indiana, an
Indiana corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, Seller is the beneficial owner of 1,489,904 shares of the
1,500,000 shares of authorized, issued and outstanding capital common stock
("Common Stock"), $1.00 par value per share ("the Shares") of the Company; and
WHEREAS, Seller desires to sell, and Purchaser desires to purchase from
Seller, all of the Shares of the Company owned by Seller;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
1.1 Terms Defined. The capitalized terms used in this Agreement and not
defined herein shall have the meanings specified in Exhibit A.
1.2 Other Definitional Provisions. Unless the context otherwise requires,
(a) references in this Agreement to the singular number shall include the
plural, and the plural number shall include the singular; (b) words denoting
gender shall include the masculine, feminine and neuter; (c) the words "hereof,"
"herein" and "hereunder" and words of similar import refer to this Agreement as
a whole and not to any particular provision of this Agreement, (d) unless
otherwise specified, all Article and Section references pertain to this
Agreement; (e) the term "or" means "and/or"; and (f) the phrase "ordinary course
of business and consistent with past practice" refers to the business and
practice of the Seller or the Company, as the case may be.
<PAGE>
ARTICLE II
SALE OF SHARES AND CLOSING
2.1 Purchase and Sale. The Seller agrees to sell to the Purchaser and the
Purchaser agrees to purchase from the Seller the Shares at the Closing upon the
terms and subject to the conditions set forth in this Agreement.
2.2 Purchase Price. Subject to adjustment pursuant to Section 2.3 hereof,
the purchase price (the "Purchase Price") for the Shares payable at the
Closing shall be equal to Eight Million Five Hundred Eighty-Three Thousand Seven
Hundred Forty-Six and no/100 Dollars ($8,583,746), of which Three Million and
no/100 Dollars ($3,000,000.00) is payable by wire transfer in immediately
available funds to such bank and account as the Seller may specify by written
notice received by the Purchaser at least three (3) Business Days prior to the
Closing Date.
The balance of the Purchase Price is payable as follows:
(a) Forgiveness and cancellation of Senior Debt of the Seller due Buyer in
the sum of Three Million Six Hundred Eighty-Eight Thousand Seven Hundred
Forty-Six and no/100 Dollars ($3,688,746);
(b) Payment of Dixie Convertible Subordinated Notes in the sum of One
Million Seven Hundred Twenty Thousand and no/100 Dollars ($1,720,000); and
(c) After Closing, the first One Hundred Seventy Five Thousand and no/100
Dollars ($175,000) recovered by the Company in respect to agent debit balances.
2.3 Adjustment.
(a) On the day prior to Closing, the Seller will determine and will deliver
to the Purchaser a certificate of the chief financial officer or chief executive
officer of the Seller setting forth the Seller's determination of the Estimated
Adjusted Capital and Surplus of Company as of the Closing Date, together with
true and complete copies of all Work Papers related thereto (collectively, the
"Estimated Closing Adjusted Capital and Surplus"). The Closing will be based on
the amount of the Estimated Closing Adjusted Capital and Surplus as shown on the
certificate of the chief financial officer or chief executive officer of the
Seller. In the event the Dixie Convertible Subordinated Notes are paid by Seller
prior to Closing, the cash portion of the Purchase Price shall be adjusted
upward by the amount of such payment. If the Estimated Closing Adjusted Capital
and Surplus is greater than $6,500,000, the excess above $6,410,000 shall be
deposited into an escrow account agreeable to both Seller and Purchaser. Within
ninety (90) days after the Closing
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Date, the chief financial officer of the Purchaser shall deliver to the
Seller a certificate setting forth the Purchaser's determination of the Adjusted
Capital and Surplus of the Company as of the Closing Date, based upon actual SAP
reserves and liabilities for insurance policies in force in the Company on the
Closing Date, together with true and complete copies of all Work Papers related
thereto (collectively, the "Proposed Final Closing Adjusted Capital and
Surplus"). If, within fifteen (15) Business Days after receipt by the Seller of
the certificate of the chief financial officer of the Purchaser of such
determination of the Proposed Final Closing Adjusted Capital and Surplus, the
Seller agrees with such determination and so notifies the Purchaser, or if the
Seller shall fail to notify the Purchaser that it disagrees with such
determination within such fifteen (15) Business Days, such determination shall
be the Closing Adjusted Capital and Surplus. If the Seller notifies the
Purchaser within such fifteen (15) Business Days that the Seller does not agree
with such determination of the Proposed Final Closing Adjusted Capital and
Surplus, the Purchaser and the Seller shall in good faith for a period of
fifteen (15) Business Days thereafter, attempt to negotiate a determination of
the Closing Adjusted Capital and Surplus. If the Seller and the Purchaser fail
to reach agreement on a determination of the Closing Adjusted Capital and
Surplus within such fifteen (15) Business Day period, the Closing Adjusted
Capital and Surplus shall be determined by KPMG Peat Marwick (the "Accounting
Firm"). The Accounting Firm shall arrive at its determination of the Closing
Adjusted Capital and Surplus within thirty (30) days after its notification by
the Seller. If the Accounting Firm's determination of the Closing Adjusted
Capital and Surplus is greater than the amount of the Proposed Final Closing
Adjusted Capital and Surplus determined by the chief financial officer of the
Purchaser, the fees and expenses of the Accounting Firm shall be paid by the
Purchaser; if the Accounting Firm's determination of the Closing Adjusted
Capital and Surplus is equal to or less than the amount of the Final Closing
Adjusted Capital and Surplus determined by the chief financial officer of the
Purchaser, the fees and expenses of the Accounting Firm shall be paid by the
Seller.
(b) The Adjusted Capital and Surplus of the Company shall be determined in
accordance with the Formula set forth on Exhibit B hereto.
(c) If the amount of the Final Closing Adjusted Capital and Surplus is
greater than $6,500.000.00, the Purchaser shall pay the difference, plus
interest at the Prime Rate from the Closing Date to the date of payment, to the
Seller within ten (10) Business Days after the determination of the Final
Closing Adjusted Capital and Surplus is made; if the amount of the Final Closing
Adjusted Capital and Surplus is less than $6,410.000.00, the Seller shall refund
the difference, plus interest at the Prime Rate from the Closing Date to the
date of payment, to the Purchaser within ten (10) Business Days after the
determination of the Final Closing Adjusted Capital and Surplus is made. Failure
by either party to pay an amount due hereunder within such ten (10) Business Day
period shall result in the imposition of an interest rate
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on the amount due equal to the Prime Rate plus four percent (4%) from
the Closing Date to the date of payment.
(d) The foregoing is subject to Section 3.13(d) hereof.
2.4 Closing. The Closing of the transactions contemplated by this Agreement
will take place at the offices of Brunini, Grantham, Grower & Hewes, P.L.L.C.,
248 East Capital Street, Suite 1400, Jackson, Mississippi, 39201, or at such
other place as the Purchaser shall specify, at 10:00 a.m., local time, on the
Closing Date. At the Closing, the Seller will deliver to the Purchaser such
documents and instruments as the Purchaser may reasonably request for the
purpose of effectuating the purchase and sale of the Shares and the transactions
contemplated hereby, including, without limitation, a certificate or
certificates representing the Shares issued in the name of the Purchaser, or
accompanied by executed stock powers transferring the Shares to the Purchaser.
In addition, at closing, Seller will purchase from the Company at book value the
Company's entire investment in Fry-Guy, Inc. equipment and leases and Cambria
loans, and Seller will deliver to Purchaser releases, waivers, terminations and
similar documents reasonably requested by Purchaser to release the Company from
any liability or obligation with respect to existing Fry-Guy, Inc. equipment and
leases and from any obligation to undertake future Fry-Guy, Inc. and Cambria
Financings.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller hereby represents and warrants to the Purchaser as follows:
3.1 Organization. Except as disclosed in Section 3.1 of the Disclosure
Schedule, Seller is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Mississippi and has full corporate power
and authority to enter into this Agreement and to perform its obligations under
this Agreement. Except as disclosed in Section 3.1 of the Disclosure Schedule,
the Company is an insurance company duly organized, validly existing, and in
good standing under the Laws of the State of Mississippi and is duly licensed,
qualified, or admitted to do business and is in good standing in all
jurisdictions in which the failure to be so licensed, qualified, or admitted and
in good standing, individually or in the aggregate with other such failures, has
or may reasonably be expected to have a material adverse effect on the validity
or enforceability of this Agreement, on the ability of the Company to perform
its obligations under this Agreement, or on the Business or Condition of the
Company. Section 3.1 of the Disclosure Schedule contains a true and complete
list of the states in which the Company is licensed to write life and health
insurance. The Seller has furnished to the Purchaser true and complete copies of
the articles of incorporation (as certified by the appropriate governmental or
regulatory authorities) and the Bylaws of the Company, including all amendments
thereto.
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3.2 Authority. The Boards of Directors of the Seller and the Company,
respectively, have duly and validly approved this Agreement and the transactions
contemplated hereby. The shareholders of the Seller must approve the sale by
Seller of the shares of the Company. Subject to and upon the prior approval by
the shareholders of the Seller, this Agreement constitutes a legal, valid, and
binding obligation of the Seller and the Company and is enforceable against the
Seller and the Company in accordance with its terms, except to the extent that
(a) enforcement may be limited by or subject to any bankruptcy, insolvency,
reorganization, moratorium, or similar Laws now or hereafter in effect relating
to or limiting creditors' rights generally and (b) the remedy of specific
performance and injunctive and other forms of equitable relief are subject to
certain equitable defenses and to the discretion of the court or other similar
Person before which any proceeding therefor may be brought.
3.3 Capital Stock. The authorized common capital stock of the Company
consists of 5,000,000 shares of common stock, $1.00 par value per share, of
which 1,500,000 shares are validly issued and outstanding, fully paid and
nonassessable, and 1,489,904 of which are owned beneficially and of record by
the Seller, free and clear of all Liens, except for Liens disclosed in Section
3.3 of the Disclosure Schedule. Except as disclosed in Section 3.3 of the
Disclosure Schedule, there are no outstanding securities, obligations, rights,
subscriptions, warrants, options, charter or founders insurance policies,
phantom stock rights, or (except for this Agreement) other Contracts of any kind
that give any Person the right to (a) purchase or otherwise receive or be issued
any shares of capital stock of the Company (or any interest therein) or any
security or Liability of any kind convertible into or exchangeable for any
shares of capital stock of the Company (or any interest therein) or (b) receive
any benefits or rights similar to any rights enjoyed by or accruing to a holder
of the Common Stock, or any rights to participate in the equity, income, or
election of directors or officers of the Company.
3.4 No Subsidiaries. The Company does not control (whether directly or
indirectly, whether through the ownership of securities or by Contract or proxy,
and whether alone or in combination with others) any corporation, partnership,
business organization, or other similar Person.
3.5 No Conflicts or Violations. The execution and delivery of this
Agreement by the Seller and the Company does not, and the performance by the
Seller and the Company of their respective obligations under this Agreement will
not:
(a) subject to obtaining the approvals contemplated by Sections 5.1 and 6.1
hereof, violate any term or provisions of any Law or any writ, judgment, decree,
injunction, or similar order applicable to the Seller or the Company;
(b) conflict with or result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default under, any of the
terms, conditions,
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or provisions of the articles or certificate of incorporation or Bylaws of the
Seller or the Company;
(c) result in the creation or imposition of any Lien upon the Seller, the
Company or any of their respective Assets and Properties that individually or in
the aggregate with any other Liens has or may reasonably be expected to have a
material adverse effect on the validity or enforceability of this Agreement, on
the ability of the Seller or the Company to perform their respective obligations
under this Agreement, or on the Business or Condition of the Seller or the
Company;
(d) conflict with or result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default under, or give to
any Person any right of termination, cancellation, acceleration, or modification
in or with respect to, any Contract to which the Seller or the Company is a
party or by which any of their respective Assets or Properties may be bound and
as to which any such conflicts, violations, breaches, defaults, or rights
individually or in the aggregate have or may reasonably be expected to have a
material adverse effect on the validity or enforceability of this Agreement, on
the ability of the Seller or the Company to perform its respective obligations
under this Agreement, or on the Business or Condition of the Seller or the
Company; or
(e) require the Seller or the Company to obtain any consent, approval, or
action of, or make any filing with or give any notice to, any Person except: (i)
as contemplated in Section 5.1 hereof; (ii) as disclosed in Section 3.5(e) of
the Disclosure Schedule; or (iii) those which the failure to obtain, make, or
give individually or in the aggregate with any other such failures has or may
reasonably be expected to have no material adverse effect on the validity or
enforceability of this Agreement, on the ability of the Seller or Company to
perform its respective obligations under this Agreement, or on the Business or
Condition of the Seller or the Company.
3.6 Books and Records. Except as disclosed in Section 3.6 of the Disclosure
Schedule, the minute books and other similar records of the Company contain a
true and complete record, in all material respects, of all actions taken at all
meetings and by all written consents in lieu of meetings of the stockholders,
Board of Directors, and each committee thereof of the Company. The Books and
Records of the Company accurately reflect in all material respects the Business
or Condition of the Company, and have been maintained in all material respects
in accordance with good business and bookkeeping practices.
3.7 SAP Statements. The Seller has previously delivered to the Purchaser
true and complete copies of the following SAP Statements:
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(a) Annual Statements and audited SAP basis financial statements of the
Company for each of the years ended December 31, 1992, 1993, and 1994 (and the
notes relating thereto, whether or not included therein).
Except as disclosed in Section 3.7 of the Disclosure Schedule, each such
SAP Statement complied in all material respects with all applicable Laws when so
filed, and all material deficiencies known to Seller or Company with respect to
any such SAP Statement have been cured or corrected. Except for the year 1992,
which has subsequently been corrected, each such SAP Statement (and the notes
relating thereto, whether or not included therein), including, without
limitation, each balance sheet and each of the statements of operations, capital
and surplus account, and cash flow contained in the respective SAP Statement,
was prepared in accordance with SAP, is true and complete in all material
respects, and fairly presents the financial condition, the Assets and
Properties, and the Liabilities of the Company as of the respective dates
thereof and the results of operations and changes in capital and surplus and in
cash flow of the Company for and during the respective periods covered thereby.
3.8 No Other Financial Statements. Except as disclosed in Section 3.8 of
the Disclosure Schedule and except for the financial statements described in
Section 3.7 (collectively, the "Financial Statements"), since December 31, 1994
no other financial statements have been prepared by or with respect to the
Company (whether on a GAAP, SAP, or other basis).
3.9 Reserves. All reserves and other similar amounts with respect to
insurance and annuities as established or reflected in the SAP Statements of the
Company dated as of December 31, 1994 (including, without limitation, the
reserves and amounts reflected respectively on lines 1 through 11.3 of page 3 of
the December 31, 1994 Annual Statement) were determined in accordance with
generally accepted actuarial principles that are in accordance with those called
for by the provisions of the related insurance and annuity Contracts and in the
related reinsurance, coinsurance, and other similar Contracts of Company, and
meet the requirements of the insurance Laws of the State of Mississippi and
states in which such insurance and annuity Contracts were issued or delivered.
All such reserves and other similar amounts will be adequate (under generally
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 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 Contract) on the respective dates of such SAP
Statements. The Company owns assets that qualify as legal reserve assets under
applicable insurance Laws in an amount at least equal to all such required
reserves and other similar amounts.
3.10 Absence of Changes. Except as disclosed in Section 3.10 of the
Disclosure Schedule or as specifically reflected in the December 31, 1994 SAP
Statement, or except for
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changes or developments relating to the conduct of the business of the
Company after the date of this Agreement in conformity with this Agreement or
the requests of the Purchaser, since December 31, 1994, there has not been,
occurred, or arisen any change in, or any event (including without limitation
any damage, destruction, or loss whether or not covered by insurance),
condition, or state of facts of any character that individually or in the
aggregate has or may reasonably be expected to have a material adverse effect
on the Business or Condition of the Company. Except as disclosed in Section 3.10
of the Disclosure Schedule (with paragraph references corresponding to those set
forth below), or except as specifically reflected in the December 31, 1994 SAP
Statement, or except for changes or developments relating to the conduct of the
business of the Company after the date of this Agreement in conformity with this
Agreement or the requests of the Purchaser, since December 31, 1994, the Company
has operated only in the ordinary course of business and consistent with past
practice, and (without limiting the generality of the foregoing) there has not
been, occurred, or arisen:
(a) any declaration, setting aside, or payment of any dividend or other
distribution in respect of the capital stock of the Company or any direct or
indirect redemption, purchase, or other acquisition by the Company of any such
stock or of any interest in or right to acquire any such stock;
(b) any employment, deferred compensation, or other salary, wage, or
compensation Contract entered into between the Company and any of its officers,
directors, employees, agents, consultants, or similar representatives, except
for normal and customary Contracts with agents and consultants in the ordinary
course of business and consistent with past practices; or any increase in the
salary, wages, or other compensation of any kind, whether current or deferred,
of any officer, director, employee, agent, consultant, or other similar
representative of the Company other than routine increases that were made in the
ordinary course of business and consistent with past practices and that did not
result in an increase of more than five percent (5%) of the respective salary,
wages, or compensation of any such Person; or any creation of any Benefit Plan
or any contribution to or amendment or modification of any Benefit Plan;
(c) any issuance, sale, or disposition by the Company of any debenture,
note, stock, or other security issued by the Company, or any modification or
amendment of any right of the holder of any outstanding debenture, note, stock,
or other security issued by the Company;
(d) any Lien created on or in any of the Assets and Properties of the
Company, or assumed by the Company with respect to any of such Assets and
Properties, which Lien relates to Liabilities individually or in the aggregate
exceeding $25,000 for the Company or which Lien individually or in the aggregate
with any other Liens has or may reasonably be expected to have a material
adverse effect on the Business or Condition of the Company;
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(e) any prepayment of any Liabilities individually or in the aggregate
exceeding $10,000;
(f) any Liability involving the borrowing of money by the Company;
(g) any Liability incurred by the Company in any transaction (other than
pursuant to any insurance or annuity Contract entered into in the ordinary
course of business and consistent with past practice) not involving the
borrowing of money, except such Liabilities incurred by the Company, the result
of which individually or in the aggregate cannot reasonably be expected to have
a material adverse effect on the Business or Condition of the Company;
(h) any damage, destruction, or loss (whether or not covered by insurance)
affecting any of the Assets and Properties of the Company, which damage,
destruction, or loss individually exceeds $25,000 or the result of which
individually or in the aggregate has or may reasonably be expected to have a
material adverse effect on the Business or Condition of the Company;
(i) any work stoppage, strike, slowdown, other labor difficulty, or (to the
best knowledge of the Seller or the Company) union organizational campaign (in
process or threatened) at or affecting the Company;
(j) any material change in any underwriting, actuarial, investment,
financial reporting, or accounting practices or policies followed by the
Company, or in any assumption underlying such a practices or policies, or in any
method of calculating any bad debt, contingency, or other reserve for financial
reporting purposes or for any other accounting purposes;
(k) any payment, discharge, or satisfaction by the Company of any Lien or
Liability other than Liens or Liabilities that were paid, discharged, or
satisfied since December 31, 1994 in the ordinary course of business and
consistent with past practice, or were paid, discharged, or satisfied as
required under this Agreement;
(l) any cancellation of any Liability owed to the Company by any other
Person;
(m) any write-off or write-down of, or any determination to write off or
down any of, the Assets and Properties of the Company or any portion thereof,
except for write-offs or write-downs that do not exceed $10,000 individually or
in the aggregate for the Company;
(n) any sale, transfer, or conveyance of any investments, or any other
Assets and Properties, of the Company with an individual book value or with an
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aggregate book value in excess of $10,000, except as contemplated in Section
5.6, and except in the ordinary course of business and consistent with past
practices;
(o) any amendment, termination, waiver, disposal, or lapse of, or other
failure to preserve, any license, permit, or other form of authorization of the
Company, the result of which individually or in the aggregate has or may
reasonably be expected to have a material adverse effect on the Business or
Condition of the Company;
(p) any transaction or arrangement under which the Company paid, lent, or
advanced any amount to or in respect of, or sold, transferred, or leased any of
its Assets and Properties or any service to, any officer or director of the
Seller or the Company (except for payments of salaries and wages in the ordinary
course of business and consistent with past practice, and except for payments
made pursuant to any Contract disclosed in Section 3.10(b) or Section 3.17(a) of
the Disclosure Schedule), or of any Affiliate of the Seller, the Company, or of
any such officer of director; (ii) any business or other Person in which the
Seller or the Company, any such officer or director, or any such Affiliate has
any material interest, except for advances made to, or reimbursements of,
officers or directors of the Seller or the Company for travel and other business
expenses in reasonable amounts in the ordinary course of business and consistent
with past practice; or any Affiliate of the Company pursuant to any Contract of
the type described in Section 3.17(g);
(q) any material amendment of, or any failure to perform all of its
obligations under, or any default under, or any waiver of any right under, or
any termination (other than on the stated expiration date) of, any Contract that
involves or reasonably would involve the annual expenditure or receipt by the
Company of more than $25,000 or that individually or in the aggregate is
material to the Business or Condition of the Company;
(r) any decrease in the amount of, or any material change in the nature of,
the insurance or annuities in force of the Company or any material change in the
amount or nature of the reserves, liabilities or other similar amounts of the
Company with respect to insurance and annuity Contracts (including, without
limitation, reserves and other similar amounts of a type required to be
reflected respectively on lines 1 through 11.3 on page 3 of an Annual Statement
of the Company);
(s) any amendment to the articles or certificate of incorporation or Bylaws
of the Company;
(t) any termination, amendment, or execution by the Company of any
reinsurance, coinsurance, or other similar Contract, as ceding or assuming
insurer;
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(u) any expenditure or commitment for additions to property, plant,
equipment or other tangible or intangible capital assets of the Company, except
for any expenditure or commitment that does not exceed $10,000 individually or
the result of which individually or in the aggregate does not have and may not
reasonably be expected to have a material adverse effect on the Business or
Condition of the Company;
(v) any amendment or introduction by the Company of any insurance or
annuity Contract other than in the ordinary course of business and consistent
with past practice; or
(w) any Contract to take any of the actions described in this Section other
than actions expressly permitted under this Section.
