UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
December 14, 1995
Date of Report (Date of earliest event reported)
I.C.H. Corporation
(Exact name of registrant as specified in its charter)
Delaware 1-7697 43-6069928
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
500 North Akard Street, Dallas, Texas 75201
(Address of principal executive offices)
(214) 954-7111
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report)
This filing contains 298 pages.
Index to Exhibits appears on page 3.
Page 1 of 298<PAGE>
Item 2. Acquisition or Disposition of Assets.
On December 14, 1995, Registrant and its wholly-owned subsidiaries, Care
Financial Corporation and SWL Holding Corporation, sold all of the capital
stock of Southwestern Life Insurance Company, Union Bankers Life Insurance
Company, Constitution Life Insurance Company and Marquette National Life
Insurance Company to Southwestern Financial Corporation ("Buyer"). The
consideration for the sale was the payment of $210 million cash, the issuance
by Buyer of a $40 million 7.0% Convertible Subordinated Reset Note Due 2005
and the delivery by PennCorp Financial Group, Inc. of shares of its common
stock, par value, $.01 per share, with an approximate market value on the date
of delivery of $10 million.
As previously reported in Registrant's Report on Form 10-Q for the
period ended September 30, 1995, Registrant on October 9, 1995, entered into a
definitive agreement to sell to Shinnecock Holdings Inc. ("Shinnecock") the
same assets ultimately sold to Buyer. Pursuant to the Competitive Offer
Procedure adopted by the U.S. Bankruptcy Court for the Northern District of
Texas on October 20, 1995, in Registrant's Chapter 11 proceeding, Buyer made
offers to compete with the offers of Shinnecock, Buyer's final offer was
determined by Registrant to be higher and better than Shinnecock's final
offer, and Buyer's final offer was recommended by Registrant to and approved
by the Bankruptcy Court on December 5, 1995.
Item 7. Financial Statements, Pro Forma Financial Information, and
Exhibits.
(a) None
(b) None
(c) Exhibits.
Exhibit No. Description
1 Purchase Agreement among I.C.H. Corporation, SWL
Holding Corporation, Care Financial Corporation,
Facilities Management Installation, Inc. and
Southwestern Financial Corporation, Southwestern
Financial Services Corporation and PennCorp Financial
Group, Inc., dated as of December 1, 1995.
2 Indenture dated December 14, 1995 between Southwestern
Financial Corporation and U.S. Trust Company of Texas,
N.A., Trustee.
3 Registration Rights Agreement dated as of December 14,
1995, between Southwestern Financial Corporation,
I.C.H. Corporation, SWL Holding Corporation and Care
Financial Corporation.
4 Registration Rights Agreement dated as of December 14,
1995, between PennCorp Financial Group, Inc., I.C.H.
Corporation, SWL Holding Corporation and Care
Financial Corporation.
5 Press Release of I.C.H. Corporation dated December 15,
1995.
Page 2 of 298<PAGE>
INDEX TO EXHIBITS
Exhibit Sequential
No. Document Description Page No.
1 Purchase Agreement among I.C.H. Corporation, SWL
Holding Corporation, Care Financial Corporation,
Facilities Management Installation, Inc. and
Southwestern Financial Corporation, Southwestern
Financial Services Corporation and PennCorp
Financial Group, Inc., dated as of December 1,
1995. 5
2 Indenture dated December 14, 1995 between
Southwestern Financial Corporation and U.S. Trust
Company of Texas, N.A., Trustee. 165
3 Registration Rights Agreement dated as of December
14, 1995, between Southwestern Financial
Corporation, I.C.H. Corporation, SWL Holding
Corporation and Care Financial Corporation. 248
4 Registration Rights Agreement dated as of December
14, 1995, between PennCorp Financial Group, Inc.,
I.C.H. Corporation, SWL Holding Corporation and
Care Financial Corporation. 276
5 Press Release of I.C.H. Corporation dated December
15, 1995. 298
Page 3 of 298<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
I.C.H. CORPORATION
By: /s/Glenn H. Gettier, Jr.
-------------------------
Glenn H. Gettier, Jr.
Chief Executive Officer and
Chairman of the Board
Date: December 21, 1995
Page 4 of 298<PAGE>
EXHIBIT 5
DATE: December 15, 1995
FOR FURTHER INFORMATION CONTACT:
Gerald J. Kohout (214) 954-7414
FOR IMMEDIATE RELEASE
DALLAS, TX--December 15, 1995--I.C.H. Corporation (ICHD--OTC) has
completed the previously announced sale of its principal insurance companies -
- - Southwestern Life Insurance Company and Union Bankers Life Insurance
Company, and their subsidiaries, Constitution Life Insurance Company and
Marquette National Life Insurance Company -- to Southwestern Financial
Corporation, a company newly formed by Knightsbridge Capital Fund I, L.P. and
PennCorp Financial Group, Inc., for gross consideration of $260 million,
consisting of $210 million cash and $50 million of securities. ICH, which has
been operating under U.S. Bankruptcy Court protection since October 10, 1995,
said that, with the sale concluded, it would begin addressing a plan of
reorganization in the near future.
Page 298 of 298<PAGE>
<PAGE>
PURCHASE AGREEMENT
among
I.C.H. CORPORATION,
SWL HOLDING CORPORATION,
CARE FINANCIAL CORPORATION,
FACILITIES MANAGEMENT INSTALLATION, INC.
and
SOUTHWESTERN FINANCIAL CORPORATION,
SOUTHWESTERN FINANCIAL SERVICES CORPORATION,
PENNCORP FINANCIAL GROUP, INC.
Dated as of December 1, 1995<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I Definitions . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Definition of Certain Terms . . . . . . . . . . . 2
ARTICLE II Sale of Stock and Assets; Closing . . . . . . . . . . . 22
2.1 Pre-Closing Transactions; Sale and Purchase of
the Acquired Shares and Surplus Debenture . . . . 22
2.2 Sale and Purchase of Acquired Assets . . . . . . . 23
2.3 Excluded Assets . . . . . . . . . . . . . . . . . 25
2.4 Excluded Liabilities . . . . . . . . . . . . . . . 26
2.5 Assumed Liabilities; Funding of Certain Assumed
Liabilities . . . . . . . . . . . . . . . . . . . 26
2.6 Closing . . . . . . . . . . . . . . . . . . . . . 27
2.6.1 Delivery of Acquired Shares and Surplus
Debenture . . . . . . . . . . . . . . . . 27
2.6.2 Transfer of Acquired Assets . . . . . . . 28
2.6.3 Payment of the Purchase Price by Buyer . 28
2.6.4 Funding of Escrow Account . . . . . . . . 29
2.6.5 Delivery of PennCorp Shares . . . . . . . 29
2.7 [Reserved] . . . . . . . . . . . . . . . . . . . . 30
2.8 [Reserved] . . . . . . . . . . . . . . . . . . . . 30
2.9 Non-Assignable Assumed Contracts . . . . . . . . . 30
2.10 Non-Assignable Intellectual Property Licenses . . 32
2.11 Buyer's Deposit . . . . . . . . . . . . . . . . . 32
ARTICLE III Conditions Precedent . . . . . . . . . . . . . . . . . . 33
3.1 Conditions to the Obligations of all Parties . . . 33
3.1.1 Regulatory Approvals . . . . . . . . . . 33
3.1.2 Bankruptcy Court Approvals . . . . . . . 33
3.1.3 Distributions Paid . . . . . . . . . . . 36
3.1.4 No Prohibition . . . . . . . . . . . . . 36
3.1.5 [Reserved] . . . . . . . . . . . . . . . 36
3.1.6 Litigation . . . . . . . . . . . . . . . 36
3.2 Conditions to Obligations of Buyer and PennCorp . 37
3.2.1 Representations and Warranties . . . . . 37
3.2.2 Performance . . . . . . . . . . . . . . . 38
3.2.3 Consents . . . . . . . . . . . . . . . . 38
3.2.4 Officer's Certificates . . . . . . . . . 38
3.2.5 Additional Regulatory Approvals . . . . . 38
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3.2.6 Proceedings . . . . . . . . . . . . . . . 40
3.2.7 Terminated Intercompany Agreements . . . 40
3.2.8 Resignation of Directors and Officers . . 40
3.2.9 Material Adverse Effect . . . . . . . . . 41
3.2.10 Opinions of Counsel to Seller . . . . . . 41
3.2.11 [Reserved] . . . . . . . . . . . . . . . . 41
3.2.12 [Reserved] . . . . . . . . . . . . . . . . 41
3.2.13 Certificate of Non-Foreign Status . . . . 41
3.2.14 Related Agreements . . . . . . . . . . . . 41
3.2.15 Section 338(h)(10) Election . . . . . . . 42
3.2.16 [Reserved] . . . . . . . . . . . . . . . . 42
3.2.17 Texas Property Tax Certificate . . . . . . 42
3.3 Conditions to Seller's Obligations . . . . . . . . 42
3.3.1 Representations and Warranties . . . . . 42
3.3.2 Performance . . . . . . . . . . . . . . . 42
3.3.3 Officer's Certificates . . . . . . . . . 42
3.3.4 Opinions of Counsel to Buyer . . . . . . 43
3.3.5 Proceedings . . . . . . . . . . . . . . . 43
3.3.6 Related Agreements . . . . . . . . . . . 43
3.3.7 Securities Laws Issues . . . . . . . . . 44
ARTICLE IV Representations and Warranties . . . . . . . . . . . . . 44
4.1 Representations and Warranties of Seller and
Selling Subsidiaries . . . . . . . . . . . . . . . 44
4.1.1 Corporate Existence . . . . . . . . . . . 44
4.1.2 Authorization; Enforcement . . . . . . . 44
4.1.3 Governmental Approvals . . . . . . . . . 45
4.1.4 No Conflicts; Third Party Consents . . . 46
4.1.5 Capital Structure . . . . . . . . . . . . 46
4.1.6 Company Documents . . . . . . . . . . . . 47
4.1.7 Financial Statements and Information . . 47
4.1.8 SEC Reports . . . . . . . . . . . . . . . 50
4.1.9 Absence of Certain Changes or Events . . 51
4.1.10 Assets . . . . . . . . . . . . . . . . . 52
4.1.11 Environmental Matters . . . . . . . . . 55
4.1.12 Liabilities and Reserves; No
Undisclosed Liabilities . . . . . . . . . 56
4.1.13 Contracts . . . . . . . . . . . . . . . 57
4.1.14 Litigation . . . . . . . . . . . . . . . 59
4.1.15 Compliance with Laws, etc. . . . . . . . 60
4.1.16 Operations Insurance . . . . . . . . . . 60
4.1.17 Taxes . . . . . . . . . . . . . . . . . 61
4.1.18 Affiliate Transactions . . . . . . . . . 64
4.1.19 Employee Benefit Plans . . . . . . . . . 65
4.1.20 Insurance Business . . . . . . . . . . . 67
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4.1.21 Reinsurance . . . . . . . . . . . . . . 69
4.1.22 Intellectual Property . . . . . . . . . 70
4.1.23 Variable Products: Securities Law
Matters: Investment Companies:
Investment Adviser . . . . . . . . . . . 71
4.1.24 Brokers and Finders, etc. . . . . . . . 72
4.1.25 Shinnecock Purchase Agreement . . . . . 72
4.1.26 Purchase for Investment . . . . . . . . 72
4.1.27 Disclosure . . . . . . . . . . . . . . . 73
4.2 Representations and Warranties of Buyer,
PennCorp and SWFSC . . . . . . . . . . . . . . . . 73
4.2.1 Corporate Existence . . . . . . . . . . . 73
4.2.2 Authorization; Enforcement . . . . . . . 73
4.2.3 Governmental Approvals . . . . . . . . . 74
4.2.4 No Conflicts . . . . . . . . . . . . . . 74
4.2.5 Brokers and Finders, etc. . . . . . . . . 75
4.2.6 [Reserved] . . . . . . . . . . . . . . . 75
4.2.7 Purchase for Investment . . . . . . . . . 75
4.2.8 Litigation . . . . . . . . . . . . . . . 75
4.2.9 Capitalization of Buyer . . . . . . . . . 75
4.2.10 Capitalization of SLAC . . . . . . . . . 77
4.2.11 Capitalization of PennCorp . . . . . . . 77
4.2.12 SEC Reports . . . . . . . . . . . . . . . 78
4.2.13 Knowledge of Material Adverse Effect . . 79
4.2.14 Disclosure . . . . . . . . . . . . . . . 79
ARTICLE V Covenants . . . . . . . . . . . . . . . . . . . . . . . 79
5.1 Operations in the Ordinary Course . . . . . . . . 79
5.2 Restrictions . . . . . . . . . . . . . . . . . . . 80
5.3 Related Matters . . . . . . . . . . . . . . . . . 84
5.4 Management of Acquired Companies . . . . . . . . . 84
5.5 Access to Information . . . . . . . . . . . . . . 85
5.6 Exclusive Dealing . . . . . . . . . . . . . . . . 87
5.7 Regulatory Filing and Compliance . . . . . . . . . 88
5.8 Commercially Reasonable Efforts . . . . . . . . . 90
5.9 Antitwisting and Antisolicitation . . . . . . . . 91
5.10 Certificate of Operating Expenses. . . . . . . . . 92
5.11 Change of Names . . . . . . . . . . . . . . . . . 92
5.12 Bankruptcy Court Approval . . . . . . . . . . . . 93
5.13 [Reserved] . . . . . . . . . . . . . . . . . . . . 94
5.14 Specific Enforcement of Covenants . . . . . . . . 94
5.15 Fund America Certificates . . . . . . . . . . . . 94
5.16 Proceeds from BL of NY . . . . . . . . . . . . . . 95
5.17 Power of Attorney . . . . . . . . . . . . . . . . 95
5.18 Notification of Developments . . . . . . . . . . . 96
5.19 Surplus Debenture and UBIC Shares . . . . . . . . 96
5.20 Limited Partnership Interests . . . . . . . . . . 96
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5.21 Additional Acquired Assets . . . . . . . . . . . . 96
5.22 Recapture of MAL Reinsurance . . . . . . . . . . . 97
5.23 Insurance Coverage . . . . . . . . . . . . . . . . 97
5.24 Transfer of Intellectual Property Licenses . . . . 97
5.25 REO Holding Corp. . . . . . . . . . . . . . . . . 98
5.26 [Reserved] . . . . . . . . . . . . . . . . . . . . 98
5.27 Intercompany Matters . . . . . . . . . . . . . . . 98
5.28 Matters Related to Notes . . . . . . . . . . . . . 98
5.29 Compliance with Securities Laws . . . . . . . . . 99
5.30 Listing of PennCorp Shares . . . . . . . . . . . . 99
5.31 Qualification of Note Indenture . . . . . . . . . 99
5.32 PennCorp Registration Statement . . . . . . . . . 99
ARTICLE VI Certain Tax Matters . . . . . . . . . . . . . . . . . . 99
6.1 Payment of Tax Liabilities . . . . . . . . . . . . 99
6.2 Filing of Tax Returns . . . . . . . . . . . . . . 103
6.3 Bridge Period . . . . . . . . . . . . . . . . . . 105
6.4 Audits and Other Proceedings . . . . . . . . . . . 105
6.5 Section 338(h)(10) Election . . . . . . . . . . . 109
6.6 Transfer Taxes . . . . . . . . . . . . . . . . . . 112
6.7 Cooperation . . . . . . . . . . . . . . . . . . . 112
6.8 Allocation of Purchase Price . . . . . . . . . . . 113
6.9 Tax Refunds and Credits . . . . . . . . . . . . . 114
6.10 Elections Relating to Section 382 of the Code . . 115
6.11 Stub-Period Taxes . . . . . . . . . . . . . . . . 115
6.12 Election Out of Installment Method . . . . . . . . 115
ARTICLE VII Employment Matters . . . . . . . . . . . . . . . . . . . 115
7.1 Definitions . . . . . . . . . . . . . . . . . . . 115
7.2 Employment of Acquired Company Employees . . . . . 116
7.3 Service Credits . . . . . . . . . . . . . . . . . 120
7.4 Savings Investment Plan . . . . . . . . . . . . . 120
7.5 Welfare, Fringe and Other Benefits . . . . . . . . 121
7.6 Retained Seller Liabilities . . . . . . . . . . . 122
7.7 COBRA and WARN . . . . . . . . . . . . . . . . . . 123
ARTICLE VIII Indemnification and Use of Escrow Fund. . . . . . . . . . 124
8.1 Indemnification . . . . . . . . . . . . . . . . . 124
8.2 Provisions Regarding Escrow Account . . . . . . . 140
8.3 Funding of Escrow Accounts . . . . . . . . . . . . 142
8.4 Tax Treatment of Escrow . . . . . . . . . . . . . 142
8.5 Escrow Payments at Buyer's Direction . . . . . . . 142
8.6 [Reserved] . . . . . . . . . . . . . . . . . . . . 143
ARTICLE IX Further Agreements . . . . . . . . . . . . . . . . . . . 143
9.1 Public Announcements . . . . . . . . . . . . . . . 143
9.2 Limited Guaranty . . . . . . . . . . . . . . . . . 143
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9.3 Matters Relating to Schedules . . . . . . . . . . 143
ARTICLE X Miscellaneous . . . . . . . . . . . . . . . . . . . . . 144
10.1 Termination . . . . . . . . . . . . . . . . . . . 144
10.2 Severability . . . . . . . . . . . . . . . . . . . 146
10.3 Agreement; No Third-Party Beneficiaries . . . . . 146
10.4 Expenses . . . . . . . . . . . . . . . . . . . . . 147
10.5 Assignment . . . . . . . . . . . . . . . . . . . . 147
10.6 Notices . . . . . . . . . . . . . . . . . . . . . 147
10.7 Amendments and Waivers . . . . . . . . . . . . . . 149
10.8 Counterparts . . . . . . . . . . . . . . . . . . . 149
10.9 Successors and Assigns . . . . . . . . . . . . . . 149
10.10 Interpretation . . . . . . . . . . . . . . . . . . 149
10.11 Schedules . . . . . . . . . . . . . . . . . . . . 149
10.12 GOVERNING LAW . . . . . . . . . . . . . . . . . . 150
v<PAGE>
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SCHEDULES
Schedule 2.2(a) . . . . . . . Tangible and Intangible Assets of Seller
and Retained Companies
Schedule 2.2(b)(i) . . . . . Tangible Assets of FMI
Schedule 2.2(b)(ii) . . . . . Scheduled Intellectual Property
Schedule 2.3 . . . . . . . . Excluded Assets
Schedule 2.5(a)(i) . . . . . FMI Assumed Contracts
Schedule 2.5(a)(ii) . . . . . Seller and Retained Company Assumed
Contracts
Schedule 2.5(b) . . . . . . . Trade Accounts
Schedule 3.2.7 . . . . . . . Intercompany Agreements
Schedule 4.1.3 . . . . . . . Governmental Approvals
Schedule 4.1.4 . . . . . . . No Conflicts; Third-Party Consents
Schedule 4.1.5 . . . . . . . Capital Structure
Schedule 4.1.7(b) . . . . . . Deviations from GAAP
Schedule 4.1.7(e) . . . . . . Capital Gains and Losses
Schedule 4.1.8(b) . . . . . . SEC Communications
Schedule 4.1.9 . . . . . . . Absence of Certain Changes or Events
Since December 31, 1994
Schedule 4.1.9(a)(i) . . . . Borrowed Funds
Schedule 4.1.9(a)(ii) . . . . Damage or Destruction
Schedule 4.1.9(a)(iii) . . . Dividends or Other Distribution
Schedule 4.1.9(a)(iv) . . . . Transactions with Directors, Officers or
Employees
Schedule 4.1.9(a)(v) . . . . Compensation Increases to Directors,
Officers or Employees
Schedule 4.1.9(a)(vi) . . . . Severance Benefits
Schedule 4.1.9(a)(vii) . . . Changes in Underwriting, Pricing,
Actuarial or Investment Practices
Schedule 4.1.9(a)(viii) . . . Reinsurance/Lapse Ratio/In-force Business
Schedule 4.1.9(a)(ix) . . . . Material Adverse Effect
Schedule 4.1.9(a)(x) . . . . Material Breach
Schedule 4.1.10(a)(i) . . . . Real Property
Schedule 4.1.10(a)(ii) . . . Real Properties Not in Compliance
Schedule 4.1.10(a)(iii) . . . Real Estate Taxes
Schedule 4.1.10(a)(iv) . . . Admitted Assets
Schedule 4.1.10(b)(i) . . . . Jointly Owned Mortgage Loans
Schedule 4.1.10(b)(iii) . . . Delinquent Mortgage Loans
Schedule 4.1.10(b)(iv) . . . Admitted Assets (Mortgage Loans)
Schedule 4.1.10(c) . . . . . Admitted Assets (Bonds)
Schedule 4.1.10(d) . . . . . Admitted Assets (Equities)
Schedule 4.1.10(e) . . . . . Ownership of Property
Schedule 4.1.10(f) . . . . . List of Worthless Assets Since
December 31, 1994
Schedule 4.1.11(a) . . . . . Compliance with Environmental Law
vi<PAGE>
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Schedule 4.1.11(b) . . . . . Other Environmental Matters
Schedule 4.1.12(a) . . . . . Liabilities and Reserves
Schedule 4.1.12(c) . . . . . Guaranty Fund Claims or Assessments
Schedule 4.1.13(a)(i) . . . . Out of the Ordinary Course of Business
Contracts that have Exposure Over $50,000
and which are not Terminable without
Penalty upon 30 Days or Less Notice
Schedule 4.1.13(a)(ii) . . . Contracts with Officers, Directors and
Agents
Schedule 4.1.13(a)(iii) . . . Contracts Containing a Limitation of
Business and/or Covenants not to Compete
Schedule 4.1.13(a)(iv) . . . Partnerships/Joint Venture Contracts
Schedule 4.1.13(a)(v) . . . . Nonrecourse Mortgage Loans Contracts and
Contracts Related to Indebtedness
Schedule 4.1.13(a)(vi) . . . Real Property and Personal Property Lease
Contracts
Schedule 4.1.13(a)(vii) . . . Contracts with Labor Unions
Schedule 4.1.13(a)(viii) . . Contracts Disposing of Business Units
Since January 1, 1989
Schedule 4.1.13(a)(ix) . . . Contracts Disposing of Real Property
Since January 1, 1989 in the Amount of
$1,000,000 or More
Schedule 4.1.13(a)(x) . . . . Contracts Between FMI or Acquired
Companies and Affiliates
Schedule 4.1.13(a)(xi) . . . Reinsurance Agreements
Schedule 4.1.13(a)(xii) . . . Agency Agreements
Schedule 4.1.13(a)(xiii) . . Other Material Agreements
Schedule 4.1.14 . . . . . . . Litigation
Schedule 4.1.14(a) . . . . . Claims, Actions, Proceedings
Schedule 4.1.14(b) . . . . . Injunctions, Orders, Judgments
Schedule 4.1.15 . . . . . . . Compliance with Laws
Schedule 4.1.16 . . . . . . . Operations Insurance
Schedule 4.1.17 . . . . . . . Taxes
Schedule 4.1.18 . . . . . . . Affiliate Transactions
Schedule 4.1.19(a) . . . . . Employee Benefit Plans
Schedule 4.1.19(c) . . . . . Post-employment Benefits/ERISA
Schedule 4.1.19(d) . . . . . Compensation Items
Schedule 4.1.20 . . . . . . . Insurance Business
Schedule 4.1.2(a) . . . . . . Insurance Licenses
Schedule 4.1.20(b) . . . . . Insurance Policies
Schedule 4.1.20(c) . . . . . Compliance with Insurance Laws
Schedule 4.1.20(e) . . . . . Insurance Deposits
Schedule 4.1.21 . . . . . . . Reinsurance
Schedule 4.1.22(a) . . . . . Owned Intellectual Property
Schedule 4.1.22(b) . . . . . Intellectual Property Used, but not Owned
vii<PAGE>
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Schedule 4.1.22(c) . . . . . Intellectual Property Licenses
Schedule 4.1.22(d) . . . . . Registered Intellectual Property
Schedule 6.8 . . . . . . . . Allocation of Purchase Price
Schedule 7.1(a)(i) . . . . . FMI Retirees
Schedule 7.1(a)(ii) . . . . . Other Acquired Company Retirees
Schedule 7.1(a)(iii) . . . . Certain Acquired Company Retirees
Schedule 7.1(b) . . . . . . . Executive Officers
Schedule 7.1(c) . . . . . . . Executive Severance Agreements
Schedule 7.1(d) . . . . . . . Supplemental Benefit Agreements
EXHIBITS
Exhibit H Summary Terms of 7.0% Convertible Subordinated Notes Due
2005
Exhibit I-1 Summary Terms of Common Stock of Southwestern Financial
Corporation
Exhibit I-2 Summary Terms of Series A Preferred Stock of Southwestern
Financial Corporation
Exhibit I-3 Summary Terms of Warrants of Southwestern Financial
Corporation
Exhibit J-1 Summary Terms of Common Stock of Southwestern Life
Acquisition Corp.
Exhibit J-2 Summary Terms of 5.5% Preferred Stock of Southwestern
Life Acquisition Corp.
Exhibit K Summary Terms of SWF Registration Rights Agreement
Exhibit L Summary Terms of PennCorp Registration Rights Agreement
Exhibit M Summary Terms of Retained Company Purchase Agreement
viii<PAGE>
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PURCHASE AGREEMENT, dated as of December 1, 1995, among I.C.H.
Corporation, a Delaware corporation ("Seller"), Facilities Management
Installation, Inc., a Delaware corporation ("FMI"), SWL Holding
Corporation, a Delaware corporation ("SWL Holding"), Care Financial
Corporation, a Delaware corporation ("CFC" and, together with FMI and SWL
Holding, the "Selling Subsidiaries"), Southwestern Financial Corporation, a
Delaware corporation ("Buyer"), Southwestern Financial Services
Corporation, a Delaware corporation and a wholly-owned direct subsidiary of
Buyer ("SWFSC"), and PennCorp Financial Group, Inc., a Delaware corporation
("PennCorp").
W I T N E S S E T H:
WHEREAS, Seller owns all of the capital stock of SWL Holding,
CFC and FMI;
WHEREAS, SWL Holding owns all of the capital stock of
Southwestern Life Insurance Company, a Texas stock life insurance company
("SWL"), and SWL owns all of the capital stock of Constitution Life
Insurance Company, a Texas life insurance company ("Constitution Life");
WHEREAS, CFC owns all of the capital stock of Union Bankers
Insurance Company, a Texas stock life insurance company ("UBIC"), and UBIC
owns all of the capital stock of Marquette National Life Insurance Company,
a Kentucky stock life insurance company ("Marquette");
WHEREAS, FMI owns certain assets and provides certain services
to SWL and UBIC and other Subsidiaries of Seller in connection with the
conduct of the Acquired Business (as hereinafter defined);
WHEREAS, prior to the Closing Date (as hereinafter defined),
Seller will cause SWL to declare and pay as a dividend to SWL Holding all
of the outstanding shares of capital stock of Constitution Life (the
"Constitution Life Shares");
WHEREAS, prior to the Closing Date, Seller will cause
Constitution Life to acquire all of the capital stock of UBIC (the "UBIC
Shares") from CFC and issue an $80.0 million surplus debenture (the
"Surplus Debenture") to CFC in consideration therefor;
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WHEREAS, (i) Buyer desires to purchase from SWL Holding, and
SWL Holding desires to sell to Buyer, the Constitution Life Shares and all
the outstanding capital stock of SWL (the "SWL Shares") for aggregate
consideration of $180 million in cash, (ii) Buyer desires to purchase from
CFC, and CFC desires to sell to Buyer, an 87.5% undivided interest in the
Surplus Debenture for consideration of $30 million in cash plus $40 million
principal amount of Notes (as hereinafter defined), (iii) PennCorp desires
to purchase from CFC, and CFC desires to sell to PennCorp, a 12.5%
undivided interest in the Surplus Debenture in consideration of the
PennCorp Shares (as hereinafter defined), and (iv) SWFSC desires to
purchase from FMI and certain of the Retained Companies, and FMI and such
companies desire to sell and assign to SWFSC, certain assets of FMI and
other miscellaneous assets in consideration of the assumption by SWFSC of
the Assumed Liabilities, all upon the terms and conditions set forth
herein;
WHEREAS, after the Closing, Seller will retain ownership of the
Retained Companies (as hereinafter defined) and SWFSC shall provide to
Seller and certain of the Retained Companies certain of the services
formerly provided to such companies by FMI pursuant to the FMI Services
Agreement;
WHEREAS, prior to the execution and delivery of this Agreement,
Seller and each of the Selling Subsidiaries have filed a voluntary petition
for reorganization relief pursuant to Chapter 11 of title 11 of the United
States Code, 11 U.S.C. Sections 101 et seq. (the "Bankruptcy Code") in the
United States Bankruptcy Court for the Northern District of Texas (the
"Bankruptcy Court"), Jointly Administered Case No. 395-36351-RCA-11 styled
In Re I.C.H. Corporation, et al (the "Case") for the purpose, in part, of
consummating the transactions contemplated by this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Definitions
1.1 Definition of Certain Terms. The capitalized terms defined
in this Section 1.1, whenever used in this Agreement (including in the
Schedules), unless otherwise defined in the Agreement, shall have the
respective meanings
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indicated below for all purposes of this Agreement. All references herein
to a Section, Article or Schedule are to a Section, Article or Schedule of
or to this Agreement, unless otherwise indicated.
Acquired Assets: as defined in Section 2.2.
Acquired Business: the life, annuity, health and variable
insurance business and other businesses conducted by the Acquired Companies
as of the date hereof, including, but not limited to, the services
currently provided by FMI to Seller and its Subsidiaries other than non-
investment advisory services provided to Philadelphia American Life
Insurance Company.
Acquired Companies: SWL; UBIC; Marquette; Constitution
Life; I.C.H. Funding Corp., a Delaware corporation; Quail Creek Recreation,
Inc., an Arizona corporation; and Quail Creek Water Company, Inc., an
Arizona corporation.
Acquired Company Employees: as defined in Section 7.1.
Acquired Company Retirees: as defined in Section 7.1.
Acquired Insurance Companies: SWL, UBIC, Constitution Life
and Marquette.
Acquired Shares: the SWL Shares and the Constitution Life
Shares, collectively.
Acquisition Proposal: as defined in Section 5.6(b).
Additional Section 338 Form: as defined in Section
6.5(b)(iii).
Affiliate: of a Person means a Person that, directly or
indirectly through one or more intermediaries, controls, is controlled by,
or is under common control with, the first Person. "Control" (including
the terms "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a person, whether through the
ownership of voting securities, by contract, as trustee or executor, or
otherwise.
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Affiliated Group: any combined, consolidated, affiliated or
unitary Tax group of which any Acquired Company is or has been a member,
including without limitation the affiliated groups filing consolidated
returns for Federal income tax purposes, of which MAL was the common parent
for Tax years through 1991, and of which Seller was the common parent for
the Tax years after 1991.
Affiliated Tax Year: any taxable period of an Affiliated
Group during which any Acquired Company was a member of such Affiliated
Group.
Agreement: this Purchase Agreement (including the Schedules
thereto), as amended from time to time.
Amended and Restated Form A: collectively, the Amended and
Restated Form A and the Second Amended and Restated Form A of Buyer and
PennCorp as filed with the Texas Department of Insurance on or about
November 20, 1995 and December 4, 1995, respectively.
Amended Retiree Program: as defined in Section 7.5(b).
Applicable Insurance Laws: as defined in Section 4.1.12(b).
Applicable Law: all applicable provisions of all
(i) constitutions, treaties, statutes, laws (including the common law),
rules, regulations, ordinances, codes or orders of any Governmental
Authority and (ii) orders, decisions, injunctions, judgments, awards and
decrees of or agreements with any Governmental Authority.
Approval Order: as defined in Section 3.1.2(a).
Associate: as defined in Rule 12b-2 of the Exchange Act.
Assumed Contracts: as defined in Section 2.5.
Assumption Documents: as defined in Section 3.3.6.
Assumed Liabilities: as defined in Section 2.5.
Average PennCorp Trading Price: the average of the closing
sales prices of the PennCorp Common Stock on the
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NYSE or, if the PennCorp Common Stock is not then traded on the NYSE, on
the principal national or regional stock exchange on which the PennCorp
Common Stock is listed or, if the PennCorp Common Stock is not listed on a
national or regional stock exchange, as reported by the Nasdaq Stock Market
and if not so reported, then the average of the bid and asked prices for
the PennCorp Common Stock as reported by the National Quotation Bureau
Incorporated, for each of the ten (10) trading days ending on the
penultimate trading day preceding the date on which the PennCorp
Registration Statement is declared effective by the SEC.
AVR: the asset valuation reserve required to be established
under SAP as a liability on a life insurer's SAP Statements.
Bankruptcy Code: as defined in the Recitals to this
Agreement.
Bankruptcy Court: as defined in the Recitals to this
Agreement.
Bankruptcy Resolution Date: means the date on which a Final
Order of the Bankruptcy Court has been entered dismissing, closing or
otherwise terminating the Case.
BL of NY: Bankers Life Insurance Company of New York, a New
York stock life insurance company.
Books and Records: all books, records, files and data,
certificates and other documents reasonably related to the conduct of the
Acquired Business or the ownership of the Acquired Assets, all sales and
promotional literature, or copies thereof, used or held for use in
connection with the conduct of the Acquired Business, and all applications
for policies of insurance and annuity contracts (including backup
documentation and work papers) submitted in connection with the Acquired
Business.
Bridge Period: as defined in Section 6.3.
Business Day: a day other than a Saturday, Sunday or other
day on which commercial banks in Dallas, Texas or New York City are
authorized or required to close by Applicable Law.
Business Employees: as defined in Section 4.1.19(a).
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Buyer: as defined in the Preamble to this Agreement.
Buyer's Deposit: as defined in Section 2.11.
Buyer Indemnitees: as defined in Section 8.1(a).
Buyer Subsidiary: a wholly-owned direct or indirect
subsidiary of Buyer.
Buyer's Savings Plan: as defined in Section 7.4.
Buyer Welfare Plans: as defined in Section 7.5(a).
Case: as defined in the Recitals to this Agreement.
Cash Equivalents: (1) negotiable certificates of deposit in
a federally insured commercial bank incorporated under the laws of the
United States or any state thereof and subject to supervision and
examination by federal and/or state authorities so long as the commercial
paper or other short-term debt obligations of such commercial bank have a
short-term credit rating of at least "Prime-1" by Moody's Investors
Service, Inc. ("Moody's") or "A-1" by Standard & Poor's Corporation
("S&P"), (2) commercial paper or similar obligations rated "Prime 1" by
Moody's or "A-1" by S&P, (3) obligations of or guaranteed by the United
States (one-half of the foregoing investments, measured by principal amount
at the time of investment, to have a maturity of not more than three months
from the date of investment, one-half of the foregoing investments,
measured by principal amount at the time of investment, to have a maturity
of not more than twelve months from the date of investment), (4) an
interest bearing account bearing a market rate of interest maintained at a
federally insured depositary institution or trust company incorporated
under the laws of the United States or any state thereof and subject to
supervision and examination by federal and/or state authorities so long as
the commercial paper or other short-term debt obligations of such
depositary institution or trust company have a short-term credit rating of
at least "Prime-1" by Moody's or "A-1" by S&P, (5) money market funds or
money market mutual funds (other than closed-end funds) which maintain a
constant net asset value and have at the
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time of such investment a rating by Moody's or S&P at least equivalent to
"A", or (6) such other investment specifically approved in writing by
Buyer.
CFC: as defined in the Recitals to this Agreement.
Claim: as defined in Section 101 of the Bankruptcy Code.
Claim Notice: as defined in Section 8.1(d)(i).
Closing: as defined in Section 2.6.
Closing Date: as defined in Section 2.6.
Code: the Internal Revenue Code of 1986, as amended.
Company Return: any Tax Return required to be filed with
any taxing authority and required to include any information regarding any
member of the Related Group or the business or assets thereof (including,
without limitation, information returns and reports required to be filed
with respect to payments to employees, policyholders or other persons).
Compensation Items: as defined in Section 7.2(c)(i).
Compromise Notice: as defined in Section 8.1(d)(v).
Confidential Disclosure Schedule: as defined in Section
9.3.
Constitution Life: as defined in the Recitals to this
Agreement.
Constitution Life Shares: as defined in the Recitals to
this Agreement.
Contract Costs: as defined in Section 2.9(a).
Contracts: as defined in Section 4.1.13(a).
December 31 GAAP Statements: as defined in Section
4.1.7(a)(i).
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December 31 SAP Statements: as defined in Section
4.1.7(a)(iii).
Deposit: as defined in Section 4.1.20(e).
Disclosure Schedule and Disclosure Schedules: as defined in
Section 9.3.
Effective Date: the date on which the PennCorp Registration
Statement is declared effective by the SEC.
Election Date: as defined in Section 8.1(d)(v).
Eligible Executive Officer: an Executive Officer who either
(i) does not receive an offer of employment with Buyer or SWFSC, effective
as of the Closing Date, or (ii) receives and rejects an offer of such
employment, which offer is (x) for a position and with duties and
responsibilities that are materially less favorable to such Executive
Officer than his position, duties and responsibilities with Seller or FMI
immediately prior to the Closing Date, (y) at a base rate of compensation
or with bonus or benefits that constitute a material reduction in the base
compensation, bonus or benefits available to such Executive Officer in
connection with his employment with Seller or FMI immediately prior to the
Closing Date or (z) subject to a requirement that such Executive Officer
relocate outside of the Dallas-Fort Worth metropolitan area.
Employees: as defined in Section 7.1.
Environmental Claim: as defined in Section 8.1(e)(ii).
Environmental Claim Notice: as defined in Section
8.1(e)(ii).
Environmental Indemnity: as defined in Section 8.1(a)(vi).
Environmental Law: any Federal, State, local or foreign
statute, law, rule, regulation, ordinance, code, permit, policy, order,
judgment, injunction, award, decree or writ or rule of common law now in
effect and in each case as amended to date and any published judicial or
administrative interpretation thereof relating to Hazardous Materials,
environmental matters, the protection of public
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health and safety from environmental or health concerns or otherwise
relating to environmental conditions except for any such judicial or
administrative interpretation published after the Closing Date that effects
a material change in the meaning of an Environmental Law as generally
accepted as of the Closing Date.
Environmental Release: any releasing, disposing,
discharging, injecting, spilling, leaking, leaching, pumping, dumping,
emitting, escaping, emptying, seeping, dispersal, migration, transporting,
placing and the like, including without limitation, the moving of any
materials through, into or upon, any land, soil, surface water, ground
water or air, or otherwise entering into the environment.
ERISA: the Employee Retirement Income Security Act of 1974,
as amended.
Escrow Agent: as defined in Section 8.2(a).
Escrow Agreement: as defined in Section 8.2(a).
Escrow Amount: the amount of funds deposited in the
Indemnity Escrow Account in accordance with Section 8.3.
Estate Property: as defined in Section 3.1.2(a).
Exchange Act: the Securities Exchange Act of 1934, as
amended.
Excluded Assets: as defined in Section 2.3.
Excluded Liabilities: as defined in Section 2.4.
Excluded Liabilities Indemnity: as defined in Section
8.1(a)(iii).
Exclusivity Period: the period from (and including) the
date of this Agreement to (and including) the earlier of the Closing Date
and the date of termination of this Agreement in accordance with Section
10.1.
Execution Date: the date of the execution of this
Agreement.
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Executive Officers: as defined in Section 7.1.
Executive Severance Arrangements: as defined in Section
7.1.
Executive Severance Benefits: All compensation and benefits
(including all employment tax liabilities in respect thereof) required to
be provided under the terms of the Executive Severance Arrangements.
Executory Contracts: as defined in Section 3.1.2(b).
Existing Reinsurance Agreements: as defined in Section
4.1.21.
Failed QSP: as defined in Section 6.5(e)(ii).
Failed QSP Losses: as defined in Section 6.5(e)(ii).
Final Order: an order or judgment the operation or effect
of which has not been stayed and as to which order or judgment (or any
revision, modification or amendment thereof), the time to appeal or seek
review or rehearing has expired and as to which no appeal or petition for
review or rehearing has been taken or is pending.
First Notice: as defined in Section 5.15(b).
FMI: as defined in the Preamble to this Agreement.
FMI Services Agreement: the Amended and Substituted
Management and Service Agreement, dated September 14, 1987, by and between
SLC and FMI, as amended and as clarified.
Form 8023: as defined in Section 6.5(b)(i).
Fund: any trust, separate account or other entity
registered under the Investment Company Act which invests funds held in the
general account or the separate accounts of any member of the Related
Group, or with respect to which any member of the Related Group provides
investment advisory services, and for which prospectus or other offering
material has stated an intention to qualify as a RIC.
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Fund America Certificates: as defined in Section 5.15(a).
Fund America Purchase Date: as defined in Section 5.15(b).
GAAP: as defined in Section 4.1.7(b).
GAAP Financial Statements: financial statements prepared in
accordance with generally accepted accounting principles which are audited
by Coopers & Lybrand L.L.P. and are accompanied by their report thereon and
are included in Seller's Annual Report on Form 10-K.
GAAP Quarterly Financial Statements: financial statements
prepared in accordance with generally accepted accounting principles which
are included in Seller's Quarterly Reports on Form 10-Q.
Governmental Approvals: as defined in Section 4.1.3.
Governmental Authority: any nation or government, any State
or other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government, including, without limitation, any court,
government authority, agency, department, board, commission or
instrumentality of the United States, any State of the United States or any
political subdivision thereof, and any tribunal or arbitrator(s) of
competent jurisdiction, and any "self-regulatory organization" as defined
in Section 3(a)(26) of the Exchange Act.
Hazardous Materials: any hazardous or toxic chemical,
waste, byproduct, pollutant; contaminant, compound, product or substance,
including, without limitation, asbestos, polychlorinated biphenyls,
petroleum (including crude oil or any fraction thereof), and any material
the exposure to, or manufacture, possession, presence, use, generation,
storage, transportation, treatment, release, disposal, abatement, cleanup,
removal, remediation or handling of which, is prohibited, controlled or
regulated by any Environmental Law, including, but not limited to
substances defined as "extremely hazardous substances," "hazardous
substances," "hazardous materials," "hazardous waste" or "toxic substances"
in the Comprehensive Environmental Response, Compensation, and Liability
Act of
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1980, as amended, 42 U.S.C. Section 6901, et seq. (the "Superfund Law");
the Emergency Planning and Community Right-To-Know Act, 42 U.S.C. Sections
11001-11050; the Hazardous Materials Transportation Act, 49 U.S.C. Section
1801, et seq.; the Resource Conservation and Recovery Act; 42 U.S.C.
Section 6901 et seq.; and in similar statutes promulgated by the States in
which the Real Property is located; and in the regulations adopted pursuant
to such statutes.
IMR: The interest maintenance reserve required to be
established by SAP as a liability on a life insurer's SAP Statements.
Indemnified Party: as defined in Section 8.1(d).
Indemnifying Party: as defined in Section 8.1(d).
Indemnity Escrow Account: as defined in Section 8.2(a).
Indemnity Notice: as defined in Section 8.1(d)(viii).
Initial Purchase Price: as defined in Section 2.6.3(a).
Insurance License: as defined in Section 4.1.20(a).
Integrity: Integrity National Life Insurance Company, a
Pennsylvania stock life insurance company.
Intellectual Property: all technology, know-how and trade
secrets relating to or used in the Acquired Business, including the
computer programs and software relating to or used in the Acquired
Business, together with the operating codes, source codes, updates,
upgrades, modifications, enhancements and any user and technical
documentation or utilities with respect thereto, and all patents, patent
licenses and patent applications, copyrights and copyright applications and
other intellectual property rights relating to the Acquired Business and
the trademarks, trade names, service marks and logos (including any
registration and any application for registration of any of the foregoing),
relating to or used in the Acquired Business.
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Intellectual Property Licenses: as defined in Section
4.1.22.
Investment Advisers Act: the Investment Advisers Act of
1940, as amended.
Investment Company Act: the Investment Company Act of 1940,
as amended.
IRS: the Internal Revenue Service.
June 30 GAAP Statement: as defined in Section 4.1.7(a)(ii).
June 30 SAP Statements: as defined in Section 4.1.7(a)(iv).
Knightsbridge: Knightsbridge Capital Fund I, L.P.
Leased Real Properties: as defined in Section 4.1.10(a)(i).
Liens: liens, security interests, options, rights of first
refusal, easements, mortgages, charges, debentures, indentures, deeds of
trust, rights-of-way, restrictions, agreements, encroachments, licenses,
leases, permits, security agreements, or any other encumbrances or other
restrictions or limitations on the use of real or personal property or
irregularities in title thereto.
Litigation: any action, cause of action, claim, demand,
suit, proceeding, citation, summons, subpoena or investigation of any
nature, civil, criminal, regulatory or otherwise, in law or in equity,
pending by or before any Governmental Authority.
Litigation Indemnity: as defined in Section 8.1(a)(v).
Losses: any and all liabilities, obligations, commitments,
losses, fines, penalties, sanctions, costs (including court costs but
excluding costs and expenses of in-house experts and other personnel),
expenses, interest, deficiencies or damages (whether absolute, accrued,
conditional or otherwise and whether or not resulting from third-party
claims) that are quantifiable in monetary terms, including reasonable out-
of-pocket expenses and reasonable
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fees and expenses of attorneys, accountants, consultants and expert
witnesses (excluding costs and expenses of in-house experts and other
personnel) incurred in the investigation or defense of claims asserted
against Buyer or any Acquired Company by a third party for which Seller is
obligated to indemnify Buyer or any Acquired Company pursuant to Article
VIII hereof or in asserting any of the respective rights of Buyer
Indemnitees or Seller Indemnitees under Section 8.1 or, in the case of the
Environmental Indemnity, subject to the limitations set forth in the final
paragraph of Section 8.1(a) and in Section 8.1(e), in performing pre-
remedial studies and investigations or post-remedial monitoring and care in
circumstances in which Buyer has a reasonable suspicion of an Environmental
Release or threatened Environmental Release.
MAL: Modern American Life Insurance Company, a Missouri
stock life insurance company.
March 31 GAAP Statement: as defined in Section
4.1.7(a)(ii).
March 31 SAP Statements: as defined in Section
4.1.7(a)(iv).
Marquette: as defined in the Recitals to this Agreement.
Material Adverse Effect: any event, occurrence, change in
facts, conditions or other change or effect materially adverse to the
business, operations, results of operations or condition (financial or
otherwise) of the Acquired Companies taken as a whole, provided that the
filing of the voluntary bankruptcy petition and subsequent bankruptcy
proceedings contemplated hereby shall not in and of themselves be deemed to
constitute a Material Adverse Effect.
Mortgage Loans: as defined in Section 4.1.10(b)(i).
Neutral Accountants: A neutral accounting firm of national
standing jointly designated by independent accounting firms acting for
Buyer and Seller, respectively.
New SWFSC Employees: as defined in Section 7.1.
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Non-Assignable Assumed Contracts: as defined in Section
2.9(a).
Non-Assignable Assumed Contracts and Non-Assignable
Intellectual Property Licenses Indemnity: as defined in Section
8.1(a)(vii).
Non-Assignable Intellectual Property Licenses: as defined
in Section 2.10.
Notes: as defined in Section 2.6.3.
Note Indenture: as defined in Section 2.6.3.
Notice Period: as defined in Section 8.1(d)(ii).
NYSE: shall mean the New York Stock Exchange, Inc.
Operating Expenses: operating expenses of the Acquired
Insurance Companies of the type required to be reported on line 22 of the
Summary of Operations in the SAP Annual Statements of such companies, plus
fees of FMI for services to the Acquired Insurance Companies relating to
management of investments that conform to the category of investment
expenses included in line 11 of exhibit 2 of the SAP Annual Statements of
the Acquired Insurance Companies, to the extent such fees exceed FMI's
actual costs of providing such services.
Owned Intellectual Property: as defined in Section 4.1.22.
Owned Real Properties: as defined in Section 4.1.10(a)(i).
PennCorp Common Stock: as defined in Section 2.6.5.
PennCorp Registration Rights Agreement: the registration
rights agreement to be entered into between PennCorp, CFC, SWL Holding and
Seller as contemplated by Section 3.1.7.
PennCorp Registration Statement: the registration statement
to be filed with the SEC pursuant to the PennCorp Registration Rights
Agreement.
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PennCorp Shares: as defined in Section 2.6.5.
Permitted Liens: (i) Liens for Taxes or assessments not yet
due and payable or which are being contested in good faith and by
appropriate proceedings and (ii) mechanics, suppliers, carriers or other
similar Liens arising in the ordinary course of the Acquired Business.
Permitted Owned Real Property Liens: as defined in Section
4.1.10(a)(i).
Permitted Real Property Liens: as defined in Section
4.1.10(a)(i).
Person: any natural person, firm, partnership, association,
corporation, company, business trust, trust, Governmental Authority or
other entity.
Phase I Report: as defined in Section 4.1.11.
Plans: as defined in Section 4.1.19(a).
Policies: as defined in Section 4.1.20(b).
Prohibited Agents: as defined in Section 5.9(a).
Purchase Price: as defined in Section 2.6.3.
Qualified Stock Purchase: a "qualified stock purchase"
within the meaning of Section 338(d)(3) of the Code.
Real Properties: as defined in Section 4.1.10(a)(i).
Reasonable Environmental Expense: as defined in Section
8.1(e).
Related Agreements: the Escrow Agreement, the SWFSC Leasing
Agreements, the Assumption Documents, the Transfer Documents, the Retained
Company Purchase Agreement, the Note Indenture, the PennCorp Registration
Rights Agreement and the SWF Registration Rights Agreement.
Related Group: the Acquired Companies, SLC Financial,
Integrity, BL of NY and FMI.
