<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): December 29, 1995
SECURITY NATIONAL FINANCIAL CORPORATION
(Exact name of registrant as specified in this Charter)
Utah 0-9341 87-0345941
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation) Identification No.)
5300 South 360 West, Suite 310 Salt Lake City, Utah 84123
- ---------------------------------- -------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (801) 264-1060
Does Not Apply
-------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. Acquisition of Civil Service Employees Life Insurance Company
On December 29, 1995, Security National Financial Corporation
(the "Company"), through its wholly-owned subsidiary, Capital
Investors Life Insurance Company, completed the purchase of all
of the outstanding shares of Common Stock (the "Shares") of Civil
Service Employees Life Insurance Company, a California
corporation ("CSE Life") from Civil Service Employees Insurance
Company, a California corporation and, prior to the closing of
the transaction, the sole shareholder of CSE Life.
At the time of the transaction, CSE Life was a California
domiciled insurance company with total assets of approximately
$16.7 million. CSE Life's assets include fixed maturity
securities, policy loans, receivables, accrued investment income,
and property, plant and equipment. CSE Life is currently
licensed to transact business in seven states, including the
state of California. CSE Life's total revenues for the year
ended December 31, 1994 for statutory accounting purposes were
$3,032,000. CSE Life had a net loss of $599,000 for fiscal 1994.
The loss is the result of a one-time adjustment for prior periods
amounting to $746,000. Without this adjustment, net income would
have been $147,000 in fiscal 1994.
As consideration for the purchase of the shares of CSE Life, the
Company provided Civil Service Employees Insurance Company at
closing with the following: (i) $4,137,000 in cash, and (ii) and
a Promissory Note in the amount of $1,063,000. Interest on the
Note is to be paid on the unpaid principal balance at the rate
equal to 7% per annum. The principal amount is to be repaid in
seven equal annual payments of $151,857.14, beginning on December
29, 1996. Accrued interest is to be paid annually beginning on
December 29, 1996. The cash portion of the purchase price for
the Shares came from the Company's internal funds.
Following the completion of the purchase of CSE Life, the Company
merged CSE Life into Capital Investors Life Insurance Company.
The Company intends to continue operating Capital Investors Life
Insurance Company as the surviving insurance company, which now
includes the assets of CSE Life.
ITEM 7. Financial Statements and Exhibits.
(a) It is impractical for the Company to provide audited
financial statements of CSE Life at the time this report is
required to be filed. The Company intends to file the required
audited financial statements as soon as practicable but not later
than sixty (60) days after this report must be filed.
(b) The Company intends to file the required pro forma
financial information as soon as practicable but not later than
sixty (60) days after this report must be filed.
(c) Exhibits
1. Stock Purchase Agreement among Capital
Investors Life Insurance, Security National
Financial Corporation, CSE Life and Civil
Service Employees Insurance Company.
2. Promissory Note between Security National
Financial Corporation, as maker, and Civil
Service Employees Insurance Company, as payee.
3. Articles of Merger of CSE Life into Capital
Investors Life Insurance Company.
4. Agreement and Plan of Merger of CSE Life into
Capital Investors Life Insurance Company.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
SECURITY NATIONAL FINANCIAL CORPORATION
(Registrant)
Date: January 16, 1996 By: Kevin F. Childress,
Assistant Treasurer
<PAGE>
STOCK PURCHASE AGREEMENT
dated as of December 27, 1995
by and among
CAPITAL INVESTORS LIFE INSURANCE COMPANY
and
SECURITY NATIONAL FINANCIAL CORPORATION,
the sole shareholder of
Security National Life Insurance Company
the sole shareholder of
Capital Investors Life Insurance Company
and
CIVIL SERVICE EMPLOYEES LIFE INSURANCE COMPANY,
and
CIVIL SERVICE EMPLOYEES INSURANCE COMPANY,
the sole shareholder of
Civil Service Employees Life Insurance Company
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C> <C>
ARTICLE I - PURCHASE AND SALES OF SHARES . . . . . . . . . . . . . . 1
1.1 Sale and Purchase of the Shares . . . . . . . . .. . 1
1.2 Purchase Consideration . . . . . . . . . . . . . . . . 1
1.3 Delivery of Shares . . . . . . . . . . . . . . . . . . 2
ARTICLE II - CLOSING . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF CSEIC AND CSE LIFE. .2
3.1 Organization, Good Standing and Power. . . . . . . . . 3
3.2 Capital Structure . . . . . . . . . . . . . . . . . . 3
3.3 Authority . . . . . . . . . . . . . . . . . . . . . . 4
3.4 Dividends, Stock Purchases, Etc. . . . . . . . . . . . 5
3.5 Financial Statements . . . . . . . . . . . . . . . . . 5
3.6 Annual Insurance Statements . . . . . . . . . . . . . 6
3.7 Insurance Business . . . . . . . . . . . . . . . . . . 7
3.8 Compliance With Law . . . . . . . . . . . . . . . . . 7
3.9 No Defaults . . . . . . . . . . . . . . . . . . . . . 8
3.10 Litigation . . . . . . . . . . . . . . . . . . . . . . 8
3.11 No Adverse Change . . . . . . . . . . . . . . . . . . 8
3.12 Absence of Undisclosed Liabilities . . . . . . . . . .10
3.13 Information Supplied . . . . . . . . . . . . . . . . .10
3.14 Certain Agreements . . . . . . . . . . . . . . . . . .11
3.15 Major Contracts . . . . . . . . . . . . . . . . . . .11
3.16 Taxes . . . . . . . . . . . . . . . . . . . . . . . .12
3.17 Interests of Officers and Directors . . . . . . . . .15
3.18 Intellectual Property . . . . . . . . . . . . . . . .15
3.19 Restrictions on Business Activities . . . . . . . . 15
3.20 Title to Properties; Absence of Liens and
Encumbrances; Conditions of Equipment. . . . . . . . .16
3.21 Governmental Authorization and Licenses. . . . . . . .16
3.22 Environmental Matters. . . . . . . . . . . . . . . . .16
3.23 Insurance. . . . . . . . . . . . . . . . . . . . . . .17
3.24 Agents; Customers and Agent Complaints . . . . . . . .18
3.25 No Employees Assumed . . . . . . . . . . . . . . . . .18
3.26 Questionable Payments. . . . . . . . . . . . . . . . .18
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF SNFC AND CILIC . . . 18
4.1 Organization, Good Standing and Power. . . . . . . . 18
4.2 Authority. . . . . . . . . . . . . . . . . . . . . . .19
4.3 Board Authorization. . . . . . . . . . . . . . . . . .19
ARTICLE V - CONDUCT AND TRANSACTIONS PRIOR TO CLOSING DATE;
ADDITIONAL AGREEMENT . . . . . . . . . . . . . . . . . .19
5.1 Conduct of Business of CSE Life. . . . . . . . . . . .19
ARTICLE VI - CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . .24
6.1 Conditions to Each Party's Obligation to
Effect This Transaction. . . . . . . . . . . . . . . .24
6.2 Conditions to Obligations of CILIC . . . . . . . . . .24
6.3 Conditions to Obligations of CSEIC and CSE Life. . . .26
ARTICLE VII - TERMINATION. . . . . . . . . . . . . . . . . . . . . .28
7.1 Termination. . . . . . . . . . . . . . . . . . . . . .28
ARTICLE VIII - INDEMNIFICATION . . . . . . . . . . . . . . . . . . .29
8.1 Obligation of CSEIC to Indemnify . . . . . . . . . . .29
8.2 Notice and Opportunity to Defend . . . . . . . . . . .29
ARTICLE IX - GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . .30
9.1 Survival of Representations, Warranties,
Covenants and Agreements . . . . . . . . . . . . . . .30
9.2 Amendment. . . . . . . . . . . . . . . . . . . . . . .31
9.3 Extension; Waiver. . . . . . . . . . . . . . . . . . .31
9.4 Notices. . . . . . . . . . . . . . . . . . . . . . . .31
9.5 Interpretation . . . . . . . . . . . . . . . . . . . .32
9.6 Counterparts . . . . . . . . . . . . . . . . . . . . .32
9.7 Entire Agreement . . . . . . . . . . . . . . . . . . .32
9.8 No Transfer. . . . . . . . . . . . . . . . . . . . . .32
9.9 Severability . . . . . . . . . . . . . . . . . . . . .32
9.10 Other Remedies. . . . . . . . . . . . . . . . . . . . . .32
9.11 Further Assurances. . . . . . . . . . . . . . . . . . . .33
9.12 No Third Party Beneficiary Rights . . . . . . . . . . . .33
9.13 Mutual Drafting . . . . . . . . . . . . . . . . . . . . .33
9.14 Governing Law . . . . . . . . . . . . . . . . . . . . . .33
9.15 Jurisdiction and Venue. . . . . . . . . . . . . . . . . .33
9.16 Expenses. . . . . . . . . . . . . . . . . . . . . . . . .33
9.17 Brokers or Finders. . . . . . . . . . . . . . . . . . . .33
9.18 Public Announcements. . . . . . . . . . . . . . . . . . .34
9.19 Confidentiality . . . . . . . . . . . . . . . . . . . . .34
9.20 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . .35
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS
<S> <C> <S>
Exhibit 1.2 Purchase Consideration
Exhibit 3 CSEIC/CSE Life Disclosure Schedule
Exhibit 5 CILIC Disclosure Schedule
</TABLE>
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is dated
effective as of December 27, 1995, and entered into by and among
Capital Investors Life Insurance Company, a Utah corporation
("CILIC"), Security National Financial Corporation, a Utah
corporation, and the sole shareholder of Security National Life
Insurance Company, a Utah corporation, which is the sole
shareholder of CILIC ("SNFC"), Civil Service Employees Life
Insurance Company, a California corporation ("CSE Life"), and
Civil Service Employees Insurance Company, a California
corporation and the sole shareholder of CSE Life ("CSEIC").
NOW THEREFORE, in consideration of the mutual covenants and
agreements contained herein, CILIC, CSE Life and CSEIC hereby
agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 Sale and Purchase of the Shares.
-------------------------------
At the Closing, as hereinafter defined, upon and subject to the
terms and conditions set forth in this Agreement, CSEIC shall sell,
transfer, assign and deliver to CILIC, and CILIC shall purchase from CSEIC,
11,500 shares of Common Stock of CSE Life (the "CSE Life Common Stock"),
representing all of the issued and outstanding stock and all
other equity and debt interests or securities of CSE Life owned
by CSEIC, free and clear of all liens, claims, options, proxies,
voting agreements, charges and encumbrances. CILIC, SNFC and
CSEIC hereby acknowledge and agree that it is CILIC's and SNFC's
intent to merge CSE Life with CILIC, with CILIC to be the
surviving corporation (the "Surviving Corporation"), and that
regulatory approval from the Utah and California insurance
departments for the transactions described in Section 1.1 must be
obtained prior to Closing.
1.2 Purchase Consideration.
----------------------
Subject to the terms and conditions of this Agreement, in reliance upon
CSEIC's representations, warranties, agreements and covenants contained
herein, and in consideration of the sale, transfer, assignment
and delivery of the Capital Shares as herein provided, SNFC and
CILIC shall provide purchase consideration in the amount of
$5,200,000 (Five Million Two Hundred Thousand Dollars) (the
"Purchase Consideration") to CSEIC:
$4,137,000 (Four Million One Hundred Thirty Seven
Thousand Dollars) in cash to be paid by wire transfer
at the Closing;
(b) $1,063,000 (One Million Sixty Three Thousand
Dollars) in a seven percent (7%) seven (7) year
note (the "Note") to be issued by SNFC, a copy of
which is attached hereto. It is the intention of
SNFC, CILIC, and CSEIC that the Note be an
admitted asset on CSEIC's statutory financial
statements, and that CSEIC be able to carry the
Note at full value. SNFC and CILIC hereby agree
that by January 31, 1996, they will either (a)
obtain a rating for the Note from the Securities
Valuation Office of the National Association of
Insurance Commissioners that permits CSEIC to
carry the Note as an admitted asset at its full
value; (b) place securities or other collateral on
deposit in an amount necessary for CSEIC to carry
the Note as an admitted asset at full value; or
(c) work with CSEIC to obtain written confirmation
from the California Department of Insurance that
the Note is an admitted asset and can be carried
at full value.
