<PAGE> 1
FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: August 9, 1995
--------------
HOUSEHOLD INTERNATIONAL, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-8198 36-3121988
- --------------------------------------------------------------
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation Number)
2700 Sanders Road, Prospect Heights, Illinois 60070
- ---------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 708/564-5000
------------<PAGE>
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
On August 9, 1995, Household Group, Inc. ("HGI"), a wholly-
owned subsidiary of Household International, Inc.
("Household"), signed a definitive agreement to sell for
cash all the capital stock of its wholly-owned subsidiary,
Alexander Hamilton Life Insurance Company of America
("AHLIC") to Jefferson-Pilot Corporation ("JP"). Prior to
the closing of this transaction, Household shall remove
from AHLIC and retain all business, related assets and
liabilities pertaining to AHLIC's credit life, accident and
health, periodic payment and corporate-owned life insurance
products so that effectively only the individual life and
annuity product lines ("Transferred Business") are being
transferred to JP pursuant to this transaction. At June
30, 1995, assets related to the Transferred Business
totaled approximately $6 billion and consisted primarily
of investment securities. The purchase price for the
Transferred Business is $575 million plus the net earnings
of AHLIC from January 1, 1995 to the closing date provided
AHLIC has, on the closing date, a minimum statutory net
worth as agreed to by the parties. The sale, which is
subject to regulatory approvals, is expected to close by
December 31, 1995.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(a) Financial statements of business acquired.
Not applicable.
(b) Pro forma financial information.
Unaudited pro forma consolidated statements of income
of Household International, Inc. for the year ended
December 31, 1994 and the six months ended June 30,
1995 and the unaudited pro forma consolidated balance
sheet as of June 30, 1995 for Household International,
Inc. giving effect to the pro forma adjustments
related to the sale of Alexander Hamilton Life
Insurance of America as described in Item 2 hereof and
certain other transactions and events as described
below.
(c) Exhibits.
No. Exhibit
2 Stock Purchase Agreement by and among
Household Group, Inc., Household
International, Inc., Alexander Hamilton Life
Insurance Company of America and Jefferson-
Pilot Corporation dated August 9, 1995.
(Confidential treatment requested with respect
to certain portions thereof.) (Exhibits and
Annexes set forth in the Agreement have been
omitted and will be provided to the Securities
and Exchange Commission upon request.)
99 News release dated August 10, 1995.
<PAGE>
<PAGE> 3
The following tables present the historical audited consolidated
statement of income for Household International, Inc. ("Household")
for the year ended December 31, 1994 and the historical unaudited
statement of income for Household for the six months ended June 30,
1995 and the historical unaudited consolidated balance sheet for
Household as of June 30, 1995 and the unaudited pro forma
consolidated statements of income for the year ended December 31,
1994 and the six months ended June 30, 1995 and the unaudited pro
forma consolidated balance sheet as of June 30, 1995 for Household.
The pro forma financial statements give effect to the pro forma
adjustments related to the sale of the universal life and annuity
product lines of Alexander Hamilton Life Insurance Company of
America ("AHLIC") as described herein. The pro forma financial
statements also give effect to other transactions and events that
individually do not represent a significant portion of a business
but which nonetheless entered into the results shown for the year
ended December 31, 1994 and six months ended June 30, 1995. The
transactions and events also included in the pro forma adjustments
presented below are:
- - the sale of Hamilton Investments, Inc. in the third quarter of
1994;
- - the sale of the Australian operation in the fourth quarter of
1994;
- - the exit from the domestic first mortgage origination business
and related restructuring charges recorded in the fourth quarter
of 1994;
- - the exit from the domestic first mortgage servicing business in
the second quarter of 1995;
- - the sales of consumer banking operations in California, Maryland
and Virginia in the second quarter of 1995;
- - the proposed sales of consumer banking operations in Ohio and
Indiana which were consummated in the third quarter of 1995.
The pro forma consolidated statements of income for the year ended
December 31, 1994 and six months ended June 30, 1995 were prepared
assuming the sales of the selected product lines of AHLIC and the
other sold or exited businesses described above took place on
January 1, 1994. The pro forma adjustments to the pro forma
consolidated balance sheet as of June 30, 1995 assume that the sale
of the product lines of AHLIC, as well as the sales of the consumer
banking operations in Ohio and Indiana, occurred on June 30, 1995.
Household does not anticipate that the sales of the Transferred
Business or the consumer banking operations in Ohio and Indiana
will have a significant effect on results of operations.
Household does not expect to incur material charges or credits as
a result of these transactions on an ongoing basis and has not
reflected such in the pro forma consolidated financial statements
below.
For purposes of preparing the pro forma financial statements,
Household has assumed the proceeds from the sale of the product
lines of AHLIC, the Australian operation and Hamilton Investments
have been used to decrease senior and senior subordinated debt.
The pro forma financial statements also assume that deposits from
sold consumer banking operations have been replaced with bank and
other borrowings. The pro forma consolidated financial statements
presented below do not purport to represent what the results of
operations or financial position would have been had the pro forma
adjustments occurred on the dates referred to above or to be
indicative of the future results of operations or financial
position of Household. The pro forma adjustments are based on
available information and certain assumptions that Household
believes are reasonable. <PAGE>
<PAGE> 4
Household International, Inc. and Subsidiaries
Pro Forma Unaudited Consolidated Statements of Income
Year Ended December 31, 1994
In millions except per share data.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Historical Household
Household Pro Forma Other International
International Adjustments Adjustments Pro Forma
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Finance income $2,642.3 $ (90.7) <F1> $2,551.6
Interest income from noninsurance
investment securities 131.9 (6.0) <F1> 125.9
Interest expense 1,242.7 (188.3) <F1> $ 132.7 <F2> 1,187.1
- -----------------------------------------------------------------------------------------
Net interest margin 1,531.5 91.6 (132.7) 1,490.4
Provision for credit losses on
owned receivables 606.8 (8.5) <F1> 598.3
- -----------------------------------------------------------------------------------------
Net interest margin after provision
for credit losses 924.7 100.1 (132.7) 892.1
- -----------------------------------------------------------------------------------------
Securitization income 655.5 <F3> 655.5
Insurance premiums and contract
revenues 282.0 (83.3) <F1> 198.7
Investment income 514.4 (364.3) <F1> 150.1
Fee income 250.5 (59.0) <F1> 191.5
Other income 126.7 <F3> (1.3) <F1> 125.4
- -----------------------------------------------------------------------------------------
Total other revenues 1,829.1 (507.9) 1,321.2
- -----------------------------------------------------------------------------------------
Salaries and fringe benefits 656.6 (139.8) <F1> 516.8
Other operating expenses 1,104.5 (263.2) <F1> 841.3
Policyholders' benefits 464.4 (264.9) <F1> 199.5
- -----------------------------------------------------------------------------------------
Total costs and expenses 2,225.5 (667.9) 1,557.6
- -----------------------------------------------------------------------------------------
Income before income taxes 528.3 260.1 (132.7) 655.7
Income taxes 160.7 102.6 <F4> (46.5) <F4> 216.8
- -----------------------------------------------------------------------------------------
Net income $ 367.6 $ 157.5 $ (86.2) $ 438.9
=========================================================================================
Primary earnings per share $ 3.52 $ 4.26
=========================================================================================
Fully diluted earnings per share $ 3.50 $ 4.23
=========================================================================================
Average shares outstanding:
Primary 96.3 96.3
Fully diluted 97.2 97.2
=========================================================================================
Explanation of pro forma adjustments:
<FN>
<F1> Represents the reduction of income and expenses related to certain businesses for the year ended
December 31, 1994 had the sales of assets and liabilities or exit from the businesses taken place on
January 1, 1994:
Sale of certain product lines of AHLIC
Sales of consumer bank branches in California, Virginia, Maryland, Ohio and Indiana
Sale of Australian operation
Sale of Hamilton Investments
Exit from domestic first mortgage origination business
Exit from domestic first mortgage servicing business
<F2> Represents (a) increase in interest expense resulting from the replacement of deposit funding with
other funding sources net of (b) reduction of interest expense from use of proceeds from the sales of
certain businesses to reduce senior and senior subordinated debt from January 1, 1994 through December
31, 1994.
<F3> Servicing fee income has been reclassified to other income to conform to the current year's
presentation.
<F4> Represents the net effect of the pro forma adjustments at statutory income tax rates, adjusted for the
tax impact of sales of certain businesses in 1994.
</FN>
/TABLE
<PAGE>
<PAGE> 5
Household International, Inc. and Subsidiaries
Pro Forma Unaudited Consolidated Statements of Income
Six Months Ended June 30, 1995
In millions except per share data.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Historical Household
Household Pro Forma Other International
International Adjustments Adjustments Pro Forma
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Finance income $1,395.2 $1,395.2
Interest income from noninsurance
investment securities 85.1 85.1
Interest expense 777.5 $ (70.7) <F1> $ 78.2 <F2> 785.0
- -----------------------------------------------------------------------------------------
Net interest margin 702.8 70.7 (78.2) 695.3
Provision for credit losses on
owned receivables 381.5 381.5
- -----------------------------------------------------------------------------------------
Net interest margin after provision
for credit losses 321.3 70.7 (78.2) 313.8
- -----------------------------------------------------------------------------------------
Securitization income 432.3 432.3
Insurance premiums and contract
revenues 174.4 (61.9) <F1> 112.5
Investment income 277.8 (203.0) <F1> 74.8
Fee income 90.8 (7.7) <F1> 83.1
Other income 131.4 (88.9) <F1> 42.5
- -----------------------------------------------------------------------------------------
Total other revenues 1,106.7 (361.5) 745.2
- -----------------------------------------------------------------------------------------
Salaries and fringe benefits 286.8 (29.4) <F1> 257.4
Other operating expenses 538.8 (87.2) <F1> 451.6
Policyholders' benefits 282.9 (176.8) <F1> 106.7
- -----------------------------------------------------------------------------------------
Total costs and expenses 1,108.5 (293.4) 815.1
- -----------------------------------------------------------------------------------------
Income before income taxes 319.5 2.6 (78.2) 243.9
Income taxes 117.2 (10.9) <F3> (27.3) <F3> 79.0
- -----------------------------------------------------------------------------------------
Net income $ 202.3 $ 13.5 $(50.9) $ 164.9
=========================================================================================
Primary earnings per share $ 1.91 $ 1.53
=========================================================================================
Fully diluted earnings per share $ 1.91 $ 1.53
=========================================================================================
Average shares outstanding:
Primary 98.7 98.7
Fully diluted 98.9 98.9
=========================================================================================
Explanation of pro forma adjustments:
<FN>
<F1> Represents the reduction of income and expenses related to certain businesses for the six months ended
June 30, 1995 had the sales of assets and liabilities or exit from the businesses taken place on
January 1, 1994:
Sale of certain product lines of AHLIC
Sales of consumer bank branches in California, Virginia, Maryland, Ohio and Indiana
Exit from domestic first mortgage servicing business
<F2> Represents (a) increase in interest expense resulting from the replacement of deposit funding with
other funding sources net of (b) reduction of interest expense from use of proceeds from the sale of
certain product lines of AHLIC to reduce senior and senior subordinated debt for the six months ended
June 30, 1995.
<F3> Represents the net effect of the pro forma adjustments at statutory income tax rates, adjusted for the
tax impact of sales of consumer banking operations.
</FN>
/TABLE
<PAGE>
<PAGE> 6
Household International, Inc. and Subsidiaries
Pro Forma Unaudited Consolidated Balance Sheet
At June 30, 1995
In millions.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Historical Household
Household Pro Forma International
International Adjustments Pro Forma
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
- ------
Cash $ 436.6 $ (10.7) <F1><F2>
644.9 <F3>
(644.9) <F4> $ 425.9
Investment securities 8,561.4 (5,551.7) <F1> 3,009.7
Receivables, net 22,505.3 (4.8) <F2> 22,500.5
Deferred insurance policy acquisition costs 483.7 (477.6) <F1> 6.1
Acquired intangibles 532.5 (26.3) <F2> 506.2
Properties and equipment 461.1 (27.4) <F1><F2> 433.7
Real estate owned 157.1 157.1
Other assets 1,431.2 (91.6) <F1> 1,339.6
- ------------------------------------------------------------------------------------------------------------
Total assets $34,568.9 $(6,190.1) $28,378.8
============================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Debt:
Deposits $ 5,966.0 $ (745.4) <F5> $ 5,220.6
Commercial paper, bank and other borrowings 6,001.4 745.4 <F5> 6,746.8
Senior and senior subordinated debt (with
original maturities over one year) 10,803.1 (644.9) <F4> 10,158.2
- ------------------------------------------------------------------------------------------------------------
Total debt 22,770.5 (644.9) 22,125.6
Insurance policy and claim reserves 6,898.0 (5,454.2) <F1> 1,443.8
Other liabilities 2,039.6 (91.0) <F1><F2> 1,948.6
- ------------------------------------------------------------------------------------------------------------
Total liabilities 31,708.1 (6,190.1) 25,518.0
- ------------------------------------------------------------------------------------------------------------
Company obligated mandatorily redeemable
preferred securities in trust 75.0 75.0
- -----------------------------------------------------------------------------------------------------------
Preferred stock 320.0 320.0
- ------------------------------------------------------------------------------------------------------------
Common shareholders' equity:
Common stock 115.7 115.7
Additional paid-in capital 385.0 385.0
Retained earnings 2,524.4 2,524.4
Foreign currency translation adjustments (122.0) (122.0)
Unrealized loss on investments, net (.5) (.5)
Common stock in treasury (436.8) (436.8)
- ------------------------------------------------------------------------------------------------------------
Total common shareholders' equity 2,465.8 2,465.8
- ------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $34,568.9 $(6,190.1) $28,378.8
============================================================================================================
Explanation of pro forma adjustments:
<FN>
<F1> Represents the assets and liabilities of the sold product lines of AHLIC at June 30, 1995.
<F2> Represents the assets and liabilities of the sold consumer bank branches in Ohio and Indiana at June
30, 1995.
<F3> Represents the net proceeds from sales of certain AHLIC product lines and consumer bank branch
operations in Ohio and Indiana.
<F4> Represents use of cash proceeds on sales of certain product lines of AHLIC and consumer bank branches
in Ohio and Indiana to reduce debt.
<F5> Represents the replacement of deposits from the Ohio and Indiana consumer bank branches with bank and
other borrowings.
</FN>
/TABLE
<PAGE>
<PAGE> 7
SIGNATURE
Pursuant to the requirement 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.
HOUSEHOLD INTERNATIONAL, INC.
-----------------------------
(Registrant)
By: /s/ David A. Schoenholz
------------------------
David A. Schoenholz
Senior Vice President -
Chief Financial Officer
and on behalf of
Household International, Inc.
Dated: August 21, 1995
---------------
EXECUTION COPY
STOCK PURCHASE AGREEMENT
By and Among
HOUSEHOLD GROUP, INC.,
HOUSEHOLD INTERNATIONAL, INC.
ALEXANDER HAMILTON LIFE
INSURANCE COMPANY OF AMERICA
AND
JEFFERSON-PILOT CORPORATION
August 9, 1995<PAGE>
TABLE OF CONTENTS
Page No.
ARTICLE I.DEFINITIONS
SECTION 1.1. Defined Terms . . . . . . . . . . . . . . . . .2
SECTION 1.2. Other Terms . . . . . . . . . . . . . . . . . 11
ARTICLE II.PURCHASE AND SALE OF SHARES
SECTION 2.1. Transfer of Shares. . . . . . . . . . . . . . 12
SECTION 2.2. Purchase Price. . . . . . . . . . . . . .. . . 12
SECTION 2.3. Post-Closing Adjustment . . . . . . . . .. . . 12
SECTION 2.4. Dispute Resolution. . . . . . . . . . . .. . . 14
ARTICLE III.CLOSING
SECTION 3.1. Time and Place of Closing . . . . . . . . . . 15
SECTION 3.2. Deliveries by Sellers . . . . . . . . . . . . 15
SECTION 3.3. Deliveries by Purchaser . . . . . . . . . . . 16
ARTICLE IV.GUARANTEE BY PARENT
SECTION 4.1. Guarantee of Seller's Performance . . . . . . 16
SECTION 4.2. Waiver. . . . . . . . . . . . . . . . . . . . 16
ARTICLE V.REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT
SECTION 5.1. Incorporation and Qualification; Subsidiaries 16
SECTION 5.2. Articles of Incorporation--By-Laws. . . . . . 18
SECTION 5.3. Acquired Subsidiaries . . . . . . . . . . . . 18
SECTION 5.4. Scope of Business . . . . . . . . . . . . . . 19
SECTION 5.5. Authorization . . . . . . . . . . . . . . . . 19
SECTION 5.6. Capitalization. . . . . . . . . . . . . . . . 19
SECTION 5.7. Ownership of Shares and Note. . . . . . . . . 19
SECTION 5.8. Statutory Statements. . . . . . . . . . . . . 20
SECTION 5.9. GAAP Financial Statements . . . . . . . . . . 20
SECTION 5.10. Investments; Defaults. . . . . . . . . . . . . 20
SECTION 5.11. Twindex Policies . . . . . . . . . . . . . . . 21
SECTION 5.12. Reserves . . . . . . . . . . . . . . . . . . . 21
SECTION 5.13. Bank Accounts; Custodial Accounts; Receivables 22
SECTION 5.14. Material Contracts (Other Than Reinsurance). . 22
SECTION 5.15. Reinsurance Treaties . . . . . . . . . . . . . 23
SECTION 5.16. Employees and Compensation . . . . . . . . . . 24
SECTION 5.17. Employee Benefit Plans . . . . . . . . . . . . 25
SECTION 5.18. Producers for the Company. . . . . . . . . . . 27
SECTION 5.19. Insurance. . . . . . . . . . . . . . . . . . . 28
SECTION 5.20. Insurance Policy Forms and Rates . . . . . . . 29
SECTION 5.21. Litigation and Regulatory Investigations . . . 29
SECTION 5.22. Compliance with Applicable Laws and Regulations30
SECTION 5.23. Brokers' or Finders' Fees. . . . . . . . . . . 30
SECTION 5.24. Full Disclosure; No Misrepresentations . . . . 30
SECTION 5.25. Dividends; Distributions on the Note . . . . . 30
SECTION 5.26. Property . . . . . . . . . . . . . . . . . . . 31
SECTION 5.27. Patents and Trademarks; Technology . . . . . . 32
SECTION 5.28. Absence of Certain Changes or Events . . . . . 33
SECTION 5.29. Agreement Does Not Violate Other Agreements. . 35
SECTION 5.30. Consents and Approvals . . . . . . . . . . . . 36
SECTION 5.31. Environmental Matters. . . . . . . . . . . . . 36
SECTION 5.32. Liabilities. . . . . . . . . . . . . . . . . . 38
SECTION 5.33. Disclaimer . . . . . . . . . . . . . . . . . . 38
SECTION 5.34. Related Party Agreements . . . . . . . . . . . 38
SECTION 5.35. Policy Information . . . . . . . . . . . . . . 39
SECTION 5.36. COLI Agreements. . . . . . . . . . . . . . . . 39
SECTION 5.37. Certain Business Practices . . . . . . . . . . 39
ARTICLE VI.REPRESENTATIONS AND WARRANTIES OF PURCHASER
SECTION 6.1. Organization and Standing . . .. . . . . . . . 40
SECTION 6.2. Authority . . . . . . . . . . .. . . . . . . . 40
SECTION 6.3. Investment Representation . . .. . . . . . . . 40
SECTION 6.4. Consents and Approvals. . . . .. . . . . . . . 40
SECTION 6.5. No Conflict or Violation. . . .. . . . . . . . 41
SECTION 6.6. Financial Ability . . . . . . .. . . . . . . . 41
SECTION 6.7. Litigation. . . . . . . . . . .. . . . . . . . 41
SECTION 6.8. Brokers . . . . . . . . . . . .. . . . . . . . 42
ARTICLE VII.CONDUCT AND TRANSACTIONS PRIOR TO THECLOSING DATE;
CERTAIN COVENANTS
SECTION 7.1. Maintenance of Business; Certain Transactions 42
SECTION 7.2. Reports . . . . . . . . . . . . . . . . . . . 44
SECTION 7.3. Corporate Existence . . . . . . . . . . . . . 44
SECTION 7.4. Twindex Policies. . . . . . . . . . . . . . . 45
SECTION 7.5. Further Assurances. . . . . . . . . . . . . . 45
SECTION 7.6. Access. . . . . . . . . . . . . . . . . . . . 45
SECTION 7.7. Consents. . . . . . . . . . . . . . . . . . . 46
SECTION 7.8. Notification of Certain Matters . . . . . . . 46
SECTION 7.9. Performance . . . . . . . . . . . . . . . . . 46
SECTION 7.10. Negotiations . . . . . . . . . . . . . . . . . 46
SECTION 7.11. Tax Basis. . . . . . . . . . . . . . . . . . . 47
SECTION 7.12. Computer Services and Software . . . . . . . . 47
SECTION 7.13. Business Transfer. . . . . . . . . . . . . . . 48
SECTION 7.14. Non-Solicitation . . . . . . . . . . . . . . . 48
SECTION 7.15. Sale of Office Building to Parent; Lease
Modification . . . . . . . . . . . . . . . . . 48
SECTION 7.16. Cross-Defaults . . . . . . . . . . . . . . . . 49
SECTION 7.17. Payments on the Note; Other Dividends. . . . . 49
SECTION 7.18. Name Change. . . . . . . . . . . . . . . . . . 50
SECTION 7.19. Delivery of Additional Financial Statements. . 50
SECTION 7.20. Administrative Services. . . . . . . . . . . . 50
ARTICLE VIII.COVENANTS OF PURCHASER
SECTION 8.1. Performance . . . . . . . . .. . . . . . . . . 51
SECTION 8.2. Further Assurances. . . . . .. . . . . . . . . 51
SECTION 8.3. Consents and Notices. . . . .. . . . . . . . . 51
SECTION 8.4. Employee Benefit Plans. . . .. . . . . . . . . 52
SECTION 8.5. Excess Benefit Plan . . . . .. . . . . . . . . 54
SECTION 8.6. Employee Welfare Benefit Plans. . . . . . . . 55
SECTION 8.7. Benefits Transition . . . . . . . . . . . . . 57
ARTICLE IX.CONDITIONS TO CLOSING
SECTION 9.1. Conditions to Each Party's Obligations. . . . .57
SECTION 9.2. Conditions to Sellers' Obligations. . . . . . .58
SECTION 9.3. Conditions to Purchaser's Obligations . . . . .59
ARTICLE X.TERMINATION
SECTION 10.1. Termination. . . . . . . . . . . . . . . . . . 62
ARTICLE XI.SURVIVAL AND INDEMNIFICATION
SECTION 11.1. Survival . . . . . . . . . . . . . . . . . . . 64
SECTION 11.2. Sellers' Indemnification . . . . . . . . . . . 64
SECTION 11.3. Purchaser's Indemnification. . . . . . . . . . 67
SECTION 11.4. Indemnification Procedure. . . . . . . . . . . 67
ARTICLE XII.TAX MATTERS
SECTION 12.1. Tax Sharing Agreements . . . . . . . . . . . . 68
SECTION 12.2. Representations, Warranties, Agreements, and
Covenants of Seller with Regard to Certain Tax
Matters. . . . . . . . . . . . . . . . . . . . 69
SECTION 12.3. Representations, Warranties, Agreement, and
Convenants of Purchaser with Regard to Certain
Tax Matters. . . . . . . . . . . . . . . . . . 72
SECTION 12.4. Joint Agreements and Covenants of Seller and
Purchaser. . . . . . . . . . . . . . . . . . . 73
SECTION 12.5. Straddle Period Tax Allocations. . . . . . . . 78
SECTION 12.6. Determination Of Tax Benefit . . . . . . . . . 78
SECTION 12.7. Tax Dispute Resolution Mechanism . . . . . . . 79
ARTICLE XIII.MISCELLANEOUS PROVISIONS
SECTION 13.1. Entire Agreement; Waiver . . . . . . . . . . . 79
SECTION 13.2. Amendment and Modification . . . . . . . . . . 79
SECTION 13.3. Confidentiality. . . . . . . . . . . . . . . . 80
SECTION 13.4. Specific Performance . . . . . . . . . . . . . 81
SECTION 13.5. Expenses . . . . . . . . . . . . . . . . . . . 81
SECTION 13.6. Notices. . . . . . . . . . . . . . . . . . . . 81
SECTION 13.7. Severability . . . . . . . . . . . . . . . . . 83
SECTION 13.8. Assignment . . . . . . . . . . . . . . . . . . 83
SECTION 13.9. Third Parties. . . . . . . . . . . . . . . . . 83
SECTION 13.10. Captions . . . . . . . . . . . . . . . . . . . 84
SECTION 13.11. Governing Law. . . . . . . . . . . . . . . . . 84
SECTION 13.12. Choice of Forum. . . . . . . . . . . . . . . . 84
SECTION 13.13. WAIVER OF JURY TRIAL . . . . . . . . . . . . . 84
SECTION 13.14. Counterparts . . . . . . . . . . . . . . . . . 84
SECTION 13.15. Drafting . . . . . . . . . . . . . . . . . . . 84
SECTION 13.16. Books and Records. . . . . . . . . . . . . . . 85
SECTION 13.17. Governmental Notices . . . . . . . . . . . . . 85
SECTION 13.18. Exhibits . . . . . . . . . . . . . . . . . . . 85
<PAGE>
LIST OF ANNEXES AND EXHIBITS
Annex A Description of Affiliated Business Transfer
Annex B Description of COLI Business Transfer
Annex C Description of PPA Business Transfer
Exhibit A Indemnified Liabilities
Exhibit B Form of Parent Guarantees
Exhibit 5.1 Incorporation and Qualification; Subsidiaries
Exhibit 5.3 Acquired Subsidiaries
Exhibit 5.10 Investments; Defaults
Exhibit 5.11 Twindex Policies
Exhibit 5.14 Material Contracts (Other than Reinsurance)
Exhibit 5.15 Reinsurance Treaties
Exhibit 5.16 Employees and Compensation
Exhibit 5.17 Employee Benefit Plans
Exhibit 5.22 Compliance with Applicable Laws and
Regulations
Exhibit 5.24 Full Disclosure; No Misrepresentation
Exhibit 5.26 Property
Exhibit 5.27 Patents and Trademarks; Technology
Exhibit 5.28 Absence of Certain Changes or Events
Exhibit 5.29 Agreement Does Not Violate Other Agreements
Exhibit 5.34 Related Party Agreements
Exhibit 5.35 Policy Information
Exhibit 5.36 COLI Agreements
Exhibit 5.37 Certain Business Agreements
Exhibit 5.38 Twindex Policies
Exhibit 8.4 Severance Policy
Exhibit 12.2 Certain Tax Matters<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of August 9, 1995, by and among
HOUSEHOLD GROUP, INC., a Delaware corporation ("Seller"), HOUSEHOLD
INTERNATIONAL, INC., a Delaware corporation ("Parent"), ALEXANDER
HAMILTON LIFE INSURANCE COMPANY OF AMERICA, a stock life insurance
company organized under the laws of the State of Michigan (the
"Company"), and JEFFERSON-PILOT CORPORATION, a North Carolina
corporation ("Purchaser").