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Related Persons: as defined in Section 4.1.19(a).
REO: REO Holding Corp., an Illinois corporation.
REO Shares: All the capital stock of REO beneficially owned
by SWL.
Response Notice: as defined in Section 8.1(d)(ii).
Retained Companies: SWL Holding; CFC; FMI; SLC Financial;
Western Pioneer Life Insurance Company, a Kentucky stock life insurance
corporation; MAL; Bankers Multiple Life Insurance Company, an Illinois
stock property and casualty insurance company; BML Agency, Inc., an
Illinois corporation; Philadelphia American Life Insurance Company, a
Pennsylvania stock life insurance corporation; Philadelphia American
Property Company, a Texas corporation; REO; and all other Subsidiaries of
Seller other than the Acquired Companies.
Retained Company Purchase Agreement: the agreement to be
entered into by Knightsbridge and Seller relating to the purchase of
certain Retained Companies.
Retention Bonus: as defined in Section 7.2(c)(i).
RIC: as defined in Section 4.1.17(c).
Sales Practices Claims: as defined in Section 8.1(a)(v).
SAP: statutory accounting practices which are prescribed or
permitted by the departments of insurance in the respective States of
domicile of each of the Acquired Insurance Companies and which are used to
prepare the SAP Annual Statements, SAP Audited Statements and SAP Quarterly
Statements filed by each of the Acquired Insurance Companies in each State
in which they are licensed.
SAP Annual Statements: financial statements prepared by an
insurance company as of each December 31 in accordance with SAP and
required to be filed on or before each March 1 with the departments of
insurance of each State in which an insurance company is licensed.
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SAP Audited Statements: financial statements prepared by an
insurance company in accordance with SAP and audited by an independent
certified public accountant.
SAP Quarterly Statement: an abbreviated form of the SAP
Annual Statement which is required to be filed within 45 days after the end
of each of the first three calendar quarters of each calendar year.
Savings Plan Transfer Amount: as defined in Section 7.4.
Scheduled Intellectual Property: as defined in Section
2.2(b)(ii).
SEC: the Securities and Exchange Commission.
SEC Documents: as defined in Section 4.1.8(a).
Second Notice: as defined in Section 5.15(c).
Section 338 Forms: as defined in Section 6.5(b)(i).
Section 338(h)(10) Elections: as defined in Section 6.5(a).
Securities Act: the Securities Act of 1933, as amended.
Seller: as defined in the Preamble to this Agreement.
Seller Indemnitees: as defined in Section 8.1(b).
Seller Losses: any and all liabilities, obligations,
commitments, losses, fines, penalties, sanctions, costs (including court
costs but excluding costs and expenses of in-house experts and other
personnel), expenses, interest, deficiencies or damages (whether absolute,
accrued, conditional or otherwise and whether or not resulting from third-
party claims) that are quantifiable in monetary terms, including reasonable
out-of-pocket expenses and reasonable fees and expenses of attorneys,
accountants, consultants and expert witnesses (excluding costs and expenses
of in-house experts and other personnel) incurred in the investigation or
defense of claims asserted
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against any of Seller, any Retained Company or, prior to closing, any
Acquired Company by a third party for which Buyer and/or PennCorp is
obligated to indemnify any of Seller or the Retained Companies pursuant to
Article VI, Article VIII or Article X hereof.
Seller Representatives: as defined in Section 5.6(a).
Sellers Employee Benefit Plan: as defined in Section 7.1.
Seller's Savings Plan: as defined in Section 7.4.
Seller Welfare Plans: as defined in Section 7.5(a).
Selling Subsidiaries: as defined in the Preamble to this
Agreement.
Senior Executive Retention Arrangement: as defined in
Section 7.1.
September 30 GAAP Statement: as defined in Section
4.1.7(a)(ii).
September 30 SAP Statement: as defined in Section
4.1.7(a)(iv).
Settlement Sum: as defined in Section 8.1(d)(v).
Shinnecock Purchase Agreement: means the Purchase
Agreement, dated as of October 9, 1995, as amended as of November 17, 1995,
by and among Seller, SWL Holding, CFC, FMI, Shinnecock Holdings Inc. and
Shinnecock Services Corp.
SLC Bonds: the 11 1/4% Subordinated Notes due 1996 issued
by Seller.
SLC Financial: SLC Financial Services, Inc., a Delaware
corporation.
Special Indemnities: the Tax Indemnity, the Litigation
Indemnity, the Excluded Liabilities, the
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Environmental Indemnity and the Non-Assignable Assumed Contracts Indemnity.
Stub Period: as defined in Section 6.1(a).
Stub Period Savings: the excess, if any, of clause (ii)
over clause (i) of the definition of Stub Period Tax Amount.
Stub Period Tax Amount: the excess, if any, of (i) the
aggregate amount of the Taxes actually paid by all Affiliated Groups and,
with respect to any separate Tax Returns filed by the Acquired Companies,
by the Acquired Companies, over (ii) the aggregate amount of Taxes that
would have been paid by the Affiliated Groups and, with respect to any
separate Tax Return filed by the Acquired Companies, by the Acquired
Companies, determined without regard to Tax Items attributable to the
business operations of the Acquired Companies during the Stub Period other
than (x) Tax Items attributable to transactions not in the ordinary course
of business, (y) capital gains and losses, and (z) Tax Items attributable
to transactions that occur, or are deemed to occur, on the Closing Date.
The amounts described in clauses (i) and (ii) shall be determined with
respect to all taxable periods or portions thereof ending on or before the
Closing Date, as of the Tax Expiration Date.
Subsidiary: with respect to any person (the "parent"), any
corporation, association, joint venture, partnership or other business
entity of which securities or other ownership interests representing more
than 50% of the ordinary voting power or beneficial interest are, at the
time as of which any determination is being made, owned or controlled by
the parent or one or more subsidiaries of the parent.
Supplemental Executive Arrangements: as defined in Section
7.1.
Supplemental Executive Benefits: all compensation and
benefits required to be provided under the terms of the Supplemental
Executive Arrangements that remain unpaid as of the Closing Date.
Surplus Debenture: as defined in the Recitals to this
Agreement.
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SWF Registration Rights Agreement: the registration rights
agreement to be entered into by Buyer, CFC, SWL Holding and Seller as
contemplated by Section 3.1.7.
SWFSC: as defined in the Preamble to this Agreement.
SWFSC Leasing Agreements: the Employee Leasing and Data
Processing Capacity Agreements, to be dated as of the Closing Date, between
SWFSC and Seller and certain of the Retained Companies, each to be
substantially in the form of Exhibit B to the Shinnecock Purchase Agreement
(with such additional changes thereto as are necessary to reflect the terms
of the transactions contemplated hereby as mutually agreed by SWFSC and
Seller).
SWL: as defined in the Recitals to this Agreement.
SWL Group: as defined in Section 6.5(e).
SWL Holding: as defined in the Preamble to this Agreement.
SWL Shares: as defined in the Recitals to this Agreement.
Tax: any Federal, State, local or foreign income, profits,
capital, premium, franchise, occupational, production, severance, gross
receipts, value added, sales, use, excise, real and personal property, ad
valorem, occupancy, stamp, transfer, employment, unemployment insurance,
social security, disability, workers' compensation, withholding or other
tax, duty or other similar governmental charge (including all interest and
penalties thereon and additions thereto).
Tax Expiration Date: the expiration of the statute of
limitations for all taxable periods through the taxable period that
includes the Closing Date of any and all Affiliated Groups which file or
have filed consolidated returns for Federal income tax purposes of which
Seller or MAL is the common parent or, if earlier, the first day after
(i) the date on which all amounts due pursuant to a closing agreement under
section 7121 or 7122 of the Code with the IRS or (ii) the date on which all
amounts due pursuant to a final, nonappealable judgment issued by the
Bankruptcy Court
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or any other court of competent jurisdiction, in each case finally
determining all Federal income tax liability of such Affiliated Groups for
all such taxable periods for which the statute of limitations remains open,
and, in each case on which all State, local or foreign Tax liabilities of
any member of such Affiliated Groups arising as a result of such closing
agreement or judgment, have been fully satisfied plus 90 days.
Tax Indemnity: as defined in Section 8.1(a)(iv).
Tax Item: any item of income, gain, loss, deduction or
credit.
Tax Return: any Federal, State, local or foreign return,
report, declaration or form (including, without limitation, information
returns) relating to Taxes.
Texas Property Tax Lien: with respect to any real or
tangible personal property, any lien that attaches to such property on
January 1 of each year under section 32.01 of the Texas Property Tax Code.
Terminated Intercompany Agreements: as defined in Section
3.2.7(a).
Third Party: as defined in Section 5.6(a).
Third Party Claim: as defined in Section 8.1(d)(i).
Transfer Documents: as defined in Section 3.2.14.
Treasury Regulations: the Treasury Regulations promulgated
with respect to Federal Taxes.
UBIC: as defined in the Recitals to this Agreement.
ARTICLE II
Sale of Stock and Assets; Closing
2.1 Pre-Closing Transactions; Sale and Purchase of the Acquired
Shares and Surplus Debenture.
(a) Prior to the Closing:
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(i) Seller will cause SWL to distribute the Constitution
Life Shares to SWL Holding;
(ii) Seller will cause Constitution Life to distribute
$21,500,000 aggregate principal amount of SLC Bonds to SWL Holding;
(iii) Seller will cause (x) CFC to sell to Constitution
Life, and Constitution Life to purchase from CFC, the UBIC Shares and
(y) Constitution Life to issue the Surplus Debenture to CFC for and
in consideration of the UBIC Shares; and
(iv) SWL Holding will (or will cause another Retained
Company to) purchase from SWL, and Seller will cause SWL to sell, the
REO Shares for and in consideration of $4,300,000 in cash.
(b) Subject to the terms and conditions hereof, and in
reliance upon the representations, warranties and covenants contained
herein, at the Closing, the following events shall take place in the
following order:
(i) SWL Holding will sell, and Buyer will purchase, the
SWL Shares;
(ii) SWL Holding will sell, and Buyer will purchase, the
Constitution Life Shares;
(iii) CFC will sell, and Buyer will purchase, an undivided
87.5% interest in the Surplus Debenture; and
(iv) CFC will sell, and PennCorp will purchase, an
undivided 12.5% interest in the Surplus Debenture.
2.2 Sale and Purchase of Acquired Assets. Subject to the terms
and conditions hereof, and in reliance upon the representations, warranties
and covenants contained herein, at the Closing, Buyer shall cause SWFSC to
purchase, in consideration for the Assumed Liabilities, the following
tangible and intangible assets from:
(a) Seller and the Retained Companies (other than FMI),
and Seller and the Retained Companies (other than FMI) shall (and Seller
shall cause the Retained Companies (other than FMI) to) sell, convey,
transfer, assign and deliver to SWFSC, (i) all rights to causes of action,
lawsuits, judgments, claims and demands of any nature
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available to or being pursued by Seller or any Retained Company (other than
FMI) relating to the Acquired Business or the ownership, use, function or
value of any Acquired Asset, whether arising by way of counterclaim or
otherwise, but only to the extent that such causes of action, lawsuits,
judgments, claims and demands do so relate; provided, that, except as
provided in Section 6.9, any income Tax refund claim pursued by Seller or
any Retained Company (other than FMI), in each case as common parent of an
Affiliated Group, shall not be an Acquired Asset; (ii) all guarantees,
warranties, indemnities and similar rights in favor of Seller or any
Retained Company (other than FMI) relating to an Acquired Asset, but only
to the extent such rights do so relate; (iii) all of Seller's and the
Retained Companies' (other than FMI's) right, title and interest in and to
all of the tangible and intangible assets set forth on Schedule 2.2(a); and
(iv) all rights of Seller and the Retained Companies (other than FMI) under
the Assumed Contracts; and
(b) FMI, and FMI shall (and Seller shall cause FMI to)
sell, convey, transfer, assign and deliver to SWFSC all of FMI's right,
title and interest in and to all of the tangible and intangible assets
relating to, used, or held for use, or reasonably necessary or required in
the operation of the Acquired Business, other than the Excluded Assets (all
such assets, together with the assets referred to in clause (a) above,
being the "Acquired Assets"), including, without limitation, all those
items in the following categories that conform to the definition of the
term "Acquired Assets":
(i) all computer and office equipment, inventory,
furnishings, furniture, vehicles and other tangible personal
property, including, without limitation, such tangible personal
property listed on Schedule 2.2(b)(i);
(ii) all Intellectual Property, including, without
limitation, the Intellectual Property listed on Schedule 2.2(b)(ii)
(the "Scheduled Intellectual Property");
(iii) all rights to causes of action, lawsuits,
judgments, claims and demands of any nature available to or being
pursued by FMI, relating to the Acquired Business or the ownership,
use, function or value of any Acquired Asset, whether arising by way
of counterclaim or otherwise; provided, that, except as
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provided in Section 6.9, any income Tax refund claim pursued by FMI
as common parent of an Affiliated Group, shall not be an Acquired
Asset;
(iv) all guarantees, warranties, indemnities and
similar rights in favor of FMI relating to any Acquired Asset;
(v) all Books and Records relating to the Acquired
Business;
(vi) all personnel records and files relating to New
SWFSC Employees; and
(vii) all rights of FMI under the Assumed Contracts.
2.3 Excluded Assets. Anything herein to the contrary
notwithstanding, the Acquired Assets shall not include, and neither Buyer
nor SWFSC shall purchase, any of Seller's and any Retained Company's rights
in the following assets (the "Excluded Assets"):
(a) subject to Section 2.5(b), all cash and cash
equivalents;
(b) all casualty, liability or other insurance policies
owned by or obtained on behalf of Seller and any Retained Company and
all claims and rights under any such insurance policies in respect of
the Excluded Liabilities or Excluded Assets;
(c) any causes of action, judgments, claims or demands of
whatever nature except to the extent related to the Acquired Assets
or the Assumed Liabilities;
(d) the certificate of incorporation, By-Laws and, except
for those related to the Acquired Assets or the Assumed Liabilities,
the Books and Records of the Seller and any Retained Company;
provided that Buyer shall have reasonable access to, and shall be
entitled to make copies of, such Books and Records for reasonable
business purposes (such as litigation or tax audits) upon prior
written notice to Seller;
(e) contracts, loans, licenses and other agreements that
are not Assumed Contracts;
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(f) subject to Section 2.5(b), all notes and accounts
receivable;
(g) all owned and leased real property;
(h) except to the extent expressly assumed by Buyer
pursuant to Article VII, all Plans and related assets and rights with
respect thereto; and
(i) assets other than the Acquired Assets, including,
without limitation, those listed on Schedule 2.3 hereof.
2.4 Excluded Liabilities. Except to the extent provided in
Section 2.5 hereof, notwithstanding anything to the contrary in this
Agreement, neither Buyer, SWFSC nor any Buyer Subsidiary or Acquired
Company shall assume any liabilities, obligations or commitments of Seller
or any Retained Company including FMI (or any predecessors thereof),
whether absolute, accrued, contingent, known or unknown or otherwise,
whether or not based on or arising out of or in connection with the
Acquired Business or Seller's or any Retained Company's including FMI's (or
such predecessors') ownership, possession, use or operation of the Acquired
Assets, on or prior to the Closing Date, including, without limitation, any
liabilities with respect to Taxes (the "Excluded Liabilities").
2.5 Assumed Liabilities; Funding of Certain Assumed Liabilities.
(a) Subject to the terms and conditions set forth herein, at the Closing,
Buyer shall cause SWFSC to assume and agree to pay, perform and discharge,
in a timely manner and in accordance with the terms thereof, all
liabilities, obligations and commitments (the "Assumed Liabilities")
(i) (A) of FMI that arise after the Closing Date under the contracts,
leases, licenses and other agreements to which FMI is a party and which are
listed in Schedule 2.5(a)(i), (B) of Seller or any Retained Company (other
than FMI) that arise after the Closing Date under the contracts, leases,
licenses and agreements listed in Schedule 2.5(a)(ii) (together with the
contracts, leases, licenses and the agreements listed in Schedule
2.5(a)(i), the "Assumed Contracts") which are assigned to SWFSC, but
excluding, in each case, any liability of Seller or such Retained Company
including FMI for breach, or for any event, occurrence, condition or act
which, with the giving of notice, the lapse of time or both, would result
in breach, of any of the Assumed Contracts to the extent such breach,
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event, occurrence, condition or act existed on or prior to the Closing
Date, (ii) solely to the extent expressly assumed pursuant to Article VII,
of FMI in respect of New SWFSC Employees, Acquired Company Retirees and
Executive Officers, and (iii) in respect of trade accounts payable as of
the Closing Date in respect of the Acquired Business to the extent set
forth on Schedule 2.5(b) delivered at the Closing Date, and (C) with
respect to FICA Taxes but only to the extent such FICA Taxes are reserved
for on Schedule 4.1.19(d).
(b) On the Closing Date, FMI shall (or Seller shall cause
a Retained Company other than FMI to) transfer to SWFSC assets consisting
of (A) cash, (B) other liquid assets, (C) furniture, fixtures and
capitalized software of FMI at their depreciated value as of the Closing
Date, and (D) the group annuity and life insurance contracts intended to
fund the deferred compensation and life insurance liabilities assumed by
Buyer pursuant to Article VII which for purposes of this Section 2.5(b)
shall have a value equal to the cash value of all such contracts as of the
Closing Date, the sum of which equals in the aggregate the sum of (i) the
amount accrued on Schedule 4.1.19(d), updated as required under Section
7.2(c)(i), for (x) Compensation Items and (y) short-term disability
compensation or benefits in respect of the active Acquired Company
Employees who become New SWFSC Employees, and (ii) the amount accrued on
Schedule 2.5(b) for trade accounts payable as of the Closing Date in
respect of the Acquired Business.
2.6 Closing. The closing of the transactions contemplated
hereby (the "Closing") will take place at the offices of Winstead
Sechrest & Minick P.C., 5400 Renaissance Tower, 1201 Elm Street, Dallas,
Texas 75270 at 10:00 A.M. Dallas time on the first Business Day (the
"Closing Date") following the satisfaction (or waiver) of the closing
conditions set forth in Article III. At the Closing, the following shall
occur:
2.6.1 Delivery of Acquired Shares and Surplus Debenture.
SWL Holding shall deliver to Buyer stock certificates representing the
Acquired Shares, free and clear of any Liens and Claims (other than Liens
or Claims contemplated by the Assumed Liabilities or created by the Buyer),
and duly endorsed in blank or accompanied by stock powers or other
instruments of transfer duly executed in blank, and bearing or accompanied
by all requisite stock transfer stamps, all in consideration of $180
million in
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cash. CFC shall deliver to Buyer an undivided 87.5% interest in the
Surplus Debenture, free and clear of any Liens or Claims (other than Liens
or Claims created by the Buyer), and duly endorsed in blank or accompanied
by bond powers or other instruments of transfer duly executed in blank, all
in consideration of $30 million in cash plus $40 million principal of
Notes. CFC shall deliver to PennCorp or PennCorp's designee an undivided
12.5% interest in the Surplus Debenture, free and clear of any Liens or
Claims (other than Liens or Claims created by PennCorp), and duly endorsed
in blank or accompanied by bond powers or other instruments of transfer
duly executed in blank, all in consideration for the PennCorp Shares.
2.6.2 Transfer of Acquired Assets. FMI, Seller or the
Retained Companies, as the case may be, shall transfer, convey and deliver
the Acquired Assets to SWFSC free and clear of all Liens and Claims (other
than Liens contemplated by the Assumed Liabilities, Liens otherwise created
by SWFSC and Texas Property Tax Liens on the Acquired Assets in respect of
Taxes imposed in 1995), and Buyer shall cause SWFSC to assume the Assumed
Liabilities.
2.6.3 Payment of the Purchase Price by Buyer. Buyer (a)
will cause to be issued, authenticated and delivered to CFC $40.0 million
aggregate principal amount of its 7.0% Convertible Subordinated Notes due
2005 (the "Notes"), which shall have substantially the terms set forth on
Exhibit H hereto and which shall be issued pursuant to an indenture
complying with the Trust Indenture Act between Buyer and a Trustee mutually
acceptable to Buyer and Seller (the "Note Indenture") and (b) will pay to
Seller, for the account of Seller and the appropriate Selling Subsidiaries,
by wire transfer of immediately available funds to an account designated by
Seller at least two Business Days prior to the Closing Date, an amount
equal to $210,000,000 (the principal amount of the Notes and such cash
amount collectively with the PennCorp Shares being the "Initial Purchase
Price") minus, in respect of the amount of the Initial Purchase Price
allocable to the Constitution Life Shares, an amount equal to the excess,
if any, of the sum of (A) the amount paid to FMI by the Acquired Insurance
Companies pursuant to the terms of the FMI Services Agreement during the
period from October 1, 1995 through the Closing Date, inclusive (which
charges shall in no event exceed $120,000 in the aggregate per day), and
(B) any other Operating Expenses during the period from October 1, 1995
through the Closing Date, inclusive, as set forth in the
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updated certificate delivered by the Seller to the Buyer on the Closing
Date pursuant to Section 5.10, over the product of $98,000 and the number
of days elapsed from October 1, 1995 through the Closing Date, inclusive;
provided, that Buyer's obligation to deliver the Initial Purchase Price as
aforesaid shall be reduced by the Escrow Amount delivered pursuant to
Section 8.3. The term "Purchase Price," as used herein, shall mean the
Initial Purchase Price, as adjusted pursuant to clause (b) above. In the
event the Initial Purchase Price is reduced by any amount pursuant to the
adjustment provided above, SWFSC shall at the Closing assume any
obligations of FMI to refund any portion of the amount by which the Initial
Purchase Price is so reduced to any of the Acquired Companies under the
terms of the FMI Service Agreement and SWFSC shall cause each of the
Acquired Companies to deliver to FMI a release at the Closing, in form and
substance reasonably acceptable to Seller, with respect to such obligation.
2.6.4 Funding of Escrow Account. Buyer shall deliver to the
Escrow Agent for deposit into the Indemnity Escrow Account the Escrow
Amount, to be held by the Escrow Agent under the terms of the Escrow
Agreement as required by Article VIII.
2.6.5 Delivery of PennCorp Shares. (a) In consideration
for the sale to PennCorp of a 12.5% undivided interest in the Surplus
Debenture, PennCorp irrevocably agrees to issue (and CFC irrevocably agrees
to accept) that number of shares of common stock, par value $.01 per share,
of PennCorp (the "PennCorp Common Stock") determined by dividing (i)
$10,000,000 by (ii) the Average PennCorp Trading Price; provided, however,
that in the event the calculation set forth above would require PennCorp to
issue to CFC more than 4.9% of the number of issued and outstanding shares
(after giving effect to such issuance) of PennCorp Common Stock, excluding
treasury shares as of the Effective Date ("4.9% of the Outstanding
Shares"), PennCorp shall deliver to Seller (via wire transfer of
immediately available funds to an account designated by Seller at least two
Business Days prior to the Effective Date) cash in an amount equal to the
value (based on the Average PennCorp Trading Price) of the number of shares
of PennCorp Common Stock in excess of 4.9% of the Outstanding Shares that
otherwise would be required to be issued pursuant to this Section 2.6.5(a)
(the number of shares of PennCorp Common Stock required to be issued
pursuant to this Section 2.6.5, after giving effect to the foregoing
proviso, being the
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"PennCorp Shares"). CFC acknowledges and agrees that it is requiring
PennCorp to file a registration statement on an appropriate form to permit,
upon the effectiveness of such registration statement, the immediate sale
of the PennCorp Shares. Consequently, CFC acknowledges and agrees that the
number of PennCorp Shares is not determinable as of the date of this
Agreement. However, the parties agree that, if the Average PennCorp
Trading Price were equal to $27.75, PennCorp would be obligated to issue
360,360 shares of PennCorp Common Stock pursuant to this Section 2.6.5(a).
PennCorp agrees that it shall give instructions to its transfer agent and
registrar for the PennCorp Common Stock to reserve 500,000 shares for
issuance to CFC upon the effectiveness of the registration statement, it
being understood and agreed, however, that CFC shall only be entitled to
receive, and PennCorp shall only be obligated to issue, that number of
shares of PennCorp Common Stock actually resulting from the calculation of
the PennCorp Shares as set forth above.
(b) Notwithstanding anything to the contrary contained
herein, PennCorp shall not be required to deliver the PennCorp Shares until
the Effective Date.
(c) In the event the Effective Date does not occur on or
prior to January 31, 1996, on the Effective Date PennCorp shall deliver to
CFC cash in an amount equal to interest accrued on the amount of
$10,000,000 at the rate of 5% per annum from and after February 1, 1996,
until the Effective Date.
2.7 [Reserved].
2.8 [Reserved].
2.9 Non-Assignable Assumed Contracts. (a) In the case of any
Assumed Contracts which are not assignable or transferable, either by their
terms or pursuant to section 365 of the Bankruptcy Code (such contracts
being the "Non-Assignable Assumed Contracts"), Seller and FMI shall use
commercially reasonable efforts to obtain, or cause to be obtained, prior
to the Closing Date, any written consents or waivers necessary to convey to
Buyer or Buyer's designee the benefit thereof. Buyer shall cooperate with
Seller and FMI at no additional cost to Buyer and/or Buyer's designee, as
the case may be, in such manner as may be reasonably requested in
connection therewith. In the event Seller and FMI shall be unable to
obtain any such consent or waiver to
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the assignment or transfer of an Assumed Contract to Buyer or Buyer's
designee, as the case may be, prior to the Closing Date, (i) Seller shall
continue to use such commercially reasonable efforts after the Closing,
(ii) Seller and FMI shall provide to Buyer or Buyer's designee, as the case
may be, from the Closing Date, at a cost to Buyer or Buyer's designee, as
the case may be, no greater than the cost Buyer or Buyer's designee, as the
case may be, would have otherwise paid under the terms of such Non-
Assignable Assumed Contract (the "Contract Costs"), benefits substantially
equivalent to each such Non-Assignable Assumed Contract, as fully as if
such consent had been obtained, to the extent Seller or FMI is reasonably
capable of providing such benefits and (iii) at Buyer's option, Buyer or
Buyer's designee, as the case may be, may procure such equivalent benefits
from third parties and Seller shall pay Buyer or Buyer's designee, as the
case may be, the amount by which the reasonable costs to Buyer or Buyer's
designee, as the case may be, of such equivalent benefits provided by such
third party, to the extent such costs relate to benefits to be provided to
an Acquired Company or a Retained Company, exceeds the related Contract
Costs; provided, however, that (A) Buyer shall provide Seller prior written
notice of procuring any such equivalent benefits 90 days (or, if 90 days'
notice is not practicable, such notice, if any, which is practicable) prior
to obtaining such equivalent benefits pursuant to clause (a)(iii) above,
(B) Seller's responsibility for costs in excess of Contract Costs incurred
by Buyer or Buyer's designee, as the case may be, with respect to such
equivalent benefits procured from third parties as contemplated by clause
(a)(iii) above shall be limited to such excess amounts relating to the
period from the date such equivalent benefits were procured through the
date on which the Non-Assignable Assumed Contract which such equivalent
benefits replace would have by its terms terminated or entitled the other
party thereto to terminate or renegotiate the costs of such benefits, and
(C) in the event Buyer or Buyer's designee, as the case may be, procures
equivalent benefits pursuant to clause (a)(iii), Seller shall be relieved
of its obligations under this Section 2.9 with respect to the Non-
Assignable Assumed Contracts with respect to which such equivalent benefits
have been so procured by Buyer and may take any and all action available to
Seller under the Bankruptcy Code to reject or otherwise terminate its
obligations under such Non-Assignable Assumed Contracts.
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(b) Notwithstanding the provisions of Section 2.9(a),
Seller shall have no liability to Buyer or Buyer's designee for any costs
incurred for a period of 90 days following the Closing Date with respect to
substitute equivalent benefits obtained as contemplated by Section
2.9(a)(iii) if, at the time such equivalent benefits are obtained, Seller
or FMI is providing to Buyer or Buyer's designee benefits substantially
equivalent to such substitute benefits in accordance with Section
2.9(a)(ii).
(c) Buyer agrees to pay, or reimburse Seller for, 100% of
Seller's direct cost, fees and expenses (including reasonable attorneys'
fees and reasonable fees and expenses of other professionals), actually
incurred by Seller in fulfilling its obligations of Section 2.9(a)(ii)
provided that the amount of such costs, fees and expenses, together with
the actual and estimated future costs to Buyer or Buyer designee, as the
case may be, with respect to the substitute equivalent benefits obtained by
Seller and FMI, shall not exceed the related Contract Costs. Buyer shall
make such payments to Seller within 30 days after the Seller's submission
of an itemized invoice therefor in detail reasonably sufficient to Buyer.
2.10 Non-Assignable Intellectual Property Licenses. In the event
that Seller, FMI or any Retained Company shall be unable prior to the
Closing Date, to obtain any written consent or waiver necessary for any
Intellectual Property License to be used by or on behalf of each Acquired
Company and each Retained Company to the same extent and in the same form
and manner (including the use of all modifications made prior to the
Closing Date) as such Intellectual Property License was used by or on
behalf of such companies prior to the Closing Date (the "Non-Assignable
Intellectual Property Licenses"), Buyer or Buyer's designee, as the case
may be, shall be entitled to receive from Seller or FMI, from the Closing
Date, benefits substantially equivalent to those provided under such Non-
Assignable Intellectual Property License prior to the Closing Date to the
same extent and upon the same terms as if such Intellectual Property
License were a Non-Assignable Assumed Contract under Section 2.9.
2.11 Buyer's Deposit. Not later than the first Business Day
after the date on which the Approval Order is entered, Buyer shall deliver
or cause to be delivered to Seller the sum of $26 million (such funds,
together with any interest or income accrued thereon, the "Buyer's
Deposit") (of which the parties acknowledge $5 million previously has
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been paid) as an earnest money deposit. Upon the closing of the
transactions contemplated hereby on or before December 31, 1995, the
Buyer's Deposit shall be applied to the cash portion of the Initial
Purchase Price to be paid by Buyer hereunder. If the transactions
contemplated hereby are not consummated on or before December 31, 1995, the
Buyer's Deposit shall be retained and disbursed as provided in Section
10.1(d) hereof.
ARTICLE III
Conditions Precedent
3.1 Conditions to the Obligations of all Parties. The
obligations of all parties hereunder to consummate the transactions
contemplated hereby are subject to the satisfaction or waiver, prior to or
at the Closing, of the following conditions:
3.1.1 Regulatory Approvals. (a) Texas. The Commissioner
of Insurance of the State of Texas shall have approved the transactions
contemplated hereby for which such approval is necessary, and none of such
approvals shall be subject to conditions that are unreasonably burdensome.
(b) Kentucky. The Commissioner of Insurance of the
Commonwealth of Kentucky shall have approved the transactions contemplated
hereby for which such approval is necessary, and none of such approvals
shall be subject to conditions that are unreasonably burdensome.
(c) Other. Such other Governmental Approvals as are listed
on Schedule 4.1.3 shall have been obtained, made or given.
3.1.2 Bankruptcy Court Approvals. (a) The sale of the
Acquired Assets, the SWL Shares, the Constitution Life Shares and the
Surplus Debenture (the "Estate Property") to Buyer, PennCorp and SWFSC
pursuant to this Agreement and the other transactions contemplated by this
Agreement and by the Related Agreements shall have been approved by the
Bankruptcy Court pursuant to section 363 of the Bankruptcy Code and orders
approving such sale in form and substance acceptable to Buyer, PennCorp and
Seller containing the provisions set forth below (the "Approval Order")
shall have been entered for a period of ten days, the effect and operation
of which shall not have been restrained, enjoined, suspended or otherwise
stayed (it being understood that certain of such provisions may be
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contained in the findings of fact or conclusions of law to be made by the
Bankruptcy Court as part of the Approval Order). The Approval Order shall
provide, among other things, that: (i) the transfers of the Estate
Property by Seller and the Selling Subsidiaries to Buyer, PennCorp and
SWFSC (A) are or will be legal, valid and effective transfers of the Estate
Property; (B) vest or will vest Buyer, PennCorp and SWFSC with all right,
title and interest of Seller, the Selling Subsidiaries and any Retained
Company to the Estate Property free and clear of all Liens and Claims
pursuant to Section 363(f) of the Bankruptcy Code (other than Liens
contemplated by the Assumed Liabilities, Liens otherwise created by Buyer,
PennCorp or SWFSC and Texas Property Tax Liens on the Acquired Assets in
respect of Taxes imposed in 1995); and (C) constitute transfers for
reasonably equivalent value and fair consideration under the Bankruptcy
Code and the laws of the State of Texas; (ii) the creation and funding of
the Indemnity Escrow Account in accordance with Section 8.2 of this
Agreement are approved; (iii) the terms and provisions of the Escrow
Agreement pursuant to which payments may be made to Buyer by the Escrow
Agent from funds held in the Indemnity Escrow Account in accordance with
the provisions of Section 8.2 of this Agreement are approved and payments
pursuant thereto may be made without any further order of the Bankruptcy
Court; (iv) all amounts to be paid to (1) Buyer and PennCorp pursuant to
this Agreement, including without limitation the obligations of the Seller
and the Selling
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Subsidiaries with respect to the indemnification amounts to be paid in
accordance with Article VIII, and (2) the Escrow Agent pursuant to the
Escrow Agreement, constitute administrative expenses under sections 503(b)
and 507(a)(1) of the Bankruptcy Code and are immediately payable if and
when the obligations of Seller and the Selling Subsidiaries arise under
this Agreement or the Escrow Agreement, as the case may be, without any
further order of the Bankruptcy Court; (v) all Persons are enjoined from in
any way pursuing Buyer, PennCorp or their respective Affiliates to recover
any Claim which such Person has against Seller or any of the Selling
Subsidiaries, except with respect to (1) Assumed Liabilities and (2) any
Claim which is independently assertable against Buyer, PennCorp or their
respective Affiliates; (vi) the termination of the Terminated Intercompany
Agreements is approved; (vii) the execution and delivery by Seller and each
of the Selling Subsidiaries, and the performance by each of them of their
respective obligations under, each of the Related Agreements to which they
are party is approved; (viii) the obligations of Seller and the Selling
Subsidiaries set forth in Article VI relating to Taxes shall be fulfilled
by Seller and the Selling Subsidiaries; (ix) the Seller is enjoined from
engaging in, and is enjoined from causing any member of the affiliated
group that is filing consolidated returns for Federal income tax purposes,
of which Seller is common parent, to engage in, any transaction that would
result in such affiliated group's having for the taxable year of such
affiliated group in which the Closing occurs (1) any discharge of
indebtedness income for purposes of section 108 of the Code; or (2) prior
to January 1, 1996, any taxable income, including any capital gain net
income as defined in section 1222(9) of the Code (determined without regard
to capital losses that arise from any transaction that occurs, or is deemed
to occur, or that are otherwise generated, on the Closing Date), in excess
of $15 million in the aggregate from extraordinary transactions, including
without limitation the sale of shares of capital stock, or of a business or
a substantial portion thereof, of Seller or any member of such affiliated
group; (x) the Bankruptcy Court retains exclusive jurisdiction through the
Bankruptcy Resolution Date to interpret and enforce the provisions of this
Agreement, any Related Agreement to which the Seller or any Selling
Subsidiary is party and the Approval Order in all respects, including,
without limitation, exclusive jurisdiction to determine or resolve any and
all objections to or disputes among the parties hereto regarding the escrow
arrangements and accounts established or contemplated hereunder (including
any objections or disputes regarding proposed charges against or
disbursements from any and all such accounts), and all objections or
disputes among the parties hereto with respect to claims for
indemnification or Purchase Price Adjustments hereunder or under the Escrow
Agreement (provided, however, that in the event the Bankruptcy Court
abstains from exercising or declines to exercise jurisdiction, such
abstention, refusal or lack of jurisdiction shall have no effect upon and
shall not control, prohibit or limit the exercise of jurisdiction of any
other court having competent jurisdiction with respect to any such matter
(including, without limitation, any court referred to in Section 10.12);
(xi) the provisions of the Approval Order are nonseverable and mutually
dependent; and (xii) the transactions contemplated by this Agreement and
the Related Agreements are undertaken by Buyer, PennCorp, SWFSC, Seller and
the Selling Subsidiaries at arm's length, without collusion and in good
faith within the meaning of section 363(m) of the Bankruptcy Code, and such
parties are
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entitled to the protections of section 363(m) of the Bankruptcy Code.
(b) Subject to Sections 2.9 and 2.10 of this Agreement,
simultaneously with the Closing, all executory contracts and unexpired
leases that are part of the Acquired Assets (collectively, the "Executory
Contracts") shall have been assumed by FMI, the Seller or any Selling
Subsidiary, as the case may be, and assigned to SWFSC and the Bankruptcy
Court in the Approval Order shall have approved such assumption and
assignment by Seller and the Selling Subsidiaries pursuant to section 365
of the Bankruptcy Code. The Approval Order shall provide that the Executory
Contracts will be transferred to, and remain in full force and effect in
accordance with their respective terms for the benefit of, SWFSC
notwithstanding any provision in such contracts or leases (including those
described in sections 365(b)(2) and (f)(1) and (3) of the Bankruptcy Code)
that prohibits such assignment or transfer.
(c) It is the intention of the parties hereto that Buyer
and PennCorp shall be entitled to, and are not waiving, the protection of
section 363(m) of the Bankruptcy Code, the mootness doctrine or any similar
statute or body of law.
3.1.3 Distributions Paid. SWL Holding shall have received
a distribution of $21,500,000 aggregate principal amount of SLC Bonds from
Constitution Life.
3.1.4 No Prohibition. Consummation of the transactions
contemplated by this Agreement and the Related Agreements shall not have
been enjoined or restrained by any order, decree or judgment of any
Governmental Authority having competent jurisdiction and there shall not
have been promulgated, entered, issued or determined to be applicable to
this Agreement or the Related Agreements any law, regulation, order,
judgment or decree making the transactions contemplated by this Agreement
or the Related Agreements illegal.
3.1.5 [Reserved].
3.1.6 Litigation. On the Closing Date, there shall not be
(a) in effect any injunction, decree or order enjoining or restraining any
of the transactions contemplated by this Agreement or the Related
Agreements, (b) pending any action or proceeding seeking an injunction,
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decree or order enjoining or restraining any of the transactions
contemplated by this Agreement or the Related Agreements, or,
alternatively, seeking substantial damages if any of such transactions are
consummated or (c) threatened or instituted any action or proceeding by any
Governmental Authority (other than the proceeding before the Bankruptcy
Court relating to the bankruptcy case of seller and the Selling
Subsidiaries) with respect to the acquisition of the Acquired Companies or
the Acquired Assets, the execution, delivery or performance of this
Agreement or the Related Agreements or the consummation of any of the other
transactions contemplated hereby or thereby.
3.1.7 Certain Agreements. Buyer shall have executed and
delivered to Seller, SWL Holding and CFC (or the Trustee as applicable) (i)
the SWF Registration Rights Agreement containing terms and conditions
mutually agreeable to Buyer and Seller, including without limitation terms
and conditions substantially as set forth on Exhibit K attached hereto and
(ii) the Note Indenture containing terms and conditions mutually agreeable
to Buyer and Seller, including without limitation terms and conditions
substantially as set forth on Exhibit H attached hereto. PennCorp shall
have executed and delivered to Seller, SWL Holding and CFC the PennCorp
Registration Rights Agreement containing terms and conditions mutually
agreeable to PennCorp and CFC, including without limitation terms and
conditions substantially as set forth on Exhibit L hereto. Knightsbridge
(or its assignee reasonably satisfactory to Seller) and Seller shall have
executed and delivered to each other the Retained Company Purchase
Agreement containing terms and conditions mutually agreeable to
Knightsbridge and Seller, including without limitation terms and conditions
substantially as set forth on Exhibit M hereto.
3.2 Conditions to Obligations of Buyer and PennCorp. The
respective obligations of Buyer and PennCorp to consummate the transactions
contemplated hereby are subject to the satisfaction or waiver, prior to or
at the Closing, of the following further conditions:
3.2.1 Representations and Warranties. The representations
and warranties of Seller and the Selling Subsidiaries contained in Section
4.1 shall have been true and correct in all material respects when made and
shall be true and correct in all material respects at and as of the Closing
as though made at and as of the Closing, except that
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any such representations and warranties that are given as of a particular
date and relate solely to a particular date or period shall be true as of
such date or period.
3.2.2 Performance. Seller and the Selling Subsidiaries
shall have duly performed and complied in all material respects with all
agreements, covenants and conditions required by this Agreement to be
performed or complied with by them prior to or at the Closing.
3.2.3 Consents. All material consents, licenses, permits,
waivers, approvals and authorizations of any third party necessary for
consummation of the transactions contemplated hereby shall have been
obtained or made and copies thereof delivered to Buyer and PennCorp.
3.2.4 Officer's Certificates. Seller and the Selling
Subsidiaries shall have delivered to Buyer and PennCorp a certificate,
dated the Closing Date, signed by the chief executive officer and chief
financial officer of Seller and each of the Selling Subsidiaries and the
chief actuary of each of the Acquired Insurance Companies, to the effect
that each such officer is authorized to execute and deliver such
certificate, that each such officer is familiar with the transactions
contemplated by this Agreement, and that, to such officers' knowledge after
due inquiry, the conditions set forth in Sections 3.2.1, 3.2.2, and 3.2.3
have been duly performed and complied with, provided that the certification
of the chief actuary or actuaries referred to above shall be made only as
to the applicable Acquired Insurance Company.
3.2.5 Additional Regulatory Approvals. (a) The
commissioners of insurance in all jurisdictions where the Acquired
Companies are domiciled or commercially domiciled shall have, to the extent
required, approved:
(i) the entering into of all management and advisory
agreements between SWF, SWFSC or any Affiliate of Knightsbridge, on
the one hand, and the Acquired Insurance Companies, on the other
hand, substantially in the forms thereof most recently filed as an
exhibit to the Amended and Restated Form A;
(ii) the entering into of a Tax sharing agreement
among the Acquired Insurance Companies substantially in the form most
recently filed as an exhibit to the Amended and Restated Form A;
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(iii) the removal of the material restrictions and
supervisory provisions imposed pursuant to the respective letter
agreements of SWL and UBIC with the Texas Department of Insurance,
dated September 24, 1993 and November 17, 1994 and the two letters
from the Texas Department of Insurance and the letter of SWL and UBIC
to the Texas Department of Insurance, each dated June 13, 1995;
(iv) [reserved];
(v) [reserved];
(vi) payments by the Acquired Insurance Companies to
satisfy the obligations set forth in Section 6.1(d); and
(vii) the maintenance of all books and records of
Marquette in the State of Texas.
(b) The commissioners of insurance in the jurisdictions in
which the Acquired Insurance Companies are domiciled or commercially
domiciled shall not have notified any of the Acquired Insurance Companies,
in writing or otherwise, of any proposed or requested change in the method
of calculating the carrying value of any material amount of the investment
assets held by the Acquired Insurance Companies as shown on the June 30 SAP
Statements filed with the States of domicile of each Acquired Insurance
Company.
(c) [Reserved].
(d) Seller shall have caused each Retained Company that is
an insurance company and which will enter into a SWFSC Leasing Agreement to
submit such SWFSC Leasing Agreement to the commissioner of insurance in its
respective state of domicile and such commissioner shall not have raised
any objections to such agreement.
(e) The Commissioner of Insurance of the State of Texas
and, if applicable, the commissioner of insurance of the state of domicile
of the purchaser of the REO Shares shall have approved such sale to such
purchaser on the terms set forth in Section 5.25.
(f) The regulatory approvals provided for in this Section
3.2.5 that shall have been obtained shall not be subject to conditions that
are unreasonably burdensome.
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3.2.6 Proceedings. Subject to the provisions in Section
5.7(d), all proceedings in connection with the transactions contemplated by
this Agreement and the Related Agreements and all documents and instruments
incident thereto, shall be reasonably satisfactory in form and substance to
Buyer and PennCorp and their respective counsel, and Buyer and PennCorp and
their respective counsel shall have received all such documents and
instruments, or copies thereof, certified if requested, as may be
reasonably requested. All notices of any proceedings before the Bankruptcy
Court in connection with the Approval Order or before any other
Governmental Authority having jurisdiction over Seller or any of its
Subsidiaries in connection herewith shall be in form, scope and substance
reasonably satisfactory to Buyer and PennCorp.
3.2.7 Terminated Intercompany Agreements. (a) Except for
the agreements listed on Schedule 3.2.7, all intercompany agreements
between Seller or any of the Retained Companies on the one hand, and any of
the Acquired Companies on the other, including without limitation any Tax
sharing, allocation, indemnification or similar agreement or arrangement
(the "Terminated Intercompany Agreements"), shall have been terminated by
mutual consent of the parties thereto at no cost or expense to any party
hereto, except to the extent provided in Section 6.7(c) or otherwise in
Article VI with respect to Taxes, and Buyer shall have received such
instruments and documents evidencing such terminations as Buyer shall have
reasonably requested.
(b) All accounts payable owed in respect of any
intercompany agreements or other intercompany transactions between Seller
or any of the Retained Companies on the one hand and any of the Acquired
Companies on the other, as of the Closing Date shall have been paid in full
and each of the Acquired Companies shall have received a release from
Seller and from each of the Retained Company parties to such agreements
acknowledging that all such amounts have been paid in full and releasing
each Acquired Company from any further obligation for such amounts (except
for amounts in respect of Taxes, which shall be governed by the provisions
of Article VI).
3.2.8 Resignation of Directors and Officers. Such
directors and officers of each Acquired Company as shall be designated in
writing by Buyer or PennCorp to Seller at least five days prior to the
Closing Date shall
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have submitted their resignations effective as of the Closing Date.
3.2.9 Material Adverse Effect. Since December 31, 1994,
there shall not have occurred or been threatened any Material Adverse
Effect, whether described on the Schedules furnished by Seller pursuant to
Article IV, or otherwise, and Seller shall have delivered to Buyer and
PennCorp a certificate, dated the Closing Date and signed in its name by
its duly authorized officer, confirming the foregoing, provided that
neither the matters listed on the Schedules furnished by Seller pursuant to
Article IV nor the results of operations or changes in financial condition
set forth in the September 30 GAAP Statements and the September 30 SAP
Statements shall, in and of themselves, constitute a Material Adverse
Effect.
3.2.10 Opinions of Counsel to Seller. Buyer and PennCorp
shall have received an opinion from Winstead Sechrest & Minick P.C.,
special counsel to Seller, substantially in the form attached as Exhibit C-
1 to the Shinnecock Purchase Agreement (with such additional changes
thereto as are necessary to reflect the terms of the transactions
contemplated hereby and as are reasonably satisfactory to Buyer and
PennCorp).
3.2.11 [Reserved].
3.2.12 [Reserved].
3.2.13 Certificate of Non-Foreign Status. Seller, SWL
Holding, CFC and FMI shall each have completed and delivered to Buyer the
certification described in section 1.1445-2(b)(2)(i) of the Treasury
Regulations and any similar certification required under State law.
3.2.14 Related Agreements. Seller and each Selling
Subsidiary shall have and shall have caused each Retained Company to have
executed and delivered to Buyer each of the Related Agreements to which it
is a party, including such documents, certificates and agreements
(collectively, the "Transfer Documents") as Buyer or PennCorp shall deem
reasonably necessary to transfer to Buyer or PennCorp, indirectly or
directly as contemplated by this Agreement, the Acquired Shares and/or the
Surplus Debenture and to SWFSC the Acquired Assets, in each case free and
clear of all Liens and Claims (other than Liens and Claims contemplated by
the Assumed Liabilities and Texas
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Property Tax Liens on the Acquired Assets in respect of Taxes imposed in
1995).
3.2.15 Section 338(h)(10) Election. Seller shall have
delivered to Buyer three executed copies of IRS Form 8023-A to effect a
joint election under section 338(h)(10) of the Code as provided in Section
6.5 for the purpose of filing that form with the IRS.
3.2.16 [Reserved].
3.2.17 Texas Property Tax Certificate. Seller shall have
delivered to Buyer certificates described in Texas Property Tax Code
section 31.08 issued by each taxing unit having the power to tax any of the
Acquired Assets or Acquired Shares with respect to such taxable Acquired
Assets and Acquired Shares showing no delinquent taxes, interest, or
penalties.
3.3 Conditions to Seller's Obligations. The obligations of
Seller to consummate the transactions contemplated hereby are subject to
the satisfaction or waiver, at or prior to the Closing, of the following
further conditions:
3.3.1 Representations and Warranties. The representations
and warranties of Buyer and PennCorp contained in Section 4.2 shall have
been true and correct in all material respects when made and shall be true
and correct in all material respects at and as of the Closing as though
made at and as of the Closing.
3.3.2 Performance. Buyer and PennCorp shall have duly
performed and complied in all material respects with all agreements,
covenants and conditions required by this Agreement to be performed or
complied with by Buyer or PennCorp prior to or at the Closing.
3.3.3 Officer's Certificates. Buyer and PennCorp shall
have each delivered to Seller a certificate, dated the Closing Date, signed
by the chief executive officer and the chief financial officer of Buyer and
PennCorp, respectively, to the effect that each such officer is authorized
to execute and deliver such certificate, that each such officer is familiar
with the transactions contemplated by this Agreement, and that the
conditions and covenants set forth in Sections 3.3.1 and 3.3.2, to such
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officer's knowledge after due inquiry, have been duly performed and
complied with.