3.11 No Undisclosed Liabilities. Except to the extent specifically
reflected in the balance sheet included in the December 31, 1994 SAP Statement
(or in the notes relating thereto), or except as disclosed in Section 3.11 of
the Disclosure Schedule, there were no Liabilities (other than policyholder
benefits payable in the ordinary course of business and consistent with past
practices) against, relating to, or affecting the Company as of December 31,
1994 that individually or in the aggregate have or may reasonably be expected to
have a material adverse effect on the Business or Condition of the Company.
Except to the extent specifically reflected in the balance sheet included in the
December 31, 1994 SAP Statement (or in the notes relating thereto), or except as
disclosed in Section 3.11 of the Disclosure Schedule, since December 31, 1994,
the Company has not incurred any Liabilities (other than policyholder benefits
payable in the ordinary course of business and consistent with past practice)
that individually or in the aggregate have or may reasonably be expected to
have a material adverse effect on the Business or Condition of the Company.
3.12 Taxes. Except as disclosed in Section 3.12 of the Disclosure Schedule
(with paragraph references corresponding to those set forth below):
(a) All Tax Returns required to be filed with respect to the Company have
been duly and timely filed, and all such Tax Returns are true and complete in
all material respects. The Company has duly and timely paid all Taxes that are
due, or claimed or asserted by any taxing authority to be due, from the Company
for the periods covered by such Tax Returns or has duly provided for all such
Taxes in the Books and Records of the Company and in accordance with GAAP and
SAP, including, without limitation, in the Financial Statements. There are no
Liens with respect to Taxes (except for Liens with respect to real and personal
property Taxes not yet due) upon any of the Assets and Properties of the
Company.
(b) With respect to any period for which Tax Returns have not yet been
filed, or for which Taxes are not yet due or owing, the Seller and the Company
have made due and sufficient current accruals for such Taxes in their respective
Books and
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Records and in accordance with SAP and GAAP, and such current accruals
through the Closing Date are duly and fully provided for in the SAP and GAAP
Financial Statements of the Seller and the Company for the period then ended.
(c) The United States federal income Tax Returns of the Seller and the
Company and of each affiliated group (within the meaning of the Code) of which
the Seller and the Company are or have been members have not been audited or
examined by the IRS, and the statute of limitations for all periods through the
year 1988 has expired. The state, local, and foreign income Tax Returns of the
Seller and the Company and of each affiliated or consolidated group of which the
Seller and the Company are or have been members have not been audited or
examined, and all statutes of limitation for all applicable state, local, and
foreign taxable periods through the respective years specified in Section
3.12(c) of the Disclosure Statement have expired. There are no outstanding
agreements, waivers, or arrangements extending the statutory period of
limitation applicable to any claim for, or the period for the collection or
assessment of, Taxes due from the Seller or the Company for any taxable period.
The Seller has previously delivered to the Purchaser true and complete copies of
each of the United States federal, state, local, and foreign income Tax Returns,
for each of the last three taxable years, filed by the Seller and the Company
(insofar as such returns relate to either the Seller or the Company) filed by
any affiliated or consolidated group of which the Seller or the Company was then
a member.
(d) No audit or other proceeding by any court, governmental or regulatory
authority, or similar Person is pending or (to the knowledge of the Seller)
threatened with respect to any Taxes due from the Seller or the Company or any
Tax Return filed by or relating to the Seller or the Company. To the best
knowledge of the Seller, no assessment of Tax is proposed against the Seller or
the Company or any of their Assets and Properties.
(e) No election under any of Sections 108, 168, 338, 441, 463, 472, 1017,
1033, or 4977 of the Code (or any predecessor provisions) has been made or filed
by or with respect to the Seller or the Company or any of their Assets and
Properties. No consent to the application of Section 341(f)(2) of the Code (or
any predecessor provision) has been made or filed by or with respect to the
Seller or the Company or any of their Assets and Properties. None of the Assets
and Properties of the Seller or the Company is an asset or property that the
Purchaser or any of its Affiliates is or will be required to treat as being
owned by any other Person pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately before the
enactment of the Tax Reform Act of 1986, or tax-exempt use property within the
meaning of Section 168(h)(1) of the Code. No closing agreement pursuant to
Section 7121 of the Code (or any predecessor provision) or any similar provision
of any state, local, or foreign Law
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has been entered into by or with respect to the Seller or the Company or any of
their Assets and Properties.
(f) Neither the Seller nor the Company has agreed to or is required to make
any adjustment pursuant to Section 481(a) of the Code (or any predecessor
provision) by reason of any change in any accounting method of the Seller or the
Company, and neither the Seller nor the Company has any application pending with
any taxing authority requesting permission for any changes in any accounting
method of the Seller or the Company. To the best knowledge of the Seller the IRS
has not proposed any such adjustment or change in accounting method.
(g) Neither the Seller nor the Company has been or is in violation (or with
notice or lapse of time or both, would be in violation) of any applicable Law
relating to the payment or withholding of Taxes. The Seller and the Company have
duly and timely withheld from employee salaries, wages, and other compensation
and paid over to the appropriate taxing authorities all amounts required to be
so withheld and paid over for all periods under all applicable Laws.
(h) Neither the Seller nor the Company is a party to, is bound by, or has
any obligation under, any Tax sharing Contract or similar Contract;
notwithstanding any disclosure contained in the Disclosure Schedule, the Seller
represents and warrants that, at the Closing, neither the Seller nor the Company
shall be a party to, be bound by or have any obligation under, any Tax sharing
Contract or similar Contract or arrangement. The Company is not a foreign person
within the meaning of Section 1445(f)(3) of the Code.
(i) Neither the Seller nor the Company has made any direct, indirect, or
deemed distributions that have been or could be taxed under Section 815 of the
Code.
(j) All ceding commission expenses paid or accrued by the Company in
connection with any reinsurance arrangement or Contract or transaction have been
capitalized and amortized over the life or lives of such reinsurance
arrangement or Contract in accordance with the decision of the United States
Supreme Court in Colonial American Life Insurance Company v. Commissioner of
Internal Revenue, 109 S.Ct. 240 (1980).
(k) No material Liabilities have been proposed in connection with any audit
or other proceeding by any court, governmental or regulatory authority, or
similar Person with respect to any Taxes due from the Seller or the Company or
any Tax Return filed by or relating to the Seller or the Company.
(l) Neither the Seller nor the Company is a party to any agreement,
contract, plan or arrangement that has resulted, or would result, separately or
in the
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aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code.
3.13 Litigation. Except as disclosed in Section 3.13 of the Disclosure
Schedule (with paragraph references corresponding to those set forth below):
(a) There are no actions, suits, investigations, or proceedings pending, or
(to the best knowledge of the Seller) threatened, against the Seller or the
Company or any of their Assets and Properties, at law or in equity, in, before,
or by any Person that individually or in the aggregate have or may reasonably
be expected to have a material adverse effect on the validity or enforceability
of this Agreement, on the ability of the Seller or the Company to perform its
respective obligations under this Agreement, or on the Business or Condition of
the Seller or the Company.
(b) There are no actions, suits, investigations, or proceedings pending, or
(to the best knowledge of the Seller) threatened, against the Seller or the
Company or any of their respective Assets and Properties, at law or in equity,
in, before, or by any Person that individually involve a claim or claims for any
injunction or similar relief or for Damages exceeding $25,000 or an unspecified
amount of Damages.
(c) There are no writs, judgments, decrees, or similar orders of any Person
outstanding against the Seller or the Company that individually exceed $10,000
or that individually or in the aggregate have or may reasonably be expected to
have a material adverse effect on the Business or Condition of the Seller or the
Company, and there are no injunctions or similar orders of any Person
outstanding against the Seller or the Company.
(d) Following the execution of this Agreement, Seller and Purchaser shall
jointly pursue settlement of the Becker v. Dixie National Life Insurance Company
litigation on terms which are acceptable to Purchaser. In the event that a
settlement agreement is reached prior to the Closing, then, notwithstanding that
final settlement may be subject to court and/or policyholder approval, Seller
and Purchaser agree as follows:
The first $600,000.00 of Costs of Settlement shall be absorbed by
Purchaser, and, accordingly, the first $600,000.00 reduction in the Closing
Adjusted Capital and Surplus made to record the Costs of Settlement shall not
affect the Purchase Price. Any Costs of Settlement in excess of $600,000.00 but
less than $1,000,000.00 shall be borne equally by Seller and Purchaser and,
accordingly, one-half of such cost shall be deducted from the Purchase Price.
Any Costs of Settlement in excess of $1,000,000.00 shall be absorbed by
Purchaser. If the costs of settlement are less than $500,000, then the Purchase
Price shall be increased by fifty percent (50%) of the difference between the
costs of settlement and $500,000. Seller's obligation to bear a portion of the
Costs of Settlement shall terminate on the Closing Date.
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For purposes of this Section 3.13(d), Costs of Settlement shall include all
fees and expenses and all costs incurred to effect the negotiation and
settlement of this litigation, including, but not limited to, attorneys fees and
expenses and the statutory liabilities required at the time of any replacement
or additional policies are issued to policyholders as part of the settlement.
3.14 Compliance With Laws. To the best knowledge of the Seller and Company
and except as disclosed in Section 3.14 of the Disclosure Schedule, the Company
has not been or is not in violation (or with or without notice or lapse of time
or both, would be in violation) of any term or provision of any Law or any writ,
judgment, decree, injunction, or similar order applicable to the Company or any
of its Assets and Properties, the result of which violation individually or
violations in the aggregate has or may reasonably be expected to have a material
adverse effect on the Business or Condition of the Company. Without limiting the
generality of the foregoing:
(a) Since January 1, 1995, the Company has duly and validly filed or caused
to be so filed all reports, statements, documents, registrations, filings, or
submissions that were required by Law to be filed with any Person and as to
which the failure to so file, individually in the aggregate with other such
failures, has or may reasonably be expected to have a material adverse effect on
the Business or Condition of the Company; all such filings complied with
applicable Laws in all material respects when filed and, no material
deficiencies have been asserted by any Person with respect to any such filings.
(b) The Seller has previously delivered to the Purchaser the reports
reflecting the results of the most recent financial examination of the Company
issued by the State of Mississippi. Except as disclosed in Section 3.14(b) of
the Disclosure Schedule, all material deficiencies or violations in such report
have been resolved to the satisfaction of the State of Mississippi.
(c) Except as disclosed in Section 3.14(c) of the Disclosure Schedule, all
outstanding insurance and annuity Contracts issued, reinsured, or underwritten
by the Company 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.
(d) (1) Section 3.14(d) of the Disclosure Schedule contains a true and
complete list of each master or prototype (as well as any individually designed)
pension, profit sharing, defined benefit, Code Section 401(k), and other
retirement or employee benefit plan or Contract (including, but not limited to,
simplified employee pension plans, Code Section 403(a), (b) and (c) annuities,
Keogh plans, and individual retirement accounts and annuities) offered or sold
by the Company to, or maintained or sponsored for the benefit of any employees
of, any other Person, and each determination letter relating to the creation or
amendment of any such
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plan or Contract. Except as disclosed in Section 3.14(d) of the Disclosure
Schedule, each such plan or Contract in all material respects conforms with, and
has been offered, sold, maintained, and sponsored in accordance with, all
applicable Laws. Except as disclosed in Section 3.14(d) of the Disclosure
Schedule, the Company is not a fiduciary with respect to any plan or Contract
referenced in this Section 3.14(d).
(2) The Company does not provide administrative or other contractual
services for any plan or Contract referenced in this Section 3.14(d), including,
but not limited to, any third party administrative services for an Employee
Welfare Benefit Plan.
(3) To the extent that the Company maintains any collective or commingled
funds or accounts which restrict the Persons who may invest therein to
tax-exempt entities or qualified plans, each such fund or account (of which a
true and complete list and description is disclosed in Section 3.14(d)(3) of the
Disclosure Schedule) has been established, maintained and operated in accordance
with all applicable Laws, has maintained its tax-exempt status and has no
nonqualified plans or trusts or other taxable entities investing in it.
(4) In addition to the representations and warranties contained in Section
3.12, there are no claims pending, or (to the best knowledge of the Seller or
Company) threatened, against the Company or any of its Assets and Properties,
under any fiduciary liability insurance policy issued by or to the Company that
individually or in the aggregate has or may reasonably be expected to have a
material adverse effect on the Business or Condition of the Company.
3.15 Benefit Plans, ERISA.
Except as disclosed in Section 3.15 of the Disclosure Schedule, the Company
has not had within the past six (6) years and does not currently have any
Benefit Plan or any commitment or obligation to create any Benefit Plan.
(a) Neither the Seller, the Company, nor any of their respective Affiliates
has any Contract, plan, or commitment, whether legally binding or not, to create
any additional Benefit Plan or to modify or change any existing Benefit Plan.
Each contribution or other payment required to be made or to be voluntarily made
by each of the Seller and the Company on or before December 31, 1994 with
respect to any of the Benefit Plans has been made.
(b) None of the Benefit Plans is or has been a multi-employer plan, as that
term is defined in Section 3(37) of ERISA. There has been no transaction,
action, or omission involving the Seller, the Company, any ERISA Affiliate, or
(to the best knowledge of the Seller) any fiduciary, trustee, or administrator
of any Benefit Plan,
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or any other Person dealing with any such Benefit Plan or the related trust or
funding vehicle, that in any manner violates or will result in a violation
(with or without notice or lapse of time or both) of Sections 404 or 406 of
ERISA or constitutes or will constitute (with or without notice or lapse of time
or both) a prohibited transaction (as defined in Section 4975(c)(I) of the Code
or Section 406 of ERISA) for which there exists neither a statutory nor a
regulatory exemption and which could subject the Seller or the Company or any
party in interest (as defined in Section 3(14) of ERISA) to criminal or civil
sanctions under Section 501 or 502 of ERISA, or to Taxes under Code Section
4975, or to any other Liability.
(c) There has been no reportable event (as defined in Section 4043(b) of
ERISA) with respect to any Employee Pension Benefit Plan or any Employee Welfare
Benefit Plan for which notice to the PBGC has not been waived by rule or
regulation. Neither the Seller nor the Company, nor any ERISA Affiliate has any
Liability to the PBGC (other than any Liability for insurance premiums not yet
due to the PBGC), to any present or former participant in or beneficiary of any
Benefit Plan (or any beneficiary of any such participant or beneficiary), or to
any Employee Pension Benefit Plan or any Employee Welfare Benefit Plan. No
event, fact, or circumstance has arisen or occurred that has resulted or may
reasonably be expected to result in any such Liability or a claim against the
Seller or the Company by the PBGC, by any present or former participant in or
any beneficiary of any Employee Pension Benefit Plan or any Employee Welfare
Benefit Plan (or any beneficiary of any such participant or beneficiary), or by
any such Benefit Plan. No filing has been or will be made by the Seller, the
Company, or any ERISA Affiliate, and no proceeding has been commenced, for the
complete or partial termination of any Employee Pension Benefit Plan or any
Employee Welfare Benefit Plan, and no complete or partial termination of any
such Benefit Plan has occurred or, as a result of the execution or delivery of
this Agreement or the consummation of the transactions contemplated hereby, will
occur.
(d) All amounts that each of the Seller and the Company is required to pay
by Law or under the terms of the Benefit Plans as a contribution or other
payment to or in respect of such Benefit Plans as of December 31, 1994 have been
paid. The funding method used in connection with each Benefit Plan that is or at
any time has been subject to the funding requirements of Title I, Subtitle B,
Part 3 of ERISA, meets the requirements of ERISA and the Code. No Benefit Plan
subject to Title IV of ERISA (or any trust established thereunder) has ever
incurred any accumulated funding deficiency (as defined in Section 302 of ERISA
and Section 412 of the Code), whether or not waived, as of the last day of the
most recent fiscal year of such Benefit Plan. With respect to any period for
which any contribution or other payment to or in respect of any Benefit Plan is
not yet due or owing, each of the Seller and the Company has made due and
sufficient current accruals for such contributions and other payments in
accordance with GAAP and SAP, and such
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current accruals through the Closing will be duly and fully provided for in the
SAP Statement of the Company for the period then ended.
(e) Each Benefit Plan is and has been operated and administered in all
material respects in accordance with all applicable Laws, including, without
limitation, ERISA and the Code. Each of the Employee Pension Benefit Plans and
Employee Welfare Benefit Plans that is intended to be qualified within the
meaning of Section 401(a) of the Code is so qualified and satisfies the
requirements of Sections 401(a) and 501(a) of the Code. There exists no fact,
condition, or set of circumstances that has or may reasonably be expected to
have a material adverse effect on the qualified status of any Employee Pension
Benefit Plan or any Employee Welfare Benefit Plan intended to be so qualified or
the intended United States federal income Tax treatment or consequences of any
Employee Pension Benefit Plan or any Employee Welfare Benefit Plan. None of the
Benefit Plans, or any related trust or funding vehicle, conducts or has
conducted any unrelated trade or business as that term is defined in Section 513
of the Code. All necessary governmental approvals, determinations, and
notifications for all Employee Pension Benefit Plans and all Employee Welfare
Benefit Plans have been obtained.
(f) Any actuarial assumptions utilized by Seller or the Company in
connection with determining the funding of each Employee Pension Benefit Plan
(as set forth in the actuarial report for such Benefit Plan) are reasonable in
all material respects. The fair market value of the Assets or Properties held
under each Employee Pension Benefit Plan exceeds the actuarially determined
present value of all accrued benefits of such Benefit Plan (whether or not
vested) determined on an ongoing-Benefit Plan basis.
(g) Except as disclosed in Section 3.15(g) of the Disclosure Schedule, and
except for claims by third parties for benefits owed to participants or
beneficiaries under the Benefit Plans, and except for divorce proceedings, there
are no pending or (to the best knowledge of the Seller) threatened actions,
suits, investigations, or other proceedings by any present or former participant
or beneficiary under any Benefit Plan (or any beneficiary of any such
participant or beneficiary) involving any Benefit Plan or any rights or benefits
under any Benefit Plan or any rights or benefits under any Benefit Plan other
than ordinary and usual claims for benefits by participants or beneficiaries
thereunder. There is no writ, judgment, decree, injunction, or similar order of
any court, governmental or regulatory authority, or other similar Person
outstanding against or in favor of any Benefit Plan or any fiduciary thereof.
3.16 Properties. Except as disclosed in Section 3.16 of the Disclosure
Schedule (with paragraph references corresponding to those set forth below):
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(a) The Company has good and valid title to all debentures, notes, stocks,
securities, and other assets that are of a type required to be disclosed in
Schedules B through DB of its Annual Statement and that are owned by it, free
and clear of all Liens.
(b) The Company owns good and indefeasible title to, or has a valid
leasehold interest in, all real property used in the conduct of its business,
operations, or affairs or of a type required to be disclosed in Schedule A of
the Company's Annual Statement, free and clear of all Liens. All such real
property, other than raw land, is in good operating condition and repair and is
suitable for its current uses. No improvement on any such real property owned,
leased, or held by the Company encroaches upon any real property of any other
Person. The Company owns, leases, or has a valid right under Contract to use
adequate means of ingress and egress to, from, and over all such real property.
(c) The Company owns good and indefeasible title to, or has a valid
leasehold interest in or has a valid right under Contract to use, all tangible
personal property that is used in the conduct of its business, operations, or
affairs, free and clear of all Liens. All such tangible personal property is in
good operating condition and repair and is suitable for its current uses.
(d) The Company has, and at all times after the Closing will have, the
right to use, free and clear of any royalty or other payment obligations, claims
of infringement or alleged infringement, or other Liens, all marks, names,
trademarks, service marks, patents, patent rights, assumed names, logos, trade
secrets, copyrights, trade names, and service marks that are used in the conduct
of its business, operations, or affairs (of which a true and complete list and
description is disclosed in Section 3.16(e) of the Disclosure Schedule), and all
computer software, programs, and similar systems owned by or licensed to the
Seller, the Company or any Affiliate of the Company or used in the conduct of
their business, operations, or affairs (of which a true and complete list and
description is disclosed in Section 3.16(e) of the Disclosure Schedule). Neither
the Seller nor the Company is in conflict with or in violation or infringement
of, nor has the Seller or the Company received any notice of any conflict with
or violation or infringement of or any claimed conflict with, any asserted
rights of any other Person with respect to any intellectual property or any
computer software, programs, or similar systems, including, without limitation,
any of such items disclosed in Section 3.16(e) of the Disclosure Schedule.