1.3 Delivery of Shares.
-------------------
At the Closing Date, CSEIC shall deliver to CILIC a certificate(s) with
stock power executed in blank representing the outstanding shares of CSE
Life Common Stock required by Section 1.2 hereof. CILIC shall deliver to
CSEIC, at the Closing, the Promissory Note and the cash required by
Section 1.2.
<PAGE>
ARTICLE II
THE CLOSING
2.1 Closing.
--------
The closing of the transaction (the "Closing") will take place at the
offices of Civil Service Employees Insurance Company, 989 Market Street,
San Francisco, California, unless a different date or place is agreed to in
writing by the parties hereto. Each party hereto shall use its reasonable
best efforts to cause the Closing to occur on or before December 29, 1995,
unless this date is extended as provided herein (the "Closing Date").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CSE LIFE AND CSEIC
Except as disclosed in a document attached hereto (the "CSE
Life/CSEIC Disclosure Schedule") referring specifically to the
applicable representation and warranty in this Agreement that
identifies the basis for an exception to a representation and
warranty in this Agreement and that is delivered by CSE Life and
CSEIC to CILIC and approved by CILIC by execution of this
Agreement, CSE Life and CSEIC each represent and warrant to be
true each and every item to CILIC as set forth below, and such
representations and warranties shall be true and correct as of
the date hereof and at all times thereafter including, without
limitation, the Closing Date, as if made at all such times. As
used in this Agreement, "Business Condition" with respect to any
corporate entity or group of corporate entities shall mean the
business and financial conditions and prospects of such entity or
entities taken as a whole.
3.1 Organization, Good Standing and Power.
--------------------------------------
CSEIC and CSE Life are corporations, duly organized, validly existing and
in good standing under the laws of their respective states of
incorporation and have all requisite power and authority to own,
operate and lease their properties and to carry on their
businesses as they are now being conducted. Schedule 3.1 of the
CSE Life/CSEIC Disclosure Schedule contains a true and correct
listing of all states in which CSE Life is registered, licensed
and authorized to engage in the insurance business. Neither
CSEIC nor CSE Life is aware of any threatened or pending action
or inaction that could result in the loss of or an adverse change
in any such registration or license. CSE Life and CSEIC are in
good standing under all such registrations and licenses. CSE
Life and CSEIC are duly qualified as foreign corporations and are
in good standing in each jurisdiction in which the failure to so
qualify would have an adverse effect on their individual Business
Condition. The CSE Life/CSEIC Disclosure Schedule also sets
forth a true and complete list of the states and foreign
countries where CSE Life is qualified as a foreign corporation.
CSE Life has no subsidiaries. CSE Life has no other direct or
indirect equity interest in or loans to any partnership,
corporation, joint venture, business association or other entity.
CSE Life has delivered to CILIC complete and correct copies of
its Articles of Incorporation and Bylaws, in each case as amended
to the date hereof, and has delivered or made available minutes
of all of CSE Life's directors' and stockholders' meetings, and
stock certificate books correctly setting forth the record
ownership of all outstanding shares of CSE Life Capital Stock.
3.2 Capital Structure.
------------------
(a) The authorized capital stock of CSE Life consists of
100,000 shares of Common Stock. There are 11,500 shares of CSE
Life Common Stock issued and outstanding, all of which are owned
by CSEIC. Except as disclosed on Schedule 3.2 of the CSE
Life/CSEIC Disclosure Schedule, there are no other debt, equity
or hybrid debt or equity interests or securities of CSE Life
issued and outstanding.
(b) All outstanding shares of CSE Life Common Stock and
other CSE Life securities, if any, are validly issued, fully paid
and non-assessable and, except as disclosed on the CSE Life/CSEIC
Disclosure Schedule, are not subject to any liens, claims,
encumbrances or charges of any kind or nature or any preemptive
rights created by statute, CSE Life's Articles of Incorporation
or Bylaws or any agreement to which CSE Life is a party or by
which CSE Life may be bound. There are no options, warrants,
calls, conversion rights, commitments or agreements of any
character to which CSE Life is a party or by which CSE Life may
be bound that do or may obligate CSE Life to issue securities of
any kind or nature or to grant, extend or enter into any such
option, warrant, call, conversion right, commitment or agreement
or which relate to the voting of the CSE Life Capital Common
Stock or other CSE Life securities, if any.
3.3 Authority.
----------
(a) CSE Life and CSEIC have all requisite corporate
power and authority to enter into this Agreement and to perform
their obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby. The execution and
delivery of this Agreement, the performance by CSE Life and CSEIC
of their obligations hereunder and thereunder and the
consummation of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate
action on the part of CSE Life and CSEIC, including approval by
their respective Boards of Directors and CSEIC as the sole CSE
Life shareholder. This Agreement shall constitute legal, valid
and binding obligations of CSE Life and CSEIC, enforceable
against CSE Life and CSEIC in accordance with their respective
terms, except as enforcement may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of
creditors' rights generally and except that the availability of
equitable remedies is subject to the discretion of the court
before which any proceeding therefor may be brought.
(b) The execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated hereby
and thereby, will not, conflict with or result in any violation
of any statute, law, rule, regulation, judgment, order, decree or
ordinance applicable to CSE Life or CSEIC or their properties or
assets, nor will it conflict with or result in any breach or
default (with or without the giving of notice or the lapse of
time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to the loss of
any benefit under, or result in the creation of a lien, charge or
encumbrance on any of the properties or assets of CSE Life
pursuant to (i) any provision of the Articles of Incorporation or
Bylaws of CSE Life or (ii) any agreement, contract, note,
mortgage, indenture, lease instrument, permit, concession,
franchise, registration or license to which CSE Life or CSEIC is
a party or by which CSE Life or CSEIC or any of their properties
or assets may be bound or affected.
(c) No consent, approval, order or authorization of,
or registration, declaration or filing with, any court,
administrative agency, commission, regulatory authority or other
governmental authority or instrumentality, whether domestic or
foreign (collectively, a "Governmental Entity"), is required by
or with respect to CSE Life or CSEIC in connection with the
execution and delivery of this Agreement and by CSE Life or CSEIC
or the consummation by CSE Life or CSEIC of the transactions
contemplated hereby or thereby, except for (i) filing required
documents with the relevant authorities of states in which CSE
Life is qualified to do business, (ii) such consents, approvals,
authorizations, registrations or qualifications as may be
required under state insurance laws as identified in the CSE
Life/CSEIC Disclosure Schedule and (iii) such consents,
approvals, orders, authorizations, registrations, declarations
and filings as may be required under the laws of any foreign
country, which, if not obtained or made, would not have an
adverse effect on the Business Condition of CSE Life. All
approvals of CSE Life's or CSEIC's Board of Directors and the
shareholder of CSE Life as required by applicable law have been
obtained and are in force and effect and no dissenters' rights
have been exercised by CSEIC under applicable law.
3.4 Dividends, Stock Purchases, Etc.
--------------------------------
Since December 31, 1994, CSE Life has not (i) declared or paid any dividends
(either in cash, property or its stock of any class) upon, or made or
become committed to make any other distribution with respect to,
or purchased, redeemed or otherwise beneficially acquired any of
its outstanding capital stock of any class, or become committed
so to do; (ii) split up, combined or reclassified any of its
outstanding capital stock of any class, or become committed so to
do; or (iii) issued or become committed to issue any additional
capital stock of any class (whether or not from treasury stock,
heretofore authorized but unissued stock, or newly authorized
stock) or any options, rights or warrants to acquire, or
securities convertible into or exchangeable for, or which
otherwise confer upon the holder or holders thereof any right to
acquire, any shares of capital stock of any class or any other
security or debt of CSE Life.
3.5 Financial Statements.
---------------------
CSEIC and CSE Life have furnished or made available to CILIC or will
furnish or make available to CILIC within ten (10) days from the date of
this Agreement CSE Life's audited financial statements for the fiscal
years ended December 31, 1991, 1992, 1993 and 1994, including
balance sheets and the related audited statements of income, cash
flow and stockholders' equity, (collectively, the "Financial
Statements"), and the related management letters, and CSE Life's
unaudited financial statements as of and for the quarters ended
March 31, 1995, and June 30, 1995, including unaudited balance
sheets of CSE Life as at March 31, 1995 and June 30, 1995 (the
"Unaudited Balance Sheets"), and the related unaudited statements
of income, cash flow and stockholders' equity (collectively, the
"Unaudited Financial Statements"). The Financial Statements and
the Unaudited Financial Statements provided previously to CILIC
are listed in Schedule 3.5 of the CSE Life/CSEIC Disclosure
Schedule. The Unaudited Financial Statements together with the
Financial Statements are, collectively, referred to as the "CSE
Life Financial Statements." The CSE Life Financial Statements
have been prepared in accordance with statutory accounting
principles consistently applied (except that the Unaudited
Financial Statements do not include footnotes) and fairly present
the financial position of CSE Life as at the dates thereof and
the results of its operations and cash flows for the periods then
ended. There has been no change in CSE Life's accounting
policies, except as described in notes to the CSE Life Financial
Statements.
<PAGE>
3.6 Annual Insurance Statements.
----------------------------
(a) CSEIC has provided CILIC with (i) all annual
statements, certificates and applications to the California
Department of Insurance or any other insurance commissioner or
department or any other Governmental Entity, which CSE Life has
filed with or submitted with respect to years ending on or after
December 31, 1992, and such documentation provided previously is
listed in Schedule 3.6 of the CSE Life/CSEIC Disclosure Schedule,
and (ii) all reports of examination issued by such insurance
commissioners or departments, regulatory authorities or any other
Governmental Entity regarding CSE Life on or after December 31,
1990, and such documentation provided previously is listed also
in Schedule 3.6.
(b) Such filings or submissions were in compliance
with applicable law when filed and, as of their respective dates,
did not contain any false statements of fact or omit to state any
fact necessary to make the statements set forth therein not
misleading in light of the circumstances under which such
statements were made; no deficiencies have been asserted by any
insurance commissioner, insurance department or other
Governmental Entity with respect to such statements; CSE Life has
provided CILIC with copies of all written responses with respect
to comments from any Governmental Entity concerning such filings,
submissions or reports of examination since December 31, 1991 and
such written responses are described in Schedule 3.6 of the CSE
Life/CSEIC Disclosure Schedule, and prior to the date of this
Agreement, no fines or penalties have been imposed on CSE Life by
any Governmental Entity; and no deposits (other than in the
ordinary course of business) have been made by CSE Life with any
Governmental Entity.
(c) The statutory financial statements for CSE Life as
of and for the years ended December 31, 1992, 1993 and 1994 (i)
fairly present the statutory financial condition of CSE Life at
such dates and (ii) have been prepared in accordance with the
required or permitted statutory insurance accounting requirements
or practices under the insurance laws of California, except as
expressly set forth or disclosed in the notes, exhibits or
schedules thereto. The amounts shown in such statements of
account on aggregate reserves for life or annuity policies and
contracts, aggregate reserves for accident and health policies,
net deferred and uncollected premiums and all policy and contract
claims liability as of the end of each such year, are computed in
accordance with accepted actuarial and industry practices, are
fairly stated in accordance with those called for in applicable
insurance policy provisions, meet the requirements of the
insurance laws of California, make a sufficient provision for all
unmatured obligations of CSE Life provided for under the terms of
its policies and are consistent with the assumptions previously
employed. Adequate provision has been made for all reserves and
related statement items which ought to be established.
3.7 Insurance Business.
-------------------
(a) CILIC has been provided true and complete copies
of all contracts, arrangements, treaties, understandings and
agreements of (or related to) CSE Life with any party with
respect to reinsurance currently in force and such documents and
information are listed in Schedule 3.7 of the CSE Life/CSEIC
Disclosure Schedule attached hereto. No party thereto is in
default with respect to any provision thereof and no such
agreement contains any provision providing that the other party
thereto may terminate same by reason of the transactions
contemplated by this Agreement or any other provisions which
would be altered or otherwise become applicable by reason of such
transactions.