3.3.4 Opinions of Counsel to Buyer. Seller shall have
received (i) an opinion from Weil, Gotshal & Manges, counsel to Buyer and
PennCorp, substantially in the form attached as Exhibit D-1 to the
Shinnecock Purchase Agreement (with such additional changes thereto as are
necessary to reflect the terms of the transactions contemplated hereby),
(ii) an opinion from Akin, Gump, Strauss, Hauer & Feld, special Texas
counsel to Buyer, substantially in the form attached as Exhibit D-2 to the
Shinnecock Purchase Agreement (with such additional changes thereto as are
necessary to reflect the terms of the transactions contemplated hereby),
(iii) an opinion from Greenebaum, Doll & McDonald, P.L.L.C., special
Kentucky counsel to Buyer, substantially in the form attached as Exhibit D-
3 to the Shinnecock Purchase Agreement (with such additional changes
thereto as are necessary to reflect the terms of the transactions
contemplated hereby), and (iv) copies of an opinion dated on or before the
Closing Date addressed to Buyer and PennCorp from Roberts & Holland LLP,
special tax counsel to Buyer and PennCorp, and from Weil, Gotshal & Manges,
counsel to Buyer and PennCorp, to the effect that the purchase of the SWL
Shares as contemplated by this Agreement will constitute a Qualified Stock
Purchase.
3.3.5 Proceedings. Subject to Section 5.7(d), all
proceedings in connection with the transactions contemplated by this
Agreement and the Related Agreements, and all documents and instruments
incident thereto, shall be reasonably satisfactory in form and substance to
Seller and its counsel, and its counsel shall have received all such
documents and instruments, or copies thereof, certified if requested, as
may be reasonably requested.
3.3.6 Related Agreements. Buyer and SWFSC shall have
executed and delivered to Seller and the Selling Subsidiaries each of the
Related Agreements to which it is a party, including such documents,
certificates and agreements (collectively, the "Assumption Documents") as
Seller shall deem reasonably necessary to effect the assumption by Buyer
and SWFSC of the Assumed Liabilities SWFSC shall have executed and
delivered to Seller and the Retained Companies the respective SWFSC Leasing
Agreements.
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3.3.7 Securities Laws Issues. Seller shall have received
either a No-Action Letter from the SEC or a reasoned opinion from Weil,
Gotshal & Manges, counsel to Buyer, in form and substance reasonably
satisfactory to Seller, substantially to the effect that, if the Debtor's
confirmed joint plan of reorganization provides for the distribution of the
Notes to holders of claims against or interests in the Debtors' estates,
the exemption provided by Section 1145(a) of the Bankruptcy Code from the
registration requirements of the Securities Act and state and local
securities laws is available for the offer and sale of the Notes and for
the offer and sale of the shares of Buyer Common Stock issuable upon
conversion of the Notes, in exchange for claims against or interests in the
Debtors' estates, it being agreed that such opinion of counsel may
expressly assume that the Bankruptcy Court enters a finding of fact or
conclusion of law that Buyer is a "successor to the Debtors" for purposes
of Section 1145(a)(1) of the Bankruptcy Code.
ARTICLE IV
Representations and Warranties
4.1 Representations and Warranties of Seller and Selling
Subsidiaries. Seller and each of the Selling Subsidiaries hereby jointly
and severally make the following representations and warranties to Buyer
and PennCorp:
4.1.1 Corporate Existence. Seller, each Selling Subsidiary
and each Acquired Company is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization
and has full power and authority to carry on its business as currently
conducted. Each Acquired Company is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which it owns or leases substantial properties or in which
the conduct of its business requires such qualification, except for such
failures to be so qualified or to be in good standing that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect or materially and adversely affect the consummation of the
transactions provided for in this Agreement.
4.1.2 Authorization; Enforcement. Each of Seller and each
Selling Subsidiary has full corporate power and authority to execute and
deliver this Agreement and to perform its obligations under this Agreement
in accordance
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with their respective terms. Each of Seller and each Selling Subsidiary
has taken all necessary corporate action to duly and validly authorize its
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby. Each of Seller and each Retained Company
has full corporate power and authority to execute and deliver the Related
Agreements to which it is a party and the other agreements and instruments
to be executed by it pursuant hereto and to perform its obligations under
the Related Agreements to which it is a party and such other agreements and
instruments to be executed by it pursuant hereto in accordance with their
respective terms. Seller and each Retained Company have taken all
necessary corporate action to duly and validly authorize its execution and
delivery of the Related Agreements to which it is a party and the other
agreements and instruments to be executed by it pursuant hereto and the
consummation of the transactions contemplated thereby. This Agreement has
been duly executed and delivered by Seller and each Selling Subsidiary, and
this Agreement constitutes and, when executed, each of the Related
Agreements to which Seller or any Retained Company is a party will be duly
executed and will constitute, the valid and legally binding obligations of
such parties, enforceable against them in accordance with their respective
terms, except (i) to the extent that enforcement may be limited by any
bankruptcy, insolvency, reorganization, moratorium, or similar laws now or
hereafter in effect relating to or affecting creditors' rights generally,
including, without limitation, for purposes of the representation and
warranty being made as of the Closing Date, the discretion of the
Bankruptcy Court for so long as the Bankruptcy Court retains jurisdiction
pursuant to the bankruptcy case of Seller and the Selling Subsidiaries
contemplated by this Agreement or (ii) as the remedy of specific
performance and injunctive and other forms of equitable relief are subject
to certain equitable defenses and to the discretion of the court or other
similar Person before which any proceeding therefor may be brought.
4.1.3 Governmental Approvals. Except as set forth on
Schedule 4.1.3 and except for the Approval Orders, no material consent,
approval, authorization, license or order of, or registration or filing
with, or notice to, any Governmental Authority (such consents, approvals,
authorizations, licenses, orders, registrations, filings and notices being
herein called, collectively, "Governmental Approvals") is required to be
obtained, made or given by or with respect to Seller, any Selling
Subsidiary or any of the
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Acquired Companies in connection with the execution and delivery of this
Agreement or the Related Agreements, the performance by Seller, any Selling
Subsidiary or any of the Acquired Companies of their respective obligations
under this Agreement or the Related Agreements or the consummation of the
transactions contemplated hereunder or thereunder.
4.1.4 No Conflicts; Third Party Consents. Except for
defaults of the type referred to in section 365(b)(2) of the Bankruptcy
Code, the execution and delivery of this Agreement and the Related
Agreements, and the consummation of any of the transactions contemplated
hereunder or thereunder, will not (a) conflict with or result in a breach
of any provision of the Certificate or Articles of Incorporation or By-Laws
(or other organizational documents) of Seller, any Selling Subsidiary or
any Acquired Company of (b) except as set forth in Schedule 4.1.4, result
in any conflict with, breach of or default (with or without notice or lapse
of time or both) under, or give rise to any right of termination,
cancellation or acceleration of any obligation or loss of any benefit
under, or result in the imposition of any Liens on any of their respective
properties or assets under, or require any consent or approval from any
third party with respect to, any material loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement or instrument or
permit, concession, franchise or license to which Seller, any Selling
Subsidiary or any Acquired Company is a party or by which Seller, any
Selling Subsidiary or any Acquired Company or any of their respective
properties or assets may be bound, (c) conflict in any material respect
with any Applicable Law applicable to Seller, any Selling Subsidiary or any
Acquired Company or any of their respective properties or assets, (d)
conflict in any material respect with or result in any termination or
recapture of reinsurance ceded under any Existing Reinsurance Agreement,
except for occurrences described in clause (b) (other than with respect to
any material loan or credit agreement, note, bond, mortgage or indenture)
or (c) that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect or materially and adversely
affect the consummation of the transactions provided for in this Agreement.
4.1.5 Capital Structure. Schedule 4.1.5 lists the name of
each Acquired Company, its jurisdiction of incorporation or organization,
the date of its acquisition by Seller or an Affiliate of or predecessor to
Seller, and
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the authorized, issued and outstanding amounts of its capital stock and
Seller's direct or indirect (through another specified Subsidiary)
percentage interest therein. All the issued and outstanding shares of the
capital stock of each Acquired Company are owned of record and
beneficially, directly or indirectly, by Seller, free and clear of any
Liens. All shares of capital stock of each Acquired Company are duly and
validly issued and outstanding and all such shares are fully paid and
nonassessable. None of the outstanding capital stock of any Acquired
Company has been issued in violation of, or is subject to, any preemptive
or subscription rights. There are no warrants, options, agreements,
convertible or exchangeable securities or other commitments pursuant to
which any Acquired Company is or may become obligation to issue, sell,
purchase, retire or redeem any shares of its capital stock and there are no
standstill, voting or similar agreements or any rights of first offer or
first refusal to which Seller, any Selling Subsidiary or any Acquired
Company is a party that presently or in the future will limit any Person's
ability to acquire, vote, sell or hold shares of any Acquired Company.
4.1.6 Company Documents. Seller has made available for
inspection by Buyer prior to the date of this Agreement true, complete and
correct copies of the Articles or Certificates of Incorporation and By-laws
of Seller, each Selling Subsidiary and each Acquired Company, each of which
is in full force and effect on the date hereof. Seller has made available
for inspection by Buyer true, complete and correct copies of the minutes of
all meetings since January 1, 1990, of Seller's Board of Directors and of
each committee thereof, and of the respective boards of directors and
committees thereof of each Acquired Company and Selling Subsidiary.
4.1.7 Financial Statements and Information. (a) Seller has
made available for inspection by Buyer true and correct copies of the
following financial statements and related materials prior to the date of
this Agreement:
(i) The GAAP Financial Statements of Seller for the
years ended December 31, 1994, 1993 and 1992, together with the notes
thereto (the "December 31 GAAP Statements");
(ii) the unaudited GAAP Quarterly Financial
Statements of Seller for the quarters ended March 31, 1995 (the
"March 31 GAAP Statement") June 30, 1995 (the
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"June 30 GAAP Statement"), and September 30, 1995 (the "September 30 GAAP
Statement") in each case together with the notes thereto and any review
reports thereon issued by Coopers & Lybrand L.L.P.;
(iii) the SAP Annual Statements of each of the
Acquired Insurance Companies as filed with the departments of
insurance in the respective States of domicile of each of the
Acquired Insurance Companies for the years ended December 31, 1994,
1993 and 1992, including all exhibits, interrogatories, notes and
schedules thereto and any actuarial opinions, affirmation or
certification filed in connection therewith, including for each year
any SAP Annual Statement filed by any of the Acquired Insurance
Companies with a department of insurance and which differs from the
SAP Annual Statement filed with the insurance department of such
Acquired Insurance Company's State of domicile (the "December 31 SAP
Statements");
(iv) the SAP Quarterly Statements of each of the
Acquired Insurance Companies as filed with the departments of
insurance in the respective States of domicile of each of the
Acquired Insurance Companies for the quarters ended March 31, 1995
(the "March 31 SAP Statements"), June 30, 1995 (the "June 30 SAP
Statements") and September 30, 1995 (the "September 30 SAP
Statements") including all exhibits, interrogatories, notes and
schedules thereto;
(v) the SAP Audited Statements of each of the
Acquired Insurance Companies as of December 31, 1994, 1993 and 1992,
and the related statements of operations, capital and surplus and
cash flows, in each case, for the years then ended, together with the
notes thereto and the report of Coopers & Lybrand L.L.P. thereon, as
filed with the departments of insurance in all States in which the
Acquired Insurance Companies are required to file;
(vi) the SAP Annual Statements of the separate
accounts of SWL and Constitution Life as filed with the departments
of insurance in the respective States of domicile of SWL and
Constitution Life for the years ended December 31, 1994, 1993 and
1992, including all exhibits, interrogatories, notes and schedules
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thereto, and any actuarial opinions, affirmation or certification
filed in connection therewith; and
(vii) copies of all material correspondence to and
from any department of insurance (whether or not from the departments
of insurance of the States of domicile of the Acquired Insurance
Companies) relating to or involving material financial reporting or
accounting matters affecting the SAP financial statements identified
in paragraphs (iii) through (vi) above.
(b) Seller's GAAP Financial Statements and GAAP Quarterly
Financial Statements referenced in clauses (a)(i) and (a)(ii) above fairly
present in all material respects the financial position of Seller and its
consolidated Subsidiaries as of the respective dates thereof and the
results of their operations and the changes in their stockholder's equity
and cash flows for the respective periods then ended, in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods indicated, except for the deviations from GAAP
disclosed thereon, in the notes thereto, or set forth on Schedule 4.1.7(b)
hereto.
(c) The SAP Annual Statements, SAP Quarterly Statements
and SAP Audited Statements of each Acquired Company referenced in clauses
(a)(iii) through (a)(v) above (i) have been prepared in accordance with
SAP, applied on a consistent basis throughout the periods involved, except
as expressly set forth or disclosed in the notes thereto, (ii) fairly
present in all material respects in accordance with SAP the admitted
assets, reserves and other liabilities, capital and surplus of each of the
Acquired Insurance Companies as of the respective dates thereof and the
results of its operations and its cash flow for the respective periods then
ended subject to, in the case of SAP Quarterly Statements, normal year end
adjustments, and (iii) in the case of SAP Annual Statements and separate
accounts of each of SWL and Constitution Life, fairly present in all
material respects the admitted assets, liabilities and surplus of the
separate accounts of SWL and Constitution Life as of the respective dates
thereof and the results of operations of such separate accounts for the
respective periods then ended, in accordance with SAP. Such SAP Annual
Statements, the SAP Quarterly Statements and the SAP Audited Statements
complied in all material respects with all Applicable Laws when filed, and
no material deficiency has been asserted
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with respect to such statements by any department of insurance with which
such statements were filed which has not been cured, waived or otherwise
resolved to the satisfaction of such department of insurance.
Notwithstanding any of the foregoing, (A) for purposes of determining
whether the condition to closing set forth in Section 3.2.1 has been
satisfied, the representations set forth in clause (ii) of this paragraph
shall be deemed to have been given as to the Acquired Insurance Companies
taken as a whole and not individually and (B) for purposes of calculating
Losses pursuant to Article VIII, any Loss attributable to the inaccuracy of
such representations shall first be reduced by the amount of any investment
asset or investment assets owned by an Acquired Insurance Company as of
September 30, 1995 that was not reflected on the September 30 Statement.
(d) [Reserved].
(e) No capital gains or losses, whether realized or
unrealized, have been recorded on the books of any Acquired Insurance
Company for the period from December 31, 1994 through September 30, 1995
except as set forth in Schedule 4.1.7(e), which schedule may be updated
prior to the delivery of the September 30 Statement to reflect capital
gains and losses for such period not recorded on the books of any Acquired
Insurance Company on or prior to the Execution Date, provided that Seller
shall update such schedule as soon as practicable after the recording of
any such capital gains and losses.
4.1.8 SEC Reports. (a) Each of the Acquired Companies has
filed all material reports, schedules, forms, statements and other
documents required to be filed by it with the SEC since January 1, 1994
(collectively, the "SEC Documents"). Except as set forth in Schedule
4.1.8(a), each of the SEC Documents has been duly and timely filed, and
when filed was in material compliance with the requirements (including
accounting requirements) of any applicable Federal securities law and the
applicable rules and regulations of the SEC thereunder, as of the date of
its filing with the SEC.
(b) None of Seller or any of the Acquired Companies has
received any material written or oral communications from the staff of the
SEC in respect of any of the SEC Documents except as set forth on Schedule
4.1.8(b) and, in the case of written communications, copies
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of all such scheduled documents have been previously provided to Buyer.
4.1.9 Absence of Certain Changes or Events. (a) Except as
set forth in Schedule 4.1.9, or expressly disclosed in either the June 30
GAAP Statements or the June 30 SAP Statements and except for the
transactions contemplated by this Agreement and the Related Agreements and
except as permitted by the Shinnecock Purchase Agreement since December 31,
1994, FMI and each of the Acquired Companies has conducted its business
only in the ordinary course consistent with its past practices, and neither
FMI nor any of the Acquired Companies has (i) borrowed, or agreed to
borrow, funds, (ii) experienced any damage, destruction or loss that, to
the extent not covered by insurance, has had or reasonably would be
expected to have a Material Adverse Effect, (iii) declared, set aside or
paid any dividend or other distribution (whether in cash, stock or
property) in respect of its capital stock (iv) entered into any material
transaction, contract or commitment involving any director or executive
officer of Seller, FMI, any Acquired Company or any retained Company, (v)
granted or committed to grant to any officer, director or, except in the
ordinary course of business consistent with past practice, employee of
Seller, FMI, any Acquired Company or any Retained Company any material
increase in compensation or benefits, (vi) granted or committed to grant to
any officer, director or other employee of Seller, FMI, any Acquired
Company or any Retained Company, any increase in or right to severance or
termination pay or any other compensation or benefits payable upon a change
in control of any such entity, (vii) in the case of any of the Acquired
Insurance Companies, made, or agreed to make, any material change in its
underwriting, pricing, actuarial or investment practices or policies, or
made, or agreed to make, any material change in its financial, Tax or
accounting practices or policies, in either case including, without
limitation, any basis for establishing reserves or any depreciation or
amortization policies or rates, (viii) in the case of any of the Acquired
Insurance Companies, experienced any material increase or decrease in the
percentage of its reinsured business, or any material increase in its lapse
ratio, or any material decrease in the amount of its in-force business,
(ix) suffered any Material Adverse Effect or (x) taken any action that, if
taken after the date hereof, reasonably would be expected to constitute a
material breach of any of the covenants set forth in Section V.
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4.1.10 Assets. (a) Real Property. (i) An Acquired Company
is the holder of good and insurable fee simple title to all real property
owned by it in fee (the "Owned Real Properties"), free and clear of all
Liens, except for Liens (the "Permitted Owned Real Property Liens") that
are (v) Permitted Liens, (w) zoning, building or other similar governmental
restrictions, (x) easements, covenants, rights of way or other similar
restrictions or other minor imperfections of title and (y) mortgages on
such Owned Real Property as of June 30, 1995 which are set forth on
Schedule 4.1.10(a)(i) (provided that the items described in clauses (v)
through (x) do not in the aggregate materially impair the Owned Real
Properties taken as a whole or, to the knowledge of Seller and the Selling
Subsidiaries, any Owned Real Property). Except as set forth and separately
identified on Schedule 4.1.10(a)(i), no Acquired Company owns any Owned
Real Property jointly with any Retained Company or any other Person. An
Acquired Company is the holder of good and valid leasehold title to the
leasehold estate in all real property leased by any of the Acquired
Companies (the "Leased Real Properties," together with the Owned Real
Properties constituting the "Real Properties"), free and clear of all
Liens, except for Liens (together with the Permitted Owned Real Property
Liens, the "Permitted Real Property Liens") that are (v) Permitted Liens,
(w) statutory Liens of landlords, (x) mortgages and other recorded liens
and encumbrances against the fee estate in the Leased Real Properties and
(y) mortgages on the Acquired Company's leasehold interests in such Leased
Real Properties as of June 30, 1995 which are set forth on Schedule
4.1.10(a)(i) (provided that the items described in clauses (v) through (x)
do not in the aggregate materially impair the leasehold interests taken as
a whole or, to the knowledge of Seller and the Selling Subsidiaries, any
leasehold interest). Except as set forth and separately identified on
Schedule 4.1.10(a)(i), no Acquired Company leases any Leased Real Property
jointly with any Retained Company or any other Person.
(ii) The use, occupancy and condition of each Real
Property is in compliance with all Applicable Laws, except where the
failure to be so in compliance would not reasonably be expected to have a
material adverse impact on the use, occupancy, operation or market value of
the Real Properties taken as a whole and except as set forth in Schedule
4.1.10(a)(ii).
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(iii) Except as provided in Schedule 4.1.10(a)(iii),
all material real property ad valorem and other similar Taxes due and
payable by FMI or any of the Acquired Companies have been paid or are
adequately reserved for in the financial statements referred to in Section
4.1.7, and the amount of such reserves has been determined in accordance
with accounting principles or practices applicable to such financial
statements.
(iv) Except as set forth on Schedule 4.1.10(a)(iv),
neither Seller nor any of the Selling Subsidiaries knows of any Real
Property classified as an admitted asset on the December 31 SAP Statements
for the year ended December 31, 1994 or the June 30 SAP Statements that
does not qualify as an admitted asset of the applicable Acquired Insurance
Company in accordance with Applicable Law.
(b) Mortgage Loans.
(i) Except as set forth and separately identified in
Schedule 4.1.10(b)(i), no Acquired Company owns any loan made by,
participated in, or acquired by any of the Acquired Companies (whether or
not held in the general account of any Acquired Insurance Company) that are
secured by any interest in real property (together with the note or notes
or other evidences of indebtedness evidencing such loan and the mortgage,
deed of trust or similar document securing such loan, a "Mortgage Loan")
jointly with any Retained Company or any other Person, whether directly or
through any partnership or other entity.
(ii) Since July 31, 1986, the origination and
collection practices used by the Acquired Companies with respect to each
Mortgage Loan have complied in all material respects with all Applicable
Laws except as would not, in any case or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(iii) Except as set forth on Schedule 4.1.10(b)(iii),
no payments were past due more than 60 days in respect of any Mortgage
Loans as of August 31, 1995 or, as may be set forth on an updated schedule,
as of the Closing Date or, in the event the Closing Date does not occur on
a calendar month end, the last day of the month ended immediately preceding
the Closing Date.
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(iv) Except as set forth on Schedule 4.1.10(b)(iv),
neither Seller nor any of the Selling Subsidiaries knows of any Mortgage
Loan classified as an admitted asset on the December 31 SAP Statements for
the year ended December 31, 1994 or the June 30 SAP Statements that does
not qualify as an admitted asset of the applicable Acquired Insurance
Company in accordance with Applicable Law.
(c) Bonds. Except as set forth on Schedule 4.1.10(c),
neither Seller nor any of the Selling Subsidiaries knows of any notes,
bonds, debentures or other fixed income investments held by any of the
Acquired Companies (whether or not held in the general account of any
Acquired Insurance Company) classified as an admitted asset on the December
31 SAP Statements for the year ended December 31, 1994 or the June 30 SAP
Statements that does not qualify as an admitted asset of the applicable
Acquired Insurance Company in accordance with Applicable Law.
(d) Equities. Except as set forth on Schedule 4.1.10(d),
neither Seller nor any of the Selling Subsidiaries knows of any common
stock, preferred stock, securities convertible into or exchangeable for
capital stock (other than the capital stock of any of the Acquired
Companies or the Retained Companies), limited partnership interests or
other similar equity interests held by any of the Acquired Companies
(whether or not held in the general account of any Acquired Insurance
Company) classified as an admitted asset on the December 31 SAP Statements
for the year ended December 31, 1994 or the June 30 SAP Statements that
does not qualify as an admitted asset of the applicable Acquired Insurance
Company in accordance with Applicable Law.
(e) Ownership of Property. Except as set forth on
Schedule 4.1.10(e), FMI and each of the Acquired Companies has good and
insurable fee simple title to the Owned Real Properties, good and valid
leasehold title to the Leased Real Properties and good and indefeasible
title to all other property which it purports to own, including, but not
limited to, the Owned Real Properties, Leased Real Properties and other
property reflected on the financial statements referred to in Section 4.1.7
and any property acquired in the ordinary course of business since June 30,
1995 (in each case other than that disposed of in the ordinary course of
business since June 30, 1995), free and clear of all Liens except for
Permitted Liens and Permitted
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Real Property Liens. The Acquired Assets and the assets owned by the
Acquired Companies (i) comprise all assets the use of which is reasonably
necessary or required for the continued conduct of the Acquired Business as
now being conducted and (ii) are and have been maintained in good condition
and are free from defects (reasonable wear and tear except) other than such
defects as would not reasonably be expected to have a Material Adverse
Effect. Pursuant to this Agreement, FMI will convey, sell, transfer,
assign and deliver to SWFSC good and valid title to all of the Acquired
Assets, free and clear of any Liens and Claims (other than the Texas
Property Tax Liens on the Acquired Assets in respect of Taxes imposed in
1995 and Assumed Liabilities or Liens otherwise created by SWFSC or
contemplated by this Agreement).
(f) Schedule 4.1.10(f) contains a true, correct and
complete list of all assets owned by any of the Acquired Companies the
value of which has been written down to zero since December 31, 1994.
4.1.11 Environmental Matters. (a) Compliance with
Environmental Law. To the knowledge of Seller and the Selling
Subsidiaries, except as set forth on Schedule 4.1.11(a) or as expressly
disclosed in Phase I Environmental Assessments, dated September 8, 1995,
prepared for G.S. Partners II, L.P. by McLaren/Hart Environmental
Engineering Corporation, true, correct and complete copies of which Seller
has made available for inspection by Buyer and PennCorp prior to the date
hereof (the "Phase I Report"), Seller, each Selling Subsidiary and each
Acquired Company has complied and is in compliance, in each case in all
material respects, with all applicable Environmental Laws pertaining to any
of the properties and assets of the Acquired Business (including the Real
Property) and the use and ownership thereof, and to the operation of the
Acquired Business. Except as set forth on Schedule 4.1.11(a) or as
expressly disclosed in the Phase I Report, no violation by Seller, any
Selling Subsidiary or any Acquired Company is being alleged under any
applicable Environmental Law relating to any of the properties and assets
of the Acquired Business (including the Real Property) or the use or
ownership thereof, or to the operation of the Acquired Business.
(b) Other Environmental Matters. (i) Except as set forth
on Schedule 4.1.11(b) or as expressly disclosed in the Phase I Report, none
of Seller, any Selling Subsidiary
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or any Acquired Company or, to the knowledge of Seller or the Selling
Subsidiaries, any other Person (including any tenant or subtenant) has
caused or taken any action, and none of FMI or any Acquired Company is
aware of any environmental conditions, that reasonably would be expected to
result in, any material liability or obligation under Environmental Law on
the part of FMI or any Acquired Company relating to (x) the environmental
conditions on, under, or about the Real Property or other properties or
assets owned, leased, operated or used by FMI or any Acquired Company or
any predecessor thereto at the present time or in the past, including
without limitation, the air, soil and groundwater conditions at such
properties or (y) the past or present use, management, handling, transport,
treatment, generation, storage, disposal or Environmental Release of any
Hazardous Materials.
(ii) Seller has disclosed and made available to Buyer
the information and reports discussed in Schedule 4.1.11(a) and (b) hereto,
which include all studies, analyses and test results, in the possession,
custody or control of or otherwise known to Seller, any Selling Subsidiary
or any Acquired Company relating to (x) the environmental conditions on,
under or about the Real Property or other properties or assets owned,
leased, operated or used by Seller, any Selling Subsidiary or any Acquired
Company or any predecessor in interest thereto at the present time or in
the past, and (y) any Hazardous Materials used, managed, handled,
transported, treated, generated, stored or Released by Seller, any Selling
Subsidiary or any other Acquired Company or to the knowledge of Seller or
any Selling Subsidiary any other Person on, under, about or from any of the
Real Property, or otherwise in connection with the use of operation of any
of the properties and assets of the Acquired Business.
4.1.12 Liabilities and Reserves; No Undisclosed
Liabilities. (a) Except as disclosed in Schedule 4.1.12(a) or Schedule
4.1.17, or to the extent specifically disclosed, reflected or reserved
against in the balance sheets contained in the December 31 SAP Statements
for the year ended December 31, 1994 or the June 30 SAP Statements or the
notes, exhibits, schedules and interrogatories thereto of each Acquired
Company, none of the Acquired Companies has any material obligations or
liabilities of any nature, including without limitation any Liens (whether
accrued, absolute, contingent, known or unknown, or otherwise, and whether
or not due, or arising out of transactions entered
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into, or any state of facts existing, prior to such date) that are not
reflected on such balance sheets or the related notes, exhibits, schedules
and interrogatories thereto except liabilities incurred since December 31,
1994, in the ordinary course of business consistent with past practice that
would not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.
(b) The reserves and other liabilities in respect of
insurance policies, annuity contracts or guaranteed investment contracts,
whether direct or assumed by reinsurance, established or reflected in the
balance sheets contained in the respective June 30 SAP Statements of each
Acquired Insurance Company that is authorized to transact life insurance,
were determined in accordance with generally accepted actuarial standards
consistently applied, were based on actuarial assumptions that were in all
material respects and are in compliance in all material respects with the
requirements of the insurance laws, rules and regulations of their
respective jurisdictions of domicile as well as those of any other
applicable jurisdictions (collectively, "Applicable Insurance Laws").
(c) Except for regular periodic assessments in the
ordinary course of business and except as set forth in Schedule 4.1.12(c),
no claim or assessment is pending nor, to the knowledge of Seller and the
Selling Subsidiaries, threatened against any of them by any State insurance
guaranty association in connection with such association's fund relating to
insolvent insurers.
4.1.13 Contracts. (a) Schedule 4.1.13 contains a correct
and complete list of all the following contracts, licenses, leases,
agreements, commitments or arrangements, written or, to the knowledge of
Seller and the Selling Subsidiaries, unwritten (access to correct and
complete copies or, if none exist, written descriptions of which have been
made available to Buyer prior to the date of this Agreement), (i) to which
FMI or any of the Acquired Companies is a party or by which any of their
respective assets or properties are or may be bound or (ii) which are used
in the Acquired Business ("Contracts"), as such Contracts may have been
amended, modified or supplemented:
(i) all Contracts out of the ordinary course of
business representing future liabilities in excess of $50,000 that
are not terminable without penalty upon not more than 30 days'
notice;
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(ii) all Contracts (including, without limitation,
Contracts relating to loans or advances other than margin loans made
in the ordinary course of business) calling for payments in excess of
$50,000 with or relating to any current or former officer or director
or employee of FMI or any Acquired Company, or any of the 20 highest
compensated agency managers and agents of any of the Acquired
Insurance Companies and the name and position of each such person and
the expiration date of each such Contract (and specifying whether
such Contract contains any change-in-control provisions);
(iii) all Contracts with any person containing any
provision or covenant limiting the ability of any Acquired Company to
engage in any line of business or compete with any person;
(iv) all material partnership or joint venture
Contracts with any Person;
(v) Contracts relating to nonrecourse mortgage
borrowing by any Acquired Company in the ordinary course of business
(other than guarantees thereof), and all Contracts relating to
indebtedness of or relating to any Acquired Company (other than
Contracts made in the ordinary course in which any Acquired Company
is a lender);
(vi) all leases, subleases or rental or use Contracts
with respect to real estate or material personal property used by FMI
or any Acquired Company in the conduct of its business operations or
affairs;
(vii) all Contracts with any labor union or
association;
(viii) all Contracts pursuant to which any business
unit was sold since January 1, 1989;
(ix) all Contracts pursuant to which any real
property was sold since January 1, 1989 for a price in excess of
$1,000,000;
(x) all material Contracts between FMI or any
Acquired Company and any of their Affiliates;
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(xi) all reinsurance agreements with any Person to
which any Acquired Insurance Company is a party;
(xii) all standard forms of agency agreements
currently used by any of the Acquired Insurance Companies or to which
any Acquired Insurance Company is a party; and
(xiii) all other material Contracts to which Seller,
FMI, any other Retained Company or any Acquired Company is a party
that relate to the Acquired Business.
(b) Each of the material Contracts is legal, valid and
binding and, to the knowledge of Seller and the Selling Subsidiaries, is
enforceable in accordance with its terms against each party thereto (except
(i) as such enforcement may be limited by any bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect
relating to or affecting creditors' rights generally or (ii) as the remedy
of specific performance and injunctive and other forms of equitable relief
are subject to certain equitable defenses and to the discretion of the
court or other similar Person before which any proceeding therefor may be
brought) and is in full force and effect. To the knowledge of Seller and
the Selling Subsidiaries, none of the Contracts contains terms which would
reasonably be expected to have a Material Adverse Effect. To the knowledge
of Seller and the Selling Subsidiaries, no party to any of the Contracts
listed in Schedule 4.1.13 is in or claimed to be in material breach or
default in any respect under any term or provision of any of such
Contracts.
4.1.14 Litigation. (a) Except as set forth in Schedule
4.1.14(a) and other than Litigation (as defined below) relating to Taxes,
there is no Litigation now pending, or, to the knowledge of Seller or any
Selling Subsidiary, threatened, against or relating to Seller, any Retained
Company or any Acquired Company or its assets, properties or business (i)
involving a claim made prior to the date of this Agreement against any
Acquired Company or FMI of more than $100,000, (ii) which reasonably would
be expected to have a material adverse effect on the ability of Seller, FMI
or any Selling Subsidiary, or any Acquired Company, to consummate any of
the transactions contemplated by this Agreement, (iii) which reasonably
would be expected to have a Material Adverse Effect, (iv) involving any
former
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officers or directors of FMI or any Acquired Company as a party adverse to
FMI or any Acquired Company, (v) involving criminal proceedings or
investigations against or targeting Seller, any Retained Company or any
Acquired Company or any of their directors or officers in their capacity as
such, (vi) involving extraordinary regulatory proceedings affecting the
Acquired Business or (vii) involving a claim made prior to the date of this
Agreement against Seller or any Retained Company of more than $250,000.
(b) Except as set forth in Schedule 4.1.14(b), neither
Seller, nor FMI nor any of the Acquired Companies nor any of their
respective officers or directors is subject to any permanent, preliminary
or temporary injunction or prohibitive order, judgment or decree of, or is
a party to any agreement with, any Governmental Authority which reasonably
would be expected to have a material adverse effect on the ability of FMI
or the Acquired Companies to consummate the transactions contemplated
hereby or which (x) restricts in any material respect the ability of FMI or
of any Acquired Company to conduct its business or to engage in any other
business, (y) enjoins or prohibits any officer or director of Seller, FMI
or of any Acquired Company from taking, or requires any of such officers or
directors to take, in his capacity as such, any action of any kind or
enjoins or prohibits any such officer or director from violating any law or
regulation.
4.1.15 Compliance with Laws, etc. Except as disclosed in
Schedule 4.1.15, Seller, the Acquired Companies and FMI have conducted, and
currently conduct, the Acquired Business in compliance with all Applicable
Laws and all licenses, approvals and permits, including, without
limitation, those relating to insurance, securities and employment
discrimination except for such noncompliances that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect.
4.1.16 Operations Insurance. Schedule 4.1.16 lists all
liability, property and casualty, workers' compensation, employers'
liability, directors' and officers' liability, surety bonds, key man life
insurance and other similar insurance contracts that insure the business,
properties, operations or affairs of any of the Acquired Companies
(including properties owned by FMI) or affect or relate to the ownership,
use or operations of any of the Acquired Companies' assets or properties.
Each such contract is in full force and effect and no such contract is
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the subject of a notice of cancellation or non-renewal by the issuing
insurer.
4.1.17 Taxes. (a) All Federal and State, and, to the
knowledge of Seller and the Selling Subsidiaries, all other Company Returns
required to be filed have been accurately prepared in all material respects
and timely filed. Except for Taxes which are being, or have been,
contested in good faith and by appropriate proceedings and which are set
forth on Schedule 4.1.17 or which have otherwise been expressly disclosed
by Seller to Charles H. Lubochinski (i) the following Taxes have (or by the
Closing Date will have) been duly and timely paid:(A) all material Taxes
reported as due, and to the knowledge of Seller and the Selling
Subsidiaries, reportable as due, on the Company Returns and all required or
estimated Tax payments, (B) all material deficiencies and assessments of
Taxes of which notice has (or by the Closing Date will have) been received
by any member of the Related Group or any Affiliated Group, (C) all
material Taxes reflected in settlement agreements with the IRS, including
IRS Form 870AD, or with any other taxing authority, and (D) all other
material Taxes due and payable on or before the Closing Date by any member
of the Related Group or any Affiliated Group or chargeable as a lien upon
the assets thereof, for which neither filing of returns nor notice of
deficiency or assessment is required, and (ii) all material Taxes required
to be withheld by or on behalf of any member of the Related Group or with
respect to the business or assets thereof have been withheld, and such
withheld Taxes have either been duly and timely paid to the proper
governmental agencies or authorities or (if not yet due for payment) set
aside in accounts for such purpose. For all taxable periods or portions
thereof ending on or before the Closing Date with respect to which Federal
income tax returns are not required to be filed on or before the Closing
Date, all Acquired Insurance Companies, Integrity and BL of NY were taxable
as domestic life insurance companies within the meaning of section 816 of
the Code.
(b) Except as set forth on Schedule 4.1.17, all Federal
and State Company Returns have been examined by the appropriate taxing
authority, or the statute of limitations with respect to the relevant
income or franchise tax liability has expired, for all taxable periods
through and including the taxable period listed with respect to each such
jurisdiction on Schedule 4.1.17. Except as set forth in Schedule 4.1.17,
(i) neither the IRS nor any other taxing authority has asserted in writing,
or has threatened in
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writing to assert against any member of the Related Group or any Affiliated
Group, any deficiency or claim for additional Taxes, and (ii) no member of
the Related Group or any Affiliated Group is currently under audit by the
IRS or any other taxing authority, and no notice of commencement of any
audit has been received. Except as set forth on Schedule 4.1.17, no member
of the Related Group or any Affiliated Group has granted any waiver of any
statute of limitations with respect to, or any extension of a period for
the assessment of, any Taxes for which any member of the Related Group or
any Affiliated Group may be held liable; no power of attorney with respect
to any such Taxes has been executed or filed with any taxing authority, and
no closing agreement with respect to any material Taxes has been entered
into by or with respect to any member of the Related Group or any
Affiliated Group pursuant to section 7121 or 7122 of the Code (or any
predecessor provision) or any similar provision of any State, local, or
foreign law.
(c) Except as listed on Schedule 4.1.17, to the knowledge
of Seller and the Selling Subsidiaries, (i) the balance of the
policyholders surplus account (as defined in Section 815 of the Code) of
each Acquired Insurance Company is zero as of December 31, 1994, and the
computation and maintenance of the policyholders surplus account balances
for the taxable years subsequent to 1958 have been computed and maintained
in accordance with Section 815 of the Code and the Treasury Regulations
thereunder, (ii) the insurance reserves with respect to each Acquired
Insurance Company set forth in all Federal income Tax Returns of such
company were determined in all material respects in accordance with Section
807 of the Code, (iii) each Fund operating in the United States has elected
to be treated as a "regulated investment company" (a "RIC") under the Code
and has, for each of its taxable years since the end of the most recent
year of such Fund that has been closed and for which the statute of
limitations for assessments has expired, qualified as a RIC, (iv) all
contracts issued by each Acquired Insurance Company that are subject to
Section 817 of the Code have met the diversification requirements
applicable thereto since the issuance of the contract, and (v) the Tax
treatment under the Code of all insurance, annuity or investment policies,
plans, or contracts, all financial products, employee benefit plans,
individual retirement accounts or annuities, or any similar or related
policy, contract, plan or product, whether individual, group or otherwise
issued or sold by any of the Acquired Insurance Companies is and at all
times has been the same or not less
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favorable to the purchaser, policyholder, or beneficiaries thereof than the
Tax treatment under the Code for which such contracts qualified or
purported to qualify or which the Acquired Insurance Companies represented
could be obtained at the time of its issuance, purchase, modification or
exchange, except to the extent that the Tax treatment of any product of any
Acquired Insurance Company is not less favorable than the Tax treatment of
substantially similar products offered by other companies. The provisions
of the Code relating to the Tax treatment of the plans, policies, contracts
and products referred to in clause (v) of the preceding sentence shall
include, but not be limited to, Sections 72, 79, 101, 104, 105, 106, 125,
130, 401, 402, 403, 404, 408, 412, 415, 419, 419A, 501, 505, 817, 818,
1035, 7702, and 7702A.
(d) Except as listed on Schedule 4.1.17, (i) none of the
Acquired Companies is a party to or is bound by any obligations under any
Tax sharing, indemnification, allocation or similar agreement or
arrangement or retains any actual or potential liability under any
agreement providing for the payment by or allocation to such company of any
Taxes assessed against any other person or entity, whether or not otherwise
related to such company, (ii) no election has been made to have the
provisions of section 341(f) of the Code apply to any of the Acquired
Companies, (iii) there are no elections in effect made by or with respect
to any of the Acquired Companies pursuant to section 338 or section 336(e)
of the Code or the Treasury Regulations thereunder, and none of the
Acquired Companies or BL of NY is subject to any constructive elections
under section 338 or section 336(e) of the Code or the Treasury Regulations
thereunder, (iv) none of the Acquired Companies or BL of NY has agreed or
is required to make, no taxing authority has proposed in writing, and no
application is pending with respect to, any adjustment under section 481 or
807(f) of the Code (or any comparable provision of State, local or foreign
law) or by reason of a change in accounting method or basis of computing
reserves or otherwise, (v) none of the Acquired Companies is a party to any
agreement or arrangement that could result, or has resulted in the past,
separately or in the aggregate in the payment of any "excess parachute
payments" within the meaning of section 280G of the Code or the payment of
excessive employee remuneration disallowed under section 162(m) of the
Code, and (vi) none of the Acquired Companies has been a member of any
Affiliated Group for any taxable period for which the statute of
limitations is open.
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(e) Except as set forth on Schedule 4.1.17, the Acquired
Insurance Companies have made adequate provision for estimated Taxes in the
June 30 SAP Statement.
(f) Except as set forth on Schedule 4.1.17, Seller, each
Affiliated Group and each member of the Related Group has made all required
estimated Tax payments sufficient to avoid any underpayment penalties.
(g) No amount payable to Seller or its Affiliates on the
Closing Date under this Agreement is subject to withholding under section
1445(a) of the Code or comparable provision of State, local or foreign law.
(h) Notwithstanding anything to the contrary in this
Section 4.1.17, to the extent the representations and warranties set forth
in this Section 4.1.17 relate to Integrity or BL of NY, such
representations and warranties are effective only for such periods prior to
(i) in the case of BL of NY, July 26, 1995, and (ii) in the case of
Integrity, September 22, 1995.
(i) Schedule 4.1.17 sets forth Seller's good faith
estimate of the total amount of Taxes, calculated on the basis of the 1994
assessments and rates, imposed in 1995 with respect to the Acquired Assets
and property held by each Acquired Company to which a Texas Property Tax
Lien has been attached, and the total amount taken into account as a
liability or otherwise specifically reserved against with respect to such
Taxes on the June 30 SAP Statements or as of such other date indicated on
such Schedule.
(j) Except as set forth on Schedule 4.1.17, (i) no
irrevocable Federal income Tax elections are in effect with respect to the
Acquired Companies (including elections under Sections 108, 168, 441, 1017,
1033 and 4977 of the Code), and (ii) no property owned by the Acquired
Companies is property that any of the Acquired Companies is 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.
4.1.18 Affiliate Transactions. Schedule 4.1.18 contains a
brief summary of each transaction since December 31, 1994, between any
Acquired Insurance Company and Seller
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or any Affiliate of Seller (other than transactions in the ordinary course
of business under the FMI Services Agreement) and identifies which of such
transactions were neither reported to nor approved by the applicable
departments of insurance.
4.1.19 Employee Benefit Plans. (a) Employee Benefit Plans.
Schedule 4.1.19(a) lists each "employee benefit plan," as such term is
defined in section 3(3) of ERISA, and each bonus, incentive or deferred
compensation, employment, severance, termination, retention, change of
control, stock option or other equity-based, performance or other material
employee or retiree benefit or compensation plan, program, arrangement,
agreement, policy or understanding, whether written or unwritten, that
provides or may provide benefits or compensation in respect of any employee
or former employee of Seller, FMI or any Acquired Company employed or
formerly employed in connection with the operation of the Acquired Business
or the beneficiaries or dependents of any such employee or former employee
(collectively, the "Business Employees") or under which any Business
Employee is or may become eligible to participate or derive a benefit and
that is or has been maintained or established by Seller, FMI, any Acquired
Company or any other trade or business, whether or not incorporated, which,
together with Seller, FMI or any Acquired Company is treated as a single
employer under section 414 of the Code (such other trades and businesses
referred to collectively as the "Related Persons"), or the which Seller,
FMI, any Acquired Company or any Related Person contributes or is or has
been obligated or required to contribute (collectively, the "Plans"). No
Acquired Company is, or could reasonably be deemed to be, the employer or a
joint employer of any Business Employee other than those Business Employees
who are specifically identified on Schedule 4.1.19(a). Except as set forth
on Schedule 4.1.19(a), each Plan that provides retiree health or life
insurance coverage to Business Employees may be amended or terminated, in
whole or in part (including, without limitation, amended to reduce or
terminate benefits provided to retirees or to increase the contributions or
other costs required to be funded by retirees), without the consent or
approval of any participant thereunder. Except as expressly permitted
pursuant to Section 7.5(b), neither Seller, FMI nor any Acquired Company
has communicated to any Business Employee any intention or commitment to
modify any Plan or to establish or implement any new or other employee or
retiree benefit or compensation agreement or arrangement.
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(b) Tax-exempt Status. (i) Each Plan intended to be
qualified under section 401(a) of the Code, and the trust (if any) forming
a part thereof, has received a favorable determination letter from the
Internal Revenue Service as to its qualification under the Code and to the
effect that each such trust is exempt from taxation under section 501(a) of
the Code, (ii) to the knowledge of Seller and the Selling Subsidiaries,
after due inquiry, nothing has occurred since the date of such
determination letter that reasonably would be expected to have a material
adverse effect on such qualification or Tax-exempt status and (iii) Seller
has filed within the time required to be eligible to make retroactive plan
changes as contemplated by section 401(b) of the Code an application for a
favorable determination of the IRS as to the continued qualification of
such Plan and Tax-exempt status of such related trust under sections 401
and 501 of the Code, respectively, as currently in effect.
(c) ERISA. No Plan is subject to Section 302 or Title IV
of ERISA or section 412 of the Code. Neither Seller, FMI, any Acquired
Company nor any Related Person (including for this purpose any trade or
business that has been treated as a single employer under section 414 of
the Code together with Seller, FMI or any Acquired Company as of any date
of determination occurring within the preceding six years) (i) has incurred
or reasonably expects to incur (either directly or indirectly, including as
a result of any indemnification obligation) any material liability under or
pursuant to Title I or IV of ERISA or the penalty, excise Tax or joint and
several liability provisions of the Code relating to employee benefit plans
that remains unpaid in any part and (ii) to the knowledge of Seller and
FMI, no event, transaction or condition has occurred or exists which, in
any such case under clause (i) or (ii), reasonably would be expected to
result in any such liability to any Acquired Company or, following the
Closing, Buyer or any of its Affiliates. Except as described on Schedule
4.1.19(c), each of the Plans has been operated and administered in all
respects in accordance with all Applicable Laws, including but not limited
to ERISA and the Code, except where any such noncompliance has not and
would not reasonably be expected to result in any material liability to any
Acquired Company, or, following the Closing, Buyer. There are no material
pending or, to the knowledge of Seller and FMI, threatened claims by or on
behalf of any of the Plans, by any Business Employee or otherwise involving
any such Plan or the assets of any Plan (other than routine claims for
benefits). All
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contributions required to have been made by Seller, FMI and each Acquired
Company to any Plan under the terms of any such plan, any agreement or
Applicable Law (including, without limitation, ERISA and the Code) have
been made within the time prescribed by any such plan, agreement or law.
Except as disclosed on Schedule 4.1.19(c), no Business Employee is or may
become entitled to post-employment benefits of any kind by reason of
employment in the operation of the Acquired Business, including, without
limitation, death or medical benefits (whether or not insured), other than
(x) coverage mandated by section 4980B of the Code, (v) retirement benefits
payable under any Plan intended to qualify under section 401(a) of the Code
or (z) deferred compensation properly and adequately accrued as a liability
on Schedule 4.1.19(c). Except as contemplated by this Agreement and the
Schedules hereto, the consummation of the transactions contemplated by this
Agreement or the Related Agreements will not result in an increase in the
amount of compensation or benefits or the acceleration of the vesting or
timing of payment of any compensation or benefits payable to or in respect
of any Business Employee.
(d) Schedule 4.1.19(d) properly and adequately reflects,
and in the case of clause (ii) below, reflects in accordance with
accounting principles agreed to by Buyer and Seller and reflected on such
Schedule, any and all liabilities and obligations of Seller, any Selling
Subsidiary, any Retained Company or any Acquired Company as of June 30,
1995 (or such more recent date as is practicable) for or in respect of (i)
Compensation Items and Executive Severance Benefits, payable in respect of
any Business Employee, (ii) post-retirement welfare benefits payable in
respect of any Acquired Company Retiree and (iii) short term disability
compensation or benefits in respect of the active Acquired Company
Employees.
4.1.20 Insurance Business. (a) Each of the Acquired
Insurance Companies possesses a license, certificate of authority, permit
or other authorization to transact insurance (an "Insurance License") in
each State or other jurisdiction in which such Acquired Insurance Company
is required to possess in Insurance License, except for such failures to
have an Insurance License as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. All such
Insurance Licenses are listed in Schedule 4.1.20(a) and are in full force
and effect and neither Seller, FMI nor any such Acquired Company has
received any notice of any event, inquiry, investigation
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or proceeding that would reasonably be expected to result in the
suspension, revocation or limitation of any such Insurance License, and to
the knowledge of Seller and the Selling Subsidiaries, there is no
sustainable basis for any such suspension, revocation or limitation.
Except as set forth in Schedule 4.1.20(a), none of the Acquired Insurance
Companies is currently the subject of any supervision, conservation,
rehabilitation, liquidation, receivership, insolvency or other similar
proceeding nor is any of the Acquired Insurance Companies operating under
any formal or informal agreement or understanding with the licensing
authority of any State which restricts its authority to do business or
requires it to take, or refrain from taking, any action.
(b) Except as set forth in Schedule 4.1.20(b), to the
knowledge of Seller and the Selling Subsidiaries, all forms of insurance
policies, annuity contracts and guaranteed interest contracts and riders
thereto (collectively, "Policies") currently issued by any Acquired
Insurance Company are, to the extent required under Applicable Insurance
Laws and in all material respects, on forms approved by applicable
Governmental Authorities of the jurisdiction where issued or have been
filed with and not objected to by such Governmental Authorities within the
period provided for objection. All Policy applications in respect of
Policy forms currently issued and material to the operation of any Acquired
Insurance Company as of the date of this Agreement and required to be filed
with or approved by applicable Governmental Authorities under Applicable
Insurance Laws have been so filed or approved. Any premium rates with
respect to Policies currently issued required to be filed with or approved
by applicable Governmental Authorities under Applicable Insurance Laws have
been so filed or approved and premiums charged conform thereto in all
material respects. No material deficiencies have been asserted by any
Governmental Authority with respect to any such filings which have not been
cured or otherwise resolved to the satisfaction of such Governmental
Authority.