3.17 Contracts. Section 3.17 of the Disclosure Schedule (with paragraph
references corresponding to those set forth below) contains a true and complete
list of each of the following Contracts or other documents or arrangements (true
and complete copies, or, if none, written descriptions, of which have been made
available to the Purchaser, together with all amendments thereto), to which the
Company is a party or by which any of its Assets and Properties is or may be
bound:
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(a) all employment, agency, consultation, or representation Contracts or
other Contracts of any type (including, without limitation, loans or advances)
with any present officer, director, employee, agent, consultant, or other
similar representative of the Company (or former officer, director, employee,
agent, consultant or similar representative of the Company, if there exists any
present or future liability with respect to such Contract, whether now existing
or contingent) (other than Contracts with consultants and similar
representatives who do not receive compensation of $25,000 or more per year and
other than employment or agency Contracts, not containing terms which are unduly
burdensome to the Company, with agents who do not receive compensation of
$25,000 or more per year), and the name, position, and rate of compensation of
each such Person and the expiration date of each such Contract, as well as all
sick leave, vacation, holiday, and other similar practices, procedures, and
policies of each of the Seller or the Company established or administered other
than as Benefit Plans;
(b) all Contracts with any Person containing any provision or covenant
limiting the ability of the Company to engage in any line of business or to
compete with or to obtain products of services from any Person or limiting the
ability of any Person to compete with or to provide products or services to the
Company;
(c) all partnership, joint venture, profit-sharing, or similar Contracts
with any Person (other than Benefit Plans);
(d) all Contracts relating to the borrowing of money by the Company or to
the direct or indirect guarantee by the Company of any obligation for borrowed
money in excess of $25,000 in the aggregate for the Company or any of its
Affiliates, or any other Liability in respect of indebtedness of any other
Person, including without limitation any Contract relating to the maintenance of
compensating balances that are not terminable by the Company without penalty
upon not more than sixty (60) calendar days' notice, any line of credit or
similar facility, the payment for property, products, or services of any other
Person even if such property, products, or services are not conveyed, delivered,
or rendered, or the obligation to take-or-pay, keep-well, make-whole, or
maintain surplus or earnings levels or perform other financial ratios or
requirements; Section 3.17(d) of the Disclosure Schedule contains a true and
complete list of any requirements for consents or approvals of creditors needed
to consummate the transactions contemplated hereby;
(e) all leases or subleases of real property used in the Company's
business, operations, or affairs, and all other leases, subleases, or rental or
use Contracts for which the Company is liable;
(f) all Contracts relating to the future disposition or acquisition of any
investment in or security of any Person or of any interest in any business
enterprise
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(other than the disposition or acquisition of investments in the ordinary course
of business and consistent with past practice);
(g) all Contracts or arrangements (including, without limitation, those
relating to the sharing or allocation of expenses, personnel, services, or
facilities) between or among the Seller or the Company and any of their
Affiliates or any other Person who is described in Section 3.10(p);
(h) all reinsurance, coinsurance, or other similar Contracts indicating,
with respect to each such Contract, the information required to be disclosed in
Schedule S of the Company's Annual Statement;
(i) all outstanding proxies, powers of attorney, or similar delegations of
authority of the Company, except for powers of attorney for the service of
process pursuant to applicable insurance Laws, except as incident to
participation by the Company in the Insurance Guaranty Fund of any State wherein
the Company is required or elects to participate in such fund.
(j) all Contracts for any product, service, equipment, facility, or similar
item (other than insurance and annuity Contracts issued, reinsured, or
underwritten by the Company and other than reinsurance, coinsurance, and other
similar Contracts) that by their respective terms do not expire or terminate or
are not terminable by the Company, without penalty or other Liability, within
six (6) months after December 31, 1994; and
(k) all other Contracts (other than insurance and annuity Contracts issued,
reinsured, or underwritten by the Company) that involve the payment or potential
payment pursuant to the terms of such Contracts, by or to the Company of more
than $10,000 individually or in the aggregate or that are otherwise material to
the Business or Condition of the Company.
Each Contract disclosed or required to be disclosed in the Disclosure
Schedule pursuant to this Section is in full force and effect and constitutes a
legal, valid, and binding obligation of the Company and of each other Person
that is a party thereto in accordance with its terms; and neither the Company
nor (to the best knowledge of the Seller and the Company) any other party to
such Contract is in violation or breach of or default under any such Contract
(or with or without notice or lapse of time or both, would be in violation or
breach of or default under any such Contract). Except as disclosed in Section
3.17 of the Disclosure Schedule (with a specific reference to this sentence),
the Company is not a party to or bound by any Contract that was not entered into
in the ordinary course of business and consistent with past practice or that has
or may reasonably be expected to have, individually or in the aggregate with any
other Contracts, a material adverse effect on the Business or Condition of the
Company. The Company is not a party to or bound by any collective bargaining or
similar labor Contract.
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3.18 Insurance Issued by the Company. Except as required by Law or except as
disclosed in Section 3.18 of the Disclosure Schedule (with paragraph references
corresponding to those set forth below):
(a) All insurance or annuity Contract benefits payable to the Company by
any other Person that is a party to or bound by any reinsurance, coinsurance, or
other similar Contract with the Company have in all material respects been paid
in accordance with the terms of the insurance, annuity, and other Contracts
under which they arose, except for such benefits for which the Company
reasonably believes there is a reasonable basis to contest payment.
(b) No outstanding insurance or annuity Contract issued, reinsured, or
underwritten by the Company entitles the holder thereof or any other Person to
receive dividends, distributions, or to share in the income of the Company or
receive any other benefits based on the revenues or earnings of the Company or
any other Person.
(c) The underwriting standards utilized and ratings applied by the Company
and (to the best knowledge of the Seller and the Company) by any other Person
that is a party to or bound by any reinsurance, coinsurance, or other similar
Contract with the Company conform in all material respects to industry accepted
practices and to the standards and ratings required pursuant to the terms of the
respective reinsurance, coinsurance, or other similar Contracts.
(d) To the best knowledge of the Seller and the Company, all amounts to
which the Company is entitled under reinsurance, coinsurance, or other similar
Contracts (including without limitation amounts based on paid and unpaid losses)
are fully collectible.
(e) To the best knowledge of the Seller and the Company, each insurance
agent, at the time such agent wrote, sold, or produced business for the Company,
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 for the Company.
(f) To the best knowledge of the Seller and the Company, no such insurance
agent violated (or with or without notice or lapse of time or both, would have
violated) any term or provision of any Law or any writ, judgment, decree,
injunction, or similar order applicable to the writing, sale, or production of
business for the Company.
(g) The tax treatment under the Code of all insurance, annuity or
investment policies, plans, or contracts; all financial products, employee
benefit plans, individual retirement accounts or annuities; or any similar or
related policy, contract,
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plan, or product, whether individual, group, or otherwise, issued or sold by the
Company is and at all times has been 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 its issuance or purchase. For purposes of this Section 3.18(g), the
provisions of the Code relating to the tax treatment of such contracts shall
include, but not be limited to, Sections 72, 79, 89, 101, 104, 105, 106, 125,
130, 401, 402, 403, 404, 408, 412, 415, 419, 419A, 501, 505, 817, 818, 7702, and
7702A of the Code.
(h) There are no reinsurance, coinsurance, or other similar Contracts under
which the Company receives or has received surplus relief.
3.19 Threats of Cancellation. Except as disclosed in Section 3.19 of the
Disclosure Schedule, since December 31, 1994 no policyholder, group of
policyholder Affiliates, or Persons writing, selling, or producing insurance
business that individually or in the aggregate accounted for five percent 5% or
more of the premium or annuity income of the Company for the year ended December
31, 1994, has terminated or (to the best knowledge of the Seller or the Company)
threatened to terminate its relationship with the Company.
3.20 Licenses and Permits. Except as disclosed in Section 3.20 of the
Disclosure Schedule (with paragraph references corresponding to those set forth
below):
(a) The Company owns or validly holds, all licenses, franchises, permits,
approvals, authorizations, exemptions, classifications, certificates,
registrations, and similar documents or instruments that are required for its
business, operations, and affairs and that the failure to so own or hold has or
may reasonably be expected to have a material adverse effect on its Business or
Condition.
(b) All such licenses, franchises, permits, approvals, authorizations,
exemptions, classifications, certificates, registrations, and similar documents
or instruments are valid and in full force and effect, and free of any
restrictions imposed by any Person.
3.21 Operations Insurance. Section 3.21 of the Disclosure Schedule contains
a true and complete list and description of all liability, property, workers
compensation, directors and officers liability, and other similar insurance
Contracts that insure the business, operations, or affairs of the Company or
affect or relate to the ownership, use, or operations of any of the Assets and
Properties of the Company and that have been issued to the Company or any of its
Affiliates (including, without limitation, the names and addresses of the
insurers, the expiration dates thereof, and the annual premiums and payment
terms thereof) or that are held by the Company or by any Affiliate of the Seller
for the benefit of the Company following the Closing. All such insurance is in
full force and effect and (to the best knowledge of the Seller and the Company)
is with financially sound and reputable insurers and, in light of the business,
operations, and affairs of the Company, is in amounts and provides coverage that
are reasonable and customary for Persons in similar businesses.
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3.22 Intercompany Accounts. Except as reflected in the December 31, 1994 SAP
Statement, or except as disclosed in Section 3.22 of the Disclosure Schedule,
there are no accounts between the Company and any of its Affiliates, and neither
the Seller nor any of its Affiliates provides or causes to be provided to the
Company any products, services, equipment, facilities, or similar items that,
individually or in the aggregate are or may reasonably be expected to be
material to the Business or Condition of the Company. Except as disclosed in
Section 3.22 of the Disclosure Schedule, since December 31, 1994 no such
intercompany accounts in excess of $10,000 have been paid or received, and all
settlements of such intercompany accounts have been made, and all allocations of
such intercompany expenses have been applied, in the ordinary course of business
and consistent with past practice. All intercompany accounts shall be written
off prior to the Closing and, if constituting an admitted asset, taken into
account in calculating the Adjusted Capital and Surplus of the Company.
3.23 Bank Accounts. Section 3.23 of the Disclosure Schedule contains a true
and complete list of the names and locations of all banks, trust companies,
securities brokers, and other financial institutions at which the Company has an
account or safe deposit box or maintains a banking, custodial, trading, or other
similar relationship and a true and complete list and description of each such
account, box, and relationship, indicating in each case the account number and
the names of the officers, employees, agents, or other similar representatives
of the Company transacting business with respect thereto.
3.24 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by the Seller directly
with the Purchaser, without the intervention of any Person on behalf of the
Seller in such manner as to give rise to any valid claim by any Person against
the Purchaser or the Seller for a finder's fee, brokerage commission, or similar
payment.
3.25 Disclosure. Neither this Agreement nor any certificate furnished by
the Seller or the Company to the Purchaser in connection with this Agreement or
the transactions contemplated hereby contains any untrue statement of a material
fact by the Seller or the Company or omits to state a material fact by the
Seller or the Company necessary to make the statements herein or therein not
misleading in light of the circumstances in which they were made.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser hereby represents and warrants to the Seller as follows:
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4.1 Organization. The Purchaser is a corporation duly organized, validly
existing, and in good standing under the Laws of the State of Indiana and has
full corporate power and authority to enter into this Agreement and to perform
its obligations under this Agreement. The Purchaser is duly licensed, qualified,
or admitted to do business and is in good standing in all jurisdictions in which
the failure to be so licensed, qualified, or admitted and in good standing,
individually or in the aggregate with other such failure, has or may reasonably
be expected to have a material adverse effect on the validity or enforceability
of this Agreement, on the ability of the Purchaser to perform its obligations
under this Agreement or on the Business or Condition of the Purchaser.
4.2 Authority. The Board of Directors of the Purchaser has duly and validly
approved this Agreement and the transactions contemplated hereby. The execution
and delivery of this Agreement by the Purchaser and the performance by the
Purchaser of its obligations under this Agreement have been duly and validly
authorized by all necessary corporate action on the part of the Purchaser. This
Agreement constitutes a legal, valid, and binding obligation of the Purchaser
and is enforceable against the Purchaser in accordance with its terms, except to
the extent that enforcement may be limited by or subject to any bankruptcy,
insolvency, reorganization, moratorium, or similar Laws now or hereafter in
effect relating to or limiting creditors' rights generally and the remedy of
specific performance and injunctive and other forms of equitable relief are
subject to certain equitable defenses and to the discretion of the court or
other similar Person before which any proceeding therefor may be brought.
4.3 No Conflicts or Violations. The execution and delivery of this
Agreement by the Purchaser do not, and the performance by the Purchaser of its
obligations under this Agreement will not:
(a) subject to obtaining the approvals contemplated by Section 6.1 hereof,
violate any term or provision of any Law or any writ, judgment, decree,
injunction, or similar order applicable to the Purchaser;
(b) conflict with or result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default under, any of the
terms, conditions, or provisions of the articles of incorporation or bylaws of
the Purchaser;
(c) except as disclosed in writing to the Seller, result in the creation or
imposition of any Lien upon the Purchaser or any of its Assets and Properties
that individually or in the aggregate with any other Liens has or may reasonably
be expected to have a material adverse effect on the validity or enforceability
of this Agreement or on the ability of the Purchaser to perform its obligations
under this Agreement;
(d) except as disclosed in writing to the Seller, conflict with or result
in a violation or breach of, or constitute (with or without notice or lapse of
time or both)
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a default under, or give to any person any right of termination, cancellation,
acceleration, or modification in or with respect to, any Contract to which the
Purchaser is a party or by which any of its Assets and Properties may be bound
and as to which any such conflicts, violations, breaches, defaults, or rights
individually or in the aggregate have or may reasonably be expected to have a
material adverse effect on the validity or enforceability of this Agreement or
on the ability of the Purchaser to perform its obligations under this Agreement;
or
(e) require the Purchaser to obtain any consent, approval, or action of, or
make any filing with or give any notice to, any Person except as contemplated in
Section 6.1, as disclosed in writing to the Seller, or those which the failure
to obtain, make, or give individually or in the aggregate with other such
failures has or may reasonably be expected to have no material adverse effect on
the validity or enforceability of this Agreement or on the ability of the
Purchaser to perform its obligations under this Agreement.
4.4 Litigation. There are no actions, suits, investigations, or proceedings
pending against the Purchaser, or (to the best knowledge of the Purchaser)
threatened against the Purchaser, at law or in equity, in, before, or by any
Person, that individually or in the aggregate have or may reasonably be expected
to have a material adverse effect on the validity or enforceability of this
Agreement, on the ability of the Purchaser to perform its obligations under this
Agreement or on the Business and Condition of the Purchaser.
4.5 Purchase for Investment. The Shares will be acquired by the Purchaser
for its own account for the purpose of investment. The Purchaser agrees that: it
will not offer, sell, pledge, hypothecate, or otherwise dispose of the shares
unless such offer, sale, pledge, hypothecation or other disposition is (i)
registered under the Securities Act of 1933 and any other applicable securities
laws, or (ii) in compliance with an opinion of counsel to the Purchaser,
delivered to the Seller and reasonably acceptable to it, to the effect that such
offer, sale, pledge, hypothecation or other disposition does not violate the
Securities Act of 1933 or such other securities laws; and the certificate(s)
representing the Shares shall bear a legend evidencing the restrictions or
transfer set forth in the foregoing clause (a).
4.6 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by the Purchaser directly
with the Seller, without the intervention of any Person on behalf of the
Purchaser in such manner as to give rise to any valid claim by any Person
against the Seller or the Purchaser for a finder's fee, brokerage commission,
or similar payment.
4.7 Disclosure. Neither this Agreement nor any certificate furnished by the
Purchaser to the Seller in connection with this Agreement or the transactions
contemplated hereby contains any untrue statement by the Purchaser of material
fact or omits to state a material fact by the Purchaser necessary to make the
statements herein or therein not misleading in light of the circumstances in
which they were made.
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ARTICLE V
COVENANTS OF SELLER AND COMPANY
The Seller and the Company covenant and agree with the Purchaser that, at
all times before the Closing, the Seller and the Company will comply with all of
the covenants and provisions of this Article V, except to the extent the
Purchaser may otherwise consent in writing or to the extent otherwise required
or permitted by this Agreement.
5.1 Regulatory Approvals. The Seller and the Company will (a) take all
commercially reasonable steps necessary or desirable, and proceed diligently and
in good faith and use all commercially reasonable efforts to obtain, as promptly
as practicable, all approvals and consents required by the applicable Contract
of any holder of indebtedness of the Seller or the Company; (b) take all
commercially reasonable steps necessary or desirable, and proceed diligently and
in good faith and use all commercially reasonable efforts to obtain, as promptly
as practicable, all approvals, authorizations, and clearances of governmental
and regulatory authorities required of the Seller or the Company to consummate
the transactions contemplated hereby; (c) provide such other information and
communications to such governmental and regulatory authorities as the Purchaser
or such authorities may reasonably request; and (d) cooperate with the Purchaser
in obtaining, as promptly as practicable, all approvals, authorizations, and
clearances of governmental or regulatory authorities and others required of the
Purchaser to consummate the transactions contemplated hereby, including, without
limitation, any required approvals of the insurance regulatory authorities in
the State of Mississippi and the State of Indiana.
5.2 Investigation by the Purchaser. The Seller and the Company will provide
(a) the Purchaser, its lenders, and their respective counsel, accountants,
actuaries, and other representatives with full access, upon prior notice and
during normal business hours, to all facilities, officers, employees, agents,
accountants, actuaries, Assets and Properties, and Books and Records of the
Seller and the Company and will furnish the Purchaser and such other Persons
during such period with all such information and data (including, without
limitation, copies of Contracts, Benefit Plans, and other Books and Records)
concerning the business, operations, and affairs of the Company as the Purchaser
or any of such other Persons reasonably may request and (b) the Purchaser with
timely notice of and full access to the minutes of all meetings (and all actions
by written consent in lieu thereof) of the board of directors and stockholders
of the Company involving matters which are not in the ordinary course of
business and consistent with past practice, except such minutes of meetings as
involve only matters related to the consummation of the transactions
contemplated herein.
5.3 No Negotiations, etc. The Seller and the Company will not take, and
will not permit any Affiliate of the Seller or the Company (or permit any other
Person acting for or on behalf of the Seller or the Company or any Affiliate of
the Seller or the Company) to take, directly or indirectly, any action (a) to
seek or encourage any offer or proposal from
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any Person to acquire any shares of capital stock or any other securities of the
Company or any interest therein or Assets and Properties thereof or any interest
therein; (b) to merge, consolidate, or combine, or to permit any other Person
to merge, consolidate or combine, with the Company; (c) to liquidate, dissolve,
or reorganize the Company in any manner; (d) to acquire or transfer any Assets
and Properties of the Company or any interests therein, except as contemplated
by the terms of this Agreement; (e) to reach any agreement or understanding
(whether or not such agreement or understanding is absolute, revocable,
contingent, or conditional) for, or otherwise to attempt to consummate, any such
acquisition, transfer, merger, consolidation, combination, or reorganization; or
(f) to furnish or cause to be furnished any information with respect to the
Company to any Person (other than the Purchaser or the Mississippi Department of
Insurance) that the Seller or the Company or any Affiliate of the Seller or the
Company (or any Person acting for or on behalf of the Seller, the Company or any
other Affiliate of the Seller or the Company) knows or has reason to believe is
in the process of attempting or considering any such acquisition, transfer,
merger, consolidation, combination, liquidation, dissolution, or reorganization.
If the Seller, the Company or any other Affiliate of the Seller or the Company
receives from any Person (other than the Purchaser) any offer, proposal,
informational request, inquiry or contact that is subject to this Section, the
Seller will promptly advise such Person, by written notice, of the terms of this
Section and will promptly deliver a copy of such notice to the Purchaser and
advise the Purchaser fully concerning the identity of such Person, the terms of
any proposal or offer, or the nature of any informational request, inquiry or
contact which is made.
5.4 Conduct of Business. The Company will conduct its business only in the
ordinary course and consistent with past practices. Without limiting the
generality of the foregoing:
(a) The Seller and the Company will use all commercially reasonable efforts
to (i) preserve intact the Company's present business organization, reputation,
and policyholder relations; (ii) keep available the services of the Company's
present officers, directors, employees, agents, consultants, and other similar
representatives; (iii) maintain all licenses, qualifications, and authorizations
of the Company to do business in each jurisdiction in which it is so licensed,
qualified, or authorized; (iv) maintain in full force and effect all Contracts,
documents, and arrangements referred to in Section 3.17 hereof, (v) maintain all
Assets and Properties of the Company in good working order and condition,
ordinary wear and tear excepted and (vi) continue all current marketing and
selling activities relating to the business, operations, or affairs of the
Company, except the Company shall not issue or commit to issue any insurance or
annuity Contracts except (A) pursuant to existing insurance or annuity Contract
provisions or (B) insurance or annuity contracts which have no impact on
Adjusted Capital and Surplus.
(b) The Seller and the Company will cause the Books and Records of the
Company to be maintained in the usual manner and consistent with past practices
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and will not permit a material change in any underwriting, investment,
actuarial, financial reporting, or accounting practices or policies of the
Company or in any assumption underlying such practices or policies, or in any
method of calculating any bad debt, contingency, or other reserve for financial
reporting purposes or for other accounting purposes (including, without
limitation, any practice, policy, assumption, or method relating to or affecting
the determination of the Company's investment income, reserves or other similar
amounts, or operating ratios with respect to expenses, losses, or lapses).
(c) The Seller and the Company will: (i) properly prepare and duly and
timely file all reports and all Tax Returns required to be filed with any
governmental or regulatory authorities with respect to the business, operations,
or affairs of the Company; and (ii) duly and fully pay all Taxes indicated by
such Tax Returns or otherwise levied or assessed upon the Company or any of its
Assets and Properties, and withhold or collect and pay to the proper taxing
authorities or hold in separate bank accounts for such payment all Taxes that
the Company is required to so withhold or collect and pay, unless such Taxes are
being contested in good faith and, if appropriate, reasonable reserves therefor
have been established and reflected in the Books and Records of the Company in
accordance with GAAP and SAP.