<PAGE>
(b) All policies of insurance issued or assumed by CSE
Life as now in force are, to the extent required under applicable
law, on forms submitted to and approved by the applicable
jurisdiction's insurance commissioner. No policy holder or
related group of policy holders which, singularly or in the
aggregate, accounted for 5% of the gross revenues of CSE Life
considered as a whole for the year ended December 31, 1994 has,
after December 31, 1994, terminated or, to the best knowledge of
the CSE Life and CSEIC, threatened to terminate its relationship
with CSE Life. The contracts between CSE Life and its agents,
managers or brokers are valid, binding and in full force and
effect in accordance with their terms. CSE Life is not in
default with respect thereto and no such contract contains any
provision providing that the other party thereto may terminate
the same by reason of the transactions contemplated by this
Agreement or any other provision which would be altered or
otherwise become applicable by reason of such transactions.
3.8 Compliance With Law.
--------------------
CSE Life and CSEIC each represent and warrant that CSEIC and CSE Life,
CSE Life and CSEIC are in compliance with and have conducted their business
so as to comply with all laws, rules, regulations, judgments, decrees or
orders of any Governmental Entity applicable to their operations
or with respect to which compliance is a condition of engaging in
the business thereof. There are no judgments, orders,
injunctions, decrees, stipulations or awards (whether rendered by
a court or administrative agency or by arbitration) against CSE
Life or against any of its properties or businesses. Schedule
3.8 of the CSE Life/CSEIC Disclosure Schedule contains a summary
of all violations of, or conflicts with, any applicable statute,
law, rule, regulation, ruling, order, judgment or decree, listed
by each such Governmental Entity, including any of the foregoing
relating to any environmental or health laws.
3.9 No Defaults.
------------
CSE Life and CSEIC each represent and warrant that CSEIC and CSE Life is
not, nor has it received, notice that it is or would be with the passage of
time or the giving of notice, or both (a) in violation of any provision of
its Articles of Incorporation or Bylaws or (b) in default or
violation of any term, condition or provision of (i) any
judgment, decree, order, injunction or stipulation applicable to
CSE Life or (ii) any agreement, note, mortgage, indenture,
contract, lease, instrument, permit, registration, concession,
franchise or license to which CSE Life is a party or by which CSE
Life or any of its properties or assets may be bound, which
violation or default could, individually or in the aggregate,
have an adverse effect on the Business Condition of CSE Life.
3.10 Litigation.
-----------
There is no action, suit, proceeding, claim, arbitration or investigation
pending against CSE Life that, individually or in the aggregate, could be
expected to have an adverse effect on the Business Condition of CSE Life, or
which in any manner challenges or seeks to prevent, enjoin, alter or
delay any of the transactions contemplated hereby. Schedule 3.10
of the CSE Life/CSEIC Disclosure Schedule sets forth with respect
to each pending action, suit, proceeding, claim, arbitration or
investigation to which CSE Life is a party, the forum, the
parties thereto, a brief description of the subject matter
thereof and the amount of damages claimed. CSE Life is not aware
of any basis for any other such action, suit, proceeding, claim,
arbitration or investigation. CSE Life has delivered or made
available to CILIC correct and complete copies of all
correspondence prepared by its counsel for CSE Life's independent
public accountants in connection with any audits or reviews
completed by CSE Life's independent public accountants.
3.11 No Adverse Change.
------------------
Since June 30, 1995, CSE Life has conducted its business in the ordinary
course and there has not occurred:
<TABLE>
<CAPTION>
<C> <S>
(a) Any adverse change in the Business Condition of CSE Life;
(b) Any amendments or changes in the Articles of Incorporation or
Bylaws of CSE Life;
(c) Any damage, destruction or loss, whether covered by insurance or
not, affecting any of the properties or business of CSE Life;
(d) Any issuance, redemption, repurchase or other acquisition of the
shares of capital stock of CSE Life or any declaration, setting aside
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to the capital stock of CSE Life;
(e) Any increase in or modification of the compensation or benefits
payable or to become payable by CSE Life to any of its directors, officers
or employees, except in the ordinary course of business consistent with past
practice;
(f) Any increase in or modification of any bonus, pension, insurance or
other employee benefit plan, payment or arrangement, including, but not
limited to, the granting of stock options, restricted stock awards or stock
appreciation rights made to, for or with any of its employees, except in the
ordinary course of business consistent with past practice;
(g) Any sale of the property or assets, other than investments, of CSE
Life individually in excess of $1,000 or in the aggregate in excess of $2,500;
(h) Any alteration in any term of any outstanding security of CSE Life;
(i) Any (a) incurrence, assumption or guarantee by CSE Life of any debt
for borrowed money; (b) issuance or sale of any securities convertible into
or exchangeable for debt securities of CSE Life; (c) issuance or sale of
options or other rights to acquire from CSE Life, directly or indirectly,
debt securities or any securities convertible into or exchangeable for any
such debt securities; or (d) any material premium refunds;
(j) Any creation or assumption by CSE Life of any mortgage, pledge,
security interest, lien or other encumbrance on any of its assets or
properties;
(k) Any making of any loan, advance or capital contribution to, or
investment in, any person other than (a) travel loans or advances made in
the ordinary course of business of CSE Life and (b) other loans and advances
in an aggregate amount that does not exceed $1,000 outstanding at any time;
(l) Any entry into or any amendment or relinquishment of or any
termination or renewal by CSE Life of any contract, lease transaction,
commitment or other right or obligation, except in the ordinary course of
business consistent with past practice;
(m) Any transfer or grant of a right under the CSE Life Intellectual
Property Rights (as defined in Section 3.19 below) other than those
transferred or granted in the ordinary course of business consistent with
past practice;
(n) Any labor dispute, other than routine individual grievances, or any
activity or proceeding by a labor union or representative thereof to
organize any employees of CSE Life;
(o) Any violation of or conflict with any applicable laws, statutes,
orders, rules or regulations promulgated, or judgment entered by any
Governmental Entity, that, individually or in the aggregate affects the
Business Condition of CSE Life;
(p) Any agreement or arrangement made by CSE Life to take any action
that, if taken prior to the date hereof, would have made any representation
or warranty set forth in this Section 3 untrue or incorrect as of the date
when made; or
(q) Any payment of amounts owing under CSE Life issued insurance policies
at variance with the Company's policy provisions and policy payment history.
<PAGE>
3.12 Absence of Undisclosed Liabilities.
-----------------------------------
Except as disclosed in Schedule 3.12 of the CSE Life/CSEIC Disclosure
Schedule or as reflected in the CSE Life Financial Statements and
except for liabilities and obligations arising after June 30,
1995 in the ordinary course of business consistent with past
practices that could not be expected to have an adverse effect on
the Business Condition of CSE Life, CSE Life has no liabilities
or obligations (whether absolute, accrued or contingent, and
whether or not determined or determinable) of a character that,
under statutory accounting principles, should be accrued, shown
or disclosed on an audited balance sheet of CSE Life (including
the footnotes thereto) or should be disclosed or described on an
Annual Insurance Statement filed with any state insurance
commissioner having jurisdiction over CSE Life or its business.
3.13 Information Supplied.
---------------------
None of the information supplied or to be supplied by CSE Life pursuant to this
Agreement and no representation or warranty made herein or in any exhibit
hereto or in any financial statement or schedule attached hereto contains
or will contain any untrue statement of a fact or omits or will omit to
state any fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are
made, not misleading.
3.14 Certain Agreements.
-------------------
Except as disclosed in Schedule 3.14 of the CSE Life/CSEIC Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby or thereby will (a)
result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute, bonus or otherwise)
becoming due to any director or employee of CSE Life under any
employee benefit plan, program, policy, commitment or other
arrangement (whether or not set forth in a written document)
covering any active, former or retired employee or consultant of
CSE Life (the "Plan") or otherwise, (b) increase any benefits
otherwise payable under any Plan or (c) result in the
acceleration of the time of payment or vesting of any such
benefit.
3.15 Major Contracts.
----------------
Except as disclosed in Schedule 3.15 of the CSE Life/CSEIC Disclosure
Schedule, CSE Life is not a party to or subject to:
(a) Any union contract or any employment or consulting
contract, agreement or arrangement providing for future
compensation, whether written or oral, with any officer,
consultant, director or employee that is not terminable by CSE
Life on thirty (30) days' or less notice without penalty or
obligation to make payments related to such termination;
(b) Any plan, contract or arrangement, whether written
or oral, providing for bonuses, pensions, deferred compensation,
severance pay or severance benefits, retirement payments, profit-
sharing payments or similar such payments;
(c) Any joint venture contract, agreement or arrangement or any
other agreement that has involved or is expected to involve a sharing of
profits with another person or entity;
(d) Any existing marketing, distribution, agency or
brokerage agreement in which the annual amount involved in fiscal
1994 exceeded $5,000 in aggregate amount or pursuant to which CSE
Life has granted or received most favored nation pricing
provisions or exclusive marketing rights related to any product,
group of products or territory;
(e) Any lease for realty or personal property in which the amount of
payments that CSE Life is required to make on an annual basis exceeds $1,500;
(f) Any instrument evidencing or related in any way to indebtedness
incurred in the acquisition of companies or other entities or indebtedness
for borrowed money by way of direct loan, sale of debt securities, purchase
money obligation, conditional sale, guarantee, leasehold obligations or
otherwise;
(g) Any license agreement, either as licensor or licensee;
(h) Any contract containing covenants purporting to limit the
freedom of CSE Life to compete in any line of business in any geographic
area;
(i) Any insurance policy or fidelity or surety bond;
(j) Any agreement of indemnification relating to CSE Life or any
of its officers, directors or employees;
(k) Any agreement, contract or commitment relating to capital
expenditures that involves future payments individually in excess of $1,500
or in the aggregate in excess of $5,000 by CSE Life;
(l) Any agreement, contract or commitment relating to personal
services to be rendered by any person to CSE Life requiring the payment of
more than $1,000 per month or the disposition or acquisition of any assets
by CSE Life; or
(m) Any other agreement, contract or commitment that is relevant
to CSE Life's business.
<PAGE>
Each agreement, contract, mortgage, indenture, plan, lease, instrument,
permit, concession, franchise, arrangement, license, regulations and
commitment listed on the CSE Life/CSEIC Disclosure Schedule pursuant to this
Section 3.15 is valid and binding on CSE Life, and is in full force and
effect, and neither CSE Life nor to the best knowledge of CSE Life, any other
party thereto has breached or is aware of any facts that would lead it
to believe that it has breached, any provision of, or is in
default under the terms of any such agreement, contract,
mortgage, indenture, plan, lease, instrument, permit, concession,
franchise, arrangement, license, regulations or commitment. To
the best knowledge of CSE Life, no such agreement, contract,
mortgage, indenture, plan, lease, instrument, permit, concession,
franchise, arrangement, license, regulations or commitment
contains any liquidated damages, penalty or similar provision.
To the best knowledge of CSE Life, no party to any such agreement
contract, mortgage, indenture, plan, lease, instrument, permit,
registration, concession, franchise, arrangement, license,
regulations or commitment intends to cancel, withdraw, modify or
amend the same.
3.16 Taxes.
------
(a) All tax returns, statements, reports and forms
(including, but not limited to, estimated Tax returns and reports
and information returns and reports) required to be filed with
any Taxing Authority (as defined in Section 3.16(f) below) with
respect to any Taxable period ending on or before the Closing
Date, by or on behalf of CSE Life (collectively, the "CSE Life
Returns"), have been or will be filed when due (including any
extensions of such due date), and all amounts shown due thereon
on or before the Closing Date have been or will be paid on or
before such date. To the best of CSEIC's knowledge, the balance
sheets included in the CSE Life Financial Statements (i) fully
accrue all actual liabilities for Taxes with respect to all
periods through June 30, 1995 and CSE Life has not and will not
incur any Tax liability in excess of the amount reflected on the
CSE Life Financial Statements with respect to such periods and
(ii) properly accrues in accordance with statutory accounting
principles all liabilities for Taxes payable after June 30, 1995
with respect to all transactions and events occurring on or prior
to such date. All information set forth in the footnotes to the
CSE Life Financial Statements relating to Tax matters is true,
complete and accurate in all material respects.
(b) No tax liability since June 30, 1995 has been
incurred other than in the ordinary course of business and
adequate provision has been or will be made for all Taxes since
that date in accordance with statutory accounting principles on
at least a quarterly basis. CSE Life has withheld and paid to
the applicable financial institution or Taxing Authority all
amounts required to be withheld. Neither CSE Life nor any member
of any affiliated or combined group of which CSE Life has been a
member has granted any extension or waiver of the limitation
period applicable to any of the CSE Life Returns.