W I T N E S S E T H
WHEREAS, Seller owns all of the 375,000 shares of capital stock of
the Company issued and outstanding as of the date hereof (the
"Shares");
WHEREAS, Parent has purchased from the Company and holds a $50
million subordinated surplus note dated September 29, 1994 (the
"Note");
WHEREAS, Parent directly owns all the outstanding common stock of
HFC and HFC directly owns all the outstanding capital stock of
Seller;
WHEREAS, Seller and Parent desire to sell and transfer to Purchaser
and Purchaser desires to purchase and receive from Seller and
Parent, as the case may be, the Shares and the Note for the
consideration, upon the terms and subject to the conditions
hereinafter set forth;
WHEREAS, Parent desires that Purchaser purchase the Shares, which
purchase is beneficial to Parent, and is willing to guarantee the
obligations of Seller herein in order to induce Purchaser to
purchase the Shares from Seller;
WHEREAS, except as otherwise provided herein, Purchaser and Seller
have agreed to make Section 338(h)(10) Elections, all on the terms
set forth in this Agreement;
WHEREAS, notwithstanding the preceding paragraph, the Parties have
agreed that if a transaction qualifying under Section 351 of the
Code, as more particularly described herein, can be accomplished on
or before December 31, 1995 and satisfy certain conditions, and the
Parties have jointly determined by September 30, 1995 that such
conditions are likely to be satisfied, then the Parties will
utilize such alternative structure rather than the structure
including the Section 338(h)(10) Election described hereinabove;
and
WHEREAS, Parent, Seller and the Company intend to arrange for the
contribution of the PPA Business Assets to the PPA Companies and
the reinsurance of the PPA Business Liabilities by such PPA
Companies and the contribution of the Affiliated Business Assets
and the COLI Business Assets to the Retained Subsidiaries and the
reinsurance of Affiliated Business Liabilities and the COLI
Business Liabilities by the Retained Subsidiaries in accordance
with the terms and conditions provided herein and in the
Transaction Documents, followed by the distribution to Seller of
the PPA Companies and the Retained Subsidiaries.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1. Defined Terms
"acquisition proposal" shall have the meaning provided in Section
7.10.
"Acquired Companies" shall mean collectively, the Company and the
Acquired Subsidiaries.
"Acquired Subsidiaries" shall have the meaning provided in Section
5.3.
"Administrative Services Agreement" shall have the meaning provided
in Section 7.20.
"Affiliate" shall mean, with respect to any Person, any other
Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common
control with the Person specified.
"Affiliated Business" shall mean the business of initiating,
selling and administering credit life and accident and health
insurance business and specialty products in conjunction with the
lending activities of Parent and its subsidiaries as undertaken by
the Company and its subsidiaries.
"Affiliated Business Assets" shall mean the assets of the Company
allocated to the Affiliated Business in the manner described in
Annex A.
"Affiliated Business Liabilities" shall mean all of the liabilities
and other obligations of the Company as described in Annex A and
all other liabilities and other obligations of the Company and
First Alexander Hamilton Life Insurance Company that arise out of
the Affiliated Business Assets and arising or relating to the
Affiliated Business, regardless of whether such liabilities or
obligations are primary or secondary, direct or indirect, absolute
or contingent, contractual, tortious or otherwise.
"Affiliated Business Reinsurance Agreements" shall mean the
reinsurance agreements between the Retained Subsidiaries and the
Company or First Alexander Hamilton Life Insurance Company entered
into in accordance with Annex A.
"Affiliated Business Transfer" shall mean the transfer of the
Affiliated Business Assets to, and the reinsurance of the
Affiliated Business Liabilities by, the Retained Subsidiaries in
accordance with Annex A.
"AHLIC-AZ" shall mean the Alexander Hamilton Life Insurance Company
of Arizona, a stock life and disability insurance company organized
under the laws of the state of Arizona.
"Alexander Hamilton Parties" shall mean collectively, Parent,
Seller and the Company.
"Allocation Agreement" shall have the meaning provided in
Section 12.4(g).
"Arbiter" shall have the meaning provided in Section 2.4.
"Asset Allocation Agreement" shall mean the Asset Allocation
Understanding regarding the allocation of assets to the Individual
Business, dated as of August 9, 1995, by and between Parent and
Purchaser.
"Benefit Plans" shall have the meaning provided in Section 5.17(a).
"Business" shall mean the business of the Company and its
subsidiaries as currently conducted, including the Affiliated
Business, the COLI Business, the PPA Business and the Individual
Business, but excluding the Property and Casualty Business.
"Business Software Rights" shall have the meaning
provided in Section 5.27(d).
"Business Transfer" shall mean the Affiliated Business
Transfer, the COLI Business Transfer and the PPA Business Transfer,
collectively.
"Closing" shall mean the satisfaction of the conditions
to and the sale and purchase of the Shares and the Note, as set
forth in Article III hereof.
"Closing Date" shall mean the date mutually agreed upon
by the Parties on which Seller and Parent sell and Purchaser
acquires the Shares and the Note, as set forth in Section 3.1.
"Closing Date Financial Statements" shall have the
meaning provided in Section 2.3(b).
"Closing Date GAAP Statements" shall have the meaning
provided in Section 2.3(b).
"Closing Date Statutory Statements" shall have the
meaning provided in Section 2.3(b).
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder, as amended.
"COLI Business" shall mean the business of initiating,
selling and administering corporate owned life insurance products
as heretofore undertaken and defined as such by the Company and its
subsidiaries.
"COLI Business Assets" shall mean the assets of the
Company allocated to the COLI Business in the manner described in
Annex B.
"COLI Business Liabilities" shall mean all of the
liabilities and other obligations of the Company as described in
Annex B and all other liabilities and other obligations of the
Company that arise out of the COLI Business Assets and arising or
relating to the COLI Business, regardless of whether such
liabilities or obligations are primary or secondary, direct or
indirect, absolute or contingent, contractual, tortious or
otherwise.
"COLI Business Reinsurance Agreements" shall mean the
reinsurance agreements among the Retained Subsidiaries and the
Company entered into in accordance with Annex B.
"COLI Business Transfer" shall mean the transfer of the
COLI Business Assets to, and the reinsurance of the COLI Business
by, the Retained Subsidiaries in accordance with Annex B.
"Company" shall have the meaning provided in the
recitals.
"Computer Services Agreement" shall have the meaning
provided in Section 7.12(a).
"Contracts" shall mean every contract, agreement, lease,
license, relationship and commitment, written and oral, to which
the Company or any Subsidiary is a party, or by which any of them
is bound, excluding (i) Investments and (ii) Reinsurance Treaties.
"Conversion Date" shall have the meaning provided in
Section 7.12(a).
"Covered Employee" shall have the meaning provided in
Section 8.4(a).
"Director" shall mean each and any member of the
Company's board of directors.
"Disputed Amounts" shall have the meaning provided in
Section 2.4.
"Dispute Notice" shall have the meaning provided in
Section 2.4.
"Dispute Notice Date" shall have the meaning provided in
Section 2.4.
"Encumbrances" shall mean any and all liens, security
interests, pledges, charges, claims, restrictions, limitations,
options, or other encumbrances of any kind, character, or
description, whether or not of record.
"Environmental Laws" shall mean all federal, state, local
and foreign laws, statutes, ordinances, rules, regulations,
principles of common law, orders, decrees, judgments and
injunctions, relating to pollution, the environment, public health
and safety, natural resources, nuclear power production or
Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time, and any
regulations or published rulings promulgated or issued thereunder.
"ERISA Affiliate" shall have the meaning provided in
Section 5.17(a).
"ERISA Affiliate Title IV Plans" shall have the meaning
provided in Section 5.17(b).
"Evaluation Materials" shall have the meaning provided in
Section 5.24(b).
"Exhibit Contracts" shall have the meaning provided in
Section 5.14(b).
"Final Arbiter" shall have the meaning provided in
Section 2.4.
"Financial Statements" shall mean the GAAP Financial
Statements and Statutory Statements, collectively.
"GAAP" shall mean generally accepted accounting
principles consistently applied.
"GAAP Financial Statements" shall have the meaning
provided in Section 5.9.
"GAAP Reserves" shall mean, as of any date, the reserves
and liabilities established by the Company and the Acquired
Subsidiaries for past and future insurance policy benefits, losses,
claims, expenses and contingencies under insurance policies as
determined in accordance with GAAP.
"Hazardous Substances" shall mean any waste, pollutant,
hazardous substance, toxic substance, hazardous waste, special
waste, nuclear substance or waste, radioactive substance or waste,
petroleum or petroleum-derived substance or waste, including any
such substance, waste or constituent regulated under, or defined
by, any Environmental Laws.
"HFC" shall mean Household Finance Corporation, a
Delaware corporation.
"HI RIP" shall mean the Household International
Retirement Income Plan.
"HI TRIP" shall mean the Household International Tax
Reduction Investment Plan.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder.
"Indemnified Costs" shall have the meaning specified in
Section 11.2(a).
"Indemnified Liability" shall mean any Indemnified Cost
whether relating to events which shall have occurred prior to, or
after the Closing Date, and relating to any of the matters
described on Exhibit A or in Section 11.2.
"Individual Business" shall mean the business of
initiating, selling and administering individual and group
insurance products, including universal life insurance, flexible
premium deferred annuities, and other life insurance and annuity
products as undertaken by the Company and the Acquired Subsidiaries
and excluding the PPA Business, the COLI Business and the
Affiliated Business.
"Intercompany Agreements" shall have the meaning provided
in Section 5.34.
"Investments" shall mean any and all stocks, bonds or
other securities, equity or proprietary interest in or loans (other
than loans to policyholders) to an individual or to a corporation
(other than the Acquired Subsidiaries), partnership, joint venture,
business enterprise or other entity of any nature.
"IRS" shall mean the United States Internal Revenue
Service.
"knowledge of the Alexander Hamilton Parties" shall mean
knowledge of any executive officer of any of the Alexander Hamilton
Parties.
"Legal Fees" shall mean, with respect to any indemnified
Person, any and all fees, costs, and expenses of any kind
reasonably incurred by such Person or its counsel in investigating,
preparing for, defending against or providing evidence, producing
documents or taking other action with respect to any threatened or
asserted claim.
"Licensed Rights" shall have the meaning provided in
Section 5.27(a).
"Material Adverse Effect" shall mean an event affecting
(i) the Company or any of the Acquired Subsidiaries that is or
would reasonably be expected to be materially adverse to the
income, operations, financial condition, assets, liabilities or
revenues, of the Company and the Acquired Subsidiaries, taken as a
whole, or of First Alexander Hamilton Life Insurance Company, after
giving effect to this Agreement and the transactions contemplated
hereby or (ii) the ability of any of Seller, Parent or the Company
to execute and deliver this Agreement and the Transaction Documents
and to consummate the transactions and perform its obligations
contemplated hereby and thereby.
"Minimum Statutory Equity Amount" shall have the meaning
provided in Section 2.3(e).
"Note" shall have the meaning provided in the recitals.
"Note Purchase Price" shall have the meaning provided in
Section 2.2(b).
"OSHA" shall mean the Occupational Safety and Health
Administration.
"Owned Software" shall have the meaning provided in
Section 5.27(d).
"Parent" shall have the meaning provided in the recitals.
"Parent Guarantees" shall mean the Guarantees from Parent
to Purchaser and the Company in the form of Exhibits B-1 to B-4
hereto.
"Parties" or "Party" shall mean either of Seller,
Purchaser, Parent, or the Company or in the plural shall mean
collectively, Seller, Purchaser, Parent, and the Company.
"Patent and Trademark Rights" shall have the meaning
provided in Section 5.27(a).
"Person" shall mean an individual, a corporation, a
partnership, an association, a joint-stock company, a trust, any
unincorporated association or organization, or a government or
political subdivision thereof.
"PIC" shall mean Prospect Life Insurance Company, a stock
life and disability insurance company to be organized pursuant to
the Arizona Insurance Code.
"Potential Tax Liability" shall have the meaning provided
in Section 12.4(k).
"PPA Business" shall mean the business of initiating,
selling and administering periodic payment annuities as heretofore
undertaken by the Company and its subsidiaries.
"PPA Business Assets" shall mean the assets of the
Company allocated to the PPA Business in the manner described in
Annex C.
"PPA Business Liabilities" shall mean all of the
liabilities and other obligations of the Company as described in
Annex C and all other liabilities and other obligations of the
Company that arise out of the PPA Business Assets and arising or
relating to the PPA Business, regardless of whether such
liabilities or obligations are primary or secondary, direct or
indirect, absolute or contingent, contractual, tortious or
otherwise.
"PPA Business Reinsurance Agreements" shall mean the
reinsurance agreements among AHLIC-AZ or PIC and the Company
entered into in accordance with Annex C.
"PPA Business Transfer" shall mean the transfer of the
PPA Business Assets to, and the reinsurance of the PPA Business by,
the PPA Companies in accordance with Annex C.
"PPA Companies" shall mean collectively, PIC and AHLIC-
AZ.
"Producers" shall mean all agents, brokers or others that
have the authority to generate insurance business for the Company
or any of its Subsidiaries, including the authority to bind the
Company or a Subsidiary to any contract for insurance.
"Producer Plans" shall have the meaning provided in
Section 5.18(b).
"Property and Casualty Business" shall mean the business
of initiating and selling property and casualty insurance and
workers' compensation insurance.
"Purchase Price" shall have the meaning provided in
Section 2.2(b).
"Purchaser" shall have the meaning provided in the
recitals.
"Realized Capital Gains" shall mean an amount equal to
*CONFIDENTIAL 1*
"Related Party Contracts" shall mean Contracts involving
an Affiliate of the Company as a party or otherwise.
"Release" shall mean any release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the indoor or outdoor
environment or into or out of any property, including the movement
of Hazardous Substances through or in the air, soil, surface water,
ground water or property.
"Reinsurance Treaties" shall mean all reinsurance
treaties or agreements (including facultative agreements) under
which the Company or any of its subsidiaries has ceded or assumed
any liability or potential liability relating to its Business to a
Person other than the Acquired Companies.
"Relicensed Software Rights" shall have the meaning
provided in Section 5.27(d).
"Retained Subsidiaries" shall mean Hamilton National Life
Insurance Company, Alexander Hamilton Insurance Company of America
and Alexander Hamilton Insurance Agency, Inc., each a Michigan
corporation and wholly owned subsidiary of the Company.
"Section 351 Transaction Structure" shall have the
meaning provided in Section 12.4(m).
"Section 338(h)(10) Elections" shall have the meaning
provided in Section 12.4(b).
"Securities Act" shall mean the United States Securities
Act of 1933, as amended.
"Seller" shall have the meaning provided in the recitals.
"Sellers" shall mean together Parent and Seller.
"Shares" shall mean the 375,000 issued and outstanding
shares of common stock of the Company with a par value of $10.00
per share, being all of the Company's issued and outstanding
shares.
"Share Purchase Price" shall have the meaning provided in
Section 2.2(a).
"Software Know-how" shall have the meaning provided in
Section 5.27(d).
"Statutory Accounting Principles" shall mean for any
Person the statutory accounting principles and applicable actuarial
standards of practice consistently applied in accordance with the
rules and regulations of the National Association of Insurance
Commissioners and the state of domicile of such Person.
"Statutory Net Income" shall mean, for any period, net
income of the Company and the Acquired Subsidiaries as reflected in
a statement which has been prepared in conformity with Statutory
Accounting Principles.
"Statutory Reserves" shall mean, as of any date, the
reserves and liabilities established by the Company and the
Acquired Subsidiaries for past and future insurance policy
benefits, losses, claims and expenses under insurance policies and
any other reserve which is contemplated under applicable Statutory
Accounting Principles.
"Statutory Statements" shall have the meaning provided in
Section 5.8.
"Straddle Period" shall have the meaning provided in
Section 12.5.
"subsidiary" shall mean, for any Person, any entity in
which such Person has an equity interest of 10% or more.
"Tax" or "Taxes" shall mean all taxes and similar
charges, fees, and levies imposed by any governmental authority,
entity, or body, or subdivision thereof, whether based upon or
measured by gross or net income or otherwise, including, without
limitation, income, gross receipts, premiums, profits, sales, use,
occupation, value added, ad valorem, transfer, franchise,
withholding, payroll, employment, excise, or property taxes,
together with any interest, toll charges, additions to tax, or
penalties imposed with respect thereto.
"Tax Benefit" shall have the meaning provided in
Section 12.6.
"Tax Dispute Accountants" shall have the meaning provided
in Section 12.7.
"Tax Returns" shall mean any return, declaration, report,
claim for refund or information return or statement relating to
Taxes, including any schedule or attachment to such documents and
any amendment of such documents.
"Transaction Documents" shall mean collectively the
Transferred Business Reinsurance Agreements, the Computer Services
Agreement, the Administrative Services Agreement, the Asset
Allocation Agreement and the Parent Guarantees.
"Transferred Assets" shall mean collectively, the PPA
Business Assets, the COLI Business Assets and the Affiliated
Business Assets.
"Transferred Business Reinsurance Agreements" shall mean
collectively the PPA Business Reinsurance Agreements, the COLI
Reinsurance Agreement and the Affiliated Business Reinsurance
Agreements.
"Transferred Liabilities" shall mean collectively the PPA
Business Liabilities, the COLI Business Liabilities and the
Affiliated Business Liabilities.
"Twindex Policies" shall mean collectively the insurance
(including annuity) products initiated or sold by the Business
which include one or more endorsements referring to an interest
crediting rate which cannot be less than the greater of a specified
long-term rate and specified short-term rate, marketed under the
name "Twindex."
SECTION 1.2. Other Terms
Where used herein, and unless the content otherwise
requires:
(i) words importing the singular number or plural
number shall include the plural number and singular
number respectively;
(ii) words importing the masculine gender shall
include the feminine and neuter genders and vice versa;
(iii) reference to "Business Day" means a day on
which banks are open for business in Chicago, Illinois,
other than a Saturday or Sunday;
(iv) reference to "include", "includes", and
"including" shall be deemed to be followed by the phrase
"without limitation;" and
(v) reference in this Agreement to "herein,"
"hereby" or "hereunder", or any similar formulation,
shall be deemed to refer to this Agreement as a whole,
including the Exhibits.
ARTICLE II.
PURCHASE AND SALE OF SHARES
SECTION 2.1. Transfer of Shares
Upon the terms and subject to the conditions contained
herein, and in reliance on the respective representations and
warranties of the Parties, on the Closing Date, Seller and Parent
as the case may be, will sell, convey, transfer, assign, and
deliver to Purchaser, and Purchaser will purchase, the Shares from
Seller for the Share Purchase Price, and the Note from Parent for
the Note Purchase Price, in each case free and clear of all
Encumbrances.
SECTION 2.2. Purchase Price
The purchase price shall be the aggregate of all amounts
set forth below:
(a) to Seller for the Shares: $525,000,000 (the "Share
Purchase Price"), subject to adjustment pursuant to Section 2.3.
(b) to Parent for the Note: $50,000,000 (the "Note
Purchase Price," and together with the Share Purchase Price, the
"Purchase Price").
SECTION 2.3. Post-Closing Adjustment
(a) The Share Purchase Price shall be subject to
adjustment after the Closing Date as specified in this Section 2.3.
(b) As soon as practicable, but in any event within 90
calendar days following the Closing Date, the Company shall prepare
and deliver to Parent, Seller and Purchaser the statements of
assets, liabilities, surplus, and other funds and summary of
operations and cash flows of the Company and each of the Acquired
Subsidiaries as of, and for the period beginning January 1, 1995
and ending on, the Closing Date (or the most recent end of a month
if the Closing Date is not the last Business Day of a month) (the
"Closing Date Statutory Statements"), which shall be prepared in
conformity with Statutory Accounting Principles, and the
consolidated balance sheets, statements of income, stockholder's
equity and cash flows of the Company and the Acquired Subsidiaries
as of and for the period beginning January 1, 1995 and ending on,
the Closing Date (or the most recent end of a month if the Closing
Date is not the last Business Day of a month), which shall be
prepared in accordance with GAAP (the "Closing Date GAAP
Statements" and collectively, the "Closing Date Financial
Statements"), except that such Closing Date Financial Statements
shall reflect an asset-by-asset recalculation in accordance with
Statement of Financial Accounting Standards No. 91 and other
applicable GAAP requirements as of the Closing Date (or the most
recent end of a month if the Closing Date is not the last Business
Day of a month) of the book value of all collateralized mortgage
obligations held by any of the Acquired Companies. The Closing
Date Financial Statements shall present fairly, in all material
respects, in accordance with Statutory Accounting Principles or
GAAP, as the case may be, the financial position of the Company and
the Acquired Subsidiaries (on a consolidated basis with respect to
the Closing Date GAAP Statements) as of the end of such period, and
the results of their operations for the periods specified and
ending on the Closing Date (or the most recent end of a month if
the Closing Date is not the last Business Day of a month). The
Company shall also deliver with such statements a calculation of
Realized Capital Gains.
(c) Subsequent to the delivery of the Closing Date
Financial Statements, Purchaser shall give Parent and its
accountants, actuaries, counsel and other representatives
reasonable access to the books and records of the Company and the
Acquired Subsidiaries in order to make such investigations as it
shall desire in conjunction with the evaluation by Parent of the
Closing Date Financial Statements. During such period, Purchaser
shall permit Parent and its representatives to consult with the
respective employees, auditors, actuaries, attorneys and agents of
the Company and the Acquired Subsidiaries.
(d) The Closing Date Financial Statements shall be
deemed final upon the earliest of the date on which Parent and
Purchaser jointly agree that the Closing Date Financial Statements
are final, the 31st day following the delivery of the Closing Date
Financial Statements, if neither Parent nor Purchaser has notified
the other of a dispute in amounts shown on the Closing Date
Financial Statements and the date on which all disputes relating to
such statements and calculations between Purchaser and Parent are
resolved in accordance with Section 2.4.
(e) On the fifth Business Day following the date on
which the Closing Date Financial Statements are deemed final,
Purchaser or Seller, as the case may be, shall pay to the other the
amount, if any, that any payment to be received by such Person
pursuant to this Section 2.3(e) exceeds any payment otherwise to be
made by such Person pursuant to this Section 2.3(e) as follows:
Seller shall be obligated to pay to Purchaser, by wire transfer,
together with interest on any such adjustment amount at an annual
interest rate of *CONFIDENTIAL 2* (based upon a 365-day year) from
the Closing Date to (but not including) the date of such payment,
the amount, if any, that, after giving effect to the Business
Transfer and the dividends and payments payable pursuant to
Section 7.17 and without giving effect to any sale of the building
contemplated by Section 7.15 (such building to be reflected in the
Closing Date Statutory Statements at its historical book value
notwithstanding its sale), the sum of the amount of the capital and
surplus of the Company and the asset valuation reserve and interest
maintenance reserve of each of the Acquired Companies, each as set
forth in the Closing Date Statutory Statements, is less than
*CONFIDENTIAL 3* (the "Minimum Statutory Equity Amount") and
(ii) Purchaser shall be obligated to pay to Seller, by wire
transfer, together with interest at an annual interest rate of
*CONFIDENTIAL 3* (based upon a 365-day year) from the Closing Date
to (but not including) the date of such payment, any dividend or
interest payment allowable pursuant to Section 7.17 for which
governmental approval has been timely applied for and not received
prior to the Closing Date.
SECTION 2.4. Dispute Resolution
In the event that the Parties hereto do not agree to the
determination of the Minimum Statutory Equity Amount pursuant to
Section 2.3, or any other financial calculation (other than Tax
matters) arising under the provisions of this Agreement (the
"Disputed Amounts"), the disputing Party shall provide notice of
such disagreement to the other Parties hereto (the "Dispute
Notice", and the date of its delivery, the "Dispute Notice Date").
The chief financial officer of Purchaser and the chief financial
officer of Parent shall meet (by conference telephone call or in
person at a mutually agreeable site) within one week after notice
of a disagreement is given as provided above. The chief financial
officers shall attempt to make a final determination of the
Disputed Amounts, and if the chief financial officers reach
agreement, any payments shall be made within five days in
accordance with such agreement. If the chief financial officers do
not reach agreement within a reasonable time, either or both of
such chief financial officers shall give notice of an impasse, in
which case the chief executive officer of Purchaser and the chief
executive officer of Parent shall meet (by conference telephone
call or in person at a mutually agreeable site) within one week
after notice of an impasse is given by the chief financial
officers. If the chief executive officers have hereto not reached
agreement as to the Disputed Amounts within a reasonable time,
either chief executive officer may give notice of an impasse, and
such determination shall be promptly submitted to a nationally
recognized independent public accounting firm or a nationally
recognized actuarial firm (an "Arbiter") jointly selected by Parent
and Purchaser. If Parent or Purchaser do not agree upon the joint
selection of an Arbiter within five (5) Business Days following the
notice of such impasse by the chief executive officers, either
Parent or Purchaser may designate a proposed qualified Arbiter to
the other by written notice. Within five (5) Business Days such
other Party shall either agree to the proposed qualified Arbiter or
propose a different Arbiter and in the latter case the two Arbiters
so proposed shall within five (5) Business Days thereafter select
an Arbiter to make a final determination of the Disputed Amounts.