(d) The Company will: (i) cause all reserves and other similar amounts with
respect to insurance and annuity Contracts established or reflected in the
Company's Books and Records to be (A) established and reflected on a basis
consistent with those reserves and other similar amounts and reserving methods
followed by the Company at December 31, 1994 and (B) good, sufficient and
adequate (under generally accepted actuarial principles consistently applied) to
cover the total amount of all reasonably anticipated matured and unmatured
benefits, dividends, losses, claims, expenses, and other Liabilities of the
Company under all insurance and annuity Contracts pursuant to 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
Contract); and (ii) continue to own assets that qualify as legal reserve assets
under all applicable insurance Laws in an amount at least equal to the required
reserves of the Company and other similar amounts.
(e) The Company will use all commercially reasonable efforts to maintain in
full force and effect until the Closing substantially the same levels of
coverage as the insurance afforded under the Contracts listed in Section 3.21 of
the Disclosure Schedule. Any and all benefits under such Contracts paid or
payable (whether before or after the effective date of this Agreement) with
respect to the business, operations, affairs, or Assets and Properties of the
Company will be paid to the Company.
(f) The Company will continue to comply, in all material respects, with all
Laws applicable to its business, operations, or affairs.
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(g) The Company will determine its Adjusted Capital and Surplus consistent
with past practices for determining capital and surplus on its Financial
Statements for any interim period.
(h) The Company will not enter into any reinsurance Contracts (whether as
the ceding company or the assuming company).
5.5 Financial Statements and Reports. (a) As promptly as practicable after
March 31, 1995, the Seller will deliver to the Purchaser a true and complete
copy of the SAP Statement filed by the Company for the quarter ended March 31,
1995, and for each quarter thereafter until Closing, prepared in accordance with
SAP and which shall present fairly the financial condition, the Assets and
Properties, and the Liabilities of the Company as of the date thereof and the
results of operations, capital and surplus account, and cash flow of the Company
for and during each of the periods covered thereby.
(b) The Seller will deliver to Purchaser audited GAAP Financial Statements
for the Company for each of the years ended December 31, 1992, 1993 and 1994
(and the notes relating thereto), and unaudited financial statements for the
quarter ended March 31, 1995, and for each quarter thereafter until Closing,
prepared in accordance with GAAP which shall present fairly the financial
condition, the Assets and Properties, and the Liabilities of the Company as of
the date thereof and the results of operations, capital and surplus account, and
cash flow of the Company for and during each of the periods covered thereby,
within thirty (30) days after Closing.
5.6 Investments. The Company will invest its future cash flow, any cash
from matured and maturing investments, any cash proceeds from the sale of its
Assets and Properties, and any cash funds currently held by the Company, in the
ordinary course of its business and consistent with past practices to meet the
Company's reasonably anticipated current obligations. The Company will take no
actions unless approved in writing by the Purchaser to sell or transfer any
Assets and Properties other than in the ordinary course of business.
5.7 Employee Matters.
(a) Except as may be required by Law or as disclosed in Section 5.7 of the
Disclosure Schedule, or except for such representations, promises, changes,
alterations, or amendments that do not and will not result in any Liability to
the Company or the Purchaser, the Seller and the Company will refrain from
directly or indirectly:
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(i) making any representation or promise, oral or written, to any officer,
director, employee, agent, consultant, or other similar representative of the
Company concerning any Benefit Plan;
(ii) making any change to, or amending in any way, the Contracts, salaries,
wages, or other compensation of any officer, director, employee, agent,
consultant, or other similar representative of the Company whose annual
compensation exceeds $25,000, other than routine changes or amendments that (a)
are made in the ordinary course of business and consistent with past practices,
(b) do not and will not result in increases of more than five percent (5%) in
the salary, wages, or other compensation of any such Person, and (c) do not and
will not exceed, in the aggregate, five percent (5%) of the total salaries,
wages, and other compensation of all employees of the Company;
(iii) adopting, entering into, amending, altering, or terminating,
partially or completely, any Benefit Plan;
(iv) adopting, entering into, amending, altering, or terminating, partially
or completely, any employment, agency, consultation, or representation Contract
that is, or had it been in existence on the effective date of this Agreement
would have been, required to be disclosed in Section 3.17(a) of the Disclosure
Schedule;
(v) approving any general or company-wide pay increases for officers,
directors, employees, agents, consultants, or other similar representatives of
the Company; or
(vi) entering into any Contract with any officer, director, employee,
agent, consultant, or other similar representative of the Company that is not
terminable by the Company, without penalty or other Liability, upon not more
than sixty (60) calendar days' notice.
5.8 No Charter Amendments. The Seller and the Company will not amend the
articles or certificate of incorporation or Bylaws of the Company and will
refrain from taking any action with respect to any such amendment.
5.9 No Issuance of Securities. The Seller and the Company will refrain from
authorizing or issuing, any shares of capital stock or other equity securities
of the Company, or from entering into any Contract or granting any option,
warrant, or right calling for the authorization or issuance of any such shares
or other equity securities, or creating or issuing any securities directly or
indirectly convertible into or exchangeable for any such shares or other equity
securities, or issuing any options, warrants, or rights to purchase any such
convertible securities.
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5.10 No Dividends. Except for dividends and distributions declared after the
date of this Agreement in conformity with this Agreement or which have been
approved in writing by the Purchaser and for which any required regulatory
approvals have been received, the Company will refrain from declaring, setting
aside, or paying any dividend or other distribution in respect of its capital
stock and from directly or indirectly redeeming, purchasing, or otherwise
acquiring any of its capital stock or any interest in or right to acquire any
such stock.
5.11 No Disposal of Property. Except as set forth in Section 5.11 of the
Disclosure Schedule or as expressly provided in this Agreement, the Company will
not (a) dispose of any of its Assets and Properties or permit any of its Assets
and Properties to be subjected to any Liens, except to the extent any such
disposition or any such Lien is made or incurred in the ordinary course of the
business and consistent with past practices, (b) sell any material part of its
insurance products, operations, or business to any third party (other than sales
of insurance products in the ordinary course of business consistent with past
practices pursuant to Section 5.4(a)), (c) enter into any contracts obligating
the Company to administer the insurance operations of any Person other than any
Affiliate, (d) enter into any Contracts permitting any Person other than any
Affiliate of the Company to administer the Company's insurance operations, or
(e) enter into or assume any Contract, if doing so could involve a loss, cost,
expense or commitment in excess of $10,000.
5.12 No Breach or Default. The Company will not violate or breach, and will
not take or fail to take any action that (with or without notice or lapse of
time or both) would constitute a violation, breach, or default in any way under
any term or provision of any Contract to which it is a party or by which any of
its Assets and Properties is or may be bound.
5.13 No Indebtedness. The Company will not create, incur, assume, guarantee,
or otherwise become liable for, and will not cancel, pay, agree to cancel or
pay, or otherwise provide for a complete or partial discharge in advance of a
scheduled payment date with respect to, any Liability, and will not waive any
right to receive any direct or indirect payment or other benefit under any
Liability owing to it.
5.14 No Acquisitions. The Company will not (a) merge, consolidate, or
otherwise combine or agree to merge, consolidate, or otherwise combine with any
other Person, (b) acquire or agree to acquire blocks of business of, or all or
substantially all the Assets and Properties or capital stock or other equity
securities of any other Person, or (c) otherwise acquire or agree to acquire
control or ownership of any other Person.
5.15 Intercompany Liabilities. At least five Business Days before the
Closing, the Seller will deliver to the Purchaser a true and complete list and
description of all Liabilities between the Company and any Affiliate of the
Company to be outstanding on the Closing Date. The Company will not enter into
any Contract or, except as required by any
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Contract disclosed in Section 3.17(g) of the Disclosure Schedule, engage in any
transaction with any of its Affiliates.
5.16 Resignations of Officers and Directors. Seller and the Company will
cause the members of the Board of Directors and officers of the Company to
tender, effective at the Closing, their resignations from the Board of Directors
and offices then held by such officers in the Company.
5.17 Tax Matters. The Seller will refrain and will cause the Company to
refrain (a) from making, filing, or entering into (whether before or after the
Closing) any election, consent, or agreement described in Section 3.12(e) or
Section 3.12(f) with respect to the Company or any of its Assets and Properties
and (b) from amending or cancelling any reinsurance or coinsurance Contract.
5.18 Dismissal of Pending Litigation. Seller will cause the counterclaim
filed in the action entitled "Standard Management Corporation v. Dixie National
Corporation", currently pending in the Marion County, Indiana Superior Court as
Cause No. 49D129410-CP-0107, to be dismissed with prejudice, effective at the
Closing, and to release any claim to the principal sum of Two Hundred Fifty
Thousand Dollars ($250,000) plus accrued interest thereon. Seller shall pay all
attorneys fees incurred by Seller or Company in said litigation.
5.19 Disclosure Schedule. The Seller shall deliver the Disclosure Schedule
to the Purchaser no later than fifteen (15) days after the date hereof.
5.20 Shareholder Meeting. The Seller shall call a meeting of shareholders of
the Seller as promptly as possible after the date of this Agreement to secure
shareholder approval to the transactions described herein.
5.21 Notice and Cure. The Seller will notify the Purchaser promptly in
writing of, and contemporaneously will provide the Purchaser with true and
complete copies of any and all information or documents relating to, and will
use all commercially reasonable efforts to cure before the Closing, any event,
transaction, or circumstance occurring after the effective date of this
Agreement that causes or will cause any covenant or agreement of the Seller
under this Agreement to be breached, or that renders or will render untrue any
representation or warranty of the Seller contained in this Agreement as if the
same were made on or as of the date of such event, transaction, or circumstance.
The Seller also will use all commercially reasonable efforts to cure, before the
Closing, any violation or breach of any representation, warranty, covenant, or
agreement made by it in this Agreement, whether occurring or arising before or
after the effective date of this Agreement.
5.22 Triennial Report. The Seller shall promptly deliver all preliminary and
final reports of the financial examination of the Company issued by the State of
Mississippi for the three (3) year period ending December 31, 1994.
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ARTICLE VI
COVENANTS OF PURCHASER
The Purchaser covenants and agrees with the Seller that, at all times before
the Closing and with respect to Sections 6.2 and 6.3, after Closing, the
Purchaser will comply with all covenants and provisions of this Article VI,
except to the extent the Seller may otherwise consent in writing or to the
extent otherwise required or permitted by this Agreement.
6.1 Regulatory Approvals. The Purchaser will (a) take all commercially
reasonable steps necessary or desirable, including the filings required to be
made with the Departments of Insurance of the States of Mississippi and Indiana
which shall be made within thirty (30) days of the date hereof, and proceed
diligently and in good faith and use all commercially reasonable efforts to
obtain, as promptly as practicable, all approvals, authorizations, and
clearances of governmental and regulatory authorities required of the Purchaser
to consummate the transactions contemplated hereby; (b) provide such other
information and communications to such governmental and regulatory authorities
as the Seller or such authorities may reasonably request; and (c) cooperate with
the Seller in obtaining, as promptly as practicable, all approvals,
authorizations, and clearances of governmental or regulatory authorities
required of the Seller to consummate the transactions contemplated hereby.
6.2 Home Office Lease. The Purchaser will cause the Company to comply with
the monthly payment obligations of that certain home office lease on premises
located at 3760 I-55 North, Jackson, Mississippi 39211 (the "Premises"), through
December 31, 1996, with the lessor, Vanguard, Inc., a wholly-owned subsidiary of
the Seller, at the rental rate of Fifteen Thousand Dollars ($15,000) per month.
For the first six months after Closing, Purchase shall pay for routine
maintenance, casualty insurance and ad valorem taxes not to exceed $5,000.00 per
month. The Purchaser will vacate the Premises within six (6) months after
Closing except for reasonable office facilities, furniture and equipment
suitable for two (2) executives and one (1) secretary of the Company to be
occupied through December 31, 1996. During the remainder of the lease following
Closing, Seller may use and occupy all portions of the Premises not reserved for
use of the Company hereunder. During the six (6) month transitional period, the
Purchaser shall be entitled to use such furniture and equipment currently
located on the Premises for employees of the Company.
6.3 Assignment of Certain Agent Debit Balances. After Closing, the Purchaser
will cause the Company to pay to Seller the first One Hundred Seventy Five
Thousand Dollars ($175,000) recovered by the Company with respect to agent debit
balances. The Purchaser will cause the Company to take commercially reasonable
efforts to recover such agent debit balances; however, the decision to institute
litigation shall be at the sole
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discretion of the Purchaser. The Seller agrees to reasonably cooperate with the
Purchaser in its efforts to recover said agent debit balances.
6.4 Notice and Cure. The Purchaser will notify the Seller promptly in
writing of, and contemporaneously will provide the Seller with true and complete
copies of any and all information or documents relating to, and will use all
commercially reasonable efforts to cure before the Closing, any event,
transaction, or circumstance occurring after the effective date of this
Agreement that causes or will cause any covenant or agreement of the Purchaser
under this Agreement to be breached, or that renders or will render untrue any
representation or warranty of the Purchaser contained in this Agreement as if
the same were made on or as of the date of such event, transaction, or
circumstance. The Purchaser also will use all commercially reasonable efforts to
cure, before the Closing, any violation or breach of any representation,
warranty, covenant, or agreement made by it in this Agreement, whether occurring
or arising before or after the effective date of this Agreement.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of the Purchaser hereunder are subject to the fulfillment,
at or before the Closing, of each of the following conditions (all or any of
which may be waived in whole or in part by the Purchaser).
7.1 Representations and Warranties. The representations and warranties made
by the Seller in this Agreement and the statements of the Seller contained in
the Disclosure Schedule shall be true as of the effective date of this
Agreement, the certifications given pursuant to Section 5.5(c) shall be true as
of the date given, and all of such representations, warranties, certifications
and statements shall be true on and as of the Closing Date as though such
representations, warranties, certifications and statements were made on and as
of the Closing Date.
7.2 Performance. The Seller and the Company shall have performed and
complied with all agreements, covenants, obligations, and conditions required by
this Agreement to be so performed or complied with by the Seller and/or the
Company at or before the Closing, including those specifically referred to
elsewhere in this Article VII.
7.3 Certificates of Officer of Seller. The Seller shall have delivered to the
Purchaser a certificate, dated the Closing Date in the form of Exhibit C hereto
and executed by the chief executive officer or chief financial officer of the
Seller, certifying (with respect to the Seller and, as appropriate, the Company)
as to the fulfillment of the conditions set forth in this Article VII. In
addition, the Seller shall have delivered to the Purchaser a certificate, dated
the Closing Date and executed by the secretary or any assistant secretary of the
Seller, certifying that the Seller has duly and validly taken all corporate
action necessary
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to authorize its execution and delivery of this Agreement and its
performance of its obligations under this Agreement, and that the resolutions
(true and complete copies of which shall be attached to the certificate) of the
Board of Directors with respect to this Agreement and the transactions
contemplated hereby have been duly and validly adopted and are in full force and
effect.
7.4 No Injunction. There shall not be in effect on the Closing Date any writ,
judgment, injunction, decree, or similar order of any court or similar Person
restraining, enjoining, or otherwise preventing consummation of any of the
transactions contemplated by this Agreement.
7.5 No Proceeding or Litigation. There shall not be instituted, pending, or
(to the best knowledge of the Purchaser or the Seller) threatened any action,
suit, investigation, or other proceeding in, before, or by any court,
governmental or regulatory authority, or other Person to restrain, enjoin, or
otherwise prevent consummation of any of the transactions contemplated by this
Agreement or to recover any Damages or obtain other relief as a result of this
Agreement or any of the transactions contemplated hereby or as a result of any
Contract entered into in connection with or as a condition precedent to the
consummation hereof, which action, suit, investigation, or other proceeding may,
in the reasonable opinion of the Purchaser, result in a decision, ruling, or
finding that individually or in the aggregate has or may reasonably be expected
to have a material adverse effect on the validity or enforceability of this
Agreement, on the ability of the Seller, the Company or the Purchaser to perform
its respective obligations under this Agreement, or on the Business or Condition
of the Purchaser or the Company. There shall not be in effect on the Closing
Date any voluntary or involuntary bankruptcy, receivership, conservatorship, or
similar proceeding with respect to the Company or the Seller.
7.6 Consents, Authorizations, etc. All orders, consents, permits,
authorizations, approvals, and waivers of every Person disclosed pursuant to
Section 4.3 and necessary to permit the Purchaser to perform its obligations
under this Agreement and to consummate the transactions contemplated hereby and
to permit the Purchaser to acquire the Shares pursuant to this Agreement
(including, without limitation, any requisite action of the insurance regulatory
authorities in the State of Mississippi and the State of Indiana, in each case
without the abrogation or diminishment of the Company's authority or license or
the imposition of significant restrictions upon the transactions contemplated
hereby) shall have been obtained and shall be in full force and effect, and the
Seller and the Company shall have obtained all consents, approvals,
authorizations and clearances referred to in Section 5.1 and the Purchaser shall
have received evidence satisfactory to it of the receipt of such consents,
approvals, authorizations and clearances.
7.7 No Adverse Change. Except as disclosed in Section 3.10 of the Disclosure
Schedule or as specifically reflected in the December 31, 1994 Annual Statement
of the Company (it being understood that no material adverse trend has been so
disclosed or reflected), or except for changes or developments relating to the
conduct of the Company's
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business after the effective date of this Agreement in conformity with the
requests of the Purchaser, since December 31, 1994 there shall not have been,
occurred, or arisen any change in, or any event (including, without limitation,
any damage, destruction, or loss whether or not covered by insurance),
condition, or state of facts of any character that individually or in the
aggregate has or may reasonably be expected to have a material adverse effect on
the Business or Condition of the Company.
7.8 Opinion of Counsel. The Seller shall have delivered to the Purchaser the
opinion, dated the Closing Date, of Wells, Moore, Simmons & Neeld, counsel to
the Seller, to the effect set forth in Exhibit E hereto.
7.9 Resignation of Officers and Directors. The resignations of the members of
the Board of Directors and officers of the Company pursuant to Section 5.16,
effective as of the Closing Date, shall have been delivered to the Purchaser on
or before the Closing Date.
7.10 Shareholder Approval. The shareholders of the Seller shall have approved
the sale of the Shares of the Company in accordance with applicable Laws and
Seller's articles of incorporation and bylaws on or before August 1, 1995.
7.11 Hart-Scott. Purchaser and Seller shall have made all filings required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (15 USC 18a),
and all waiting periods shall have passed without any action having been taken
by the Department of Justice or any other governmental department.
7.12 Management Agreement. The current management agreement between the
Seller and the Company shall have been terminated and or, at Purchaser's option,
assigned from Seller to Purchaser.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of the Seller hereunder are subject to the fulfillment, at or
before the Closing, of each of the following conditions (all or any of which may
be waived in whole or in part by the Seller).
8.1 Representations and Warranties. The representations and warranties made
by the Purchaser in this Agreement shall be true as of the effective date of
this Agreement and shall be true on and as of the Closing Date as though such
representations and warranties were made on and as of the Closing Date.
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8.2 Performance. The Purchaser shall have performed and complied with all
agreements, covenants, obligations, and conditions required by this Agreement to
be so performed or complied with by the Purchaser at or before the Closing.
8.3 Officer's Certificates. The Purchaser shall have delivered to the Seller
a certificate, dated the Closing Date in the form of Exhibit E hereto and
executed by the chief executive officer or the chief financial officer of the
Purchaser, certifying with respect to the Purchaser as to the fulfillment of the
conditions set forth in this Article VIII. In addition, the Purchaser shall have
delivered to the Seller a certificate, dated the Closing Date and executed by
the secretary or any assistant secretary of the Purchaser certifying that the
Purchaser has duly and validly taken all corporate action necessary to authorize
its execution and delivery of this Agreement and its performance of its
obligations under this Agreement, including, without limitation, that Purchaser
has taken all action necessary to authorize the acquisition of the Shares, and
that the resolutions (true and complete copies of which shall be attached to the
certificate) of the Board of Directors of the Purchaser with respect to this
Agreement and the transactions contemplated hereby have been duly and validly
adopted and are in full force and effect.
8.4 No Injunction. There shall not be in effect on the Closing Date any writ,
judgment, injunction, decree, or similar order of any court or similar Person
restraining, enjoining, or otherwise preventing consummation of any of the
transactions contemplated by this Agreement.
8.5 No Proceeding or Litigation. There shall not be instituted, pending, or
(to the best knowledge of the Purchaser or of the Seller) threatened any action,
suit, investigation, or other proceeding in, before, or by any court,
governmental or regulatory authority, or other Person to restrain, enjoin, or
otherwise prevent consummation of any of the transactions contemplated by this
Agreement or to recover any Damages or obtain other relief as a result of this
Agreement or any of the transactions contemplated hereby or as a result of any
Contract entered into in connection with or as a condition precedent to the
consummation hereof, which action, suit investigation, or other proceeding may,
in the reasonable opinion of the Seller, result in a decision, ruling, or
finding that individually or in the aggregate has or may reasonably be expected
to have a material adverse effect on the validity or enforceability of this
Agreement, on the ability of the Purchaser or the Seller to perform its
obligations under this Agreement, or on the Business or Condition of the Seller.
8.6 Consents, Authorizations, etc. All orders, consents, permits,
authorizations, approvals, and waivers of every Person disclosed pursuant to
Section 3.5 and necessary to permit the Seller to perform its obligations under
this Agreement and to consummate the transactions contemplated hereby shall have
been obtained and shall be in full force and effect, and the Purchaser shall
have obtained all consents, approvals, authorizations and clearances referred to
in Section 6.1 and the Seller shall have received evidence satisfactory to it of
the receipt of such consents, approvals, authorizations and clearances.
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8.7 Opinion of Counsel. The Purchaser shall have delivered to the Seller the
opinion, dated the Closing Date, of Brunini, Grantham, Grower & Hewes, P.L.L.C.,
counsel to the Purchaser, to the effect set forth in Exhibit F hereto.