(c) There is no claim, audit, action, suit, proceeding
or investigation now pending or (to the best knowledge of CSE
Life) threatened against or with respect to CSE Life in respect
of any Tax or assessment. No notice of deficiency or similar
document of any Tax Authority has been received by CSE Life, and
there are no liabilities for Taxes (including liabilities for
interest additions to tax and penalties thereof and related
expenses) with respect to the issues that have been raised (and
are currently pending) by any Tax Authority that could, if
determined adversely to CSE Life, affect the liability of CSE
Life for Taxes. There are no liens for Taxes against the assets
of CSE Life except liens for current Taxes not yet due. CSE Life
has not been and will not be required to include any adjustment
in its Taxable income for any Tax period (or portion thereof)
pursuant to the Code or any comparable provision under state or
foreign Tax laws as a result of transactions, events or
accounting methods employed prior to the Closing.
(d) There is no contract, agreement, plan or arrangement,
including, but not limited to, the provisions of this Agreement, covering
any employee or independent contractor or former employee or independent
contract of CSE Life that, individually or collectively, could give rise to
the payment of any amount that would not be deductible pursuant to the Code.
Other than pursuant to this Agreement, CSE Life is not a party to
or bound by (nor will it, prior to the Closing Date, become a
party to or become bound by) any tax indemnity, tax sharing or
tax allocation agreement (whether written, oral or arising under
operation of federal law as a result of CSE Life being a member
of a group filing consolidated tax returns, under operation of
certain state law as a result of CSE Life being a member of a
group filing consolidated tax returns, under operation of certain
state laws as a result of CSE Life being a member of a unitary
group or under comparable laws of other states or foreign
jurisdictions) that includes a party other than CSE Life. CSE
Life has listed in Schedule 3.16 of the CSE Life/CSEIC Disclosure
Schedule all of CSE Life's federal and state tax returns for
years ending December 31, 1993 and 1994, information statements,
reports work papers, Tax opinions, Tax memoranda and other Tax
data and documents of CSE Life that CSE Life has furnished or
made available to CILIC or will furnish or make available to
CILIC within ten (10) days from the date of this Agreement.
(e) The federal income tax returns of CSE Life have not been
audited by the Internal Revenue Service, (or a predecessor agency). CSE
Life has not received any notice of assessment or proposed assessment of
any United States, State or other tax measured by its income, property or
transactions, and no issues have been raised by any taxing authority
providing a basis for any additional assessment of any such tax. CSE Life
has not waived any law or regulation fixing, or consenting to the
extension of, any period of time for the assessment of any tax or
other governmental imposition, or become committed to do so. The
reserves for current taxes accrued on the books of CSE Life are
reasonable and adequate in amount. CSEIC agrees to indemnify
CILIC for any and all tax assessments not accrued on the books of
CSE Life and related to any income, events, transactions, or time
periods prior to the Closing to the extent such assessments, in
the aggregate, exceed the difference between CSE Life's surplus
at the Closing Date and its surplus as of June 30, 1995.
(f) For purposes of this Agreement, the following
terms have the following meanings: "Tax" (and, with correlative
meaning, "Taxes" and "Taxable") means (i) any net income,
alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, privilege,
intangible, profits, license, withholding, payroll, employment,
excise, insurance, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom, duty or
other tax, governmental fee or other like assessment or charge of
any kind whatsoever, together with any interest or any penalty,
addition to or additional amount imposed by any Governmental
Entity (a "Taxing Authority") responsible for the imposition of
any such tax (whether domestic or foreign), (ii) any liability
for the payment of any amounts of the type described in clause
(i) above as a result of being a member of an affiliated,
consolidated, combined or unitary group for any Taxable period
and (iii) any liability for the payment of any amounts of the
type described in clause (i) or clause (ii) above as a result of
any express or implied obligation to indemnify any other person
or entity.
3.17 Interests of Officers and Directors.
------------------------------------
None of CSE Life's officers or directors (or relatives of such persons living
in the same household) have any interest in any property, whether
real or personal, tangible or intangible, used in or pertaining
to CSE Life's business.
3.18 Intellectual Property.
----------------------
(a) CSE Life owns or is licensed or otherwise entitled
to exercise all rights under or with respect to all intellectual
property including without limitation, patents, copyrights,
trademarks or service marks owned or used in connection with its
business. Schedule 3.18 of the CSE Life/CSEIC Disclosure
Schedule lists all patents, trademarks, works of authorship,
registered and unregistered copyrights, registered and
unregistered trademarks, trade names and service marks, and all
applications therefor owned or licensed by CSE Life (the
"Intellectual Property Rights"), and further specifies the
jurisdictions in which each such matter and registration has been
filed, including the respective registration or application
numbers. Schedule 3.18 of the CSE Life/CSEIC Disclosure Schedule
also lists all licenses, sublicenses and other agreements (oral
or written) as to which CSE Life is a party and pursuant to which
CSE Life or any other person or entity owns or is licensed or
otherwise authorized or obligated with respect to any
Intellectual Property Right and includes the identity of all
parties thereto. CSE Life is not, nor as a result of the
execution and delivery of this Agreement or the performance of
CSE Life's obligations hereunder will be, in violation of any
license, sublicense or other agreement applicable to it, whether
or not described in the CSE Life/CSEIC Disclosure Schedule.
Except to the extent clearly and conspicuously disclosed in
Schedule 3.18 of the CSE Life/CSEIC Disclosure Schedule, CSE Life
is the sole and exclusive owner or licensee of, with full right,
title and interest in and to (free and clear of any liens, claims
or encumbrances), the Intellectual Property Rights, and has the
sole and exclusive right in respect thereof (and, except as set
forth in Schedule 3.18 of the CSE Life/CSEIC Disclosure Schedule
is not contractually obligated to pay any compensation to any
third party with respect thereto).
3.19 Restrictions on Business Activities.
------------------------------------
There is no agreement, judgment, injunction, order or decree binding upon CSE
Life or CSEIC that has or could be expected to have the effect of
prohibiting or impairing any business practice of CSE Life, any
acquisition of property by CSE Life or the conduct of business by
CSE Life as currently conducted or as currently proposed to be
conducted.
3.20 Title to Properties; Absence of Liens and Encumbrances;
Condition of Equipment.--------------------------------------------
- -----------------------
(a) Schedule 3.20 of the CSE Life/CSEIC Disclosure
Schedule sets forth a true, complete and accurate list of all
real property owned or leased by CSE Life and summarizes all
lease terms, including the aggregate annual rental or other fees
payable, the length of all leases and the number of extensions
available.
<PAGE>
(b) CSE Life has good and valid title to, or, in the
case of leased properties and assets, valid leasehold interests
in, all of its tangible properties and assets, whether real,
personal or mixed, used in its business, free and clear of any
liens (other than liens for taxes that are not yet delinquent),
claims, charges, pledges, security interests or other
encumbrances, except as reflected in the CSE Life Financial
Statements.
(c) The machinery, equipment and other personal
property (collectively, the "Equipment") owned or leased by CSE
Life is, taken as a whole (i) adequate for the conduct of the
business of CSE Life consistent with its past practice, (ii)
suitable for the uses to which it is currently employed, (iii) in
good operating condition, (iv) regularly and properly maintained,
(v) not obsolete, dangerous or in need of renewal or replacement,
except for renewal or replacement in the ordinary course of
business and (vi) free from all defects.
3.21 Governmental Authorizations and Licenses.
-----------------------------------------
CSE Life is the holder of all licenses, authorizations, permits,
concessions, registrations, certificates and other franchises of
any Governmental Entity required to operate its business
(collectively, the "Licenses") and is in compliance with the
terms, conditions, limitations, restrictions, standards,
prohibitions, requirements and obligations of all of such
Licenses. The Licenses are in full force and effect on the date
hereof and will be in full force and effect on the Closing Date.
There is not now pending or is there threatened, any action,
suit, investigation or proceeding against CSE Life before any
Governmental Entity with respect to the Licenses, nor is there
any issued or outstanding notice, order or complaint with respect
to the violation by CSE Life of the terms of any such License or
any rule or regulation applicable thereto.
3.22 Environmental Matters.
----------------------
(a) No substance that is regulated by any Governmental
Entity or that has been designated by any Governmental Entity to
be radioactive, toxic, hazardous or otherwise a danger to health
or the environment (a "Hazardous Material") is present in, on or
under any property that CSE Life has at any time owned, operated,
occupied or leased.
(b) CSE Life has not transported, stored, used,
manufactured, released or exposed its employees or any other
person to any Hazardous Material in violation of any applicable
statute, rule, regulation, order or law.
(c) CSE Life has obtained all permits, consents,
waivers, exemptions, licenses, approvals and other authorizations
(collectively, "Environmental Permits") required to be obtained
under the applicable statutes, rules, regulations, orders or
laws of any Governmental Entity relating to land use, public and
employee health and safety, pollution or protection of the
environment (collectively, "Environmental Laws"). Schedule 3.22
of the CSE Life/CSEIC Disclosure Schedule sets forth a true,
complete and accurate list of all such Environmental Permits,
each of which is in full force and effect on the date hereof and
will be in full force and effect on the Closing Date. CSE Life
(i) is in full compliance in all respects with all of the terms
and conditions of the Environmental Permits and (ii) is in
compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and
timetables contained in the Environmental Laws or contained in
any regulation, code, plan, order, decree, judgment, notice or
demand letter issued, entered into, promulgated by or approved
thereunder. CSE Life has not received any notice nor is CSE Life
aware of any past or present condition or practice of the
business conducted by CSE Life that forms or that could be
expected to form the basis of any claim, action, suit,
proceeding, hearing or investigation against CSE Life, arising
out of the manufacture, processing, distribution, use, treatment,
storage, spill, disposal, transport or handling, or the emission,
discharge, release or threatened release into the environment, of
any Hazardous Material by CSE Life.
3.23 Insurance.
-----------
Schedule 3.23 of the CSE Life/CSEIC Disclosure Schedule lists and summarizes
all insurance policies and fidelity or surety bonds covering the assets,
Inventories, business, equipment, properties, operations, employees, officers
and directors of CSE Life, the amounts of coverage under each
such policy and bond of CSE Life. Within the last four (4)
years, CSE Life has not been refused any requested insurance or
bond coverage. Except as disclosed on the CSE Life/CSEIC
Disclosure Schedule, all premiums payable under all of such
policies and bonds have been paid and CSE Life is otherwise in
full compliance with the terms of all of such policies and bonds
(or other policies and bonds providing substantially similar
insurance coverage). Such policies of insurance and bonds are of
the type and in amounts customarily carried by persons and
entities conducting businesses similar to that of CSE Life. CSE
Life does not know of any threatened termination of or premium
increase with respect to, any of such insurance policies or
bonds.
3.24 Agents; Customers and Complaints.
---------------------------------
Schedule 3.24 of the CSE Life/CSEIC Disclosure Schedule sets forth the names
and addresses of the sales agents or brokers of CSE Life as of June
30, 1995. As of the date hereof, CSE Life has no unresolved
customer or agent complaints filed with a Governmental Entity
concerning its products and/or services.
3.25 No Employees Assumed.
---------------------
Except as disclosed in Schedule 3.25 of the CSE Life/CSEIC Disclosure Schedule,
CSE Life and CSEIC represent and warrant that at Closing, CSE Life will have
no employees and that neither CILIC nor CSE Life shall assume or
be responsible for any liability of any kind or nature to any
employees of CSE Life existing prior to the Closing.
3.26 Questionable Payments.
----------------------
Neither CSE Life nor any director, officer or other employee of CSE Life has:
(i) made any payments or provided services or other favors in the United
States or in any foreign country in order to obtain preferential
treatment or consideration by any Governmental Entity with
respect to any aspect of the business of CSE Life or any of its
Subsidiaries or (ii) made any political contributions that would
not be lawful under the laws of the United States and the foreign
country in which such payments were made. Neither CSE Life nor
any director, officer or other employee of CSE Life nor any
customer or supplier of any of them, has been the subject of any
inquiry or investigation by any Governmental Entity in connection
with payments or benefits or other favors to or for the benefit
of any governmental or armed services official, agent,
representative or employee with respect to any aspect of the
business of CSE Life or with respect to any political
contribution.