(c) Except as set forth in Schedule 4.1.20(c), to the
knowledge of Seller, each of the Acquired Insurance Companies is in
material compliance with all Applicable Insurance Laws regulating the
practices of selling life and health insurance policies, annuity contracts
and variable annuity contracts, except for such failures to be in
compliance that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect,
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including but not limited to Applicable Insurance Laws regulating
advertisements, requiring mandatory disclosure of policy information,
requiring employment of standards to determine if the purchase of a policy
or contract is suitable for an applicant, prohibiting the use of unfair
methods of competition and deceptive acts or practices and regulating
replacement transactions. For purposes of this Section 4.1.20(c), (i)
"advertisement" means any material designed to create public interest in
life and health insurance policies, annuity contracts and variable annuity
contracts or in an insurer, or in an insurance producer, or to induce the
public to purchase, increase, modify, reinstate, borrow on, surrender,
replace or retain such a policy or contract, and (ii) "replacement
transaction" means a transaction in which a new life or health insurance
policy, annuity contract or variable annuity contract is to be purchased by
a prospective insured and the proposing producer should know that one or
more existing life or health insurance policies, annuity contracts or
variable annuity contracts is to be lapsed, forfeited, surrendered, reduced
in value or pledged as collateral for greater than 25% of the loan value
set forth in the policy.
(d) The Acquired Insurance Companies have (i) timely paid
all guaranty fund assessments that are due, or claimed or asserted by any
insurance regulatory authority to be due, from the Acquired Insurance
Companies, or (ii) provided for all such assessments in their statutory
financial statements, filed with the appropriate Insurance Commissioner, to
the extent necessary to be in conformity in all material respects with SAP
for such statements.
(e) Except as set forth in Schedule 4.1.20(e), the
December 31, 1994 SAP Statements list all funds maintained in a state of
licensure by any of the Acquired Insurance Companies under any Applicable
Insurance Law (each a "Deposit"), including, without limitation, any
Deposit the beneficial interest of which may have been transferred in
connection with an Existing Reinsurance Agreement. Except as set forth in
Schedule 4.1.20(e), the December 31, 1994 SAP Statements accurately set
forth as of August 31, 1995 the dollar amount of each such Deposit and the
name of the depository in which such Deposit is maintained.
4.1.21 Reinsurance. Schedule 4.1.21 lists all contractual
treaties and agreements regarding ceded or assumed reinsurance to which any
Acquired Insurance Company is a party and under which there is liability by
either
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party to the agreement (collectively, the "Existing Reinsurance
Agreements"). Each of the Existing Reinsurance Agreements is valid and
binding in all material respects in accordance with its terms on the
Acquired Insurance Company party thereto. To the knowledge of Seller and
the Selling Subsidiaries, amounts recoverable by any Acquired Insurance
Company pursuant to any Existing Reinsurance Agreement are collectible in
the ordinary course of business. No Acquired Insurance Company or, to the
knowledge of Seller and the Selling Subsidiaries, any other party thereto,
is in default in any material respect as to any Existing Reinsurance
Agreement and, to the knowledge of Seller and the Selling Subsidiaries,
there is no reason to believe that the financial condition of any such
other party is impaired to the extent that a default thereunder may
reasonably be anticipated. Except as disclosed in Schedule 4.1.21, to
default thereunder may reasonably be anticipated. Except as disclosed in
Schedule 4.1.21, to the knowledge of Seller and the Selling Subsidiaries,
none of the Existing Reinsurance Agreements contains any provision
providing that the other party hereto may terminate such Existing
Reinsurance Agreement, whether as a result of a change of control or
otherwise, and any Acquired Insurance Company that has ceded reinsurance
pursuant to any such Existing Reinsurance Agreement is entitled to take
full credit in its statutory financial statements filed with State
insurance regulators for such ceded reinsurance pursuant to Applicable
Insurance Laws.
4.1.22 Intellectual Property. Schedule 4.1.22(a) sets
forth a complete and correct list of all Intellectual Property that is
owned by FMI and the Acquired Insurance Companies (the "Owned Intellectual
Property"). To the knowledge of Seller and the Selling Subsidiaries, the
Owned Intellectual Property constitutes all Intellectual Property actually
used in or necessary for the conduct of the Acquired Business, except as
set forth on Schedule 4.1.22(b). Immediately after the Closing, SWFSC will
have the right to use all Intellectual Property described on Schedule
4.1.22(b) or to receive benefits substantially equivalent thereto pursuant
to Section 2.1.10 and will own all of FMI's and the Acquired Companies'
right, title and interest in the Owned Intellectual Property, free from any
Liens (other than Liens contemplated by the Assumed Liabilities or Liens
created by Buyer or SWFSC). Schedule 4.1.22(c) sets forth a complete and
correct list of all material written or, to the knowledge of Seller and the
Selling Subsidiaries, oral licenses and arrangements, (i)
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pursuant to which the use by any Person of Intellectual Property is
permitted by FMI or any of the Acquired Insurance Companies and (ii)
pursuant to which the use by FMI or any of the Acquired Insurance Companies
of Intellectual Property is permitted by any Person (collectively, the
"Intellectual Property Licenses"). All Intellectual Property Licenses are
in full force and effect in accordance with their terms, except for such
failures to be in full force and effect that would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect and
are free and clear of any Liens (other than Permitted Liens and Liens
contemplated by the Assumed Liabilities). Neither FMI nor any Acquired
Company is in default under any material Intellectual Property License, and
no such default is currently threatened. To the knowledge of Seller and
the Selling Subsidiaries, the conduct of the Acquired Business does not
infringe the rights of any third party in respect of any Intellectual
Property, and none of the Intellectual Property is being infringed in any
material respect by third parties. There is no claim or demand of any
Person pertaining to, or any proceeding which is pending or, to the
knowledge of Seller and the Selling Subsidiaries, threatened, that
challenges the rights of FMI and the Acquired Insurance Companies in
respect of any Intellectual Property, or claims that any default exists
under any Intellectual Property License. None of the Owned Intellectual
Property or the Intellectual Property Licenses is subject to any
outstanding order, ruling, decree, judgment or stipulation by or with any
court, tribunal arbitrator or other Governmental Authority. Schedule
4.1.22(d) lists all Owned Intellectual Property which has been duly
registered with, filed in or issued by, as the case may be, the United
States Patent and Trademark Office and United States Copyright Office or
other filing offices, domestic or foreign, and identifies the office with
which such filing was made. Each such registration and filing remains in
full force and effect, and a copy of each such registration or filing is
attached to such Schedule 4.1.22(d).
4.1.23 Variable Products: Securities Law Matters:
Investment Companies: Investment Adviser. (a) The Acquired Companies and
FMI are in compliance in all material respects with the Securities Act, the
Exchange Act, the Investment Company Act, the Investment Advisers Act and
State securities laws to the extent that such Acts apply to their
operations.
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(b) Since January 1, 1990, neither Seller nor FMI nor any
of the Acquired Companies has been enjoined, indicted, convicted or made
the subject of disciplinary proceedings, consent decrees or administrative
orders on account of any violation of the Securities Act, the Exchange Act,
the Investment Company Act or the Investment Advisers Act or State
securities laws in connection with its insurance operations or its
sponsorship, underwriting or advisory relationships with investment
companies.
4.1.24 Brokers and Finders, etc. Neither Seller nor any of
its subsidiaries, officers, directors or employees has employed any broker,
agent or finder other than Donaldson, Lufkin & Jenrette Securities
Corporation, or incurred any liability for any brokerage fees, commissions
or finders' fees in connection with the transactions contemplated by this
Agreement, other than fees to Donaldson, Lufkin & Jenrette Securities
Corporation, which fees are obligations solely of Seller and will be duly
paid by Seller in accordance with, and subject to, approvals received from
the Bankruptcy Court.
4.1.25 Shinnecock Purchase Agreement. From the date of the
Shinnecock Purchase Agreement to the date hereof, FMI and each of the
Acquired Companies has conducted its business only in a manner complying
with the Shinnecock Purchase Agreement, without giving effect to any waiver
thereof, except for such waivers disclosed in a letter dated December 1,
1995 addressed to Scott D. Silverman from Daniel B. Gail.
4.1.26 Purchase for Investment. The PennCorp Shares and
the Notes to be acquired under the terms of this Agreement will be acquired
by CFC for its own account for the purpose of investment and not with a
view to further distributions other than as contemplated by the PennCorp
Registration Rights Agreement or the SWF Registration Rights Agreement,
respectively, or pursuant to a confirmed joint plan of reorganization for
Seller and the Selling Subsidiaries under Chapter 11 of the Bankruptcy
Code. CFC will refrain from transferring or otherwise disposing of any of
the PennCorp Shares or Notes, or any interest therein, in such a manner as
to violate any provision of the Securities Act or of any applicable state
securities law regulating the disposition thereof. CFC agrees that the
certificates representing the PennCorp Shares and the Notes may bear
legends to the effect that such securities have not been registered under
the Securities Act or such other state
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securities laws and that no interest therein may be transferred or
otherwise disposed of in violation of the provisions thereof.
4.1.27 Disclosure. No representation or warranty by Seller
or any Selling Subsidiary contained in this Agreement nor any statement or
certificate (other than the certificate delivered pursuant to Section 5.10
as to the items referenced in clause (C) thereof) furnished or to be
furnished by or on behalf of Seller or any Selling Subsidiary to Buyer or
its representatives in connection herewith or pursuant hereto contains or
will contain any untrue statement of a material fact, or, to the knowledge
of Seller and the Selling Subsidiaries, omits or will omit to state any
material fact required to make the statements contained herein or therein
not materially misleading.
4.2 Representations and Warranties of Buyer, PennCorp and SWFSC.
Each of Buyer, PennCorp and SWFSC hereby severally, each as to itself, make
the following representations and warranties to Seller:
4.2.1 Corporate Existence. Each of Buyer, PennCorp and
SWFSC is a corporation duly organized and validly existing and in good
standing under the laws of Delaware and has full power and authority to
carry on its business as currently conducted or proposed to be conducted.
Each of Buyer, PennCorp and SWFSC is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which the conduct of its business requires such
qualification, except for such failures to be so qualified or to be in good
standing that would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on it or materially and
adversely affect the consummation of the transactions provided for in this
Agreement. All of the issued and outstanding shares of capital stock of
SWFSC are owned beneficially and of record by Buyer.
4.2.2 Authorization; Enforcement. Each of Buyer, PennCorp
and SWFSC has full corporate power and authority to execute and deliver
this Agreement, the Related Agreements to which it is a party and the other
agreements and instruments to be executed by it pursuant hereto and to
perform its obligations under this Agreement, the Related Agreements to
which it is a party and such other agreements and instruments in accordance
with their respective terms. Each of Buyer, PennCorp and SWFSC has taken
all necessary
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corporate action to duly and validly authorize its execution and delivery
of this Agreement, the Related Agreements to which it is a party and such
other agreements and instruments to be delivered pursuant hereto and
thereto and the consummation of the transactions contemplated hereby and
thereby. This Agreement has been duly executed by each of Buyer, PennCorp
and SWFSC and this Agreement constitutes and, when executed, the other
Related Agreements to which each of Buyer, PennCorp and SWFSC is a party
will constitute the valid and legally binding obligations of such parties,
enforceable against them in accordance with their terms.
4.2.3 Governmental Approvals. No material Governmental
Approval is required to be obtained, made or given by or with respect to
Buyer, PennCorp or SWFSC in connection with the execution and delivery of
this Agreement or the Related Agreements, the performance by such parties
of their respective obligations under this Agreement or the Related
Agreements or the consummation of the transactions contemplated hereunder
and thereunder, other than as set forth in Sections 3.1.1 and 3.2.5. No
Governmental Approval is required to be obtained under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976.
4.2.4 No Conflicts. The execution and delivery of this
Agreement and the Related Agreements and the consummation of any of the
transactions contemplated hereunder or thereunder will not (a) conflict
with or result in a breach of any provision of the Certificate of
Incorporation or By-Laws of Buyer, PennCorp or SWFSC or (b) result in any
conflict with, breach of or default (with or without notice or lapse of
time or both) under, or give rise to any right of termination, cancellation
or acceleration of any obligation or loss of any benefit under, or result
in the imposition of any Liens on any of Buyer's, PennCorp's or SWFSC's
properties or assets under, or require any consent or approval from any
third party with respect to, any material loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement or instrument or
permit, concession, franchise or license to which Buyer, PennCorp or SWFSC,
as the case may be, is a party or by which Buyer or SWFSC or any of their
respective properties or assets may be bound, or (c) conflict in any
material respect with any Applicable Law applicable to Buyer, PennCorp or
SWFSC or any of their respective properties or assets, except for
occurrences described in clause (b) or (c) that would not, individually or
in the aggregate, reasonably be expected to materially and adversely affect
the consummation of the
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transactions provided for in this Agreement or have a material adverse
effect on the ability of SWFSC to provide to Seller and the Retained
Companies the services contemplated under the SWFSC Leasing Agreement.
4.2.5 Brokers and Finders, etc. None of the Buyer,
PennCorp or SWFSC nor any of their respective subsidiaries, officers,
directors or employees has employed any broker, agent or finder other than
Smith Barney Inc. and Knightsbridge Management, L.L.C., or incurred any
liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated by this Agreement, other than
fees to Smith Barney Inc. and Knightsbridge Management, L.L.C., which fees
are obligations solely of Buyer and/or PennCorp and will be duly paid by
Buyer and/or PennCorp.
4.2.6 [Reserved].
4.2.7 Purchase for Investment. The Acquired Shares to be
acquired under the terms of this Agreement will be acquired by the Buyer
for its own account for the purpose of investment and not with a view to
further distributions. The Buyer will refrain from transferring or
otherwise disposing of any of the Acquired Shares, or any interest therein,
in such a manner as to violate any provision of the Securities Act or of
any applicable state securities law regulating the disposition thereof.
Buyer agrees that the certificates representing the Acquired Shares may
bear legends to the effect that such shares have not been registered under
the Securities Act or such other state securities laws and that no interest
therein may be transferred or otherwise disposed of in violation of the
provisions thereof.
4.2.8 Litigation. There is no Litigation now pending or,
to its knowledge, threatened, against or relating to it or any of its
directors or officers in their capacity as such, which reasonably would be
expected to have a material adverse effect on its ability to consummate the
transactions provided for hereunder or SWFSC's ability to provide to Seller
and the Retained Companies the services contemplated under the SWFSC
Leasing Agreement.
4.2.9 Capitalization of Buyer. As of the Closing Date, the
authorized capital stock of Buyer will consist of 28,000,000 shares of
common stock ("Buyer Common Stock"), par value $.01 per share, of which (i)
18,000,000
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shares will be designated "Class A Common Stock" and (ii) 10,000,000 shares
will be designated "Class B Nonvoting Common Stock," and 500,000 shares of
preferred stock (the "Buyer Preferred Stock"), par value $.01 per share, of
which (A) 210,000 shares will be designated "Redeemable Preferred Stock"
and (B) 210,000 will be designated as "Series A Preferred Stock."
Immediately after giving effect to the consummation of the transactions
contemplated hereby, there will be (i) 3,500,000 shares of Class A Common
Stock issued and outstanding, of which 2,350,000 shares will be owned of
record and beneficially by Knightsbridge, 500,000 shares will be owned of
record and beneficially by PennCorp Southwest, Inc., a Delaware corporation
and a wholly owned subsidiary of PennCorp ("PSI"), and 650,000 shares, in
the aggregate, will be owned by Messrs. David J. Stone and Steven W.
Fickes, respectively, (ii) 8,400,000 shares of Class B Nonvoting Common
Stock issued and outstanding, all of which will be owned of record and
beneficially by PSI, (iii) 210,000 shares of Series A Preferred Stock
issued and outstanding, all of which will be owned of record and
beneficially by PSI, and (iv) no shares of Redeemable Preferred Stock
issued and outstanding. A copy of the summary terms of each class or
series of Buyer Common Stock and Buyer Preferred Stock to be outstanding as
of the Closing Date is attached hereto as Exhibits I-1 and I-2. As of the
Closing Date, Buyer will have reserved for issuance to the holders of the
Notes (i) 800,000 shares of its Class B Nonvoting Common Stock, and
(ii) 2,400,000 shares of its Class A Common Stock. As of the Closing Date,
except for the Notes and the warrants to purchase 1,785,000 shares of
Class A Common Stock to be issued to Knightsbridge (a copy of the summary
terms of such warrants being attached hereto as Exhibit I-3), there will be
no outstanding securities of Buyer convertible into or evidencing the right
to purchase or subscribe for any shares of capital stock of Buyer, there
will be no outstanding or authorized options, warrants, calls,
subscriptions, rights, commitments or any other agreements of any character
obligating Buyer to issue any shares of its capital stock or any other
securities convertible into or evidencing the right to purchase or
subscribe for any shares of such stock and, except for the Stockholders
Agreement to be entered into between Buyer, Knightsbridge, and PSI (a copy
of which will be provided to Seller after the date hereof), there will be
no agreements or understandings with respect to the voting, sale or
transfer of any shares of capital stock of Buyer to which Buyer is a party.
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4.2.10 Capitalization of SLAC. As of the Closing Date, the
authorized capital stock of Southwestern Life Acquisition Corp., a Delaware
corporation ("SLAC"), will consist of 1,000 shares of its common stock par
value $.01 per share ("SLAC Common Stock"), and 210,000 shares of its
preferred stock, par value $.01 per share (the "SLAC Preferred Stock"), all
of which will be designated as its 5.5% Preferred Stock. As of the Closing
Date, there will be (i) 1,000 shares of SLAC Common Stock issued and
outstanding, all of which will be owned of record and beneficially by Buyer
and (ii) 210,000 shares of 5.5% Preferred Stock issued and outstanding, all
of which will be held of record and beneficially by various insurance
subsidiaries of PennCorp. A copy of the summary terms of each class or
series of the SLAC Common Stock and the SLAC Preferred Stock is attached
hereto as Exhibits J-1 and J-2.
4.2.11 Capitalization of PennCorp. As of the date hereof,
the authorized capital stock of PennCorp consists of 50,000,000 shares of
PennCorp Common Stock and 10,000,000 shares of preferred stock, par value
$.01 per share (the "PennCorp Preferred Stock"). As of November 30, 1995,
there were (i) 22,840,458 shares of PennCorp Common Stock issued and
outstanding; (ii) 39,250 shares of PennCorp Common Stock held in the
treasury of PennCorp; (iii) 2,571,395 shares of PennCorp Common Stock
reserved for issuance upon exercise of issued and outstanding or authorized
options and warrants; and (iv) 5,088,495 shares of PennCorp Common Stock
reserved for issuance upon conversion of PennCorp's $3.375 Convertible
Preferred Stock; (v) 127,500 shares of PennCorp's Series B Preferred Stock
issued and outstanding; (vi) 178,500 shares of PennCorp's Series C
Preferred Stock issued and outstanding; and (vii) 2,300,000 shares of
PennCorp's $3.375 Convertible Preferred Stock issued and outstanding. All
of the outstanding shares of PennCorp Common Stock are duly authorized,
validly issued, fully paid, nonassessable and free of preemptive rights.
The PennCorp Shares to be issued pursuant to this Agreement have been
reserved for issuance and have been duly authorized and, when issued in
accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable and will not have been issued in violation of any
preemptive rights. As of the date hereof, except with respect to the
options and warrants to purchase PennCorp Common Stock described in this
Section 4.2.11 and except for the shares of PennCorp Common Stock issuable
upon conversion of PennCorp's $3.375 Convertible Preferred Stock, there are
no outstanding
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securities of PennCorp convertible into or evidencing the right to purchase
or subscribe for any shares of capital stock of PennCorp, there are no
outstanding or authorized options, warrants, calls, subscriptions, rights,
commitments or any other agreements of any character obligating PennCorp to
issue any shares of its capital stock or any other securities convertible
into or evidencing the right to purchase or subscribe for any shares of
such stock and there are no agreements or understandings with respect to
the voting, sale or transfer of any shares of capital stock of PennCorp to
which PennCorp is a party.
4.2.12 SEC Reports. Each report, schedule, registration
statement and definitive proxy statement filed by PennCorp with the SEC
since January 1, 1995 (the "PennCorp SEC Documents"), as of its respective
filing date, (i) complied in all material respects with the requirements of
the Securities Act, the Exchange Act and the respective rules and
regulations of the SEC thereunder applicable to such PennCorp SEC Documents
and (ii) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order
to make the statements therein not misleading. PennCorp has timely filed
all documents that it was required to file with the SEC since January 1,
1995. The consolidated balance sheets and the related consolidated
statements of operations, stockholders' equity and cash flows (including,
without limitation, the related notes thereto) of PennCorp included in the
PennCorp SEC Documents, including PennCorp's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994 and PennCorp's Quarterly Reports on
Form 10-Q for the three months ended March 31, 1995, for the three and six
months ended June 30, 1995, and for the three and nine months ended
September 30, 1995, complied at the time filed (or, if such reports were
amended, complied at the time such amended reports were filed) as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles and
fairly present the consolidated financial position of PennCorp and its
consolidated subsidiaries as at the dates thereof and the consolidated
results of their operations and changes in their cash flows and
stockholders' equity for the periods then ended except, in the case of the
unaudited interim financial statements, for normal and recurring year-end
audit adjustments. Except as set forth in any PennCorp SEC Documents filed
prior to the date
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hereof, at September 30, 1995, neither PennCorp nor any of its subsidiaries
had, and since such date neither PennCorp, nor any of such subsidiaries has
incurred, any liabilities or obligations of any nature (whether accrued,
contingent, absolute or otherwise) which, individually or in the aggregate,
would reasonably be expected to have a material adverse effect on the
condition, financial or otherwise, business, assets, properties or results
of operations of PennCorp and its subsidiaries taken as a whole. PennCorp
has delivered to Seller for review true and complete copies of each of the
PennCorp SEC Documents.
4.2.13 Knowledge of Material Adverse Effect. As of the
date hereof, none of David J. Stone, Steven W. Fickes, Scott D. Silverman
or Charles H. Lubochinski has knowledge (after due inquiry) (i) of any
event, occurrence, change in facts, condition, or other change or effect
constituting a Material Adverse Effect or that may reasonably be expected
to result in the non-satisfaction of a condition to Buyer's obligation to
consummate the transactions contemplated hereby or (ii) of any reason for
any lender to fail to provide any of the proposed financing to be utilized
by Buyer or PennCorp in connection with the transactions contemplated by
this Agreement.
4.2.14 Disclosure. No representation or warranty by Buyer,
PennCorp or SWFSC contained in this Agreement nor any statement or
certificate furnished or to be furnished by or on behalf of Buyer, PennCorp
or SWFSC to Seller or its representatives in connection herewith or
pursuant hereto contains or will contain any untrue statement of a material
fact, or, to the knowledge of Buyer, PennCorp or SWFSC, omits or will omit
to state any material fact required to make the statements contained herein
or therein not materially misleading.
ARTICLE V
Covenants
5.1 Operations in the Ordinary Course. Subsequent to the date
of this Agreement and prior to the Closing Date, except as otherwise
contemplated by this Agreement or consented to by Buyer and PennCorp in
writing (which consent shall not be unreasonably withheld), Seller shall
cause the business of FMI and of each of the Acquired Companies to be
operated in the usual, regular and ordinary course in substantially the
same manner as heretofore and in the same manner as if Seller were
operating such business for its own
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account consistent with past practice. Seller shall comply with the
provisions of the preceding sentence even if the cost of so operating would
require an adjustment in the Initial Purchase Price because the sum of the
payments to FMI and the other Operating Expenses of the Acquired Companies
would exceed allowances provided for in Section 2.6.3(a)(iii). Except as
otherwise contemplated by this Agreement or consented to by Buyer and
PennCorp in writing (which consent shall not be unreasonably withheld),
Seller shall and shall cause FMI and each of the Acquired Companies to (i)
maintain insurance coverages (to the extent available on commercially
reasonable terms) and maintain its books, accounts and records in the usual
manner on a basis consistent with past practice; (ii) comply in all
material respects with all applicable judgments, orders, injunctions, laws,
statutes, regulations, ordinances, licenses, approvals and permits of
Governmental Authorities and use its commercially reasonable efforts to
preserve in full force and effect all Insurance Licenses held by it; (iii)
use its commercially reasonable efforts to maintain and keep its properties
and equipment in good repair, working order and condition, subject to
normal wear and tear; (iv) perform in all material respects its obligations
under all material Contracts to which it is a party or by which it is
bound, except, other than in the case of the Assumed Contracts, to the
extent such performance is excused or modified by an order of the
Bankruptcy Court or pursuant to the Bankruptcy Code; and (v) use reasonable
efforts to promote its business, maintain and preserve its business
organization, retain the services of its present officers and employees and
maintain its relationships with its agents, policyholders, suppliers and
customers.
5.2 Restrictions. Except as otherwise contemplated by this
Agreement or consented to by Buyer and PennCorp in writing (which consent
shall not unreasonably be withheld), prior to the Closing Date Seller shall
not cause or permit FMI or any of the Acquired Companies to do any of the
following:
(a) Indebtedness. (i) In the case of any Acquired
Company, incur, create or assume any indebtedness, other than short-
term indebtedness arising out of trade accounts payable incurred in
the ordinary course of
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business consistent with past practice, or (ii) create or assume any
other liability or obligation (absolute or contingent) material to
any Acquired Company other than in the ordinary course of business
consistent with past practice, or grant or create any Lien on any of
its assets, other than Permitted Liens.
(b) Investment Policy. With respect to the investment of
assets included in the general account of any Acquired Insurance
Company, (i) make any material change in its investment practices or
policies (except to the extent such change arises from complying with
any of the restrictions of this Section 5.2), (ii) make any
investment other than purchases of publicly traded fixed income
securities having a remaining maturity at the time of purchase of no
more than 10 years and having a rating of "AA" or better from Moody's
Investor's Service, Inc. (or a substantially equivalent rating from
another nationally recognized rating agency), or (iii) sell or
dispose (other than by maturity) of any investment, except in
accordance with the description of contemplated dispositions for each
week provided to a designated representative of Buyer by 11:00 a.m.,
Dallas time, on each Monday after the Execution Date.
(c) Actuarial Accounting, etc. Policy. In the case of any
Acquired Company, make any material change in its underwriting,
pricing, actuarial practices or policies or any material change in
its financial, Tax or accounting practices or policies, including,
without imitation, any change in any basis for establishing reserves
and any depreciation policies or rates.
(d) Compensation, etc. Except as set forth on Schedule
4.1.13(a)(ii) and except as expressly provided for in an existing
Plan or agreement set forth on Schedule 4.1.19(a), grant or promise
to grant to any of its officers, directors, managerial personnel or
other employees (including leased employees, if any) or agents, any
material increase in compensation or commissions, or in severance or
termination pay, or, except as required under Section 7.5(b), adopt
or amend or promise to adopt or amend any new or existing Plan
covering any Business Employee employed or formerly employed in
connection with the business of Seller, FMI or the Acquired Companies
or amend in any material respect any Plan, unless such amendment is
required to comply with applicable law or is expressly permitted
under Section 7.5(b), or grant or promise to grant any
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material benefits payable upon a change in control of any such
entity.
(e) Employment Contracts. Enter into any employment
agreement with any director, officer or other key employee of FMI or
any Acquired Company, except (i) those terminable without liability
to FMI or any Acquired Company on 30 days' notice or less or amend
any such agreement presently existing or (ii) with those individuals
who are not employees of FMI on the Execution Date and who will
remain employees of FMI after the Closing.
(f) Capital Stock. Authorize, issue or sell any of its
capital stock or other equity securities or any security convertible
into or exchangeable for such capital stock or other equity
securities, or any option with respect thereto.
(g) Charter, etc. Amend its Certificate or Articles of
Incorporation or By-laws without the prior approval of Buyer.
(h) Mergers. (x) Merge or consolidate with any other
person or (y) acquire all or substantially all the assets or capital
stock of any other person, except, in the case of clause (x) or (y),
to the extent that (1) such transaction results from the exercise by
Seller, FMI or any of the Acquired Companies of its remedies under
any mortgage, deed of trust or other security or collateral
agreement, or (2) such transaction is contemplated by this Agreement,
provided that clause (1) of this exception shall not permit Seller,
FMI or any Acquired Company to merge or consolidate with any other
person in any transaction in which Seller or an Acquired Company is
not the surviving corporation or which otherwise interferes with or
restricts its ability to perform its obligations under this
Agreement, or (z) sell, lease, pledge, mortgage, transfer or
otherwise dispose of (whether by bulk reinsurance or otherwise) all
or any material portion of its assets, properties or business or any
of its significant business segments, or any asset, property or
business material to FMI, Seller or any Acquired Company.
(i) Acquisition of Assets. In the case of any Acquired
Company, other than pursuant to any Contract
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entered into prior to the date of this Agreement which has been
disclosed on a Schedule hereto, acquire from any Person any material
assets, except assets acquired in the ordinary course of business
consistent with restrictions set forth in Section 5.2(b).
(j) Insurance Licenses. Take any action to forfeit,
abandon, modify, waive, terminate or otherwise change any of its
Insurance License, except (x) as may be required in order to comply
with Applicable Law, (y) as may be contemplated by this Agreement or,
(z) such modifications or waivers of Insurance Licenses made in the
ordinary course of business of any Acquired Insurance Companies as
would not in any case or in the aggregate restrict the business or
operations of such Acquired Insurance Companies in any material
respect.
(k) Representations. Take any action, or omit to take any
commercially reasonable action, that would, or that would reasonably
be expected to, result in (i) any of the representations and
warranties of Seller and the Selling Subsidiaries set forth in
Section 4.1 becoming untrue in any material respect or (ii) any of
the conditions to the Closing set forth in Article III not being
satisfied.
(l) Affiliate Investments. In the case of any Acquired
Company, make any debt or equity investment in, or purchase any debt
or equity securities of, or make any loan or advance or capital
contribution to, any Affiliated Company or enter into any agreement
to do so.
(m) Dividends, Payments, etc. In the case of the Acquired
Companies, declare, set aside, make provision for or pay any
dividends, or make any payments to or for the benefit of Seller or
any of its Affiliates, except for (i) the distribution of
Constitution Life to SWL Holding and the distribution of the SLC
Bonds by Constitution Life to SWL Holding, as contemplated by Section
3.1.1 and 3.1.3, (ii) payments contemplated under Tax sharing or
allocation agreements between Seller and any of its affiliates and
(iii) payments made pursuant to the terms of the FMI Services
Agreement.
(n) New and Existing Policies. In the case of any
Acquired Company, issue or sell new kinds of
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Policies, or amend existing kinds of Policies except to the extent
required to comply with Applicable Law.
(o) Regulatory. Enter into any material agreement with
any Governmental Authority except as may be contemplated by this
Agreement or except to the extent required to comply with Applicable
Law.
(p) Real Property Acquisitions. In the case of any
Acquired Company, acquire title to any real property, whether through
foreclosure or otherwise, except for the Lakeside Plaza Office
Complex, Oklahoma City, Oklahoma through the foreclosure of Loan N.
00030549 to United States Fidelity and Guaranty Company.
(q) Reinsurance. In the case of any Acquired Company,
modify any Existing Reinsurance Agreement or enter into any new
contractual treaties and agreements regarding ceded or assumed
reinsurance except to the extent required to comply with Applicable
Law.
(r) Material Contracts. Modify any existing material
Contract or enter into any new material Contract.
(s) General. Authorize any of, or commit or agree to take
any of, the foregoing actions.
5.3 Related Matters. Seller shall promptly report to Buyer the
termination of employment of any senior officer of Seller or of any
Acquired Company.
5.4 Management of Acquired Companies. Seller shall, from the
date of this Agreement through the Closing Date, cause its management and
that of FMI to consult on a regular basis and in good faith with the
employees and representatives of Buyer concerning the management of the
Acquired Companies' businesses, including without limitation the policies
and practices of the Acquired Companies with respect to (i) the ceding or
assumption of reinsurance or the termination or modification of Existing
Reinsurance Agreements (except as contemplated by this Agreement), (ii)
significant underwriting, actuarial, Tax or accounting issues (including
matters related to Tax audits or the establishment, review and modification
of insurance and other reserves), (iii) significant matters relating to the
conditions, forms and pricing of new kinds of Policies and
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(iv) significant matters relating to the agency force, product
distribution, commissions and similar matters.
5.5 Access to Information. (a) Subsequent to the signing of
this Agreement and prior to the Closing Date, Seller shall cause FMI and
each of the Acquired Companies to afford Buyer and PennCorp and Buyer's and
PennCorp's accountants, actuaries, counsel, financial advisers and other
representatives with full access during normal business hours to all their
respective properties, Books and Records, contracts, and commitments and
reasonable access to their officers and employees. To that end, during
such period, Seller will make a reasonable amount of office space
(including standard office equipment) at its corporate headquarters in
Dallas, Texas available to such agents, employees, advisers and other
representatives as Seller shall designate. During such period, Seller and
each of the Acquired Companies shall furnish promptly to Buyer and PennCorp
(a) a copy of each (i) SAP Annual Statement, SAP Quarterly Statement and
SAP Audited Statement filed by it during such period pursuant to the
requirements of any Federal, State or foreign insurance law or regulation
and (ii) GAAP Financial Statement and GAAP Quarterly Statement filed by it
during such period pursuant to the requirements of any Federal or State law
or regulation, (b) in the case of Seller, FMI and each of Acquired
Companies, after the end of each month, any management financial reports
(together with all accompanying documents) prepared with respect to such
month, (c) all notices to any Acquired Company with respect to any alleged
deficiency or violation material to the financial condition or operations
of such Acquired Insurance Company from any Governmental Authority, (d)
each written report on examination of financial condition or market conduct
(whether in draft or final form) of any Acquired Insurance Company issued
by any applicable Governmental Authority, (e) all material filings with
State insurance regulators made by any of the Acquired Insurance Companies
under the insurance holding company statutes of their domiciliary States,
(f) all material correspondence with, and any prepared summaries of
meetings with, representatives of the IRS or other taxing authorities,
(g) all material correspondence or communications with State insurance
regulatory authorities concerning the Acquired Companies, including without
limitation any such items relating to rehabilitation, insolvency,
liquidation, supervision, or other comparable State proceeding and (h) all
other information and documents concerning its business, properties and
personnel as Buyer and/or PennCorp may reasonably request. Seller and each
of the Selling Subsidiaries will promptly deliver to Buyer and PennCorp
such copies of all pleadings, motions, notices, statements, schedules,
applications, reports and other papers filed in the Case as Buyer and/or
PennCorp
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may reasonably request. Subject to any applicable confidentiality
agreements, Seller and each of the Selling Subsidiaries will promptly
provide Buyer and PennCorp with all documents and materials relating to the
proposed sale of the Acquired Business or any portion thereof (whether
created before or after the Closing Date), including without limitation
with respect to competing bids, and otherwise cooperate with Buyer and
PennCorp, to the extent reasonably necessary in connection with Buyer's and
PennCorp's preparation for or participation in any part of the bankruptcy
proceedings of Seller or any of the Retained Companies in which Buyer's
and/or PennCorp's participation is necessary or required. Seller will and
will cause each Retained Company to promptly deliver to Buyer and PennCorp
all pleadings, motions, notices, statements, schedules, applications,
reports and other papers filed in any judicial or administrative proceeding
as Buyer and/or PennCorp may reasonably request. Each financial statement
provided to Buyer and/or PennCorp in accordance with subparagraph (a) above
shall be prepared on a basis consistent with that used in the preparation
of the earlier applicable financial statements described in Section 4.1.7
hereto, and shall, (x) in the case of any SAP Annual Statement, SAP
Quarterly Statement or SAP Audited Statement, fairly present in all
material respects the admitted assets, reserves, liabilities, capital and
surplus of such Acquired Insurance Company as of the date thereof and the
results of operations and cash flow for the period then ended and (y) in
the case of any GAAP Financial Statement or GAAP Quarterly Statement,
fairly present in all material respects the financial position of Seller
and its consolidated Subsidiaries as of the respective dates thereof and
the results of operations and the changes in their stockholder's equity and
cash flows for the period then ended. Records and other documents that are
subject to an attorney-client or similar privilege that protects such
documents and records from a discovery or similar disclosure report from
third parties shall not be required to be disclosed if such disclosure
would make such privilege unavailable and if the disclosing party would be
materially damaged by the loss of such privilege.
(b) From and after the Closing, Buyer will, and will cause
SWFSC and each of the Acquired Companies to, and PennCorp will use
commercially reasonable efforts to furnish
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on a timely basis to Seller and the Retained Companies such data and other
information as Seller shall reasonably request in order to permit Seller
and the Retained Companies to (1) prepare their respective financial and
tax statements and reports, (2) prepare all forms, reports, applications
and other documents required under Applicable Law and (3) make such
filings, applications, reports and other similar matters in connection with
proceedings before the Bankruptcy Court as may be appropriate or necessary.
At Buyer's election, in lieu of providing such data and information, Buyer
may make the respective books and records of SWFSC and the Retained
Companies available to Seller and the Retained Companies and their
respective accountants, actuaries, counsel, financial advisers and other
representatives during normal business hours. Buyer, SWFSC and the
Acquired Companies shall not be obligated to provide information or access
to information pursuant to this Section 5.5(b) to the extent such
information is sought in connection with any proceeding in which Seller or
any Retained Company is disputing any matter with Buyer, PennCorp, any
Acquired Company, or any Buyer Indemnitee. Records and other documents
that are subject to an attorney/client or similar privilege that protects
such documents and records from a discovery or similar disclosure by third
parties shall not be required to be disclosed if such disclosure would make
such privilege unavailable and if the disclosing party would be materially
damaged by the loss of such privilege.
5.6 Exclusive Dealing. (a) During the Exclusivity Period,
Seller shall not, and shall not authorize or permit any of its Affiliates
or any officer, director, agent or employee of, or any investment banker,
financial advisor, attorney, accountant or other representatives retained
by Seller or any Affiliate of Seller ("Seller Representatives"), to,
directly or indirectly, solicit, initiate, seek or encourage (including by
way of furnishing information or assistance) or take other material action
to facilitate any inquiries or the making of any proposal which constitutes
or may reasonably be expected to lead to, an Acquisition Proposal (as
defined below) from any person other than Buyer (a "Third Party"), or
engage in any discussions or negotiations relating thereto or in
furtherance thereof or accept any Acquisition Proposal, and Seller shall
promptly (but in any event within one day thereafter) notify Buyer orally
(which notice shall promptly be confirmed in writing) of any Acquisition
Proposal or any inquiry with respect thereto which Seller or any of its
Affiliates or any Seller Representative may receive and
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shall provide a copy of any written materials provided to Seller in
connection with any such Acquisition Proposal.
(b) As used in this Agreement "Acquisition Proposal" shall
mean any proposal or offer, other than a proposal or offer (1) by Buyer or
any of its Affiliates or (2) with respect to any Retained Companies, for
(i) any merger, consolidation, share exchange, business combination or
other similar transaction (including reinsurance) with Seller or any of its
Subsidiaries, (ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition of 10% or more of the assets or policies (including
through reinsurance) of Seller or any of its Subsidiaries, in a single
transaction or series of transactions (whether related or unrelated), (iii)
any tender offer or exchange offer for 20% or more of the outstanding
shares of Seller's common stock or any class of Seller's debt securities or
the filing of a registration statement under the Securities Act in
connection therewith, (iv) the acquisition by any Third Party of beneficial
ownership or a right to acquire beneficial ownership of, or the formation
of any "group" (as defined under Section 13(d)(3) of the Exchange Act)
which beneficially owns or has the right to acquire beneficial ownership
of, 20% or more of the then outstanding shares of any class of Seller
common stock or any class of Seller's debt securities or (v) any public
announcement of a proposal, plan or intention to do any of the foregoing or
any agreement to engage in any of the foregoing.
5.7 Regulatory Filing and Compliance. (a) Seller and FMI will
furnish Buyer and PennCorp with such information as Buyer and PennCorp may
reasonably request in connection with any application, notification or
filing Buyer and/or PennCorp may make to applicable Governmental
Authorities in connection with this Agreement and the Related Agreements
including without limitation those under any Applicable Insurance Laws.
Seller will cause each of its Subsidiaries to cooperate with Buyer and
PennCorp, to the extent Buyer and/or PennCorp may reasonably request, to
enable it to make such applications, notifications or filings as promptly
as practicable.
(b) Buyer and PennCorp will furnish Seller with such
information as Seller may reasonably request in connection with any
application, notification or filing Seller may make to applicable
Governmental Authorities in connection with this Agreement and the Related
Agreements including, without limitation, those under any Applicable
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Insurance Laws. Buyer and PennCorp will cooperate with Seller, to the
extent Seller may reasonably request, to enable it to make such
applications, notifications or filings as promptly as practicable.
(c) Buyer and PennCorp, on the one hand, and Seller, FMI
and the Acquired Companies, on the other hand, shall as soon as reasonably
practicable after the date of this Agreement prepare and file or cause to
be prepared and filed with the appropriate Governmental Authorities all
documentation and information required by law or requested by any such
Governmental Authority to be filed by Buyer, Affiliates of Buyer, PennCorp,
Affiliates of PennCorp, Seller, FMI and the Acquired Companies to permit
the consummation of the transactions provided for in this Agreement,
including, without limitation, (i) notifications and filings required to be
made under any Applicable Insurance Laws, (ii) any necessary applications,
reports or other documents to be filed with the SEC, the NYSE, the American
Stock Exchange, Inc., the National Association of Securities Dealers, Inc.,
any other regulatory or self-regulatory organization and the securities
commissions of States in which any of Seller's Subsidiaries acts as a
broker-dealer or Investment Adviser and (iii) other notifications and
filings referred to in Sections 3.1.1, 3.1.2, and 3.2.5. Seller, FMI and
the Acquired Companies shall perform all such other actions reasonably
necessary to obtain prompt favorable action from any such Governmental
Authority.
(d) Neither Seller, FMI nor any Acquired Company on the
one hand, nor Buyer, PennCorp or SWFSC on the other, shall deliver to any
Governmental Authority any material application, notification, or filing or
other document relating to the transactions contemplated by this Agreement
or any Related Agreement without affording the other a reasonable
opportunity to review and comment on such application, notification, filing
or other document and shall not make any such application, notification or
filing that describes or refers to the other or any Affiliate of the other
or the transactions contemplated hereby without the prior approval of the
other of such description or reference (which approval will not be
unreasonably withheld); provided that, subject to the last sentence of
Section 5.8 and Sections 3.1.2 and 5.12, nothing contained herein shall in
any way restrict or otherwise affect Seller's, Buyer's or PennCorp's right
to make any such application, pleading, motion or other filing with the
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Bankruptcy Court as Seller, Buyer or PennCorp, as the case may be, deems
appropriate in its sole discretion. Each of Seller, Buyer and PennCorp
shall promptly deliver to the other copies of all applications,
notifications, filings (other than those with respect to Policy forms or
premium rates) or other documents filed with any Governmental Authority by
Seller, FMI or any of the Acquired Companies on the one hand, or Buyer,
PennCorp or SWFSC on the other, with respect to the transactions
contemplated hereby, and copies of all material correspondence to and from
such Governmental Authority in connection therewith.
5.8 Commercially Reasonable Efforts. Subject to the terms and
conditions of this Agreement, each party will use commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to
be done, and to assist and cooperate with the other parties in doing, to
the extent commercially reasonable, all things necessary, proper or
advisable to consummate and make effective in the most expeditious manner
practicable, the Closing, and the other transactions contemplated by this
Agreement including, without limitation, (i) the obtaining of all necessary
actions or non-actions, waivers, consents and approvals from Governmental
Authorities and the making of all necessary registrations and filings
(including filings with Governmental Authorities, if any) and the taking of
all reasonable steps as may be necessary to obtain an approval or waiver
from, or to avoid an action or proceeding by, any Governmental Authority,
(ii) the defending of any lawsuits or other legal proceedings, whether
judicial or administrative, brought against such party challenging this
Agreement or the consummation of the transactions contemplated hereby,
including seeking to have any stay or temporary restraining order entered
by any court or other Governmental Authority vacated or reversed and (iii)
the execution and delivery of any additional instruments or documents or
the taking of all actions, whether prior to or after the Closing Date,
necessary to sell, convey, transfer or assign to Buyer, any Buyer
Subsidiary or PennCorp, or to enable Buyer or any Buyer Subsidiary to use,
any of the Acquired Assets or otherwise to carry out the purpose and intent
of this Agreement including, without limitation, the execution and delivery
of any additional instruments necessary to transfer ownership of all
Deposits listed on Schedule 4.1.20(e) hereto. The parties will use all
commercially reasonable efforts to obtain, or cause to be obtained, all
necessary consents, approvals or waivers from third parties in connection
with the Closing and the other
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transactions contemplated hereby. Seller and the Selling Subsidiaries
agree not to take, directly or indirectly, any action in the Bankruptcy
Court to hinder or delay the consummation of the transactions contemplated
in this Agreement, provided that this covenant shall not be deemed to have
been breached by any action taken in accordance with, or that is reasonably
responsive to an order of, the Bankruptcy Court.
5.9 Antitwisting and Antisolicitation. (a) Seller and the
Retained Companies will not, and Seller shall cause each of the Retained
Companies to agree that it will not, knowingly replace, and shall issue
instructions prohibiting any officer, employee, agent, broker or producer
of Seller, FMI or the Retained Companies (collectively, the "Prohibited
Agents") from replacing, or attempting to replace, the insurance policies,
annuity contracts or guaranteed interest contracts issued or assumed by any
of the Acquired Insurance Companies or reinsured and assumed by the
Acquired Insurance Companies with an insurance policy, annuity contract or
guaranteed investment contract issued by Seller or by any current or future
Subsidiary of Seller (other than the Acquired Insurance Companies) for a
period of two years following the Closing Date.
(b) For a period of two years from the Closing Date,
Seller will not, and Seller shall cause each of the Retained Companies to
agree that it will not, directly or indirectly, attempt to induce (i) any
person who is in the employ of Buyer, SWFSC or any of the Acquired
Companies to leave the employ of Buyer, SWFSC or any of the Acquired
Companies, or (ii) any agent, broker or producer of the Acquired Insurance
Companies to cease writing or placing insurance policies, annuity contracts
or guaranteed interest contracts issued by the Acquired Insurance
Companies.
(c) For a period of two years from the Closing Date,
Seller will not, and Seller shall cause each of the Retained Companies to
agree that it will not, directly or indirectly, sell or write insurance
policies, annuity contracts, or guaranteed interest contracts on policy
forms which are substantially the same as those being used by the Acquired
Insurance Companies on the Closing Date.
(d) For a period of two years from the Closing Date,
Seller will not, and Seller shall cause each of the Retained Companies to
agree that it will not, target any
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solicitation to current or former policyholders of the Acquired Insurance
Companies.
(e) Seller shall not sell or otherwise dispose of any of
the Retained Insurance Companies prior to the expiration of two years from
the Closing Date unless the Person acquiring the Retained Insurance Company
acknowledges to the Buyer in writing the obligation of such Retained
Insurance Company to abide by the restrictions of this Section 5.9;
provided, that, from and after the time any Retained Company ceases to be a
Subsidiary of Seller, neither Seller nor any Retained Company that is a
Subsidiary of Seller shall have any liability or obligation for any breach
of the restrictions of this Section 5.9 by such Retained Company that has
ceased to be a Subsidiary of Seller or any Prohibited Agent of such
Retained Company.
5.10 Certificate of Operating Expenses. On the date, as notified
by Buyer to Seller, that is the fifth day prior to the expected Closing
Date, Seller shall deliver to Buyer an officer's certificate certifying (A)
the amount paid to FMI by the Acquired Insurance Companies pursuant to the
terms of the FMI Services Agreement from October 1, 1995 through the
Closing Date, (B) any other Operating Expenses from October 1, 1995 through
the Closing Date, and (C) all intercompany transactions between any of the
Acquired Insurance Companies and their Affiliates between October 1, 1995
and the Closing Date. As to the matters listed in clauses (A), (B) and (C)
of the preceding sentence, such certificate(a) shall be accompanied by
detailed supporting schedules, (b) shall present amounts arising between
the date of such certificate and the Closing Date on the basis of Seller's
good faith estimate, (c) shall be updated on the Closing Date to reflect
the actual applicable amounts arising between the date of such certificate
and the Closing Date and (d) as so updated, shall fairly present the
matters listed in such clauses (A) and (B) in all material respects.
5.11 Change of Names. On or prior to the Closing Date, Seller
shall cause each of the Retained Companies to change its name to eliminate
the words "Southwestern Life," "Southwestern," "SWL," "Union Bankers" or
any derivatives thereof and thereafter not use such words in the conduct of
its business or otherwise in any way, except as may be required by
Applicable Law; provided that Buyer acknowledges and agrees that "Bankers,"
"Bankers Multiple Line," or "BML" shall not be deemed a derivative of
"Union Bankers" for purposes of this Section 5.11.
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5.12 Bankruptcy Court Approval. (a) As promptly as practicable
after the date hereof, Seller and the Selling Subsidiaries shall jointly
file a motion with the Bankruptcy Court seeking entry of the Approval Order
approving, inter alia, the sale of the Estate Property to Buyer and
PennCorp pursuant to section 363 of the Bankruptcy Code and the assumption
and assignment of all Executory Contracts pursuant to section 365 of the
Bankruptcy Code to the extent such motion shall be necessary to obtain
entry of the Approval Order. Seller and each of the Selling Subsidiaries
agrees to make promptly any filings, to take all actions and to use its
best efforts to obtain any and all other approvals and orders necessary or
appropriate for the consummation of the transactions contemplated hereby.