ARTICLE IX
SURVIVAL OF PROVISIONS; REMEDIES
9.1 Survival. The representations, warranties, covenants, and agreements
respectively made by the Seller and the Purchaser in this Agreement, in the
Disclosure Schedule, or in any certificate respectively delivered by the Seller
or the Purchaser pursuant to Section 7.3 or Section 8.3 will survive the
Closing:
(a) until the expiration of all applicable statutes of limitations
(including all periods of extension, whether automatic or permissive) in the
case of the representations and warranties of the Seller respectively set forth
in Sections 3.1, 3.2, 3.3, 3.12, and 3.14 hereof, and in the case of the
indemnification agreements respectively set forth in Sections 10.1 and 10.2
hereof; and
(b) until the thirty-sixth (36th) month anniversary of the Closing in the
case of all other representations, warranties, covenants, and agreements, except
that covenants and agreements to be performed after the Closing in accordance
with their terms will survive until the last period to which any such Tax
benefit could be carried pursuant to the Code, and each indemnification
agreement as to litigation set forth in clause (ii) or (iii) of Section 10.3(a)
will survive until a final, nonappealable judgment has been entered with respect
to the last of such litigation.
If a Claim Notice or an Indemnity Notice is given in accordance with Section
10.5 before expiration of the applicable time period referenced above, then
(notwithstanding such time period) the representation, warranty, covenant,
or agreement applicable to such claim shall survive until, but only for purposes
of, resolution of such claim.
9.2 Available Remedies. Each party expressly agrees that, consistent with its
intention and agreement to be bound by the terms of this Agreement and to
consummate the transactions contemplated hereby, subject only to the performance
or satisfaction of precedent conditions or of precedent requirements imposed
upon another party hereto, the remedy of specific performance shall be available
to a non-breaching and non-defaulting party to enforce performance of this
Agreement by a breaching or defaulting party, including, without limitation, to
require the consummation of the Closing on the Closing Date.
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ARTICLE X
INDEMNIFICATION
10.1 Tax Indemnification.
(a) Subject to the provisions of Article IX hereof and this Section, the
Seller agrees to pay, and to indemnify the Purchaser and the Company in respect
of, and hold each of them harmless against, any and all Damages for or in
respect of Taxes actually incurred by, imposed upon, or assessed against the
Purchaser, the Seller, or the Company as a result of or relating to any period
ending on or before the Closing Date, save and except for any increased tax
liability for any period, or portion of a period, prior to Closing that results
from or is contributed to any election (by action or inaction) of Purchaser.
(b) The Seller will notify the Purchaser, or (if applicable) the Company
will notify the Seller and the Purchaser, promptly of the commencement of any
claim, audit, examination, or other proposed change or adjustment by any taxing
authority concerning any Tax or other Damages covered by Section 10.1(a) ("Tax
Claim").
(c) The Seller will furnish the Purchaser, or (if applicable) the Company
will furnish the Seller and the Purchaser, promptly with copies of all
correspondence (including, without limitation, notices, requests, explanations,
determinations, schedules, charts, and lists) received from any taxing authority
in connection with any Tax Claim. The Seller will have the right to approve in
advance any correspondence sent to any taxing authority by or on behalf of the
Company with respect to any Tax Claim to the extent such correspondence would
adversely affect the Seller's obligations under Section 10.1(a); provided,
however, that the Seller will be deemed to have approved any such correspondence
to the extent notice of its disapproval thereof is not delivered or mailed to
the Purchaser in accordance with Article XII hereof with reasonable promptness,
but in all events at least fourteen (14) calendar days before the date on which
payment of the Tax is due or, if earlier, at least fourteen (14) calendar days
before the date on which the ability of the Company to defend against the Tax
Claim is irrevocably prejudiced.
(d) At its option (following reasonable notice to and consultation with the
Purchaser), the Seller may contest any Tax Claim in any legally permissible
manner until such time as any payment for Taxes or other Damages with respect to
such Tax Claim is due or, upon the Seller's payment of such Taxes and other
Damages, may sue for a refund thereof where permitted by applicable Law. Except
as provided in the last sentence of this subsection, the Seller will control all
proceedings taken in connection with any such contest or refund suit, and may
pursue or forego any and all administrative appeals, proceedings, hearings, and
conferences with the taxing authority in respect of such Tax Claim. The Company
will take such lawful action
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in connection with the contest or refund suit as the Seller may reasonably
request in writing from time to time, including, without limitation, the
prosecution of the contest or refund suit to a final determination, provided
that (i) the Seller requests such action with reasonable promptness, but in all
events at least fourteen (14) calendar days before the date on which payment of
the Taxes or other Damages are due or become final, or if earlier, at least
fourteen (14) calendar days before the date on which the Company's ability to
defend against the Tax Claim is irrevocably prejudiced, (ii) a reasonable basis
exists for such contest or refund suit, and (iii) the Seller acknowledges
(without any equivocation) its obligations under this Section. Notwithstanding
the foregoing provisions of this Section 10.1(e), if such contest or refund suit
has or may reasonably be expected to have a material effect on the Liability of
the Company or the Purchaser for Taxes with respect to any period ending after
the Closing Date, then the Seller and the Purchaser will jointly control any
such contest or refund suit.
10.2 Other Indemnification.
(a) Subject to the provisions of Article IX and Section 10.4, the Seller
agrees to indemnify the Purchaser and the Company in respect of, and hold each
of them harmless against:
(i) any and all Damages (other than Damages that the Seller has paid or is
unequivocally liable to pay to the Purchaser or the Company pursuant to Section
10.1) resulting from or relating to any misrepresentation, breach of warranty,
or nonfulfillment of or failure to perform any covenant or agreement on the part
of the Seller made as a part of or contained in this Agreement, the Disclosure
Schedule, or any certificate delivered by or for the Seller pursuant to Section
7.3;
(ii) except as disclosed in Section 3.13 of the Disclosure Schedule, any
and all Damages resulting from or relating to any action, suit, investigation,
or proceeding pending against the Company (whether as a defendant, counterclaim
or third party defendant, intervenor, or otherwise) on the Closing Date of this
Agreement or arising at any time with respect to matters occurring before the
Closing, including, without limitation, any action, suit, investigation or
proceeding relating to any claims arising under any insurance policies or
Contracts assumed by Seller from Company at any time on or prior to the Closing
Date; and
(iii) except as disclosed in Section 3.13 of the Disclosure Schedule, any
and all punitive, treble or other exemplary Damages resulting from or relating
to any claim (other than claims for such actual policy benefits as
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are specified under insurance or annuity Contracts issued, reinsured, or
underwritten by the Company) asserted in any action, suit, investigation, or
proceeding against the Company (whether as a defendant, counterclaim or third
party defendant, intervenor, or otherwise) pending on the Closing Date of this
Agreement or arising at any time with respect to matters occurring before the
Closing.
(b) Subject to the provisions of Article IX and Section 10.4, the Purchaser
agrees to indemnify the Seller in respect of, and hold the Seller harmless
against, any and all Damages resulting from or relating to any
misrepresentation, breach of warranty, or nonfulfillment of or failure to
perform any covenant or agreement on the part of the Purchaser made as a part of
or contained in this Agreement or any certificate delivered by or for the
Purchaser pursuant to Section 8.3.
10.3 Method of Asserting Claims. All claims for indemnification by any
Indemnified Party under Section 10.2 will be asserted and resolved as follows:
(a) In the event any claim or demand for which an Indemnifying Party would
be liable for Damages to an Indemnified Party under Section 10.2 or 10.3 is
asserted against or sought to be collected from such Indemnified Party by a
Person other than the Seller, the Purchaser, the Company, or any Affiliate of
the Seller or the Purchaser ("Third Party Claim"), the Indemnified Party will
deliver a Claim Notice with reasonable promptness to the Indemnifying Party;
provided, however, that except as set forth in Section 10.4(d), no Claim Notice
will be required with respect to any action, suit, investigation, or proceeding
that is in existence on the Closing Date to which indemnification applies. If
the Indemnified Party fails to provide the Indemnifying Party with the Claim
Notice required by the preceding sentence at least 14 calendar days before the
date on which the Indemnifying Party's ability to defend against the Third Party
Claim is irrevocably prejudiced by the Indemnified Party's failure to provide
such Claim Notice, the Indemnifying Party will not be obligated to indemnify the
Indemnified Party with respect to such portion of the Third Party Claim as to
which the Indemnifying Party's ability to defend has been prejudiced by such
failure of the Indemnified Party. The Indemnifying Party will notify the
Indemnified Party with reasonable promptness, but in all events at least 14
calendar days before the date on which the Indemnified Party's ability to defend
against the Third Party Claim is irrevocably prejudiced ("Notice Period"),
whether the Indemnifying Party disputes the Liability of the Indemnifying Party
to the Indemnified Party hereunder with respect to such Third Party Claim and
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.
(b) If the Indemnifying Party notifies the Indemnified Party within the
Notice Period that the Indemnifying Party (without any equivocation) does not
dispute its Liability to the Indemnified Party and that the Indemnifying Party
desires
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to defend the Indemnified Party with respect to the Third Party Claim
pursuant to this Article X, then the Indemnifying Party will have the right to
defend, at its sole cost and expense, such Third Party Claim by all appropriate
proceedings, which proceedings will be diligently prosecuted by the Indemnifying
Party to a final conclusion or will be settled at the discretion of the
Indemnifying Party (with the consent of the Indemnified Party, which consent
will not be withheld unreasonably). The Indemnifying party will have full
control of such defense and proceedings, including any compromise or settlement
thereof; 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 or those of the Indemnifying Party and not
irrevocably prejudicial to the Indemnifying Party (it being understood and
agreed that, except as provided in Section 10.3(c), 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, 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 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 or any of
its Affiliates). The Indemnified Party may participate in, but not control, any
defense or settlement of any Third Party Claim controlled by the Indemnifying
Party pursuant to this Section 10.3(b), and except as provided in the preceding
sentence, the Indemnified Party will bear its own costs and expenses with
respect to such participation.
(c) If the Indemnifying Party fails to notify the Indemnified Party within
the Notice Period that the Indemnifying Party (without any equivocation) does
not dispute its Liability to the Indemnified Party and that the Indemnifying
Party desires to defend the Indemnified Party with respect to the Third Party
Claim pursuant to this Article X, or if the Indemnifying Party gives such notice
but fails diligently and promptly to prosecute or settle the Third Party Claim,
or if the Indemnifying Party fails to give any notice whatsoever within the
Notice Period, then the Indemnified Party will have the right to defend, at the
sole cost and expense of the Indemnifying Party, the Third Party Claim by all
appropriate proceedings, which proceedings will be promptly and vigorously
prosecuted by the Indemnified Party to a final conclusion or will be settled at
the discretion of the Indemnified Party (with the consent of the Indemnifying
Party, which consent will not be withheld unreasonably). The Indemnified Party
will 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
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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 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 Indemnifying Party or any of
its Affiliates). Notwithstanding the foregoing provisions of this Section
10.3(c), if the Indemnifying Party has timely notified the Indemnified Party
that the Indemnifying Party disputes its Liability to the Indemnified Party and
if such dispute is resolved in favor of the Indemnifying Party by final,
nonappealable order of a court of competent jurisdiction, the Indemnifying Party
will not be required to bear the costs and expenses of the Indemnified Party's
defense pursuant to this Section 10.3(c) 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 10.3(c),
and the Indemnifying Party will bear its own costs and expenses with respect to
such participation.
(d) At the Closing, the Seller will provide the Purchaser with the notice
required by Section 10.3(b) or 10.3(c) hereof with respect to each action, suit,
investigation, or proceeding that is described in clause (ii) or (iii) of
Section 10.2(a) hereof and is in existence on the Closing Date to which
indemnification applies.
10.4 After-Tax Damages. With respect to the indemnification agreements set
forth in this Article X, the Seller and the Purchaser agree that:
(a) the amount of any Tax refund actually received, and the amount of any
Tax reduction actually realized by any of the Seller, the Purchaser, or the
Company after the Closing as a result of Damages (including without limitation
Taxes) for which any indemnification payment has been made or is then due by the
Seller pursuant to Section 10.1, 10.2(a) hereof will be promptly paid to the
Seller or offset against Damages then owed by the Seller hereunder; and
(b) the amount of any Tax refund actually received, and the amount of any
Tax reduction actually realized, by the Seller after the Closing as a result of
Damages for which any indemnification payment has been made or is then due by
the Purchaser pursuant to Section 10.2(b) hereof will be promptly paid to the
Purchaser or offset against Damages then owed by the Purchaser hereunder.
10.5 Assignment of Indemnification. Each of the Purchaser and the Company may
assign its rights to indemnification under this Article X to any direct or
indirect
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transferee or transferees of all the Shares, and each such transferee shall
have the same rights to indemnification under this Article X as the Purchaser
and the Company.
ARTICLE XI
WAIVER
11.1 Senior Debt of Seller. Heretofore, Purchaser acquired from Trustmark
National Bank of Jackson, Mississippi, the Senior Debt of Seller. Such Senior
Debt is governed by the provisions of a certain loan agreement (the "Loan
Agreement") dated the 3rd day of May, 1993, between Trustmark National Bank and
Seller.
(a) In a Letter of Intent between the Purchaser and Seller executed on or
about March 6, 1995, Purchaser extended the maturity of the aforesaid Senior
Debt until the Closing or ninety (90) days following the notification by either
party hereto to the other of the impossibility of Closing according to the terms
hereof. Subsequently, Purchaser waived until the maturity of the Senior Debt the
provisions of Section 4.01(v)(a) of the Loan Agreement.
(b) Purchaser, for the consideration herein stated, herein confirms the
extension of the maturity of the aforesaid Senior Debt as set forth in the
Letter of Intent. Further, Purchaser confirms the waiver of Section 4.01(v)(a)
of the Loan Agreement and agrees to waive, until the maturity of the Senior
Debt, Sections 4.01(b), (c), 4.02(a)(solely as related to Seller), (d)(solely as
related to Seller), and (f)(solely as related to Seller).
ARTICLE XII
TERMINATION
12.1 Termination. This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned, upon notice by the terminating party to
the other party:
(a) at any time before the Closing, by mutual written agreement of the
Seller and the Purchaser; or
(b) by the Purchaser effective on the giving of written notice from the
Purchaser to the Seller stating the Purchaser's disapproval of any aspect of the
Business or Condition of the Company (including, without limitation, any aspect
disclosed pursuant to the information included in the Disclosure Schedule);
provided, that such written notice must be received by the Seller with fifteen
(15) days after delivery of the Disclosure Schedule pursuant to Section 5.19.
Delivery of the notice provided in this Section 11.1(b) shall not be deemed to
create any express or implied
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obligation on the part of the Purchaser to negotiate concerning or to justify
its termination pursuant to this Section, such termination being in the
Purchaser's sole and absolute discretion.
(c) at any time by the Seller if any of the covenants set forth in Article
VI shall have been breached or any of the conditions set forth in Article VIII
hereof shall not have been satisfied, performed, or complied with, in any
material respect, at or before the Closing Date and such breach,
non-satisfaction, non-performance, or non-compliance has not been cured or
eliminated within thirty (30) calendar days after notice thereof has been given
to the Purchaser, provided that at the time of such termination the Seller has
neither breached any of the covenants set forth in Article V nor failed to
satisfy, perform, or comply with any of the conditions set forth in Article VII
hereof, in any material respect; or
(d) at any time by the Purchaser if any of the covenants set forth in
Article V shall have been breached or any of the conditions set forth in Article
VII hereof shall not have been satisfied, performed, or complied with, in any
material respect, before the Closing Date and such breach, non-satisfaction,
non-performance or non-compliance has not been cured or eliminated within thirty
(30) days after notice thereof has been given to the Seller, or if the
Disclosure Schedule is not delivered to the Purchaser within five (5) days
after the date hereof, or if the Disclosure Schedule or other information
provided to the Purchaser dis-closes any change in, or event, trend, condition
or state of facts of any character that individually or in the aggregate has or
may reasonably be expected to have a material adverse effect on the Business or
Condition of the Company and such change, event, trend, condition or state of
facts has not been cured or eliminated within ten (10) days after notice thereof
has been given to the Seller, provided that at the time of such termination the
Purchaser has neither breached any of the covenants set forth in Article VI nor
failed to satisfy, perform, or comply with any of the conditions set forth in
Article VIII hereof, in any material respect; or
(e) at any time after August 1, 1995, by the Seller or the Purchaser, if
the transactions contemplated by this Agreement have not been consummated on or
before such date and such failure to consummate is not caused by a breach of
this Agreement (or any representation, warranty, covenant, or agreement included
herein) by the party electing to terminate pursuant to this clause (e).
12.2 Effect of Termination. If this Agreement is validly terminated
pursuant to Section 11.1, this Agreement will forth-with become null and void,
and there will be no Liability on the part of the Seller or the Purchaser (or
any of their respective officers, directors, employees, agents, consultants, or
other representatives), except that the provisions relating to confidentiality
in Section 12.4 will continue to apply following any such termination; provided,
however, that, notwithstanding anything in this Section to the contrary, no
party electing to terminate this Agreement pursuant to Section 11.1 will be
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relieved of any Liability for Damages that the electing party may have to
the other party by reason of the electing party's breach of this Agreement (or
any representation, warranty, covenant, or agreement included herein).
ARTICLE XIII
MISCELLANEOUS
13.1 (a) Default. If Purchaser believes there has been a default with
respect to one or more of the representations, warranties, covenants or
agreements of Seller or the Company in this Agreement, Purchaser shall send
notice to Seller of such alleged default (which notice shall describe the nature
of such default, provide appropriate documentation (where available), and, where
clearly determinable from the nature of the default, the amount of the related
claim (including any consequential or incidental damages) (a "Default Notice").
Thereupon, the parties shall in good faith attempt to informally resolve such
default and agree upon the amount of such claim.
(b) Arbitration. In the event that the parties are unable to informally
resolve a matter which is the subject of a Default Notice under this Section
13.1 within 45 days after receipt of the notice, either party, upon written
notice to the other, may elect to submit the matter to arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
then in effect, except as otherwise provided herein.
Arbitration shall be before a panel of three (3) neutral arbitrators expert
in the life insurance business. Within ten (10) days of receipt of notice of an
election of arbitration, each party shall select an arbitrator and notify the
other of such party's selection. Within ten (10) days thereafter, the two
arbitrators shall select a third arbitrator. If they fail to select a third
arbitrator, then the third arbitrator shall be designated by the American
Arbitration Association.
All Default Notice matters subject to arbitration under this Section 13.1
shall take place in Indianapolis, Indiana. All awards shall be made on the
majority vote of the arbitrators. The non-prevailing party shall pay all fees
and expenses of such arbitration, as well as the reasonably and actually
incurred attorneys' fees of the prevailing party. If there is no clear
prevailing party, the arbitrators may award fees and expenses as they deem just.
The award in the arbitration shall be final and binding on the parties, and
judgment may be entered in any court having competent jurisdiction.
13.2 Notices. All notices and other communications under this Agreement must
be in writing and will be deemed to have been duly given if delivered,
telecopied or mailed, by certified mail, return receipt requested, first class
postage prepaid, to the parties at the following addresses:
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If to the Seller, to:
Dixie National Corporation
3760 I-55 North
Jackson, Mississippi 39211
Attention: Robert B. Neal
Telecopy: (601)981-8076
With a copy to:
Wells, Moore Simmons & Neeld
1300 Deposit Guaranty Plaza
Jackson, Mississippi 39215-1970
Attention: James H. Neeld, III, Esq.
Telecopy: (601)355-5850
If to the Purchaser, to:
Standard Life Insurance Company of Indiana
9100 Keystone Crossing, #600
Indianapolis, Indiana 46240
Attention: Edward T. Stahl, Executive Vice President
Telecopy: (317)574-6227
With a copy to:
Brunini, Grantham, Grower & Hewes, P.L.L.C.
1400 Trustmark Building
248 E. Capitol Street
Jackson, Mississippi 39201
Attention: Robert D. Drinkwater, Esq.
Telecopy: (601)960-6902
All notices and other communications required or permitted under this Agreement
that are addressed as provided in this Article XII will, if delivered
personally, be deemed given upon delivery, will, if delivered by telecopy, be
deemed delivered when confirmed and will, if delivered by mail in the manner
described above, be deemed given on the third Business Day after the day it is
deposited in a regular depository of the United States mail. Any party from time
to time may change its address for the purpose of notices to that party by
giving a similar notice specifying a new address, but no such notice will be
deemed to have been given until it is actually received by the party sought to
be charged with the contents thereof.
13.3 Entire Agreement. Except for documents executed by the Seller and the
Purchaser pursuant hereto, this Agreement supersedes all prior discussions and
agreements
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between the parties with respect to the subject matter of this Agreement,
and this Agreement (including the exhibits thereto, the Disclosure Schedule, and
other Contracts and documents delivered in connection herewith) contains the
sole and entire agreement between the parties hereto with respect to the subject
matter hereof.
13.4 Expenses. Except as otherwise expressly provided in this Agreement
(including, without limitation, as provided in Article X and Section 12.2), each
of the Seller and the Purchaser will pay its own costs and expenses in
connection with this Agreement and the transactions contemplated hereby.
13.5 Public Announcements. At all times at or before the Closing, the
Seller and the Purchaser will each consult with the other before issuing or
making any reports, statements, or releases to the public with respect to this
Agreement or the transactions contemplated hereby and will use good faith
efforts to agree on the text of a joint public report, statement, or release or
will use good faith efforts to obtain the other party's approval of the text of
any public report, statement, or release to be made solely on behalf of a party.