The Arbiter so selected by either Parent and Purchaser jointly or
by the Arbiters (the "Final Arbiter") shall make its determination
of the Disputed Amounts solely in accordance with the terms of this
Agreement. The Parties shall cooperate fully in assisting the
Final Arbiter in calculating the Disputed Amounts and shall take
such actions as necessary to expedite and to cause the Final
Arbiter to expedite such calculation. Each of Parent and Purchaser
shall pay one-half of the total fees and expenses of the Final
Arbiter.
ARTICLE III.
CLOSING
SECTION 3.1. Time and Place of Closing
(a) Upon the terms and subject to the conditions
contained in this Agreement, the Closing of the transactions
contemplated by this Agreement will take place at the offices of
Purchaser in Greensboro, North Carolina, at 9:00 a.m., Eastern
time, on October 2, 1995 (the Closing on such date to be given
effect as of September 30, 1995), or at such place, date and time
as the Parties may mutually agree within 30 days of the date the
conditions set forth in Article IX are satisfied or waived, but in
no event later than December 31, 1995.
(b) If all of the conditions to Closing contained in
this Agreement have been satisfied other than receipt of approval
of the insurance department of the State of New York, the Parties
agree to use their best efforts to effect a Closing promptly,
including effecting a Closing prior to receipt of such approval,
through the utilization of a trust or other arrangement to hold the
capital stock of First Alexander Life Insurance Company; provided
that no Party shall be required to take any action that would have
a materially adverse effect on it or the Acquired Companies.
SECTION 3.2. Deliveries by Sellers
At the Closing, Sellers will deliver the following to
Purchaser:
(a) stock certificates representing the Shares,
accompanied by stock powers duly executed in blank or duly executed
instruments of transfer, and any other documents that are necessary
to transfer to Purchaser good title to the Shares;
(b) the original Note with an assignment to Purchaser
thereof;
(c) copies of the articles of incorporation and by-laws
of each of Parent, Seller and the Acquired Companies;
(d) the stock books, stock ledgers, minute books, and
corporate seals of the Acquired Companies and the stock
certificates evidencing ownership of the Acquired Subsidiaries;
(e) the opinion, certificates, and other documents set
forth in Section 9.3 of this Agreement; and
(f) resignations of such directors and officers of the
Acquired Companies as are employees of Parent or HFC and such other
directors or officers as Purchaser may request.
SECTION 3.3. Deliveries by Purchaser
At the Closing, Purchaser will deliver the following:
(a) the Purchase Price, in immediately available funds,
to such bank accounts of Seller and Parent as Parent designates in
writing to Purchaser.
(b) to Sellers, the opinion, certificates, and other
documents set forth in Section 9.2 of this Agreement.
ARTICLE IV.
GUARANTEE BY PARENT
SECTION 4.1. Guarantee of Seller's Performance
Parent unconditionally and irrevocably guarantees to
Purchaser the due and punctual performance of all of Seller's
obligations set forth in this Agreement.
SECTION 4.2. Waiver
Parent waives (a) any right to require Purchaser to
exhaust remedies against Seller, (b) notice of any modifications of
this Agreement, (c) notice of any default under or breach of this
Agreement, (d) demand and presentation for payment upon Seller,
(e) protest, notice of protest and diligence of bringing suit
against Seller, and (f) any other defenses available to Parent that
are not available to Seller.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF
SELLER AND PARENT
Seller and Parent jointly and severally represent and warrant
to Purchaser as follows:
SECTION 5.1. Incorporation and Qualification; Subsidiaries
(a) Each of Parent, Seller, the Company and the Acquired
Subsidiaries is a corporation duly incorporated, validly existing
and in good standing, if applicable, under the laws of the
jurisdiction of its incorporation and has all requisite corporate
power and authority to own, lease and operate its properties and to
carry on its business as now being conducted, and is duly qualified
to do business and is in good standing, where applicable, in each
jurisdiction in which the nature of its business or the ownership
or leasing of its properties make such qualification necessary,
except where the failure to be so qualified or in good standing
would not have a Material Adverse Effect.
(b) Attached hereto as Exhibit 5.1(b) is a complete and
accurate list of all states and territories where the Company and
each of the Acquired Subsidiaries has written or is qualified to
write insurance, which list includes all jurisdictions in which
failure to be so qualified, if qualification is required, would
have a Material Adverse Effect; a list of all licenses and permits
held by the Company and each of the Acquired Subsidiaries issued by
any state insurance authority, and a description of the classes and
lines of business the Company and each of the Acquired Subsidiaries
is authorized to write in each jurisdiction. Except as set forth
in Exhibit 5.1(b), the Company's and each of the Acquired
Subsidiaries' authority to write the classes and lines of insurance
business reflected on said Exhibit is unrestricted and neither the
Company nor any of the Acquired Subsidiaries is a party to any
agreement, formal or informal, with any state insurance regulatory
official limiting the Company's or such Acquired Subsidiary's
ability to make full use of the licenses or permits which have been
issued to it or requiring the Company and the Acquired Subsidiaries
to comply with regulatory standards, procedures or requirements
different from those applicable to companies with licenses or
permits identical to those issued to the Company or such Acquired
Subsidiary. The licenses and permits listed on Exhibit 5.1(b)
constitute all licenses and permits material to the conduct of
Business, as it is now conducted and will be conducted prior to the
Closing. All such licenses and permits are in full force and
effect and there are no reasonable grounds to believe that any such
license or permit will not, in the ordinary course, be renewed upon
its expiration. Except as set forth on Exhibit 5.1(b), the Company
and the Acquired Subsidiaries have not incurred fines or penalties
in excess of $25,000 during the 36 month period prior to the date
hereof and have filed all reports, paid all fees and taken all
other actions under any applicable statute, rule or regulation by
any state regulatory agency having jurisdiction over its activities
which are required to comply in all material respects with all
state insurance laws and regulations applicable to the Business.
Except as set forth in Exhibit 5.1(b), neither the Company nor any
of the Acquired Subsidiaries has within the last five years (i) had
any of its licenses or permits revoked or suspended, (ii) been
involved in a proceeding or investigation, whether formal or
informal, to revoke, suspend, limit or restrict such licenses or
permits or (iii) been notified by any licensing authority that such
authority might have cause to revoke, suspend, limit or restrict
any such license or permit and to the best knowledge of the
Alexander Hamilton Parties, no such suspension, revocation or
limitation is threatened by any governmental authority or
department.
(c) Attached hereto as Exhibit 5.1(c) is a complete and
accurate list of all states and territories in which the Company or
any Acquired Subsidiary currently has applications for licenses,
permits or certificates of authority pending. Exhibit 5.1(c) also
sets forth the current status of all such applications.
(d) The Company and each Acquired Subsidiary belong to
all state required rating bureaus, service organizations,
insolvency funds, assigned risk pools and similar organizations
necessary to conduct the Business as it is now being, and has been,
conducted.
SECTION 5.2. Articles of Incorporation--By-Laws
Sellers have delivered to Purchaser complete and correct
copies of the articles or certificate of incorporation and all
amendments thereto to the date hereof, and the by-laws, as amended
to the date hereof, and any other governing documents (including
stockholder agreements) of the Company and the Acquired
Subsidiaries. The minutes of the board of directors', any
investment committees and stockholders' meetings and the stock
books of the Company and the Acquired Subsidiaries, all of which
have been previously made available to Purchaser, are the complete
and correct records of such board of directors', investment
committee's and stockholders' meetings and stock issuances through
and including the date hereof and reflect all transactions through
and including the date hereof required to be contained in such
records, as well as those matters customarily contained in records
of such type, and all such meetings were duly called.
SECTION 5.3. Acquired Subsidiaries
All of the subsidiaries of the Company (other than the
subsidiaries to be transferred pursuant to the Business Transfer)
(the "Acquired Subsidiaries") are set forth in Exhibit 5.3 attached
hereto. The Company has no ownership interest, directly or
indirectly, in any other Person, which is not shown on its Annual
Statement as of December 31, 1994, as filed with Michigan
Department of Insurance, except for such ownership interests that
have been acquired as Investments for the Company and the Acquired
Subsidiaries in the ordinary course of their business since
December 31, 1994. Except as set forth in Exhibit 5.3, the Company
owns, directly or indirectly, all of the outstanding capital stock
of each Acquired Subsidiary, free and clear of all Encumbrances,
except such restrictions on transfer as may apply under applicable
federal or state securities laws, the New York Insurance Code and
any other state insurance code, and all of such capital stock has
been duly authorized and is validly issued, fully paid and
nonassessable and was not issued in violation of any preemptive
rights. There are no outstanding options or rights to subscribe
to, or any Contracts to issue or sell any shares of the capital
stock or any securities or obligations convertible into or
exchangeable for, or giving any Person any right to acquire, any
shares of the capital stock or any other securities of any Acquired
Subsidiary or any stock appreciation rights or similar rights
relating to the capital stock of any Acquired Subsidiary. Upon
consummation of the transactions contemplated by this Agreement and
the Transaction Documents, the Company will continue to own good
and valid title to the stock of each Acquired Subsidiary, free and
clear of all Encumbrances, except such restrictions on transfer as
may apply under applicable federal or state securities laws, the
New York Insurance Code and any other state insurance code.
SECTION 5.4. Scope of Business
Immediately prior to the consummation of the transactions
contemplated by this Agreement and the Transaction Documents, the
Company and the Acquired Subsidiaries will be involved in no other
type of business activities except for the Business.
SECTION 5.5. Authorization
Except for any regulatory or governmental consents or
notices that may be required, Seller, Parent and the Company each
have all necessary corporate power and authority to enter into this
Agreement and the Transaction Documents and to perform them in
accordance with their terms. The execution and delivery of this
Agreement and the Transaction Documents and the sale and other
obligations contemplated hereby and thereby have been duly
authorized by all requisite corporate action of Seller, Parent and
the Company. This Agreement has been, and each of the Transaction
Documents will be, duly executed and delivered by each of these
Parties, and will constitute valid and binding obligations of each
of them, enforceable against such Parties, in accordance with the
terms hereof and thereof and subject, as to the enforceability of
remedies, to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general principles of equity.
SECTION 5.6. Capitalization
The duly authorized capital stock of the Company consists
solely of 500,000 shares of Common Stock, par value $10.00 per
share, 375,000 of which are issued and outstanding. The Company
has no other shares of capital stock of any class or other equity
securities authorized, issued or outstanding, and there are no
outstanding or authorized options, warrants, calls, subscriptions,
rights, agreements or commitments of any character obligating the
Company to issue any shares of its capital stock or securities
convertible into or exchangeable for or evidencing the right to
purchase or subscribe for any shares of its capital stock or the
stock of any Acquired Subsidiary. All of the Shares have been
validly issued, fully paid and are nonassessable and free of
preemptive rights.
SECTION 5.7. Ownership of Shares and Note
Seller is the beneficial and legal registered owner of
all of the Shares and Parent is the beneficial and legal registered
owner of the Note. Each of Seller and Parent has good and valid
title thereto and the right to sell, assign, and transfer the same
to Purchaser free and clear of all Encumbrances except such
restrictions as to further transfer that may apply under any
applicable federal or state securities laws, the Michigan Insurance
Code or any other state insurance code or insurance laws applicable
to the Acquired Companies. Upon delivery of the Shares and the
Note to Purchaser at the Closing, Purchaser will acquire good and
valid title thereto free and clear of any and all Encumbrances
except such restrictions as to further transfer that may be imposed
by federal or state securities laws, the Michigan Insurance Code or
any other state insurance code or insurance laws applicable to the
Acquired Companies.
SECTION 5.8. Statutory Statements
Seller previously made available to Purchaser a complete
copy of the Annual Statements of the Company, and each of the
Acquired Subsidiaries dated December 31, 1992, December 31, 1993
and December 31, 1994, as filed with the department of insurance of
such company's state of domicile, a complete copy of the Quarterly
Statement of the Company and each of the Acquired Subsidiaries,
dated March 31, 1995, as filed with the department of insurance of
such company's state of domicile, and will deliver as soon as they
are filed such interim financial statements that may be required to
be filed with any state departments of insurance prior to the
Closing Date (collectively, the "Statutory Statements"). The
Statutory Statements have been or will be prepared in accordance
with Statutory Accounting Principles. The Statutory Statements
present (and such statements to be delivered hereafter will
present) fairly in all material respects in accordance with
Statutory Accounting Principles the financial position of the
company presented as of the dates indicated and the results of its
operations for the periods therein specified.
SECTION 5.9. GAAP Financial Statements
Prior to the Closing Date Seller will deliver to
Purchaser audited consolidated balance sheets of the Company and
its subsidiaries at December 31, 1994 and 1993 and consolidated
statements of income, cash flows and changes in stockholder's
equity for the three years ended December 31, 1994, and the notes
thereto, and has previously delivered the unaudited consolidated
balance sheet of the Company and its subsidiaries as of March 31,
1995, and consolidated statements of income for the three months
ended March 31, 1994 and 1995, and will deliver on a timely basis
interim financial statements as of the end of each subsequent
quarter and for the quarter and year then ended, in each case
prepared in accordance with GAAP (collectively, the "GAAP Financial
Statements"). The GAAP Financial Statements present fairly or will
present fairly in all material respects in accordance with GAAP the
consolidated financial position of the Company and its subsidiaries
as of the dates indicated and the results of their operations for
the periods therein specified.
SECTION 5.10. Investments; Defaults
(a) Seller has previously delivered to Purchaser a
complete list of all Investments owned, directly or indirectly, by
the Company and the Acquired Subsidiaries as of June 30, 1995.
Except as set forth on Exhibit 5.10(a)(1) (as updated for
subsequent events), none of the Alexander Hamilton Parties has
received notice of (i) any payment defaults with respect to any
Investment or (ii) any other notice of nonperformance of any
Investment. Exhibit 5.10(a)(1) also contains a list of all
bankruptcies, nonperforming assets, foreclosures and payment
defaults known to the Alexander Hamilton Parties with respect to
the Investments as of June 30, 1995. Except as disclosed on
Exhibit 5.10(a)(2), all of the Investments constitute admitted
assets on the Company's Statutory Statements and their carrying
values have been described in conformity with Statutory Accounting
Principles and in accordance with values prescribed by the National
Association of Insurance Commissioners, when appropriate,
consistent with the prior reporting practices of the Company and
the Acquired Subsidiaries.
(b) To the best knowledge of the Alexander Hamilton
Parties, neither the Company nor any of the Acquired Subsidiaries
has committed any act or omitted to take any act which would make
any of the Investments not enforceable against the issuer thereof
or the parties thereto in accordance with their terms, except that
(i) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter
in effect relating to creditors' rights generally or the rights of
creditors of insurance companies generally and (ii) the remedy of
specific performance and injunctive and other forms of relief may
be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(c) Except as set forth on Exhibit 5.10(c), since
December 31, 1994, none of the Company nor any Acquired Subsidiary
has (i) purchased or otherwise invested in or committed to purchase
or otherwise invest in any interest in real property (including,
any extension of credit secured by a mortgage or deed of trust),
(ii) purchased or otherwise invested in or committed to purchase or
otherwise invest in securities which are below investment grade at
the time of purchase, (iii) entered into any agreement or
commitment with respect to the purchase or other acquisition, sale
or other disposition or allocation of any Investment with any
Affiliate or other entity in which an Affiliate owns an equity
interest of more than 25% or (iv) entered into any agreement or
commitment with respect to any foreign Investments. For the
purposes of this Section 5.10 the term "investment grade" shall
mean with respect to any Investment which is an evidence of
indebtedness, a rating of Baa3 or higher by Moody's Investors
Service Inc., a rating of BBB- or higher by Standard & Poor's
Corporation or category 2 or higher by the National Association of
Insurance Commissioners Securities Valuation Office.
SECTION 5.11. Twindex Policies
Exhibit 5.11 sets forth a complete and accurate list of
all insurance (including annuity) policy forms issued by the
Company or any Acquired Subsidiary which constitute Twindex
Policies, and the additional information shown on Exhibit 5.11 for
such policies is accurate in all material respects.
SECTION 5.12. Reserves
The GAAP Reserves and Statutory Reserves reflected in the
Financial Statements were, or will be, computed in accordance with
accepted actuarial standards as prescribed by the American Academy
of Actuaries, are or will be fairly stated in accordance with sound
actuarial principles, were, or will be, computed in a manner
consistent with the computation of such items in the preceding
corresponding period.
SECTION 5.13. Bank Accounts; Custodial Accounts; Receivables
Prior to the Closing Date, other than petty cash accounts
aggregating to less than $150,000, the Company will have delivered
a true and complete list (in all material respects) and brief
description (including the account or box number and the names of
all Persons currently authorized to draw thereon, withdraw
therefrom or have access thereto) of each and every bank account,
safe deposit box, brokerage account, trust account, depository
account or other custodial account of the Acquired Companies
including, but not limited to, any deposits maintained with any
governmental agency or department for the purpose of obtaining or
continuing any authority within the subject jurisdiction or
otherwise. Other than the assets deposited in such accounts, the
Acquired Companies have no other liquid assets or Investments held
or maintained with any other Person at any location.
SECTION 5.14. Material Contracts (Other Than Reinsurance)
(a) Each Contract to which the Company or any Acquired
Subsidiary is a party or bound or to which it or its property is
subject is listed on Exhibit 5.14, except for Contracts set forth
or cross-referenced on Exhibits 5.10, 5.11, 5.16, 5.17, 5.18, 5.19,
5.26, 5.27, 5.34 and 5.36 and except for Contracts:
(i) Relating to insurance Contracts issued or to be
issued in the ordinary course of business which involve
annual premiums of less than $500,000;
(ii) For the purchase or rental of materials and
supplies by the Company or any Acquired Subsidiary
entered into in the ordinary and usual course of business
which do not individually exceed $250,000 (treating each
purchase order as a separate agreement); and
(iii) For the purchase of services by the
Company or any Acquired Subsidiary entered into in the
ordinary course of business which do not individually
involve an amount in excess of $250,000 and which are
reasonably expected to be fully performed within 12
months of their respective dates.
(b) Except as set forth on Exhibit 5.14(b):
(i) Neither the Company nor any Acquired Subsidiary
has any outstanding Contract (other than for vested
commissions or vested deferred compensation) with any
Producer that is not cancelable by the Company or such
Acquired Subsidiary, on notice of not longer than 60 days
and without any expense, liability, penalty or premium of
any kind in an amount greater than $25,000, or any
Contract providing for the payment of any bonus or
commission based on sales or earnings of any of the
Acquired Companies; and
(ii) Neither the Company nor any Acquired Subsidiary
is subject to any Contract containing covenants limiting
the freedom of the Company or any Acquired Subsidiary to
compete in any line of business in any geographic area,
restricting or requiring any particular sales or other
office location or requiring the Company to share any
profits.
(c) To the best knowledge of the Alexander Hamilton
Parties, all Contracts referred to, or required to be referred to,
on any Exhibit delivered hereunder ("Exhibit Contracts") are valid
and binding, and are in full force and effect and are enforceable
in accordance with their terms, subject to the effect of any
bankruptcy, insolvency, moratorium, or other similar laws affecting
the enforcement of creditors' rights generally and except as the
availability of equitable remedies may be limited by general
principles of equity. Except as described on Exhibit 5.14(b), the
Alexander Hamilton Parties have no knowledge of any pending or
threatened bankruptcy, insolvency or similar proceeding with
respect to any party to such Exhibit Contracts. Except as
described on Exhibit 5.14(b), no event has occurred or state of
facts exists which (whether with or without notice, lapse of time
or the happening or occurrence of any other event) would constitute
a default thereunder by the Company or any Acquired Subsidiary or,
to the best knowledge of the Alexander Hamilton Parties, any other
party thereto. Each of the Company and the Acquired Subsidiaries
has duly complied in all material respects with all provisions of
every Exhibit Contract to which the Company or such Acquired
Subsidiary is a party and is not in default as to any such
Contract.
(d) All outstanding insurance Contracts of the Company
and the Acquired Subsidiaries were issued in conformity with the
Company's underwriting standards and, with respect to such
Contracts reinsured in whole or in part, conform to the standards
agreed to with the reinsurer in the related reinsurance,
coinsurance or other similar contracts.
SECTION 5.15. Reinsurance Treaties
Except for the Transferred Business Reinsurance
Agreements, Exhibit 5.15 lists all of the Reinsurance Treaties.
Seller has provided to Purchaser copies of the Reinsurance Treaties
which are true, accurate and complete, including all amendments or
modifications thereto. All Reinsurance Agreements are in full
force and effect, enforceable in accordance with their terms, and,
except as set forth in Exhibit 5.15, neither the Company nor, to
the best knowledge of the Alexander Hamilton Parties, any other
party to the Reinsurance Treaties is in default or alleged to be in
default under the terms thereof, and there exists no condition
which, after notice or lapse of time or both, would constitute a
default thereunder. Except as provided for in the Statutory
Financial Statement as of and for the year ended December 31, 1994,
or as disclosed in Exhibit 5.15 hereto, all reinsurance represented
by the Reinsurance Treaties represents an admitted asset or
reduction of loss reserves of the Company or an Acquired Subsidiary
in the Statutory Statements and their carrying values have been
described in conformity with Statutory Accounting Principles and in
accordance with values prescribed by the National Association of
Insurance Commissioners, when appropriate, consistent with the
prior reporting practices of the Company and the Acquired
Subsidiaries. Except as set forth on Exhibit 5.15, no consent from
any assuming reinsurer under any of the Reinsurance Treaties is
required in order for Seller to validly and effectively sell the
Shares to Purchaser as provided hereunder. The consummation of the
transactions contemplated by this Agreement will not affect any
Acquired Company's rights under the Reinsurance Treaties and
specifically (i) no Reinsurance Treaties will be terminable nor
will any commutation or recapture thereunder be required as a
result thereof and (ii) such consummation will not adversely affect
an Acquired Company's recapture rights under such Reinsurance
Treaties. Recapture rights under the Reinsurance Treaties in
connection with the increase in retention limits implemented in
1995 under life insurance contracts are available and have not been
diminished.
SECTION 5.16. Employees and Compensation
(a) Each of the Acquired Companies has complied
materially with all applicable rules, laws and regulations
concerning wages, bonuses, discrimination in employment,
disabilities, family and medical leave, immigration, wrongful
termination, worker's compensation for injury or sickness,
collective bargaining, OSHA and other employment matters and made,
in a timely manner, true, complete and accurate filings (in all
material respects) required in connection therewith by any federal,
state, local or Canadian governmental unit or agency. Other than
the HI RIP and the HI TRIP, no Acquired Company is liable to any
former employee for any accrued wages or other benefits except as
outlined in Section 5.17. Each of the Acquired Companies has
complied with all garnishment orders it has received and has made
available all garnishment orders it has received in the last year
to Purchaser. Seller has previously delivered to Purchaser a list
of all employees of the Acquired Companies whose annual salary is
in excess of $75,000, including their current salary or rate of
remuneration, any Contracts between each such employee and any
Acquired Company and any special benefits or arrangements to which
they are entitled, including any promised salary, wage or
commission increase, other than non-qualified pension plans,
welfare benefit plans or fringe benefits referred to in
Exhibit 5.17. Except as set forth in Exhibit 5.16, there are no
employment Contracts with any employee of the Company or any
Acquired Subsidiary and the employment of each employee of the
Acquired Companies is terminable at will by the Acquired Companies
without restriction, penalty or payment of any kind, other than
payments with respect to liabilities reflected on the Financial
Statements and for services actually performed, non-material
payments for accrued benefits and the severance plan attached as
Exhibit 8.4. No employee of any Acquired Company has suffered an
"employment loss" (as defined in the Worker Adjustment and
Retraining Notification Act) within the 90 days prior to the date
hereof or is anticipated to suffer an "employment loss" within the
90 days prior to the Closing Date.
(b) Since December 31, 1994 no employee of an Acquired
Company, or group of employees, the loss of whom would have a
significant adverse effect on the Business, has notified any
Acquired Company of his or their intent to (i) terminate his or
their relationship with the Acquired Companies or (ii) make any
demand for material payments or modifications of his or their
arrangements with any Acquired Company.
(c) Except as set forth in Exhibit 5.16, the employees
of the Acquired Companies are not represented by a labor
organization, no Acquired Company is a signatory to a collective
bargaining agreement with any labor organization, no union claims
to represent any such employees and no union organizing effort is
or within the last three years has been underway involving
employees of any Acquired Company.
SECTION 5.17. Employee Benefit Plans
(a) Other than the HI RIP and the HI TRIP, Exhibit 5.17
sets forth a complete list of each bonus, deferred compensation,
incentive compensation, stock purchase, stock option, equity-based
award, severance or termination pay, hospitalization or other
medical, accident, disability, life or other insurance,
supplemental unemployment benefits, fringe and other welfare
benefit, profit-sharing, pension, or retirement plan, program,
agreement or arrangement, and each other employee benefit plan,
program, agreement or arrangement, sponsored, maintained or
contributed to or required to be contributed to by the Acquired
Companies or by any trade or business, whether or not incorporated,
that together with the Acquired Companies would be deemed a "single
employer" within the meaning of section 4001 of ERISA, or
considered as being members of a controlled group of corporations,
under common control, or members of an affiliated service group
within the meaning of subsections 414(b), (c), (m) or (o) of the
Code or Section 4001(a) (14) of ERISA (each such Subsidiary, trade,
business or member an "ERISA Affiliate"), in each case for the
benefit of any employee or former employee of the Acquired
Companies (the "Benefit Plans"). Seller has previously furnished
to Purchaser all of the written personnel policies, rules or
procedures applicable to employees of any Acquired Company.
(b) Neither the Company nor any Acquired Subsidiary has
(within the last six years prior to the date hereof) terminated or
withdrawn from or sought a funding waiver with respect to, and no
facts exist which could reasonably be expected to result in a
termination or withdrawal from or seeking a funding waiver with
respect to, any employee benefit plan which is subject to Title IV
of ERISA other than the matters described in Exhibit 5.17(b).