Prior to Closing, Seller shall comply with the provisions of section
365(b)(1) of the Bankruptcy Code with respect to the Executory Contracts.
(b) Prior to entry of the Approval Order, each of Seller,
Selling Subsidiaries, Buyer, PennCorp and SWFSC will accurately inform the
Bankruptcy Court of all material facts of which it is aware relating to
this Agreement and the Related Agreements and the transactions contemplated
hereby and thereby. Seller, the Selling Subsidiaries, Buyer and PennCorp
will jointly endeavor to have the Bankruptcy Court make the findings of
fact and conclusions of law that Buyer and PennCorp and, if appropriate,
any Affiliates of Buyer or any Affiliates of PennCorp, Seller and, if
appropriate, any Affiliates of Seller, are each a purchaser or seller in
good faith, as the case may be, within the meaning of section 363(m) of the
Bankruptcy Code and such parties are entitled to the protections of Section
363(m) of the Bankruptcy Code.
(c) If the Approval Order or any other orders of the
Bankruptcy Court relating to this Agreement, the sale, or assumption and
assignment of the Executory Contracts, shall be appealed by any party (or a
petition for certiorari or motion for hearing or reargument shall be filed
with respect thereto), Seller and each of the Selling Subsidiaries agrees
to take all steps as may be reasonable and appropriate to defend against
such appeal, petition or motion, and Buyer and PennCorp agree to cooperate
in such efforts, and each party hereto agrees to use its best efforts to
obtain an expedited resolution of such appeal; provided, however, that
nothing herein shall preclude the parties hereto from consummating the
transactions
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contemplated herein if the Approval Order shall have been entered and shall
not have been stayed.
5.13 [Reserved].
5.14 Specific Enforcement of Covenants. Seller, FMI and the
Acquired Companies acknowledge that irreparable damage would occur in the
event that any of the covenants and agreements of Seller set forth in this
Article V or in any other part of this Agreement were not timely performed
in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that Buyer shall be entitled to an injunction or
injunctions to prevent or cure any breach of such covenants and agreements
of Seller and the Acquired Companies and to enforce specifically the terms
and provisions thereof in any court of the United States or any State
having jurisdiction, this being in addition to any other remedy, which
shall not include the right to terminate this Agreement, to which it may be
entitled at law or in equity, it being understood that the Bankruptcy Court
shall have jurisdiction over such matters to the extent provided for in the
order of the Bankruptcy Court described in Section 3.1.2(a)(xi).
5.15 Fund America Certificates. (a) At Buyer's request at any
time and from time to time after the Closing, Seller will, and will cause
each Retained Company that owns of record or beneficially any of the Pass
Through Certificates Series 1993-C, Class B Certificates (the "Fund America
Certificates") to deliver to Buyer irrevocable proxies and other
instruments, in form and substance reasonably satisfactory to Buyer, that
confer upon Buyer or any Acquired Company designated by Buyer the right to
exercise all voting, consent or approval rights that pertain to the Fund
America Certificates in any way. Such right shall be irrevocable so long
as any Acquired Company owns, of record or beneficially, any Fund America
Certificates, provided that such irrevocable proxy shall not continue in
respect of any Fund America Certificate sold by Seller or any Retained
Company pursuant to this Section 5.15.
(b) If at any time and from time to time Seller or any
Retained Company shall decide to sell or otherwise dispose of any Fund
America Certificates, Seller shall, or shall cause the Retained Company to,
give notice (the "First Notice") to Buyer of its intention to do so. The
First Notice shall specify the principal amount of the Certificates to be
sold and a date (the "Fund America
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Purchase Date") not less than 45 days after the date the First Notice is
given, on which Buyer must purchase the Fund America Certificates or after
which Seller or the Retained Company shall be free to sell the Fund America
Certificates.
(c) If Buyer intends to purchase the Fund America
Certificates, within 20 days of the receipt of a First Notice, Buyer must
deliver a notice (the "Second Notice") to Seller informing Seller of
Buyer's election to purchase all, but not less than all, of the principal
amount of the Fund America Certificates specified in the First Notice. The
Second Notice shall list the names of five dealers in collateralized
mortgage obligations of national standing. Within five days after receipt
of the Second Notice, Seller shall select three of the dealers specified in
such Second Notice. Buyer and Seller shall jointly solicit bids from the
three dealers so specified for the Fund America Certificates proposed to be
sold. The purchase price to be paid by Buyer to Seller for the Fund
America Certificates shall be the average of the bids submitted by such
dealers. On the Fund America Purchase Date, the purchase price shall be
paid by wire transfer to Seller or one or more of the Retained Companies,
as the case may be, in immediately available funds to an account specified
by Seller or a Retained Company at least two Business Days before the Fund
America Purchase Date, against transfer of the Fund America Certificates to
be purchased free and clear of all Liens and accompanied by instruments of
transfer reasonably satisfactory to Buyer.
(d) If Buyer fails to purchase the Fund America
Certificates specified in the First Notice, Seller or the Retained
Companies, as the case may be, thereafter shall be free to sell such Fund
America Certificates free and clear of this Section 5.15.
5.16 Proceeds from BL of NY. SWL shall retain the entire amount
of proceeds obtained from the sale of BL of NY, which was consummated on
July 27, 1995, and no amount of such proceeds shall be paid by SWL, by
dividend or otherwise, to Seller or to any Retained Company.
5.17 Power of Attorney. On the Closing Date, and subject to the
terms and conditions hereof, Seller and each Retained Company will execute
and deliver to Buyer a special power of attorney in substantially the form
attached as Exhibit E to the Shinnecock Purchase Agreement (with such
additional changes thereto as are necessary to reflect the
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terms of the transactions contemplated hereby and as are reasonably
satisfactory to Seller, Buyer and PennCorp).
5.18 Notification of Developments. Each of Seller, Buyer and
PennCorp will give prompt notice in writing to the other party, of and
contemporaneously will provide such other party with true and complete
copies of any and all information or documents relating to, and will use
commercially reasonable efforts to cure before the Closing (a) any fact,
condition, event or occurrence that causes or would reasonably be expected
to cause or result in the conditions contained in Section 3.1 to fail to be
satisfied or reasonably would be expected to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any
material respect at any time, (b) any material failure of Seller, any
Selling Subsidiary, Buyer or PennCorp, as the case may be, or any officer,
director, employee, or agent of Seller, any Selling Subsidiary, Buyer or
PennCorp to comply with or satisfy any covenant, condition, or agreement to
be complied with or satisfied by it under this Agreement, or (c) any other
fact, condition, event or occurrence that would reasonably be expected to
result in the failure of any of the other conditions of Seller in Section
3.1 or 3.2, or one of the other conditions of Buyer and PennCorp in Section
3.1 or 3.3, to be satisfied, promptly upon becoming aware of the same. No
such notification will affect the representations or warranties of the
parties or the conditions to the obligations of the parties under this
Agreement.
5.19 Surplus Debenture and UBIC Shares. Prior to the Closing
Date, CFC shall sell, assign and deliver the UBIC Shares to Constitution
Life for and in consideration of the $80,000,000 Surplus Debenture, which
shall contain substantially the terms and conditions as the form of Surplus
Debenture most recently filed as an exhibit to the Amended and Restated
Form A.
5.20 Limited Partnership Interests. Prior to the Closing Date,
Seller shall cause all limited partnership interests in Conseco Capital
Partners, L.P. II and in any limited partnership formed under Hicks, Muse
Equity Fund, L.P. owned by Marquette and Constitution Life to be sold for
cash at 120% of their respective book value to Seller or one or more
Retained Companies.
5.21 Additional Acquired Assets. From and after the Closing
Date, Seller shall and shall cause the Retained
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Companies to convey, transfer, assign and deliver to SWFSC for no
additional consideration all of Seller's or any Retained Company's right,
title and interest in and to any tangible or intangible asset (other than
an Excluded Asset) relating to, used, held for use, or reasonably necessary
or required in the operation of the Acquired Business, which was not
conveyed to SWFSC on the Closing Date.
5.22 Recapture of MAL Reinsurance. Prior to the Closing Date,
Seller shall use its commercially reasonable efforts to cause the
termination of the reinsurance transaction between MAL and SWL now in
effect, such termination to include a transfer of assets to MAL consistent
with the allocation of assets for the related liabilities calculated in
accordance with SAP contained in the Tillinghast Report dated April 19,
1995, with the assets and the asset values to be agreed to by Buyer and
Seller, provided, however, that the mortgage loans component of such assets
will include loans number 30515 (6500 Britmore Road, Houston, Texas) and
number 30399 (525 Highway 90, Milton, Florida), which for this purpose will
be valued at $1,319,000 and $600,000 respectively.
5.23 Insurance Coverage. Buyer intends to obtain adequate
insurance coverage for the Acquired Business prior to the Closing Date. If
Buyer is unable to arrange for such adequate coverage prior to the Closing
Date, Seller will cooperate with Buyer to provide or extend coverage for
the Acquired Business, at Buyer's expense, to the same extent as such
coverage was provided prior to the Closing Date until Buyer is able to
obtain adequate insurance coverage for the Acquired Business, provided that
after the Closing Date (a) any risk of loss with respect to the Acquired
Business shall be borne by Buyer, and (b) Seller shall not be liable for
the adequacy or sufficiency of such coverage.
5.24 Transfer of Intellectual Property Licenses. Prior to the
Closing Date, Seller and FMI shall use commercially reasonable efforts to
obtain, or cause to be obtained, any written consents or waivers necessary
for each Intellectual Property License to be used by or on behalf of each
Acquired Company and each Retained Company to the same extent and in the
same form and manner (including the use of all modifications made prior to
the Closing Date) as such Intellectual Property License was used by or on
behalf of such companies prior to the Closing Date.
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5.25 REO Holding Corp. Prior to the Closing Date, Seller shall
cause the REO Shares to be sold for cash in the amount of $4,300,000 to
Seller or one or more of the Retained Companies.
5.26 [Reserved].
5.27 Intercompany Matters. Subject to the provisions of Article
VI hereof with respect to the allocation and payment of, and
indemnification with respect to, Taxes, during the period from October 1,
1995 to the Closing Date, (a) the allocation of investment expenses and
Taxes among the Acquired Insurance Companies and their Affiliates shall be
no less advantageous to the Acquired Companies than allocations according
to prior practice and (b) no Acquired Insurance Company shall assume any
liability of Seller, any Selling Subsidiary or any Retained Company except
as expressly contemplated by this Agreement.
5.28 Matters Related to Notes. Buyer agrees that, upon request
from Seller, it shall provide to Seller for inclusion in a disclosure
statement to be filed with the Bankruptcy Court with respect to the
Debtors' proposed joint plan of reorganization, such information (including
audited, unaudited and pro forma financial statements with respect to Buyer
and the Notes to the extent available to Buyer without unreasonable effort
or expense as such term is used in the rules and regulations of the SEC) as
Seller reasonably may request. Buyer agrees to cooperate in good faith
with Seller in the preparation of such disclosure statement, to the extent
that it relates to Buyer and the Notes and to provide such additional
information as Seller reasonably may request from time to time in order to
comply with any orders of the Bankruptcy Court in connection with its
ruling upon the adequacy of the disclosure contained in the disclosure
statement pursuant to Section 1125 of the Bankruptcy Code. Seller agrees
that it shall not file or mail to holders of claims or interests any
disclosure statement or proposed disclosure statement that contains any
information relating to Buyer and the Notes and without having first
furnished Buyer and its counsel with a copy of such disclosure statement
and proposed disclosure statement, affording them a reasonable period of
time (not less than three full Business Days) to review such disclosure
statement or proposed disclosure statement, and making such changes therein
with respect to Buyer and the Notes as Buyer or its counsel shall
reasonably request.
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5.29 Compliance with Securities Laws. PennCorp shall take such
actions as are reasonably necessary to cause the offer, sale and issuance
of the PennCorp Shares, and Buyer shall take such actions as are reasonably
necessary to cause the offer, sale and issuance of the Notes, pursuant to
this Agreement to be effected in accordance with applicable federal and
state securities laws.
5.30 Listing of PennCorp Shares. PennCorp shall take such action
prior to the effectiveness of the PennCorp Registration Statement as is
reasonably necessary to cause the PennCorp Shares to be issued pursuant to
this Agreement to be approved for listing on the NYSE, subject to official
notice of issuance.
5.31 Qualification of Note Indenture. Buyer shall take such
action as is reasonably necessary to cause the Note Indenture to be
qualified under the Trust Indenture Act of 1939, as amended, as soon as
practicable after the Closing and in any event prior to the confirmation of
the joint plan of reorganization of Seller and the Selling Subsidiaries in
the Case.
5.32 PennCorp Registration Statement. Unless prohibited by the
Securities and Exchange Commission, PennCorp shall indicate in a "Plan of
Distribution" section contained in the final prospectus constituting a part
of the PennCorp Registration Statement at the time it is declared effective
by the SEC that such prospectus may be delivered to holders of claims
against and interests in the Debtors' estates in connection with the
solicitation of acceptances of the Debtors' joint plan of reorganization,
and that the PennCorp Shares may be distributed by the Debtors to holders
of claims against and interests in the Debtors' estates in exchange for
such claims and interests, it being agreed by PennCorp that it shall advise
the SEC in writing (in such manner as PennCorp deems appropriate) of the
foregoing disclosure to be contained in such prospectus.
ARTICLE VI
Certain Tax Matters
6.1 Payment of Tax Liabilities. (a) Seller and the Selling
Subsidiaries, jointly and severally, will defend, indemnify and hold
harmless each Buyer Indemnitee from and against, and pay or reimburse each
Buyer Indemnitee for, any and all Losses resulting from or arising out of
(i) Taxes arising out of or relating to the business operated by,
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transactions involving, and distributions made by or to, any member of the
Related Group, or the assets of any of them, with respect to any taxable
period or portion thereof ending on or before the Closing Date, including
without limitation any Taxes asserted against Buyer or its Affiliates,
including the Acquired Companies, as a result of transferee liability at
law or equity; (ii) Taxes asserted against any member of an Affiliated
Group for any taxable period or portion thereof ending on or before the
Closing Date, including, without limitation, Taxes for which the Acquired
Companies are held liable pursuant to Treasury Regulations section 1.1502-6
or any comparable provision of State, local or foreign law; (iii) Taxes or
any other payments required to be made to secure recognition from the IRS
of the Tax treatment specified in Section 4.1.17(c) for taxable periods
ending on or before the Closing Date; (iv) any Tax sharing agreement or
arrangement with respect to which Seller has assumed the obligation of the
Acquired Companies pursuant to Section 6.7(c); and (v) Taxes asserted
against any Person for which the Buyer Indemnitees are liable under an
agreement entered into by Seller, the Retained Companies, any member of the
Related Group or any of their Affiliates on or prior to the Closing Date to
indemnify such Person; provided that Seller and the Selling Subsidiaries
shall not be liable for or obligated to indemnify any Buyer Indemnitees for
any Losses for Taxes to the extent:
(v) Buyer is obligated to indemnify Seller for such Taxes
pursuant to Section 6.5(e)(ii);
(w) such Taxes relate to the period beginning October 1,
1995 and ending on the day before the Closing Date (the "Stub
Period") and arise out of the business operated by the Acquired
Companies, or with respect to the Acquired Assets, except for Taxes
arising out of transactions not in the ordinary course of business
that were not expressly consented to in writing by Buyer;
(x) such Taxes are taken into account as a liability or
otherwise specifically reserved against in the September 30
Statement;
(y) such Taxes arise as a result of the business, affairs,
operations, transactions or actions or inactions of the Acquired
Companies after the Closing, whether on the Closing Date or at any
time thereafter; provided that this clause (y) shall not
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apply by reason of the Acquired Companies performing any obligation,
or exercising or forebearing the exercise of any right, in good
faith, under this Agreement or any Exhibit hereto; or
(z) such Taxes arise as a result of any actions or
inactions of Buyer or SWFSC (other than as required by law) or,
whether on the Closing Date or at any time thereafter, of any
Affiliate of Buyer; provided that this clause (z) shall not apply by
reason of Buyer or its Affiliates performing any obligation, or
exercising or forebearing the exercise of any right, in good faith,
under this Agreement or any Exhibit hereto.
(b) Buyer will defend, indemnify and hold harmless Seller
Indemnitees from and against, and pay or reimburse Seller Indemnitees for,
any and all Losses resulting from or arising out of Taxes arising out of,
or relating to, the business operated by, transactions involving, or
distributions made by or to, Buyer or the Acquired Companies, or the assets
of any of them, with respect to any taxable period or portion thereof
beginning after the Closing Date; provided that Buyer shall not be liable
for or obligated to indemnify any Seller Indemnitee for any Losses for
Taxes to the extent that such Losses arise as a result of (i) any
inaccuracy of any representation or warranty, or breach of any covenant or
agreement, under this Agreement (other than as required by law) by Seller
or the Selling Subsidiaries, (ii) any action or inaction of Seller or
Selling Subsidiaries at any time after the Closing Date; provided that
clause (ii) of this Section 6.1(b) shall not apply by reason of Seller or
Selling Subsidiaries performing any obligation, or exercising or
forebearing the exercise of any right, in good faith, under this Agreement
or any Exhibit hereto.
(c) Buyer or Seller, as applicable, will notify the other
party promptly of the commencement of any claim, audit, examination, or
other proposed change or adjustment by any taxing authority concerning the
Tax or other Losses covered by this Section 6.1.
(d) Any payment made by Seller or any Selling Subsidiary
to any Buyer Indemnitee, or by Buyer to any Seller Indemnitee, pursuant to
this Section 6.1 in respect of Losses shall be (i) reduced by an amount
equal to the Tax benefits, if any, attributable to, arising out of or
resulting from, such Losses, and (ii) increased by an amount
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equal to the Taxes attributable to the receipt of such indemnity payment
(not including Taxes attributable to a reduction in the purchase price for
Tax purposes), but only to the extent, and at the time, that such Tax
benefits are actually realized, or such Taxes are actually paid, as the
case may be, by Buyer, the Acquired Companies, Seller, the Retained
Companies or any consolidated, combined, affiliated or unitary Tax group of
which any such corporation is a member. To the extent that such Tax
benefits are actually realized, or such Taxes are actually paid, after such
indemnity payment is made, such reduction or increase shall be effected by
having the indemnified party or the indemnifying party, as the case may be,
pay (or cause its applicable Affiliate to pay) the appropriate amount to
the other party. For purposes of this Section 6.1(d), (x) no Tax benefit
attributable to any taxable period shall be considered to be realized prior
to the date on which the Tax liability for such taxable period is finally
determined: (1) by a closing agreement with the IRS under section 7121 or
7122 of the Code; (2) by a decision by a court of competent jurisdiction
that has become final and unappealable; or (3) by any other disposition by
reason of the expiration of the applicable statute of limitations; unless
Seller makes an election under this Section 6.1(d) to accelerate payment of
Tax benefits; and (y) the amount of Tax benefits attributable to a Loss, or
Taxes paid attributable to the receipt of an indemnity payment, shall be
calculated by comparing the actual Tax liability of the indemnified party
and any consolidated, combined, affiliated or unitary Tax group of which
the indemnified party is a member, with the Tax liability of the
indemnified party and any such group determined without regard to the item
giving rise to such Loss or payment. On or before December 31 of any year,
Seller may make a one-time election to accelerate payment of Tax benefits
under this Section 6.1(d) by providing Buyer with written notice of such
election on or prior to such date. The election shall be effective on
September 16 of the year following the year in which notice of the election
is delivered to Buyer. On the effective date of such election Buyer shall
pay to Seller the amount of such Tax benefit, determined in accordance with
clause (y) above, taking into account all taxable periods ending on or
before December 31 of the year in which notice of the election is provided
to Buyer. The amount payable pursuant to such election shall be reduced by
the amount of any Tax benefit attributable to, arising out of, or resulting
from the payment of interest to the IRS or other taxing authority for any
taxable period that remains open or otherwise subject to
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audit or examination by the IRS or other taxing authority. By making such
election Seller and Selling Subsidiaries waive any and all right to reduce
their obligation to indemnify Buyer Indemnitees for Losses by the amount
of, or to receive any payment on account of, any Tax benefit that may be
realized in taxable periods beginning after the year in which notice is
provided. Buyer's obligation to pay Tax benefits, and the amount of any
reduction, under clause (i) of, this Section 6.1(d) shall bear interest at
the overpayment rate described in section 6621(a)(1) of the Code accruing
from the date the relevant Tax Return for the taxable period in which the
Tax benefit is actually realized is due to be filed (without extension)
through the date the Tax benefit is paid or any reduction is made pursuant
to clause (i) of this Section 6.1(d).
6.2 Filing of Tax Returns. Seller and Buyer shall cause the
Acquired Companies, to the extent permitted by law, to join, for all
taxable periods ending on or prior to the Closing Date, in (a) the
consolidated Federal income tax returns of the Affiliated Group of which
Seller is the common parent and (b) the combined, consolidated or unitary
Tax Returns for State, local and foreign income taxes with respect to which
any Acquired Company (i) filed such a Tax Return for the most recent
taxable period for which such a Tax Return has been filed prior to the
Closing Date and may file such a Tax Return for subsequent taxable periods
or (ii) is required to file such a Tax Return. Seller shall file, or cause
to be filed, all other Company Returns required to be filed on or before
the Closing Date. Seller shall permit Buyer to review and comment on,
prior to filing, any Federal or State Tax Return which includes the
operations of the Acquired Companies for any period prior to the Closing
Date. Neither Seller nor any of its Affiliates will make any election to
retain losses from operations, net operating losses or capital loss
carryovers of the Acquired Companies pursuant to the procedure set forth in
Treasury Regulations section 1.1502-20(g) or any similar or successor
provision of Federal, State or local law. From and after the date hereof,
Seller shall not, and shall not permit any of its Affiliates to, amend any
Company Return previously filed, which includes information relating to one
or more of the Acquired Companies, unless prior written notice thereof has
been delivered to Buyer. Any such amended Federal or State Company Return
shall not be filed without the express written consent of Buyer if the
amendment reports an increase in Tax, taking into account all interest,
penalties and additions to Tax (unless Seller, at the time of filing
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such amended return, pays the IRS or other relevant taxing authority an
amount equal to such increase in Tax from sources other than the Indemnity
Escrow Account and such payment does not reduce the funds otherwise
provided for in this Agreement to secure the obligations of Seller and its
Affiliates under Article VIII), or would affect the liability for Taxes of
Buyer, the Acquired Companies, or any consolidated, combined, affiliated or
unitary Tax group of which any thereof is a member in a taxable period or
portion thereof beginning after the Closing Date. Buyer shall timely file
or cause to be timely filed any Company Return (including any amendments
thereto) required to be filed by an Acquired Company due after the Closing
Date (other than any Company Return described in the first sentence of this
Section 6.2 required to be filed by Seller or the Retained Companies). For
purposes of preparing all Company Returns for taxable periods up to and
including the Closing Date, the income, deductions and credits of the
Acquired Companies shall be allocated in a manner consistent with the
method provided in Section 6.3. All Company Returns filed after the
Execution Date shall, insofar as they relate to items for periods that
include days on or before the Closing Date and to the extent permitted by
applicable Tax law, be on a basis consistent with the last previous such
Tax Returns filed in respect of the Acquired Companies, and Buyer and the
Acquired Companies shall not take any action in respect of such Tax Returns
(insofar as they relate to items for periods that include days on or before
the Closing Date) which is inconsistent with or causes a challenge to such
Tax Returns and the items relating to such Tax Returns. After the Closing
Date each Tax Return filed by any Acquired Company or by Buyer with respect
to any Acquired Company for any period that includes days on or before the
Closing Date (including, without limitation, all Tax Returns prepared by
Buyer for filing by of with respect to any Acquired Company pursuant to
Section 6.2) shall be subject to pre-filing review by Seller and each Tax
Return filed by Seller, and any of the Acquired Companies or any Affiliated
Group after the Execution Date that relates to a period that ends on or
before the Closing Date shall be subject to pre-filing review by Buyer. In
the event of any disagreement between Seller and Buyer or an Acquired
Company, as the case may be, such disagreement shall be resolved on a basis
consistent with the position a reasonable person would take if such person
owned the business and assets of Seller, the Retained Companies and the
Acquired Companies, using the same procedures for Neutral Accountants
specified in Section 6.5(b)(iii), except to the extent such procedures are
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inconsistent with the timing requirements of this Section 6.2. Unless
otherwise agreed to by the parties, Tax Returns subject to such pre-filing
review shall be submitted by Buyer or Seller, as the case may be, to the
reviewing party at least 45 days prior to the due date (including
extensions) of such Tax Returns and the reviewing party shall either
approve or provide written comments on such Tax Returns within 15 days of
receipt of such Tax Returns.
6.3 Bridge Period. If, for any State, local or foreign Tax
purpose, a taxable year or taxable period of any Acquired Company which
begins before the Closing Date and ends after the Closing Date (a "Bridge
Period") does not terminate on the Closing Date, the parties hereto will,
to the extent permitted by applicable law, elect with the relevant taxing
authority to treat the portion of the Bridge Period on or before the
Closing Date and for all purposes as a short taxable period ending as of
the close of the Closing Date and such short taxable period shall be
treated as a taxable period ending on the Closing Date for purposes of this
Agreement. For purposes of preparing a Company Return for and Bridge
Period and for purposes of the Agreement, Taxes for the Bridge Period shall
be allocated between the portion of the Bridge Period ending on the Closing
Date and the portion of the Bridge Period beginning on the day after the
Closing Date using a closing of the books method and assuming that each
Acquired Company's taxable period ended at the end of the Closing Date,
except that (i) exemptions, allowances or deductions that are calculated on
an annual basis (such as the deduction for depreciation) shall (to the
extent permitted by law) be apportioned on a per diem basis, (ii) real
property Taxes shall be allocated in accordance with section 164(d) of the
Code and (iii) property Taxes that are calculated on annual basis shall be
apportioned on a per diem basis.
6.4 Audits and Other Proceedings. (a) Following the Closing
Date, Seller shall control the conduct of any audit or other administrative
of judicial proceeding with respect to Taxes of any Affiliated Group of
which Seller or any of the Retained Companies is the common parent or for
which Seller otherwise may be obligated to indemnify Buyer Indemnitees
pursuant to Section 6.1; provided, that (i) Buyer may elect to participate
in the control of such audit or proceeding jointly with Seller to the
extent such audit or proceeding relates to Taxes attributable to any
Acquired Company for a Bridge Period; (ii) Buyer, in its sole discretion,
may assume joint control of any such audit or
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proceeding for Tax years beginning before 1992 for any Affiliated Group of
which MAL was the common parent if MAL is placed under supervision by a
state regulatory authority or is subject to court supervised conservation,
rehabilitation, liquidation or similar proceeding or if there is a transfer
of control (including control of Tax audits) of MAL to a party other than
Seller or its Affiliates; (iii) Buyer shall control any audit or proceeding
to the extent (but only to the extent) such audit or proceeding relates to
(A) Taxes for which Buyer would be obligated to indemnify Seller
Indemnitees pursuant to Section 6.1 or Section 6.5(e)(ii) or (B) Taxes for
which the Seller would have been entitled to a refund but for the Failed
QSP; and (iv) Buyer shall control any audit or proceeding to the extent
(but only to the extent) such audit or proceeding relates to the
qualification of the sale of the shares of SWL as a Qualified Stock
Purchase. In the event Buyer assumes control or joint control of any audit
or administrative or judicial proceeding pursuant to this Section 6.4,
Seller shall, and shall cause MAL and the other Retained Companies to,
provide Buyer with any reasonable assistance requested by Buyer in
connection with such audit or other proceeding, including, without
limitation, executing any power of attorney or other document which is
necessary or appropriate to enable Buyer to act on behalf of, or jointly on
behalf of, Seller of MAL. Buyer shall control the conduct of all other
audits or administrative or judicial proceedings with respect to the
liability for Taxes of the Acquired Companies for any taxable period or
portion thereof. With respect to any audit or other proceeding that Seller
controls, Seller shall (1) promptly provide Buyer with, or cause to be
provided to Buyer, written notice of any claim, or of the commencement of
any audit or proceeding, regarding the liability for Taxes of any
Affiliated Group for any affiliated Tax year together with all
correspondence, notices or other documents received by Seller or any of its
Affiliates with respect thereto; (2) provide, or cause to be provided,
Buyer with notice of and an opportunity to attend any meeting with the IRS
or other taxing authorities regarding any such claim, audit or proceeding;
(3) consult with Buyer or its Tax advisors, or cause Buyer or its Tax
advisors to be consulted, with respect to any material action Seller or any
of its Affiliates may take with respect to any such claim, audit or
proceeding; (4) afford, or cause to be afforded to, Buyer and its Tax
advisors the right to participate in conferences with the relevant taxing
authorities (including, without limitation, executing any power of attorney
or other
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document that is required to enable, and, to the extent permitted by
applicable law (or by agreement between any or all of Buyer, Buyer's tax
advisors, Seller and MAL), is solely for purpose of enabling, Buyer and its
Tax advisers to so participate); (5) permit Buyer to be permitted, to
review and comment upon any material written submission to the IRS or other
taxing authorities prior to its submission; and (6) shall not, and shall
not permit any of its Affiliates to, grant any extension or waiver of any
applicable statue of limitations for any taxable period beginning after
December 31, 1992 or enter into any settlement of agreement in compromise
of any proposed adjustment with respect to the liability for Taxes of any
Affiliated Group for any affiliated tax year without the express written
consent of Buyer; provided that in the event the (w) Buyer fails to consent
to any such settlement or agreement in compromise with respect to any Taxes
for which Seller or the Seller's Subsidiaries have liability under Section
6.1 to indemnify Buyer Indemnitees; (x) such settlement or agreement would
not have the result of materially increasing the Taxes of any Buyer
Indemnitees or any consolidated, combined, or unitary group of which any
Buyer Indemnitee is a member for any taxable period or portion thereof
beginning after the Closing Date or any Taxes for which Buyer has liability
pursuant to Section 6.1(b) (in each case through the operation of the terms
of such settlement or agreement or through the potential resolutions of the
same or similar issues for any such period or portion thereof on the same
or similar basis as under such settlement or agreement); (y) Seller
identifies the sources from which Taxes due pursuant to such settlement or
agreement would be paid, including from the Indemnity Escrow Amount to the
extent permitted by Article VIII; and (z) Seller deposits in an escrow
account (subject to terms and conditions reasonably acceptable to Buyer),
any amount so identified by Seller to be funded from sources other than the
Indemnity Escrow Account, then Seller may elect to transfer complete
control of the related audit or proceeding to Buyer by providing written
notice to Buyer, in which case the amount for which Seller and the Selling
Subsidiaries shall be required to indemnify Buyer Indemnitees on account of
Taxes expressly covered by such settlement or agreement in compromise shall
be limited to the amount of such proposed settlement or agreement in
compromise plus interest, penalties and additions to Tax determined through
the date Buyer assumes control.
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(b) During the period beginning on the Execution Date and
ending on the Closing Date, none of the Seller or its Affiliates shall
enter into any settlement or agreement in compromise with respect to Taxes
with the IRS or any other taxing authority, including without limitation by
executing an IRS Form 870-AD, without the prior written consent of Buyer,
which shall not be unreasonably withheld. For purposes of the preceding
sentence, consent shall be deemed to have been reasonably withheld if Buyer
withholds consent from a settlement or agreement in compromise that would
adversely affect the protection from Losses resulting from, or arising out
of, Taxes that would otherwise have been provided to Buyer, the Acquired
Companies or an Affiliate of any thereof, by the Indemnity Escrow Account
or by funds otherwise provided for in this Agreement to secure the
obligations of Seller and its Affiliates under Article VIII, or would
otherwise result in a Material Adverse Effect to Buyer, the Acquired
Companies or any Affiliate thereof.
(c) Seller and Selling Subsidiaries shall use their best
efforts, in their reasonable business judgment, to expedite the
determination of their federal income tax liability for all taxable periods
through the Closing Date consistent with minimizing the taxes payable by
Seller and its Affiliates. Buyer shall have standing to seek to have the
Bankruptcy Court compel Seller and the Selling Subsidiaries to take such
actions as are necessary to comply with the foregoing requirement. Seller
shall provide in any plan of reorganization proposed by it for the
Bankruptcy Court to retain jurisdiction after confirmation of such plan
over resolution of disputes between Seller and the IRS regarding the
allowance or disallowance of federal income tax claims for tax periods
prior to the confirmation of such plan.
(d) All references to the right of Buyer to control or
participate in any audit or proceeding, or to consent to or approve any
settlement or agreement in compromise, and all rights granted to Buyer
under the fourth sentence of Section 6.4(a), shall extend also to PennCorp
to the extent the audit or proceeding relates to Taxes the payment of which
would be guaranteed to Seller by PennCorp (including any Taxes the refund
of which is so guaranteed). Any right to exercise control of, or to
approve or consent to, any matter covered by the preceding sentence shall
require the exercise jointly by, or require the joint consent or approval
of, Buyer and PennCorp.
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6.5 Section 338(h)(10) Election. (a) Election. Buyer and Seller
shall join in an election pursuant to Section 338(h)(10) of the Code with
respect to the purchase and sale of the shares of SWL, and in all
comparable elections under state and local Tax law with respect to the
purchase and sale of any such shares (together with the election under
section 338 (h)(10) of the Code, any additional such elections under
Section 6.5(f) and any deemed election(s) under Section 338(g) of the Code
or any comparable state and local Tax law, the "Section 338(h)(10)
Elections").
(b) Forms.
(i) Subject to Section 6.5(b)(ii), Buyer shall
prepare all forms and schedules required to be filed in connection with the
Section 338(h)(10) Elections ("Section 338 Forms"), including without
limitation IRS Form 8023-A and all attachments required to be filed
therewith pursuant to applicable Treasury Regulations and the instructions
to such form, including without limitation the allocation of deemed
purchase price among the assets of SWL ("Form 8023"). Seller shall provide
Buyer with such information and records, and shall make its employees
available for consultation under regular business hours, as Buyer
reasonably requires to prepare such Section 338 Forms. Buyer shall timely
file the Section 338 Forms with the proper taxing authorities.
(ii) At least 5 days prior to the Closing Date, Buyer
shall furnish Seller with three copies of the Form 8023 with respect to
SWL. On or before the Closing Date, Buyer and Seller shall endeavor to
agree upon the form and content of such Form 8023. If the parties are
unable to agree upon the form and content of the Form 8023, the dispute
shall be resolved after the Closing in accordance with this Section;
provided, that at the Closing, Seller shall deliver to Buyer three copies
of the Form 8023 provided by Buyer executed by the proper party on behalf
of Seller (without attachments, if such attachments have not been agreed
to).
(iii) On or before the beginning of the sixth month
after the month in which the Closing occurs Buyer shall deliver to Seller a
revised Form 8023 which reflects proposed modifications or attachments to
the form and content of the executed Form 8023, and any state or local
reports or forms that are necessary or appropriate for
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purposes of complying with the requirements for making the Section
338(h)(10) Elections (each an "Additional Section 338 Form"). Such
proposed modifications or attachments shall take into account adjustments
to the Purchase Price pursuant to Article II and any other appropriate
adjustments to reflect information available at such time. The parties
shall endeavor to agree on the Additional Section 338 Forms; provided that,
if Seller and Buyer agree upon the form and content of Form 8023 at
Closing, Seller shall be entitled to object to any proposed modifications
only on the basis that it would leave Seller and the Retained Companies in
a position less favorable than their position under the original Form 8023.
If prior to the beginning of the seventh month beginning after the month in
which the Closing occurs there remains a dispute as to the form and content
of the Additional Section 338 Forms, then the dispute shall be submitted to
the Neutral Accountants. Each party agrees to execute, if requested by the
Neutral Accountants, a reasonable engagement letter. All fees and expenses
relating to the work, if any, to be performed by the Neutral Accountants
pursuant to this Section 6.5(b)(iii) shall be borne by Seller unless more
than 50% (calculated on the basis of the dollar amounts of the disputed
items) of the disputed items submitted by Seller relating to the claimed
adjustments are sustained by the Neutral Accountants, in which case such
fees and expenses shall be paid by Buyer. The Neutral Accountants shall
act as an arbitrator to determine, based solely on presentations by Buyer
and Seller and their respective representatives, and not by independent
review, only those issues related to the formal content of the Additional
Section 338 Forms still in dispute. Buyer and Seller, and their respective
representatives, shall cooperate fully with the Neutral Accountants. The
parties hereto shall give, and shall cause their representatives to give,
the Neutral Accountants and their representatives such assistance and
access to the books and records relating to the dispute, and any work
papers, schedules and other documents as the Neutral Accountants shall
reasonably request. The Neutral Accountants' determination shall be made
within 30 days of their selection, or such other time as the parties may
agree, shall be set forth in a written statement delivered to Buyer and
Seller and shall be final, binding and conclusive on the parties hereto;
provided, that the agreement pursuant to which the Neutral Accountants are
retained shall provide that the determination of the Neutral Accountants
shall be made no later than the beginning of the ninth month after the
month in which the Closing occurs. Buyer shall prepare three copies of
Form 8023 and three
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copies of any Additional Section 338 Form, as determined according to such
procedures, and Seller shall promptly execute, or cause the proper party to
execute, such forms. The Form 8023, as determined according to such
procedures, shall supersede the original Form 8023 for all purposes of this
Agreement and shall be treated as the only Form 8023.
(c) Modification Revocation. Except as provided in this
Section, Buyer and Seller shall not take, and shall not permit any of their
Affiliates to take, any action to modify the Section 338 Forms following
the execution thereof, or to modify or revoke the Section 338(h)(10)
Elections following the filing of the Section 338 Forms, without the
written consent of Seller and Buyer.
(d) Consistent Treatment; Reporting. Buyer and Seller
shall file, and shall cause their respective Affiliates to file, all Tax
Returns in a manner consistent with the information contained in the
Section 338 Forms. Buyer and Seller shall not take, and shall not permit
any of their Affiliates to take, any position contrary to the allocations
reflected in such Section 338 Forms with any government agency or taxing
authority without the express written consent of the other party.
(e) Taxes and Expenses Resulting from Elections or Failure
to Qualify for Elections. Notwithstanding any other provision of this
Agreement, (i) Seller shall be responsible for, and shall indemnify and
hold harmless Buyer and its Affiliates from and against, all Taxes of
Seller, the Selling Subsidiaries or any Affiliated Group, arising in
taxable periods or portions thereof ending on or before the Closing Date
and resulting from the Section 338(h)(10) Elections; and (ii) in the event
that the sale of the SWL Shares to Buyer pursuant to this Agreement shall
fail to constitute a Qualified Stock Purchase in Seller's 1995 Tax year,
Buyer shall be responsible for, and shall indemnify and hold harmless
Seller Indemnitees from and against, (X) any Taxes of SWL and any other
member of any Affiliated Group of which SWL was a member on or prior to the
Closing Date (the "SWL Group") which are payable as a result of the failure
of a Qualified Stock Purchase of the SWL Shares to have occurred by
December 31, 1995 (the "Failed QSP"), (Y) any Tax refunds to which the SWL
Group would have been entitled if a Qualified Stock Purchase of the SWL
Shares occurred on December 29, 1995 and (Z) any other Seller Losses of
the SWL Group resulting from the Failed QSP (such items referred to in
clauses (X), (Y) and (Z) herein
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referred to as "Failed QSP Losses"); provided, however, that the maximum
amount payable by Buyer under this Section 6.5(e)(ii) as a result of the
Failed QSP shall not exceed $25 million. Any amount payable pursuant to
clause (ii)(Y) of the preceding sentence shall be treated for all other
purposes of this Agreement as an actual Tax refund that Seller has received
and delivered to Buyer to the extent such amount otherwise would have been
payable to or for the benefit of Buyer (and no actual cash payment shall be
required in respect thereof, but shall be taken into account as a payment
by Buyer to Seller for purposes of the $25 million maximum liability
described in the preceding sentence), and Buyer and Seller agree that any
indemnity payments by Buyer pursuant to clause (ii) of the preceding
sentence shall be treated as a purchase price adjustment.
(f) Additional Section 338(h)(10) Elections. The making
of any elections under section 338(h)(10) of the Code with respect to UBIC,
Constitution Life or other Acquired Companies except for SWL shall be
subject to the mutual agreement of Buyer and Seller.
6.6 Transfer Taxes. Seller shall pay and be responsible for all
sales, use, transfer, real property gains or transfer, stamp or other
similar Taxes and fees arising as a result of the consummation of the
transaction contemplated by this Agreement. Seller shall at its expense
timely file all necessary Tax Returns and other documentation in respect of
any such Taxes.
6.7 Cooperation. (a) Buyer and Seller shall cooperate, and
Buyer shall cause the Acquired Companies to cooperate with Seller and
Seller shall cause the Retained Companies to cooperate with Buyer, with
respect to the preparation and filing of any Tax Return (or amended Tax
Return) or the conduct of any Tax audit or other proceeding for which the
other is responsible pursuant to this Article VI. Such cooperation shall
include, without limitation, making its employees available for
consultation and making workpapers and other records available during
regular business hours, provided that each shall pay any out-of-pocket
costs incurred by the other in connection with such cooperation; provided
that records and other documents that are subject to an attorney-client or
similar privilege that protects such records and documents from a discovery
or similar disclosure request from third parties shall not be required to
be disclosed to the other party if such disclosure would make such
privilege unavailable.
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(b) Seller agrees to retain and deliver to Buyer such
records, accounts, accounting data and other information as are reasonably
necessary for determination of the Tax liabilities of the Acquired
Companies for all taxable periods or portions thereof beginning on or
before September 30, 1995 for which the statute of limitations remains open
for examination by the IRS or other pertinent taxing authorities; provided,
that records and other information of Seller or any Retained Company that
are subject to an attorney-client or similar privilege that protects such
records and other information from discovery or similar disclosure request
from third parties shall not be required to be disclosed to Buyer pursuant
to this Section 6.7(b), but only if such disclosure would make such
privilege unavailable.
(c) Seller shall assume the obligations of the Acquired
Companies, and cause the other members of the Affiliated Group to release
the Acquired Companies from their obligations, under that certain
Consolidated Tax Allocation Agreement between I.C.H. Corporation, MAL and
certain subsidiaries of MAL dated March 28, 1986, as amended by Amendment
No. 1 thereto, between I.C.H. Corporation and its subsidiaries, except as
expressly provided in this Article VI and in the September 30 Statement,
and from and after the Closing Date none of the Acquired Companies shall
have any further liability for the payment of any amount, nor shall any
Acquired Company have the right to receive any amount, pursuant to such
agreement. Seller shall provide, or cause the Retained Companies to
provide, such assistance as Buyer shall reasonably request to enable SWL to
comply with its obligations in respect of Taxes under the agreement of sale
under which BL of NY was sold.
6.8 Allocation of Purchase Price. The Initial Purchase Price
and the PennCorp Purchase Price and the Assumed Liabilities shall be
allocated between and among the shares of each Acquired Company, the
Surplus Debenture and the Acquired Assets as set forth on Schedule 6.8.
Seller and Buyer shall, and shall cause each of their Affiliates to (i)
prepare and file all statements or other information required to be
furnished to the IRS or any other taxing authority pursuant to section 1060
of the Code and the Treasury Regulations or other applicable Tax law in a
manner consistent with the allocation set forth on the final Schedule 6.8
and (ii) prepare their respective financial statements and all Tax Returns
and reports required to be filed by them in a manner consistent with such
allocation,
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and shall not take any position contrary to such allocation with any
government agency or taxing authority without the express written consent
of the other.
6.9 Tax Refunds and Credits. Any Tax refund with respect to a
taxable period or portion thereof ending on or before the Closing Date that
is not shown as an asset on the September 30 Statement shall belong to
Seller, except that the following Tax refunds shall belong to Buyer and
shall be paid promptly to Buyer: (i) any Tax refund received by Seller or
the Retained Companies generated by carrybacks of available losses or
credits arising in taxable periods or portions thereof of the Acquired
Companies beginning after the Closing Date; and (ii) any Tax refund
received by Seller or the Retained Companies for any taxable period or
portion thereof ending on or before September 30, 1995, to the extent any
Buyer Indemnitee has a claim under any of the Tax Indemnities which claim
resulted from a Tax Return position that generated such Tax refund or, in
the case of any other indemnity claim pursuant to Article VIII, an
undisputed claim, that has not been fully satisfied prior to receipt of
such tax refund due to an insufficiency of funds in the Indemnity Escrow
Account, but only to the extent of such unsatisfied claim, provided, that
no amount shall be payable pursuant to clause (ii) of this Section 6.9 to
the extent such Tax refund is due by Seller to any Retained Company under
the Tax allocation agreement referred to in Section 6.7(c). Any amount
described in clause (ii) above shall be treated as an indemnity payment
under Article VIII. In the event Seller or the Retained Companies fail to
make such payment, the Tax refund due shall be treated as a Loss to which
the Tax Indemnity shall apply subject to the provisions of Article VIII.
Buyer shall pay, or shall cause SWL to pay, promptly to Seller any amount
SWL, Buyer or any Affiliate of Buyer receives from Tenneco Inc. under that
certain Stock Purchase Agreement between Tenneco Inc. and I.C.H.
Corporation dated as of July 31, 1986; provided, that such amount shall be
retained by SWL, Buyer or such Affiliate, as the case may be, to the extent
(x) any Buyer Indemnitee has a claim under any of the Tax Indemnities or,
in the case of any other indemnity claim pursuant to Article VIII, an
undisputed claim, that has not been fully satisfied prior to the receipt of
any such amount due to an insufficiency of funds in the Indemnity Escrow
Account, and (v) such amount was paid by Tenneco Inc. in respect of a
liability for Taxes that was paid by SWL, Buyer or any Affiliate of Buyer,
after September 30, 1995.
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6.10 Elections Relating to Section 382 of the Code. Seller shall
elect under proposed Treasury Regulations section 1.1502-95 to apportion
the full amount of any prior consolidated limitation under section 382 of
the Code applicable to I.C.H. Funding Corporation or to any other Acquired
Company, to the appropriate company.
6.11 Stub-Period Taxes. (a) Promptly after the final
determination of the Stub Period Tax Amount and the Stub Period Savings
under Section 6.11(b), Buyer shall pay Seller the Stub Period Tax Amount,
if any, and Seller shall pay Buyer the Stub Period Savings, if any.
(b) Within 30 days after the Tax Expiration Date, Seller
shall provide Buyer with a preliminary calculation of the Stub Period Tax
Amount, if any, and the Stub Period Savings, if any. Buyer and Seller
shall endeavor to agree on the final calculation of the Stub Period Amount
and the Stub Period Savings. In the event of any disagreement between
Seller and Buyer, such disagreement shall be resolved using the same
procedures for Neutral Accountants specified in Section 6.5(b)(iii).
6.12 Election Out of Installment Method. If SWL Holding
recognizes a gain upon the sale of the SWL Shares, Seller and SWL Holding
shall elect out of the installment method of accounting, with respect to
the sale of the SWL Shares, for income Tax purposes.
ARTICLE VII
Employment Matters
7.1 Definitions. The terms defined in this Section 7.1,
whenever used in this Agreement or any Schedule to this Agreement, shall
have the respective meanings indicated below.
"Acquired Company Employees" mean those current employees of
FMI who perform services (1) exclusively for one or more Acquired Companies
or (ii) on a non-exclusive basis for (x) Seller or a Retained Company and
(y) an Acquired Company.
"Acquired Company Retirees" mean those retirees, other than
any such retiree whose initial absence from employment was due to such
retiree's disability, of FMI listed on Schedule 7.1(a)(i) hereto, those
retirees of an Acquired Company (or a predecessor thereto) listed on
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Schedule 7.1(a)(ii) hereto and those Acquired Company Employees (listed on
Schedule 7.1(a)(iii)) who, as of the Closing Date, have completed a number
of years of service and attained an age sufficient to satisfy the age and
service related eligibility requirements under any welfare Plan to receive
retiree medical or life coverage upon retirement, collectively.
"Employees" means collectively, (i) the Acquired Company
Employees, (ii) the Acquired Company Retirees, (iii) those current
employees of FMI who perform services exclusively for one or more of Seller
or a Retained Company and (iv) all other current and former employees
(including retirees) of Seller, FMI or any Retained Company.
"Executive Officers" mean those current senior executive
employees of FMI or Seller listed on Schedule 7.1(b) hereto.
"Executive Severance Arrangements" mean the separate
Executive Severance Benefit Agreements, dated as of March 23, 1995, between
Seller, FMI and certain Executive Officers, listed on Schedule 7.1(c)
hereto.
"New SWFSC Employees" mean those Acquired Company Employees
who accept Buyer's or a Buyer Subsidiary's offer of employment effective as
of the Closing Date in accordance with Section 7.2(b) hereof.
"Seller's Employee Benefit Plan" means the Southwestern Life
Corporation Employee Benefit Plan, as in effect on the Closing Date.
"Senior Executive Retention Arrangement" means the executive
officer incentive and retention compensation program, approved by the Board
of Directors of Seller on March 2, 1995, providing for discretionary cash
bonuses to be paid to certain Executive Officers upon the successful
completion of a capital restructuring of Seller.
"Supplemental Executive Arrangements" mean the separate
Amended and Restated Supplemental Benefit Agreements, dated as of October
10, 1994, between Seller, FMI and certain Executive Officers, listed on
Schedule 7.1(d) hereto.