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CILIC AND SNFC
Except as noted on the CILIC Disclosure Schedule, CILIC and
SNFC represent and warrant as follows:
4.1 Organization, Good Standing and Power.
--------------------------------------
CILIC and SNFC are each a corporation validly existing and in good standing
under the laws of the state of Utah and each has all requisite
corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being
conducted. CILIC and SNFC have each delivered to CSEIC complete
and correct copies of their Articles of Incorporation and Bylaws,
as amended to the date hereof.
4.2 Authority.
----------
(a) CILIC and SNFC have each all requisite corporate
power and authority to enter into and execute and deliver this
Agreement and to consummate the transactions contemplated hereby
and thereby, subject to approval of the transactions by
applicable state insurance commissioners and other relevant
Governmental Entities having jurisdiction over its business.
This Agreement, when executed and delivered by CILIC and SNFC,
will constitute the valid and binding obligations of CILIC and
SNFC, respectively, enforceable in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights
generally and except that the availability of equitable remedies
is subject to the discretion of the court before which any
proceeding therefor may be brought.
(b) The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby and
thereby, will not conflict with or result in any violation of any
statute, law, rule, regulation, judgment, order, decree or
ordinance applicable to CILIC or SNFC or any of SNFC's
Subsidiaries or their respective properties or assets, nor will
it conflict with or result in any breach or default (with or
without the giving of notice or the lapse of time, or both)
under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to the loss of any benefit
under (i) any provision of the Articles of Incorporation or
Bylaws of CILIC, SNFC or of any of SNFC's Subsidiaries or (ii)
any agreement, contract, note, mortgage, indenture, lease,
instrument, permit, concession, franchise or license to which
CILIC, SNFC or any of SNFC's Subsidiaries is a party or by which
CILIC, SNFC or any of SNFC's Subsidiaries or their respective
properties or assets may be bound or affected.
4.3 Board Authorization.
--------------------
Prior to the Closing, the Board of Directors of CILIC and SNFC will each
have authorized the Articles of Merger and the execution and delivery of this
Agreement and the performance by CILIC and SNFC, respectively, of
the obligations under the Agreement.
ARTICLE V
CONDUCT AND TRANSACTIONS PRIOR TO CLOSING
DATE; ADDITIONAL AGREEMENT
5.1 Conduct of Business of CSE Life.
--------------------------------
(a) During the period from the date of this Agreement
and continuing until the earlier of the termination of this
Agreement or the Closing Date, CSE Life shall carry on its
business in the usual, regular and ordinary course and in the
same manner as conducted prior to the date of this Agreement and
shall use all efforts consistent with past practice and policies
to preserve intact its present business organizations, keep
available the services of its present officers and key employees
and preserve its relationships with customers, suppliers,
distributors, agents, brokers, licensors, licensees, Governmental
Entities, and others having business dealings with them, to the
end that its good will and ongoing businesses shall be unimpaired
at the Closing Date. CSE Life shall promptly notify CILIC of any
event or occurrence not in the ordinary course of business of CSE
Life, and any event which could have an adverse effect on the
Business Condition of CSE Life. Except as expressly contemplated
by this Agreement or disclosed in the CSE Life/SNF Disclosure
Schedule, CSE Life shall not, without the prior written consent
of CILIC:
(i) Grant any options, warrants, or stock purchase rights;
(ii) Enter into any commitment or transaction not in the
ordinary course of business to be performed over a period longer than six
months in duration, or to purchase fixed assets with an aggregate purchase
price exceeding $5,000, or (ii) sell or commit to sell any products with an
aggregate purchase price greater than $5,000 in any single month
if the expected profit margins are lower than those customarily
obtained for sales of similar products by CSE Life in the past.
(iii) Grant any severance or termination pay to any
director, officer, employee or consultant.
(iv) Transfer to any person title to any rights to CSE
Life Intellectual Property Rights except in the ordinary course of business;
(v) Enter into or amend any agreements pursuant to which
any other party is granted marketing, agency or other similar rights of any
type or scope with respect to any products of CSE Life;
(vi) Violate, amend or otherwise modify the terms of any
of their contracts binding on CSE Life;
(vii) Commence a lawsuit other than for the routine
collection of bills or for a breach of this Agreement;
(viii) Declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of,
lieu of or in substitution for shares of its capital stock, or
repurchase or otherwise acquire, directly or indirectly, any
shares of its capital stock except from former employees,
directors and consultants in accordance with agreements providing
for the repurchase of shares in connection with any termination
of service to CSE Life;
(ix) Issue, deliver or sell, authorize or propose the
issuance, delivery or sale of, or purchase or propose the purchase of, any
shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants, or options to acquire, or other agreements
or commitments of any character obligating it to issue any such shares or
other convertible securities;
(x) Solicit approval for and effect any amendments to
CSE Life's of Incorporation or Bylaws (other than as contemplated by this
Agreement);
(xi) Acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to the Business Condition of CSE Life;
(xii) Sell, lease, license or otherwise dispose of any
of its properties or assets except in the ordinary course of business and
consistent with past practice;
(xiii) Incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others or loan money to others;
(xiv) Adopt or amend any Plan, or enter into any
employment contract, pay any special bonus or special remuneration to any
director, employee or consultant, or increase the salaries or wage rates of
its employees other than pursuant to scheduled employee reviews under CSE
Life's normal employee review cycle, as the case may be, or in connection
with the hiring of employees other than officers in the ordinary course of
business, in all cases consistent with past practice;
(xv) Revalue any of its assets, including without
limitation, writing down the value of inventory or writing off notes or
accounts receivable other than in the ordinary course of business and
consistent with past practice;
(xvi) Pay, discharge or satisfy in an amount in
excess of $25,000 in any one case any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against CSE Life's Financial
Statements or those incurred after the date of the June 30, 1995 Unaudited
Balance Sheet in the ordinary course of business;
(xvii) Make any tax election other than in the ordinary
course of business and consistent with past practice, change any tax
election, adopt any tax accounting method practice, change any tax accounting
method, file any tax return (other than any estimate tax returns, payroll tax
returns or sale tax returns) or any amendment to a tax return, enter into
any closing agreement, settle any tax claim or assessment, or
consent to any tax claim or assessment, without the prior written
or unwritten consent of CILIC, which consent will not be
reasonably withheld; and
(xviii) Engage in any activities or transactions that are
outside the ordinary course of its business consistent with past practice.
(b) Unless and until this Agreement shall have been terminated by
either party pursuant to Article VII, CSE Life shall not, directly or
indirectly, through any officer, director, agent or otherwise, (i) solicit,
initiate or encourage submission or proposals or offers from any person
relating to any acquisition or purchase of all or substantially all of the
assets of, or any equity interest in, CSE Life or any merger, consolidation,
business combination or similar transaction with CSE Life, or (ii)
participate in any discussions or negotiations regarding, furnish to any
other person any confidential information with respect to, or otherwise
cooperate with any way with, or participate in, facilitate or encourage,
any effort or attempt by any other person to do or seek any of the foregoing.
(c) Each of CILIC, CSE Life and CSEIC shall not take, or fail
to take, any action which from the date hereof through the Closing would
cause or constitute a breach of any of their respective representations,
warranties and covenants set forth in this Agreement or which would from the
date hereof through the Closing cause any of such representations or
warranties to be inaccurate. In the event of, and promptly after becoming
aware of, the occurrence of or the pending or threatened occurrence of any
event which would cause or constitute such a breach of inaccuracy, each party
shall give detailed notice thereof to the other parties and shall use its
best efforts to prevent or promptly remedy such breach or inaccuracy.
(d) Each of CILIC, CSE Life and CSEIC shall
promptly apply for or otherwise seek, and use its commercially
reasonable efforts to obtain all consents and approvals required
to be obtained by it for the consummation of this transaction,
and CSE Life shall obtain all necessary consents, waivers and
approvals under any of CSE Life's agreements, contracts licenses
or leases in connection with this transaction.
(e) CILIC, CSE Life and CSEIC shall each use its best efforts to
effectuate the transactions contemplated hereby and to fulfill and cause to
be fulfilled the conditions to closing under this Agreement.
(f) CSEIC and CSE Life shall take all reasonable actions
necessary to comply promptly with all legal requirements which may be
imposed on CSE Life with respect to this transaction and will promptly
cooperate with and furnish information to CILIC in connection with any such
requirements imposed upon CSE Life, CILIC or any other party in connection
with this transaction. CSE Life shall take all reasonable actions to obtain
(and to cooperate with CILIC and its subsidiaries in obtaining) a consent,
authorization, order or approval of, or any exception by, any Governmental
Entity, required to be obtained or made by CSE Life (or by CILIC or its
subsidiaries) in connection with this transaction or the taking
of any action contemplated, by this Agreement, and to defend all
lawsuits or other legal proceedings challenging this Agreement or
the consummation of the transactions contemplated by this
Agreement and to defend all lawsuits or other legal proceedings
challenging this Agreement or the consummation of the
transactions contemplated hereby, to lift or rescind any
injunction or restraining order or other order adversely
affecting the ability or the parties to consummate the
transactions contemplated hereby, and to effect all necessary
registrations and filings and submissions or information required
by any Governmental Entity, and to fulfill all conditions to this
Agreement.
<PAGE>
(g) CILIC shall take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on them with
respect to this transaction and will promptly cooperate with and furnish
information to CSE Life in connection with this transaction. CILIC and CSE
Life shall take all reasonable actions to obtain (and to cooperate with CSE
Life in obtaining) and consent, authorization, order or approval of, or
exemption by, and Governmental Entity required to be obtained or made by CSE
Life or any of its subsidiaries action contemplated by this Agreement, and
to defend all lawsuits or other legal proceedings challenging this Agreement
or the consummation of the transactions contemplated hereby to lift or
rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transaction
contemplated hereby, and to effect all necessary registrations and filings
and submissions of information required by any Governmental Entity, and to
fulfill all conditions to this Agreement.
(h) CSEIC and CSE Life shall give CILIC and its agents, full and
complete access to all books, records, personnel, properties, assets and
facilities of CSE Life for CILIC's inspection and due diligence, in its
discretion and CILIC may make copies of all documents and information subject
to Section 9.19 below.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect
This Transaction.-------------------------------------------------
- ----------------
The respective obligation of each party to effect this transaction shall be
subject to the satisfaction prior to the Closing of the following conditions:
(a) Legal Action.
-------------
No temporary restraining order, preliminary injunction or permanent injunction
or other order preventing the consummation of this transaction shall have
been issued by any Governmental Entity and remain in effect, and no
itigation seeking the issuance of such and order or injunction, or seeking
relief against CSE Life, CSEIC, CILIC or SNFC if this transaction is
consummated, shall be pending which, in the good faith judgment of CSE
Life's or CILIC's Board of Directors has a reasonable probability of
resulting in such order, injunction or relief and such relief would have an
adverse effect on the Business Condition of such party. In the event any
such order or injunction shall have been issued, each party
agrees to use commercially reasonable efforts to have such an
injunction lifted.
(b) Statutes.
---------
No action shall have been taken, and no statute, rule, regulation or order
shall have been enacted, promulgated or issued or deemed applicable to this
transaction by any Governmental Entity which would (i) make the
consummation of this transaction illegal, (ii) prohibit CILIC's
or CSE Life's ownership or operation of all or a material portion
of the business or assets of CSE Life or CILIC, respectively, or
compel CILIC or CSE Life to dispose of or hold separate all or a
material portion of the business or assets of CSE Life or CILIC
as a result of this transaction or (iii) render CILIC or CSE Life
unable to consummate this transaction, except for any waiting
period provisions.
6.2 Conditions to Obligations of CILIC.
-----------------------------------
The obligations of CILIC and SNFC to effect this transaction are
subject to the satisfaction of the following conditions, unless
waived by CILIC and SNFC:
(a) Representations and Warranties.
-------------------------------
The representations and warranties of CSE Life set forth in this
Agreement (determined without regard to any materiality
qualifiers, including without limitation "material adverse
effect") shall be true and correct in all respects as of the date
of this Agreement and as of the Closing Date; and there shall
have been no breach by CSE Life of any of its representations or
warranties made in this Agreement. CILIC and SNFC shall have
received a certificate signed by the chief executive officer and
the chief financial officer of CSE Life to such effect on the Closing Date.
(b) No Adverse Change.
------------------
There shall have been no adverse change in the Business Condition of CSE Life
from the date of this Agreement through the Closing Date and CILIC and
SNFC shall have received a certificate signed by the chief
executive officer and the chief financial officer of CSE Life to
such effect on the Closing Date.