Neither the Company nor any Acquired Subsidiary has incurred
liability, and no facts exist which could reasonably be expected to
result in such liability, as a result of a termination, withdrawal
or funding waiver with respect to any plan, program or arrangement
maintained for the benefit of the employees or former employees of
an ERISA Affiliate (other than a Benefit Plan described in
Section 5.17(a)) that is subject to Title IV of ERISA (an "ERISA
Affiliate Title IV Plan").
(c) Seller has furnished to Purchaser (except as noted
on Exhibit 5.17(c)) (i) a true, complete and current copy of
(i) each written Benefit Plan, any amendments thereto and all
trust, insurance or other funding agreements therefor and (ii) with
respect to each Benefit Plan, all currently effective IRS,
Department of Labor or Pension Benefit Guaranty Corporation rulings
or determinations or rulings or determinations of any foreign
government or agency, and the most recent annual reports, summary
plan descriptions, actuarial reports and Statement of Financial
Accounting Standards Nos. 87, 106 and 112 reports, (iii) a complete
written description of each other Benefit Plan and (iv) such other
documentation with respect to any Benefit Plan as has been
reasonably requested by Purchaser.
(d) Based on the Towers Perrin report dated April 1995,
the aggregate present value of the liability to the Company and the
Acquired Subsidiaries to provide post-retirement medical benefits
and life benefits is estimated at *CONFIDENTIAL 4* as of January 1,
1995 and to provide long-term disability benefits to former and
present employees of the Company and any of the Acquired
Subsidiaries (and their dependents) is estimated to be
*CONFIDENTIAL 4*.
(e) Each Benefit Plan and each ERISA Affiliate Title IV
Plan has been established, maintained and administered in
compliance in all material respects with all applicable laws,
including applicable provisions of the laws of the United States
and Canada.
(f) Neither the Company nor any Acquired Subsidiary has
incurred, and no facts exist which are reasonably likely to result
in, any liability to the Company or any Acquired Subsidiary for any
tax or penalty with respect to any Benefit Plan, ERISA Affiliate
Title IV Plan or any group health plan (as described in section
5000 of the Code) of an ERISA Affiliate, including without
limitation, any liability, tax or penalty under ERISA, the Code or
Canadian law.
(g) The Company and each Acquired Subsidiary will have
the right after the Closing Date under the terms of each Benefit
Plan and under applicable law to terminate such plan or its
participation in such plan at any time by action of the Company or
the Acquired Subsidiary, and no additional contributions would be
required in order to properly effect the termination of such plan
or its participation in such plan in accordance with the terms of
such plan and applicable law.
(h) Except as set forth on Exhibit 5.17(h), the
consummation of the transactions contemplated by this Agreement
will not, except as expressly provided in this Agreement, (i)
entitle any current or former employee, director or officer of any
Acquired Company to severance pay, unemployment compensation or any
other payment or (ii) accelerate the time of payment or vesting or
increase the amount of compensation due any such employee, director
or officer.
(i) No Acquired Company makes or has made, nor has or
has had an obligation to make, nor reimburses or has reimbursed,
nor has or has had an obligation to reimburse, another employer,
directly or indirectly, for making, contributions to a
multiemployer plan as described in Title IV of ERISA.
(j) The HI RIP and the HI TRIP satisfy the qualification
requirements of Section 401 (a) of the Code, each plan has received
a favorable determination with respect to its qualification under
Section 401 (a) of the Code and any amendment made with respect to
each such plan either is subject to such a favorable determination
letter or a timely application for such a letter is pending with
the IRS. No audit or investigation by any domestic or foreign
governmental or other law enforcement agency is pending or has been
proposed with respect to either such plan except for the current
audit of RIP by the U.S. Department of Labor. No claims have been
made or threatened by any person or governmental agency with
respect to either such plan which claim could reasonably be
expected to result in liability to the Company or an Acquired
Subsidiary (other than routine and reasonable claims made in the
ordinary course of plan operations).
SECTION 5.18. Producers for the Company
(a) Seller has previously delivered to Purchaser a
complete and accurate list of the Producers for the Business who
earned $100,000 or more in commission income from the Company or
the Acquired Subsidiaries during 1994, including, with respect to
each of the top 20 Producers, a brief description of the Producer's
authority and the compensation and other terms of its relationship
with the Company or the Acquired Subsidiary. Seller has provided
to Purchaser true, accurate and complete copies (in all material
respects) of all agreements with such Producers, including all
amendments or modifications thereof.
(b) The Company has previously furnished to Purchaser
the forms of Contracts that govern the basic relationship between
any of the Acquired Companies and personal producing general agents
and agents. Exhibit 5.18(b) sets forth a list of all other plans,
programs and practices, whether written or oral, maintained or
contributed to by the Company or any Acquired Subsidiary in effect
as of the date hereof which presently provide or are reasonably
likely to provide in the future benefits or compensation in excess
of $100,000 to or on behalf of Producers or former Producers of the
Company or any Acquired Subsidiary (excluding any promotional
contests for Producers as to which the aggregate amounts payable
thereunder do not exceed $100,000) ("Producer Plans"), copies of
which have been previously furnished to Purchaser. Except as set
forth on Exhibit 5.18(b), each such Producer Plan may be terminated
within 90 days of the giving of notice without any liability
whatsoever to any Person whomsoever except payment to or on behalf
of any Producers or former Producers (other than commissions
accrued prior to such termination and vested renewals) of an amount
less than or equal to $25,000 or, in the aggregate for all such
Producers or former Producers, of an amount less than or equal to
$250,000.
(c) To the best knowledge of the Alexander Hamilton
Parties, there is no, and since December 31, 1994 there has not
been any, condition or state of facts (excluding the transactions
contemplated by this Agreement and external political and economic
conditions) which is reasonably likely to affect the Company's and
the Acquired Subsidiaries' relations with the Producers described
on Exhibit 5.18(a) in a manner which would have a Material Adverse
Effect, and no Producer or group of Producers, the loss of whom
would have a Material Adverse Effect, has notified the Company or
any Acquired Subsidiary since December 31, 1994 of his or their
intent to (i) terminate his or their relationship with the Company
or any Acquired Subsidiary or (ii) make any demand for material
payments or modifications of his or their arrangements with the
Company or any Acquired Subsidiary.
SECTION 5.19. Insurance
Exhibit 5.19 contains a true and complete list of all
policies currently in force relating to liability (including
professional liability), theft, fidelity, fire and other casualty,
life, accident and health, workers compensation, and any other form
of insurance in force naming the Company, any Acquired Subsidiary
or any employees thereof as an insured or beneficiary or as a loss
payable payee and for which the Company or any Acquired Subsidiary
has paid or is obligated to pay all or part of the premiums
including the following information: (i) the name of the insurer,
(ii) the amount of coverage and any retention or deductible, (iii)
type of insurance coverage, (iv) insurance policy number, (v) any
pending claims thereunder relating to the Company or any Acquired
Subsidiary whether by the Company or otherwise (and the Company has
disclosed to Purchaser all significant facts and circumstances
known to the Alexander Hamilton Parties which may give rise to any
claim) and (vi) the expiration date. Except as set forth on
Exhibit 5.19, neither the Company nor any Acquired Subsidiary has
received notice of any pending or threatened cancellation or
premium increase of more than 10% (retroactive or otherwise) with
respect to any such policies referred to on Exhibit 5.19, and the
Company and each Acquired Subsidiary is in compliance with all
conditions contained therein. The policies listed in Exhibit 5.19
are in amounts which are adequate with respect to the operation of
the Acquired Companies through the Closing Date. Except as set
forth on Exhibit 5.19, the limits of liability or amount of
insurance under the policies listed in Exhibit 5.19 is not limited
or subject to reduction or exhaustion due to claims made by or
against any Person other than the Company or any Acquired
Subsidiary. Except as set forth on Exhibit 5.19, there are no
pending claims against such insurance by the Company or any of the
Acquired Subsidiaries as to which insurers are defending under
reservation of rights or have denied liability, and there exists no
claim under such insurance that has not been properly filed by the
Company or the Acquired Subsidiaries. The Company and each
Acquired Subsidiary have been and are insured by reputable insurers
with respect to their properties and the conduct of their business
in such amounts and against such risks as are reasonable in
relation to their business, and the Company will use its
commercially reasonable best efforts to maintain such insurance in
force at least through the Closing Date.
SECTION 5.20. Insurance Policy Forms and Rates
Each insurance policy or certificate form, as well as any
related application form, written advertising material and rate or
rule currently in use by the Company or any Acquired Subsidiary,
the use or issuance of which requires filing or approval, has been
appropriately filed, and if required, approved by the Michigan
Insurance Department or other applicable regulatory agencies. All
such policies and certificates, forms, applications, advertising
materials and rates or rules are in compliance in all material
respects with all applicable laws and regulations.
SECTION 5.21. Litigation and Regulatory Investigations
(a) The Company has delivered to Purchaser a Litigation
Memorandum which sets forth all actions, suits, claims,
investigations, unresolved regulatory inquiries or legal,
administrative or arbitration proceedings pending or threatened
which are known to the Alexander Hamilton Parties and which would
involve a claim for an amount in excess of $100,000 in any single
instance against or on behalf of the Company or any Acquired
Subsidiary, or any officer, employee or director thereof in such
individual's capacity as officer, employee or director of the
Company or any Acquired Subsidiary or involving any of their
properties or the Business, whether at law or in equity, before or
by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, or any private party or entity and which indicates which
of such matters are being defended by an insurance carrier, and
which of the matters being so defended are being defended under a
reservation of rights. None of such matters (singly or in the
aggregate) could reasonably be expected to result in a Material
Adverse Effect. Further, except as set forth in the Litigation
Memorandum, there are no outstanding judgments, orders, decrees,
stipulations or awards (whether rendered by a court, administrative
agency, or by arbitration, pursuant to a grievance or other
procedures) against or relating to the Company or any Acquired
Subsidiary which contain any remaining restrictions or obligations
to perform. There is no pending or, to the best knowledge of the
Alexander Hamilton Parties, threatened action, proceeding or
investigation with respect to the Company, any Acquired Subsidiary
or any other Person which questions the validity of this Agreement
or the Transaction Documents or any transaction contemplated hereby
or thereby, could prevent or materially adversely affect any action
taken or to be taken pursuant hereto or thereto or which might
result in any revocation, suspension or limitation of any
regulatory authority of the Company or any Acquired Subsidiary or
have a Material Adverse Effect, or which might result in any
material liability of the Acquired Companies, taken as a whole.
(b) The Litigation Memorandum described in paragraph (a)
above sets forth a description of all settlements for any action,
suit, claim, investigation, regulatory inquiry or legal,
administrative, arbitration or other proceeding involving any of
the Acquired Companies during the 24 month period ending June 30,
1995 and which resulted in a payment in full satisfaction thereof
of more than $100,000.
SECTION 5.22. Compliance with Applicable Laws and Regulations
Except as disclosed in Exhibit 5.22, each Acquired
Company has complied in all material respects with its obligation
to make each required filing or report with governmental or
regulatory bodies and complied in all material respects with all
laws, rules, regulations, licensing requirements and orders
applicable to the Acquired Companies or the operation of the
Business, and there has been no assertion by any party responsible
for the administration or enforcement thereof that the Company or
its Subsidiaries has violated any such laws, rules, regulations,
requirements or orders. All filings and reports to governmental
or regulatory authorities have been true, complete and accurate in
all material respects.
SECTION 5.23. Brokers' or Finders' Fees
Other than Morgan Stanley & Co. Incorporated (whose fees
shall be paid solely by Parent), no agent, broker, investment
banker, Person or firm acting on behalf or under the authority of
Seller, Parent or its Affiliates or the Company is or will be
entitled to any brokers' or finder' fee or any other commission or
similar fee directly or indirectly from Purchaser or any Acquired
Company in connection with any of the transactions contemplated by
this Agreement.
SECTION 5.24. Full Disclosure; No Misrepresentations
(a) No information contained in the representations and
warranties of Seller or Parent set forth in this Agreement, the
Annex or in any of the certificates, schedules, lists, documents,
exhibits or other instruments relating hereto or to be delivered or
referenced as having previously been delivered to Purchaser
hereunder contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements contained
herein or therein, in light of the circumstances under which they
were made, not misleading. There is no fact or condition known to
Parent, Seller or the Company which has not been disclosed to
Purchaser in writing which materially adversely affects or to the
knowledge of any of the Alexander Hamilton Parties reasonably may
be expected to materially adversely affect the business, assets,
liabilities or financial condition of the Acquired Companies, taken
as a whole.
(b) The Alexander Hamilton Parties have provided to
Purchaser and its representatives certain documentation and
information described on Exhibit 5.24(b) (the "Evaluation
Materials"). To the best knowledge of the Alexander Hamilton
Parties, the statements contained in Exhibit 5.24(b) are true and
complete in all material respects.
SECTION 5.25. Dividends; Distributions on the Note
(a) Since December 31, 1994, other than the dividends
permitted by this Agreement, the Company has not declared, set
aside or paid any dividend payable in cash, stock or property or
made any other distribution with respect to its capital stock.
Since December 31, 1994, none of the Company's subsidiaries has
declared, set aside or paid any dividend payable in cash, stock or
property or made any other distribution with respect to its capital
stock.
(b) Other than the payment to Parent of *CONFIDENTIAL 5*
in interest on the Note during 1995, the Company has not paid or
set aside in a reserve any other payment on the Note.
SECTION 5.26. Property
(a) Attached hereto as Exhibit 5.26(a) is a list of all
the real property that the Company or any of the Acquired
Subsidiaries will own as of the Closing Date. As to such real
property listed,
(i) the identified owner has good and marketable
title to the parcel of real property, free and
clear of any Encumbrances, covenant or other
restriction except (A) as noted on the list
therein and (B) for taxes not yet due,
recorded easements, covenants and other
restrictions, and utility easements, building
restrictions, zoning restrictions, and other
easements and restrictions existing generally
with respect to properties of a similar
character;
(ii) except as disclosed on Exhibit 5.26(a), there
are no leases, subleases, licenses,
concessions or other agreements granting to
any party or parties the right of use or
occupancy of any portion or the parcel of real
property; and
(iii) except as disclosed on Exhibit 5.26(a),
there are no outstanding options or
rights of first refusal to purchase the
parcel of real property, or any portion
or interest therein.
(b) The Company and each of its subsidiaries has good
and marketable title or other rights to possess or use such of its
personal property as is necessary to conduct its business as
presently conducted, free and clear of all Encumbrances that could
reasonably be expected to have a material adverse effect on the
conduct the business of the Company and its subsidiaries, taken as
a whole.
(c) Except with respect to personal property described
in Section 5.27, all of the personal property necessary for the
Company and each of its subsidiaries to conduct its business as
presently conducted is under the possession or control of the
Company.
(d) All real property leased by the Company and each of
its subsidiaries is in good order, condition and repair, and the
operations conducted on such real property comply with all
applicable zoning and use restrictions except where the failure to
be in such good order, condition, and repair, or to comply with
such restrictions would not materially and adversely affect the
Company's or its subsidiaries' ability to conduct the Business as
such business is currently conducted.
(e) Except as set forth on Exhibit 5.26(e), the book
value of the personal property (including all improvements on any
real property owned by the Company or any Acquired Subsidiary and
excluding all Investments and deposits) and leasehold improvements
which are not located on the premises of the principal business
operations of the Company or any Acquired Subsidiary does not
exceed $250,000 in the aggregate.
(f) The structures and equipment owned by the Company or
any Acquired Subsidiary and the structures and equipment leased by
the Company or any Acquired Subsidiary, are structurally sound with
no material defects, are in good and safe operating condition and
repair and are adequate for the uses to which they are being put.
SECTION 5.27. Patents and Trademarks; Technology
(a) Exhibit 5.27(a) sets forth a complete and accurate
list and description of (i) all material United States and foreign
patents, trademarks, trade names, service marks, copyrights and
applications therefor owned by the Company or any Acquired
Subsidiary (the "Patent and Trademark Rights") and (ii) all
material United States and foreign patents, trademarks, trade
names, service marks, copyrights and applications therefor,
licensed to the Company or any Acquired Subsidiary (the "Licensed
Rights"). Except as set forth on Exhibit 5.27(a), (i) the Patent
and Trademark Rights are free of any Encumbrances, are not subject
to any license (royalty-bearing or royalty-free) and are not
subject to any other arrangement requiring any payment to any
Person or the obligation to grant rights to any Person in exchange,
(ii) the Licensed Rights are free and clear of any liens, claims,
encumbrances, royalties or other obligations created by the Company
or any Acquired Subsidiary and (iii) the Patent and Trademark
Rights and the Licensed Rights are all those rights necessary to
the Business as currently being conducted. Except as set forth on
Exhibit 5.27(a), the validity of the Patent and Trademark Rights
and the validity of the Licensed Rights (i) have not been
questioned in any prior litigation, (ii) are not being questioned
in any pending litigation and (iii) to the best knowledge of the
Alexander Hamilton Parties, are not the subject(s) of any
threatened or proposed litigation. Except as set forth on Exhibit
5.27(a), the Business, as currently being conducted, does not
conflict with and has not been alleged to conflict with any
patents, trademarks, trade names, service marks, or copyright of
others. The consummation of the transactions contemplated by this
Agreement and the Transaction Documents will not result in the loss
or impairment of any of the Patent and Trademark Rights or any of
the Licensed Rights or result in any requirement of new or
additional royalty, licensing fees, relicensing fees or other
expenses. Except as set forth on Exhibit 5.27(a), none of the
Alexander Hamilton Parties knows of any use by others of the Patent
and Trademark Rights or the Licensed Rights.
(b) The Company or an Acquired Subsidiary is the sole
owner of the Patent and Trademark Rights and neither the Company
nor any Acquired Subsidiary has previously assigned or granted and
will not, prior to the Closing, grant to any Person any right,
title or interest, option, or claim in respect of the Patent and
Trademark Rights
(c) Neither the Company nor any Acquired Subsidiary in
the conduct of the Business as currently conducted, infringes or
wrongfully uses any confidential information, trade secrets,
copyrights, letters, patent trade marks, service rights, trade
names, designs, business names, or similar industrial, commercial
or intellectual property rights.
(d) Exhibit 5.27(d) sets forth a list of certain
computer software that (i) is used in connection with the Business
(the "Business Software Rights") on the Closing Date, (ii) a subset
of such Business Software Rights agreed to by the Parties which
will be obtained for the Acquired Companies for the use with the
Individual Business on the Conversion Date (the "Relicensed
Software Rights") or (iii) has been internally created by or for
the Company or an Acquired Subsidiary and which the Parent
(including all affiliates thereof) will be granted a nonexclusive
perpetual royalty-free license to use from Purchaser (the "Owned
Software"). As of the Closing Date, the Company and each Acquired
Subsidiary shall have access to and be entitled to use the Business
Software Rights pursuant to a Computer Services Agreement as set
forth in Section 7.12. The Company and the Acquired Subsidiaries
will possess rights to use all know-how and improvements relating
to the Relicensed Software Rights ("Software Know-how") (whether
developed by any of them or Parent or any Affiliate (other than the
Acquired Companies)). As of the Conversion Date, Company and each
Acquired Subsidiary shall possess valid rights to use all
Relicensed Software Rights, Owned Software or Software Know-how and
such conversion will not result in the loss or impairment of any
Relicensed Software Rights, Owned Software or Software Know-how to
the Acquired Companies.
SECTION 5.28. Absence of Certain Changes or Events
Except (i) as set forth on Exhibit 5.28, (ii) for
Contracts solely between or among the Company and any of the
Acquired Subsidiaries in the ordinary course of business and
consistent with past practice or (iii) as contemplated herein or in
the Transaction Documents, neither the Company nor any of its
subsidiaries has since December 31, 1994:
(a) Suffered any change in its financial condition or
results of operations, policyholders' surplus, assets or
liabilities, reserves, nature of its business or operations which
change could reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect;
(b) Incurred any liability or obligation (absolute,
accrued, contingent or otherwise) except in the ordinary course of
business and consistent with past practice, or suffered any
material bad debt, contingency or other reserve increase (except
insurance reserve increases resulting in the ordinary course of
business);
(c) Made, declared or paid any dividend or made any
distribution or payment, in respect of, or directly or indirectly
redeemed, purchased or otherwise acquired, any shares of its
outstanding capital stock, changed the number of shares of its
authorized or issued capital stock, permitted shares of its capital
stock held in treasury to become outstanding, or issued any capital
stock or issued or granted any option, warrant, call, commitment,
subscription, right to purchase or contract of any character
relating to its authorized or issued capital stock or any
securities convertible into, relating to or based on its capital
stock.
(d) Paid, discharged or satisfied any claims,
liabilities or obligations (absolute, accrued, contingent or
otherwise), other than the payment, discharge or satisfaction in
the ordinary course of business and consistent with past practice
of liabilities and obligations reflected or reserved in the
Statutory Statements or incurred in the ordinary course of business
and consistent with past practice since December 31, 1994;
(e) Permitted or allowed any of its property or assets
(real, personal or mixed, tangible or intangible) to be subjected
to any Encumbrance;
(f) Written off as uncollectible any notes or accounts
receivable or any portion thereof, except such write-offs in the
ordinary course of business and consistent with past practice which
are not in excess of $250,000 in the aggregate;
(g) Written down the value of any asset or investment on
its books or records, except for depreciation and amortization
taken in the ordinary course of business and consistent with past
practice;
(h) Canceled any debts or waived any claims or rights in
excess of $250,000 in the aggregate, or sold, transferred or
otherwise disposed of any of its properties or assets, except in
transactions in the ordinary course of business and consistent with
past practice and except pursuant to existing Reinsurance
Agreements;
(i) Made aggregate capital expenditures and commitments
in excess of $500,000 (on a consolidated basis) for additions to
property or equipment;
(j) Paid, loaned or advanced (other than the payment of
salaries or benefits or reimbursements of expenses in the ordinary
course of business) any amount to, or sold, transferred or leased
any properties or assets to, or entered into any Contract with, any
of its officers or directors, any Affiliate or associate of any of
its officers or directors, or either Seller or any Affiliate of
such Seller;
(k) Adopted or made any material change in any Benefit
Plan;
(l) Taken or failed to take any action with respect to
any Benefit Plan which would result in a failure to comply with
applicable law or with Section 401 of the Code to the extent such
Benefit Plan is intended to satisfy such section;
(m) Suffered any significant labor controversy or
deterioration or loss in its agency force;
(n) Except for customary wage or salary increases for
employees and customary compensation increases for Producers,
increased or announced any increase in the compensation payable or
to become payable to any employee or Producer or increased or
announced any increase in any bonus, insurance, pension or other
Benefit Plan for such employees or Producers or entered into or
amended any employment, consulting, severance or similar Contract,
except for (i) at will employment arrangements and (ii) Contracts
with Producers, in each case entered into or terminated, as the
case may be, in the ordinary course of business consistent with
past practice;
(o) Made any change in any accounting method, practice
or principle or systems of internal accounting controls, or any
change in any actuarial or reserving standard or any change in
depreciation or amortization policies or rates adopted by it;
(p) Made any change in its underwriting standards,
retention limits or administrative practices with respect to
additions to (new business) or deletions from (policy terminations)
any policy master files;
(q) Entered into any transaction other than in the
ordinary course of business;
(r) Experienced any other event, development or
condition of any character which has had or is reasonably likely to
have a Material Adverse Effect;
(s) Made any change in crediting rates, except changes
generally comparable to those made by principal competitors or as
agreed to by Purchaser; or
(t) Agreed, whether in writing or otherwise, to take any
action described in this Section 5.28.
SECTION 5.29. Agreement Does Not Violate Other Agreements
Except as set forth on Exhibit 5.29, neither the
execution, delivery, and performance by Parent, Seller or the
Company of this Agreement and the Transaction Documents, nor the
consummation of the transactions contemplated hereby and thereby,
will (i) violate, conflict with, result in a breach of any
provision of, constitute a default (or an event that, with notice
or lapse of time or both, would constitute a default) under, result
in the termination of, accelerate the performance required by, or
result in a right of termination or acceleration, or the creation
of any Encumbrance upon any of the properties or assets of Parent,
Seller, the Company or any Acquired Subsidiary, under any of the
terms, conditions, or provisions of (A) the articles of
incorporation or by-laws of Seller, the Company, Parent or any
Acquired Subsidiary or any shareholders' agreements relating to
Parent, Seller, the Company or any Acquired Subsidiary or (B) any
material commitment, mortgage, note, bond, indenture, contract,
agreement, license or other instrument or obligation to which
Seller, the Company, Parent or any of the Acquired Subsidiaries is
a party, or by which the properties or assets of the Company or any
of the Acquired Subsidiaries may be bound, except to the extent of
the approvals described in Section 5.30, (ii) violate or conflict
with any provision of any order, writ, injunction, statute, law,
rule, regulation, permit or decree of any court, administrative
agency or governmental body applicable to the Company or the
Acquired Subsidiaries or (iii) alter or impair any permits,
certificates, licenses, approvals and other authorizations required
by the Company and the Acquired Subsidiaries to conduct the
Business, except for states in which approval of the state
insurance regulatory authority is required or in which the
regulatory authority has discretionary authority to review the
terms or effect of the transactions contemplated by this Agreement.
SECTION 5.30. Consents and Approvals
Except as required by the HSR Act and other than
consents, authorizations, approvals, or exemptions required under
any applicable insurance and insurance holding company system
statutes, no filing and no permit, authorization, consent or
approval of any other Person is necessary for the execution and
delivery of this Agreement and the Transaction Documents by the
Alexander Hamilton Parties and the consummation by Parent, Seller
or the Company of the transactions contemplated herein and therein;
provided, however, that the Parties recognize that a Section 351
Transaction Structure would require approval under insurance laws
and regulations of the states in which business is conducted by the
Company, as well as the regulatory clearances contemplated in
Section 12.4(m).
SECTION 5.31. Environmental Matters
Except as set forth on Exhibit 5.31:
(a) The Company and the Acquired Subsidiaries have
obtained all permits, licenses and other authorizations and filed
all notices which are required to be obtained or filed by any
applicable Environmental Laws.