7.2 Employment of Acquired Company Employees. (a) Seller shall,
and shall cause the Selling Subsidiaries
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to, use commercially reasonable efforts to cause the Acquired Company
Employees to make available their employment services to Buyer and the
Buyer Subsidiaries and, in connection therewith, during the period from the
date hereof to the Closing Date, Seller shall not, and shall not permit any
of its Subsidiaries (other than FMI) to, solicit, offer to employ or employ
any such Acquired Company Employee. For a period of two years from the
Closing Date, without Buyer's prior written consent, Seller shall not, and
shall not permit any of the Retained Companies to, solicit, offer to employ
or otherwise interfere with the relationship of Buyer or any Buyer
Subsidiary with any Person who, at any time during the six month period
preceding any such solicitation, offer or other interference, is or was an
officer or other key management employee of Buyer or any Buyer Subsidiary,
other than the solicitation of any such Person whose employment with Buyer
and the Buyer Subsidiaries has been involuntarily terminated by the Buyer
and the Buyer Subsidiaries but only to the extent such solicitation
commences following such Person's termination of employment with Buyer and
the Buyer Subsidiaries.
(b) Effective as of the Closing Date, Buyer shall, or
shall cause a Buyer Subsidiary to, offer employment to those Acquired
Company Employees selected by Buyer at wage or salary levels, as
applicable, that are substantially the same as those in effect for such
individuals immediately prior to the Closing Date and with employee
benefits that are generally comparable, in the aggregate (or as soon as
practicable with respect to benefits provided pursuant to Section 7.4), to
the employee benefits of such Acquired Company Employees in effect
immediately prior to the Closing Date. Such offers of employment shall, in
the case of an Executive Officer, be subject to the execution and delivery
by such Executive Officer of releases acceptable to Buyer, such execution
and delivery to be effected in accordance with the Older Workers Benefit
Protection Act.
(c) (i) Effective as of the Closing Date, Buyer shall,
or shall cause a Buyer Subsidiary to, assume the liabilities of FMI and
Seller to or in respect of (x) the New SWFSC Employees for accrued vacation
and sick pay, 1995 bonuses and incentive compensation, accrued but unpaid
compensation, and accrued deferred compensation and the related obligations
to provide accrued life insurance coverage equal to the excess of (A) 200%
of each covered Acquired Company Employee's base salary, over (B) such
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Acquired Company Employee's accrued deferred compensation, in each such
case under this clause (x) including all employment tax liabilities in
respect thereof (such amounts in this clause (x) referred to as
"Compensation Items") and (y) the New SWFSC Employees for short-term
disability compensation or benefits that become payable as a result of a
short-term disability of any such New SWFSC Employee that commences after
the Closing Date. Buyer hereby agrees that, effective as of the Closing
Date Buyer shall, or shall cause a Buyer Subsidiary to assume the
liabilities of FMI and Seller to or in respect of each Executive Officer
who becomes a New SWFSC Employee who is a party to an Executive Severance
Arrangement, for compensation and benefits (including all employment tax
liabilities in respect thereof) required to be provided under the terms of
the Executive Severance Arrangements. Notwithstanding the foregoing
provisions of this Section 7.2(c)(i), (x) to the extent applicable, the
assumption of liabilities pursuant to this Section 7.2(c)(i) is conditioned
upon and subject to the transfer of assets required pursuant to Section
2.5(b), (y) such assumption of liabilities for Compensation Items, in the
case of sick pay and vacation pay with respect to services rendered prior
to the last day of the calendar month immediately preceding the Closing
Date, and in the case of all other Compensation Items, with respect to
services rendered prior to the Closing Date, is expressly limited to the
amount (or in the case of accrued vacation, the number of accrued vacation
days) accrued therefor in respect of the New SWFSC Employees or, if
applicable, Acquired Company Employees on Schedule 4.1.19(d) as of the date
of this Agreement, updated as required pursuant to the immediately
succeeding sentence and (z) such assumption of liabilities for deferred
compensation and accrued life insurance coverage is conditioned upon the
transfer and assignment to Buyer, or in Buyer's sole discretion to a Buyer
Subsidiary, of all of FMI's and Seller's rights and obligations under the
portion of any group annuity contract and group term life contract intended
to fund any portion of the deferred compensation benefits of any New SWFSC
Employee. Immediately prior to the Closing, Seller shall prepare and
deliver to Buyer a revised Schedule 4.1.19(d) that has been updated, with
respect to Compensation Items, to reflect properly and adequately as of the
Closing Date the liabilities and obligations for or in respect of
Compensation Items described in Section 4.1.19(d) hereof, except that such
liabilities and obligations for vacation and sick pay shall be reflected as
of the last day of the month immediately preceding the Closing Date.
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(ii) From and after the Closing, Seller and the
Selling Subsidiaries shall, jointly and severally, remain solely
responsible for any and all claims, liabilities, obligations and
commitments (A) for Compensation Items in respect of New SWFSC Employees
and, as applicable, Acquired Company Employees to the extent such liability
is not reflected therefor on Schedule 4.1.19(d), updated as required under
the last sentence of Section 7.2(c)(i), (B) for Compensation Items in
respect of Employees other than the New SWFSC Employees, (C) for retention
bonuses payable (x) to any Acquired Company Employee or (y) to any
Executive Officer pursuant to the terms of the Seller's Senior Executive
Retention Arrangement, (D) for benefits payable pursuant to the Seller's
Supplemental Executive Arrangement, (E) for Executive Severance Benefits
payable to any Executive Officer who does not become a New SWFSC Employee,
and (F) for severance, termination or other similar compensation or
benefits (including, without limitation, claims, liabilities, obligations
and commitments to provide continuation of health coverage under any Plan
pursuant to section 4980B of the Code but excluding those liabilities to
provide retiree medical and death benefits to Acquired Company Retirees
expressly assumed by Buyer pursuant to Section 7.5(a) or expressly retained
by an Acquired Company pursuant to clause (D) of Section 7.6) which are or
may become payable in connection with (x) any actual termination of
employment of any Employee who is neither a New SWFSC Employee nor an
Executive Officer or (y) any claim of any Employee of actual or
constructive termination of employment in connection with or as a result of
the consummation of the transactions contemplated by this Agreement or the
Related Agreements, it being understood that claims of any New SWFSC
Employee of actual termination of employment from Buyer or any of the Buyer
Subsidiaries after the Closing Date shall not be included in the
liabilities, obligations and commitments retained by Seller and the Selling
Subsidiaries pursuant to the foregoing clause (F)(y). Notwithstanding any
other provision hereof, Seller and the Selling Subsidiaries shall, jointly
and severally, assume and remain responsible for any and all obligations,
liabilities and commitments in respect of amounts accrued or paid on or
after October 1, 1995 under the bonus arrangement with Mr. Jerry Rice other
than in respect of bonus payments related to the sale of Morrow I and
Conroy Square, which in any event shall not in the aggregate exceed
$23,500.
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(d) Nothing in this Agreement shall prejudice the right of
Buyer or any Buyer Subsidiary to amend or terminate any plan, program,
policy or arrangement applicable to any New SWFSC Employee or Acquired
Company Retiree from or after the Closing Date.
(e) [Reserved].
(f) To the extent any funds delivered to SWFSC pursuant to
Section 2.5(b)(ii)(x) are greater than the amounts in respect thereof
actually paid by Buyer or a Buyer Subsidiary to, or in the case of vacation
pay, accrued for a person for whom such amounts were accrued on Schedule
4.1.19(d), other than amounts for sick pay, Buyer or a Buyer Subsidiary
shall reimburse Seller for such excess amounts upon the earlier to occur of
(i) the determination by Buyer or any Buyer Subsidiary that the New SWFSC
Employee or Acquired Company Employee with respect to whom such amounts
were accrued on Schedule 4.1.19(d) is not entitled thereto or (ii) the
forfeiture by such New SWFSC Employee or Acquired Company Employee of such
Compensation Items in accordance with the terms pursuant to which such
Compensation Items were provided to such person.
7.3 Service Credits. Buyer shall, or shall cause a Buyer
Subsidiary to, cause the employee benefit plans, programs and policies of
Buyer and the Buyer Subsidiaries covering the New SWFSC Employees to
recognize the service of each New SWFSC Employee with Seller or any of its
Subsidiaries completed prior to the Closing Date for purposes of
eligibility to participate and vesting of benefits under such plans,
programs and policies, but not for purposes of benefit accrual under
pension plans, to the same extent such service was recognized for such
purpose as of the Closing Date under the comparable Plan in which such New
SWFSC Employee was a participant immediately prior to the Closing Date.
7.4 Savings Investment Plan. Effective as of the Closing Date,
or as soon as practicable thereafter, Buyer shall, or shall cause the Buyer
Subsidiaries to, establish a qualified defined contribution plan (the
"Buyer's Savings Plan") containing a cash or deferred arrangement within
the meaning of section 401(k) of the Code and, to the extent required to be
provided by a transferee plan pursuant to section 411(d)(6) of the Code,
containing provisions similar to the provisions of the Southwestern Life
Corporation Savings Investment Plan (the "Seller's Savings Plan"). As
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soon as reasonably practicable, but in no event later than 60 days, after
the later of (i) the establishment of Buyer's Savings Plan, (ii) the
expiration of a 30-day period following the date of filing of the required
IRS Forms 5310A, if applicable, with the IRS (which notices, if applicable,
shall be filed by Buyer and Seller no later than twenty days after notice
to Seller of the establishment of Buyer's Savings Plan) and (iii) receipt
by Seller of a favorable determination letter from the IRS regarding the
qualification of the Buyer's Savings Plan under section 401(a) of the Code,
Seller shall transfer, or cause to be transferred, to the trust or trusts,
as directed by Buyer, utilized under Buyer's Savings Plan an amount (the
"Savings Plan Transfer Amount"), in cash, equal to the fair market value as
of the date of transfer of the aggregate account balances under Seller's
Savings Plan of those New SWFSC Employees who were participants in Seller's
Savings Plan immediately prior to the Closing (including account balances
of any "alternate payee," as such term is defined in section 414(p)(8) of
the Code, with respect to any New SWFSC Employee). On or before the
Closing Date, Seller shall contribute to the accounts of the applicable New
SWFSC Employees under Seller's Savings Plan all amounts required by
Seller's Savings Plan or Applicable Law to be contributed (whether or not
vested) with respect to such New SWFSC Employees on account of any period
prior to the Closing.
7.5 Welfare, Fringe and Other Benefits. (a) Subject to
compliance with Applicable Law, the participation of the New SWFSC
Employees under those Plans that are "employee welfare benefit plans"
(within the meaning of section 3(1) of ERISA, whether or not subject to
ERISA) or other employee fringe benefit plans (the "Seller Welfare Plans")
and the participation of any Acquired Company Retirees under Seller's
Employee Benefit Plan shall cease, effective as of the Closing. As of and
immediately after the Closing, Buyer shall, or shall cause the Buyer
Subsidiaries to, provide (i) the New SWFSC Employees and their dependents
and beneficiaries coverage under welfare and fringe benefit plans,
programs, policies or arrangements established by Buyer or the Buyer
Subsidiaries (the "Buyer Welfare Plans"), (ii) those Acquired Company
Retirees who participated in the Seller's Employee Benefit Plan immediately
prior to the Closing and their beneficiaries and dependents retiree medical
and death benefit coverage under the Buyer Welfare Plans and (iii) for the
waiver under the applicable Buyer Welfare Plan of the pre-existing
condition exclusion provision thereof with respect to a pre-existing
condition
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of a New SWFSC Employee or Acquired Company Retiree (or any dependent
thereof) that would have been covered under the Seller Welfare Plan in
which such individual was an active participant immediately prior to the
Closing Date had such individual continued coverage under such Seller
Welfare Plan. On or about 15 days after the Closing Date, Buyer shall, or
shall cause a Buyer Subsidiary to, provide a written list to Seller of all
New SWFSC Employees, specifically identifying those New SWFSC Employees who
have not elected health coverage under a Buyer Welfare Plan, to the extent
election is required.
(b) Prior to the Closing, Seller shall develop a retiree
medical and death benefit program covering the Acquired Company Retirees
and their eligible dependents (the "Amended Retiree Program") (i)
containing terms substantially in accordance with those set forth on
Schedule 7.5(b) hereto, as the same may be revised by mutual agreement of
the parties hereto, and (ii) to become effective as of the earliest
practicable date. Prior to the Closing, Seller and FMI shall notify all
Acquired Company Retirees in writing of the nature of the proposed changes
to their retiree medical and death benefit coverage (including contribution
or other cost sharing rates) intended to be implemented pursuant to the
Amended Retiree Program and, to the maximum extent administratively
feasible and commercially reasonable, Seller and FMI shall take all steps
necessary or appropriate to implement such Amended Retiree Program;
provided that, in any such case, Buyer shall have approved, in writing and
in advance, all communications to the Acquired Company Retirees and all
such implementing steps.
(c) As of and immediately after the Closing, Buyer shall,
or shall cause the Buyer Subsidiaries to, provide those Acquired Company
Retirees listed on Schedule 7.1(a)(ii) who were receiving long-term
disability benefits under the Seller's Employee Benefit Plan immediately
prior to the Closing long-term disability coverage under the Buyer Welfare
Plans.
7.6 Retained Seller Liabilities. From and after the Closing,
Seller and the Selling Subsidiaries shall, jointly and severally, assume
and remain solely responsible for any and all claims, liabilities,
obligations and commitments in respect of any Employee or the beneficiary
or dependent of any Employee (including, without limitation, any Acquired
Company Employee, Acquired Company Retiree and the
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beneficiaries and dependents of any such Employee), (i) under any Plan,
(ii) otherwise in connection with the provision of, or the failure to
provide, welfare, fringe, retirement or other compensation or benefits to
or in respect of any such Employee or his or her beneficiary or dependent
or (iii) for or in respect of any and all claims for benefits or other
expense reimbursements in respect of the Employees (including, without
limitation, the New SWFSC Employees and the Acquired Company Retirees) and
their dependents and beneficiaries relating to or arising in connection
with medical, dental, vision, hospitalization or other health services,
treatments or related benefits or expense reimbursements, life, disability,
accident, tuition reimbursement, dependent care, flexible spending or other
welfare or fringe benefits or expense reimbursements which claims relate to
or are based upon an event, condition, illness, death, disability,
treatment or confinement occurring or commencing on or before the Closing
Date, in any case, whether such claim, liability, obligation or commitment
is asserted before, on or after the Closing Date, other than (A) subject to
the transfer of the Savings Plan Transfer Amount under Seller's Savings
Plan to Buyer's Savings Plan pursuant to Section 7.4, liabilities and
obligations under Seller's Savings Plan for such Savings Plan Transfer
Amount, (B) those liabilities expressly assumed by Buyer or a Buyer
Subsidiary pursuant to Section 7.2(c)(i), (C) subject to 7.6(iii)
liabilities and obligations to provide post-retirement medical and death
benefits to the Acquired Company Retirees covered under the Seller's
Employee Benefit Plan immediately prior to the Closing, (D) subject to
7.6(iii) liabilities and obligations to provide post-retirement medical and
death benefits to the Acquired Company Retirees covered under (i) the SWL
Retired Employees Plan, (ii) the SWL Retired Agents Plan or (iii) the
Bankers Life & Casualty Group Insurance Plan No. 778 described in the
Summary Plan Description entitled "Your Group Insurance Plan" delivered by
Seller to Buyer prior to the execution of this Agreement and (E) with
respect to disability benefits that become due and payable after the
Closing Date, liabilities and obligations to provide those Acquired Company
Retirees listed on Schedule 7.1(a)(ii) who were receiving long-term
disability benefits under the Seller's Employee Benefit Plan immediately
prior to the Closing Date long-term disability coverage under the Buyer
Welfare Plans.
7.7 COBRA and WARN. From and after the Closing Date, Seller and
the Selling Subsidiaries shall, jointly and
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severally, remain solely responsible for any and all claims, liabilities,
obligations and commitments relating to or arising in connection with the
requirements of Section 4980B of the Code to provide continuation of health
care coverage under any Plan in respect of (i) Employees, other than the
New SWFSC Employees and their covered dependents, and (ii) to the extent
related to a qualifying event occurring on or before the Closing Date, the
New SWFSC Employees and their covered dependents. From and after the
Closing Date, Seller and the Selling Subsidiaries shall, jointly and
severally, remain solely responsible for any and all claims, liabilities,
obligations or commitments relating to or arising in connection with
compliance with the notice requirements of the Worker Adjustment Retraining
and Notification Act (the "WARN Act") in respect of Employees other than
the New SWFSC Employees, except that Buyer shall be responsible for any
claims, liabilities, obligations or commitments relating to or arising in
connection with compliance with the notice requirements of the WARN Act
triggered by any loss of employment at the Dallas location.
ARTICLE VIII
Indemnification and Use of Escrow Fund
8.1 Indemnification. (a) By Seller and Selling Subsidiaries.
Seller and the Selling Subsidiaries, jointly and severally, will defend,
indemnify and hold harmless each of Buyer, PennCorp, the Acquired Companies
and any of their officers, directors and employees (collectively, the
"Buyer Indemnitees") from and against, and pay or reimburse Buyer
Indemnitees for, any and all Losses resulting from or arising out of:
(i) any inaccuracy of any representations or warranties
made by Seller or any Selling Subsidiary in Sections 4.1.5, 4.1.7,
4.1.8 (to the extent applicable to the Acquired Companies),
4.1.10(e), 4.1.12 and 4.1.14 of this Agreement, provided, that Seller
and the Selling Subsidiaries shall have no obligation to indemnify
the Buyer Indemnitees for any Loss arising from any inaccuracy of any
representation or warranty contained in Section 4.1.12 to the extent
that the inaccuracy asserted by the Buyer Indemnitees (A) was
actually known to David J. Stone, Steven W. Fickes, Scott D.
Silverman or Charles H. Lubochinski (x) on the Execution Date or (y)
on the Closing Date, but only if such inaccuracy was not known to any
such named person on the Execution Date and Seller was notified in
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writing by any such Persons of such inaccuracy prior to the Closing
Date, and Seller acknowledges in writing on or prior to the Closing
Date that such inaccuracy is such that the condition set forth in
Section 3.2.1 has not been satisfied, and (B) caused such Loss (it
being understood that solely for purposes of this Article VIII,
including without limitation the calculations of Losses pursuant to
the final paragraph of this Section 8.1(a), and notwithstanding
anything to the contrary contained in this Agreement, to determine if
there has been an inaccuracy of a representation or warranty and the
Losses arising from such an inaccuracy, such representation or
warranty shall be read as if it were not qualified by materiality,
including, without limitation, qualifications indicating accuracy "in
all material respects" or accuracy except to the extent the
inaccuracy will not have a "Material Adverse Effect");
(ii) any failure of Seller or any Selling Subsidiary to
perform any covenant or agreement hereunder or under the Related
Agreements or fulfill any other obligation in respect hereof or
thereof;
(iii) any and all Excluded Liabilities (the "Excluded
Liabilities Indemnity");
(iv) liabilities for Taxes as provided in Article VI (the
"Tax Indemnity");
(v) the lawsuits captioned Castle v. Modern American Life
Insurance Company, CV93-10275, Circuit Court of Jackson County,
Missouri; Meyer v. Jay Angoff, Director of the Missouri Department of
Insurance, CV193-1331CC, Circuit Court of Cole County, Missouri;
Mutual Security Life Insurance Company, By Its Liquidator, Donna D.
Bennett v. Fail, Case IP 94-0001-C, United States District Court for
the Southern District of Indiana; Mutual Security Life Insurance
Company, By Its Liquidator, Donna Bennett v. Fail, Case No. IP 94-
1934-C-M/S, United States District Court for the Southern District of
Indiana; Bluebonnet Savings Bank v. FDIC, Case No. 3:91-CV-1066-X,
United States District Court for the Northern District of Texas;
State of Arizona v. Farm and Home Life Insurance Company, No. CV
90-23436, Maricopa County, Arizona, Superior Court; Optiz v. Duncan,
Civil Action No. 3-95CV-0516G, United States District Court for the
Northern District of Texas; Antonicello v. Beisenherz,
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No. 3-95-CV-0696-G, United States District Court for the Northern
District of Texas; Sheniak v. Southwestern Life Corporation, Civil
Action No. 3-95-CV-0627G, United States District Court for the
Northern District of Texas; Phill I. Cohen, M.D. and Peter M. Nims,
M.D., individually and as representatives of a class of Medigap
insurance assignees similarly situated v. Bankers Life and Casualty
Company et al., Case No. 294256, Court of Common Pleas, Cuyahoga
County, Ohio, and Golde v. Gail, Civil Action No. 3-95-CV-0626G,
United States District Court for the Northern District of Texas;
whether such Losses arise directly out of such lawsuits, from the
assertion of claims for contribution or indemnity in connection with
such lawsuits or from the assertion of any other claims that arise
from the matters alleged in such lawsuits, claims under the Articles
of Incorporation and Bylaws of the Acquired Companies (and the
resolutions of the respective boards of directors relating thereto)
that arise from conduct that occurred prior to the Closing Date;
claims arising from sales practices in the life insurance business of
the Acquired Insurance Companies that arise from conduct that
occurred prior to the Closing Date, except for claims arising
relating to policy forms as to which an Acquired Insurance Company
after the Closing Date has changed non-guaranteed elements of life
insurance policies other than interest rate changes, except for (A)
changes in the ICH UL business as described in correspondence between
Seller and Buyer as of the date hereof or (B) changes reasonably
justified by changes in underlying experience under applicable
actuarial principles ("Sales Practices Claims"); and claims, other
than policyholder claims and other claims in the ordinary course of
the Acquired Business, asserted after the Closing Date that arise
from conduct that occurred prior to the Closing Date, including
without limitation: indemnification obligations of SWL under the
agreement of sale under which BL of NY was sold, litigation asserting
violations of state or federal securities laws by Seller, any
Retained Company or any Acquired Company or any officer or director
of Seller, any Retained Company or any Acquired Company prior to the
filing of Seller's Chapter 11 petition under the Bankruptcy Code (the
"Litigation Indemnity");
(vi) (A) any inaccuracy of the representations and
warranties contained in Section 4.1.11 (it being
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understood that solely for purposes of this Article VIII, including
without limitation the calculations of Losses pursuant to the final
paragraph of this Section 8.1(a), and notwithstanding anything to the
contrary contained in this Agreement, to determine if there has been
an inaccuracy of a representation or warranty and the Losses arising
from such an inaccuracy, such representation or warranty shall be
read as if it were not qualified by materiality, including, without
limitation, qualifications indicating accuracy "in all material
respects" or accuracy except to the extent the inaccuracy will not
have a "Material Adverse Effect"; (B) any noncompliance by Seller or
any Selling Subsidiary with any Environmental Law on or before the
Closing Date; (C) subject to Section 8.1(e) below, any of the
following: (1) any Environmental Releases or threatened
Environmental Releases of Hazardous Materials occurring, or
environmental conditions existing, on or before the Closing Date at,
on, under, or above any of the properties and assets of the Acquired
Business (including the Real Property) or any other property
currently or previously owned, leased, operated or used by Seller or
any Selling Subsidiary; or (2) any generation, treatment, storage,
disposal, transportation, shipment offsite, or other management of a
Hazardous Material by Seller or any Selling Subsidiary on or before
the Closing Date (for purposes of this Section 8.1(a)(vi), "Seller"
and "Selling Subsidiary" shall include any predecessor or affiliate
of each of them); or (3) any amount paid by Buyer or any Buyer
Indemnitee with respect to any of the environmental matters
identified on the Phase I Report (the "Environmental Indemnity"); and
(vii) any obligations of Seller pursuant to Section 2.9 or
2.10 (the "Non-Assignable Assumed Contracts and Non-Assignable
Intellectual Property Licenses Indemnity").
Notwithstanding anything to the contrary contained in this Section 8.1,
Seller and the Selling Subsidiaries shall not have any liability referred
to: (a) solely under clause (i) above, unless the aggregate of all Losses
relating thereto for which Seller and the Selling Subsidiaries would, but
for this sentence, be liable exceeds on a cumulative basis $5 million, and
then only to the extent of the sum of (i) $2.5 million and (ii) such
excess; (b) solely under clause (vi) above, unless the aggregate of all
Losses relating thereto
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for which Seller and the Selling Subsidiaries would, but for this sentence,
be liable exceeds on a cumulative basis $1 million, and, to the extent such
Losses exceed on a cumulative basis $1 million but are less than $11
million, only to the extent of 90% of the amount of such Losses in excess
of $1 million and (c) solely under clause (v) above with respect to Sales
Practices Claims only, unless the aggregate of all Losses relating thereto
for which Seller and the Selling Subsidiaries would, but for this sentence,
be liable exceeds on a cumulative basis $1 million; provided, that Seller
and the Selling Subsidiaries shall not have any liability under clause (a),
(b) or (c) above and the amount of any Losses shall not be aggregated with
other Losses for purposes of determining whether Losses exceed a certain
amount unless the claim for indemnification exceeds (or series of related
claims in the aggregate exceed) $50,000. Notwithstanding anything to the
contrary contained in this Agreement, the costs of pre-remedial studies and
post-remedial monitoring and care referred to in the final clause of the
definition of "Losses" shall constitute Losses only for the purpose of
determining whether the $1 million threshold set forth in the preceding
clause (b) has been satisfied. The liability of Seller and the Selling
Subsidiaries under this Section 8.1 shall not be limited by the amount of
funds deposited in the Indemnity Escrow Account or otherwise provided for
in this Agreement to secure such obligations. Notwithstanding the
provisions of Section 8.1(a), neither Seller nor any Selling Subsidiary
shall be liable to indemnify any Buyer Indemnitee for any Loss to the
extent such Losses are reserved against or otherwise expressly reflected as
a liability in the September 30 Statement. Notwithstanding any provision
of this Section 8.1, to the extent that SWL and its Affiliates or any other
Buyer Indemnitee have the right to be indemnified under the agreements
listed on Schedule 8.1 hereto (the "Fail Indemnity"), for Losses which
would otherwise be indemnifiable under this Section 8.1, the Buyer
Indemnitees shall initially make such claim under the Fail Indemnity,
provided that the Buyer Indemnitees shall initially make such claim under
the Fail Indemnity, provided that the Buyer Indemnitees shall have no
obligation to pursue collection procedures, and if any such claim is not
paid in accordance with the terms of such agreement, or does not fully
indemnify the Buyer Indemnitees for all Losses relating to such claim,
Buyer may assert such claim under this Section 8.1. To the extent that
Seller incurs expenses or Losses covered by the Fail Indemnity, the Buyer
Indemnitees shall cooperate with Seller to assist in the
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subrogation of Seller to the rights of the Buyer Indemnitees under the Fail
Indemnity. To the extent that a Buyer Indemnitee makes a claim against
Seller or the Selling Subsidiaries in respect of Losses arising out of
matters involving James Fail, upon payment in full by Seller or a Selling
Subsidiary of such claim, Seller or the Selling Subsidiary shall be
subrogated to the rights of the Buyer Indemnitee against James Fail and the
Buyer Indemnitee shall assign such rights to Seller or the Selling
Subsidiary, as the case may be.
(b) By Buyer. Buyer and PennCorp (but, as to PennCorp,
only with respect to clause (i) below) will defend, indemnify and hold
harmless Seller and the Retained Companies and their officers, directors
and employees (collectively, the "Seller Indemnitees") from and against,
and pay or reimburse Seller Indemnitees for, any and all Seller Losses
resulting from or arising out of:
(i) any failure of Buyer or PennCorp (but each only
as to its own failure) to perform any covenant or agreement hereunder
or under the Related Agreements or fulfill any other obligation in
respect hereof or thereof;
(ii) any and all Assumed Liabilities;
(iii) liabilities of Buyer or any Acquired Companies
for Taxes as provided in Section 6.1(b), 6.1(d), 6.3 and 6.5(e)(ii)
hereof; and
(iv) any and all Seller Losses incurred by Seller or
any Retained Company (excluding Losses for (A) liabilities for which
Seller or any Retained Company are liable under the terms of this
Agreement, including without limitation Excluded Liabilities and (B)
Losses for which Seller or any Selling Subsidiary is obligated to
indemnify Buyer Indemnitees pursuant to Section 8.1(a) hereof) that
arise or result from any actions taken by SWFSC pursuant to the
powers of attorney delivered to SWFSC as contemplated by Section 5.17
hereof.
(c) Punitive, Consequential Damages. The amount of Losses
or Seller Losses, as applicable, deemed to have been suffered by Buyer
Indemnitees or Seller Indemnitees shall not include punitive or
consequential damages (except to the extent such Losses or Seller Losses,
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as applicable, are paid to unaffiliated Third Parties); provided that out-
of-pocket expenses and reasonable fees and expenses of attorneys,
accountants, consultants and expert witnesses incurred in investigation or
defense of any claim for which Losses are asserted shall not be deemed
consequential or punitive damages.
(d) Indemnification Procedures. (i) The provisions of
this paragraph (d) are subject to those of Article VI to the extent such
Article VI provisions are applicable and inconsistent with the provisions
hereof. In the event any claim or demand for which a party to this
Agreement (an "Indemnifying Party") would be liable for Losses or Seller
Losses, as applicable, to any other Person (an "Indemnified Party") under
Section 8.1 hereof is asserted against or sought to be collected from such
Indemnified Party by a Person other than Seller, a Retained Company, Buyer
or any Affiliate of Seller, Buyer or a Retained Company (a "Third Party
Claim"), the Indemnified Party will deliver a notice (a "Claim Notice") to
the Indemnifying Party with reasonable promptness, but in any event on or
prior to the later of (x) the date 14 calendar days before the date on
which the Indemnifying Party's ability to defend against such claim is
irrevocably prejudiced by the Indemnified Party's failure to provide such
notice or (y) two Business Days after such Indemnified Party becomes aware
of any such Third Party Claim; provided, that the Indemnified Party's
failure to provide the Indemnifying Party with such Claim Notice shall not
relieve the Indemnifying Party of its obligation under this Agreement
except to the extent that such omission results in a failure of actual
notice to the Indemnifying Party and such Indemnifying Party's ability to
defend has been actually prejudiced as a result of such failure.
(ii) The Indemnifying Party will notify the
Indemnified Party with reasonable promptness after the Indemnifying Party's
receipt of a Claim Notice (such notice being a "Response Notice"), but in
any event on or prior to the seventh calendar day after receipt of the
Claim Notice (the "Notice Period"), of whether the Indemnifying Party
disputes the liability of the Indemnifying Party to the Indemnified Party
hereunder with respect to such Third Party Claim and whether the
Indemnifying Party desires, at the sole cost and expense of the
Indemnifying Party, to defend the Indemnified Party against such Third
Party Claim. If the Indemnifying Party notifies the Indemnified Party
within the Notice Period that the Indemnifying Party (without any
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reservation of rights) does not dispute its liability to the Indemnified
Party and that the Indemnifying Party desires to defend the Indemnified
Party with respect to the Third Party Claim, then the Indemnifying Party
will have the right to defend, and the Indemnified Party shall permit the
Indemnifying Party (at the expense of such Indemnifying Party) to assume
the defense of, such Third Party Claim by all appropriate proceedings,
which proceedings will be diligently prosecuted by the Indemnifying Party;
provided that (i) the counsel for the Indemnifying Party who shall conduct
the defense of such claim or litigation shall be reasonably satisfactory to
the Indemnified Party, and (ii) the Indemnified Party may participate in
such defense at such Indemnified Party's expense.
(iii) As to any matters for which the Indemnifying
Party has acknowledged its liability to the Indemnified Party (without
reservation of rights) and has elected to assume the defense of such
matters, from the date of the Response Notice, the Indemnifying Party will
have full control of such defense and proceedings including, subject to
Section 8.1(d)(v), any compromise or settlement thereof, provided, that the
Indemnified Party may, at any time prior to its receipt of such notice from
the Indemnifying Party, file any motion, answer, or other pleadings that
the Indemnified Party may deem necessary or appropriate to protect its
interests or those of the Indemnifying Party and not irrevocably
prejudicial to the Indemnifying Party (it being understood and agreed that,
except as provided in Section 8.1(d)(iv) hereof, if an Indemnified Party
takes any such action that is irrevocably prejudicial and conclusively
causes a final adjudication that is adverse to the Indemnifying Party, the
Indemnifying Party will be relieved of its obligations hereunder with
respect to the portion of such Third Party Claim prejudiced by the
Indemnified Party's action); and provided, further, that if requested by
the Indemnifying Party, the Indemnified Party agrees, at the sole cost and
expense of the Indemnifying Party, to cooperate with the Indemnifying Party
and its counsel in contesting any Third Party Claim that the Indemnifying
Party elects to contest, or, if appropriate and related to the Third Party
Claim in question, in making any counterclaim against the Person asserting
the claim, or any cross-complaint against any Person (other than the
Indemnified Party or any of its Affiliates).
(iv) If the Indemnifying Party fails to notify the
Indemnified Party that the Indemnifying Party
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(without any reservation of rights) does not dispute its liability to the
Indemnified Party and that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim, or if the
Indemnifying Party gives such notice but fails diligently and promptly to
defend the Third Party Claim, then the Indemnified Party will have the
right to defend, at the sole cost and expense of the Indemnifying Party,
such claim by all appropriate proceedings, which proceedings will be
promptly and vigorously defended by the Indemnified Party. The Indemnified
Party will have full control of such defense and proceedings, including,
subject to Section 8.1(d)(v) any compromise or settlement thereof;
provided, however, that if requested by the Indemnified Party, the
Indemnifying Party agrees at the sole cost and expense of the Indemnifying
Party, to cooperate with the Indemnified Party and its counsel in
contesting any Third Party Claim which the Indemnified Party is contesting,
or, if appropriate and related to the Third Party Claim in question, in
making any counterclaim against the Person asserting the claim, or any
cross-complaint against any Person (other than the Indemnifying Party or
any of its Affiliates). The Indemnifying Party may participate in, but not
control, any defense or settlement controlled by the Indemnified Party
pursuant to this Section 8.1(d)(iv), and the Indemnifying Party will bear
its own costs and expenses with respect to such participation.
(v) Except with the prior written consent of the
Indemnified Party, no Indemnified Party, in the defense of any Third Party
Claim, shall consent to entry of any judgment or enter into any settlement
that provides for injunctive or other nonmonetary relief (or, if Seller or
any Selling Subsidiary is an Indemnifying Party, for monetary relief
exceeding the sum of the amount of funds then contained in the Indemnity
Escrow Account that are not subject to claims (whether or not such claims
are Third Party Claims) for indemnification previously asserted under this
Agreement and outstanding against Seller and the Selling Subsidiaries) that
affects the Indemnified Party and does not include as an unconditional term
thereof the giving by each claimant or plaintiff to such Indemnified Party
of a release from all liability with respect to such Third Party Claim
without any payment by the Indemnified Party and the acknowledgement by the
Indemnifying Party of its liability to the Indemnified Party pursuant to
Section 8.1 hereof with respect to such Third Party Claim. Except with the
prior written consent of the Indemnifying Party, which consent
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shall not be unreasonably withheld, an Indemnified Party will not consent
to the entry of any judgment or enter into any settlement for which a claim
is being made under this Section 8.1(d) for indemnifiable Losses. In the
event that (i) a firm offer is made to compromise or settle an indemnified
Third Party Claim in a manner that will not subject the Indemnified Party
to injunctive or nonmonetary sanctions (and, if Seller or any Selling
Subsidiary is an Indemnifying Party, for monetary relief exceeding the sum
of the amount of funds then contained in the Indemnity Escrow Account that
are not subject to claims (whether or not such claims are Third Party
Claims) for indemnification previously asserted under this Agreement and
outstanding against Seller and the Selling Subsidiaries) and would not
otherwise adversely affect the rights of the Indemnified Party, which offer
includes as an unconditional term thereof the giving by each claimant or
plaintiff to such Indemnified Party of a release from all liability with
respect to such Third Party Claim without any payment by the Indemnified
Party and the acknowledgement by the Indemnifying Party of its liability to
the Indemnified Party pursuant to Section 8.1, and (ii) all parties to such
indemnified claim (other than the Indemnified Party) deliver a notice to
the Indemnified Party setting forth the terms of the compromise or
settlement (a "Compromise Notice"), but (iii) the Indemnified Party does
not elect (within 30 calendar days after its receipt of the last of such
Compromise Notices (the "Election Date")) to accept or agree to such
compromise or settlement, then the obligation of the Indemnifying Party
arising from or relating to such Indemnified Claim will be limited to the
sum set forth in the Compromise Notice (the "Settlement Sum"), and
thereafter the Indemnified Party will reimburse the Indemnifying Party
promptly following the final, non-appealable conclusion, of such
indemnified claim for the amount by which the liability, counsel fees, and
expenses incurred by the Indemnifying Party after the Election Date exceeds
the Settlement Sum.
(vi) In the event that an Indemnified Party shall in
good faith determine that the conduct of the defense of any Third Party
Claim subject to indemnification hereunder or any proposed settlement of
any such claim by the Indemnifying Party might be expected to affect
adversely the Indemnified Party's Tax liability or ability to conduct its
business, or that the Indemnified Party may have available to it one or
more defenses or counterclaims that are inconsistent with one or more of
those that may be available to the Indemnifying Party or any other
conflicts
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of interest in respect of such claim relating thereto, the Indemnified
Party shall have the right at all times to employ separate counsel to
represent it as to any such aspect of a Third Party Claim that might so
adversely affect the Indemnified Party, or as to any such inconsistent
defenses or counterclaim, the reasonable fees of such separate counsel to
be borne by the Indemnifying Party.
(vii) In any event, the Indemnifying Party and the
Indemnified Party shall cooperate in the defense of any Third Party Claim
subject to this Section 8.1 and the records of each shall be available to
the other with respect to such defense. The provisions of Section 8.1(d)
relating to the Indemnifying Party's right to assume the defense of Third
Party Claims for which it has an indemnification obligation hereunder
shall, if Seller or any Selling Subsidiary is an Indemnifying Party, apply
only for so long as the funds contained in the Indemnity Escrow Account are
sufficient to cover all claims (whether or not such claims are Third Party
Claims) for indemnification under this Agreement then outstanding against
Seller and the Selling Subsidiaries.
(viii) In the event any Indemnified Party shall have a
claim against any Indemnifying Party hereunder that does not involve (x) a
Third Party Claim being asserted against or sought to be collected from the
Indemnified Party or (y) a claim arising under or relating to a Special
Indemnity, the Indemnified Party will notify the Indemnifying Party with
reasonable promptness after such Indemnified Party has actual knowledge of
such claim, specifying the nature of and specific basis for such claim and
the amount or the estimated amount of such claim (the "Indemnity Notice").
If the Indemnifying Party does not notify the Indemnified Party that the
Indemnifying Party disputes such claim within 10 days after the date of the
Indemnifying Party's receipt of the Indemnity Notice, the estimated amount
of such claim specified by the Indemnified Party will be conclusively
deemed a liability of the Indemnifying Party hereunder. If the
Indemnifying Party timely disputes such claim, the Indemnifying Party and
the Indemnified Party agree to proceed in good faith to attempt to
negotiate a resolution of such dispute, and if not resolved through
negotiations either party may pursue whatever remedies it may have under
Applicable Law. Claims by any Buyer Indemnitee arising under or relating
to a Special Indemnity shall not be subject to the procedures set
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forth in Section 8.1(d), but rather shall be subject to Section 8.2(d).
(e) Certain Environmental Matters. (i) The covenant to
indemnify under Section 8.1(a)(vi)(C) shall only apply to the extent that
the Loss incurred by a Buyer Indemnitee is a Reasonable Environmental
Expense, determined as follows:
(A) With respect to a Loss that does not arise from
a duty under Environmental Law, a Reasonable Environmental Expense is
an expense or other cost that is reasonably necessary for the
continued utilization of the property in a manner consistent with its
general land use type as of the Closing Date, but only to the extent
that a reasonable and prudent Person in the Buyer Indemnitee's
position (i.e., one owning or holding a security interest in real
property, as the case may be) would choose to incur such expense or
cost in order to minimize Losses to such Person that over a period of
time could arise from the relevant presence, management,
Environmental Release or threatened Environmental Release of
Hazardous Materials or other environmental condition or matter, if
such Person did not have the benefit of a contractual indemnity but
rather would be paying for such present or future Losses with its own
funds. Determining what is a Reasonable Environmental Expense with
respect to a Loss that does not arise from noncompliance with or a
duty under Environmental Law shall include consideration of factors
such as (x) the estimated cost of the contemplated current expense,
(y) the magnitude and likelihood of Losses that may result if such
expense is not incurred, and (z) the value of the property to which
the environmental expense relates. For purposes of this Section
8.1(e)(i)(A), the phrase "general land use type" shall mean
industrial use, commercial use, residential use, agricultural use, or
other generally recognized broad category of potential land uses.
(B) With respect to a Loss that arises from a duty
imposed under Environmental Law, but where applicable Environmental
Law allows the Buyer Indemnitee a range of options with significantly
differing costs as to how to comply with or discharge that duty, an
expense or cost shall be deemed a Reasonable Environmental Expense
only if it is an expense or other cost that (1) is one of such
options
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that a reasonable and prudent Person in the Buyer Indemnitee's
position (i.e., one currently or previously owning an interest in
real property) would incur to comply with or to discharge the duty
imposed under Environmental Law, if such Person did not have the
benefit of a contractual indemnity but rather would be paying for
such cost or expense with its own funds (and in a jurisdiction that
has formally adopted risk based cleanup standards for the presence of
Hazardous Materials in the soil, groundwater and other environmental
media based upon current or future land uses if such standards and
the cost of meeting them differ according to the current or future
land use type then only expenses and other costs associated with
attaining such standards applicable to the property's current land
use type as of the Closing Date use shall be deemed a Reasonable
Environmental Expense); (2) is incurred pursuant to an order by a
Governmental Authority under Environmental Law; or (3) is incurred in
order to prevent or abate an imminent and substantial endangerment to
human health or the environment in response to an environmental
condition, Environmental Release or threatened Environmental Release.
(C) Notwithstanding the preceding clauses (A) and
(B), with respect to any Loss, a cost or expense shall not be deemed
a Reasonable Environmental Expense to the extent such cost or
expense, or any duty under Environmental Law to undertake the
activity giving rise to such cost or expense, arises from any actual
or proposed demolition, remodeling, expansion, construction,
replacement or similar activity by or at the direction of Buyer or
any Affiliate of Buyer in, on, under or within any such property that
is neither (1) otherwise required to be undertaken under any
Environmental Law or other Applicable Law nor (2) reasonably
necessary for the continued utilization of the property in a manner
consistent with its particular use as of the Closing Date.
(ii) For a claim (an "Environmental Claim") to be a
Loss eligible for indemnification under Section 8.1(a)(vi)(C), prior to
incurring any costs or expenses for which indemnification is to be sought,
the Buyer Indemnitee shall provide Seller with a notice (an "Environmental
Claim Notice") which notice shall include documentation showing in
reasonable detail the basis for Buyer Indemnitee's assertion
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that the proposed action and the costs and expenses anticipated to be
incurred are Reasonable Environmental Expenses. The Buyer Indemnitee shall
provide, and cause its representatives to provide, Seller and Seller's
authorized representatives access to and the opportunity to review related
studies, records, sampling data, cost estimates and other related documents
utilized by the Buyer Indemnitee in connection with establishing the
Environmental Claim. Unless Seller delivers written notice to the Buyer
Indemnitee prior to the 15th day following Seller's receipt of the
Environmental Claim Notice disputing its and the Selling Subsidiaries'
liability to indemnify the Buyer Indemnitee with respect to all or part of
the Environmental Claim, which notice shall specify in reasonable detail
the basis therefor, Seller and the Selling Subsidiaries shall be deemed to
have agreed to indemnify the relevant Buyer Indemnitee in respect of such
Environmental Claim. If Seller so disputes its and the Selling
Subsidiaries' liability to indemnify the Buyer Indemnitee in respect of all
or part of an Environmental Claim, the Buyer Indemnitee and Seller shall
use reasonable efforts to resolve in good faith their differences and any
resolution by them shall be reduced to writing and signed by a duly
authorized officer of the respective parties and shall be final, binding
and conclusive. Notwithstanding any other provision of this Section
8.1(e)(ii), Buyer Indemnitee shall not be required to provide notice to
Seller before incurring any costs or expense (1) pursuant to an order by a
Governmental Authority under Environmental Law or (2) in order to prevent
or abate an imminent and substantial endangerment from an environmental
condition, Environmental Release or threatened Environmental Release.
(iii) If, after 10 Business Days following delivery of
the Environmental Claim Notice (or such other period as Seller and Buyer
agree) any Environmental Claim or part thereof remains in dispute, the
Environmental Claim shall be submitted for final resolution to the
Environmental Panel, consisting of one representative chosen by each of
Seller and Buyer and a third party chosen by the representatives of Seller
and Buyer ("Environmental Panel"). Each party agrees to execute, if
requested by the members of the Environmental Panel, a reasonable
engagement letter in form and substance satisfactory to such members.
Representatives on the Environmental Panel shall be competent in real
property transactions and the impact that adverse environmental conditions
may have on the value and/or use of real property. All fees and expenses
relating
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to the work, if any, to be performed by the Environmental Panel shall be
borne by Seller. The Environmental Panel shall act as an arbitrator to
determine, based solely on presentations by Buyer and Seller and their
respective representatives, and not by independent review, the
Environmental Claim, or part thereof, in dispute. Buyer and Seller, and
their respective representatives, shall cooperate fully with the
Environmental Panel. Buyer and Seller shall provide, and shall cause their
representatives to provide, the Environmental Panel and its representatives
such assistance and access to the relevant site or property that is the
basis of the claim, and any studies, reports, sampling data, cost
estimates, and other documents as the Environmental Panel shall reasonably
request. The Environmental Panel's determination shall be based upon
majority vote, shall be made within 30 days of its selection, or at such
other time as Buyer, Seller and the Environmental Panel may mutually agree,
shall be set forth in a written statement delivered to Buyer and Seller and
shall be final, binding and conclusive on Buyer, any other Buyer
Indemnitee, Seller and the Selling Subsidiaries.
(iv) Upon the payment to Buyer Indemnitee for any
Loss arising out of an Environmental Claim, Seller shall be subrogated to
all rights and causes of action which Buyer Indemnitee may have against any
third party to the extent of such Loss.
(v) Notwithstanding any provision to the contrary in
this Agreement, the Buyer Indemnitees shall not be entitled to recover for
any Loss arising out of an Environmental Claim with respect to any property
subject to a Mortgage Loan for any amount exceeding the amount designated
for such Mortgage Loan in correspondence between Seller and Buyer as of the
date hereof less the amount of any principal repayments in respect of such
Mortgage Loan after June 30, 1995.
(f) Time Limitation. All claims for indemnification under
clause (i) of the first sentence of Section 8.1(a) must be asserted on or
prior to the date of termination of the respective survival periods set
forth in Section 8.1(h). All claims for indemnification under clause (ii)
of the first sentence of Section 8.1(a) or under clause (i) of Section
8.1(b), to the extent that such claims relate to covenants and agreements
that, by their terms, are to be performed or complied with at or before the
Closing, must be asserted on or prior to July 31, 1996. To the extent that
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such claims relate to covenants and agreements that, by their terms, are to
be performed or complied with after the Closing, such claims must be
asserted on or prior to the expiration of all applicable statutes of
limitations (including without limitation, all periods of extension,
whether automatic or permissive) affecting any such covenant or agreement;
provided, however, that if any such covenant or agreement that specifies a
term or period expiring before the expiration of all applicable statutes of
limitations, such claims must be asserted on or prior to the 180th day
following the end of such period. Any other claims for indemnification
hereunder may be asserted indefinitely subject to any applicable statute of
limitations with respect to such matters. If a claim for indemnification
is made before the expiration of the applicable survival period referred to
above, then (notwithstanding the expiration of such survival period) the
representation, warranty, covenant or agreement applicable to such claim
shall survive until, but only for purposes of, the resolution of such
claim.
(g) Remedies. For so long as funds remain in the
Indemnity Escrow Account, Buyer's and PennCorp's sole remedy for breaches
of representations, warranties and covenants hereunder shall be pursuant to
this Article VIII except to the extent any such claims, in the aggregate,
exceed or may exceed such amounts. Subject to the preceding sentence, the
rights and remedies herein provided are cumulative and are not exclusive of
any rights or remedies that any party may otherwise have at law or in
equity. The parties acknowledge and agree that any payments made to one
party pursuant to the provisions of Section 2.9 shall not preclude such
party from being indemnified or recovering damages for breaches of
representations, warranties or any other covenant or agreement made in this
Agreement, nor shall any such indemnification or recovery of damages
preclude a party from receiving any payments due to it under Section 2.7,
2.8 or 2.9.
(h) Survival of Representations and Warranties. No
representation or warranty contained in this Agreement shall survive the
Closing Date, except as specified below:
(i) the representations and warranties contained in
Sections 4.1.5, 4.1.8 (to the extent applicable to the Acquired
Companies), 4.1.10(e), 4.1.11, 4.1.12 and 4.1.14 shall survive until
July 31, 1997;
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(ii) the representations and warranties contained in
Section 4.1.7 shall survive until July 31, 1996;
(iii) the representations and warranties contained in
Section 4.1.17 shall survive for so long as any applicable statute of
limitations remains open, in whole or in part, including without
limitation by reason of waiver of such statute of limitations.
8.2 Provisions Regarding Escrow Account. (a) Creation of Escrow
Account. At the Closing, Buyer, Seller, the Selling Subsidiaries, and an
escrow agent mutually acceptable to the parties hereto (the "Escrow Agent")
shall enter into an escrow agreement, substantially in the form of
Exhibit F to the Shinnecock Purchase Agreement (subject to such mutually
agreeable changes thereto as shall, in the reasonable judgment of Buyer and
Seller, reflect the terms of the transactions contemplated by this
Agreement (the "Escrow Agreement"), pursuant to which an escrow account
will be established (the "Indemnity Escrow Account") to secure the
indemnification obligations of Seller and the Selling Subsidiaries under
Section 8.1.