(c) Performance of Obligations of CSEIC and CSE Life.
-------------------------------------------------
CSEIC and CSE Life shall have performed all obligations and covenants
required to be performed by it under this Agreement prior to the Closing
Date, and CILIC and SNFC shall have received a certificate signed by the
chief executive officer and the chief financial officer of CSE Life to such
effect on the Closing Date.
(d) Regulatory Approvals.
---------------------
All authorizations, consents, orders or approvals of, or declarations of, or
declarations or filing with, or expiration of waiting periods imposed by,
any Governmental Entity (including, without limitation, the states of Utah
and California) necessary for the consummation of the transactions
contemplated by this Agreement and the transactions referred to in
Sections 1.1(a) and (b) above shall have been obtained.
(e) Consents.
---------
CILIC and SNFC shall have received duly executed copies of all third-party
non-regulatory consents and approvals contemplated by this Agreement or the
CSE Life/CSEIC Disclosure Schedule in form and substance reasonably
satisfactory to CILIC and SNFC.
(f) Resignation of Directors.
------------------------
The directors of CSE Life in office immediately prior to the Closing Date shall
have resigned as directors of the Surviving Corporation effective as of the
Closing Date.
(g) Legal Opinion.
--------------
CILIC and SNFC shall have received an opinion of CSE Life's legal counsel, in
form and substance acceptable to CILIC and SNFC, to the effect that:
(i) this Agreement has been duly authorized, executed and
delivered by CSEIC and CSE Life and constitutes the valid and binding
obligations of CSEIC and CSE Life, and all corporate action required by
CSEIC and CSE Life in order to effect the transactions contemplated hereby
has been taken;
(ii) CSEIC is a corporation duly incorporated and
validly existing in good standing under the laws of the State of California
and is duly authorized to conduct its business as presently conducted;
(iii) CSE Life is a corporation duly incorporated and
validly existing in good standing under the laws of the State of California
and is duly licensed to conduct the insurance business that it presently
conducts under the California insurance law;
(iv) the authorized capital stock of CSE Life consists
of 100,000 shares of Common Stock and there are 11,500 shares of CSE Life
Common Stock issued and outstanding, all of which are owned by CSEIC. All
issued and outstanding shares of CSE Life Common Stock have been duly
authorized, validly issued and are fully-paid and nonassessable and were not
issued in violation of the preemptive rights of any CSE Life
shareholder;
(v) upon delivery to CILIC and SNFC of the stock
certificates evidencing all of the issued and outstanding shares of CSE
Life Common Stock, said Common Stock will be free and clear of all liens,
claims, encumbrances or other adverse interests; and
(vi) neither the execution and delivery by
CSEIC or CSE Life of this Agreement, nor the compliance by CSEIC
or CSE Life with the terms and provisions hereof, will conflict
with or result in a breach of any of the terms, conditions or
provisions of the Articles or Certificate of Incorporation, the
Bylaws or any other governing instrument with respect to CSEIC or
CSE Life, or with any judgment, order, injunction, decree, law,
statute, regulation or ruling with or of any court or
Governmental Entity to which CSEIC or CSE Life is subject, or
will constitute a default thereunder.
In rendering such opinion, such counsel may rely, to the extent such counsel
deems such reliance necessary or appropriate, upon certificates of public
officials or of any officer or officers of CSEIC or CSE Life, provided the
extent of such reliance is specified in such opinion and executed copies of
such opinions and certificates are furnished to CILIC and SNFC.
6.3 Conditions to Obligations of CSEIC and CSE Life.
------------------------------------------------
The obligation of CSEIC and CSE Life to effect this transaction
is subject to the satisfaction of the following conditions unless
waived by CSEIC and CSE Life:
(a) Representations and Warranties.
-------------------------------
The representations and warranties of CILIC and SNFC set forth in
this Agreement shall be true and correct in all material
respects; (i) as of the date of this Agreement, and (ii) as of
the Closing Date as though made on and as of each such date,
except as otherwise contemplated by this Agreement, and CSE Life
shall have received a certificate signed by the chief executive
officer and the chief financial officer of CILIC and SNFC to such
effect.
(b) Performance of Obligations of CILIC.
------------------------------------
CILIC and SNFC shall have performed all obligations and covenants
required to be performed by them under this Agreement prior to
the Closing Date, and CSEIC and CSE Life shall have received a
certificate signed by the chief executive officer and the chief
financial officer of CILIC and SNFC to such effect.
(c) Legal Opinion.
-------------
CSEIC shall have received an opinion of CILIC's and SNFC's legal counsel, in
form and substance satisfactory to CSEIC, to the effect that:
(i) CILIC and SNFC are each a corporation
duly organized, validly existing and in good standing under the laws of the
State of Utah with all requisite corporate power and corporate authority to
execute, deliver and preform this Agreement;
(ii) the execution, delivery and performance of
this Agreement by CILIC and SNFC will not conflict with any of the terms,
provisions or conditions of the Articles of Incorporation or the Bylaws of
CILIC and SNFC;
(iii) the execution, delivery and performance of
this Agreement has been duly authorized by all necessary corporate action on
the part of CILIC and SNFC and is enforceable against CILIC and SNFC in
accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws or
equitable principles relating to or limiting creditor's rights generally.
In rendering such opinion such counsel may rely,
to the extent such counsel deems such reliance necessary or
appropriate, upon certificates of public officials or of any
officer or officers of CILIC and SNFC, provided the extent of
such reliance is specified in such opinion and executed copies of
such certificates are furnished to CSEIC.
(d) Payment of Purchase Consideration. CILIC
shall pay the Purchase Consideration as required in Section 1.2
of this Agreement.
ARTICLE VII
TERMINATION
7.1 Termination.
------------
(a) This Agreement may be terminated at any
time prior to the Closing Date:
(i) by mutual written agreement of CILIC, SNFC,
CSE Life and CSEIC;
(ii) by CILIC or SNFC, if there has been a
breach by CSE Life or CSEIC of any representation, warranty, covenant or
agreement set forth in this Agreement on the part of CSE Life or CSEIC which
CSE Life or CSEIC fails to cure within five (5) business days after notice
thereof is given by CILIC (except that no cure period shall be provided for
a breach by CSE Life or CSEIC which by its nature cannot be cured);
(iii) by CSE Life or CSEIC, if there has
been a breach by CILIC or SNFC of any representation, warranty,
covenant or agreement set forth in this Agreement on the part of
CILIC or SNFC and which CILIC or SNFC fails to cure within five
(5) business days after notice thereof is given by CSE Life
(except that no cure period shall be provided for a breach by
CILIC or SNFC which by its nature cannot be cured);
(iv) by CILIC or CSEIC, if this
transaction shall not have been consummated on or before December
30, 1995; provided, however, that if the sole reason this
transaction has not been completed by such date results from
delays in the regulatory approval process, this Agreement may not
be terminated but rather shall remain in full force and effect
for an additional sixty (60) days beyond December 30, 1995;
(v) by CILIC or CSE Life if any
permanent injunction or other order of a court or other competent
authority preventing this transaction shall have become final and
nonappealable.
(b) Where action is taken to terminate this
Agreement pursuant to this Section 7.1 it shall be sufficient for
such action to be authorized by the Board of Directors of the
party taking such action.
(c) In the event of termination of this
Agreement as provided in this Section, the provisions of this
Agreement shall forthwith become void, except that the agreements
contained or referred to in Sections 9.16 (expenses), 9.17
(brokers, finders), 9.18 (public announcements) and 9.19
(confidentiality) shall survive. Notwithstanding the foregoing,
in the event of a breach of this Agreement by any party hereto,
nothing herein shall limit the remedies at law or in equity of
the other party with respect thereto.
ARTICLE VIII
INDEMNIFICATION
8.1 Obligation of CSEIC To Indemnify.
---------------------------------
Subject to the time limitations set forth in Section 9.1 below, CSEIC
agrees to indemnify, defend and hold harmless CILIC and SNFC and their
respective directors, officers, employees, agents, subsidiaries,
affiliates, successors and assigns, from and against all losses,
liabilities, claims, damages, deficiencies, costs and expenses,
including without limitation interest, penalties and attorneys'
fees and disbursements (collectively, the "Losses" and
singularly, a "Loss"), based upon, arising out of or otherwise
related to any inaccuracy in or any breach of any representation,
warranty, covenant or agreement of CSE Life or CSEIC contained in this
Agreement or in any document or other papers delivered pursuant
to this Agreement and in respect of any third party claim made
based upon facts alleged which, if true, would have constituted
any such inaccuracy or breach. For purposes of this Agreement,
CILIC and SNFC shall be deemed to have suffered a Loss if and to
the extent that such Loss has been suffered by CSE Life.
Notwithstanding the foregoing, the time limitations set forth in
Section 9.1 below do not apply to CSEIC's tax obligations set
forth in Section 3.16 hereof.
8.2 Notice and Opportunity to Defend.
---------------------------------
(a) Notice of Asserted Liability.
----------------------------
Promptly after receipt by any person entitled to indemnity under this
Agreement (the "Indemnitee") of notice of any demand, claim or
circumstances which, with the lapse of time, would or might give
rise to a claim or the commencement or threatened commencement of
any action, proceeding or investigation (an "Asserted Liability")
that may result in a Loss, the Indemnitee may, at its option,
give notice thereof (the "Claims Notice") to CSEIC (the
"Indemnifying Party"). The Claims Notice shall describe the
Asserted Liability in reasonable detail, and shall indicate the
amount (estimate, if necessary and to the extent feasible) of the
Loss that has been or may be suffered by the Indemnitee.
(b) Opportunity To Defend.
----------------------
The Indemnifying Party may elect to compromise or defend, at its own expense
and by its own counsel, any Asserted Liability. If the Indemnifying
Party elects to compromise or defend such Asserted Liability, it
shall within thirty (30) days after the Claims Notice is given or
sooner, if the nature of the Asserted Liability so requires,
notify the Indemnitee of its intent to do so, and the Indemnitee
shall cooperate, at the expense of the Indemnifying Party, in the
compromise of, or defense against, such Asserted Liability. If
the Indemnifying Party elects not to compromise or defend the
Asserted Liability, fails to notify the Indemnitee of its
election as herein provided or contests its obligation to
indemnify under this Agreement, the Indemnitee may pay,
compromise or defend such Asserted Liability. Notwithstanding
the foregoing, neither the Indemnifying Party nor the Indemnitee
may settle or compromise any claim over the objection of the
other, provided, however, that consent to settlement or
compromise shall not be unreasonably withheld. In any event, the
Indemnitee and the Indemnifying Party may participate, at their
own expense, in the defense of such Asserted Liability. If the
Indemnifying Party chooses to defend any claim, the Indemnitee
shall make available to the Indemnifying Party any books, records
or other documents within its control that are necessary or
appropriate for such defense.
(c) Disputes with Third Parties.
----------------------------
Anything in this Section 8.2(c) to the contrary notwithstanding, in the case
of any Asserted Liability by any supplier, distributor, agent,
broker, shareholder, franchisee, customer or other third party
doing business with CSE Life prior to the Closing in connection
with which CILIC or SNFC may make a claim against CSEIC for
indemnification pursuant to this Section 8.2(c), CILIC and SNFC
may, at their option, give a Claims Notice with respect thereto
but, unless CILIC or SNFC and the Indemnifying Party otherwise
agree, CILIC and SNFC shall have the exclusive right at its
option to defend any such matter, subject to the duty of CILIC
and SNFC to consult with the Indemnifying Party and its attorneys
in connection with such defense and provided that no such matter
shall be compromised or settled by CILIC and SNFC without the
prior consent of the Indemnifying Party, which consent shall not
be unreasonably withheld. The Indemnifying Party shall have the
right to recommend in good faith CILIC and SNFC proposals to
compromise or settle claims brought by a supplier, agent, or
customer, and CILIC and SNFC agree to present such proposed
compromises or settlements to such supplier, distributor,
shareholder, franchisee or customer. All amounts required to be
paid in connection with any such Asserted Liability pursuant to
the determination of any court, governmental or regulatory body
or arbitrator, and all amounts required to be paid in connection
with any such compromise or settlement consented to by the
Indemnifying Party, shall be borne and paid by the Indemnifying
Party. The parties agree to cooperate fully with one another in
the defense, compromise or settlement of any Asserted Liability.