(b) To the best knowledge of the Alexander Hamilton
Parties, the Company and the Acquired Subsidiaries are in
compliance in all material respects with all terms and conditions
of such required permits, licenses and authorizations.
(c) To the best knowledge of the Alexander Hamilton
Parties, the Company and the Acquired Subsidiaries are in
compliance in all material respects with all Environmental Laws.
(d) To the best knowledge of the Alexander Hamilton
Parties, there are no past or present events, conditions,
circumstances, activities, practices, incidents, actions or plans
which may interfere with or prevent continued compliance, or which
may give rise to any common law or statutory liability, or
otherwise form the basis of any claim, action, suit, proceeding,
earning or investigation, based on or related to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the Release or threatened Release of
Hazardous Substances with respect to the Company, any Acquired
Subsidiary, the Business or any property, owned, leased or operated
by the Company or the Acquired Subsidiaries.
(e) With regard to any properties owned, leased or
operated by the Company or the Acquired Subsidiaries, to the best
knowledge of the Alexander Hamilton Parties:
(i) There has been no Release or threatened Release of
Hazardous Substances in violation of Environmental
Laws or in quantities that reasonably could result
in liability to the Company or the Acquired
Subsidiaries.
(ii) They are not subject to a Encumbrance pursuant to
Environmental Laws.
(iii) There is not now and has not been, on, in or
at such properties, owned or leased by the
Company or any Acquired Subsidiary any
underground storage tanks; surface
impoundment, lagoon or other similar, land-
based containment facility for the temporary
or permanent storage, treatment or disposal of
Hazardous Substances; landfill or solid waste
disposal area; polychlorinated biphenyls; or
asbestos or asbestos-containing materials.
(iv) They are in compliance in all material
respects with all Environmental Laws.
(f) The Alexander Hamilton Parties have made available
to Purchaser all material information known to the Alexander
Hamilton Parties regarding potential claims against the Company or
the Acquired Subsidiaries under Environmental Laws with respect to
the properties underlying mortgage loan Investments and properties
owned, leased or operated by the Company or the Acquired
Subsidiaries.
(g) Neither the Alexander Hamilton Parties nor, to their
knowledge any past owner, operator, or occupant of the properties,
now or in the past, owned, leased or operated by the Company and
the Acquired Subsidiaries has received any claim or notification,
either direct or indirect, pursuant to Environmental Laws that such
properties (i) are or may be subject to any investigation or
evaluation by any Person, (ii) that the Company or the Acquired
Subsidiaries are or may be liable for cleaning up Hazardous
Substances on, under, in or migrating from such properties and
(iii) that Hazardous Substances are or may be migrating onto or
under such properties.
(h) The Alexander Hamilton Parties have not received any
claim or notice, either direct or indirect by a Person asserting
that the Company or the Acquired Subsidiaries are or may be liable
for personal injury or property damage arising under Environmental
Laws.
SECTION 5.32. Liabilities
Except as and to the extent reflected and adequately
reserved against in the consolidated balance sheet of the Company
and its subsidiaries of December 31, 1994 or referenced in any
other Exhibit hereto, neither the Company nor any of the Acquired
Subsidiaries has any material liability or obligation (direct or
indirect, contingent or absolute, asserted or unasserted) of any
nature other than liabilities or obligations (i) shown on and
reserved for on the last Financial Statements or notes thereto,
(ii) incurred by the Company or any of the Acquired Subsidiaries in
the ordinary course of its business since the most recent Financial
Statements that has not had and will not have a Material Adverse
Effect or (iii) incurred in connection with the transactions
contemplated by this Agreement or otherwise governed by the
Transaction Documents; provided, however, that this representation
and warranty shall not extend to any liability arising as a result
of events or circumstances occurring after the Closing Date or from
any amendment, modification, interpretation, or other change in any
statute, regulation, ruling, or accounting standard applicable
generally to Persons engaged in activities similar to those of the
Company or the Acquired Subsidiaries.
SECTION 5.33. Disclaimer
Except as specifically set forth herein, Seller and
Parent make no other representation or warranty, express or
implied, as to the Acquired Companies' financial condition,
business, assets, liabilities, operations, or prospects, and no
Person has been authorized by Seller or Parent to make any
representation or warranty except as specifically set forth in this
Agreement.
SECTION 5.34. Related Party Agreements
Except for the Note, and the Contracts, Tax sharing
agreements, and affiliated investments and commitments (together
the "Intercompany Agreements") listed on Exhibit 5.34 and except
for agreements solely between or among the Company and the Acquired
Subsidiaries, there are no outstanding Contracts between Parent,
Seller or any of their Affiliates, on the one hand, and the Company
or any Acquired Subsidiary, on the other hand, and none of Parent,
Seller or any of their Affiliates nor any officer or director
thereof has any other claim, cause of action or rights (whether
contractual or otherwise) against the Company or any Acquired
Subsidiary or any predecessor in interest, other than as
contemplated by this Agreement. Except as set forth on
Exhibit 5.34, there are no Contracts of the Company or any Acquired
Subsidiary with any director or officer of Parent, any Affiliate of
Parent, the Company or any Acquired Subsidiary, or with any Person
related to any such Person or with any company or other
organization in which any director or officer of Parent, any
Affiliate of Parent, the Company or any Acquired Subsidiary, or
anyone related to any Person, has a direct or indirect financial
interest.
SECTION 5.35. Policy Information
The information furnished to Purchaser and its
representatives as set forth in Exhibit 5.35 is accurate in all
material respects.
SECTION 5.36. COLI Agreements
Exhibit 5.36 lists all of the Contracts issued or to be
issued by the COLI Business, and the Company previously has
delivered to Purchaser copies of all such Contracts, including all
outstanding agreements, undertakings, commitments or obligations to
provide insurance, whether or not in the ordinary course of
business.
SECTION 5.37. Certain Business Practices
Except as set forth on Exhibit 5.37:
(a) All insurance or annuity benefits that have become
payable and not subject to a bona fide dispute by the Company or
any Acquired Subsidiary, and are not in the course of settlement in
good faith by such Person, have been paid, or provided for, in
accordance with the terms of the insurance, annuity or other
similar contract or agreement under which they arose;
(b) No outstanding insurance policy or annuity contract
issued, reinsured or underwritten by the Company or any Acquired
Subsidiary entitles any Person to receive dividends, distributions
or other benefits based on the revenues or earnings of the contract
issuer;
(c) The underwriting standards utilized and ratings
applied by the Company or any Acquired Subsidiary with regard to
insurance products currently offered by such Person conform in all
material respects to industry accepted practices; and
(d) No Producer currently has, and no Producer has had
in the past, any authority to make underwriting decisions with
respect to insurance policies issued by the Company or any Acquired
Subsidiary, as the case may be.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller and Parent
as follows:
SECTION 6.1. Organization and Standing
Purchaser is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of North
Carolina.
SECTION 6.2. Authority
Except for any regulatory or governmental consents that
may be required, Purchaser has all necessary corporate power and
authority to enter into this Agreement and all other agreements
contemplated hereunder and to perform the obligations to be
performed by it hereunder and thereunder. The execution and
delivery of this Agreement and the purchase and other obligations
contemplated hereby have been duly authorized by all requisite
corporate action of Purchaser. This Agreement has been, and any
other agreements executed by Purchaser pursuant to this Agreement
will on the Closing Date be, duly executed and delivered by
Purchaser and constitute valid and binding obligations of
Purchaser, enforceable against Purchaser in accordance with the
terms hereof and thereof, subject, as to enforceability of
remedies, to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general principles of equity.
SECTION 6.3. Investment Representation
Purchaser acknowledges that the Shares and the Note are
not registered under the securities laws of any jurisdiction and
that it is acquiring the Shares and the Note for its own account,
and not with a view to the distribution thereof. Purchaser is a
sophisticated investor with knowledge and experience in financial
matters and has received information from Seller concerning the
Company and has had the opportunity to obtain additional
information in order to evaluate the purchase contemplated hereby.
Purchaser is purchasing the Shares and the Note for investment
purposes and not with the intention of reselling or distributing
the Shares; provided, however, that the foregoing representation
shall in no way limit Purchaser's right to dispose of all or any
portion of the Shares or the Note, at any time, at Purchaser's sole
discretion.
SECTION 6.4. Consents and Approvals
Except as set forth on Exhibit 6.4 and as required by the
HSR Act and other than consents, authorizations, approvals, or
exemptions required under any applicable insurance holding company
system statutes in the States of Arizona, Michigan, New York and
North Carolina, no filing and no permit, authorization, consent or
approval of any other Person is necessary for the execution and
delivery of this Agreement and the Transaction Documents by
Purchaser and the consummation by Purchaser of the transactions
contemplated herein and therein.
SECTION 6.5. No Conflict or Violation
The execution, delivery and performance by Purchaser of
this Agreement and the Transaction Documents and the consummation
of the transactions contemplated hereby and thereby will not (i)
violate, conflict with, result in a breach of any provision of,
constitute a default (or an event that, with notice or lapse of
time or both, would constitute a default), result in the
termination of, accelerate the performance required by, or result
in a right of termination or acceleration, or the creation of any
Encumbrance upon any of the properties or assets of Purchaser,
under any of the terms, conditions or provisions of (A) the
articles of incorporation or by-laws of Purchaser or any
shareholders' agreements relating to Purchaser or (B) any material
commitment, mortgage, note, bond, indenture, contract, agreement,
license or other instrument or obligation to which Purchaser is a
party, or by which Purchaser may be bound, (ii) violate or conflict
with any provision of any order, writ, injunction, statute, law,
rule, regulation, permit or decree of any court, administrative
agency or governmental body applicable to Purchaser or (iii) alter
or impair any permits, certificates, licenses, approvals and other
authorizations required by Purchaser to conduct the Business,
except for states in which approval from the state insurance
regulatory authority is required or in which the regulatory
authority has discretionary authority to review the terms or effect
of the transactions contemplated by this Agreement.
SECTION 6.6. Financial Ability
Purchaser is financially capable and has sufficient cash
and other resources available to complete the transactions
contemplated by this Agreement.
SECTION 6.7. Litigation
There are no claims, actions, suits, proceedings or
investigations pending, or to the knowledge of any executive
officer of Purchaser, threatened or contemplated, against or
affecting Purchaser or any of its property or other rights which
would impair in any manner the ability of Purchaser to perform its
obligations hereunder, or against the transactions contemplated by
this Agreement, at law or in equity, before any court or other
governmental agency or instrumentality, domestic or foreign, or any
other body, and to the knowledge of any executive officer of
Purchaser, there is no basis for any such claim, action, suit,
proceeding or investigation, including without limitation, any such
claim, action, suit, proceeding or investigation relating to,
arising out of, or based upon any proceedings by an insurance
regulatory authority.
SECTION 6.8. Brokers
Other than Goldman, Sachs & Co. (whose fees shall be paid
solely by Purchaser), no broker, agent, investment banker, Person
or firm acting on behalf or under the authority of Purchaser or its
Affiliates is or will be entitled to any brokers' or finder fee or
any commission or similar fee directly or indirectly from any
Alexander Hamilton Party in connection with any of the
transactions contemplated by this Agreement.
ARTICLE VII.
CONDUCT AND TRANSACTIONS PRIOR TO THE
CLOSING DATE; CERTAIN COVENANTS
The Alexander Hamilton Parties covenant that between the
date of this Agreement and the Closing Date:
SECTION 7.1. Maintenance of Business; Certain Transactions
Except to the extent that Purchaser shall otherwise
consent in writing and except as contemplated by this Agreement,
the Company and its subsidiaries will operate the Business as
currently conducted and only in the ordinary course. In addition,
Sellers and the Company agree that from the date hereof to the
Closing Date, and except as expressly authorized under this
Agreement and the Transaction Documents or as otherwise consented
to by Purchaser in writing, neither the Company nor any of its
subsidiaries will:
(a) Take any action which would result in any
representation or warranty contained in Article V no longer being
true and correct in all material respects as if such
representations or warranty were made on the date thereof;
(b) Enter into or amend in any material respect any
Contract (other than insurance Contracts in the ordinary course of
business consistent with past practice) involving more than
$100,000 over its noncancellable term or enter into any Contract
(other than insurance Contracts in the ordinary course of business
consistent with past practice) involving an amount in excess of
$100,000 which is not cancelable on 30 days' notice without
penalty;
(c) Other than in the ordinary course or to protect the
business, enter into or amend or cancel or agree to the amendment
or cancellation of any insurance Contract or other agreement or
undertaking relating to the COLI Business;
(d) Issue any periodic payment annuities in respect of
lotteries or structured settlements;
(e) Take any action to amend or terminate any Benefit
Plan or adopt any other plan, program, Contract or practice
providing benefits for or compensation to or on behalf of employees
or former employees of the Company or any Acquired Subsidiary, or
permit any Affiliate of the Company to take any such action if such
action could subject the Company or any Acquired Subsidiary to an
obligation or liability in excess of $10,000 with respect to an
individual employee or former employee or $100,000 in the
aggregate;
(f) Change any provision of its articles of
incorporation or by-laws or similar governing documents;
(g) Make, declare or pay any dividend or make any
distribution or payment in respect of or directly or indirectly
redeem, purchase or otherwise acquire, any shares of its
outstanding capital stock or the Note, change the number of shares
of its authorized or issued capital stock, permit any shares of its
capital stock held in treasury to become outstanding, or issue any
capital stock or issue or grant any option, warrant, call,
commitment, subscription, right to purchase or Contract of any
character relating to its authorized or issued capital stock or any
securities convertible into, relating to or based on shares of such
stock;
(h) Other than in connection with the development and
marketing of the insurance product to be sold under the name
"Allegiance Variable Annuity," undertake any other new product
introduction;
(i) Except in the ordinary course of business, make any
loans or advances to any other Person;
(j) Pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise), other
than payments in the ordinary course of business consistent with
past practice;
(k) Purchase, sell or distribute any real or personal
property or purchase or sell any options to purchase or sell any
real or personal property, with a market value in excess of
$100,000 in the aggregate;
(l) Permit any insurance policy naming it as a
beneficiary or a loss payable payee to be canceled or terminated or
any of the coverage thereunder to lapse unless (i) simultaneously
with such termination or cancellation substantially similar
replacement policies reasonably satisfactory to Purchaser are in
full force and effect or (ii) the cost of renewal is commercially
unreasonable;
(m) Enter into or amend or cancel or agree to the
amendment or cancellation of any reinsurance agreement, treaty or
arrangement;
(n) Make any investment of a capital nature either by
purchase of stock or securities, contributions to capital, property
transfers or otherwise, or by the purchase of any property or
assets of any other individual, firm or corporation, except for
portfolio transactions and Investments in the ordinary course of
business consistent with past practice;
(o) Engage in any other transaction or series of related
transactions (not otherwise referred to in this Section 7.1)
involving an amount in excess of $100,000;
(p) Amend or agree to the amendment of any form of
Producer Contract that is provided on Exhibit 5.18(b) hereof; or
(q) Enter into a Contract to do any of the things
described in clauses (a) through (p) above.
SECTION 7.2. Reports
The Company shall from time to time furnish to Purchaser,
promptly following the receipt by senior management of the Company,
(i) copies of all monthly management reports prepared for senior
management of the Company, (ii) copies of all monthly financial
statements and reports, (iii) monthly updates of Exhibit 5.10 and
(iv) a copy of any report filed with any insurance regulatory
authority, which in each such case, shall be prepared in a manner
consistent with past practice.
SECTION 7.3. Corporate Existence
(a) Except as provided by this Agreement, the Company
and each of its subsidiaries will use best efforts to preserve its
respective business organization and goodwill intact, preserve and
maintain its licenses, keep available the services of its current
officers and key employees, and maintain satisfactory relationships
with Producers, licensors, licensees, agents, suppliers,
contractors, regulators, distributors, policyholders, customers and
others with whom business relationships exist with the Company or
such Subsidiary.
(b) The Company and each of its Subsidiaries will
(i) maintain its respective corporate existence;
(ii) pay or reserve all Taxes, charges and
assessments as reflected on any government filing on a
timely basis unless the same are being contested and
adequate reserves therefor have been established on the
Company's or such subsidiary's books;
(iii) make all debt service payments when
contractually due and payable; and
(iv) pay all accounts payable and other liabilities
on a timely basis.
SECTION 7.4. Twindex Policies
If requested by Purchaser and agreed by Seller, on or
before the Closing Date, the Alexander Hamilton Parties will
provide notice to all holders of Twindex Policies of an amendment
of the existing reference rate provisions mutually agreeable to
Purchaser, on the one hand, and the Alexander Hamilton Parties, on
the other hand.
SECTION 7.5. Further Assurances
Subject to the terms and conditions of this Agreement,
the Alexander Hamilton Parties will use all reasonable efforts to
take, or cause to be taken, all action, and to do, or cause to be
done, all things reasonably necessary, proper, or advisable under
applicable laws and regulations to consummate the transactions
contemplated by this Agreement and to make effective the sale of
the Shares and the Note pursuant to this Agreement. From time to
time after the Closing Date, without further consideration, the
Alexander Hamilton Parties shall, at their own expense, execute and
deliver such documents to Purchaser as Purchaser may reasonably
request in order more effectively to vest in Purchaser good title
to the Shares and the Note.
SECTION 7.6. Access
The Alexander Hamilton Parties shall give to Purchaser
and its accountants, actuaries, counsel and other representatives
reasonable access throughout the period prior to the Closing Date
to all of the properties, books, Contracts, commitments and records
(including Tax Returns and insurance policies) of the Company and
the Acquired Subsidiaries in order that Purchaser may have
opportunity to make such investigations as it shall desire in
conjunction with the transactions contemplated hereunder. During
such period, the Alexander Hamilton Parties shall permit Purchaser
and its representatives to consult with the respective directors,
officers, employees, auditors, actuaries, attorneys and agents of
the Company and the Acquired Subsidiaries and, to the extent
available, the Alexander Hamilton Parties will authorize and direct
their respective officers, accountants and actuaries to furnish
such additional financial and operating data and other information
(including financial statements and other information and consents
required in connection with any registration statement that may be
filed by Purchaser which is required to include financial
information concerning the Acquired Companies) as Purchaser shall
from time to time reasonably request.
SECTION 7.7. Consents
Seller, Parent and the Company will use their best
efforts to obtain all consents of, and provide all notices to,
other Persons required for Seller, Parent or the Company to
authorize, approve or permit the sale of the Shares and the Note
and the consummation of the transactions contemplated by this
Agreement and the Transaction Documents, if any such consents or
notices are required. Without limiting the generality of the
foregoing, Seller and the Company shall use their best efforts to
satisfy or cause to be satisfied all the conditions to the
obligations of Seller set forth in Sections 9.1 and 9.3.
SECTION Notification of Certain Matters
Seller, Parent and the Company shall give prompt notice
to Purchaser of (i) the occurrence, or failure to occur, of any
event which occurrence or failure would be likely to cause any
representation or warranty contained in this Agreement to be untrue
or inaccurate at any time from the date of this Agreement to the
Closing Date and (ii) any material failure of Seller or Parent to
comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder.
SECTION 7.9. Performance
(i) Seller and Parent shall perform all acts to be
performed by it prior to the Closing pursuant to this Agreement and
shall refrain from taking or omitting to take any action that would
violate Seller's or Parent's representations and warranties
hereunder in any material respect or render such representations
and warranties inaccurate in any material respect as of the date of
this Agreement or the Closing Date or that in any way would prevent
or impede the consummation of the transactions contemplated hereby.
(ii) *CONFIDENTIAL 6*
SECTION 7.10. Negotiations
From the date hereof to the termination of this Agreement
in accordance with Article X, neither Sellers, the Company, or any
Affiliate of such Persons shall take any action or authorize or
permit any of their officers, directors or employees or any
investment banker, attorney, accountant or other representative
retained by them to take any action (i) to solicit or encourage,
directly or indirectly (including by way of furnishing any
information), any inquiries or the making of any proposal which
could reasonably be expected to lead to any acquisition proposal
relating to the Company or any Acquired Subsidiary, (ii) to engage
in any negotiations with respect to an acquisition proposal, (iii)
to provide any non-public information concerning the Company or any
Acquired Subsidiary to any Person in connection with any
acquisition proposal or (iv) to reach any agreement or
understanding for any acquisition proposal. Sellers will promptly
advise Purchaser orally and in writing of any such inquiries or
proposals of which the Alexander Hamilton Parties become aware. As
used in this Agreement, "acquisition proposal" shall mean any
proposal for a merger, acquisition of all of the stock or assets
of, or other business combination involving the Company or any
Acquired Subsidiary or the acquisition of a substantial equity
interest in any of them, or a substantial portion of the assets of
any of them other than the transactions contemplated hereunder.
SECTION 7.11. Tax Basis
At or prior to the Closing, the Alexander Hamilton
Parties shall deliver to Purchaser a list setting forth as of the
last date on which such information is available (but not prior to
December 31, 1994) the adjusted basis of the depreciable or
amortizable assets of the Company and the Acquired Subsidiaries for
all Tax Returns for which such information is available and showing
the original tax cost of the assets and the tax depreciation or
amortization thereon.
SECTION 7.12. Computer Services and Software
(a) On or before the Closing Date, Parent, for itself
and on behalf of its Affiliates, shall enter into a computer
services agreement with the Company (the "Computer Services
Agreement") and shall cause the Information Technology Services
Agreement between the Company and an Affiliate of Parent to be
terminated without any cost or expense to the Acquired Companies.
The Computer Services Agreement shall obligate Parent and its
Affiliates to provide certain processing, software, network and
other computer services (as identified in the Computer Services
Agreement) to the Acquired Companies. In addition, the Computer
Services Agreement shall require the employees of Parent and any
Affiliate to provide reasonable assistance to the Purchaser to
ultimately integrate the Relicensed Software Rights and Owned
Software into Purchaser's operations in support of the Acquired
Companies as specified in the Computer Services Agreement. The
obligations of the Parties described in the foregoing sentence
shall have a term of 12 months from the Closing Date (subject to
earlier termination at the sole option of Purchaser upon 90 days
prior written notice, with the termination date of the Computer
Services Agreement being deemed the "Conversion Date"), and the
Computer Services Agreement will provide, as compensation
thereunder, that Parent will be entitled to receive from Purchaser
reimbursement for costs reasonably related to providing such
services.
(b) On or before the Closing Date, Parent shall obtain
all necessary consents or licenses required for Parent to perform
under the Computer Services Agreement and utilize the Business
Software Rights for the benefit of the Acquired Companies. All
fees and expenses for obtaining any licenses or consents required
for the use of the Business Software Rights for the benefit of the
Acquired Companies to the Conversion Date shall be paid by
*CONFIDENTIAL 7*. Parent is required to maintain such licenses for
the benefit of the Acquired Companies only as long as the Computer
Services Agreement is in effect.
(c) Prior to the Conversion Date, Parent and Purchaser
shall cooperate to obtain any license required for the Acquired
Companies to use the Relicensed Software Rights and Owned Software
after the Conversion Date. All one time license fees required to
be paid for the licenses as set forth herein shall be paid by
*CONFIDENTIAL 7*. The Company shall be responsible for all ongoing
annual fees after the Conversion Date.
SECTION 7.13. Business Transfer
Subject to receipt of appropriate regulatory approvals,
immediately prior to the Closing Date, Parent shall cause to be
effected (i) the transfer of the Affiliated Business Assets and the
reinsurance of the Affiliated Business Liabilities by the Retained
Subsidiaries on the terms described on Annex A, (ii) the transfer
of the COLI Business Assets and the reinsurance of the COLI
Business Liabilities by the Retained Subsidiaries on the terms
described in Annex B and (iii) the transfer of the PPA Business
Assets and the reinsurance of the PPA Business Liabilities by the
PPA Companies on the terms described in Annex C.
SECTION 7.14. Non-Solicitation
For a period of *CONFIDENTIAL 8* years following the
Closing Date, Sellers agree that, without the prior written consent
of Purchaser, neither of Sellers nor any of their Affiliates will
hire, or solicit to hire, any Producers, officers, directors or
other employees of the Company and the Acquired Subsidiaries;
provided that Sellers shall not be prohibited from hiring or
soliciting to hire (i) individuals who have provided their
resignations to Purchaser pursuant to Section 3.2(f),
(ii) individuals who were employed in the Affiliated Business, the
COLI Business or the PPA Business as of the Closing Date and were
not expressly retained by an Acquired Company after the Closing
Date, (iii) individuals whose employment is terminated by the
Company after the Closing Date and (iv) any clerical or other
individuals not comprising senior management who respond to any
general solicitation.
SECTION 7.15. *CONFIDENTIAL 9*
SECTION 7.16. Cross-Defaults
*CONFIDENTIAL 10*
SECTION 7.17. Payments on the Note; Other Dividends
(a) *CONFIDENTIAL 11*
(b) *CONFIDENTIAL 11*
SECTION 7.18. Name Change
Following the Closing Date, and in no event later than
one year following the Closing Date, Seller shall change the
corporate names of Alexander Hamilton Life Insurance Company of
Arizona, Alexander Hamilton Insurance Agency, Inc., Hamilton
National Life Insurance Company and Alexander Hamilton Insurance
Company of America, to one that does not include the words
"Alexander Hamilton" or "Hamilton" or any other words confusingly
similar thereto and will make all necessary filings to record such
name change.
SECTION 7.19. Delivery of Additional Financial Statements
At Purchaser's request, the Company will cooperate on a
timely
basis with Purchaser in the preparation of all financial statements
required to meet Purchaser's SEC reporting requirements and will be
reimbursed for any incremental direct costs, except those
associated with the statements contemplated in Section 5.9.
SECTION 7.20. Administrative Services
Purchaser and Sellers agree that on or prior to the
Closing Date they will enter into an agreement (the "Administrative
Services Agreement") on mutually acceptable terms for Purchaser to
provide administrative services for the PPA Business, the COLI
Business and the Affiliated Businesses, pursuant to which Purchaser
will be entitled to receive reimbursement for costs reasonably
related to providing such service.
ARTICLE VIII.