If the Seller and the Purchaser are unable to agree on or approve any such
public report, statement, or release and such report, statement, or release is,
in the opinion of legal counsel to a party, required by Law or may be
appropriate in order to discharge such party's disclosure obligations, then such
party may make or issue the legally required report, statement, or release. Any
such report, statement, or release approved or permitted to be made pursuant to
this Section may be disclosed or otherwise provided by the Seller or the
Purchaser to any Person, including without limitation to any employee or
customer of either party hereto and to any governmental or regulatory authority.
13.6 Confidentiality. Each of the Seller and the Purchaser will hold, and
will cause its respective officers, directors, employees, agents, consultants,
and other representatives to hold, in strict confidence, unless compelled to
disclose by judicial or administrative process (including, without limitation,
in connection with obtaining the necessary approval of insurance regulatory
authorities) or by other requirements of Law, all confidential documents and
confidential information concerning the other party furnished to it by the other
party or such other party's officers, directors, employees, agents, consultants,
or representatives in connection with this Agreement or the transactions
contemplated hereby, except to the extent that such documents or information can
be shown to have been (a) previously lawfully known by the party receiving such
documents or information, (b) in the public domain through no fault of such
receiving party, or (c) later acquired by the receiving party from other sources
not themselves bound by, and in breach of, a confidentiality agreement. Neither
the Seller nor the Purchaser will disclose or otherwise provide any such
confidential documents or confidential information to any other Person, except
to the Purchaser's lenders and investors and to either party's respective
auditors, actuaries, attorneys, financial advisors, and other consultants and
advisors who need such documents or information in connection with this
Agreement and except as required by the provisions of Sections 5.1 and 6.1.
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13.7 Further Assurances. The Seller and the Purchaser agree that, from time
to time after the Closing, upon the reasonable request of the other, they will
cooperate and will cause their respective Affiliates to cooperate with each
other to effect the orderly transition of the business, operations, and affairs
of the Company. Without limiting the generality of the foregoing, the Seller
will give and will cause its Affiliates to give representatives of the Purchaser
reasonable access to all Books and Records of the Seller and its Affiliates
reasonably requested by the Purchaser in the preparation of any post-Closing
financial statements, reports, or Tax Returns.
13.8 Waiver. Any term or condition of this Agreement may be waived at any
time by the party that is entitled to the benefit thereof. Such waiver must be
in writing and must be executed by the chief executive officer or the chief
operating officer of such party. A waiver on one occasion will not be deemed to
be a waiver of the same or any other breach on a future occasion. All remedies,
either under this Agreement, or by Law or otherwise afforded, will be cumulative
and not alternative.
13.9 Amendment. This Agreement may be modified or amended only by a writing
duly executed by or on behalf of the Seller and the Purchaser.
13.10 Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which will be deemed an original, but all of
which will constitute one and the same instrument.
13.11 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of the Seller and the Purchaser,
and their respective successors or assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person.
13.12 Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF INDIANA (EXCLUSIVE OF CONFLICTS OF LAW
PRINCIPLES) AND WILL, TO THE MAXIMUM EXTENT PRACTICABLE, BE DEEMED TO CALL FOR
PERFORMANCE IN MARION COUNTY, INDIANA. COURTS WITHIN THE STATE OF INDIANA SHALL
HAVE JURISDICTION OVER ANY AND ALL DISPUTES BETWEEN THE PARTIES HERETO, WHETHER
IN LAW OR EQUITY, INCLUDING, WITHOUT LIMITATION, ANY AND ALL DISPUTES ARISING
OUT OF OR RELATING TO THIS AGREEMENT. THE PARTIES HEREBY CONSENT TO AND AGREE TO
SUBMIT TO THE JURISDICTION OF SUCH COURTS. VENUE IN ANY SUCH DISPUTE WHETHER IN
FEDERAL OR STATE COURT SHALL BE LAID IN MARION COUNTY, INDIANA.
13.13 Binding Effect. This Agreement is binding upon and will inure to the
benefit of the parties and their respective successors and assigns.
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13.14 Assignment. Except as otherwise provided herein (including, without
limitation, as provided in Section 10.6), this Agreement or any right hereunder
or part hereof may not be assigned by any party hereto without the prior written
consent of the other party hereto.
13.15 Headings, etc. The headings used in this Agreement have been inserted
for convenience and do not constitute matter to be construed or interpreted in
connection with this Agreement.
13.16 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under any present or future Law, and if the
rights or obligations of the Seller or the Purchaser under this Agreement will
not be materially and adversely affected thereby; (a) such provision will be
fully severable; (b) this Agreement will be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a party hereof;
(c) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid, or unenforceable
provision or by its severance herefrom; and (d) in lieu of such illegal,
invalid, or unenforceable provision, there will be added automatically as a part
of this Agreement a legal, valid, and enforceable provision as similar in terms
to such illegal, invalid, or unenforceable provision as may be possible.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties hereto, effective as of the date first written above.
DIXIE NATIONAL CORPORATION
By: /s/S.L. Reed, Jr.
Name: S.L. Reed, Jr.
Title: Chairman and Chief Executive Officer
DIXIE NATIONAL LIFE INSURANCE COMPANY
By: /s/Robert B. Neal
Name: Robert B. Neal
Title: Chairman and Chief Executive Officer
STANDARD LIFE INSURANCE COMPANY OF
INDIANA
By: /s/Ronald D. Hunter
Name: Ronald D. Hunter
Title: Chairman and Chief Executive Officer
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Exhibit A
DEFINITIONS OF TERMS
"Adjusted Capital and Surplus" as of any date shall mean the Company's
statutory capital and surplus as of such date, adjusted pursuant to the Formula
set forth on Exhibit B hereto and determined based on SAP consistently applied
throughout the specified period and in the immediately prior comparable period.
"Affiliate" shall mean any Person that directly, or indirectly through one
or more intermediaries, controls, is controlled by, or is under common control
with the Person specified.
"Agreement" shall mean this Stock Purchase Agreement, together with the
exhibits and the Disclosure Schedule attached hereto, and the Contracts and
other documents to be executed and delivered respectively by Seller and Company
pursuant hereto.
"Annual Statement" shall mean any annual statement of the Company filed
with or submitted to the insurance regulatory authority in the State of
Mississippi on forms prescribed or permitted by such authority.
"Assets and Properties" shall mean all assets or properties of every kind,
nature, character, and description (whether real, personal, or mixed whether
tangible or intangible, whether absolute, accrued, contingent, fixed, or
otherwise, and wherever situated) as now operated, owned, or leased by a
specified Person, including without limitation cash, cash equivalents,
securities, accounts and notes receivable, real estate, equipment, furniture,
fixtures, insurance or annuities in force, goodwill, and going-concern value.
"AVR" shall mean the asset valuation reserve required to be established and
maintained by the Company at any particular date, calculated in accordance with
SAP.
"Benefit Plans" shall mean all Employee Pension Benefit Plans, all Employee
Welfare Benefit Plans, all stock bonus, stock ownership, stock option, stock
purchase, stock appreciation rights, phantom stock, and other stock plans
(whether qualified or nonqualified), and all other pension, welfare, severance,
retirement, bonus, deferred compensation, incentive compensation, insurance
(whether life, accident and health, or other and whether key man, group, workers
compensation, or other), profit sharing, disability, thrift, day care, legal
services, leave of absence, layoff, and supplemental or excess benefit plans,
and all other benefit Contracts, arrangements, or procedures having the effect
of a plan, in each case existing on or before the Closing Date under which the
Company is or may hereafter become obligated in any manner (including without
limitation obligations to make contributions or other payments) and which cover
some or all of the present or former
A-1
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officers, directors, employees, agents, consultants, or other similar
representatives providing services to or for the Company; provided, however,
that such term shall not include (a) routine employment policies and procedures
developed and applied in the ordinary course of business and consistent with
past practice, including without limitation sick leave, vacation, and holiday
policies, and (b) directors and officers liability insurance.
"Books and Records" shall mean all accounting, financial reporting, Tax,
business, marketing, corporate, and other files, documents, instruments, papers,
books, and records of a specified Person, including without limitation financial
statements, budgets, projections, ledgers, journals, deeds, titles, policies,
manuals, minute books, stock certificates and books, stock transfer ledgers,
Contracts, franchises, permits, agency lists, policyholder lists, supplier
lists, reports, computer files, retrieval programs, operating data or plans, and
environmental studies or plans.
"Business Day" shall mean a day other than Saturday, Sunday, or any day on
which the principal commercial banks located in the City of Indianapolis are
authorized or obligated to close under the Laws of the State of Indiana.
"Business or Condition" shall mean the organization, existence, authority,
capitalization, business, licenses, condition (financial or otherwise), cash
flow, management, sales force, solvency, prospects, SAP results of operations,
insurance or annuities in force, SAP capital and surplus, MSVR, Liabilities, or
Assets and Properties of a specified Person.
"Claim Notice" shall mean written notification of a Third Party Claim by
and Indemnified Party to an Indemnifying Party pursuant to Section 10.3(a),
enclosing a copy of all papers served, if any.
"Closing" shall mean the closing of the transactions contemplated by this
Agreement as provided in Section 2.4.
"Closing Adjusted Capital and Surplus" shall have the meaning ascribed to
in Section 2.3 hereof.
"Closing Date" shall mean the earlier of (a) the fifth Business Day next
following the satisfaction to all conditions to Seller's and Purchaser's
obligations, or (b) such other date as the Purchaser and Seller may mutually
agree upon in writing.
"Code" shall mean the Internal Revenue Code of 1986, as amended (including
without limitation any successor code), and the rules and regulations
promulgated thereunder.
"Common Stock" shall have the meaning ascribed to it in the preamble of
this Agreement.
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"Damages" shall mean any and all monetary damages, Liabilities, fines,
fees, penalties, interest obligations, deficiencies, losses, and expenses
(including without limitation punitive, treble, or other exemplary or extra
contractual damages, amounts paid in settlement, interest, court costs, costs of
investigation, fees and expenses of attorneys, accountants, actuaries, and
other experts, and other expenses of litigation or of any claim, default, or
assessment).
"Dixie Convertible Subordinated Notes" shall mean the outstanding
subordinated convertible notes dated May 1, 1993, issued by Seller.
"Disclosure Schedule" shall mean the bound record dated the effective date
of this Agreement, furnished by Seller to the Purchaser, and containing all
lists, descriptions, exceptions, and other information and materials as are
required to be included therein pursuant to this Agreement.
"Employee Pension Benefit Plan" shall mean each employee pension benefit
plan (whether or not insured), as defined in Section 3(2) of ERISA, which is or
was in existence on or before the Closing Date and to which the Company is or
may hereafter become obligated in any manner as an employer.
"Employee Welfare Benefit Plan" shall mean each employee welfare benefit
plan (whether or not insured), as defined in Section 3(1) of ERISA, which is or
was in existence on or before the Closing Date and to which the Company is or
may hereafter become obligated in any manner as an employer.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended (including without limitation any successor act), and the rules and
regulations promulgated thereunder.
"ERISA Affiliate" shall mean any Person under common control (as defined in
Section 414 of the Code) with the Company.
"GAAP" shall mean generally accepted accounting principles, consistently
applied throughout the specified period and in the immediately prior comparable
period.
"IMR" shall mean the interest maintenance reserve required to be
established and maintained by the Company at any particular date, calculated in
accordance with SAP.
"Indemnified Party" shall mean a Person claiming indemnification under this
Agreement.
"Indemnifying Party" shall mean a Person against whom claims of
indemnification are being asserted under this Agreement.
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"IRS" shall mean the United States Internal Revenue Service or any
successor agency.
"Laws" shall mean all laws, statutes, ordinances, regulations, and other
pronouncements having the effect of law in the United States of America, any
foreign country, or any domestic or foreign state, province, commonwealth, city,
country, municipality, territory, protectorate, possession, court, tribunal,
agency, government, department, commission, arbitrator, board, bureau, or
instrumentality thereof.
"Liabilities" shall mean all debts, obligations, and other liabilities of a
Person (whether absolute, accrued, contingent, fixed, or otherwise, or whether
due or to become due).
"Lien" shall mean any mortgage, pledge, assessment, security interest,
lease, sublease, lien, adverse claim, levy, charge, or other encumbrance of any
kind, or any conditional sale Contract, title retention Contract, or other
Contract to give or to refrain from giving any of the foregoing.
"Market Value" shall mean the value at which any Assets or Properties of
the Company would be sold in an arm's length transaction between a willing
seller and a willing purchaser, neither of whom was under any obligation to sell
or purchase such Assets or Properties. The Market Value of securities for which
quotes are available in The Wall Street Journal shall be determined by reference
to the Closing Bid price for such Assets and Properties as quoted in the final
edition of the Wall Street Journal on the Closing Date; and for securities for
which a quoted price is not available, by a securities firm of recognized
national standing mutually acceptable to the parties. In the event the parties
cannot agree upon the Market Value of any specific Assets or Properties of the
Company, such Assets and Properties shall be sold within five (5) Business Days
after the Closing Date, and the Market Value shall be the amount realized upon
the sale of such Assets and Properties.
"Non-Admitted Assets" shall mean any assets of the Company required to be
reported as "assets not admitted" on Exhibit 13 of any Annual Statement or
Quarterly Statement filed by the Company.
"Notice Period" shall have the meaning ascribed to it in Section 10.3(a).
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
under ERISA.
"Prime Rate" shall mean the prime commercial interest rate as quoted by
Trustmark National Bank at its main offices as its prime rate as of the date the
principal liability accrued.
"Purchaser" shall have the meaning ascribed to it in the preamble of this
Agreement.
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"Quarterly Statement" shall mean any quarterly statement of the Company
filed with or submitted to the insurance regulatory authority in the State of
Mississippi on forms prescribed or permitted by such authority.
"SAP" shall mean the accounting practices required or permitted by the
National Association of Insurance Commissioners and the insurance regulatory
authority in the State of Mississippi, consistently applied throughout the
specified period and in the immediately prior comparable period.
"SAP Statements" shall mean the Annual Statements, Quarterly Statements,
and other financial statements and presentations of the Company prepared in
accordance with SAP and delivered to the Purchaser pursuant to this Agreement.
"Seller" shall have the meaning ascribed to it in the preamble of this
Agreement and shall include the Company, unless the context otherwise requires.
"Senior Debt" shall mean that certain promissory note of Seller in favor of
Trustmark National Bank dated May 3, 1993 in the principal amount of Three
Million Six Hundred Eighty-Eight Thousand Seven Hundred Forty-Six Dollars and
34/100 ($3,688,746.34), which was sold to Purchaser on November 7, 1994.
"Shares" shall have the meaning ascribed to it in the preamble of this
Agreement.
"SMC" shall mean Standard Management Corporation.
"Taxes" shall mean all taxes, charges, fees, levies, or other similar
assessments or Liabilities, including without limitation income, gross
receipts, ad valorem, premium, excise, real property, personal property,
windfall profit, sales, use, transfer, licensing, withholding, employment,
payroll, Phase III, and franchise taxes imposed by the United States of America
or any state, local, or foreign government, or any subdivision agency, or other
similar Person of the United States or any such government; and such term
shall include any interest, fines, penalties, assessments, or additions to tax
resulting from, attributable to, or incurred in connection with any such tax or
any contest or dispute thereof.
"Tax Claim" shall have the meaning ascribed to it in Section 10.1(b).
"Tax Returns" shall mean any report, return, or other information required
to be supplied to a taxing authority in connection with Taxes.
"Third Party Claim" shall have the meaning ascribed to it in Section
10.3(a).
"Work Papers" shall mean all summaries, calculations, compilations and
similar written documentation derived from the accounts of the Company and used
or prepared by accountants in the process of computing Adjusted Capital and
Surplus.
A-5
<PAGE>
EXHIBIT B
FORMULA FOR DETERMINING
ADJUSTED CAPITAL AND SURPLUS OF COMPANY
AS OF THE CLOSING DATE
PURSUANT TO SECTION 2.3(b)
The Adjusted Capital and Surplus of the Company on the Closing Date shall
be determined as follows (the "Formula"):
1. SAP Capital and Surplus as of the month end prior to the Closing Date,
PLUS:
2. The present value of the IMR of the Company on the month end prior to
the Closing Date, discounted at the rate of 4.0% per annum; PLUS:
3. The AVR held by the Company as of the month end prior to Closing Date.
B-1
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF OFFICER OF SELLER
At the Closing, the Seller shall deliver to the Purchaser a certificate,
dated the Closing Date, executed by the Chief Executive Officer or Chief
Financial Officer of the Seller, to the following effect:
Pursuant to the provisions of Section 7.3 of that certain Stock Purchase
Agreement dated April 18, 1995 (the "Agreement") by and among Dixie National
Corporation (the "Seller"), Dixie National Life Insurance Company (the
"Company") and Standard Life Insurance Company of Indiana (the "Purchaser"), and
relating to the purchase and sale of 1,489,904 shares of the common capital
stock of the Company (the "Stock") by the Seller to the Purchaser, I, the
undersigned [Chief Executive Officer/Chief Financial Officer] of the Seller do
hereby certify to the Purchaser as follows:
1. That I am the duly elected [Chief Executive Officer/Chief Financial
Officer] of the Seller, and in that capacity have the requisite power and
authority to execute and deliver this certificate on behalf of the Seller and,
as appropriate, the Company;
2. That the representations and warranties of the Seller and the Company
made in connection with the Agreement and contained in Article III thereof and
in the Disclosure Schedule attached to the Agreement and the certifications
given pursuant to Section 5.5(c) of the Agreement are true and correct as of the
date of this certificate as though made by the Seller and the Company on and as
of the date, whether or not they were untrue or incorrect prior to such date;
3. That the Seller and the Company have each performed and complied with
all agreements, covenants, obligations and conditions required by the Agreement
to be so performed or complied with by the Seller and/or the Company at or
before the Closing, including those specifically referred to in Articles V and
VII of the Agreement; and
4. That all of the conditions to the obligations of the Purchaser to
purchase the Stock from the Seller set forth in Article VII of the Agreement
have fulfilled.
C-1
<PAGE>
EXHIBIT D
FORM OF SELLER'S COUNSEL'S OPINION
At the Closing, Seller shall deliver to Purchaser the opinion of its
counsel, Wells, Moore Simmons & Neeld, to the following effect:
1. The Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Mississippi and has full corporate power
and authority to enter into the Agreement and perform its obligations
thereunder.
2. The Company is an insurance company duly organized, validly existing and
in good standing under the laws of the State of Mississippi, and is duly
licensed, qualified or admitted to do business and is in good standing in all
jurisdictions listed on Section 3.1 of the Disclosure Schedule, and has full
corporate power and authority to enter into the Agreement and perform its
obligations thereunder.
3. The execution and delivery of the Agreement by the Seller and the
Company and the performance of their respective obligations thereunder have been
duly and validly authorized by all necessary corporate action on the part of the
Seller and the Company, and the Agreement constitutes the legal, valid and
binding obligation of the Seller and the Company and is enforceable against each
of them in accordance with its terms, except to the extent that (a) enforcement
may be limited by or subject to any bankruptcy, insolvency, reorganization,
moratorium or other similar Laws now or hereafter in effect relating to or
limiting creditors' rights generally and (b) the remedy of specific performance
and injunctive and other forms of equitable relief are subject to certain
equitable defenses and to the discretion of the court or other Person before
which any such proceeding therefor may be brought.
4. The authorized capital stock of the Company is as set forth in Section
3.3 of the Agreement; all of such shares are validly issued and outstanding,
fully paid and nonassessable, and 1,489,904 of such shares are owned
beneficially and of record by the Seller, free and clear of all Liens, except as
may be disclosed in Section 3.3 of the Disclosure Schedule; and there are no
securities, obligations, rights, subscriptions, warrants, options, charter or
founders insurance policies, phantom stock rights, or Contracts of any kind of
the Company which are subject of any rights or options of the nature described
in Section 3.3 of the Agreement.
5. The execution and delivery of the Agreement by the Seller and the
Company does not, and the performance by the Seller and the Company of their
respective obligations under the agreement will not, subject to obtaining the
approvals contemplated by Sections 5.1 and 6.1 of the Agreement, (a) violate any
term or provisions of any Law or any writ, judgment, decree, injunction or
similar order applicable to the Seller or the Company; (b)
D-1
<PAGE>
conflict with or result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default under, any of the terms,
conditions, or provisions of the articles or certificate of incorporation or
Bylaws of the Seller or the Company; (c) result in the creation or imposition of
any Lien upon the Seller, the Company, or any of their respective Assets and
Properties that individually or in the aggregate with any other Liens has or may
reasonably be expected to have a material adverse effect on the validity or
enforceability of the Agreement, on the ability of the Seller or the Company to
perform their respective obligations under the Agreement, or on the Business or
Condition of the Seller or the Company; of (d) conflict with or result in a
violation or breach of, or constitute (with or without notice or lapse of time
or both) a default under, or give to any Person any right of termination,
cancellation, acceleration, or modification in or with respect to, any Contract
to which the Seller or the Company is a party or by which any of their
respective Assets or Properties may be bound and as to which any such conflicts,
violations, breaches, defaults or rights individually or in the aggregate have
or may reasonably be expected to have a material adverse effect on the validity
or enforceability of the Agreement, on the ability of the Seller or the Company
to perform its respective obligations under the Agreement, or on the Business or
Condition of the Seller or the Company.
6. Any consent, approval, order or authorization of, or any waiting period
imposed by any regulatory authority under federal or state law, including the
laws of the State of Mississippi and the State of Indiana, which require the
Seller or the Company to obtain any consent, approval, or action of, or make any
filing with or give any notice to, any person except those which the failure to
obtain, make, or give individually or in the aggregate with any other such
failures has or may reasonably be expected to have no material adverse effect on
the validity or enforceability of the Agreement, or in the Business or Condition
of the Seller or the Company, in connection with the execution and delivery of
the Agreement and the performance by the Seller and the Company of their
respective obligations under the Agreement has been obtained or, in the case of
any such waiting period, has expired.