(b) [Reserved].
(c) Payments from Indemnity Escrow Account. Subject to
Section 8.2(d), the Buyer Indemnitees shall be entitled to receive payments
from the Indemnity Escrow Account by wire transfer in immediately available
funds promptly upon delivery to the Escrow Agent of (i) a written
instruction executed jointly by Seller and Buyer setting forth the amounts
to be paid to the Buyer Indemnitees or (ii) a written instruction or order
issued by a court of competent jurisdiction setting forth the amount to be
paid to the Buyer Indemnitees. On the later of (x) August 31, 1997, (y)
disposal or settlement of all Claims by the Bankruptcy Court and (z) the
first day after the Tax Expiration Date all cash amounts remaining in the
Indemnity Escrow Account (subject to application of Section 8.2(d) or as
set forth in correspondence between Seller and Buyer as of the date hereof)
shall be paid to Seller for distribution in accordance with the Debtors'
confirmed plan of reorganization; provided that, in the event that a Buyer
Indemnitee has a pending claim or claims against Seller or the Selling
Subsidiaries for indemnification under this Agreement, funds from the
Indemnity Escrow Account in the amount of such claims shall be retained by
the Escrow Agent
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until it has received (A) a written instruction directing payment of such
retained amount executed jointly by Seller and Buyer or (B) a written
instruction or order issued by the Bankruptcy Court or, if the Bankruptcy
Court is no longer the court of jurisdiction, any other court of competent
jurisdiction directing payment of such remaining amount.
(d) Special Indemnity Payments. The Buyer Indemnitees
shall be entitled to receive Special Indemnity payments from the Indemnity
Escrow Account by wire transfer in immediately available funds promptly
upon delivery by Buyer to the Escrow Agent of a certificate, executed by a
senior financial officer of Buyer, (i) in the case of amounts owed to any
Buyer Indemnitee under the Tax Indemnity, setting forth the amount of Taxes
paid, or (provided such amounts are then due and payable) to be paid, by
Buyer or any of its Affiliates, (ii) in the case of amounts owed to any
Buyer Indemnitee under the Litigation Indemnity (provided that Seller or a
Selling Subsidiary has previously declined to dispute its liability for,
and has assumed the defense of, the underlying claim pursuant to Section
8.1(d)(ii)), attaching thereto a copy of the court order, judgment or
settlement agreement pursuant to which such Buyer Indemnitee has incurred a
Loss, (iii) in the case of amounts owed to any Buyer Indemnitee for
Excluded Liabilities (provided that Seller or a Selling Subsidiary has
previously declined to dispute its liability for, and has assumed the
defense of, the underlying claim pursuant to Section 8.1(d)(ii)), setting
forth the amounts paid, or to be paid, by the Buyer Indemnitee as a result
of such Excluded Liabilities, (iv) in the case of amounts owed to any Buyer
Indemnitee under the Environmental Indemnity, the amounts paid or then due
and payable by the Buyer Indemnitee, attaching the written statement of the
Environmental Panel delivered pursuant to Section 8.1(e)(iii), if
applicable, and (v) in the case of the Non-Assignable Assumed Contracts
Indemnity, setting forth the costs incurred by any Buyer Indemnitee
pursuant to Section 2.10, plus, in each case other than clause (v), any
penalties and interest with respect thereto and the amount of any out-of-
pocket costs (including the fees and expenses of Buyer Indemnitee's
attorneys, actuaries, accountants and other advisors) incurred by the Buyer
Indemnitees in connection therewith. A copy of the certificate referred to
in the preceding sentence shall be delivered by Buyer to Seller no later
than ten days before delivery of such certificate to the Escrow Agent, but
the related payments
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from the Escrow Account shall not be subject to the prior approval of
Seller. Upon request by Seller, Buyer shall direct the Escrow Agent to
disburse from the Indemnity Escrow Account, to the extent there are cash
funds available in the Indemnity Escrow Account, or if there are no such
cash funds, Buyer shall pay or cause to be paid, on behalf of the
applicable taxpayer, directly to the IRS or any other taxing authority in
respect to Taxes to the following extent: (a) up to $67 million less any
reduction in funding under Section 8.3(ii), in respect to Taxes of any
Affiliated Group for the Tax years 1986 through 1989 and (b) up to an
additional $21 million in respect of other Taxes of any Affiliated Group.
If any amounts are disbursed from the Indemnity Escrow Account under clause
(b) of this Section 8.2(d), and a refund of Taxes attributable to taxable
periods, or portions thereof beginning on or after January 1, 1992 and
ending on or before the Closing Date is thereafter received by Seller that
is not otherwise payable to a Retained Company pursuant to the tax
allocation agreement referred to in Section 6.7(c) or to any Buyer
Indemnitee, Seller shall deposit in the Indemnity Escrow Account so much of
such refund as is necessary to restore any amounts previously disbursed
under clause (b) of this Section 8.2(d), together with any interest
received thereon.
8.3 Funding of Escrow Accounts. On the Closing Date, Buyer
shall fund the Indemnity Escrow Account with cash that equals the lesser of
(i) $167 million and (ii) $167 million minus the amount, up to $67 million,
of any payments of Taxes made to the IRS after the Execution Date but
before the Closing Date in respect of Taxes of any Affiliated Group for the
Tax years 1986 through 1989 pursuant to a settlement agreement reflected in
an IRS Form 870-AD delivered to Buyer by Seller; provided, that Buyer has
received evidence reasonably satisfactory to it of any such payment of
Taxes.
8.4 Tax Treatment of Escrow. Seller and Buyer agree that for
income tax purposes Seller shall treat the taxable income of the Indemnity
Escrow Account as includable in the Tax Returns of Seller, and
distributions from the Escrow Accounts to Buyer and Buyer Indemnitees and
indemnity payments pursuant to this Article VIII shall be treated as
adjustments to Purchase Price.
8.5 Escrow Payments at Buyer's Direction. At any time following
the later of the Closing Date and the date that is four months after the
Execution Date, Buyer may,
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five Business Days after notice to Seller, pay or direct the Escrow Agent
to pay, or deposit with, the IRS or any other taxing authority, on behalf
of the applicable taxpayer, the amount of Taxes that would be due in
accordance with the settlement agreement with the IRS reflected on IRS Form
870-AD delivered to Buyer on or before the Execution Date for Tax years
1986 through 1989 with respect to the affiliated group filing consolidated
returns for Federal income tax purposes of which Seller or MAL is the
common parent; provided that Buyer shall not make such payment or give such
direction for so long as (a) Seller contributes, on a quarterly basis,
additional funds to the Indemnity Escrow Account equal to the amount of
interest, penalties and additions to Tax attributable to such Taxes and (b)
the amount in the Indemnity Escrow Account at such time is at least equal
to the sum of (i) $67 million less any reduction in such amount pursuant to
clause (a) of Section 8.2(d) and (ii) the amount of interest, penalties and
additions to Tax attributable to such Taxes since the Closing Date.
8.6 [Reserved].
ARTICLE IX
Further Agreements
9.1 Public Announcements. Buyer, Seller, FMI and the Selling
Subsidiaries will consult with each other before issuing any press release
or otherwise making any public statements with respect to the transactions
contemplated by this Agreement, and shall not issue any such press release
or make any such public statement prior to such consultation or, after such
consultation, if any party is not reasonably satisfied with the text of
such release or statement, except as may otherwise be required by
applicable law.
9.2 Limited Guaranty. PennCorp hereby unconditionally
guarantees the prompt payment by Buyer of the indemnity obligation of Buyer
set forth in Section 6.5(e)(ii) of this Agreement; provided that in no
event shall PennCorp's obligation under this guaranty exceed $25 million.
9.3 Matters Relating to Schedules. Notwithstanding any other
provision in this Agreement to the contrary, Buyer and Seller agree that
all schedules to this Agreement shall refer to that (i) certain Disclosure
Schedule to the Shinnecock Purchase Agreement (the "Disclosure Schedule")
and (ii) that certain Confidential Disclosure Schedule to
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the Shinnecock Purchase Agreement (the "Confidential Disclosure Schedule,"
and together with the Disclosure Schedule, the "Disclosure Schedules,").
The parties agree, in good faith, to discuss and agree (promptly, but in no
event later than 5 days after the date hereof) to such mutually agreeable
changes, modifications, deletions and additions to the Disclosure Schedules
as may be necessary to accurately reflect the transactions contemplated by
this Agreement; provided that any such changes, modifications, deletions
and additions (except with respect to Schedule 6.8) shall not affect in any
manner the Buyer Indemnitees right to seek indemnification hereunder with
respect to matters disclosed on such updated schedules but not disclosed on
the Disclosure Schedules, it being the intention of the parties that for
purposes of determining whether any representation, warranty, covenant or
agreement has been breached, the Disclosure Schedules to the Shinnecock
Purchase Agreement shall be operative subject to any changes to Schedule
4.2.3 reasonably necessary to reflect the structure of the transactions
contemplated by this Agreement.
ARTICLE X
Miscellaneous
10.1 Termination. (a) This Agreement may be terminated at any
time, but not later than the Closing Date, by Buyer and Seller mutually
agreeing in writing to terminate this Agreement. Notwithstanding the
proviso to the first sentence of Section 10.1(d) below, if this Agreement
is terminated by mutual agreement of the parties, neither party shall be
entitled to assert that the other party has breached any of the terms and
conditions of this Agreement, and any such breach shall by such mutual
termination be irrevocably waived.
(b) This Agreement shall terminate (without any action or
notice (in writing or otherwise) by any of the parties hereto) unless Buyer
in its sole and absolute discretion shall have extended in writing any of
the dates or any of the periods set forth in this Section 10.1(b) (or any
of the extended dates or periods):
(i) if the Approval Order has not been entered by
the Bankruptcy Court within 10 days of the date hereof; or
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(ii) if a supervisor, conservator, rehabilitator,
liquidator, receiver or other Person in a similar capacity shall be
appointed for any of the Acquired Insurance Companies or a cease-and-
desist order is entered, and in the case of a cease-and-desist order,
such cease-and-desist order is not overturned, vacated or reversed
within three Business Days of the entry of such order, with respect
to any of the Acquired Insurance Companies.
(c) Buyer (for itself, SWFSC and PennCorp) or Seller (for
itself and the Selling Subsidiaries) shall have the right to terminate this
Agreement if the Closing Date shall not have occurred on or prior to
December 31, 1995.
(d) Except as expressly set forth in this Agreement, in
the event of the termination of this Agreement, this Agreement shall
forthwith become void and have no effect and there shall be no obligation
or liability on the part of any party hereto or its Affiliates, directors,
officers or shareholders; provided that neither any provision herein nor
the termination of this Agreement pursuant to Section 10.1(c) shall relieve
any party hereto from any liability for any breach hereof or for any
obligation of any party under this Section 10.1(d). Notwithstanding
anything to the contrary contained herein, in the event the transactions
contemplated by this Agreement are not consummated on or before December
31, 1995, for any reason other than (i) the failure of the condition set
forth in Section 3.2.9 hereof to have been satisfied or (ii) the willful
breach by Seller or any of the Selling Subsidiaries of any of their
respective representations, warranties, covenants or agreements contained
herein, the result of which prevents Buyer from consummating the
transactions contemplated by this Agreement, then: (A) Seller shall be
permitted to retain the Buyer's Deposit and neither Buyer, PennCorp nor any
other Person (other than Seller or its designees) shall have any Claim with
respect thereto, and (B) Buyer and PennCorp, jointly and severally, shall
be liable for, and shall indemnify and hold harmless Seller Indemnities
from and against (1) any Failed QSP Losses (without any limitations to
Buyer's or PennCorp's liability thereto) and (2) such other Seller Losses
resulting from or arising out of any failure of Buyer or PennCorp to
perform any covenant or agreement hereunder or fulfill any other obligation
in respect hereof, but only to the extent such Failed QSP Losses and Seller
Losses specified in this clause (B), in the aggregate, exceed the amount of
the Buyer
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Deposit; provided, that Buyer and Seller shall use commercially reasonable
efforts to (i) minimize the amount of Taxes and Seller Losses resulting
from a failure of the transactions described above to constitute a
Qualified Stock Purchase and to seek the largest Tax refunds to which they
are entitled in light of the facts and circumstances and (ii) minimize the
amount of Seller Losses resulting from or arising out of any failure of
Buyer or PennCorp to perform any covenant or agreement hereunder or fulfill
any other obligation in respect thereto. Notwithstanding anything to the
contrary contained herein, neither Buyer nor PennCorp shall have any
liability under this Agreement if the transactions contemplated hereby are
not consummated due to (1) failure of the condition set forth in Section
3.2.9 hereof to have been satisfied or (2) a willful breach by Seller or
any of the Selling Subsidiaries of any of their representations,
warranties, covenants or agreements, which prevents Buyer from consummating
the transactions contemplated by this Agreement, in which event Buyer shall
be entitled to return of the Buyer's Deposit immediately by wire transfer
of immediately available funds.
10.2 Severability. If any provision of this Agreement is held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the provisions of this Agreement shall remain in full force
and effect. The parties shall endeavor in good faith negotiations to
replace any invalid, illegal or, unenforceable provision with a valid,
legal and enforceable provision, the economic effect of which comes as
close as possible to that of the invalid, illegal or unenforceable
provision.
10.3 Agreement; No Third-Party Beneficiaries. This Agreement,
together with those certain letters of even date herewith executed by Buyer
and Seller discussing various matters relevant hereto, and the other
documents and instruments referred to herein (a) constitutes the entire
agreement and understanding and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to
the subject matter hereof, and (b) except as otherwise expressly specified
herein, are not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder. The only representations and
warranties made by the parties hereto with respect to the subject matter
hereof are the representations and warranties contained in this Agreement.
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10.4 Expenses. Except as otherwise specifically provided for in
this Agreement, Seller and the Selling Subsidiaries, on the one hand, and
Buyer on the other hand, shall bear their respective expenses, costs and
fees (including attorneys', auditors' and financing commitment fees) in
connection with the transactions contemplated hereby, including the
preparation, execution and delivery of this Agreement and the Related
Agreements and compliance herewith and therewith, whether or not the
transactions contemplated hereby shall be consummated.
10.5 Assignment. This Agreement shall not be assignable or
otherwise transferable by any party hereto without the prior written
consent of the other parties hereto, and any purported assignment or other
transfer without such consent shall be void and unenforceable; provided,
that Buyer may assign this Agreement to any Subsidiary of Buyer, or to any
lender to Buyer or any Subsidiary or Affiliate thereof as security for
obligations to such lender, and provided, further, that no assignment to
any such lender shall in any way affect Buyer's obligations or liabilities
under this Agreement.
10.6 Notices. Any notice, demand, election, request, consent or
other communication required or permitted to be given hereunder shall be in
writing and shall be effective (a) when personally delivered or delivered
by telecopy on a Business Day during normal business hours (at the place of
receipt) at the address or number designated below or (b) on the second
Business Day following the date of mailing by overnight courier, fully
prepaid, addressed to such address, whichever shall first occur. The
addresses for such communications shall be:
If to Seller:
I.C.H. Corporation
500 North Akard, 12th Floor
Dallas, Texas 75201
Attention: Daniel B. Gail, Executive Vice President
and General Counsel
Telecopy: (214) 954-7717
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with a copy to:
Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75201
Attention: Edward A. Petersen, Esq.
Telecopy: (214) 745-5390
If to Buyer or to SWFSC:
Southwestern Financial Corporation
3 Bethesda Metro Center, Suite 1600
Bethesda, Maryland 20814
Attention: Steven W. Fickes
Telecopy: (301) 365-4774
with a copy to:
Weil, Gotshal & Manges
100 Crescent Court, Suite 1300
Dallas, Texas 75201-6950
Attention: Jeremy W. Dickens, Esq.
Telecopy: (214) 746-7777
If to PennCorp:
PennCorp Financial Group, Inc.
745 Fifth Avenue, 5th Floor
New York, New York 10151
Attention: Steven W. Fickes
Telecopy: (212) 758-5442
with a copy to:
PennCorp Financial, Inc.
1001 Wade Avenue
Raleigh, North Carolina 27605
Attention: Scott D. Silverman, Esq.
Telecopy: (919) 831-8409
with a copy to:
Weil, Gotshal & Manges
100 Crescent Court, Suite 1300
Dallas, Texas 75201-6950
Attention: Jeremy W. Dickens, Esq.
Telecopy: (214) 746-7777
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Any party hereto may from time to time change its address for
communications under this Section 10.6 by giving at least 5 days' notice of
such changed address to the other party hereto.
10.7 Amendments and Waivers. This Agreement may not be amended,
supplemented or discharged, and none of its provisions may be modified,
except expressly by an instrument in writing signed by the party to be
charged. The parties hereto may amend this Agreement without notice to or
the consent of any third party. Any term or provision of this Agreement
may be waived, but only in writing by the party which is entitled to the
benefit of that provision. No waiver by any party of any default with
respect to any provision, condition or requirement hereof shall be deemed
to be a continuing waiver in the future thereof or a waiver of any other
provision, condition or requirement hereof; nor shall any delay or omission
of any party to exercise any right hereunder in any manner impair the
exercise of any such right accruing to it thereafter.
10.8 Counterparts. This Agreement may be executed in one or more
counterparts, which together shall constitute but one instrument. It shall
not be necessary for each party to sign each counterpart so long as each
party has signed at least one counterpart.
10.9 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
heirs, successors and permitted assigns.
10.10 Interpretation. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
10.11 Schedules. The Schedules to this Agreement form an integral
part hereof. Capitalized terms defined in one Schedule are used as so
defined in all Schedules (unless the context requires otherwise), and
capitalized terms used in the Schedules without definition are used as
defined in this Agreement. The fact that any matter is disclosed in any
Schedule shall not be construed to mean that such disclosure is required by
this Agreement, including, without limitation, in order to render any
representation or warranty true or correct or in order to permit any action
or
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event to take place consistent with any covenant or agreement.
10.12 GOVERNING LAW. (a) THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.
(b) THE PARTIES SUBMIT TO THE EXCLUSIVE JURISDICTION OF
THE BANKRUPTCY COURT AS CONTEMPLATED BY THE ORDER REFERRED TO IN SECTION
3.1.2.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF OR RELATING TO THIS AGREEMENT, OR THE BREACH, TERMINATION OR
VALIDITY OF THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO
REPRESENTATIVE, AGENT OR ATTORNEY OR ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH
SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH SUCH PARTY HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.12.
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IN WITNESS WHEREOF, each of the parties hereto has duly
executed this Agreement as of the date first above written.
I.C.H. CORPORATION
By: /s/Glenn H. Gettier, Jr.
------------------------
Name: Glenn H. Gettier, Jr.
Title: Chairman and Chief, Executive Officer
SWL HOLDING CORPORATION
By: /s/ Daniel B. Gail
------------------
Name: Daniel B. Gail
Title: Executive Vice President
FACILITIES MANAGEMENT INSTALLATION, INC.
By: /s/Daniel B. Gail
-----------------
Name: Daniel B. Gail
Title: Executive Vice President
CARE FINANCIAL CORPORATION
By: /s/Daniel B. Gail
-----------------
Name: Daniel B. Gail
Title: Executive Vice President
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SOUTHWESTERN FINANCIAL CORPORATION
By: /s/Scott D. Silverman
---------------------
Name: Scott D. Silverman
Title: Senior Vice President and
General Counsel
SOUTHWESTERN FINANCIAL SERVICES CORPORATION
By: /s/Scott D. Silverman
---------------------
Name: Scott D. Silverman
Title: Senior Vice President
PENNCORP FINANCIAL GROUP, INC.
By: /s/Scott D. Silverman
---------------------
Name: Scott D. Silverman
Title: Senior Vice President, General Counsel
and Secretary
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SOUTHWESTERN FINANCIAL CORPORATION
AND
U.S. TRUST COMPANY OF TEXAS, N.A., Trustee
INDENTURE
Dated December 14, 1995
_________________
$40,000,000
CONVERTIBLE SUBORDINATED RESET NOTES DUE 2005<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Terms Defined . . . . . . . . . . . . . . . . . 1
ARTICLE II
ISSUE, EXECUTION, FORM AND
REGISTRATION OF SECURITIES
SECTION 2.1 Authentication and Delivery of Securities . . . . . . . 11
SECTION 2.2 Execution of Securities . . . . . . . . . . . . . . . . 11
SECTION 2.3 Certificate of Authentication . . . . . . . . . . . . . 12
SECTION 2.4 Form, Denomination and Date of Securities; Payments of
Interest . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.5 Registration, Transfer and Exchange . . . . . . . . . . 13
SECTION 2.6 Mutilated, Defaced, Destroyed, Lost and Stolen
Securities . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.7 CUSIP Number . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.8 Cancellation of Securities; Destruction Thereof . . . . 16
SECTION 2.9 Temporary Securities . . . . . . . . . . . . . . . . . 16
ARTICLE III
COVENANTS OF
THE ISSUER
SECTION 3.1 Payment of Principal and Interest . . . . . . . . . . . 17
SECTION 3.2 Offices for Payments, etc. . . . . . . . . . . . . . . 17
SECTION 3.3 Appointment to Fill a Vacancy in Office of Trustee . . 18
SECTION 3.4 Paying Agents . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.8 Certificate to Trustee . . . . . . . . . . . . . . . . 19
SECTION 3.9 Securityholders' Lists . . . . . . . . . . . . . . . . 19
SECTION 3.10 Reports by the Issuer . . . . . . . . . . . . . . . . . 20
SECTION 3.11 Offer to Purchase; Interest Rate Reset . . . . . . . . 20
SECTION 3.12 Interest Payment Reserve . . . . . . . . . . . . . . . 21
SECTION 3.13 Waiver of Stay, Extension or Usury Laws . . . . . . . . 22
ARTICLE IV
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT
SECTION 4.1 Event of Default Defined; Acceleration of Maturity;
Waiver of Default . . . . . . . . . . . . . . . . . . . 22
SECTION 4.2 Collection of Indebtedness by Trustee; Trustee May
Prove Indebtedness . . . . . . . . . . . . . . . . . . 24
SECTION 4.3 Application of Proceeds . . . . . . . . . . . . . . . . 26
i<PAGE>
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SECTION 4.4 Suits for Enforcement . . . . . . . . . . . . . . . . . 27
SECTION 4.5 Restoration of Rights on Abandonment of Proceedings . . 27
SECTION 4.6 Limitations on Suits by Securityholders . . . . . . . . 28
SECTION 4.7 Powers and Remedies Cumulative: Delay or Omission Not
Waiver of Default . . . . . . . . . . . . . . . . . . . 28
SECTION 4.8 Control by Securityholders . . . . . . . . . . . . . . 29
SECTION 4.9 Waiver of Past Defaults . . . . . . . . . . . . . . . . 29
SECTION 4.10 Unconditional Right of Holders to Receive Payments . . 30
ARTICLE V
CONCERNING THE TRUSTEE
SECTION 5.1 Duties and Responsibilities of the Trustee; During
Default; Prior to Default . . . . . . . . . . . . . . . 30
SECTION 5.2 Certain Rights of the Trustee . . . . . . . . . . . . . 31
SECTION 5.3 Trustee Not Responsible for Recitals, Disposition of
Securities or Application of Proceeds Thereof . . . . . 32
SECTION 5.4 Trustee and Agents May Hold Securities; Collections,
etc. . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 5.5 Moneys Held by Trustee . . . . . . . . . . . . . . . . 33
SECTION 5.6 Compensation and Indemnification of Trustee and Its
Prior Claim . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 5.7 Right of Trustee to Rely on Officers' Certificate, etc. 34
SECTION 5.8 Persons Eligible for Appointment as Trustee . . . . . . 34
SECTION 5.9 Resignation and Removal; Appointment of Successor
Trustee . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 5.10 Acceptance of Appointment by Successor Trustee . . . . 35
SECTION 5.11 Merger, Conversion, Consolidation or Succession to
Business of Trustee . . . . . . . . . . . . . . . . . . 36
SECTION 5.12 Reports by the Trustee . . . . . . . . . . . . . . . . 36
ARTICLE VI
CONCERNING THE SECURITYHOLDERS
SECTION 6.1 Evidence of Action Taken by Securityholders . . . . . . 37
SECTION 6.2 Proof of Execution of Instruments and of Holding of
Securities; Record Date . . . . . . . . . . . . . . . . 37
SECTION 6.3 Holders to be Treated as Owners . . . . . . . . . . . . 37
SECTION 6.4 Securities Owned by Issuer Deemed Not Outstanding . . . 37
SECTION 6.5 Right of Revocation of Action Taken . . . . . . . . . . 38
ARTICLE VII
SUPPLEMENTAL INDENTURES
SECTION 7.1 Supplemental Indentures Without Consent of
Securityholders . . . . . . . . . . . . . . . . . . . . 39
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SECTION 7.2 Supplemental Indentures With Consent of Securityholders. 40
SECTION 7.3 Effect of Supplemental Indenture . . . . . . . . . . . 41
SECTION 7.4 Documents to Be Given to Trustee . . . . . . . . . . . 41
SECTION 7.5 Notation on Securities in Respect of Supplemental
Indentures . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE VIII
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
SECTION 8.1 When Issuer May Merge, Etc. . . . . . . . . . . . . . . 42
SECTION 8.2 Successor Corporation Substituted . . . . . . . . . . . 42
SECTION 8.3 Opinion of Counsel to Trustee . . . . . . . . . . . . . 43
ARTICLE IX
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS
SECTION 9.1 Satisfaction and Discharge of Indenture . . . . . . . . 43
SECTION 9.2 Application by Trustee of Funds Deposited for Payment
of Securities . . . . . . . . . . . . . . . . . . . . . 45
SECTION 9.3 Repayment of Moneys Held by Paying Agent . . . . . . . 45
SECTION 9.4 Return of Moneys Held by Trustee and Paying Agent
Unclaimed for Three Years . . . . . . . . . . . . . . . 45
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1 Incorporators, Stockholders, Officers and Directors of
Issuer Exempt from Individual Liability . . . . . . . . 46
SECTION 10.2 Provisions of Indenture for the Sole Benefit of Parties
and Securityholders . . . . . . . . . . . . . . . . . . 46
SECTION 10.3 Successors and Assigns of Issuer Bound by Indenture . . 46
SECTION 10.4 Notices and Demands on Issuer, Trustee and
Securityholders . . . . . . . . . . . . . . . . . . . . 46
SECTION 10.5 Officers' Certificates and Opinions of Counsel;
Statements to Be Contained Therein . . . . . . . . . . 47
SECTION 10.6 Payments Due on Saturdays, Sundays and Holidays . . . . 48
SECTION 10.7 Conflict of Any Provision of Indenture with Trust
Indenture Act of 1939 . . . . . . . . . . . . . . . . . 48
SECTION 10.8 TEXAS LAW TO GOVERN . . . . . . . . . . . . . . . . . . 48
SECTION 10.9 Counterparts . . . . . . . . . . . . . . . . . . . . . 49
SECTION 10.10 Effect of Headings . . . . . . . . . . . . . . . . . . 49
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ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.1 Right of Optional Redemption; Prices . . . . . . . . . 49
SECTION 11.2 Notice of Redemption; Partial Redemptions . . . . . . . 49
SECTION 11.3 Payment of Securities Called for Redemption . . . . . . 50
SECTION 11.4 Exclusion of Certain Securities from Eligibility for
Selection for Redemption . . . . . . . . . . . . . . . 51
ARTICLE XII
SUBORDINATION OF SECURITIES
SECTION 12.1 Securities Subordinated to Senior Indebtedness . . . . 51
SECTION 12.2 No Payment on Securities in Certain Circumstances . . . 51
SECTION 12.3 Payment Over of Proceeds upon Dissolution, Etc. . . . . 53
SECTION 12.4 Payments May Be Paid Prior to Dissolution . . . . . . . 54
SECTION 12.5 Subrogation . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 12.6 Obligations of the Issuer Unconditional . . . . . . . . 55
SECTION 12.7 Notice to Trustee . . . . . . . . . . . . . . . . . . . 55
SECTION 12.8 Reliance on Judicial Order or Certificate of
Liquidating Agent . . . . . . . . . . . . . . . . . . . 56
SECTION 12.9 Trustee's Relation to Senior Indebtedness . . . . . . . 56
SECTION 12.10 Subordination Rights Not Impaired by Acts or Omissions
of the Issuer or Holders of Senior Indebtedness . . . . 57
SECTION 12.11 Securityholders Authorize Trustee To Effectuate
Subordination of Securities . . . . . . . . . . . . . . 57
SECTION 12.12 This Article XII Not To Prevent Events of Default . . . 57
SECTION 12.13 Trustee's Compensation Not Prejudiced . . . . . . . . . 57
ARTICLE XIII
CONVERSION OF SECURITIES
SECTION 13.1 Right of Conversion . . . . . . . . . . . . . . . . . . 58
SECTION 13.2 Issuance of Class A Common Stock and Class B Non-Voting
Common Stock; Time of Conversion . . . . . . . . . . . 59
SECTION 13.3 No Adjustments in Respect of Interest or Dividends . . 59
SECTION 13.4 Taxes and Charges . . . . . . . . . . . . . . . . . . . 60
SECTION 13.5 Trustee and Conversion Agents Not Liable . . . . . . . 60
SECTION 13.6 Fractional Shares . . . . . . . . . . . . . . . . . . . 60
SECTION 13.7 Shares to be Reserved . . . . . . . . . . . . . . . . . 61
SECTION 13.8 Adjustment of Conversion Price . . . . . . . . . . . . 61
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THIS INDENTURE, dated as of December 14, 1995, is entered into
between Southwestern Financial Corporation, a Delaware corporation (the
"Issuer"), and U.S. Trust Company of Texas, N.A., a national banking
association (the "Trustee").
W I T N E S S E T H :
WHEREAS, the Issuer has duly authorized the issue of its
Convertible Subordinated Reset Notes due 2005 (the "Securities") and, to
provide, among other things, for the authentication, delivery and
administration thereof, the Issuer has duly authorized the execution and
delivery of this Indenture; and
WHEREAS, all things necessary to make the Securities, when
executed by the Issuer and authenticated and delivered by the Trustee as in
this Indenture provided, the valid, binding and legal obligations of the
Issuer, and to constitute these presents a valid indenture and agreement
according to its terms, have been done;
NOW, THEREFORE:
In consideration of the premises and the purchase of the
Securities by the holders thereof, the Issuer and the Trustee mutually
covenant and agree for the equal and proportionate benefit of the
respective holders from time to time of the Securities as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Terms Defined. The following terms
(except as otherwise expressly provided or unless the context otherwise
clearly requires) for all purposes of this Indenture and of any indenture
supplemental hereto shall have the respective meanings specified in this
Section. All other terms used in this Indenture which are defined in the
Trust Indenture Act of 1939 or the definitions of which in the Securities
Act of 1933 are referred to in the Trust Indenture Act of 1939 (except as
herein otherwise expressly provided or unless the context otherwise clearly
requires), shall have the meanings assigned to such terms in said Trust
Indenture Act and in said Securities Act as in force at the date of this
Indenture. All accounting terms used herein and not expressly defined
shall have the meanings given to them in accordance with GAAP (as defined
herein). The words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision. The terms defined in this Article
include the plural as well as the singular.
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"Acceleration Notice" has the meaning set forth in Section 4.1
hereof.
"Affiliate" means, with respect to any Person, any other
Person that directly or indirectly controls or is controlled by or is under
direct or indirect common control with such specified Person. For purposes
of this definition, "control" (including, with correlative meanings, the
terms "controlling," "controlled by" and "under common control with"), as
used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management
or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise; provided, however, that the term
"Affiliate," when used with respect to the Issuer, shall not include its
Wholly Owned Subsidiaries.
"Board of Directors" means either the Board of Directors of
the Issuer or any committee of such Board duly authorized to act hereunder.
"Business Day" means a day which in New York, New York is
neither a legal holiday nor a day on which banking institutions are
authorized by law or regulation to close.
"Capital Lease Obligation" means, at any time any
determination thereof is to be made, the amount of the liability in respect
of a lease that would at such time be required to be capitalized on a
balance sheet prepared in accordance with GAAP.
"Capital Stock" of any Person means any and all shares,
interests, participations, or other equivalents (however designated) of
such Person's capital stock, and any warrants, options or similar rights to
acquire such capital stock.
"Cash Equivalents" means (i) marketable direct obligations
issued by, or unconditionally guaranteed by, the United States Government
or issued by any agency thereof and backed by the full faith and credit of
the United States, in each case maturing within one year from the date of
acquisition thereof; (ii) marketable direct obligations issued by any state
of the United States of America or any political subdivision of any such
state or any public instrumentality thereof maturing within one year from
the date of acquisition thereof and, at the time of acquisition, having one
of the two highest ratings obtainable from either Standard & Poor's
Corporation or Moody's Investors Service, Inc.; (iii) commercial paper
maturing no more than one year from the date of creation thereof and, at
the time of acquisition, having a rating of at least A-1 from Investors
Service, Inc.; (iv) certificates of deposit or banker's acceptances
maturing within one year from the date of acquisition thereof issued by any
commercial bank organized under the laws of the United States of America or
any state thereof or the District of Columbia or any U.S. branch of a
foreign bank having at the date of acquisition thereof combined capital and
surplus of not less than $200,000,000; (v) repurchase obligations with a
term of not more than seven days for underlying securities of the types
described in clause (i)
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above entered into with any bank meeting the qualifications specified in
clause (iv) above; and (vi) investments in money market funds which invest
substantially all their assets in securities of the types described in
clauses (i) through (v) above, including any of the UST Master Funds the
assets of which are invested entirely in securities of the types described
in clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the
following events: (i) a majority of the Board of Directors of the Issuer
shall consist of Persons who are not Continuing Directors; or (ii) the
acquisition by any Person or group of related Persons for purposes of
Section 13(d) of the Exchange Act (a "Group") (other than the Permitted
Holders) of the power, directly or indirectly, to vote or direct the voting
of securities having more than 50% of the ordinary voting power for the
election of directors of the Issuer.
"Class A Common Stock" means the Class A Common Stock, par
value $.01 per share, of the Company, and any class or series of Capital
Stock into which such Class A Common Stock thereafter may be changed.
"Class B Non-Voting Common Stock" means the Class B Non-Voting
Common Stock, par value $.01 per share, of the Company, and any class or
series of Capital Stock into which such Class B Non-Voting Common Stock
thereafter may be changed.
"Common Stock" means, with respect to any Person, any and all
shares, interests, participations and other equivalents (however
designated, whether voting or non-voting) of such Person's common stock or
common shares, whether now outstanding or issued after the date of this
Indenture, and includes, without limitation, all series and classes of such
common stock or common shares.
"Continuing Director" means, as of the date of determination,
any Person who (i) was a member of the Board of Directors of the Issuer on
the date of this Indenture, (ii) was nominated for election or elected to
the Board of Directors of the Issuer with the affirmative vote of a
majority of the Continuing Directors who are members of such Board of
Directors at the time of such nomination or election, or (iii) is a
representative of a Permitted Holder.
"Corporate Trust Office" means the office of the Trustee at
which the corporate trust business of the Trustee shall, at any particular
time, be administered, which office is, at the date as of which this
Indenture is dated, located at 2001 Ross Avenue, Suite 2700, Dallas,
Texas 75201-2936, Attention: Corporate Trust Administration.
"Credit Agreement" means the Credit Agreement, dated on or
about December 14, 1995, among the Issuer, the financial institutions
parties thereto as lenders from time to time and The First National Bank of
Chicago, as agent, together with the related
3<PAGE>
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documents thereto (including, without limitation, any guarantee agreements
and security documents), in each case as such agreements may be amended
(including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
by way of adding subsidiaries of the Issuer as additional borrowers or
guarantors thereunder) all or any portion of the Indebtedness under such
agreement or any successor or replacement agreement and whether by the same
or any other agent, lender or group of lenders.
"Debtor" shall mean any of I.C.H. Corporation, a Delaware
corporation, SWL Holding Corporation, a Delaware corporation, Care
Financial Corporation, a Delaware corporation, or Facilities Management
Installation, Inc., a Delaware corporation.
"Default" means any event that is or with the passage of time
or the giving of notice or both would be an Event of Default.
"Designated Senior Indebtedness" means (i) Indebtedness under
or in respect of the Credit Agreement and (ii) any other Indebtedness
constituting Senior Indebtedness which, at the time of determination, has
an aggregate principal amount of at least $10,000,000 and is specifically
designated in the instrument evidencing such Senior Indebtedness as
"Designated Senior Indebtedness" by the Company.
"Disposition" shall mean (i) a merger, consolidation or other
business combination in which the Issuer is a surviving entity and the
Issuer's stockholders receive cash or non-cash consideration in exchange
for or in respect of their shares of Capital Stock of the Issuer or (ii)
the sale, lease, conveyance, transfer or other disposition (other than to
any wholly-owned direct or indirect Subsidiary) in any single transaction
or series of related transactions (including a sale and leaseback
transaction) of all or substantially all of the assets of the Issuer, to
any Person or Group other than the Permitted Holders.
"Distribution" means the sale of the Securities to holders of
claims against and/or interests in one or more of the estates of the
Debtors in exchange for such claims or interests in accordance with a plan
of reorganization with respect to the Debtors' jointly administered cases
under Chapter 11 of the United States Bankruptcy Code that has been
confirmed by the United States Bankruptcy Court for the Northern District
of Texas, Dallas Division, has not been stayed pending appeal and becomes
effective in accordance with its terms or an order of such Bankruptcy
Court.
"Disqualified Capital Stock" means any Capital Stock which, by
its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event, matures
(excluding any maturity as the result of an optional redemption by the
issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund
obligation or
4<PAGE>
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otherwise, or is redeemable at the sole option of the holder thereof, in
whole or in part, on or prior to the final Maturity of the Securities.
"Distribution Effective Date" shall mean the date upon which
at least 75% of the aggregate principal amount of the outstanding
Securities shall have been distributed to holders of claims against and/or
interests in one or more of the estates of the Debtors in exchange for such
claims or interests in accordance with a plan of reorganization with
respect to the Debtors' jointly administered cases under Chapter 11 of the
United States Bankruptcy Code that has been confirmed by the United States
Bankruptcy Court for the Northern District of Texas, Dallas Division, has
not been stayed pending appeal and becomes effective in accordance with its
terms or an order of such Bankruptcy Court.
"Effective Registration" means that the Issuer shall have
filed and caused to become effective under the Securities Act a
registration statement for the sale of the Securities by the Holders.
"Event of Default" means any event or condition specified as
such in Section 4.1 that shall have continued for the period of time, if
any, therein designated.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"GAAP" or "generally accepted accounting principles" means
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting
profession, which are in effect on the date of this Indenture.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any
Indebtedness of any other Person and, without limiting the generality of
the foregoing, any obligation, direct or indirect, contingent or otherwise,
of such Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness of such other Person (whether
arising by virtue of participation arrangements, the grant of any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind, to
purchase assets, goods, securities or services, to take-or-pay, or to
maintain financial statement condition or otherwise) or (ii) entered into
for the purpose of assuring the obligor of such Indebtedness in any other
manner of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided that the term "Guarantee"
shall not include endorsements for collection or deposit in the ordinary
course of business. The
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amount of a Guarantee shall be deemed to be the maximum amount of the
Indebtedness guaranteed for which the guarantor could be held liable under
such Guarantee.
"Holder", "holder of Securities", "Securityholder" or other
similar terms means the registered holder of any Security.
"Indebtedness" means, with respect to any Person, (a) any
liability of such Person (i) for borrowed money under any senior bank
facility or publicly-offered debt of such Person, or under any
reimbursement obligation relating to a letter of credit, bankers'
acceptance or note purchase facility, whether or not evidenced by a bond,
note, debenture or similar instrument (including a purchase money
obligation), or for the balance deferred and unpaid of the purchase price
for any property (but not any such balance that constitutes a trade payable
in the ordinary course of business), or (ii) for the payment of money
relating to a lease that is required to be classified as a Capital Lease
Obligation in accordance with GAAP; and (b) any liability of others
described in clause (a) that such Person has Guaranteed, that is recourse
to such Person or that is otherwise the legal liability of such Person.
"Indenture" means this instrument as originally executed and
delivered or, if amended or supplemented as herein provided, as so amended
or supplemented.
"Interest Payment Date" means the dates specified in the
Security as the fixed date on which an installment of interest on the
Securities is due and payable.
"Interest Swap Obligations" means the obligations of any
Person under any interest rate swap agreement, interest rate cap agreement
or other financial agreement or arrangement designed to protect the Issuer
or any of its Subsidiaries against fluctuations in interest rates.
"Issue Date" means December 14, 1995.
"Issuer" means Southwestern Financial Corporation, a Delaware
corporation, and, subject to Article Eight, its successors and assigns.
"Maturity," when used with respect to any Security, means the
date on which the principal of such Security becomes due and payable as
therein or herein provided, whether at the date specified in such Security
as the fixed date on which the principal of such Security is due and
payable or by declaration of acceleration, call for redemption or
otherwise.
"Non-Surviving Combination" shall mean any merger,
consolidation or other business combination by the Issuer with one or more
other entities in a transaction in which the Issuer is not the surviving
entity; provided that any such merger, consolidation or other business
6<PAGE>
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combination shall not be deemed a Non-Surviving Combination if the holders
of the outstanding Common Stock of the Issuer immediately prior to such
transaction shall hold at least a majority of the outstanding Voting Stock
of the surviving entity immediately after giving effect to such merger,
consolidation or other business combination.
"Obligations" means all obligations for principal, premium,
interest, penalties, fees, indemnifications, reimbursements, damages and
other liabilities payable under the documentation governing, or otherwise
relating to, any Indebtedness.
"Officers' Certificate" means a certificate signed by the
Chairman of the Board of Directors or the President or any Vice President
(whether or not designated by a number or numbers or a word or words added
before or after the title "Vice President") and by the Treasurer or the
Secretary or any Assistant Secretary of the Issuer and delivered to the
Trustee. Each such certificate shall comply with Section 314 of the Trust
Indenture Act of 1939 and include the statements provided for in Section
10.5.
"Opinion of Counsel" means an opinion in writing signed by
legal counsel who may be an employee of or counsel to the Issuer or who may
be other counsel satisfactory to the Trustee. Each such opinion shall
comply with Section 314 of the Trust Indenture Act of 1939 and include the
statements provided for in Section 10.5, if and to the extent required
hereby.
"outstanding", when used with reference to Securities, shall,
subject to the provisions of Section 6.4, mean, as of any particular time,
all Securities authenticated and delivered by the Trustee under this
Indenture, except
(a) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(b) Securities, or portions thereof, for the payment or
redemption of which moneys in the necessary amount shall have been
deposited in trust with the Trustee or with any paying agent (other than
the Issuer) or shall have been set aside, segregated and held in trust by
the Issuer (if the Issuer shall act as its own paying agent), provided
that if such Securities are to be redeemed prior to the maturity thereof,
notice of such redemption shall have been given as herein provided, or
provision satisfactory to the Trustee shall have been made for giving
such notice; and
(c) Securities in substitution for which other Securities
shall have been authenticated and delivered, or which shall have been
paid, pursuant to the terms of Section 2.6 (unless proof satisfactory to
the Trustee is presented that any of such Securities is held by a person
in whose hands such Security is a legal, valid and binding obligation of
the Issuer).
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"Permitted Holders" means PennCorp Southwest, Inc., a Delaware
corporation, Knightsbridge Capital Fund I, L.P., a Delaware limited
partnership, or any of their respective Affiliates (including, in the case
of Knightsbridge Capital Fund I, L.P., David J. Stone and Steven W. Fickes
and any Person controlled by either or both of them).
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust or unincorporated
organization (including any subdivision or ongoing business of any such
entity or substantially all the assets of any such entity, subdivision or
business).
"principal", wherever used with reference to the Securities or
any Security or any portion thereof, shall be deemed to include "and
premium, if any".
"property" of any Person means all types of real, personal,
tangible, intangible or mixed property owned by such Person whether or not
included in the most recent consolidated balance sheet of such Person under
generally accepted accounting principles.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Qualified Initial Public Offering" means an underwritten
public offering of Common Stock of the Issuer generating gross proceeds to
the Issuer of at least $50.0 million in cash pursuant to an effective
registration statement under the Securities Act which is the initial public
offering of such Common Stock.
"Repurchase Offer" shall have the meaning set forth in Section
3.11 hereof.
"Repurchase Payment" shall have the meaning set forth in
Section 3.11 hereof.
"Repurchase Payment Date" shall have the meaning set forth in
Section 3.11 hereof.
"Representative" for any issue of Indebtedness shall mean the
Person acting as agent, trustee or in a similar representative capacity for
the holders of such Indebtedness, provided that if, and for so long as, any
issue of Indebtedness lacks such a representative, then the Representative
for such issue of Indebtedness shall at all such times constitute the
holders of a majority in outstanding principal amount of the respective
issue of Indebtedness.
"Sales Price" means the closing sales price of the relevant
class of Common Stock (or if no sale price is reported, the average of the
high and low bid prices) as reported by the principal national or regional
stock exchange on which such class of Common Stock is listed or,
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if such class of Common Stock is not listed on a national or regional stock
exchange, as reported by the Nasdaq Stock Market or, if not so reported,
then the average of the bid and asked prices for such class of Common Stock
as reported by the National Quotation Bureau Incorporated or, if not so
reported, the fair market value per share for such class of Common Stock as
determined in good faith by the Board of Directors.
"SEC" means the Securities and Exchange Commission or any
successor agency thereto.
"Security" or "Securities" means the securities described in
the first recital hereof and as described herein and on the forms
contemplated by Exhibit A hereto and authenticated and issued under this
Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means (i) at any time prior to the
consummation of the Repurchase Offer or a Qualified Initial Public
Offering, the principal of, premium, if any, interest (including any
interest accruing subsequent to the filing of a petition of bankruptcy at a
rate provided for in the documentation with respect thereto, whether or not
such interest is an allowed claim under applicable law) on, and all other
amounts owing in respect of, and all monetary obligations of every nature
under, (x) the Credit Agreement, including without limitation, obligations
to pay principal and interest, reimbursement obligations under letters of
credit, fees, expenses and indemnities, (y) all Interest Swap Obligations
and (z) any Indebtedness incurred in an underwritten public offering to
refinance any portion of the Credit Agreement, including all accrued and
unpaid interest thereon, prepayment penalties and premiums, and all other
amounts arising in respect thereof, and (ii) at any time after the
consummation of the Repurchase Offer or a Qualified Initial Public
Offering, any Indebtedness of the Issuer (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided
for in the documentation with respect thereto, whether or not such interest
is an allowed claim under applicable law), whether outstanding on the Issue
Date or thereafter created, incurred or assumed, unless, in the case of any
particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Securities;
provided, however, that notwithstanding anything hereinabove to the
contrary, Senior Indebtedness shall not include any of the following
amounts (whether or not constituting Indebtedness as defined in this
Indenture): (i) any Indebtedness of the Issuer to a Subsidiary of the
Issuer; (ii) Indebtedness and other amounts owing to trade creditors
incurred in connection with obtaining goods, materials or services; and
(iii) any liability for federal, state, local or other taxes owed or owing
by the Issuer.
"Significant Subsidiary" shall have the meaning assigned to
that term under Regulation S-X of the Securities Act, as in effect on the
Issue Date.
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"Subsidiary" means, with respect to any Person, any
corporation, association or other business entity of which more than 50% of
the total voting power of shares of Capital Stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly
or indirectly, by such Person or one or more of the other Subsidiaries of
such Person or a combination thereof.
"Trigger Event" shall mean any of the following events: (i) a
Qualified Initial Public Offering; (ii) a Change of Control; (iii) a
Disposition; or (iv) a Non-Surviving Combination.
"Trust Indenture Act of 1939" means the Trust Indenture Act of
1939 as in force at the date as of which this Indenture was originally
executed, except until qualification of the Indenture under the Trust
Indenture Act of 1939, then as of the date of such qualification, and
except to the extent that any subsequent amendment of the Trust Indenture
Act of 1939 shall apply retroactively to this Indenture.
"Trustee" means the entity identified as "Trustee" in the
first paragraph hereof and, subject to the provisions of Article Five,
shall also include any successor trustee.
"U.S. Government Obligations" means direct obligations of the
United States of America, or any agency or instrumentality thereof, for the
payment of which the good faith and credit of the United States of America
is pledged.
"Voting Stock" means, with respect to any Person, one or more
classes of the Capital Stock of such Person entitled to vote under ordinary
circumstances in the election of directors, managers or trustees of such
Person.
"Warrants" means the warrants to purchase up to 1,785,000
shares of Class A Common Stock issued on the Issue Date.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the
then outstanding principal amount of such Indebtedness into (b) the total
of the product obtained by multiplying (x) the amount of each then
remaining installment, sinking fund, serial maturity or other required
payments of principal, including payment at final maturity, in respect
thereof, by (y) the number of years (calculated to the nearest one-twelfth)
that will elapse between such date and the making of such payment.
"Wholly Owned Subsidiary" means, with respect to any Person, a
Subsidiary of such Person, all of the outstanding shares of Capital Stock
of which (other than directors' qualifying shares) are at the time directly
or indirectly owned by such Person or by one or more
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Wholly Owned Subsidiaries of such Person or by such Person and one or more
of its Wholly Owned Subsidiaries.