COVENANTS OF PURCHASER
Purchaser covenants and agrees that between the date of
this Agreement and the Closing Date:
SECTION 8.1. Performance
Purchaser shall perform all acts to be performed by it
prior to the Closing pursuant to this Agreement and shall refrain
from taking or omitting to take any action that would violate
Purchaser's representations and warranties hereunder in any
material respect or render such representations and warranties
inaccurate in any material respect as of the date of this Agreement
or the Closing Date or that in any way would prevent or impede the
consummation of the transactions contemplated hereby.
SECTION 8.2. Further Assurances
Subject to the terms and conditions of this Agreement,
Purchaser shall use all reasonable efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things
reasonably necessary, proper, or advisable under applicable laws
and regulations to consummate the transactions contemplated by this
Agreement and to make effective the sale of the Shares and the Note
pursuant to this Agreement.
SECTION 8.3. Consents and Notices
Purchaser shall use its best efforts to obtain all
consents of, and provide all notices to, other Persons reasonably
required for Purchaser to consummate the transactions contemplated
hereby and by the Transaction Documents, if any such consents or
notices are required. Without limiting the generality of the
foregoing, Purchaser shall use its best efforts to satisfy or cause
to be satisfied all the conditions to the obligations of Seller set
forth in Sections 9.1 and 9.2. Purchaser shall use its best
efforts to make within 45 days following the date hereof all
initial filings required to be made by it relating to its
acquisition of control of the Company and the Acquired
Subsidiaries, including all filings believed by it to be required
to be made with state insurance regulatory officials. Purchaser
shall respond promptly to each request for further information or
documentation from regulatory officials and shall provide, where
practicable, Seller with prior notice of, and shall seek to obtain
for Seller the opportunity to participate in, all material
telephone conferences and meetings with regulatory officials
concerning the transactions contemplated hereby. Purchaser shall
provide Seller with a copy of, and the opportunity to comment on,
all filings and material correspondence with regulatory officials
within one Business Day prior to its filing with and delivery to
such officials, and shall provide Seller with a copy of all
correspondence or notices from regulatory officials within one
Business Day following receipt by Purchaser.
SECTION 8.4. Employee Benefit Plans
(a) Effective as of the Closing Date (or such other
administratively convenient date mutually determined by Parent and
Purchaser), Purchaser shall amend one or more of its previously
adopted defined benefit plans or shall adopt (or shall cause the
Company to adopt) one or more defined benefit plans for the benefit
of employees and former employees of the Acquired Companies
(including their surviving spouses and other beneficiaries) who
immediately prior to the Closing Date were participants in the HI
RIP, other than employees of the Retained Subsidiaries and the PPA
Companies. For purposes of Sections 8.4, 8.5, 8.6 and 8.7 hereof,
"former employees" of the Acquired Companies shall be determined as
of the Closing Date and shall not include any employees of the
Retained Subsidiaries or the PPA Companies. Such individuals
covered by such plan or plans maintained by Purchaser (or by the
Company) hereunder shall be known as the "Covered Employees." Such
plan(s) shall be tax-qualified under Section 401(a) of the Code.
Effective as of the Closing Date (or such other administratively
convenient date determined by Parent and Purchaser), each Covered
Employee shall have an accrued benefit under the plan(s) maintained
by Purchaser (or by the Company) pursuant to this Section 8.4 that
is no less than the accrued benefit that he or she had under the HI
RIP as of the date immediately prior to the Closing Date. The term
"accrued benefit" for this purpose shall include any optional forms
of accrued benefits and other rights within the scope of
Section 411(d)(6) of the Code. Effective as of the date
immediately prior to the Closing Date, benefits on behalf of
Covered Employees shall cease to accrue under the HI RIP. The sum
of the assets properly allocated to the accrued benefits of each
Covered Employee *CONFIDENTIAL 12* in the HI RIP, shall be
transferred in conformity with the requirements of Section 414 of
the Code in cash, or in kind if such assets are satisfactory to
Purchaser, from the trust under the HI RIP to the separate account,
trust or other funding vehicle under Purchaser's (or the Company's)
Benefit Plan(s) on a date that is mutually agreeable to Parent and
Purchaser, which shall be no later than the last day of the 12th
month following the Closing Date and at least 30 days after filing
the appropriate notices with the IRS. The total amount of assets
to be transferred shall be a percentage of the total fair market
value of the assets held under the HI RIP as of the end of the
month preceding the month in which the transfer occurs, with the
percentage determined as follows. Parent shall cause to be made a
calculation of benefits on an *CONFIDENTIAL 13* basis as of
January 1, 1995 for the Covered Employees, based on the methodology
and assumptions used in Parent's actuarial report from Towers
Perrin dated March 1995. The total *CONFIDENTIAL 13* for the
HI RIP as of January 1, 1995 as presented in the Towers Perrin
report, and the *CONFIDENTIAL 13* for the Covered Employees as of
January 1, 1995, each shall be rolled forward to the Closing Date
to reflect the actual benefit payments, current pension cost
accruals and the *CONFIDENTIAL 13* assumed earnings rate through
such date. The percentage of assets transferred shall be the
percentage that the *CONFIDENTIAL 13* for Covered Employees
represents of the total *CONFIDENTIAL 13* for the HI RIP. Upon
such transfer, but subject to the obligation to reconcile errors,
neither Parent nor any Affiliate shall have any liability to the
Covered Employees for benefits accrued under the HI RIP prior to
the Closing Date and no further funding obligation in respect of
such benefits. Prior to the date of such transfer, Purchaser shall
furnish Parent the following, to the extent applicable: (i) at
Parent's request, copies of Purchaser's (or the Company's) benefit
plan(s) contemplated herein and the funding agreements thereunder,
together with any amendments thereof, (ii) copies of the most
recent determination letter(s) issued by the IRS with respect to
the qualification under Section 401(a) of the Code of Purchaser's
(or the Company's) plan(s) contemplated herein, (iii) copies of any
applications for determination with respect to such plan(s) and as
to which determination letters have not yet been received, (iv) if
no determination letter(s) have yet been received with respect to
the initial qualification of Purchaser's (or the Company's) plan(s)
contemplated herein, or if such plan(s) have been amended since the
date of the last determination letter(s), a letter from counsel to
Purchaser, satisfactory to Parent, that provides that the plan(s)
(or plan(s), as amended) are intended to satisfy the qualification
requirements of Section 401(a) of the Code and that Purchaser will
timely make (or cause the Company to make) such amendments as may
be required by the Internal Revenue Service to receive the
determination letter(s) and (v) evidence satisfactory to Parent
that Purchaser (or the Company's) plan(s) contain language
providing for the receipt of the transferred assets as provided
herein. The obligation to provide benefits that accrued prior to
the Closing Date in the case of any Covered Employee whose
employment was terminated prior to the date of the transfer of
assets contemplated herein shall remain that of the HI RIP until
such transfer of assets; provided, however, that any payments made
in the interim from the HI RIP shall be a credit to the total
amount of assets to be transferred as provided herein. The Parties
shall cooperate in giving any appropriate notices to employees and
former employees and to governmental agencies.
(b) Effective as of the Closing Date (or such other
administratively convenient date mutually determined by Parent and
Purchaser), Purchaser shall amend one or more of its previously
adopted profit sharing or stock bonus plans or shall adopt (or
shall cause the Company to adopt) one or more profit sharing or
stock bonus plans for the benefit of employees and former employees
of the Acquired Companies (including their surviving spouses and
other beneficiaries) who immediately prior to the Closing Date were
participants in the HI TRIP, other than employees of the Retained
Subsidiaries and the PPA Companies (and their surviving spouses and
other beneficiaries). Such individuals covered by such plan or
plans maintained by Purchaser (or by the Company) as contemplated
hereunder shall be known as the "TRIP Eligible Employees." Such
plan(s) shall (i) be tax-qualified under Section 401(a) of the
Code, (ii) contain a qualified cash or deferred arrangement under
Section 401(k) of the Code and (iii) preserve all optional forms of
benefits and other rights within the scope of Section 411(d)(6) of
the Code. On a date that is mutually agreeable to Parent and
Purchaser, which shall be no later than the last day of the 12th
month following the Closing Date, there shall be a transfer from
the HI TRIP to a trust, separate account or other funding vehicle
under such plan(s) contemplated herein and maintained by Purchaser
(or by the Company) (i) the obligation for benefit payments under
the HI TRIP to all TRIP Eligible Employees and (ii) an amount of
assets, in cash or in kind (if the assets are mutually agreeable to
Parent and Purchaser), equal to the aggregate account balances
under the HI TRIP of all TRIP Eligible Employees, determined as of
a valuation date not more than three Business Days prior to the
date of the transfer as determined by Parent. Prior to the date of
such transfer, Purchaser shall furnish Parent the following, to the
extent applicable, (i) at Parent's request, copies of the
Purchaser's (or the Company's) plan(s) contemplated herein and the
trust or other funding agreements thereunder, together with any
amendments thereof, (ii) copies of the most recent determination
letter(s) issued by the IRS with respect to the qualification under
Section 401(a) of the Code of Purchaser's (or the Company's)
plan(s) contemplated herein, (iii) copies of any applications for
determination with respect to such plan(s) and as to which
determination letters have not yet been received, (iv) if no
determination letter(s) have yet been received with respect to the
initial qualification of Purchaser's (or the Company's) plan(s)
contemplated herein, or if such plan(s) have been amended since the
date of the last determination letter(s), a letter from counsel to
Purchaser, satisfactory to Parent, that provides that the plan(s)
(or plan(s), as amended) are intended to satisfy the qualification
requirements of Section 401(a) of the Code and that Purchaser will
timely make (or cause the Company to make) such amendments as may
be required by the Internal Revenue Service to receive the
determination letter(s) and (v) evidence satisfactory to Parent
that Purchaser's (or the Company's) plan(s) contain language
providing for the receipt of the transferred assets as provided
herein. Prior to the transfers described herein, Parent shall
continue to administer the account balances of the TRIP Eligible
Employees in such manner as Parent, in its sole discretion, shall
determine, and *CONFIDENTIAL 14*. At Parent's request, Purchaser
(or the Company) shall make payroll withholding arrangements to
ensure that TRIP Eligible Employees' loans from HI TRIP are timely
repaid.
(c) *CONFIDENTIAL 15*
(d) Except as otherwise provided in this Article VIII,
Purchaser makes no representations, warranties or covenants with
respect to any compensation or benefits to be offered or provided
to employees or former employees of any Acquired Company after the
Closing Date.
SECTION 8.5. Excess Benefit Plan
(a) Parent shall provide Purchaser with a list of each
employee or former employee of any Acquired Company other than
employees of the Retained Subsidiaries and the PPA Companies who is
covered under the Household International Supplemental Retirement
Income Plan and the benefit accrued under such plan through the
Closing Date by each such person. Purchaser shall amend its
previously adopted excess defined benefit plan or shall adopt (or
cause the Company to adopt) an excess defined benefit plan to cover
such employees and former employees, and each such person's accrued
benefit under Purchaser's (or the Company's) plan shall not be less
than such person's benefit accrued through the Closing Date as
shown on such list. As soon as practicable following the Closing
Date, and based on the assumptions used in Parent's actuarial
report from Towers Perrin dated March 1995, Parent shall transfer
cash or assets acceptable to Purchaser equal to the present value
of such accrued benefits plus interest (at the rate of 7.75% per
annum), less any benefit payments made in the interim to the date
of transfer. The obligation to provide such benefits prior to the
Closing Date in the case of any employee whose employment is
terminated prior to the date of the transfer of assets contemplated
herein shall remain that of Parent until such transfer of assets.
(b) Parent shall provide Purchaser with a list of each
employee or former employee of any Acquired Company other than
employees of the Retained Subsidiaries and the PPA Companies who is
covered under the Household International Supplemental Tax
Reduction Investment Plan and the account balances under such plan
through the Closing Date for each such person. Purchaser shall
amend its previously adopted excess defined contribution plan or
shall adopt (or cause the Company to adopt) an excess defined
contribution plan to cover such employees and former employees, and
each such person's opening account balance under Purchaser's (or
the Company's) plan shall not be less than such person's account
balance through the Closing Date as shown on such list. As soon as
practicable following the Closing Date, Parent shall transfer cash
or assets acceptable to Purchaser equal to the account balance of
each such person at the Closing Date plus reasonable interest to
the date of transfer. The obligation to provide benefits in the
case of any employee whose employment is terminated prior to the
date of the transfer of assets contemplated herein shall remain
that of Parent until such transfer of assets.
SECTION 8.6. Employee Welfare Benefit Plans
(a) Definitions. In addition to terms defined elsewhere
in this Agreement, the following terms shall have the following
meanings for purposes of this Section 8.6:
(i) "COBRA" shall mean the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended.
(ii) "Former Employees" shall mean the individuals
who have terminated (or terminate) employment with the
Acquired Companies other than employees of the Retained
Subsidiaries and the PPA Companies prior to and including
the Closing Date, and who have made a prior election, are
eligible to elect, or will be eligible to elect
continuation coverage under COBRA in the future.
(iii) "Present Employees" shall mean the
individuals who are employed by the Acquired Companies
other than employees of the Retained Subsidiaries and the
PPA Companies as of the Closing Date.
(iv) "Retirees" shall mean all individuals who have
retired in the past or who elect retirement prior to or
as of the Closing Date from the employ of the Acquired
Companies (including any individuals who retired from any
predecessors to the Acquired Companies) and are eligible
for and/or enrolled for post-retirement benefits under
one or more of Parent's welfare plans listed in
Exhibit 5.17.
(v) "Welfare Plan" shall mean an employee welfare
benefit plan as described in Section 3(1) of ERISA.
(b) Cessation of Participation in Parent's Welfare Plans
(i) Effective on the Closing Date, Company shall
cease participation in any Welfare Plan sponsored by
Parent, including, but not limited to, all fully insured
Welfare Plans (including Health Maintenance Organization
and Dental Maintenance Organization contracts), all self-
insured coverages and the Parent's Internal Revenue Code
Section 125 Plan and any Health or Dependent Care
Spending Accounts thereunder. Purchaser (or the Company)
shall give written notice to all of the Company's
Welfare Plan participants, including Former Employees,
Present Employees and Retirees that the Company has
assumed full responsibility for all Welfare Plan benefits
in accordance with clause (ii) below.
(ii) Effective on the Closing Date, Purchaser (or
the Company) shall assume full responsibility for all
Welfare Plan coverages as follows. All Present
Employees, Retirees and Former Employees shall be
eligible for immediate coverage under Purchaser's (or the
Company's) Welfare Plans, with waiver of any pre-existing
conditions and including coverage required under COBRA,
and neither Parent, nor any member of Parent's controlled
group shall thereupon be responsible, or liable, for
coverage (including any past, present or future coverage
required under COBRA) of such individuals.
(iii) With respect to Retiree Welfare Plan
coverages currently provided under Parent's Welfare
Plans, the Company shall establish Retiree Health Plans
covering all Retirees as defined under this Section 8.6,
and shall assume all liability for the Retiree Welfare
Plan coverages as of such date. The Parties acknowledge
that nothing in this clause (iii) is intended to limit
Purchaser's or the Company's ability to amend such
Retiree Health Plans on or after the Closing Date.
(c) Transitional Matters
(i) Liabilities under the Welfare Plans for claims
incurred prior to the Closing Date shall remain with
Parent under its Welfare Plans.
(ii) Parent and Purchaser shall mutually agree upon
the method of handling the transitional issues related to
cafeteria plans including the transfer of any Health or
Dependent Care Spending Account credits.
SECTION 8.7. Benefits Transition
On and after the Closing Date, neither Parent nor Seller shall
have any liability with respect to any plans or benefits listed in
Exhibit 5.17 as they apply to employees or former employees of the
Acquired Companies, and the Company assumes all liability therefor;
provided, however that (a) the Company shall not assume any
liability for accruals to the Closing Date for the HI RIP, the HI
TRIP and the excess plans until such time, if any, that the
respective plan assets (and amounts described in Section 8.5(a) and
(b)) are transferred, (b) liabilities under welfare benefit plans
for claims and other events that occur prior to the Closing Date
shall remain with Parent under its plans and (c) for stock options
and other plans or programs over which the Acquired Companies do
not have control, Parent shall remain obligated and no liability
therefor will be assumed by any Acquired Company.
ARTICLE IX.
CONDITIONS TO CLOSING
SECTION 9.1. Conditions to Each Party's Obligations
The respective obligations of each Party to effect the
transactions contemplated hereby shall be subject to the following
conditions:
(a) Absence of Restraints. At the Closing Date, there
shall be no litigation, claim, action, governmental or other
proceeding, investigation, inquiry, or review, pending or
threatened, to restrain, prohibit, invalidate, or set aside in
whole or in part the consummation of this Agreement or the
transactions contemplated hereby or to obtain substantial damages
in connection therewith. There shall be in effect no judgment,
injunction, order, writ, decree, or ruling of any court, government
or governmental authority of competent jurisdiction restraining or
prohibiting in whole or in part the transactions contemplated
hereby.
(b) Consents. All consents, approvals, waivers, and
actions of governmental authorities and others necessary to permit
the Parties to consummate the transactions contemplated hereunder
shall have been obtained or waived.
(c) Ancillary Agreements. The Parties shall have
entered into such other agreements as contemplated by this
Agreement, including but not limited to the Transaction Documents.
SECTION 9.2. Conditions to Sellers' Obligations
The obligations of Sellers to consummate the transactions
contemplated by this Agreement are subject to the satisfaction, at
or prior to the Closing Date, of each of the following conditions
(any or all of which may be waived by Sellers):
(a) Compliance with Covenants. Purchaser shall have
performed and complied in all material respects with the terms,
covenants and conditions required by this Agreement to be performed
or complied with by it on or before the Closing Date.
(b) Representations and Warranties True and Correct.
The representations and warranties of Purchaser contained in this
Agreement shall be true and correct in all material respects as of
the Closing Date with the same force and effect as though such
representations and warranties had been made as of the Closing
Date, and Sellers shall have received as of the Closing Date a
certificate of an authorized officer of Purchaser, dated as of the
Closing Date, to such effect.
(c) Opinion of Counsel. Seller shall have received from
John D. Hopkins, General Counsel of Purchaser, an opinion dated the
Closing Date, in a form satisfactory to Seller, to the effect that:
(i) Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of
North Carolina, and Purchaser has the corporate power and
authority to own its properties and conduct its business
as currently conducted.
(ii) All corporate proceedings required on the part
of Purchaser to authorize the execution, delivery and
performance of the Agreement, the purchase of the Shares
and the Note hereunder by Purchaser and other obligations
contemplated hereunder have been duly completed.
(iii) This Agreement has been and the other
agreements to be executed by Purchaser on the Closing
Date as contemplated by this Agreement will be, duly
executed and delivered by Purchaser and are valid and
binding upon, and enforceable against, Purchaser in
accordance with their terms, subject, as to the
enforceability of remedies, to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws
of general applicability relating to or affecting
creditors' rights and to general principles of equity.
(iv) All consents and approvals from any
governmental or regulatory authority that are required
for Purchaser to consummate the transactions contemplated
by this Agreement have been received and obtained.
(d) No Litigation. There shall not be pending or, to
the knowledge of any executive officer of Purchaser, threatened,
any claim, suit, action or other proceeding by any governmental
agency before any court or governmental agency, seeking to prohibit
or restrain the transactions contemplated by the Agreement or
seeking material damages in connection therewith. The waiting
period required by the HSR Act shall have expired or the Parties
shall have been granted early termination. All approvals appearing
on Exhibit 6.4 shall have been obtained.
(e) Corporate Actions. All corporate and other acts
necessary to authorize Purchaser's execution, delivery, and
performance of this Agreement and the Transaction Documents and the
consummation of the transactions contemplated hereunder and
thereunder shall have been taken by Purchaser.
(f) Corporate Documents. At the Closing, Purchaser
shall have delivered to Sellers:
(i) a certificate of its jurisdiction of
incorporation dated not earlier than the 10th day
preceding the Closing Date, to the effect that Purchaser
is a corporation validly existing and in good standing
(if applicable) under the laws of such place of
jurisdiction as of such date;
(ii) certificates of the Secretary or Assistant
Secretary of Purchaser attaching (A) duly enacted
resolutions of Purchaser's board of directors with
respect to the approval of this Agreement and the
Transaction Documents and any other agreements executed
and delivered among the Parties hereby and thereby and
the performance and consummation hereby and thereby and
the authorization of the officers of Purchaser to sign
this Agreement, which resolutions shall continue to be in
force as of the Closing Date, and (B) specimen signatures
of the officers of Purchaser authorized to sign this
Agreement and the Transaction Documents;
(iii) a copy, certified as true by the Secretary
or Assistant Secretary of Purchaser, of the
organizational documents of Purchaser; and
(iv) all other documents, instruments, and writings
required to be delivered by Purchaser pursuant to this
Agreement.
SECTION 9.3. Conditions to Purchaser's Obligations
The obligations of Purchaser to consummate the
transactions contemplated by this Agreement are subject to the
satisfaction on or prior to the Closing Date of each of the
following conditions (any or all of which may be waived by
Purchaser):
(a) Compliance with Covenants. Parent, Seller and the
Company shall have performed and complied in all material respects
with the terms, covenants and conditions required by this Agreement
to be performed or complied with by them on or before the Closing
Date.
(b) Representations and Warranties True and Correct.
The representations and warranties of Parent and Seller contained
in this Agreement shall be true and correct in all material
respects as of the Closing Date with the same force and effect as
though such representations and warranties had been made as of the
Closing Date, and Purchaser shall have received a certificate,
dated as of the Closing Date, executed by an authorized officer of
each such Party, to such effect.
(c) Opinion of Counsel. Purchaser shall have received
from John W. Blenke, counsel to Parent and Seller, an opinion dated
the Closing Date in a form satisfactory to Purchaser to the effect
that:
(i) Each of Seller and Parent is a corporation
duly organized, validly existing and in good
standing under the law of the State of
Delaware, and all corporate proceedings
required on the part of Seller and Parent to
authorize the execution, delivery and
performance of the Agreement and the
Transaction Documents and the sale of Shares
and the Note hereunder have been duly
completed.
(ii) The Company is a corporation duly
incorporated, validly existing and in good
standing under the laws of the State of
Michigan, with full corporate power and
authority to own, operate and lease its
properties and to carry on its business as
presently being conducted. The Company is
duly qualified to do business as a foreign
corporation and is in good standing, if
applicable, in each jurisdiction where the
failure to be so qualified, if qualification
is required, would have a Material Adverse
Effect. Each of the Company and First
Alexander Hamilton Life Insurance Company is
duly qualified to do business as a stock life
insurance company and is in good standing, if
applicable, as an insurance corporation in the
jurisdictions listed in Exhibit 5.1(b). All
corporate proceedings required on the part of
the Company to authorize the execution,
delivery and performance of the Agreement have
been duly completed.
(iii) The Agreement and the Transaction
Documents have been duly executed and
delivered by Parent and Seller and are
valid and binding upon, and enforceable
against, each of them in accordance with
their terms, subject, as to the
enforceability of remedies, to applicable
bankruptcy, insolvency, reorganization,
moratorium and similar laws of general
applicability relating to or affecting
creditors' rights and to general
principles of equity.
(iv) The authorized capital stock of the Company
consists solely of 500,000 shares of common
stock, par value $10.00 per share, of which
375,000 shares issued and outstanding. The
Company has no other shares of capital stock
of any class or other equity securities
authorized, issued or outstanding, and there
are no outstanding or authorized options,
warrants, calls, subscriptions, rights,
agreements or commitments of any character
obligating the Company to issue any shares of
its capital stock or securities convertible
into or exchangeable for or evidencing the
right to purchase or subscribe for any shares
of capital stock of the Company. The Shares
have been validly issued, fully paid and are
nonassessable and free of preemptive rights.
(v) Seller is the beneficial and legal registered
owner of the Shares and Parent is the legal
registered owner of the Note. Upon
consummation of the transactions contemplated
by the Agreement and the Transaction
Documents, Purchaser will acquire good and
valid title to the Shares and Note, in each
case free and clear of all Encumbrances.
(vi) The Company is the registered owner of all
outstanding shares of the capital stock of
each of the Acquired Subsidiaries, and each of
the Acquired Subsidiaries is a corporation
(A) duly incorporated, validly existing and in
good standing, if applicable, under the laws
of the jurisdiction of its incorporation, with
full corporate power and authority to own,
operate and lease its properties and carry on
its business as presently being conducted and
(B) duly qualified to do business as a foreign
or domestic corporation and in good standing,
if applicable, in all jurisdictions in which
failure to be so qualified, if qualification
is required, would have a Material Adverse
Effect.
(d) Corporate Actions. All corporate and other acts
necessary to authorize the execution, delivery, and performance of
this Agreement and the Transaction Documents and the consummation
of the transactions contemplated hereunder and thereunder shall
have been taken by the Alexander Hamilton Parties.
(e) Shares and Note. Seller and Parent shall have
delivered to Purchaser certificates representing the Shares and the
original Note, respectively, endorsed for transfer to Purchaser or
accompanied by an assignment duly executed.
(f) Corporate Documents. At the Closing, Sellers shall
have delivered to Purchaser:
(i) a certificate of its jurisdiction of
incorporation dated not earlier than the date of the 10th
day preceding the Closing Date for each of Sellers and
the Acquired Subsidiaries, to the effect that such
corporation is a corporation validly existing and in good
standing (if applicable) under the laws of such place of
jurisdiction as of such date;
(ii) certificates of the secretary or assistant
secretary of each of the Alexander Hamilton Parties
attaching (A) duly enacted resolutions of its board of
directors with respect to the approval of this Agreement
and the Transaction Documents and any other agreements
executed and delivered among the Parties hereby and
thereby and the performance and consummation hereby and
thereby and the authorization of the officers of such
Person to sign this Agreement, which resolutions shall
continue to be in force as of the Closing Date and
(B) specimen signatures of the officers of such Person
authorized to sign this Agreement and the Transaction
Documents;
(iii) a copy, certified as true by the secretary
or assistant secretary of each of Sellers and the
Acquired Companies, of the articles of incorporation and
the by-laws of such Person; and
(iv) all other agreements (including the Transaction
Documents), documents, instruments and writings required
to be delivered by Sellers or the Company pursuant to
this Agreement.