7. To such counsel's actual knowledge, except as disclosed in Section 3.13
of the Disclosure Schedule: (a) there are no actions, suits investigations or
proceedings pending or threatened against the Seller or the Company or any of
their respective Assets and properties, at law or in equity, in, before, or by
any Person that individually or in the aggregate have or may reasonably be
expected to have a material adverse effect on the validity or enforceability of
the Agreement, on the ability of the Seller or the Company to perform their
respective obligations under the Agreement, or on the Business or Condition of
the Seller or the Company; and (b) there are no writs, judgments, decrees or
similar orders of any Person restraining, enjoining or otherwise preventing
consummation of the transactions contemplated by the Agreement.
D-2
<PAGE>
EXHIBIT E
FORM OF CERTIFICATE OF OFFICER OF PURCHASER
At the Closing, the Purchaser shall deliver to the Seller a certificate,
dated the Closing Date, executed by the Chief Executive Officer or Chief
Financial Officer of the Purchaser, to the following effect:
Pursuant to the provisions of Section 8.3 of that certain Stock Purchase
Agreement dated April 18, 1995 (the "Agreement") by and among Dixie National
Corporation (the "Seller"), Dixie National Life Insurance Company (the
"Company") and Standard Life Insurance Company of Indiana (the "Purchaser"), and
relating to the purchase and sale of 1,489,904 shares of the common capital
stock of the Company (the "Stock") by the Seller to the Purchaser, I, the
undersigned [Chief Executive Officer/Chief Financial Officer] of the Purchaser
do hereby certify to the Seller as follows:
1. That I am the duly elected [Chief Executive Officer/Chief Financial
Officer] of the Purchaser, and in that capacity have the requisite power and
authority to execute and deliver this certificate on behalf of the Purchaser;
2. That the representations and warranties of the Purchaser in connection
with the Agreement and contained in Article IV thereof are true and correct as
of the date of this certificate as though made by the Purchaser on and as of the
date, whether or not they were untrue or incorrect prior to such date;
3. That the Purchaser has performed and complied with all agreements,
covenants, obligations and conditions required by the Agreement to be so
performed or complied with by the Purchaser at or before the Closing, including
those specifically referred to in Articles VI and VIII of the Agreement; and
4. That all of the conditions to the obligations of Seller to sell the
Stock to the Purchaser set forth in Article VIII of the Agreement have been
fulfilled.
E-1
<PAGE>
EXHIBIT F
FORM OF PURCHASER'S COUNSEL'S OPINION
At the Closing, Purchaser shall deliver to Seller the opinion of its
counsel, Brunini, Grantham, Grower and Hewes, P.L.L.C., to the following effect:
1. The Purchaser is a life insurance company duly organized, validly
existing and in good standing under the laws of the State of Indiana and has
full corporate power and authority to enter into the Agreement and perform its
obligations thereunder.
2. The execution and delivery of the Agreement by the Purchaser and the
performance of its obligations thereunder have been duly and validly authorized
by all necessary corporate action on the part of the Purchaser, and the
Agreement constitutes the legal, valid, and binding obligation of the Purchaser
and is enforceable against the Purchaser in accordance with the terms, except to
the extent that (a) enforcement may be limited by or subject to any bankruptcy,
insolvency, reorganization, moratorium, or similar Laws now or hereafter in
effect relating to or limiting creditors' rights generally and (b) the remedy of
specific performance and injunctive and other forms of equitable relief are
subject to certain equitable defenses and to the discretion of the court or
other similar Person before which any such proceeding therefor may be brought.
3. The execution and delivery of the Agreement by the Purchaser does not,
and the performance by the Purchaser of its obligations under the Agreement will
not, subject to obtaining the approvals contemplated by Sections 5.1 and 6.1 of
the Agreement, (a) violate any term or provisions of any Law or any writ,
judgment, decree, injunction or similar order applicable to the Purchaser; (b)
conflict with or result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default under, any of the terms,
conditions, or provisions of the articles or certificate of incorporation or
Bylaws of the Purchaser; (c) result in the creation or imposition of any Lien
upon the Purchaser or any of its Assets and Properties that individually or in
the aggregate with any other Liens has or may reasonably be expected to have a
material adverse effect on the validity or enforceability of the Agreement or on
the ability of the Purchaser to perform its obligations thereunder; or (d)
conflict with or result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default under, or give any Person any
right of termination, cancellation, acceleration, or modification in or with
respect to, any Contract to which the purchaser is a party or by which any of
its Assets or Properties may be bound and as to which any such conflicts,
violations, breaches, defaults or rights individually or in the aggregate have
or may reasonably be expected to have a material adverse effect on the validity
or enforceability of the Agreement or on the ability of the Purchaser to perform
its obligations under the Agreement.
F-1
<PAGE>
4. Any consent, approval, order or authorization of, or any waiting period
imposed by any regulatory authority under federal or state law, including the
laws of the State of Mississippi and the State of Indiana, which require the
Purchaser to obtain any consent, approval or action of, or make any filing with
or give any notice to, any Person except those which the failure to obtain,
make, or give individually or in the aggregate with any other such failures has
or may be expected to have no material adverse effect on the validity or
enforceability of the Agreement or on the ability of the Purchaser to perform
its obligations thereunder in connection with the execution and delivery of the
Agreement and the performance by the Purchaser of its obligations thereunder has
been obtained or, in the case of any such waiting period, has expired.
SECOND
AMENDED AND RESTATED AGREEMENT
BY AND BETWEEN
DIXIE NATIONAL CORPORATION
AND
UNIVERSAL MANAGEMENT SERVICES
<PAGE>
TABLE OF CONTENTS
Page
1. Approvals Required for Effectiveness. . . . . . . . . . . 1
2. Maintenance of Value. . . . . . . . . . . . . . . . . . . 1
3. Method of Placement . . . . . . . . . . . . . . . . . . . 2
4. Acquisition of Common Stock of Phoenix Medical
Management. . . . . . . . . . . . . . . . . . . . . . . . 2
5. Option to Assist in Placement of Additional Shares. . . . 3
5.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5.3 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6. Additional Market Makers. . . . . . . . . . . . . . . . . 3
7. Board Representation. . . . . . . . . . . . . . . . . . . 4
8. Termination . . . . . . . . . . . . . . . . . . . . . . . 4
9. Representations and Warranties of UMS . . . . . . . . . . 4
10. Representations and Warranties of DNC . . . . . . . . . . 5
11. Identity of Purchasers. . . . . . . . . . . . . . . . . . 6
12. Notice. . . . . . . . . . . . . . . . . . . . . . . . . . 6
13. General Provisions. . . . . . . . . . . . . . . . . . . . 7
13.1 Entire Agreement. . . . . . . . . . . . . . . . 7
13.2 No Waiver . . . . . . . . . . . . . . . . . . . 7
13.3 Binding Agreement . . . . . . . . . . . . . . . 7
13.4 Headings. . . . . . . . . . . . . . . . . . . . 7
13.5 Expenses. . . . . . . . . . . . . . . . . . . . 7
13.6 Cooperation . . . . . . . . . . . . . . . . . . 7
13.7 Execution . . . . . . . . . . . . . . . . . . . 8
13.8 Governing Law . . . . . . . . . . . . . . . . . 8
13.9 Severability. . . . . . . . . . . . . . . . . . 8
13.10 Interpretation. . . . . . . . . . . . . . . . . 8
13.11 Extension of Time. . . . . . . . . . . . . . . 8
13.12 Remedies. . . . . . . . . . . . . . . . . . . . 8
<PAGE>
SECOND AMENDED AND RESTATED AGREEMENT
HERETOFORE on or about October 27, 1994, Dixie National Corporation, a
Mississippi corporation ("DNC"), entered into a contract (the "Agreement") with
Universal Management Services, a Nevada corporation ("UMS"), pursuant to which
UMS agreed to assist DNC in the placement of DNC's common stock pursuant to
Regulation S as promulgated by the Securities and Exchange Commission of the
United States ("SEC") under the Securities Act of 1993 ("the Act"), and,
SUBSEQUENTLY, on or about March 24, 1995, the Agreement of October 27,
1994, was amended by the execution of a Restated Agreement (the "Restated
Agreement", collectively with the Agreement, the "Agreements") to reflect
changes in circumstances which had occurred subsequent to the execution of the
Agreement, and,
WHEREAS, additional changes in circumstances and objectives have occurred
subsequent to the execution of the Agreements and both DNC and UMS desire at
this time to amend and restate the Agreements to accurately reflect the present
circumstances of the parties and their current objectives.
NOW, THEREFORE, for the consideration herein stated, DNC and UMS agree as
follows:
1. Approvals Required for Effectiveness. At the time of the execution
hereof, DNC is the parent company of Dixie National Life Insurance Company
("Dixie Life"), an insurance company domiciled in the State of Mississippi. DNC
has entered into a Letter of Intent pursuant to which DNC will sell all of the
common stock of Dixie Life which it owns. In the event DNC has not closed the
sale of Dixie Life before the occurrence of events provided in the Agreement and
herein which would constitute a change of control of Dixie Life, the parties
agree that the Agreements as amended and restated herein, shall not be effective
and binding until and unless the approval of the Commissioner of Insurance of
the State of Mississippi, to the extent required, is obtained on a timely basis.
2. Maintenance of Value. Previously, in a transaction closed November 29,
1994, DNC had received shares of the common stock of Alanco Environmental
Resources, Inc. (Alanco) as consideration for 2,000,000 shares of DNC common
stock purchased by certain non-United States entities (the "November
Transaction"). Under the Agreements, UMS had the obligation to cause the
purchasers of DNC common stock to maintain the value of certain securities
conveyed to DNC in consideration for the DNC common stock. The purchasers of the
DNC common stock in the November
<PAGE>
Transaction agreed to maintain the value of the Alanco stock at a minimum level
of $2,000,000 for a period specified in the Agreement by delivering additional
shares of Alanco, if required. The parties now agree to permit the purchasers of
the DNC stock in the November Transaction to utilize securities other than
Alanco common shares for the purposes of maintaining such value. The parties
therefore agree that the purchasers of the DNC stock may satisfy the obligation
to maintain the value of the consideration paid to DNC by depositing not only
Alanco stock, but shares of other common stock of companies which are currently
traded on NASDAQ, the American Stock Exchange or the New York Stock Exchange.
The parties further agree that the period of time during which the purchasers of
DNC common stock in the November Transaction shall be required to maintain the
value of the consideration paid to DNC at a minimum of $2,000,000 shall be
extended to the latter of the closing date for the sale of Dixie Life to
Standard Management Corporation or ninety (90) days after cancellation of the
agreement relating to such sale. UMS will take such steps as are necessary to
obtain the binding agreement of the original purchasers of the DNC stock in the
November Transaction to maintain the value thereof as herein set forth.
3. Method of Placement. UMS agrees to use its best effort to assist DNC in
the placement of its common stock by locating individuals capable and qualified
to purchase DNC common stock pursuant to Regulation S. With the exception of the
placement of a portion of the shares as provided in Paragraph 4 hereof, such
placement shall be pursuant to and in compliance with Regulation S as
promulgated by the SEC under the Act as well as in compliance with other
provisions of the Act including, but not limited to, notice to the purchasers in
any Regulation S sale of the purchaser's inability to resell of such stock
within the United States within forty days of such purchase. Further, such sales
or placements shall be in compliance with the laws and regulations of the
political subdivision within which the purchasers of such securities reside or
are domiciled and in compliance with the laws and regulations of such other
political subdivisions as may have jurisdiction over the sales or placements.
4. Acquisition of Common Stock of Phoenix Medical Management. In
consideration of UMS's successful efforts in assisting DNC in the sale of its
common stock, DNC grants to UMS the option to assist DNC in acquiring shares of
Phoenix Medical Management, Inc., an Arizona corporation ("PMM"), as follows:
(a) By exchanging 2,000,000 shares of DNC common stock for shares equal to
16% of the outstanding shares of the common stock of PMM.
(b) By DNC issuing 100,000 shares of its common stock for an option to
acquire the remaining 84% of the outstanding
2
<PAGE>
shares of the common stock of PMM in consideration for 10,400,000
shares of DNC common stock.
(c) In the exchange of DNC's stock for shares of PMM, to the
extent the owners of the PMM stock are non-residents of the United
States, such exchange shall be made pursuant to provisions of
Regulation S under the Act. As to the owners of PMM stock who reside in
the United States and where such exchange involves a United States
transaction, such exchange shall be pursuant to a private placement
exemption available under the Act.
5. Option to Assist in Placement of Additional Shares. For the
consideration herein before stated, DNC grants to UMS the option to use its best
efforts to assist DNC in placing additional shares of DNC common stock in
foreign transactions with certain foreign investors known to UMS, in the amount
and manner as hereinafter provided. The purchase or placement under this
paragraph shall be subject to the following terms and conditions:
5.1 All sales or placements shall be made under and in
compliance with Regulation S as promulgated by the SEC under
the Act.
5.2 All sales or placements shall be made in compliance with
the laws and regulations of the political subdivisions which
have jurisdiction over the purchaser and/or the transaction.
5.3 If UMS has effected the transactions pursuant to Paragraph
4, UMS shall have the right to place or acquire such
additional number of shares that may be required to bring the
total shares purchase or placed by UMS under the Agreements
and this Second Amended and Restated Agreement to 14,500,000.
The right to place shares of DNC common stock pursuant to this
Paragraph 5 shall expire on June 30, 1995. The net price to be
received by DNC for DNC common stock issued hereunder for
assets or other readily marketable assets under Paragraph 5
shall be the greater of $1.00 per share or 60% of the market
price of such DNC common stock on the date of such sale or
placement. Such market price shall be deemed to be the average
of the average bid and average asked price as quoted on the
NASDAQ quotation system on the date of such sale or placement.
6. Additional Market Makers. UMS agrees to exert its best efforts to
secure additional market makers to participate in making a market in DNC stock
on the NASDAQ quotations.
3
<PAGE>
7. Board Representation. The Board of Directors of DNC presently
consists of 9 individuals. At such time as DNC has sold or placed not less than
6,425,000 shares of its common stock as a direct result of the efforts of UMS
hereunder, a sufficient number of the then existing Directors of DNC shall
resign so that the investors purchasing the aforesaid amount of common stock
shall have the ability to elect a majority of the Board of Directors of DNC as
such Board is thus constituted.
8. Termination. The parties agree that this agreement calls for various
actions to be taken in a sequential manner with the right to exercise later
rights being dependent upon completion in a timely manner of the preceding
steps. Therefore, the parties acknowledge and agree that in the event of the
termination of this Contract or any rights hereunder resulting hereunder or
herefrom, such termination will have no effect on any completed transaction or
transactions, each of which shall stand alone and shall be considered completed,
valid and binding.
9. Representations and Warranties of UMS. UMS repeats and confirms
the representations and warranties heretofore made in the Agreement and
Restated Agreement and confirms that the present directors of UMS are:
D. R. Ellenbecker
4110 North Scottsdale Road, Suite 200
Scottsdale, Arizona 85260
Norman E. Meyer
4110 North Scottsdale Road, Suite 200
Scottsdale, Arizona 85260
Kevin L. Jones
9175 East Winchcomb Dr.
Scottsdale, AZ 85260
John E. Haggar
4110 N. Scottsdale Rd., Suite 215
Scottsdale, AZ 85251
The current officers of UMS are:
Kevin L. Jones, President
9175 East Winchcomb Dr.
Scottsdale, AZ 85260
John Haggar, CFO, Secretary and Treasurer
4110 N. Scottsdale Rd., Suite 215
Scottsdale, AZ 85251
D.R. Ellenbecker, Chairman and CEO
4
<PAGE>
4110 North Scottsdale Road, Suite 200
Scottsdale, Arizona 85260
Dean A. Douglas, COO
64266 East Whispering Tree
Tucson, AZ 85737
10. Representations and Warranties of DNC. DNC repeats and confirms
the representations and warranties heretofore made in the Agreement and
Restated Agreement and confirms that the present directors of DNC are:
T.H. Etheridge
P.O. Drawer 577
Carthage, MS 39051
John E. Haggar
4110 N. Scottsdale Rd., Suite 215
Scottsdale, AZ 85251
Robert B. Neal
P.O. Box 22587
Jackson, MS 39225-2587
Dennis Nielsen
2560 Neff's Circle
Salt Lake City, Utah 84109
Joe D. Pegram
P.O. Box 389
Oxford, MS 38655
S.L. Reed, Jr.
107 Executive Center
Hilton Head Island, SC 29928
James G. Ricketts
4110 N. Scottsdale Rd., Suite 235
Scottsdale, AZ 85121
Herbert G. Rogers, III
P.O. Box 807
New Albany, MS 38652
W.A. Taylor, Jr.
939 W. Main
Louisville, MS 39339
The present officers of DNC are:
S.L. Reed, Jr.
5
<PAGE>
Chairman and Chief Executive Officer
107 Executive Center
Hilton Head Island, SC 29928
Robert B. Neal
President
P.O. Box 22587
Jackson, MS 39225-2587
Monroe M. Wright
Senior Vice President and Treasurer
P.O. Box 22587
Jackson, MS 39225-2587
Jerry M. Greer
Senior Vice President and Secretary
P.O. Box 22587
Jackson, MS 39225-2587
Thomas F. Flowers
Senior Vice President Marketing
P.O. Box 22587
Jackson, MS 39225-2587
11. Identity of Purchasers. UMS acknowledges that, in order for DNC to
comply with the requirements and provisions of the Act and regulations
promulgated thereunder, it is necessary that DNC know the identities of those
who will acquire the common stock of DNC pursuant hereto. UMS agrees to make
such information available to DNC in sufficient time in advance of the
consummation of the transactions contemplated by Paragraph 5 in order that DNC
may satisfy itself in this regard.
12. Notice. Any notice given hereunder shall be given in writing,
signed by the party giving such notice, and signed by the party giving such
notice, and shall be sent by Federal Express or UPS overnight mail service, with
proper postage and registration fees prepaid, addressed to the party for whom
intended or by hand delivery only to the addressee at the following address:
To DNC: President
Dixie National Corporation
3760 I-55 North
Jackson, MS 39211
with Copy to:
James H. Neeld, III, Esq.
Wells, Moore, Simmons & Neeld
1300 Deposit Guaranty Plaza
Jackson, MS 39201
6
<PAGE>
To UMS: President
Universal Management Services
4110 N. Scottsdale Road, Suite 215
Scottsdale, AZ 85251
or to such other address as the party being given such notice shall from time to
time designate to the other by notice given in accordance herewith. The
effective date of any notice given pursuant to this Agreement shall be the date
that the notice is received by DNC or UMS, as the case may be, if by hand
delivery, or as evidenced by the date indicated on the delivery receipt of such
notice, if by Federal Express or UPS overnight mail service.
13. General Provisions.
13.1 Entire Agreement. This writing constitutes the entire
agreement of DNC and UMS with respect to the subject matter of
this transaction and may not be modified or amended except by
a written agreement specifically referring to this Agreement
signed by both DNC and UMS. This agreement supersedes any
prior agreement between UMS and DNC except for the Agreements.
13.2 No Waiver. No waiver of any breach or default
hereunder shall be considered valid unless in writing and
signed by the party giving such waiver, and no such waiver
shall be deemed a waiver of any subsequent breach or default
of the same or similar nature.
13.3 Binding Agreement. This Agreement shall be
binding upon and inure to the benefit or detriment of DNC
and UMS, their respective successors, assigns, and legal
representatives.
13.4 Headings. The paragraph headings contained in this
Agreement are inserted for convenience of reference only, and
shall not be construed as defining, limiting, extending or
describing the scope of this Agreement, any paragraph or
subparagraph hereof, or the intent of any provision hereof.
13.5 Expenses. DNC and UMS shall pay their own expenses in
connection with this Agreement and the transactions
contemplated in connection with this Agreement.
13.6 Cooperation.DNC and UMS shall cooperate, shall take
such further action and shall execute and deliver such further
documents as may be reasonably requested in order to carry out
the provisions and purposes of this Agreement.
7
<PAGE>
13.7 Execution. This Agreement may be executed in one or
more counterparts, all of which taken together shall be
deemed one original.
13.8 Governing Law. This Agreement, as amended, shall be
governed by and construed in accordance with the laws of the
State of Mississippi.
13.9 Severability. If any provision of this Agreement, or
the application thereof to any person or circumstance, shall
be held invalid or unenforceable under any applicable law,
such invalidity or unenforceability shall not affect any other
provision of this Agreement that can be given effect without
the invalid or unenforceable provision, or the application of
such provision to other Persons or circumstances, and, to this
end, the provisions hereof are severable.
13.10 Interpretation. This Agreement shall not be
construed or interpreted in favor of or against DNC or UMS on
the basis of draftsmanship or preparation of the Agreement.
13.11 Extension of Time. The parties may, but only by
written amendment hereto, extend any time period set forth
herein. Any time period dependent upon an earlier time
provision which is extended shall be executed from the term
equal to the length of the underlying extension.