In the event any compromise, settlement or judgment amount
includes amounts resulting from frivolous or groundless claims or
defenses made by Indemnitee, the Indemnifying Party shall not
bear the portion of the amount to be paid relating to such
frivolous or groundless claims.
ARTICLE IX
GENERAL PROVISIONS
9.1 Survival of Representations, Warranties, Covenants
and Agreements.---------------------------------------------------
- --------------
Except as provided below with regard to Section 3.15, all representations,
warranties, covenants and agreements in this Agreement or in any document or
instrument delivered pursuant to this Agreement shall be deemed to be
conditions to this transaction and shall survive the consummation of this
transaction for a period of thirty-six (36) months after the
Closing Date. Notwithstanding the foregoing, except as provided
below with regard to Section 3.17, all representations,
warranties, covenants and agreements shall survive the Closing
Date for thirty-six (36) months following the Closing Date if
such representations, warranties, covenants and agreements are
breached due to fraud or gross negligence. Notwithstanding the
foregoing, the tax obligations set forth in Section 3.17 above
shall survive the consummation of this transaction and the
Closing Date for an indefinite period of time.
9.2 Amendment.
----------
This Agreement may be amended by the parties hereto, by action taken by
their respective Boards of Directors, at any time before or after approval
of this transaction by CSEIC; provided, however, that following approval
of this transaction by CSEIC, no amendment hereto shall be made
that by law requires the further approval of CSEIC without
obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of
both of the parties hereto.
9.3 Extension; Waiver.
------------------
At any time prior to the Closing Date, CSE Life, CSEIC, CILIC and SNFC by
action taken by their respective Boards of Directors, may, to the extent
legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other, (ii) waive any
inaccuracies in the representations and warranties made to it
contained herein or in any document or instrument delivered
pursuant hereto and (iii) waive compliance with any of the
agreements or conditions for the benefit of it contained herein.
Any agreement on the part of either party hereto to any such
extension or waiver shall be valid only if set forth in an
instrument in writing signed by such party.
9.4 Notices.
--------
All notices and other communications hereunder shall be in writing and shall
be deemed given if delivered personally or mailed by registered or certified
mail (return receipt requested) or if sent by telecopy, confirmation
received, to the respective party at the following addresses
and/or telecopy numbers, with the original thereof being mailed
by registered or certified mail, return receipt requested (or at
such other address or telecopy number for the parties hereto as
shall be specified by like notice):
(a) If to CILIC or SNFC, to:
Security National Financial Corporation
5300 South 360 West, Suite 310
Salt Lake City, Utah 84123
Attn: Scott M. Quist, Esq.
Telephone No.: (801) 264-1060
Telecopy No.: (801) 265-9882
With a copy to:
Mackey Price & Williams, P.C.
900 First Interstate Plaza
170 South Main Street
Salt Lake City, Utah 84101-1655
Attn: Randall A. Mackey, Esq.
Telephone No.: (801) 575-5000
Telecopy No.: (801) 575-5006
(b) If to CSEIC or CSE Life, to:
Civil Service Employees Insurance Company
989 Market Street
San Francisco, California 94103
Telephone No.: (415) 495-6800
Telecopy No.: (415) 495-0192
With a copy to:
Buchalter, Nemer, Fields & Younger
601 South Figueroa Street, Suite 2400
Los Angeles, California 90017-5704
Attn: John L. Ingersoll, Esq.
Telephone No.: (213) 891-0700
Telecopy No.: (213) 896-0400
<PAGE>
9.5 Interpretation.
---------------
When a reference is made in this Agreement to Sections or Exhibits, such
references shall be deemed to be to a Section or Exhibit to this Agreement,
unless otherwise indicated. The words "include", "includes" and
"including" when used herein shall be deemed in each case to be
followed by the words "without limitation". The Table of
Contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
9.6 Counterparts.
-------------
This Agreement may be executed in one or more counterparts, all of which, when
taken together, shall be considered one and the same agreement, and this
Agreement shall become effective when one or more counterparts
have been signed by each of the parties hereto and delivered to
the other parties hereto.
9.7 Entire Agreement.
-----------------
This Agreement and the documents and instruments attached hereto as Exhibits
and all other agreements between the parties hereto delivered pursuant to
this Agreement constitute the entire agreement between the
parties hereto with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written
and oral, between the parties hereto with respect to the subject
matter hereof and are not intended to confer upon any other
person or entity any rights or remedies hereunder except as
otherwise expressly provided herein.
9.8 No Transfer.
------------
This Agreement and the rights and obligations set forth herein may not be
transferred or assigned by operation of law or otherwise without the consent
of both parties hereto. This Agreement is binding upon and will inure to
the benefit of each party hereto and their respective successors
and permitted assigns.
9.9 Severability.
-------------
If any provision of this Agreement, or the application thereof, is for any
reason whatsoever and to any extent deemed to be invalid or unenforceable,
the remainder of this Agreement and the application thereof to other persons,
entities or circumstances will be interpreted so as reasonably to
effect the intent of the parties hereto. The parties hereto
further agree to replace any such void or unenforceable provision
of this Agreement with a valid and enforceable provision that
will achieve, to the extent possible, the economic, business and
other purposes of the void or unenforceable provision hereof.
9.10 Other Remedies.
---------------
Except as otherwise provided herein, any and all remedies herein expressly
conferred upon a party hereto will be deemed cumulative with, and not
exclusive of, any other remedy conferred hereby or by law or equity on such
party; and the exercise of any one remedy will not preclude the
exercise of any other remedy otherwise available at law or in
equity.
9.11 Further Assurances.
-------------------
Both parties hereto agree to cooperate fully with the other party hereto and to
execute such further instruments, documents and agreements and to give such
further written assurances as may be reasonably requested by the
other party hereto in order to evidence and reflect the
transactions described herein and contemplated hereby and to
carry into effect the intents and purposes of this Agreement,
including any merger of CSE Life with CILIC or any entity
following the Closing.
9.12 No Third Party Beneficiary Rights.
----------------------------------
No provision of this Agreement is intended, nor will any provision hereof be
interpreted, to provide or create any third party beneficiary
rights or any other rights of any kind whatsoever in any client,
customer, supplier affiliate, stockholder, employee, distributor,
partner of either party hereto or any other person or entity, and
all of the provisions hereof shall be deemed to be personal in
nature and between the parties to this Agreement.
9.13 Mutual Drafting.
----------------
This Agreement is the joint product of CILIC, SNFC, CSEIC and CSE Life, and
each provision hereof has been subject to the mutual consultation,
negotiation and agreement of CILIC, SNFC, CSEIC and CSE Life and shall not be
construed for or against either party hereto.
9.14 Governing Law.
--------------
This Agreement shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of Utah, without giving
effect to its choice of law principles.
9.15 Jurisdiction and Venue.
-----------------------
The federal and state courts within the State of Utah shall have exclusive
jurisdiction to adjudicate any dispute arising under or out of this Agreement.
The parties hereto expressly consent to (i) the personal
jurisdiction of the federal and state courts within the State of
Utah and (ii) service of process being effected upon them by
registered or certified mail or telecopy sent to the address or
telecopy number set forth in Section 9.4 above. Venue shall be
deemed to be with the state and federal courts sitting in Salt
Lake County, State of Utah.
9.16 Expenses.
---------
All costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby and thereby shall be paid by the party
incurring such costs and expenses.
9.17 Brokers or Finders.
-------------------
CILIC, SNFC, CSEIC and CSE Life each represent, as to itself and, to the
extent applicable, its subsidiaries, that except for Robert Tookey (who is
CILIC's and SNFC's agent/broker and CILIC's and SNFC's responsibility to
compensate), no agent, broker, investment banker or other firm or
person is, or will be, entitled to any broker's or finder's fee
or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement.
9.18 Public Announcements.
---------------------
Each party hereto will consult in advance with the other concerning the timing
and content of any announcements, press releases and public
statements concerning this transaction and will not make any such
announcement, press release or public statement without the
other's prior consent; provided, however, that CILIC and SNFC may
make any public statement or announcement concerning this
transaction without CSE Life's or CSEIC's prior consent if, in
the opinion of counsel for CILIC and SNFC, such public statement
or announcement is required or advisable to comply with
applicable law.
9.19 Confidentiality.
----------------
No party hereto shall release, publish, reveal or disclose, directly or
indirectly, any business or technical information of the other party hereto or
any of its Subsidiaries considered by the other party as "confidential",
"secret" or "proprietary" (or words of similar meaning)
including, but not limited to, systems, processes, formulas,
recipes, data, functional specifications, computer programs, blue
prints, know-how, improvements, discoveries, developments,
designs, inventions, techniques, new products, marketing and
advertising methods, distribution methods and programs, supplier
agreements, customer or distributor lists, pricing policies,
financial information, projections, forecasts, strategies,
budgets or other information related to its business or its
distributors, suppliers or customers (collectively, "Confidential
Material"), except to the party's directors, officers, employees,
financial advisors, legal counsel, independent public accountants
or other agents, advisors or representatives who shall require
access thereto on a "need-to-know" basis for the purpose of the
transactions contemplated by this Agreement and who shall agree
in writing to be bound by the terms of this Section 9.19. Both
parties hereto agree to take all reasonable precautions to
safeguard the confidentiality of the other party's Confidential
Material and to exercise the same degree of care with respect to
such other party's Confidential Material that the party in
possession of such Confidential Material exercises with respect
to its own confidential information. Neither party hereto shall
make or permit to be made, except in furtherance of the
transactions contemplated by this Agreement, any copies,
abstracts or summaries of the other party's Confidential
Material. In addition, all Confidential Material belonging to
the other party hereto shall be used solely for the purpose of
the investigation and evaluation contemplated by this Section
9.19, and shall not be used for any other purpose, including any
use that would be to the detriment of the other party hereto or
its Subsidiaries, nor shall such Confidential Material be used in
competition with the other party hereto or its Subsidiaries. The
restrictions on disclosure of information contained in this
Section 9.19 do not extend to any information that (a) is already
known to the receiving party; (b) was or is independently
developed by the receiving party; (c) is now or hereafter becomes
available to the public other than as a consequence of a breach
of obligations under this Section 9.19 or (d) is disclosed to
third parties hereto outside of the receiving party in accordance
with terms approved by the disclosing party. Upon written
request, the parties hereto shall return all writings, documents
and materials containing Confidential Material with a letter
confirming that all copies, abstracts and summaries of the
Confidential Material have been returned or destroyed. In the
event that either party hereto becomes legally required to
disclose the other party's Confidential Material, it shall
provide such other party with prompt written notice of such
requirement prior to such disclosure. In the event that a
protective order or other remedy is not obtained, or such other
party waives compliance with the provisions of this Section 9.19
with respect to the Confidential Material subject to such
requirement, such party agrees to furnish only that portion of
the Confidential Material that it is legally required to furnish
and, where appropriate, agrees to use its best efforts to obtain
assurances that such Confidential Material will be accorded
confidential treatment.
9.20 Attorneys' Fees.
----------------
In the event any legal action or arbitration or other proceeding is brought
for the enforcement of this Agreement or in connection with any other
provisions of this Agreement, the successful and prevailing party or parties
shall be entitled to reasonable attorneys' fees and other costs
incurred in such action or proceeding.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, CILIC, SNFC, CSE Life and CSEIC have each caused this
Agreement to be signed effective as of the date first written above.
CIVIL SERVICE EMPLOYEES LIFE CAPITAL INVESTORS LIFE INSURANCE
INSURANCE COMPANY, a California COMPANY, a Utah corporation
corporation
By: __________________________ By: ________________________
Its: __________________________ Its: ________________________
CIVIL SERVICE EMPLOYEES INSURANCE SECURITY NATIONAL FINANCIAL
COMPANY, a California corporation CORPORATION, a Utah
corporation
By: __________________________ By: __________________________
Its: __________________________ Its: __________________________
<PAGE>
PROMISSORY NOTE
DATED as of this 29th day of December, 1995.
For valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, Security National Financial
Corporation, a Utah corporation (the "Maker"), hereby promises to
pay to the order of Civil Service Employees Insurance Company, a
California corporation (the "Payee"), at 989 Market Street, San
Francisco, California 94103, or, at the Payee's option, at such
other place as may be designed in writing from time to time by
the Payee, the sum of One Million Sixty-three Thousand Dollars
($1,063,000), together with interest thereon as hereinafter
provided, in lawful money of the United States.