ARTICLE X.
TERMINATION
SECTION 10.1. Termination
This Agreement (except for the provisions of
Section 5.23, 6.8, 13.3, and 13.5 which will continue in effect)
may be terminated and the transactions contemplated hereunder
abandoned:
(a) At any time prior to the Closing Date by the mutual
written agreement of Sellers and Purchaser;
(b) By Sellers:
(i) if the Closing is not consummated on or before
December 31, 1995, unless the failure of such occurrence
shall be due to the intentional failure of any of the
Alexander Hamilton Parties to perform or observe the
covenants, agreements and conditions hereof to be
performed or observed by such entity at or before the
Closing Date;
(ii) if events occur which render impossible
compliance with one or more of the conditions set forth
in Sections 9.1 and 9.2 hereof and such conditions are
not waived by Parent; provided that such events did not
result from any action or omission by any Alexander
Hamilton Parties which was within the control of such
entity and which such entity was not expressly permitted
to take or omit by the terms of this Agreement; or
(iii) if any Alexander Hamilton Party is
enjoined by any administrative agency, commission or
court and such injunction prevents the performance by the
Alexander Hamilton Parties of their obligations hereunder
and such injunction shall not have been withdrawn by the
earlier to occur of the date which is 60 days after the
date on which such injunction was first issued or
December 31, 1995.
(c) By Purchaser:
(i) if the Closing is not consummated on or before
December 31, 1995, unless the failure of such occurrence
shall be due to the intentional failure of Purchaser to
perform or observe the covenants, agreements and
conditions hereof to be performed or observed by it at or
before the Closing Date;
(ii) if events occur which render impossible
compliance with one or more of the conditions set forth
in Sections 9.1 and 9.3 hereof and such conditions are
not waived by Purchaser; provided that such events did
not result from any action or omission by Purchaser which
was within its control and which Purchaser was not
expressly permitted to take or omit by the terms of this
Agreement; or
(iii) if Purchaser is enjoined by any
administrative agency, commission or court and such
injunction prevents the performance by Purchaser of its
obligations hereunder and such injunction shall not have
been withdrawn by the earlier to occur of the date 60
days after the date on which such injunction was first
issued or December 31, 1995.
ARTICLE XI.
SURVIVAL AND INDEMNIFICATION
SECTION 11.1. Survival
The representations and warranties made herein or in any
Transaction Document or other documentation delivered hereby or
thereby shall survive the Closing Date for *CONFIDENTIAL 16*;
provided, however that (i) the representations and warranties of
Sellers in Sections 5.3, 5.5, 5.6 and 5.7, (ii) the representations
and warranties of Sellers in Section 5.31 (but only to the extent
that the representations and warranties in Section 5.31 relate to
Investments or property interests that were not owned, leased or
operated by any of the Acquired Companies at any time after the
Closing); and (iii) all covenants, agreements and indemnification
matters, other than as otherwise provided in Section 11.2(a)(i),
(iii) or (iv), shall survive *CONFIDENTIAL 16*; provided, further,
that the representations, warranties, agreements, covenants and
indemnification matters of Article XII shall survive *CONFIDENTIAL
16*.
SECTION 11.2. Sellers' Indemnification
(a) Except with respect to Taxes (which are provided for
in Article XII exclusively), Sellers jointly and severally shall
indemnify and hold harmless Purchaser, its Affiliates, officers,
directors, employees, agents, successors, and assigns and related
entities from and reimburse them for any loss, cost, expense,
damage (including damages to Persons, property or the environment),
liability, fines, penalties or claim (including all Legal Fees,
engineering and other consultant fees and expenses and collectively
the "Indemnified Costs") relating to, arising out of, based upon,
or resulting from:
(i) (A) Any inaccuracy in any representation or
warranty made by Parent or Seller in this Agreement or
the Transaction Documents for which indemnification is
claimed hereunder within the applicable survival period;
and
(B) The Company's or any of its subsidiaries,
violation of, or liabilities under, any Environmental
Laws, irrespective of whether known as of the Closing
Date; provided that, if a claim for indemnification under
this subclause (B) relates to an Investment or other
property interest that was owned, leased or operated by
any of the Acquired Companies at any time after the
Closing, such claim for indemnification shall be valid
only if made within *CONFIDENTIAL 16* following the
Closing Date;
provided, that Sellers shall not have any liability for
such indemnification pursuant to *CONFIDENTIAL 17*, in
which case Sellers' liability shall be only for such
excess and, provided, further, that such limitation shall
not apply to the breach of any representation or warranty
contained in Sections 5.3, 5.5, 5.6 or 5.7 or
Article XII;
(ii) Seller's, Parent's or the Company's breach of
or failure to perform any of its covenants or agreements
contained in or made pursuant to this Agreement or the
Transaction Documents;
(iii) *CONFIDENTIAL 17*;
(iv) *CONFIDENTIAL 17*;
(v) *CONFIDENTIAL 17*;
(vi) *CONFIDENTIAL 17*; and
(vii) Any Indemnified Liability.
(b) *CONFIDENTIAL 17*:
(i) to the extent and in the amount of any
nonutilized provision or reserve in respect of the
matter, action, or proceeding giving rise to any such
liability specifically made by the Company or the
Acquired Subsidiaries and such reserve is reflected on
the Closing Date Statutory Statements as agreed by the
Parties in accordance with Section 2.3;
(ii) to the extent such liability arises from some
act or omission of Purchaser at any time or of the
Company after the Closing Date; and
(iii) to the extent that Purchaser, the Company,
or any Affiliate thereof obtains a Tax Benefit.
(c) (i) *CONFIDENTIAL 17*
(ii) *CONFIDENTIAL 17*
(d) Notwithstanding anything else contained in this
Section 11.2, with respect to any breach of a representation or
warranty in Article V hereof, no claims for *CONFIDENTIAL 17*
shall be permitted unless a trier of fact or arbitrator determines
that an executive officer of the Alexander Hamilton Parties knew
that the information on which such a claim is based was inaccurate
or unless the issue is one of ownership of any of the Acquired
Companies. Under no circumstances shall an award include punitive
or exemplary damages.
SECTION 11.3. Purchaser's Indemnification
(a) Except for Taxes (which are provided for in
Article XII exclusively), Purchaser shall indemnify and hold
Seller, Parent, its Affiliates, officers, directors, employees,
agents, successors, and assigns, and related entities from, and
reimburse them for, Indemnified Costs relating to, arising out of,
based upon, or resulting from
(i) Any inaccuracy in any representation or
warranty made by Purchaser in this Agreement; provided
that Purchaser shall not have any liability for such
indemnification pursuant to this clause (i) unless the
aggregate of all Indemnified Costs under this clause (i)
for which Purchaser would, but for this proviso, be
liable exceeds on a cumulative basis *CONFIDENTIAL 17*,
in which case Purchaser's liability shall be only for
such excess and, provided, further, that such limitation
shall not apply to the breach of any representation or
warranty contained in Section 6.2;
(ii) Purchaser's breach of or failure to perform any
of its covenants or agreements contained in or made
pursuant to this Agreement or the Transaction Documents
after the Closing Date; and
(iii) The operation of the Individual Business
after the Closing Date.
(b) Notwithstanding the foregoing, Purchaser shall not
have any liability to the extent that Parent, Seller or any
Affiliate thereof obtains a Tax Benefit.
SECTION 11.4. Indemnification Procedure
(a) Except for Taxes (which are provided for in
Article XII exclusively), any Person claiming indemnification
pursuant to this Agreement shall promptly notify the indemnifying
Party in writing of the occurrence of any event that such Person
asserts is or may be an indemnifiable event pursuant to this
Agreement. If such event involves the claim of any third party and
the indemnifying Party confirms in writing its responsibility for
such liability, if established, the indemnifying Party shall be
entitled to participate in and, to the extent it shall wish, assume
control over (in which case the indemnifying Party shall assume all
expense with respect to) the defense, settlement, adjustment or
compromise of such claim.
(b) The indemnified Person shall have the right to
employ separate counsel in any action or claim and to participate
in the defense thereof at the expense of the indemnifying Party
(i) if the retention of such counsel has been specifically
authorized by the indemnifying Party, or (ii) if the counsel is
retained because the indemnifying Party does not notify the
indemnified Person within 20 days after receipt of a claim notice
that it elects to undertake the defense thereof. The indemnified
Person shall have the right to employ counsel at the indemnified
Party's own expense and participate in such action or claim,
including settlement or trial.
(c) The indemnifying Party shall obtain the prior
written approval of the indemnified Person before entering into any
settlement, adjustment, or compromise of such claim or ceasing to
defend against such claim that provides for any relief other than
the payment of monetary damages or which would have a materially
adverse effect on the indemnified Person or its business or
operations.
(d) If the indemnifying Party does not assume control
over the defense of such claim as provided in Section 11.4(a)
within 30 days of receipt of notice thereof, the indemnified Person
shall have the right to defend the claim in such manner as it may
deem appropriate at the cost and expense of the indemnifying Party
to settle, adjust, or compromise such claim.
(e) The indemnifying Party shall remit payment for the
amount of a valid and substantiated claim for indemnification
hereunder promptly upon receipt of a claim notice therefor. Upon
the payment in full of any claim hereunder, the indemnifying Party
shall be subrogated to the rights of the indemnified Person against
any person with respect to the subject matter of such claim.
(f) In the event that the indemnifying Party reimburses
the indemnified Person for any third party claim, the indemnified
Person shall remit to the indemnifying Party any reimbursement that
the indemnified Person subsequently receives for such third party
claim.
(g) Any matter as to which a claim has been asserted by
written notice (describing in reasonable details the facts, events
and circumstances relating to the subject matter of such claim and
the amount (if reasonably calculable) of the Indemnified Costs in
connection therewith) to the indemnifying Party that is pending or
unresolved at the end of any applicable survival period shall
continue, to the extent permitted by law, to be covered by this
Article XI notwithstanding any applicable statute of limitations
(which the Parties hereby waive) or the expiration of such survival
period until such matter is finally terminated or otherwise
resolved by the Parties under this Agreement or by a court of
competent jurisdiction and any amounts payable hereunder are
finally determined and paid.
ARTICLE XII.
TAX MATTERS
SECTION 12.1. Tax Sharing Agreements
(a) On the Closing Date, any Tax sharing agreements and
arrangements between one or more of the Acquired Companies, on the
one hand, and Seller and any of its Affiliates, on the other hand,
shall be terminated, and no additional payments shall be made, or
be due to be made, by any party thereunder, and this Article XII
shall exclusively control any Tax-related issues between Seller,
Parent, and Purchaser or involving any of the Acquired Companies.
(b) Notwithstanding any other provisions of this
Agreement to the contrary, Seller shall be permitted, at the
Seller's sole discretion, to make a "deemed dividend election" with
respect to the Acquired Companies.
SECTION 12.2. Representations, Warranties, Agreements, and
Covenants of Seller with Regard to Certain Tax Matters
(a) With the exception of Canadian income tax returns
for the years 1991 through 1994, all Tax Returns required to be
filed by or with respect to the Company and each Acquired
Subsidiary for taxable periods ending on or prior to the Closing
Date have been timely filed by them, or will be, and, with respect
to the Company and the Acquired Subsidiaries, all such Tax Returns
are or will be true and complete in all material respects. Complete
and accurate copies of all federal and Canadian Tax Returns filed
within the past three years have been furnished or made available
to Purchaser. Complete and accurate copies of all other Tax
Returns filed within the past three years have been made available
to Purchaser. All Taxes reported on such Tax Returns have been
paid when due or otherwise payable. To the extent that any of the
Taxes are not yet due and payable, the Company and each Acquired
Subsidiary have accrued or otherwise adequately reserved for such
Taxes on the Financial Statements in accordance with GAAP and
Statutory Accounting Principles.
(b) The Company and each Acquired Subsidiary is a member
of the affiliated group (as defined in Section 1504 of the Code) of
which Parent is the common parent. Parent has included or will
include the Company and the Acquired Subsidiaries in its
consolidated federal income Tax Returns for all taxable years that
begin, on or after January 1, 1992, and end on or before the
Closing Date, and, to the extent required by law, Parent, Seller or
the Company has included the Company and the Acquired Subsidiaries
in their consolidated, combined or unitary Tax Returns relating to
state income Taxes. The Seller and Parent shall be solely
responsible for all Taxes related to the transfers to the PPA
Companies and the Retained Subsidiaries, and the sale of the
building pursuant to Section 7.15 hereof.
(c) Neither the Company nor any Acquired Subsidiary has
received written notice from any governmental agency in a
jurisdiction in which such entity does not file a Tax Return
stating that such entity is subject to taxation by that
jurisdiction. Except as set forth on Schedule 12.2(c), neither the
Company nor any Acquired Subsidiary is required to file any Tax
Return in any jurisdiction outside the United States.
(d) Except as set forth in Exhibit 12.2(d), no Tax
Return of the Company or any Acquired Subsidiary is currently being
audited by any Taxing authority, and no Potential Tax Liability has
been threatened by any Taxing authority. Except as set forth in
Exhibit 12.2(d), there is no agreement, waiver, or other document
extending, or having the effect of extending, the period for
assessment or collection of any Taxes of the Company or any
Acquired Subsidiary, which extension or waiver is still in effect.
Sellers have delivered or made available to Purchaser correct and
complete copies of all examination reports, statements of
deficiencies and similar documents prepared by the IRS or any other
taxing authority that relate to the income, operations or business
of the Company or any Acquired Subsidiary with respect to any
period ending on or after December 31, 1985. All final adjustments
made by the IRS with respect to any federal Tax Return of the
Company or any Acquired Subsidiary have been reported to the
relevant state, local, or foreign taxing authorities to the extent
required by law. The Financial Statements of the Company or any
Acquired Subsidiary have accrued or adequately reserved for all
Taxes assessed, asserted or claimed to be due (including any Taxes
for subsequent tax years resulting from the carryover of audit
adjustments from any prior year's tax returns).
(e) Except as set forth on Exhibit 12.2(e), no requests
for ruling or determination letters filed by any of the Alexander
Hamilton Parties with respect to the income, operations or business
of the Company or any Acquired Subsidiary are pending with any
taxing authority.
(f) Neither the Company nor any Acquired Subsidiary has
filed a consent pursuant to Section 341(f) of the Code, or agreed
to have Section 341(f)(2) of the Code apply to any disposition of
a subsection (f) asset (as such term is defined in
Section 341(f)(4) of the Code) owned by it. No property of the
Company or any Acquired Subsidiary is property that such a
corporation is or will be required to treat as being owned by
another Person pursuant to the provisions of Section 168(f)(8) of
the Internal Revenue Code of 1954, as amended, and in effect
immediately prior to the enactment of the Tax Reform Act of 1986,
or is "tax exempt use property" within the meaning of
Section 168(h)(1) of the Code. Except as set forth in
Exhibit 12.2(f), neither the Company nor any Acquired Subsidiary
has agreed to or is required to make any adjustment pursuant to
Section 481(a) of the Code by reason of a change in the accounting
method initiated by any of the Alexander Hamilton Parties that is
currently in effect. Except as set forth in Exhibit 12.2(f),
neither Parent, Seller, the Company, nor any Acquired Subsidiary
(x) has, for periods ending on or after January 1, 1992, been a
member of an affiliated group filing a consolidated federal income
tax return, other than the affiliated group the common parent of
which is Parent, or (y) has any liability for Taxes of any Person
(other than Parent, Seller, the Company and their Subsidiaries)
under Treasury Regulation Sec. 1.1502-6 or any similar provision of
state, local or foreign law, or as a transferee or successor, by
contract, or otherwise.
(g) The Company and each Acquired Subsidiary are not in
violation of any material applicable tax information reporting and
tax withholding obligations (or with notice or lapse of time, or
both, would be in violation). Except as disclosed on Exhibit 12.2
(g), the Company and the Acquired Subsidiaries have timely withheld
from, and paid over to the appropriate taxing authorities, and have
properly reported all employee salaries, wages and other
compensation. Each life insurance and annuity product issued, sold
or administered by, or on behalf of, the Company or any Acquired
Subsidiary has been, and is, in compliance in all material respects
with Sections 72 and 264 of the Code. The representations made in
this paragraph shall only refer to those obligations arising from
insurance policies not otherwise subject to an agreed upon
indemnity between Seller and Company.
(h) Subject to Purchaser's cooperation as set forth in
Section 12.4, Parent shall prepare and file in a timely manner the
federal Tax Returns, and any other Tax Returns for Parent's
consolidated return group required to be filed by or with respect
to the Company and each Acquired Subsidiary for taxable periods
ending on or before the Closing Date. Parent shall pay all Taxes
due with respect to such Tax Returns, regardless of when such Taxes
are determined to be due, except that Purchaser shall reimburse
Seller to the extent such Taxes are provided for in the Closing
Date Statutory Statements. If Seller requests within thirty days
after Closing, each Acquired Company shall prepare for filing by
Seller (at Seller's expense) any Tax Returns relating to the
business or assets of the Acquired Company required to be filed
after the Closing Date for any period ending on or before the
Closing Date The Tax Returns referred to in this Section 12.2(h)
shall, to the extent permitted by applicable Tax law, be prepared
on a basis consistent with the last previous such Return filed for,
or with respect to, the respective Acquired Company.
Notwithstanding anything to the contrary in this Agreement,
Purchaser shall pay any sales Taxes, transfer Taxes, registration
fees, stamp Taxes and other similar Taxes imposed on the sale and
purchase of the Shares.
(i) Seller agrees to provide Purchaser complete copies
of all Tax Returns filed by Seller after the Closing Date for or
with respect to each Acquired Company, no later than 30 Business
Days after such Returns have been timely filed with the applicable
taxing authorities, taking into account all valid extensions of
time to file such Returns.
(j) Purchaser shall prepare and file in a timely manner
all Tax Returns, other than the Tax Returns provided for in
paragraph (h) above, that are required to be filed by or with
respect to the Company and each Acquired Subsidiary for Straddle
Periods. Seller shall be obligated for the portion of the Taxes
properly allocable to the time period from the start of the
Straddle Period through the Closing Date, as determined in
accordance with the provisions of Section 12.5. Except to the
extent provided for in the Closing Date Statutory Statements,
Seller shall pay its allocable share of all Taxes due with respect
to such Tax Returns under this paragraph (j), regardless of when
such Taxes are determined to be due. Purchaser agrees to provide
to Seller complete copies of all such Tax Returns no later than the
time period prescribed in paragraph (i) above.
(k) Seller and Purchaser agree that the Tax Returns
filed pursuant to paragraphs (h) and (j) above will reflect the
transactions related to the Business Transfer described in
Section 7.13 of the Agreement.
(l) In the event that the IRS or any other taxing
authority collects from Purchaser or any Acquired Company (i) any
amount of Taxes attributable to taxable periods that end on or
prior to Closing or (ii) any amount of Taxes assumed by the Seller
under the provisions of this Article, Purchaser or such Acquired
Company shall be entitled to prompt, full reimbursement from Seller
upon demand for such Tax after payment of such Tax by Purchaser or
such Acquired Company to the taxing authority (to the extent not
reserved for on the Closing Date Statutory Statements).
Notwithstanding the prior sentence, Seller's liability for Taxes
under this Section 12.2(l) shall be adjusted to reflect any Tax
Benefit from the payment of such Tax by Purchaser or such Acquired
Company.
(m) Seller shall have no obligation to indemnify the
Purchaser or the Acquired Companies pursuant to this Article XII
with respect to any Potential Tax Liability if (i) the Acquired
Companies or Purchaser failed to give notice as required in
Section 12.4(j) hereof (excluding any failure when the Seller has
actual knowledge of the Potential Tax Liability, or in
circumstances in which it is not reasonably practicable for the
Acquired Companies or Purchaser to notify Seller prior to
themselves paying such Potential Tax Liability) and (ii) the
ability of Seller to defend, negotiate, settle, or obtain refunds
for such Potential Tax Liability was materially harmed by the
failure of the Acquired Companies or Purchaser to give such notice.
(n) Immediately prior to the distributions referred to
in Section 7.13 of the Agreement and the sale and purchase of the
Shares, Seller shall cause each Acquired Company to adopt, solely
for the tax purposes of Sections 332 and 338 of the Code, a plan
that shall constitute a plan of complete liquidation. The Business
Transfer distributions pursuant to such Section 7.13 shall be made
in accordance with such plans. Seller shall present such plans to
Purchaser for review at least 30 Business Days prior to Closing or
the agreed upon date of the distributions, whichever is earlier.
SECTION 12.3. Representations, Warranties, Agreement, and
Covenants of Purchaser with Regard to Certain Tax Matters
Purchaser shall be responsible for the preparation of all
Tax Returns for, or with respect to, each Acquired Company for any
taxable period that ends after the Closing Date, and, to the extent
such Taxes are not allocated or assumed by the Seller pursuant to
Sections 12.2 and 12.5 herein, Purchaser and each Acquired Company
shall be responsible for the payment of all Taxes due with respect
to such Returns without reimbursement or indemnification from
Seller.
SECTION 12.4. Joint Agreements and Covenants of Seller and
Purchaser
(a) Purchaser and Parent shall allocate the Share
Purchase Price and the Note Purchase Price in accordance with
Section 1060 of the Code and the Treasury Regulations thereunder,
and such allocation shall be used for purposes of determining the
modified aggregate deemed sales price under applicable Treasury
Regulations and in reporting the deemed sales of assets of the
Company and its Acquired Subsidiaries in connection with the
Section 338(h)(10) Elections. Any adjustment to the Purchase Price
or other consideration paid pursuant to this Agreement shall result
in an appropriate adjustment to such allocation.
(b) Seller and Purchaser agree to join in making
elections under section 338(g) and section 338(h)(10) of the Code
and all comparable elections under state and local tax law
(together, the "Section 338(h)(10) Elections") with respect to each
of the Acquired Companies. Notwithstanding any other provision in
the Agreement or this Article XII, Purchaser (including the
Acquired Companies), on the one side, and Seller, on the other
side, shall bear their respective administrative, legal,
accounting, and similar expenses resulting from the making of the
Section 338(h)(10) Elections.
(c) Seller and Purchaser agree to cooperate fully with
respect to the making of the Section 338(h)(10) Elections. Such
cooperation shall include, but not be limited to, the calculation
of Adjusted Grossed-Up Basis, within the meaning of Treasury
Regulation section 1.338(b)-1, the allocation of the Purchase Price
in accordance with Section 12.4(g) below, and the preparation and
delivery of any other related documentation required by the
applicable taxing authorities.
(d) Purchaser shall prepare for delivery to Seller for
review a fully completed set of IRS Form 8023-A and, if required,
Form 8594, including all additional data and materials required to
be attached to such Form 8023-A pursuant to the Treasury
Regulations under section 338 of the Code. Such documents and forms
shall be delivered to Parent or Seller for review by the earliest
of (i) the tenth Business Day following the date Parent and
Purchaser deem the Closing Date Financial Statements final, and
(ii) the 45th Business Day prior to the date any such Section 338
or 1060 forms are to be filed.
(e) Purchaser agrees to attach a copy of the agreed upon
Form 8023-A (including Form 8594, to the extent required) referred
to in Section 12.4(d) above, to the first federal income Tax Return
(and any other applicable Tax Returns) filed for each of the
Acquired Companies for the period beginning immediately after the
Closing Date. Seller agrees to attach a copy of such agreed upon
Form 8023-A (including Form 8594, to the extent required) to the
consolidated federal income Tax Return (and any other applicable
Tax Returns) in which Seller joins for the taxable period that
includes the Closing Date. The Parties agree to timely file such
Tax Returns, including any extensions.
(f) Seller and Purchaser agree to treat the deemed
transfer of the Acquired Companies' insurance contracts that will
occur pursuant to the Section 338(h)(10) Elections as deemed
assumption reinsurance transactions for federal income tax
purposes. Moreover, Seller and Purchaser agree to treat such
deemed reinsurance transactions consistently for federal income tax
purposes, and consistently report the nature and amount of any
deemed ceding commissions, as determined in Section 12.4(g) below.
(g) No later than 60 days after the date of the
Agreement, Seller and Purchaser agree to consult with each other in
order to agree to the methodology for the allocation of the
Purchase Price to the assets conveyed pursuant to the Agreement and
to determine ceding commissions for the deemed reinsurance
transactions resulting from the Section 338(h)(10) Elections, in
each case using reasonable valuation methodologies. If the Parties
have agreed to the asset allocation, including the amount of any
deemed ceding commissions (the "Allocation Agreement"), such
agreement shall be reduced to writing prior to the Closing Date.
(h) Seller and Purchaser agree, and Purchaser shall
cause the Acquired Companies, to retain all Tax or Tax-related
records associated with the Acquired Companies for periods ending
on or before the Closing Date until the expiration of the full
period of the applicable statute of limitations, including any
extensions thereof. If the applicable statute of limitations have
not expired by the end of the tenth year following the Closing
Date, the Purchaser shall have the option of transferring the
records to the Seller or Parent for their storage. Each party
agrees to notify the other of any extension of an applicable
statute of limitations and each party shall make a good faith
effort to obtain the consent of the other party before destroying
any of such records after the expiration of the statute of
limitations period.
(i) Purchaser and Seller shall cooperate, and Purchaser
shall cause the Acquired Companies to cooperate with Seller, with
respect to the preparation and filing of any Tax Return (including
amended Tax Returns) for which the other is responsible pursuant to
this Article XII (including, but not limited to, providing work
papers and schedules).
(j) Except as otherwise provided with respect to items
relating to the allocation of the Purchase Price for the deemed
sale of assets resulting from the making of the Section 338(h)(10)
Elections, Purchaser shall prepare or cause the Acquired Companies
to prepare, in a manner and at such time or times as is consistent
with past practice but no later than May 1, 1996, the tax work
paper preparation package or packages necessary to enable Seller to
prepare consolidated federal and combined state and local Tax
Returns for the period or periods from January 1, 1995 through the
Closing Date.