13.12 Remedies. The rights and remedies of DNC and UMS
hereunder shall not be mutually exclusive; i.e., the exercise
of one or more of the provisions hereof shall not preclude the
exercise of any other provision hereof. DNC and UMS
acknowledge, confirm, and agree that damages will be
inadequate for a breach or a threatened breach of this
Agreement and, in the event of a breach or threatened breach
of any provision hereof, the respective rights and obligations
hereunder shall be enforceable by specific performance,
injunction, or other equitable remedy, but nothing contained
herein shall limit or affect any rights at law or by statute
or otherwise of either party aggrieved as against the other
for a breach or threatened breach of any provision hereof, it
being the intent of DNC and UMS and this provision to make
clear that the agreement of DNC and UMS is that the respective
rights and obligations of DNC and UMS shall be enforceable in
equity as well as at law or otherwise.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Agreement effective as of the 24th day of March, 1995.
DIXIE NATIONAL CORPORATION
By:___________________________
Title:________________________
Executed:_____________________
ATTEST:
________________________
SECRETARY
UNIVERSAL MANAGEMENT SERVICES
By:___________________________
Title:________________________
Executed:_____________________
ATTEST:
________________________
SECRETARY
9
EXTENSION OF MATURITY
HERETOFORE, on or about May 3, 1993, the undersigned ________________
("Noteholder") purchased from Dixie National Corporation ("Dixie") one
Subordinated Convertible Callable Fixed Interest Rate Note in the principal
amount of $______________ being Note numbered________________(the "Note"), and
WHEREAS, the Note has a maturity date of May 1, 1995, and while Dixie
currently has unencumbered assets which could be sold to generate funds with
which to pay the Note as and when due, Dixie desires to extend the maturity and
payment of the Note so as to permit the payment thereof from the proceeds to be
received by Dixie from the sale of the common stock of its controlled subsidiary
Dixie National Life Insurance Company ("Dixie Life") to Standard Management
Corporation ("Standard"), or one of its affiliates, and
WHEREAS, the Note is subordinate to and subject in right of payment to
the prior payment in full of all other indebtedness of Dixie, and
WHEREAS, the Note, together with other similar notes, is secured by the
pledge by Dixie pursuant to a Security Agreement dated as of May 1, 1993 (the
"Security Agreement") of all Dixie Life stock owned by Dixie, and
WHEREAS, Dixie proposes to further secure the payment of the Note by
placing into an escrow account (the "Escrow") the number of shares of Eligible
Securities, as defined in the Escrow Agreement, Exhibit 1 hereto, which have an
aggregate market value of not less than $1,810,000, and agrees to bring the
amount of such securities back to $1,810,000 in the event the market value of
the Eligible Securities subject to the Escrow falls below such amount for a
period of five (5) consecutive trading days. The Escrow Account shall be
restored to the required level on the next trading day following such five (5)
day period as provided in the Escrow Agreement, and
WHEREAS, the Noteholder is agreeable to extending the maturity of the
Note as required by Dixie subject to the terms and condition herein stated,
NOW THEREFORE, the parties agree:
1. For and in consideration of the creation of the Escrow by
Dixie and the placement therein by Dixie of Eligible Securities with a market
value in an amount of not less than $1,810,000, as aforesaid, Noteholder agrees
that the maturity date of the Note shall be extended from May 1, 1995, to the
earliest of the following dates: (a) date of the closing of the sale by Dixie to
Standard, or an affiliate thereof, of all of the common stock of Dixie National
Life Insurance Company owned by Dixie or, (b) in the event such sale fails to
close, to a date which shall be 90 days from the date of notice from either
Dixie or Standard to the other of the impossibility of closing such sale or (c)
240 days after May 1, 1995 (the "New Maturity Date").
1
<PAGE>
Except for the provisions of 1(c) of this section, it is the intent of the
parties hereto that the New Maturity Date of the Note be the same as the
maturity date of the Senior Debt of Dixie to Standard as such maturity date is
defined in the Stock Purchase Agreement between Dixie and Standard dated April
17, 1995, a copy of the pertinent provisions thereof being attached hereto as
Exhibit 2.
2. In consideration of the agreement of the Noteholder to extend
the Maturity Date of the Note as herein provided, Dixie agrees to create the
Escrow as herein described and to place into such Escrow a sufficient amount of
Eligible Securities so that the market value thereof will equal or exceed
$1,810,000 and to maintain the market value of the Eligible Securities in the
Escrow at the level and in the manner provided in paragraph numbered 1 hereof.
3. The parties hereto agree that the law firm of Wells, Moore,
Simmons & Neeld, PLLC, of Jackson, Mississippi, shall serve as Escrow Agent of
the Escrow, the terms and conditions of which shall be as set forth in Exhibit 2
hereto.
4. During the extended term of the Note, Dixie shall continue to
pay interest as and when due in accordance with the original Note.
5. Except for the extension of the Maturity Date of the Note and
the providing of additional collateral to secure the payment of the Note as and
when due under the terms hereof, all of the terms, conditions, rights and
obligations of Dixie under the Note and the Security Agreement and of the
Noteholder in relation thereto, shall remain unchanged including, but not
limited to, the rate of interest payable on the Note and all conversion rights
of the Noteholder thereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Extension of
Maturity effective as of the 1st day of May, 1995.
NOTEHOLDER
By _______________________
Title:
DIXIE NATIONAL CORPORATION
By _______________________
CHAIRMAN AND CEO
2
<PAGE>
ESCROW AGREEMENT
This Escrow Agreement is made by and among Wells, Moore, Simmons and
Neeld, PLLC ("Escrow Agent"), Dixie National Corporation, a Mississippi
corporation ("Dixie"), and________________("Noteholder"), who agree as follows:
1. Recitals. Simultaneously with the execution of this Agreement, the
parties are executing a certain Extension of Maturity concerning the payment by
Dixie of its Subordinated Convertible Callable Fixed Interest Rate Note (the
"Note") held by Noteholder. Under the terms of the Extension of Maturity, the
parties agreed to establish an escrow in order for additional security to be
deposited by Dixie to secure the payment of the Note as and when due on the New
Maturity Date. The purpose of this Agreement is to set forth in writing the
terms of the agreement of the parties relative to the escrow of the additional
security.
2. Definitions. Terms not defined herein shall have the meanings assigned
to them under the terms of the Extension of Maturity and the Stock Purchase
Agreement between Dixie and Standard Management Corporation. For the purposes of
this Agreement, Market Value is defined as the closing bid price for the
security involved on the date as of which valuation is made on the exchange or
market where such security is traded as reported in the Wall Street Journal. If
such quote is not available, the value shall be established by the quote of a
recognized security firm acceptable to the parties.
3. Escrow Account. The escrow hereby established shall be accomplished
either by the physical delivery of cash to Escrow Agent or by the transfer of
Eligible Securities to an account subject to the exclusive control of Escrow
Agent which shall be established at J.C. Bradford & Co. in the name of Dixie
National Corporation Escrow Account for the Benefit of Subordinated Convertible
Noteholders, Wells, Moore, Simmons & Neeld, Escrow Agent. Escrow Agent will
allocate the Escrow Account to Noteholders (the "Noteholders") pro rata in
accordance with Schedule A attached hereto and incorporated as a part of this
Escrow Agreement. The parties agree the Eligible Securities shall consist of
common stock of Alanco Environment Resources, Inc. or AppleTree Companies, Inc.
or such other Eligible Securities as may be approved by American Capitol
Insurance Company ("American Capitol").
4. Deposits and Disbursements. The escrow subject to this Agreement has
been established pursuant to the terms of the Extension of Maturity. Dixie has
transferred to the Escrow Account described in Paragraph 3 and Escrow Agent
hereby acknowledges receipt of____________ shares of the common stock of_______
_________ with a Market Value as of the date hereof of not less than $1,810,000
to be held by Escrow Agent in accordance with the terms hereof for the
benefit of all Noteholders in proportion to their interest as shown on Schedule
A. Disbursement of the assets subject to this Escrow shall be made as follows:
<PAGE>
(a) The assets deposited subject hereto are to secure the
prompt payment as and when due by Dixie of the principal and interest
of the Note held by Noteholder and the discharge by Dixie of its
obligations hereunder.
(b) The due date of the Note secured by the assets subject to
this Escrow is deemed to be the New Maturity Date as set forth and
defined in the Extension of Maturity.
(c) If Dixie pays the principal and all interest due under the
Note to Noteholder on the New Maturity Date, this Escrow shall
terminate and Escrow Agent shall return the assets subject to the terms
hereof to Dixie. Payment of the Note shall be evidenced by written
notification to Escrow Agent from Dixie and Noteholder of the time,
amount and method of payment.
(d) In the event Dixie fails to pay Noteholder all principal
and interest due on the Note on or before the New Maturity Date,
Noteholder shall deliver to Escrow Agent written notification of
Dixie's failure to make such payment. Upon receipt of such notice from
Noteholder, Escrow Agent shall deliver to Noteholder his proportionate
share of all assets held for Noteholder's benefit pursuant to this
Agreement. Escrow Agent shall have the right at any time during the
term of this escrow to convert any Eligible Security held by Escrow
Agent to cash upon instruction from Dixie. Any cash received by Escrow
Agent as a result of the liquidation of Eligible Securities shall be
held by Escrow Agent subject to the terms hereof.
(e) This Agreement may be terminated by the mutual written
consent of Dixie and Noteholder by delivering written notification of
such termination to Escrow Agent in which event Escrow Agent shall
deliver the assets held under the terms hereof for the benefit of
Noteholder to the party and in the manner specified in such notice of
termination.
(f) Dixie agrees that if at any time during the term of this
Agreement, the Market Value of the securities on deposit hereunder
becomes less than $1,810,000 for a period of five (5) consecutive
trading days, Dixie, on the next trading day, shall deposit cash or
additional Eligible Securities, as defined in Paragraph 3 hereof, with
Escrow Agent in an amount sufficient to cause the Market Value of all
securities and cash held by Escrow Agent for the benefit of Noteholders
to equal or exceed the sum of $1,810,000.
(g) At any time during the term of the escrow, Dixie shall
have the right to substitute cash or other Eligible Securities, as
defined in Paragraph 3 hereof, for any security being held by Escrow
Agent provided such substitutions shall not diminish the aggregate
Market Value of securities and cash held by the Escrow Agent below
$1,810,000.
2
<PAGE>
(h) In the event of default by Dixie under the terms hereof,
or under the terms of the Note and related security agreement,
Noteholder shall have the rights set out in this Agreement as well as
all other rights.
5. Default. An Event of Default shall be deemed to have occurred under the
terms hereof in the event Dixie fails to comply with any term, condition, or
requirement of the Note, the Security Agreement securing the Note, or this
Agreement, specifically including but not limited to:
(a) Failure to maintain the Market Value of the Escrow
Account as provided and required by Paragraph 4(f) hereof;
(b) Default by Dixie under the Note or the Security
Agreement executed in relation to the Note; or
(c) Failure of Dixie to pay the principal of the Note on the
New Maturity Date or to pay interest due on the Note as and when due
prior to or on the New Maturity Date.
6. Remedies Upon Default. Upon the occurrence of an Event of Default, as
defined herein, Noteholder shall be entitled to institute foreclosure,
collection, or other legal proceedings to realize upon its security interest in
the Eligible Securities held by the Escrow Agent hereunder. If an Event of
Default described in Paragraph 5(b) hereof should occur, Noteholder may proceed
against the assets held in the Escrow Account without the requirement to exhaust
its remedies relative to its subordinate security interest in the common stock
of Dixie National Life Insurance Company owned by Dixie.
7. Liquidation of Escrow Account. In the event the New Maturity Date shall
be a day ninety (90) days from the date of notice from either Dixie or Standard
to the other of the impossibility of closing the sale by Dixie to Standard of
the common stock of Dixie National Life Insurance Company owned by Dixie, copies
of which notice shall be promptly sent by Dixie to Noteholders and Escrow Agent,
but in any event within three (3) business days. Dixie agrees thereupon to
immediately instruct Escrow Agent, without the necessity of additional notice or
request from Noteholder, to immediately commence the orderly liquidation of
Eligible Securities. Escrow Agent shall commence such liquidation within thirty
(30) days of the date of such notice and shall exert its best efforts to
complete such liquidation within such ninety (90) days. Further, Dixie agrees to
give Noteholder a copy of any notice, as described in this paragraph, given or
received by Dixie. At the expiration of such ninety (90) day liquidation period,
any assets remaining in the Escrow Account shall be distributed by the Escrow
Agent to the Noteholders pro rata in accordance with Schedule A hereto.
8. Reimbursement of Attorney's Fees. Upon execution hereof, Dixie shall pay
American Capitol the sum of $10,000.00 in full reimbursement for attorney's fees
incurred or expended by American Capitol. In addition, Dixie agrees to reimburse
American Capitol for
3
<PAGE>
reasonable attorney's fees and expenses which it may incur in the event it is
necessary for American Capitol to institute suit, foreclosure, or other legal
proceedings to collect the debt secured by this Escrow Agreement.
9. Ultimate Maturity. Anything herein to the contrary notwithstanding, the
Parties agree that upon the expiration of 180 days from the execution hereof,
Dixie shall therefrom immediately instruct Escrow Agent, without the necessity
of additional request or notice from Noteholders to immediately commence the
orderly liquidation of Eligible Securities. Escrow Agent shall commence such
liquidation within thirty (30) days from the date of such notice and shall exert
its best efforts to complete such liquidation not later than 240 days from the
execution hereof. Any assets remaining in the Escrow Account at the end of such
240 day period shall be distributed by the Escrow Agent to the Noteholders pro
rata in accordance with Schedule A hereto to the extent of their respective
interests.
10. Opinion of Counsel. American Capitol shall receive an opinion of Wells,
Moore, Simmons & Neeld, in form and substance satisfactory to American Capitol,
to the effect that Noteholders have a perfected first security interest in the
property subject to escrow. Such opinion shall be delivered no later than May
30, 1995. In the event Wells, Moore, Simmons & Neeld is unable to opine as
herein set forth or such opinion is for any other reason not delivered to
American Capitol by May 30, 1995, and the parties are unable by May 30, 1995, to
agree to alternative arrangements to secure the Noteholders, such lack of
agreement among the parties shall thereupon constitute an event of default
hereunder.
11. Indemnification. Dixie and American Capitol hereby agree to indemnify
and hold Escrow Agent free and harmless from and against any and all losses,
costs, damages, liabilities or expenses including cost of reasonable attorneys
fees to which Escrow Agent may reasonably be put, or which it may reasonably
incur, by reason of or in connection with this Agreement; such obligation of
Dixie and American Capitol shall not be joint and several but American Capitol
and Dixie shall respectively each have the obligation to indemnify Escrow Agent
to the extent of fifty percent (50%) of any amount in relation to which Escrow
Agent is entitled to indemnity. Provided, however, that Dixie and American
Capitol shall not be obligated to indemnify Escrow Agent with respect to any
loss, costs, damages, liabilities or expense occasioned solely by Escrow Agent's
gross negligence or willful and wanton acts.
12. Nature of Custody. The assets deposited pursuant hereto are being held
by Escrow Agent as custodian only. Escrow Agent shall have no obligation to take
any action relative to such security either regarding receipt and disbursement
of dividends, execution of proxies or responding to any other written
notification or request for action or inaction. Escrow Agent's sole
responsibility in relation to the assets deposited pursuant hereto shall be the
safe custody of such assets.
13. Conflict in Demands. Escrow Agent shall be obligated to perform only
such duties as are expressly set forth herein. In case of conflicting demands
upon Escrow Agent, it
4
<PAGE>
shall interplead the escrowed property in dispute with the Chancery Court of
the First Judicial District of Hinds County, Mississippi.
14. No Obligation to Take Legal Action. Escrow Agent shall not be under any
obligation to take any legal action in connection with this Escrow or its
enforcement or to appear in, prosecute or defend any action or legal proceeding
which, in its opinion, would or might involve it in any cost, expense, loss, or
liability unless and as often as required by it, it shall be furnished with
security and indemnity satisfactory to it against all such costs, expenses,
losses or liabilities.
15. Status of Escrow Agent. Escrow Agent is to be considered and regarded
as a depositor only and, except as provided in Paragraph 11 hereof, shall not be
responsible or liable (except for its failure to exercise due care) for the
efficiency or correctness as to form, manner of execution or validity of any
instrument deposited in this escrow, nor as to the identity, authority, or
rights of any person executing the same; its duties hereunder shall be limited
to the safekeeping of the securities received by it as Escrow Agent and for the
delivery of the same in accordance with the written escrow instructions given in
accordance with this agreement.
16. Overriding Affirmative Duties of Escrow Agent. Notwithstanding anything
in this Agreement to the contrary, the Parties agree and acknowledge that
nothing herein contained shall prohibit the Escrow Agent from undertaking the
liquidation of the assets subject to this Agreement in accordance with the terms
hereof. Escrow Agent agrees to exert its best efforts to forward promptly to
Dixie and Noteholders any written communication received by it relative to the
assets deposited in the Escrow Account.
17. Written Instruction of the Parties. Notwithstanding anything herein to
the contrary, Escrow Agent shall at all times have full right and authority to
deliver the escrowed securities in accordance with the joint written
instructions signed by Dixie and Noteholder.
18. Escrow Agent's Fees and Expenses. Escrow Agent's fees and expenses
involved in discharging its duties under the terms hereof shall be paid by
Dixie.
19. Creation of Security Interest. It is the intent of the parties to
create, by the execution of this Agreement, a first priority security interest
in favor of the Noteholders in and to the collateral subject to the Escrow
hereby created. Perfection of this security interest is being accomplished by
delivery of the collateral to the Escrow Agent or its designated bailee, J.C.
Bradford & Company. The security interest hereby created is in addition to and
in no manner subordinate or secondary to the security interest in common stock
of Dixie National Life Insurance Company in favor of the Noteholders resulting
from the Security Agreement executed in connection with the execution and
delivery of the Note.
5
<PAGE>
WITNESS the signatures of the parties hereto effective as of
the 1st day of May, 1995.
ESCROW AGENT:
WELLS, MOORE, SIMMONS & NEELD, PLLC
By: ____________________
DIXIE NATIONAL CORPORATION
By: ____________________
Its Chairman and CEO
NOTEHOLDER
By: ____________________
Title:
6
<PAGE>
DIXIE NATIONAL CORPORATION
SUBORDINATED CONVERTIBLE CALLABLE
FIXED INTEREST RATE NOTE
DUE MAY 1, 1995
ISSUED TO AMOUNT
(1) American Capital Insurance Co. 1,000,000
10555 Richmond Ave.
Houston, Texas 77042
(2) William A. Taylor, Jr. 100,000
650 N. Church
Louisville, Ms 39339
(3) Massachusetts Fidelity Trust Co. 20,000
FBO: Rubel Phillips, IRA
4333 Edgewood Rd., N.E.
Cedar Rapids, IA 52499
(4) Sarah L. Fowler 30,000
P.O. Box 309
Columbus, Ms 39703
(5) M.E. Pigott 100,000
8782 St. Andrews Dr.
Destin, Fl 32541
(6) Virginia N. Low 15,000
1456 Mossline Dr.
Jackson, Ms 39211
(7) John T. C. Low 25,000
133 Olympia Fields
Jackson, Ms 39211
(8) Taylor Equipment & Machine 100,000
Tool Corp.
650 North Church
Louisville, Ms 39339
(9) Rubel L. Phillips 20,000
(10) Thomas F. Flowers, Jr. 50,000
(11) Robert B. Neal 100,000
SCHEDULE A
<PAGE>
(12) Jerry M. Greer 50,000
(13) W. Cleopha Pigg 100,000
4002 Mangum Dr.
Pearl, Ms 39208
(14) Rubel L. Phillips 10,000
----------
1,720,000
----------
<PAGE>
ARTICLE XI
WAIVER
11.1 Senior Debt of Seller. Heretofore, Purchaser acquired from Trustmark
National Bank of Jackson, Mississippi, the Senior Debt of Seller. Such Senior
Debt is governed by the provisions of a certain loan agreement (the "Loan
Agreement") dated the 3rd day of May, 1993, between Trustmark National Bank and
Seller.
(a) In a Letter of Intent between the Purchaser and Seller executed on or
about March 6, 1995, Purchaser extended the maturity of the aforesaid Senior
Debt until the Closing or ninety (90) days following the notification by either
party hereto to the other of the impossibility of Closing according to the terms
hereof. Subsequently, Purchaser waived until the maturity of the Senior Debt the
provisions of Section 4.01(v)(a) of the Loan Agreement.
(b) Purchaser, for the consideration herein stated, herein confirms the
extension of the maturity of the aforesaid Senior Debt as set forth in the
Letter of Intent. Further, Purchaser confirms the waiver of Section 4.01(v)(a)
of the Loan Agreement and agrees to waive, until the maturity of the Senior
Debt, Sections 4.01(b), (c), 4.02(a)(solely as related to Seller), (d)(solely as
related to Seller), and (f)(solely as related to Seller).
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<DEBT-HELD-FOR-SALE> 17,647,294
<DEBT-CARRYING-VALUE> 563,057
<DEBT-MARKET-VALUE> 0
<EQUITIES> 2,000,000
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 33,838,896
<CASH> 4,266,116
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 6,573,528
<TOTAL-ASSETS> 40,487,880
<POLICY-LOSSES> 27,481,172
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 311,519
<POLICY-HOLDER-FUNDS> 827,955
<NOTES-PAYABLE> 6,058,506
<COMMON> 8,394,973
0
0
<OTHER-SE> (3,096,830)
<TOTAL-LIABILITY-AND-EQUITY> 40,487,880
810,697
<INVESTMENT-INCOME> 617,412
<INVESTMENT-GAINS> 36,757
<OTHER-INCOME> 0
<BENEFITS> 392,703
<UNDERWRITING-AMORTIZATION> 225,728
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> (173,323)
<INCOME-TAX> 0
<INCOME-CONTINUING> (173,323)
<DISCONTINUED> (4,635,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,808,323)
<EPS-PRIMARY> (.57)
<EPS-DILUTED> (.57)
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