Interest on the Loan shall be charged on the unpaid principal of the Loan
at a rate equal to seven percent (7%) per annum, computed on the basis of a
365 day year.
Principal amount shall be payable in seven equal annual
payments of $151,857.14, beginning on December 29, 1996. Accrued
interest shall be payable annually beginning on December 29,
1996.
The Maker may prepay all or any portion of the principal
balance of the Note at any time, and from time to time, without
penalty. All payments made under this Note shall be applied
first toward the reduction of accrued and unpaid interest and
then toward the reduction of the unpaid principal hereof.
The Maker shall be in default under this Note if the
Maker shall (a) fail to make payment due hereunder when the same
shall be due and payable, (b) file a petition seeking to be
adjudged bankrupt, (c) make a general assignment for the benefit
of creditors, (d) suffer the appointment of a receiver, (e) be
found to have made any misrepresentation to the Payee, whether or
not any such misrepresentation resulted in the making of this
Note, (f) fail to comply with any other agreement related to or
contemplated in connection with the execution of this Note, or
(g) become insolvent, and, in the Payee's sole discretion, any
such occurrence of default shall not be cured within twenty (20)
days thereof.
Upon default hereunder, at the option of the Payee, the
Payee will, in addition to the remedies set forth herein, be
entitled to exercise all legal and equitable remedies available
to the holder of a full recourse obligation, including seeking
payment from all of the assets of the Maker. No agreement has
been made, or will be made, which limits the Payee's right to
proceed for payment against any or all of the Maker's assets.
Upon default hereunder, the Maker immediately shall pay the
Payee, on demand, any and all expenses reasonably incurred in
relation hereto, including reasonable attorney's fees incurred or
paid by the Payee in protection or enforcing its rights
hereunder.
This Note, in whole or in part, may be extended from time
to time with the written consent of the Payee, without in any
manner affecting the liability of the Maker. Any consent of the
Payee hereunder (written or otherwise), acceptance of any payment
due and payable under this Note other than in accordance with the
terms and provisions hereof, or any failure of the Payee to
exercise any rights under this Note or to specifically enforce
the terms and provisions hereof shall not be deemed or constitute
a waiver of any rights or remedies to which the Payee is entitled
to under this Note or otherwise.
<PAGE>
This Note has been executed as of the date first above
written in conformity with, and shall be construed under and
governed by, the laws of the State of Utah.
MAKER:
SECURITY NATIONAL FINANCIAL CORPORATION,
a Utah corporation
By: _______________________________________
George R. Quist, President
ATTEST:
By: _______________________________________
William C. Sargent
Senior Vice President and Secretary
<PAGE>
ARTICLES OF MERGER
OF
CIVIL SERVICE EMPLOYEES LIFE INSURANCE COMPANY
INTO
CAPITAL INVESTORS LIFE INSURANCE COMPANY
Capital Investors Life Insurance Company, a Utah
corporation, and Civil Service Employees Life Insurance Company,
a California corporation and a wholly owned subsidiary of Capital
Investors Life Insurance Company, pursuant to Section 16-10a-1004
of the Utah Revised Business Corporation Act, do hereby certify:
FIRST: That the name and state of incorporation of each of the constituent
corporations of the merger is as follows:
Name State of Incorporation
------------------- ------------------------
Capital Investors Life Utah
Insurance Company
Civil Service Employees Life California
Insurance Company
SECOND: That an Agreement and Plan of Merger between the parties has
been approved, adopted, certified, executed and acknowledged
by each of the constituent corporations in accordance with the
requirements of applicable law, pursuant to which, on the
effective date of the merger, Civil Service Employees
Life Insurance Company will be merged into Capital
Investors Life Insurance Company. A copy of the
Agreement and Plan of Merger is attached hereto as
Exhibit "A."
THIRD: That the name of the surviving company of the merger is "Capital
Investors Life Insurance Company."
FOURTH: That the Articles of Incorporation of Capital Investors Life
Insurance Company shall be the Articles of Incorporation of the
surviving corporation.
FIFTH: That the executed Plan and Agreement of Merger is on file at the
principal place of business of the surviving corporation. The
address of the surviving corporation's principal place of business
is 5300 South 360 West, Salt Lake City, Utah 84123.
SIXTH: There are 15,000 shares of Common Stock of Capital Investors Life
Insurance Company issued and outstanding as of the date hereof. All
such shares were in favor of the Plan and Agreement of Merger. No
voting group was entitled to vote separately on the Agreement
and Plan of Merger.
SEVENTH: The authorized capital stock of Capital Investors Life Insurance
is 50,000 shares of Common Stock and 10,000 shares of Preferred
Stock, each having a par value of $170.00 per share.
EIGHTH: These Articles of Merger shall be effective on December 29, 1995.
IN WITNESS WHEREOF, we have executed these Articles of Merger
as of December 29, 1995.
CAPITAL INVESTORS LIFE
INSURANCE COMPANY
Attest:
By: _____________________________
By: _____________________________
Assistant Secretary
Its: _____________________________
CIVIL SERVICE EMPLOYEES
LIFE INSURANCE COMPANY
Attest:
By: ______________________________
By: ______________________________
Assistant Secretary
Its: _____________________________
<PAGE>
AGREEMENT AND PLAN OF MERGER
OF
CIVIL SERVICE EMPLOYEES LIFE INSURANCE COMPANY
INTO
CAPITAL INVESTORS LIFE INSURANCE COMPANY
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is
made and entered into this 28th day of December, 1995, to be
effective at the Effective Date set forth below, by and between
Civil Service Employees Life Insurance Company, a California
domestic insurer ("CSE Life") and Capital Investors Life
Insurance Company, a Utah domestic insurer ("Capital Investors").
RECITALS
A. Capital Investors owns 100% of the issued and outstanding
shares of CSE Life. The Boards of Directors of Capital Investors and CSE
Life deem it advisable, for the mutual benefit of Capital Investors, CSE
Life and their respective shareholders, that CSE Life be merged into and
with Capital Investors.
B. Prior to the execution of this Agreement, Capital
Investors acquired all of the issued and outstanding shares of
CSE Life pursuant to a Stock Purchase Agreement (the "Purchase
Agreement") dated as of December 27, 1995, by and among Capital
Investors, Security National Financial Corporation, Security
National Life Insurance Company, CSE Life and Civil Service
Employees Insurance Company. The Stock Purchase Agreement
contained certain representations, warranties, covenants and
indemnities, all of which are intended to survive and continue in
full force and effect following the transactions contemplated by
this Agreement. The merger of CSE Life into and with Capital
Investors shall not eliminate, diminish, or otherwise alter the
rights and obligations of the parties to the Purchase Agreement.
C. The parties to this Agreement desire to effect a
statutory parent-subsidiary merger of CSE Life into and with
Capital Investors, in the manner set forth herein.
In consideration of the premises and the mutual covenants
set forth below, and other good and valuable considerations, the
receipt and sufficiency of which are hereby acknowledged, the
parties to this Agreement hereby agree as follows:
1. Merger.
-------
At the Effective Date, as defined below, CSE Life shall be merged into
and with Capital Investors (the "Merger") in accordance with the provisions
f all laws applicable to the Merger. For purposes of this Agreement,
Capital Investors shall be the surviving corporation and shall
continue to be a Utah domestic insurer. CSE Life shall be the
disappearing corporation, and its separate existence shall cease
upon the Merger.
2. Name.
-----
The name of the surviving corporation shall be "Capital Investors Life
Insurance Company."
3. Articles and Bylaws.
--------------------
The Articles of Incorporation and Bylaws of Capital Investors in effect
immediately prior to the Effective Date of the Merger shall
continue to be the Articles of Incorporation and Bylaws of the
surviving corporation, unless and until amended or repealed as
provided by law and in such Articles of Incorporation and Bylaws.
4. Board of Directors and Officers.
--------------------------------
The directors and executive officers of Capital Investors from and after the
Effective Date shall remain unchanged as a result of the Merger.
5. Effect on Outstanding Shares of Disappearing and Surviving
Corporation. ----------------------------------------------------------
- ------------
a. Effect on Outstanding Capital Stock of Capital Investors.
--------------------------------------------------------
The shares of Common Stock of Capital Investors issued and outstanding
prior to the Effective Date shall remain issued and outstanding from and
after the Effective Date and shall not be affected by the Merger.
b. Effect on Outstanding Capital Stock of CSE Life.
------------------------------------------------
From and after the Effective Date, as a result of the Merger and without any
action on the part of the holders of any shares of capital stock of CSE Life
("CSE Life Stock"), all issued and outstanding shares of the CSE Life Stock
shall automatically and by operation of law be cancelled, and all
certificates evidencing ownership of such shares shall be void
and of no effect.
c. Fractional Shares.
------------------
No certificates or scrip representing fractional shares of CSE Life Stock
shall be issued in the Merger.
6. Board and Shareholder Approval.
-------------------------------
The Boards of Directors of Capital Investors and CSE Life shall approve this
Agreement and all related matters. Pursuant to the provisions of
the Merger Laws, this Agreement and all related matters shall not
be submitted to the shareholders of Capital Investors or CSE Life
to vote or consent with respect thereto.
7. Plan of Reorganization.
-----------------------
This Agreement constitutes a plan of reorganization to be carried out in the
manner and on the terms and conditions set forth herein.
8. Effective Date.
---------------
The Merger shall become effective on the date on which this Agreement or
Articles of Merger are filed with the Secretary of State in the last state
where such filing is required (the "Effective Date").
9. Compliance With Law.
--------------------
The parties shall take such steps as may be necessary under the Merger Laws or
otherwise to give effect to this Agreement, including the filing of a copy of
this Agreement in the offices of the Secretary of State of each
state where such filing is required and, if applicable, the
filing of this Agreement or Articles of Merger in the offices of
the county recorder of each county in this State in which CSE
Life owns real property.
10. Effect of Merger.
-----------------
The effect of the Merger shall be as set forth in the applicable laws of the
states affected by the Merger. Without any further act of the parties.
a. Upon the Effective Date, the separate
existence of CSE Life shall cease, and the title to all real
estate and other property owned by CSE Life is vested in Capital
Investors without reversion or impairment, and Capital Investors
without reversion or impairment, and Capital Investors shall be
subject to all the debts and liabilities of CSE Life in the same
manner as if Capital Investors had itself incurred them.
b. Following the Merger, all rights of
creditors and all liens upon the property of CSE Life shall be
preserved unimpaired, provided that such liens of CSE Life shall
be limited to the property affected thereby immediately prior to
the Effective Date.
c. Following the Merger, any action or
proceeding pending by or against CSE Life may be continued as if
the merger did not occur, or Capital Investors may be substituted
in the proceeding for CSE Life.
11. Termination.
------------
This Agreement may be terminated at any time prior to the Effective Date
of the Merger by mutual agreement of the Boards of Directors of CSE Life
and Capital Investors. In the event of any such termination of this
Agreement, this Agreement shall forthwith become void and there
shall be no liability on the part of either CSE Life or Capital
Investors.
12. Amendment.
----------
This Agreement may not be amended except by an instrument in writing signed by
each of the parties hereto.
<PAGE>
13. Governing Law.
--------------
The interpretation, performance and enforcement of this Agreement and the
legal relations among the parties hereto shall be governed by and construed
in accordance with the internal laws of the State of Utah applicable
to contracts made and to be wholly performed in such state.
14. Headings.
---------
The headings and subheadings used in this Agreement are for convenience of
reference only and shall not be considered in construing this Agreement.
15. Counterpart Execution.
----------------------
This Agreement may be executed in counterparts with the same effect as if
all parties hereto had signed the same document. All counterparts so
executed shall be deemed to be an original, shall be construed
together and shall constitute one Agreement.
16. Successors and Assigns.
-----------------------
This Agreement shall be binding upon and inure to the benefit of the
respective successors and assigns of the parties, but may not be assigned
by either party without the prior written consent of the other.
The parties hereto have executed this Agreement as of the
date first set forth above.
CIVIL SERVICE EMPLOYEES LIFE CAPITAL INVESTORS LIFE INSURANCE
INSURANCE COMPANY COMPANY
By: ___________________________
By: ___________________________
Title:__________________________
Title:__________________________
Attest: Attest:
______________________________ ___________________________
Secretary Secretary
</TABLE>