(k) Purchaser and Seller each agree promptly to notify
the other in writing within 30 Business Days from the receipt of
notice of any pending or threatened tax audits or assessments
("Potential Tax Liability") of the Acquired Companies for any
taxable periods ending on or before the Closing Date as long as
such periods remain open. The written notification shall contain
information, to the extent known by the Purchaser or the Acquired
Companies (or the Seller, as the case may be), describing the
Potential Tax Liability. With respect to any Potential Tax
Liability that does not potentially affect the tax liability of any
of the Acquired Companies for a tax period that includes or follows
the Date of Closing, Seller shall have the sole right to represent
the interests of the Acquired Companies in any tax audit or
administrative or court proceeding to the extent relating to Taxes
or Tax Returns filed for, or with respect to, the Acquired
Companies for periods ending on or before the Closing Date. With
respect to any Potential Tax Liability that potentially affects
the tax liability of any of the Acquired Companies for a tax period
that includes or follows the Date of Closing, Seller shall give due
consideration to the interests of the Acquired Companies, and shall
have the primary right to represent the interests of the Acquired
Companies in any tax audit or administrative or court proceeding to
the extent relating to Taxes or Tax Returns filed for, or with
respect to, the Acquired Companies for periods ending on or before
the Closing Date. Seller may employ counsel of its choice at its
expense, provided that Seller shall keep Purchaser reasonably
informed on an ongoing basis. Purchaser shall cooperate, and shall
cause the Acquired Companies to cooperate, with Seller, with
respect to any tax audit or administrative or court proceeding
referred to in this paragraph. Such cooperation shall include
providing all relevant information that is available to Purchaser
or the Acquired Companies, as the case may be, with respect to any
such audit or proceeding, making personnel available at reasonable
times and, including, without limitation, preparation of responses
to requests for information, provided that the foregoing shall be
done in a manner so as not to interfere unreasonably with the
conduct of the business of Purchaser and the Acquired Companies.
Seller shall notify Purchaser at least 30 Business Days prior to
settling or otherwise resolving any Potential Tax Liability that is
likely to have a negative Tax detriment on any of the Acquired
Companies after the Closing Date. If Purchaser objects to the
proposed settlement or resolution within the above 30 Business Day
period, Purchaser may elect at its sole expense to further contest
the Potential Tax Liability in which case Purchaser will indemnify
Seller to the extent final settlement or other resolution of the
Potential Tax Liability is on terms less favorable to Seller than
the settlement or resolution proposed by Seller. If Seller fails
to provide notice to Purchaser under this section or fails to
permit Purchaser to contest the Potential Tax Liability pursuant to
the immediately preceding sentence, then in the event that the
Seller settles or otherwise resolves any Potential Tax Liability
that is likely to have a negative Tax detriment on any of the
Acquired Companies, the Acquired Company will be entitled to
receive prompt payment from the Seller of the detriment, determined
under the Tax Benefit provisions of Section 12.6. Purchaser shall
notify Seller at least 30 Business Days prior to settling or
otherwise resolving any Potential Tax Liability that is likely to
have a negative Tax detriment on any of the Acquired Companies
prior to the Closing Date. If Seller objects to the proposed
settlement or resolution within the above 30 Business Day period,
Seller may elect at its sole expense to further contest the
Potential Tax Liability in which case Seller will indemnify
Purchaser to the extent final settlement or other resolution of the
Potential Tax Liability is on terms less favorable to Purchaser
than the settlement or resolution proposed by Purchaser. If
Purchaser fails to provide notice to Seller under this section or
fails to permit Seller to contest the Potential Tax Liability
pursuant to the immediately preceding sentence, then in the event
that the Purchaser settles or otherwise resolves any Potential Tax
Liability that is likely to have a negative tax detriment on
Seller, the Seller will be entitled to receive prompt payment from
the Purchaser of the detriment, determined consistently with the
Tax Benefit provisions of Section 12.6.
(l) Seller shall have the right to pursue, and shall be
entitled to retain, or receive prompt payment from the Acquired
Companies or Purchaser of, any overpayment, refund or credit
received by an Acquired Company or Purchaser with respect to Taxes
(including, without limitation, refunds and credits arising by
reason of Tax Returns as originally filed or amended Tax Returns
filed after the Closing Date or adjustments by the IRS or
comparable state or local taxing authorities) relating to the
Acquired Companies that are the responsibility of Seller under this
Article XII, plus any interest received with respect thereto from
the applicable taxing authorities. With respect to any request
for refund, overpayment or credit that potentially affects the tax
liability of any of the Acquired Companies for a tax period that
includes or follows the Date of Closing, Seller shall give due
consideration to the interests of the Acquired Companies, and shall
have the primary right to represent the interests of the Acquired
Companies in any tax audit or administrative or court proceeding to
the extent relating to Taxes or Tax Returns filed for, or with
respect to, the Acquired Companies for periods ending on or before
the Closing Date. Purchaser and Seller shall cooperate, and
Purchaser shall cause the Acquired Companies to cooperate with
Seller, with respect to claiming any refund or credit with respect
to Taxes referred to in this Section 12.4(j). Seller shall bear
any out-of-pocket expenses incurred in seeking such refund or
credit. Seller shall notify Purchaser at least 30 Business Days
prior to settling or otherwise resolving any Potential Tax
Liability that is likely to have a negative Tax detriment on any of
the Acquired Companies after the Closing Date. If Purchaser
objects to the proposed settlement or resolution within the above
30 Business Day period, Purchaser may elect at its sole expense to
further contest the Potential Tax Liability in which case Purchaser
will indemnify Seller to the extent final settlement or other
resolution of the Potential Tax Liability is on terms less
favorable to Seller than the settlement or resolution proposed by
Seller. If Seller fails to provide notice to Purchaser under this
section or fails to permit Purchaser to contest the Potential Tax
Liability pursuant to the immediately preceding sentence, then in
the event that the Seller settles or otherwise resolves any request
for refund, overpayment or credit which is likely to have a
negative tax detriment on any of the Acquired Companies, the
Acquired Company will be entitled to receive prompt payment from
the Seller of the detriment, determined under the Tax Benefit
provisions of Section 12.6. If, as the result of an examination by
any taxing authority of any Tax Return or Tax of the Acquired
Companies, (i) an adjustment is made which gives rise to a Tax
deficiency payable by the Acquired Companies to such taxing
authority that is attributable to any Tax period, or portion
thereof, ending prior to or on the Closing Date, (ii) Seller or an
Affiliate of Seller pays (or is obligated to pay) such deficiency
or indemnifies (or is obligated to indemnify) Purchaser or the
Acquired Companies under this Agreement for a payment of such
deficiency, and (iii) such adjustment will reverse in a Tax period,
or portion thereof, ending after the Closing Date, thereby
producing a refund, credit, offset, or deduction to the Acquired
Companies, Purchaser shall pay to Seller the amount of such Tax
Benefit determined consistently with Section 12.6 below, within 30
days after the Acquired Companies are notified by Seller of such
adjustment. However, if as the result of such an examination, (i)
an adjustment is made which gives rise to a Tax Benefit to the
Acquired Companies that is attributable to any Tax period ending
prior to or on the Closing Date and (ii) such adjustment reverses
in a Tax period ending after the Closing Date thereby producing a
Tax detriment payable by the Acquired Companies to the taxing
authorities, the Seller shall pay the amount of such Tax detriment,
determined consistently with Section 12.6 below, to Purchaser
within thirty days after demand is made by Purchaser to Seller for
such payment.
(m) Sellers and Purchaser agree to cooperate in the
prompt evaluation of a structure for the purchase of the Stock and
the Note by Purchaser hereunder in which the Note is acquired by
Purchaser from Parent for $50 million in cash and the Company,
after giving effect to the Business Transfer and the dividend and
other payments contemplated by Section 7.17, merges, in a
transaction complying with Section 351 of the Code, into a direct
or indirect subsidiary of Purchaser and Seller receives as
consideration for the Stock in such merger cash in the amount of
$475 million and preferred stock of such subsidiary of Purchaser
that has characteristics that qualify it as stock under Section 351
of the Code and has a face amount of $50 million and the terms
mutually agreed by the Parties (the "Section 351 Transaction
Structure"). Purchaser and Seller (i) agree to use their best
efforts, if the conditions specified in the proviso below are
satisfied, to effect the transactions contemplated hereunder
pursuant to the Section 351 Transaction Structure and (ii) if the
Section 351 Transaction Structure is implemented, agree that
neither Seller nor Purchaser will make (or consent to be made) any
Section 338(h)(10) Elections; provided that the Section 351
Transaction Structure will not be utilized if the transactions
contemplated hereby as modified by such structure (A) cannot be
consummated on or prior to December 31, 1995, (B) have a Tax effect
which is materially worse than Purchaser's federal, state and local
Tax position if it had acquired the Stock and the Note directly
from Parent and Seller without making a Section 338(h)(10)
Election, (C) are likely to be deemed by any state insurance
commissioner to constitute an assumption reinsurance transaction,
(D) require the Company or the subsidiary of Purchaser as successor
entity in the Section 351 Transaction Structure to be relicensed in
any state; (E) require notice to or the consent of policyholders,
(F) require the Acquired Companies' agents to be relicensed by any
state insurance department, (G) require any new approvals from any
state insurance department for any of the Acquired Companies'
current products, (H) reduce the tax basis of Section 848 of the
Code deferred acquisition costs which would have been otherwise
available if the Stock had been acquired directly by Purchaser
without making a Section 338(h)(10) Election or (I) have a Material
Adverse Effect or materially adversely affect Purchaser; and
provided further that if Seller and Purchaser have not jointly
determined by September 30, 1995 that the foregoing conditions are
likely to be satisfied, Seller and Purchaser agree that the
Section 351 Transaction Structure will not be utilized and the
transactions contemplated by this Agreement will be effected as
provided in this Agreement without giving effect to this
Section 12.4(m).
If the Parties implement the Section 351 Transaction
Structure pursuant to this Section 12.4(m), Parent will not
purchase the building immediately prior to the transaction.
However, if the Section 351 Transaction Structure is implemented,
but a final determination is made that Section 351 does not apply
to the transaction and the Section 351 Transaction Structure is
treated as an asset acquisition for Federal income tax purposes,
Parent agrees to purchase the building referred to in Section 7.15
on an "as is" basis without warranty, for a purchase price of $45
million, adjusted to reflect a proration for utilities, taxes and
other similar expenses, and upon such purchase the lease agreement
relating to such building between Parent and the Company shall be
terminated without additional expense to either party. A final
determination for purposes of the immediately preceding sentence
will consist of an adjustment to Taxes made by the IRS whether such
adjustment is a result of or in settlement of any audit or other
administrative proceeding or judicial proceeding or the filing of
an amended return to reflect the consequences of any determination
made in connection with any such audit or proceeding or otherwise,
provided, however, that Purchaser will make a good faith effort, in
consultation with Seller, to sustain the Section 351 Transaction
Structure. Parent's obligation to purchase the building under this
provision shall expire on January 1, 2007.
If the Parties agree prior to September 30, 1995 to
implement the Section 351 Transaction Structure, and if Purchaser
fails to close this transaction, Purchaser agrees to reimburse
Seller for Seller's hedging costs incurred after September 30,
1995, associated with the increased Tax cost that would result from
an increase in the appreciation of the Company's assets.
SECTION 12.5. Straddle Period Tax Allocations Any Taxes for
a period that includes the Closing Date but does not terminate on
such date (a "Straddle Period") shall be the joint responsibility
of Purchaser and Seller, and shall be apportioned between the
portion of the Straddle Period ending on the Closing Date and the
portion beginning immediately after the Closing Date in accordance
with this section. Any Taxes allocable to the portion ending on or
prior to the Closing Date will be the sole responsibility of
Seller, and any Taxes allocable to the portion beginning after the
Closing will be the sole responsibility of Purchaser. Any Straddle
Period Taxes based on actual activities or transactions (e.g., the
Business Transfers, capital transactions, reinsurance outside the
ordinary course of business, or real estate transfer taxes) shall
be allocated based on the actual activities or transactions of each
Acquired Company for such period. All other Straddle Period Taxes
(including all transaction related to regular, recurring items
incurred in the ordinary course of business) shall be allocated
based on the number of days in the portions of the Straddle Period
before and after the Closing Date, respectively.
SECTION 12.6. Determination Of Tax Benefit For purposes of
this Article and the indemnification provisions of Article XI, any
positive or negative Tax Benefit to a Party shall be determined in
accordance with this Section. If a Party actually derives, or is
likely to derive, a benefit or suffer a detriment from (i) an
increase (or decrease) in tax attributes, (ii) or the recognition
of any item of income (or loss), the Tax Benefit (or detriment)
shall be calculated. The amount of the Tax Benefit (or detriment)
shall be determined based on the present value of a refund, credit,
offset, deduction, gain, or item of income and shall be determined
using a discount rate equal to 12%, assuming that the Party will
have sufficient taxable income and tax liability against which to
use any such refund, credit, offset, or liability, and assuming an
effective tax rate of 35%.
SECTION 12.7. Tax Dispute Resolution Mechanism Any dispute
with respect to this Article XII shall be resolved as follows: the
parties will in good faith attempt to negotiate a settlement of the
dispute; if the parties are unable to negotiate a resolution of the
dispute within 30 days after notice of such dispute is given by
either party to the other party, the dispute will be submitted to
(i) a nationally recognized accounting firm mutually agreed upon by
Seller and Purchaser or (ii) if the Seller and Purchaser are unable
to agree upon an accounting firm, each Party will select an
accounting firm, and representatives of those firms will pick a
nationally recognized accounting firm to resolve the dispute (the
"Tax Dispute Accountants"). The parties will present their
arguments to the Tax Dispute Accountants within 15 days after
submission of the dispute to the Tax Dispute Accountants. The Tax
Dispute Accountants will resolve the dispute, in a fair and
equitable manner and in accordance with the applicable tax law,
within 30 days, or as expeditiously as possible, after the parties
have presented their arguments to the Tax Dispute Accountants,
whose decision shall be final, conclusive and binding on the
parties. The fees and expenses of the Tax Dispute Accountants in
resolving a dispute will be borne equally by Seller and Purchaser.
ARTICLE XIII.
MISCELLANEOUS PROVISIONS
SECTION 13.1. Entire Agreement; Waiver
This Agreement, the Annexes and the exhibits attached hereto
and the other writings specifically identified herein or executed
and delivered by the Parties to be bound thereby in conjunction
with this Agreement or the transactions contemplated hereby contain
the entire agreement among the Parties with respect to the
transactions contemplated hereby and thereby and supersede all
previous written or oral negotiations, commitments, and writings.
No supplement or waiver of this Agreement shall be binding unless
executed in writing and signed by the Party to be bound thereby.
No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof
(whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
SECTION 13.2. Amendment and Modification
Subject to applicable law, this Agreement may be amended,
modified, or supplemented only by written agreement of the Parties.
SECTION 13.3. Confidentiality
(a) None of the Parties to this Agreement nor any of
their Affiliates shall issue any press release or public
announcement concerning the contemplated transaction, the existence
of this Agreement, or of the terms, conditions, and provisions of
this Agreement (i) unless mutually agreed by Seller and Purchaser
or (ii) except as required by law, in which event the disclosing
Party shall consult with the other Parties to the extent
practicable before making such disclosure.
(b) Each of the Parties and its respective Affiliates
shall use reasonable precautions to keep confidential, in
accordance with its customary procedures for handling confidential
information of this nature and in accordance with safe and sound
practices, any non-public information supplied to it by any other
Party pursuant to this Agreement that is identified by such other
Party as being confidential at the time the same is delivered to
such Party, including without limitation, the negotiations between
the Parties relating to the execution of this Agreement and the
terms and conditions of this Agreement, to the extent that they are
not in the public domain. Such information shall be kept
confidential and shall not be disclosed by the Parties otherwise
than to each other; provided, that nothing herein shall limit the
disclosure of any such information
(i) to the extent required by statute, rule,
regulation, or judicial process;
(ii) to governmental authorities, or representatives
thereof, or regulatory personnel, auditors, or
accountants;
(iii) in connection with any litigation to which
any one or more of the Parties or an Affiliate is a
party;
(iv) to counsel for any of the Parties; or
(v) to a subsidiary or Affiliate of such Party;
in the case of Sections 13.3(b)(i), (ii), and (iii), if such person
to whom such confidential information is given is notified that
such information is confidential, and in the case of Sections
13.3(b)(iv) and (v) if such person to whom such confidential
information is given agrees to be subject to the same strictures on
disclosure as are set forth in this Agreement.
(c) In the event that any Party receives a request to
disclose any non-public information of another Party under a
subpoena or judicial or administrative order, such Party shall, to
the extent not prohibited by law or such legal process,
(i) notify the other Parties thereof within ten
(10) days after receipt of such request;
(ii) consult with the other Parties, on the
advisability of taking steps to resist or narrow such
request and cooperate with the other Parties in resisting
such disclosure, if requested; and
(iii) if disclosure is required or deemed
advisable, cooperate with the other Parties in any
attempt that it may make to obtain an order or other
reliable assurance that confidential treatment will be
accorded to designated portions of the non-public
information.
SECTION 13.4. Specific Performance
Each of the Parties acknowledges that money damages would
not be a sufficient remedy for any breach of this Agreement for
failure to close and that irreparable harm would result if this
Agreement were not specifically enforced. Therefore, if any Party
intentionally fails to take any action required to be taken by it
under the terms of this Agreement, the rights and obligations of
the Parties under this Agreement shall be enforceable by a decree
of specific performance issued by any court of competent
jurisdiction, and appropriate injunctive relief may be applied for
and granted in connection therewith. A Party's right to specific
performance shall be in addition to all other legal or equitable
remedies available to such Party.
SECTION 13.5. Expenses
Each Party hereto shall bear its own expenses, including
the fees of any attorneys, accountants, or others engaged by such
Party, in connection with this Agreement and the transactions
contemplated hereby, except as otherwise expressly provided herein.
SECTION 13.6. Notices
All notices, requests, demands, consents, approvals,
agreements, or other communications to or by a Party to this
Agreement shall:
(a) be in writing addressed to the authorized address of
the recipient set out in this Section 13.6 or to such other address
as it may have notified the sender;
(b) be signed by an authorized officer of the sender;
and
(c) be delivered in person or sent by registered or
certified mail return receipt requested or facsimile transmission
and be deemed to be duly given or made:
(i) in the case of delivery in person when
delivered to the recipient at such address; or
(ii) in the case of facsimile transmission when
received in legible form by the recipient at such address
and when the recipient has been requested to acknowledge
receipt of the entire facsimile transmission upon the
sending or receiving the acknowledgment of receipt (which
acknowledgment the recipient will promptly give);
but if such delivery or dispatch is later than 5:00 pm local time
on a day on which business is generally carried on in the place to
which such communication is sent or occurs on a day on which
business is not generally carried on in the place to which such
communication is sent, it will be deemed to have been duly given or
made at the commencement of business on the next day on which
business is generally carried on in that place.
Notices to Purchaser may be sent to
Jefferson-Pilot Corporation
P.O. Box 21008
Greensboro, North Carolina 27420
Attention: Chief Financial Officer
Telephone No: (910) 691-3441
Facsimile No: (910) 691-3283
with a copy to:
Jefferson-Pilot Corporation
P.O. Box 21008
Greensboro, North Carolina 27420
Attention: General Counsel
Telephone No: (910) 691-3308
Facsimile No: (910) 691-3639
King & Spalding
120 West 45th Street
New York, New York 10036
Attention: E. William Bates, II, Esq.
Telephone No: (212) 556-2100
Facsimile No: (212) 556-2222
Notices to Seller and Parent may be sent to
Household International, Inc.
2700 Sanders Road
Prospect Heights, Illinois 60070
Attention: Office of the Secretary
Telephone No: 708-564-5000
Facsimile No: 708-205-7536
with a copy to:
Russell J. Bruemmer, Esq.
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037-1420
Telephone No: 202-663-6804
Facsimile No: 202-663-6363
SECTION 13.7. Severability
If any one or more of the provisions of this Agreement
shall be held to be invalid, illegal, or unenforceable, the
validity, legality and enforceability of the remaining provisions
of this Agreement shall not be affected thereby. To the extent
permitted by applicable law, each Party hereto waives any provision
of law which renders any provision of this Agreement invalid,
illegal, or unenforceable in any respect, unless material to the
purpose of this Agreement.
SECTION 13.8. Assignment
This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the Parties hereto and
their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests, or obligations
hereunder shall be assigned by either of Sellers or Purchaser
hereto without the prior written consent of the other Parties, nor
is this Agreement intended to confer upon any other person except
the Parties any rights or remedies hereunder; provided that
Purchaser may assign all or any portion of its respective rights,
interests or obligations hereunder to an Affiliate of Purchaser
without the prior written consent of Parent, Seller or the Company,
provided that such assignment shall not release Purchaser from, or
in any manner limit, Purchaser's obligations hereunder.
SECTION 13.9. Third Parties.
Nothing in this Agreement is intended to confer any right
on any person other than the Parties hereto and their respective
successors and assigns and the persons identified in Sections 11.2
and 11.3; nor is anything in this Agreement intended to modify or
discharge the obligation or liability of any third person to any
Party to this Agreement, nor shall any provision give any third
person any right of subrogation or action over against any Party to
this Agreement.
SECTION 13.10. Captions
The captions in this Agreement are for convenience only,
do not form a part hereof, and do not in any way modify, interpret,
or construe the intentions of the Parties hereto.
SECTION 13.11. Governing Law
This Agreement shall be governed by the laws of the State
of Michigan (regardless of the laws that might otherwise govern
under applicable principles of conflicts of law).
SECTION 13.12. Choice of Forum
Any judicial proceeding brought against any of the
Parties hereto with respect to this Agreement shall be brought in
any court of competent jurisdiction in the Eastern District of
Michigan or Oakland County, Michigan, irrespective of where such
Party may be located at the time of such proceeding, and by
execution and delivery of this Agreement, each of the Parties to
this Agreement hereby consents to the exclusive jurisdiction of any
such court and waives any defense or opposition to such
jurisdiction.
SECTION 13.13. WAIVER OF JURY TRIAL
EACH PARTY HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, THE RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 13.14. Counterparts
This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same instrument.
SECTION 13.15. Drafting
Each Party acknowledges that its legal counsel
participated in the preparation of this Agreement. The Parties
therefore stipulate that the rule of construction that ambiguities
are to be resolved against the drafting Party shall not be employed
in the interpretation of this Agreement to favor any Party against
the other.
SECTION 13.16. Books and Records
Seller and Purchaser agree that, so long as any books,
records, and files relating to the business, properties, assets, or
operations of the Company or its subsidiaries, to the extent that
they pertain to the operations of the Company or its subsidiaries
prior to the Closing Date, remain in existence and are available,
on and after the Closing Date each Party (at its expense) shall
have the right to inspect and to make copies of the same at any
time during business hours for the purpose of complying with
regulatory requirements, meeting auditing needs, or fulfilling
similar obligations for which such books, records, or files are
reasonably necessary.
SECTION 13.17. Governmental Notices
After Closing, Purchaser shall provide to any
governmental or regulatory authority with jurisdiction over such
matters, all required notices of the consummation of this
transaction.
SECTION 13.18. Exhibits
Disclosure of any fact or item in any Exhibit to this
Agreement referenced to a particular Section of this Agreement
shall, should the existence of the fact or item or its contents be
relevant to any other Section, be deemed to be disclosed with
respect to that other Section whether or not an explicit cross-
reference appears; provided, that the nature of any matter
disclosed by such fact or item is reasonably apparent from the
context of the disclosed fact or item without reference to any
collateral document.
[The remainder of this page is intentionally blank]<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this
Stock Purchase Agreement as of the date first above written.
HOUSEHOLD GROUP INC.
By: ___________________________
Name:
Title:
HOUSEHOLD INTERNATIONAL, INC.
By: ______________________________
Name:
Title:
ALEXANDER HAMILTON LIFE
INSURANCE COMPANY OF AMERICA
By: ______________________________
Name:
Title:
JEFFERSON-PILOT CORPORATION
By: ______________________________
Name:
Title:<PAGE>
EXHIBIT A
INDEMNIFIED LIABILITIES
*CONFIDENTIAL* <PAGE>
FOR RELEASE: Immediately
CONTACT: Michael H. Morgan
Vice President - Corporate Communications
708/564-6053, or home: 708/231-6999
Howard Adamski
Director - Financial Relations
708/564-6054, or home: 708/291-1467
Household to Sell Insurance Operations to Jefferson-Pilot
---------------------------------------------------------
Prospect Heights, IL, August 10, 1995 -- Household
International (NYSE: HI) announced today that it had reached a
definitive agreement to sell Alexander Hamilton Life Insurance
Company to Jefferson-Pilot (NYSE: JP). Household is selling the
individual life and annuity business, but will retain the credit
life insurance unit.
Alexander Hamilton is a major provider of universal life and
annuity products through 5,000 independent agents. At June 30,
Alexander Hamilton had assets related to its individual life and
annuity business of approximately $6 billion. In 1994 Alexander
Hamilton's individual life insurance and annuity businesses
contributed net income of $42 million to Household. Household
said it anticipates no significant impact on current year's
earnings per share. The transaction, which is subject to
regulatory approvals, is expected to close by year end.
The company said proceeds from the sale would be used to
fund growth in its core lending operations and to further
strengthen the capital base. Specific terms of the transaction
were not immediately available.
William Aldinger, Household's president and chief executive
officer, said "This action is a further major step in refocusing
Household in the consumer lending arena. While Alexander
Hamilton is an excellent company, its business focus and customer
base are much different from our core lending businesses, thereby
detracting from our business focus. Also, the returns from the
life insurance business are less than our core businesses. As a
result we decided to sell the individual life and annuity
businesses and reinvest our resources in our higher return
consumer lending units."
Mr. Aldinger also said "We will continue to offer credit and
related insurance products to our Household customers."
Jefferson-Pilot is one of the nation's largest shareholder-
owned insurance companies, and has interests in the
communications field. It is headquartered in Greensboro, North
Carolina.
Household International is a major provider of consumer
financial services in the United States, Canada, and the United
Kingdom. Its primary businesses include HFC, the nation's oldest
consumer finance company, and Household Bank. Household is also
one of the largest issuers of private label and general purpose
credit cards in the United States, including The GM Card.
# # #