ARTICLE II
ISSUE, EXECUTION, FORM AND
REGISTRATION OF SECURITIES
SECTION 2.1 Authentication and Delivery of Securities. Upon
the execution and delivery of this Indenture, or from time to time
thereafter, Securities in an aggregate principal amount not to exceed
$40,000,000 (except as otherwise provided in Section 2.6) may be executed
by the Issuer and delivered to the Trustee for authentication, and the
Trustee shall thereupon authenticate and deliver said Securities to or upon
the written order of the Issuer, signed by both (a) its Chairman of the
Board of Directors, or any Vice Chairman of the Board of Directors, or its
President or any Vice President (whether or not designated by a number or
numbers or a word or words added before or after the title "Vice
President") and (b) by its Treasurer or any Assistant Treasurer or its
Secretary or any Assistant Secretary without any further action by the
Issuer.
SECTION 2.2 Execution of Securities. The Securities shall be
signed on behalf of the Issuer by both (a) its Chairman of the Board of
Directors or any Vice Chairman of the Board of Directors or its President
or any Vice President (whether or not designated by a number or numbers or
a word or words added before or after the title "Vice President") and
(b) by its Treasurer or any Assistant Treasurer or its Secretary or any
Assistant Secretary, under its corporate seal which may, but need not, be
attested. Such signatures may be the manual or facsimile signatures of the
present or any future such officers. The seal of the Issuer may be in the
form of a facsimile thereof and may be impressed, affixed, imprinted or
otherwise reproduced on the Securities. Typographical and other minor
errors or defects in any such reproduction of the seal or any such
signature shall not affect the validity or enforceability of any Security
which has been duly authenticated and delivered by the Trustee.
In case any officer of the Issuer who shall have signed any of
the Securities shall cease to be such officer before the Security so signed
shall be authenticated and delivered by the Trustee or disposed of by the
Issuer, such Security nevertheless may be authenticated and delivered or
disposed of as though the person who signed such Security had not ceased to
be such officer of the Issuer; and any Security may be signed on behalf of
the Issuer by such persons as, at the actual date of the execution of such
Security, shall be the proper officers of the Issuer, although at the date
of the execution and delivery of this Indenture any such person was not
such officer.
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SECTION 2.3 Certificate of Authentication. Only such
Securities as shall bear thereon a certificate of authentication
substantially in the form set forth on Exhibit A hereto, executed by the
Trustee by manual signature of one of its authorized officers, shall be
entitled to the benefits of this Indenture or be valid or obligatory for
any purpose. Such certificate by the Trustee upon any Security executed by
the Issuer shall be conclusive evidence that the Security so authenticated
has been duly authenticated and delivered hereunder and that the holder is
entitled to the benefits of this Indenture.
SECTION 2.4 Form, Denomination and Date of Securities;
Payments of Interest. (a) The Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A hereto,
which is part of this Indenture. The Securities shall be numbered,
lettered, or otherwise distinguished in such manner or in accordance with
such plans as the officers of the Issuer executing the same may determine
with the approval of the Trustee. Any of the Securities may be issued with
appropriate insertions, omissions, substitutions and variations, and may
have imprinted or otherwise reproduced thereon such legend or legends, not
inconsistent with the provisions of this Indenture, as may be required to
comply with any law or with any rules or regulations pursuant thereto, or
with the rules of any securities market in which the Securities are
admitted to trading, or to conform to general usage. All Securities shall
be otherwise substantially identical expect as to denomination and as
provided herein.
Each Security shall be dated the date of its authentication,
shall bear interest from the applicable date and shall be payable on the
dates specified on the face of the form of Security recited above.
The Person in whose name any Security is registered at the
close of business on any record date with respect to any Interest Payment
Date shall be entitled to receive the interest, if any, payable on such
Interest Payment Date notwithstanding any transfer or exchange of such
Security subsequent to the record date and prior to such Interest Payment
Date, except if and to the extent the Issuer shall default in the payment
of the interest due on such Interest Payment Date, in which case such
defaulted interest shall be paid to the Persons in whose names outstanding
Securities are registered at the close of business on a subsequent record
date (which shall be not less than five business days prior to the date of
payment of such defaulted interest) established by notice given by mail by
or on behalf of the Issuer to the holders of Securities not less than 15
days preceding such subsequent record date. The term "record date" as used
with respect to any Interest Payment Date (except a date for payment of
defaulted interest) shall mean if such Interest Payment Date is the first
day of a calendar month, the fifteenth day of the next preceding calendar
month and shall mean, if such interest payment date is the fifteenth day of
a calendar month, the first day of such calendar month, whether or not such
record date is a Business Day.
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(b) Securities shall be issued in the form of
certificated securities in definitive, fully registered form without
interest coupons. All certificated Securities shall be issuable in
denominations of $1,000.00 principal amount and any integral multiple
thereof.
(c) The Securities are being offered and sold by the
Issuer pursuant to the Purchase Agreement, dated as of December 1, 1995, by
and among I.C.H. Corporation, SWL Holding Corporation, Care Financial
Corporation, Facilities Management Installation, Inc., the Issuer,
Southwestern Financial Services Corp., and PennCorp Financial Group, Inc.
(the "Purchase Agreement"). The initial Holder of the Securities issued
pursuant to the Purchase Agreement will receive certificated Securities
bearing the "Restricted Securities Legend" set forth in the form of
Security attached hereto as Exhibit A ("Restricted Securities").
Securities issued under this Indenture shall bear the Restricted Securities
Legend unless removed in accordance with Section 2.5 hereof.
SECTION 2.5 Registration, Transfer and Exchange.
(a) The Issuer will keep at each office or agency to be
maintained for the purpose as provided in Section 3.2 a register or
registers in which, subject to such reasonable regulations as it may
prescribe, it will register, and will register the transfer of, Securities
as in this Article provided. Such register shall be in written form in the
English language or in any other form capable of being converted into such
form within a reasonable time. At all reasonable times such register or
registers shall be open for inspection by the Trustee.
Upon due presentation for registration of transfer of any
Security at each such office or agency, the Issuer shall execute and the
Trustee shall authenticate and deliver in the name of the transferee or
transferees a new Security or Securities in authorized denominations for a
like aggregate principal amount.
Any Security or Securities may be exchanged for a Security or
Securities in other authorized denominations, in an equal aggregate
principal amount. Securities to be exchanged shall be surrendered at each
office or agency to be maintained by the Issuer for the purpose as provided
in Section 3.2, and the Issuer shall execute and the Trustee shall
authenticate and deliver in exchange therefor the Security or Securities
which the Securityholder making the exchange shall be entitled to receive,
bearing numbers not contemporaneously outstanding.
All Securities presented for registration of transfer,
exchange, redemption or payment shall (if so required by the Issuer or the
Trustee) be duly endorsed by, or be accompanied by a written instrument or
instruments of transfer in form satisfactory to the Issuer and the Trustee
duly executed by, the holder or his attorney duly authorized in writing.
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The Issuer may require payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection with
any exchange or registration of transfer of Securities. No service charge
shall be made for any such transaction.
The Trustee shall not be required to exchange or register a
transfer of (a) any Securities for a period of 15 days next preceding the
first mailing of notice of redemption of Securities to be redeemed or
(b) any Securities selected, called or being called for redemption except,
in the case of any Security where public notice has been given that such
Security is to be redeemed in part, the portion thereof not so to be
redeemed.
All Securities issued upon any transfer or exchange of
Securities shall be valid obligations of the Issuer, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such transfer or exchange.
(b) If a Holder of a Restricted Security wishes at any
time to transfer such Restricted Security to a Person who wishes to take
delivery thereof in the form of a Restricted Security, such Holder may,
subject to the restrictions on transfer set forth herein and in such
Restricted Security, cause the exchange of such Restricted Security for one
or more Restricted Securities of any authorized denomination or
denominations and of the same aggregate principal amount. Upon receipt by
the Trustee of (1) such Restricted Security, duly endorsed as provided
herein, (2) instructions from such Holder directing the Trustee to
authenticate and deliver one or more Restricted Securities of the same
aggregate principal amount as the Restricted Security to be exchanged, such
instructions to contain the name or names of the designated transferee or
transferees, the authorized denomination or denominations of the Restricted
Securities to be so issued and appropriate delivery instructions, and (3)
if requested by the Issuer, an opinion of counsel to the transferor of such
Restricted Security, in substantially the form of Exhibit B hereto, and
such other certificates as the Issuer may reasonably request, then, upon
direction of the Issuer, the Trustee shall cancel or cause to be cancelled
such Restricted Security and, concurrently therewith, the Issuer shall
execute, and the Trustee shall authenticate and deliver, one or more
Restricted Securities of the same aggregate principal amount, in accordance
with the instructions referred to above.
(c) If Securities are issued upon the transfer, exchange
or replacement of Securities bearing the Restricted Securities Legend and
if a request is made to remove such Restricted Securities Legend, the
Restricted Securities Legend shall not be removed unless (i) there is
delivered to the Issuer and the Trustee such satisfactory evidence, which
may include an opinion of counsel reasonably satisfactory to the Issuer,
that neither the Restricted Securities Legend nor the restrictions on
transfer set forth therein are required to ensure that transfers thereof
comply with the provisions of the Securities Act or, with respect to
Restricted Securities, that such Securities are not "restricted" within the
meaning of Rule 144 under the Securities Act, (ii) there is an Effective
Registration with respect to the Securities then in effect and there is
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delivered to the Issuer and the Trustee satisfactory evidence that the
Security as to which the Restricted Securities Legend is sought to be
removed has been disposed of in accordance with the Effective Registration
or (iii) there is delivered to the Issuer and the Trustee satisfactory
evidence that the Security as to which the Restricted Securities Legend is
sought to be removed is to be transferred to the prospective Holder in
connection with a Distribution. Upon provision of such satisfactory
evidence in the case of each of clauses (i), (ii) or (iii), the Trustee, at
the direction of the Issuer, shall authenticate and deliver Securities that
do not bear the Restricted Securities Legend.
SECTION 2.6 Mutilated, Defaced, Destroyed, Lost and Stolen
Securities. In case any temporary or definitive Security shall become
mutilated, defaced or be apparently destroyed, lost or stolen, the Issuer
in its discretion may execute, and upon the written request of any officer
of the Issuer, the Trustee shall authenticate and deliver, a new Security,
bearing a number not contemporaneously outstanding, in exchange and
substitution for the mutilated or defaced Security, or in lieu of and
substitution for the Security so apparently destroyed, lost or stolen. In
every case the applicant for a substitute Security shall furnish to the
Issuer and to the Trustee and any agent of the Issuer or the Trustee such
security or indemnity as may be required by them to indemnify and defend
and to save each of them harmless and, in every case of destruction, loss
or theft evidence to their satisfaction of the apparent destruction, loss
or theft of such Security and of the ownership thereof.
Upon the issuance of any substitute Security, the Issuer may
require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected
therewith. In case any Security which has matured or is about to mature,
or has been called for redemption in full, shall become mutilated or
defaced or be apparently destroyed, lost or stolen, the Issuer may, instead
of issuing a substitute Security, pay or authorize the payment of the same
(without surrender thereof except in the case of a mutilated or defaced
Security), if the applicant for such payment shall furnish to the Issuer
and to the Trustee and any agent of the Issuer or the Trustee such security
or indemnity as any of them may require to indemnify and defend and to save
each of them harmless from all risks, however remote, and, in every case of
apparent destruction, loss or theft, the applicant shall also furnish to
the Issuer and the Trustee and any agent of the Issuer or the Trustee
evidence to their satisfaction of the apparent destruction, loss or theft
of such Security and of the ownership thereof.
Every substitute Security issued pursuant to the provisions of
this Section by virtue of the fact that any Security is apparently
destroyed, lost or stolen shall constitute an additional contractual
obligation of the Issuer, whether or not the apparently destroyed, lost or
stolen Security shall be at any time enforceable by anyone and shall be
entitled to all the benefits of (but shall be subject to all the
limitations of rights set forth in) this Indenture equally and
proportionately with any and all other Securities duly authenticated and
delivered hereunder. All
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Securities shall be held and owned upon the express condition that, to the
extent permitted by law, the foregoing provisions are exclusive with
respect to the replacement or payment of mutilated, defaced, or apparently
destroyed, lost or stolen Securities and shall preclude any and all other
rights or remedies notwithstanding any law or statute existing or hereafter
enacted to the contrary with respect to the replacement or payment of
negotiable instruments or other securities without their surrender.
SECTION 2.7 CUSIP Number. The Issuer in issuing the
Securities may use a "CUSIP" number, and if so, the Trustee shall use the
CUSIP number in notices of redemption or exchange as a convenience to
Holders; provided that no representation is hereby deemed to be made by the
Trustee as to the correctness or accuracy of the CUSIP number printed in
the notice or on the Securities, and that reliance may be placed only on
the other identification numbers printed on the Securities.
SECTION 2.8 Cancellation of Securities; Destruction Thereof.
All Securities surrendered for payment, conversion, redemption,
registration of transfer or exchange, if surrendered to the Issuer, any
conversion agent or any agent of the Issuer or the Trustee, shall be
delivered to the Trustee for cancellation or, if surrendered to the
Trustee, shall be cancelled by it; and no Securities shall be issued in
lieu thereof except as expressly permitted by any of the provisions of this
Indenture. The Trustee shall deliver cancelled Securities held by it to
the Issuer. If the Issuer shall acquire any of the Securities, such
acquisition shall not operate as a redemption or satisfaction of the
indebtedness represented by such Securities unless and until the same are
delivered to the Trustee for cancellation.
SECTION 2.9 Temporary Securities. Pending the preparation of
definitive Securities, the Issuer may execute and, pursuant to a written
order of the Issuer in accordance with Section 2.1, the Trustee shall
authenticate and deliver temporary Securities (printed, lithographed,
typewritten or otherwise reproduced, in each case in form satisfactory to
the Trustee). Temporary Securities shall be issuable as registered
Securities without coupons, of any authorized denomination, and
substantially in the form of the definitive Securities but with such
omissions, insertions and variations as may be appropriate for temporary
Securities, all as may be determined by the Issuer with the concurrence of
the Trustee. Temporary Securities may contain such reference to any
provisions of this Indenture as may be appropriate. Every temporary
Security shall be executed by the Issuer and be authenticated by the
Trustee upon the same conditions and in substantially the same manner, and
with like effect, as the definitive Securities. Without unreasonable delay
the Issuer shall execute and shall furnish definitive Securities and
thereupon temporary Securities may be surrendered in exchange therefor
without charge at each office or agency to be maintained by the Issuer for
the purpose pursuant to Section 3.2, and the Trustee shall authenticate and
deliver in exchange for such temporary Securities a like aggregate
principal amount of definitive Securities of authorized denominations.
Until so exchanged the
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temporary Securities shall be entitled to the same benefits under this
Indenture as definitive Securities.
The Issuer will promptly make available to the Trustee a
reasonable supply of certificated Securities in definitive, fully
registered form without interest coupons.
ARTICLE III
COVENANTS OF
THE ISSUER
SECTION 3.1 Payment of Principal and Interest. The Issuer
covenants and agrees that it will duly and punctually pay or cause to be
paid the principal of, and interest on, each of the Securities at the place
or places, at the respective times and in the manner provided in the
Securities. Each installment of interest on the Securities may be paid by
mailing checks for such interest payable to or upon the written order of
the holders of Securities entitled thereto as they shall appear on the
registry books of the Issuer. To the extent the principal of, any interest
on, the redemption price of or the Repurchase Price with respect to the
Securities or any portion thereof is to be paid through the Trustee or the
paying agent, the Issuer covenants and agrees that it will transfer
immediately available funds in the aggregate amount of each such payment to
the Trustee or paying agent, as the case may be, so that the Trustee or
paying agent, as the case may be, shall have received such immediately
available funds in its designated account by no later than 11:00 a.m., New
York, New York time, on the date on which such payment is to be made.
SECTION 3.2 Offices for Payments, etc. So long as any of the
Securities remain outstanding, the Issuer will maintain in the City of New
York the following: (a) an office or agency where the Securities may be
presented for payment or repurchase, (b) an office or agency where the
Securities may be presented for registration of transfer and for exchange
as in this Indenture provided, (c) an office or agency where the Securities
may be presented for conversion and (d) an office or agency where notices
and demands to or upon the Issuer in respect of the Securities or this
Indenture may be served. The Issuer will give to the Trustee written
notice of the location of any such office or agency and of any change of
location thereof. The Issuer hereby initially designates the designated
office of the Trustee at the Borough of Manhattan in the City of New York,
State of New York, or such other location as the Issuer may designate upon
notice from the Trustee, as the office or agency for each such purpose. In
case the Issuer shall fail to maintain any such office or agency or shall
fail to give such notice of the location or of any change in the location
thereof, presentations and demands may be made and notices may be served at
the Corporate Trust Office.
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SECTION 3.3 Appointment to Fill a Vacancy in Office of
Trustee. The Issuer, whenever necessary to avoid or fill a vacancy in the
office of Trustee, will appoint, in the manner provided in Section 5.9, a
successor Trustee, so that there shall at all times be a Trustee hereunder.
SECTION 3.4 Paying Agents. The paying agent will initially
be the Trustee. Whenever the Issuer shall appoint a paying agent other
than the Trustee, it will cause such paying agent to execute and deliver to
the Trustee an instrument in which such agent shall agree with the Trustee,
subject to the provisions of this Section,
(a) that it will hold all sums received by it as such
agent for the payment of the principal of or interest on the Securities,
any redemption price, or Repurchase Payment (whether such sums have been
paid to it by the Issuer or by any other obligor on the Securities) in
trust for the benefit of the holders of the Securities or of the Trustee,
(b) that it will give the Trustee notice of any failure
by the Issuer (or by any other obligor on the Securities) to make any
payment of the principal of or interest on the Securities, any redemption
price, or Repurchase Payment when the same shall be due and payable, and
(c) pay any such sums so held in trust by it to the
Trustee upon the Trustee's written request at any time during the
continuance of the failure referred to in clause (b) above.
The Issuer will, prior to each due date of the principal of or
interest on the Securities, deposit with the paying agent a sum sufficient
to pay such principal or interest, and (unless such paying agent is the
Trustee) the Issuer will promptly notify the Trustee of any failure to take
such action.
If the Issuer shall act as its own paying agent, it will, on
or before each due date of the principal of or interest on the Securities,
set aside, segregate and hold in trust for the benefit of the holders of
the Securities or of the Trustee a sum sufficient to pay such principal or
interest so becoming due. The Issuer will promptly notify the Trustee of
any failure to take such action.
Anything in this Section to the contrary notwithstanding, the
Issuer may at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture or for any other reason, pay or cause to be
paid to the Trustee all sums held in trust by the Issuer or any paying
agent hereunder, as required by this Section, such sums to be held by the
Trustee upon the trusts herein contained. Upon such payment to the Trustee,
the relevant paying agent, if any, shall be released from any liability
with respect to such sums.
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Anything in this Section to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section are subject to
the provisions of Sections 9.3 and 9.4.
SECTION 3.5 Existence. Subject to Article VIII, the Issuer
shall do or cause to be done all things reasonably necessary to preserve
and keep in full force and effect its existence, rights (charter and
statutory) and franchises; provided, however, that the Issuer shall not be
required to preserve any such right or franchise if the Board of Directors
shall determine that the loss thereof is not disadvantageous in any
material respect to the Holders.
SECTION 3.6 Maintenance of Properties. The Issuer shall use
its reasonable efforts to cause all material properties operated by the
Issuer or any Subsidiary and used or useful in the conduct of the business
of the Issuer or such Subsidiary to be maintained and kept in good
condition, repair and working order (reasonable wear and tear excepted) and
will cause to be made all necessary repairs and replacements thereof, all
as in the judgment of the Issuer may be necessary so that the business
carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this Section 3.6
shall prevent the Issuer from discontinuing the use, operation or
maintenance of any of such properties, or disposing of any of them, if such
discontinuance or disposal, in the judgment of the Issuer, would not have a
material adverse effect on the Issuer and its Subsidiaries taken as a
whole.
SECTION 3.7 Payment of Taxes and Other Claims. Except with
respect to items deemed by the Issuer to be immaterial, the Issuer shall
pay or discharge or cause to be paid or discharged, before the same shall
become delinquent, (a) all taxes, assessments and governmental charges
levied or imposed upon the Issuer or any Subsidiary or upon the income,
profits or property of the Issuer or any Subsidiary and (b) all lawful
claims for labor, materials and supplies which, if unpaid, might by law
become a lien upon the property of the Issuer or any Subsidiary; provided,
however, that the Issuer shall not be required to pay or discharge or cause
to be paid or discharged any such tax, assessment, charge or claim the
amount, applicability or validity of which is being contested in good
faith.
SECTION 3.8 Certificate to Trustee. The Issuer will furnish
to the Trustee on or before April 1 in each year (beginning with April 1,
1996) a brief certificate (which need not comply with Section 10.5) from
the principal executive, financial or accounting officer of the Issuer as
to his or her knowledge of the Issuer's compliance with all conditions and
covenants under the Indenture (such compliance to be determined without
regard to any period of grace or requirement of notice provided under the
Indenture).
SECTION 3.9 Securityholders' Lists. If and so long as the
Trustee shall not be the Security registrar, the Issuer will furnish or
cause to be furnished to the Trustee a list in such form as the Trustee may
reasonably require of the names and addresses of the Holders of the
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Securities pursuant to Section 312 of the Trust Indenture Act (a) semi-
annually not more than 15 days after each record date for the payment of
semi-annual interest on the Securities, as hereinabove specified, as of
such record date, and (b) at such other times as the Trustee may request in
writing, within 30 days after receipt by the Issuer of any such request as
of a date not more than 15 days prior to the time such information is
furnished. The Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and addresses of
the Holders of the Securities contained in the most recent list furnished
to it as provided by the foregoing sentence or maintained by the Trustee in
its capacity as the Security registrar, if so acting. The Trustee may
destroy any list furnished to it as provided by the first sentence of this
Section 3.4 upon receipt of a new list so furnished.
SECTION 3.10 Reports by the Issuer. The Issuer covenants to
file with the Trustee, within 15 days after the Issuer is required to file
the same with the SEC, copies of the annual reports and of the information,
documents, and other reports, if any, which the Issuer may be required to
file with the SEC pursuant to Section 13 or Section 15(d) of the Exchange
Act.
SECTION 3.11 Offer to Purchase; Interest Rate Reset. (a) On
June 15, 1997, the Issuer, in its sole discretion, shall either (i) offer
to each Holder of Securities the right to require the Issuer to repurchase
all or any part (equal to $1,000.00 or an integral multiple thereof) of
such Holder's Securities as described below (the "Repurchase Offer") at a
purchase price equal to 100% of the aggregate principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase (the
"Repurchase Payment") or (ii) reset the interest rate per annum borne by
the Securities as provided in the Securities. If the Issuer elects to make
the Repurchase Offer, the Issuer shall send, by first class mail, a notice
to each Holder, with a copy to the Trustee, which notice shall govern the
terms of the Repurchase Offer. Such notice shall state: (1) that the
Repurchase Offer is being made pursuant to this Section 3.11 and that all
Securities tendered will be accepted for payment; (2) the purchase price
and the purchase date, which shall be no earlier than 30 days nor later
than 60 days from the date such notice is mailed (the "Repurchase Payment
Date"); (3) that any Security not tendered will continue to accrue
interest; (4) that, unless the Issuer defaults in the payment of the
Repurchase Payment, all Securities accepted for payment pursuant to the
Repurchase Offer shall cease to accrue interest after the Repurchase
Payment Date; (5) that Holders electing to have any Securities purchased
pursuant to a Repurchase Offer will be required to surrender the
Securities, properly endorsed for transfer together with such customary
documents as the Company may reasonably request, to the paying agent at the
address specified in the notice prior to the close of business on the
Business Day preceding the Repurchase Payment Date; (6) that Holders will
be entitled to withdraw their election if the paying agent receives, not
later than the close of business on the Fifth Business Day preceding the
Repurchase Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of
Securities delivered for purchase, and a statement that such Holder is
withdrawing his election to have such Securities purchased;
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and (7) that Holders whose Securities are being purchased only in part will
be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered, which unpurchased portion must be
equal to $1,000.00 in principal amount or an integral multiple thereof. If
all Securities properly tendered are not purchased pursuant to the
Repurchase Offer, then the interest rate per annum borne by the Securities
not so purchased shall be reset as provided in the Securities. The Issuer
shall comply with the requirements of the Exchange Act and any other
securities laws and regulations to the extent such laws and regulations are
applicable to the Repurchase Offer. To the extent such requirements
conflict with the provisions of this Indenture relating to a Repurchase
Offer, the Issuer shall comply with such requirements and be deemed not to
have breached its obligations relating to such Repurchase Offer by virtue
thereof. If the Issuer elects to make the Repurchase Offer and thereupon
purchases in accordance with the terms hereof all Securities properly
tendered in respect of such Repurchase Offer, it shall have no obligation
to reset the interest rate on the Securities; conversely, if the Issuer
elects to reset the interest rate on the Notes, it shall have no obligation
to make the Repurchase Offer.
(b) On the Repurchase Payment Date, the Issuer will, to
the extent lawful, (1) accept for payment Securities or portions thereof
validly tendered pursuant to the Repurchase Offer, (2) deposit with the
paying agent an amount equal to the Repurchase Payment in respect of all
Securities or portions thereof so tendered, and (3) deliver or cause to be
delivered to the Trustee the Securities so accepted together with an
Officers' Certificate identifying the Securities or portions thereof
tendered to the Issuer. The paying agent shall promptly mail to each
Holder of Securities so accepted payment in an amount equal to the
Repurchase Payment for such Securities, and the Trustee shall promptly
authenticate and mail to each Holder a new Security equal in principal
amount to any unpurchased portion of the Securities surrendered, if any;
provided, however, that each such new Security shall be in a principal
amount of $1,000.00 or an integral multiple thereof. The Issuer will
publicly announce the results of the Repurchase Offer on or as soon as
practicable after the Repurchase Payment Date.
(c) If the notice of a Repurchase Offer shall not have
been mailed on or before June 15, 1997 as provided in clause (a), then the
interest rate per annum borne by the Securities will be reset as provided
in the Securities.
SECTION 3.12 Interest Payment Reserve. (a) The Issuer shall,
at all times prior to and including December 15, 1998, maintain cash and
Cash Equivalents in an amount determined in good faith by the Board of
Directors to be sufficient to satisfy the remaining interest payment
obligations of the Issuer to and including December 15, 1998 with respect
to the Securities then remaining outstanding (using an interest rate of 7%
per annum, whether or not the interest rate on the Securities is reset as
provided in Section 3.11(a) above).
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(b) Upon the conversion of any Securities pursuant to
Article XIII, the maintenance of that amount of cash and Cash Equivalents
allocable to the converted Securities pursuant to the foregoing sentence
shall no longer be required to be maintained by the Issuer pursuant to this
Section 3.12.
SECTION 3.13 Waiver of Stay, Extension or Usury Laws. The
Issuer covenants (to the extent it may lawfully do so) that it will not at
any time insist upon, plead, or in any manner whatsoever claim, and will
resist and oppose any all efforts to be compelled to take the benefit or
advantage of, any stay or extension law or any usury law or other law that
would prohibit or forgive the Issuer from paying all or any portion of the
principal of or interest on the Securities as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it
may lawfully do so) the Issuer hereby waives all benefit or advantage of
any such law, and covenants that it will not hinder, delay or impede the
execution of any such power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
ARTICLE IV
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT
SECTION 4.1 Event of Default Defined; Acceleration of
Maturity; Waiver of Default. In case one or more of the following Events
of Default (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body) shall have
occurred and be continuing, that is to say:
(a) default in the payment of any installment of interest
upon any of the Securities as and when the same shall become due and
payable, and continuance of such default for a period of 30 days, whether
or not such payment is prohibited by Article XII; or
(b) default in the payment of all or any part of the
principal on any of the Securities as and when the same shall become due
and payable, either at maturity, upon any redemption, by declaration or
otherwise, whether or not such payment is prohibited by Article XII; or
(c) (i) failure on the part of the Issuer to observe or
perform any of the covenants or agreements described in Section 3.11 or
Section 8.1 or (ii) failure on the
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part of the Issuer duly to observe or perform any other of the covenants or
agreements on the part of the Issuer in the Securities or contained in this
Indenture for a period of 30 days after the date on which written notice
specifying such failure, stating that such notice is a "Notice of Default"
hereunder and demanding that the Issuer remedy the same, shall have been
given by registered or certified mail, return receipt requested, to the
Issuer by the Trustee, or to the Issuer and the Trustee by the holders of
at least 40% (25% on and after the Distribution Effective Date) in
aggregate principal amount of the Securities at the time outstanding; or
(d) default with respect to any Indebtedness of the
Issuer or any Subsidiary, as a result of which the maturity of such
Indebtedness has been accelerated prior to its stated maturity, and the
principal amount of such Indebtedness exceeds $10.0 million in the
aggregate; or
(e) any final judgments rendered against the Issuer
and/or any Significant Subsidiary aggregating in excess of $10.0 million
and (x) any creditor has commenced any enforcement proceeding upon any
such judgment and (y) any such judgment remains undischarged or unstayed
for 60 days; or
(f) by the filing against the Issuer or any Significant
Subsidiary of a petition commencing an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of the Issuer or any
Significant Subsidiary or for any substantial part of the property of the
Issuer or ordering the winding up or liquidation of its affairs, and such
petition shall not be dismissed or stayed pending appeal within 60 days;
or
(g) the Issuer or any Significant Subsidiary shall
commence a voluntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or consent to the entry of
an order for relief in an involuntary case under any such law, or consent
to the appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of the
Issuer or any Significant Subsidiary or for any substantial part of the
property of the Issuer, or the Issuer or any Significant Subsidiary shall
make any general assignment for the benefit of creditors,
then, and in each and every such case (other than an Event of Default with
respect to the Issuer specified in Section 4.1(f) or 4.1(g) above), either
the Trustee or the holders of at least 40% (25% on and after the
Distribution Effective Date) in aggregate principal amount of the
Securities then outstanding hereunder, by notice in writing to the Issuer,
or to the Issuer and to the Trustee in the event of action taken by the
holders of the requisite percentage of the Securities, specifying
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the respective Event of Default and that it is a "Notice of Acceleration"
(the "Acceleration Notice"), may declare the entire principal amount,
together with interest accrued and unpaid on the Securities, to be due and
payable immediately, and the same shall become immediately due and payable;
provided the Trustee shall not be charged with knowledge of any default or
on Event of Default under Section 4.1(d) or (e) above unless written notice
thereof shall have been given to the Trustee by the Issuer or a
Representative of any issue of Indebtedness.
If an Event of Default with respect to the Issuer specified in
Section 4.1(f) or 4.1(g) occurs, the principal amount together with
interest accrued and unpaid on the Securities shall become and be
immediately due and payable without any declaration or other act on the
part of the Trustee or any Securityholder.
The declaration of acceleration is subject to the condition
that if, at any time after the principal amount of the Securities shall
have been so declared due and payable, and before any judgment or decree
for the payment of the moneys due shall have been obtained or entered as
hereinafter provided, the Issuer shall pay or shall deposit with the
Trustee a sum sufficient to pay all matured installments of interest upon
all the Securities and the principal of any and all Securities which shall
have become due otherwise than by acceleration (with interest upon such
principal and, to the extent that payment of such interest is enforceable
under applicable law, on overdue installments of interest, at the same rate
as the rate of interest specified in the Securities, to the date of such
payment or deposit) and such amount as shall be sufficient to cover
reasonable compensation to the Trustee and each predecessor Trustee, their
respective agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Trustee and each
predecessor Trustee except as a result of negligence or bad faith, and if
any and all defaults and Events of Default under the Indenture, other than
the non-payment of the principal of Securities which shall have become due
by acceleration, shall have been cured, waived or otherwise remedied as
provided herein -- then and in every such case the holders of a majority in
aggregate principal amount of the Securities then outstanding, by written
notice to the Issuer and to the Trustee, may waive all defaults and rescind
and annul such declaration and its consequences, but no such waiver or
rescission and annulment shall extend to or shall affect any subsequent
default or shall impair any right consequent thereon.
SECTION 4.2 Collection of Indebtedness by Trustee; Trustee
May Prove Indebtedness. The Issuer covenants that (a) in case default
shall be made in the payment of any installment of interest on any of the
Securities when such interest shall have become due and payable, and such
default shall have continued for a period of 30 days or (b) in case default
shall be made in the payment of all or any part of the principal of any of
the Securities when the same shall have become due and payable, whether
upon maturity or upon any redemption or repurchase or by declaration or
otherwise -- then upon demand of the Trustee, the Issuer will pay to the
Trustee for the benefit of the Holders of the Securities the whole amount
that then shall have become due and payable on all such Securities for
principal or interest, as the case may be
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(with interest to the date of such payment upon the overdue principal and,
to the extent that payment of such interest is enforceable under applicable
law, on overdue installments of interest at the same rate as the rate of
interest specified in the Securities); and in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including reasonable compensation to the Trustee and each
predecessor Trustee, their respective agents, attorneys and counsel, and
any expenses and liabilities incurred, and all advances made, by the
Trustee and each predecessor Trustee except as a result of its negligence
or bad faith.
Until such demand is made by the Trustee, the Issuer may pay
the principal of and interest on the Securities to the registered holders,
whether or not the Securities be overdue.
In case the Issuer shall fail forthwith to pay such amounts
upon such demand, the Trustee, in its own name and as trustee of an express
trust, shall be entitled and empowered to institute any action or
proceedings at law or in equity for the collection of the sums so due and
unpaid, and may prosecute any such action or proceedings to judgment or
final decree, and may enforce any such judgment or final decree against the
Issuer or other obligor upon the Securities and collect in the manner
provided by law out of the property of the Issuer or other obligor upon the
Securities, wherever situated the moneys adjudged or decreed to be payable.
In case there shall be pending proceedings relative to the
Issuer or any other obligor upon the Securities under Title 11 of the
United States Code or any other applicable Federal or state bankruptcy,
insolvency or other similar law, or in case a receiver, assignee or trustee
in bankruptcy or reorganization, liquidator, sequestrator or similar
official shall have been appointed for or taken possession of the Issuer or
its property or such other obligor, or in case of any other comparable
judicial proceedings relative to the Issuer or other obligor upon the
Securities, or to the creditors or property of the Issuer or such other
obligor, the Trustee, irrespective of whether the principal of the
Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have
made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such proceedings or otherwise:
(a) to file and prove a claim or claims for the whole
amount of principal and interest owing and unpaid in respect of the
Securities, and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee
(including any claim for reasonable compensation to the Trustee and each
predecessor Trustee, and their respective agents, attorneys and counsel,
and for reimbursement of all expenses and liabilities incurred, and all
advances made, by the Trustee and each predecessor Trustee, except as a
result of negligence or bad faith) and of the Securityholders allowed in
any judicial proceedings relative to the Issuer or other obligor upon the
Securities, or to the creditors or property of the Issuer or such other
obligor,
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(b) unless prohibited by applicable law and regulations,
to vote on behalf of the holders of the Securities in any election of a
trustee or a standby trustee in arrangement, reorganization, liquidation
or other bankruptcy or insolvency proceedings or person performing
similar functions in comparable proceedings, and
(c) to collect and receive any moneys or other property
payable or deliverable on any such claims, and to distribute all amounts
received with respect to the claims of the Securityholders and of the
Trustee on their behalf; and any trustee, receiver, or liquidator,
custodian or other similar official is hereby authorized by each of the
Securityholders to make payments to the Trustee, and, in the event that
the Trustee shall consent to the making of payments directly to the
Securityholders, to pay to the Trustee such amounts as shall be
sufficient to cover all unpaid, reasonable compensation to the Trustee,
each predecessor Trustee and their respective agents, attorneys and
counsel, and all other unpaid expenses and liabilities incurred, and all
advances made, by the Trustee and each predecessor Trustee except as a
result of negligence or bad faith.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or vote for or accept or adopt on behalf
of any Securityholder any plan or reorganization, arrangement, adjustment
or composition affecting the Securities or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Securityholder in any such proceeding except, as aforesaid, to vote for the
election of a trustee in bankruptcy or similar person.
All rights of action and of asserting claims under this
Indenture, or under any of the Securities, may be enforced by the Trustee
without the possession of any of the Securities or the production thereof
on any trial or other proceedings relative thereto, and any such action or
proceedings instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment, subject to the
payment of the expenses, disbursements and compensation of the Trustee,
each predecessor Trustee and their respective agents, attorneys and
counsel, shall be for the ratable benefit of the holders of the Securities.
In any proceedings brought by the Trustee (and also any
proceedings involving the interpretation of any provision of this Indenture
to which the Trustee shall be a party) the Trustee shall be held to
represent all the holders of the Securities, and it shall not be necessary
to make any holders of the Securities parties to any such proceedings.
SECTION 4.3 Application of Proceeds. Any moneys collected by
the Trustee pursuant to this Article shall be applied, subject to Article
XII, in the following order at the date or dates fixed by the Trustee and,
in case of the distribution of such moneys on account of principal or
interest, upon presentation of the several Securities and stamping (or
otherwise
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noting) thereon the payment, or issuing Securities in reduced principal
amounts in exchange for the presented Securities if only partially paid, or
upon surrender thereof if fully paid:
FIRST: To the payment of costs and expenses, including all
unpaid, reasonable compensation to the Trustee and each predecessor
Trustee and their respective agents, attorneys and counsel and of all
unpaid expenses and liabilities incurred, and all advances made, by the
Trustee and each predecessor Trustee except as a result of negligence or
bad faith;
SECOND: In case the principal of the Securities shall not
have become and be then due and payable, to the payment of interest in
default in the order of the maturity of the installments of such
interest, with interest (to the extent that such interest has been
collected by the Trustee) upon the overdue installments of interest at
the same rate as the rate of interest specified in the Securities, such
payments to be made ratably to the Persons entitled thereto, without
discrimination or preference;
THIRD: In case the principal of the Securities shall have
become and shall be then due and payable, to the payment of the whole
amount then owing and unpaid upon all the Securities for principal and
interest, with interest upon the overdue principal, and (to the extent
that such interest is provided for in the Securities and has been
collected by the Trustee) upon overdue installments of interest at the
same rate as the rate of interest specified in the Securities; and in
case such moneys shall be insufficient to pay in full the whole amount so
due and unpaid upon the Securities, then to the payment of interest on
the overdue installments of interest to the extent provided in the
Securities, and then to the payment of interest in default in the order
of maturity of the installments of such interest, and then to the
principal owing and unpaid; and
FOURTH: The remainder, if any, shall be paid to the Issuer or
any other Person lawfully entitled thereto.
SECTION 4.4 Suits for Enforcement. In case an Event of
Default has occurred, has not been waived and is continuing, the Trustee
may in its discretion proceed to protect and enforce the rights vested in
it by this Indenture by such appropriate judicial proceedings as the
Trustee shall deem most effectual to protect and enforce any of such
rights, either at law or in equity or in bankruptcy or otherwise, whether
for the specific enforcement of any covenant or agreement contained in this
Indenture or in aid of the exercise of any power granted in this Indenture
or to enforce any other legal or equitable right vested in the Trustee by
this Indenture or by law.
SECTION 4.5 Restoration of Rights on Abandonment of
Proceedings. In case the Trustee shall have proceeded to enforce any right
under this Indenture and such proceedings
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shall have been discontinued or abandoned for any reason, or shall have
been determined adversely to the Trustee, then and in every such case the
Issuer and the Trustee shall be restored respectively to their former
positions and rights hereunder, and all rights, remedies and powers of the
Issuer, the Trustee and the Securityholders shall continue as though no
such proceedings had been taken.
SECTION 4.6 Limitations on Suits by Securityholders. No
holder of any Security shall have any right by virtue or by availing of any
provision of this Indenture to institute any action or proceeding at law or
in equity or in bankruptcy or otherwise upon or under or with respect to
this Indenture, or for the appointment of a trustee, receiver, liquidator,
custodian or other similar official or for any other remedy hereunder,
unless such holder previously shall have given to the Trustee written
notice of default and of the continuance thereof, as hereinbefore provided,
and unless also the holders of not less than 40% (25% on and after the
Distribution Effective Date) in aggregate principal amount of the
Securities then outstanding shall have made written request upon the
Trustee to institute such action or proceedings in its own name as trustee
hereunder and shall have offered to the Trustee such reasonable indemnity
as it may require against the costs, expenses and liabilities to be
incurred therein or thereby and the Trustee for 60 days after its receipt
of such notice, request and offer of indemnity shall have failed to
institute any such action or proceedings and no direction inconsistent with
such written request shall have been given to the Trustee pursuant to
Section 4.8; it being understood and intended, and being expressly
covenanted by the taker and holder of every Security with every other taker
and holder and the Trustee, that no one or more holders of Securities shall
have any right in any manner whatever by virtue or by availing of any
provision of this Indenture to affect, disturb or prejudice the rights of
any other holder of Securities, or to obtain or seek to obtain priority
over or preference to any other such holder or to enforce any right under
this Indenture, except in the manner herein provided and for the equal,
ratable and common benefit of all holders of Securities. For the
protection and enforcement of the provisions of this Section, each and
every Securityholder and the Trustee shall be entitled to such relief as
can be given either at law or in equity.
SECTION 4.7 Powers and Remedies Cumulative: Delay or Omission
Not Waiver of Default. Except as provided in Section 2.6, no right or
remedy herein conferred upon or reserved to the Trustee or to the
Securityholders is intended to be exclusive of any other right or remedy,
and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder
or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
No delay or omission of the Trustee or of any holder of any of
the Securities to exercise any right or power accruing upon any Event of
Default occurring and continuing as
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aforesaid shall impair any such right or power or shall be construed to be
a waiver of any such Event of Default or an acquiescence therein; and,
subject to Section 4.6, every power and remedy given by this Indenture or
by law to the Trustee or to the Securityholders may be exercised from time
to time, and as often as shall be deemed expedient, by the Trustee or by
the Securityholders.
SECTION 4.8 Control by Securityholders. The holders of a
majority in aggregate principal amount of the Securities at the time
outstanding shall have the right to direct the time, method, and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee by this Indenture;
provided that such direction shall not be otherwise than in accordance with
law and the provisions of this Indenture and provided further that (subject
to the provisions of Section 5.1) the Trustee shall have the right to
decline to follow any such direction if the Trustee, being advised by
counsel, shall determine that the action or proceeding so directed may not
lawfully be taken or if the Trustee in good faith by its board of
directors, the executive committee, or a trust committee of directors or
responsible officers of the Trustee shall determine that the action or
proceedings so directed would subject the Trustee to personal liability or
if the Trustee in good faith shall so determine that the actions or
forebearances specified in or pursuant to such direction shall be unduly
prejudicial to the interests of holders of the Securities not joining in
the giving of said direction, it being understood that (subject to Section
5.1) the Trustee shall have no duty to ascertain whether or not such
actions or forebearances are unduly prejudicial to such holders.
Nothing in this Indenture shall impair the right of the
Trustee in its discretion to take any action deemed proper by the Trustee
and which is not inconsistent with such direction by Securityholders.
SECTION 4.9 Waiver of Past Defaults. Prior to the Maturity
of the Securities as provided in Section 4.1, the holders of a majority in
aggregate principal amount of the Securities at the time outstanding may on
behalf of the holders of all the Securities waive any past default or Event
of Default hereunder and its consequences, except a default or Event of
Default (a) in the payment of principal of or interest on any of the
Securities or (b) in respect of a covenant or provision hereof which cannot
be modified or amended without the consent of the holder of each Security
affected. In the case of any such waiver, the Issuer, the Trustee and the
holders of the Securities shall be restored to their former positions and
rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
Upon any such waiver, such default shall cease to exist and be
deemed to have been cured and not to have occurred, and any Event of
Default arising therefrom shall be deemed to have been cured, and not to
have occurred for every purpose of this Indenture; but no such
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waiver shall extend to any subsequent or other default or Event of Default
or impair any right consequent thereon.
SECTION 4.10 Unconditional Right of Holders to Receive
Payments. Notwithstanding any provision in this Indenture to the contrary,
the Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment of the principal of and interest on such
Security when due as provided in such Security and this Indenture and to
institute suit for the enforcement of any such payment, and such rights
shall not be impaired without the consent of such Holder.
ARTICLE V
CONCERNING THE TRUSTEE
SECTION 5.1 Duties and Responsibilities of the Trustee;
During Default; Prior to Default. The Trustee, prior to the occurrence of
an Event of Default and after the curing or waiving of all Events of
Default that may have occurred, undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture. In case an
Event of Default has occurred (which has not been cured or waived) the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as
a prudent man would exercise or use under the circumstances in the conduct
of his own affairs. The Trustee shall not be charged with knowledge of the
existence of an Event of Default, other than with respect to a payment
default, unless and until the Trustee has actual knowledge of such Event of
Default or the Trustee shall have received notice thereof in writing from
the Issuer or from the holders of a majority in principal amount of the
Securities.
No provision of this Indenture shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act or its own wilful misconduct, except that
(a) prior to the occurrence of an Event of Default and
after the curing or waiving of all such Events of Default which may have
occurred:
(i) the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Indenture,
and the Trustee shall not be liable except for the performance
of such duties and obligations as are specifically set forth
in this Indenture, and no implied covenants or obligations
shall be read into this Indenture against the Trustee; and
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(ii) in the absence of bad faith on the part of the
Trustee, the Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed
therein, upon any statements, certificates or opinions
furnished to the Trustee and conforming to the requirements of
this Indenture; but in the case of any such statements,
certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this
Indenture;
(b) the Trustee shall not be liable for any error of
judgment made in good faith by a responsible officer or responsible
officers of the Trustee, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(c) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the direction of the holders of not less than a majority in
principal amount of the Securities at the time outstanding relating to
the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred upon
the Trustee, under this Indenture.
None of the provisions contained in this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or in
the exercise of any of its rights or powers, if there shall be reasonable
ground for believing that the repayment of such funds or adequate indemnity
against such liability is not reasonably assured to it.
This Section 5.1 is in furtherance of and subject to Sections
315 and 316 of the Trust Indenture Act of 1939.
SECTION 5.2 Certain Rights of the Trustee. In furtherance of
and subject to the Trust Indenture Act of 1939, and subject to Section 5.1:
(a) the Trustee may rely and shall be protected in acting
or refraining from acting upon any resolution, Officers' Certificate or
any other certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, debenture, note, coupon, security or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request, direction, order or demand of the Issuer
mentioned herein shall be sufficiently evidenced by an Officers'
Certificate (unless other evidence in respect thereof be herein
specifically prescribed); and any resolution of the Board of Directors
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may be evidenced to the Trustee by a copy thereof certified by the
Secretary or an Assistant Secretary of the Issuer;
(c) the Trustee may consult with counsel and any advice
or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted to be
taken by it hereunder in good faith and in reliance on such advice or
Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise
any of the trusts or powers vested in it by this Indenture at the
request, order or direction of any of the Securityholders pursuant to the
provisions of this Indenture, unless such Securityholders shall have
offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred therein or
thereby;
(e) the Trustee shall not be liable for any action taken
or omitted by it in good faith and believed by it to be authorized or
within the discretion, rights or powers conferred upon it by this
Indenture;
(f) prior to the occurrence of an Event of Default
hereunder and after the curing or waiving of all Events of Default, the
Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, appraisal,
bond, debenture, note, coupon, security, or other paper or document
unless requested in writing so to do by the holders of not less than a
majority in aggregate principal amount of the Securities then
outstanding; provided that, if the payment within a reasonable time to
the Trustee of the costs, expenses or liabilities likely to be incurred
by it in the making of such investigation is, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security afforded
to it by the terms of this Indenture, the Trustee may require reasonable
indemnity against such costs, expenses or liabilities as a condition to
proceeding; the reasonable expenses of every such examination shall be
paid by the Issuer or, if paid by the Trustee or any predecessor trustee,
shall be repaid by the Issuer upon demand; and
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys not regularly in its employ and the Trustee
shall not be responsible for any misconduct or negligence on the part of
any such agent or attorney appointed with due care by it hereunder.
SECTION 5.3 Trustee Not Responsible for Recitals, Disposition
of Securities or Application of Proceeds Thereof. The recitals contained
herein and in the Securities, except the Trustee's certificates of
authentication, shall be taken as the statements of the Issuer, and the
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Trustee assumes no responsibility for the correctness of the same. The
Trustee makes no representation as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be accountable for
the use or application by the Issuer of any of the Securities or of the
proceeds thereof.
SECTION 5.4 Trustee and Agents May Hold Securities;
Collections, etc. The Trustee or any agent of the Issuer or the Trustee,
in its individual or any other capacity, may become the owner or pledgee of
Securities with the same rights it would have if it were not the Trustee or
such agent and may otherwise deal with the Issuer and receive, collect,
hold and retain collections from the Issuer with the same rights it would
have if it were not the Trustee or such agent.
SECTION 5.5 Moneys Held by Trustee. Subject to the
provisions of Section 9.4 hereof, all moneys received by the Trustee shall,
until used or applied as herein provided, be held in trust for the purposes
for which they were received, but need not be segregated from other funds
except to the extent required by mandatory provisions of law. Neither the
Trustee nor any agent of the Issuer or the Trustee shall be under any
liability for interest on any moneys received by it hereunder.
SECTION 5.6 Compensation and Indemnification of Trustee and
Its Prior Claim. The Issuer covenants and agrees to pay to the Trustee
from time to time, and the Trustee shall be entitled to, reasonable
compensation (which shall not be limited by any provision of law in regard
to the compensation of a trustee of an express trust) and the Issuer
covenants and agrees to pay or reimburse the Trustee and each predecessor
trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by or on behalf of it in accordance with any of
the provisions of this Indenture (including the reasonable compensation and
the expenses and disbursements of its counsel and of all agents and other
persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence or bad faith. The Issuer also
covenants to indemnify the Trustee and each predecessor Trustee for, and to
hold each of them harmless against, any loss, liability or expense incurred
without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of this Indenture or the
trusts hereunder and its duties hereunder, including the costs and expenses
of defending itself against or investigating any claim of liability in the
premises. The obligations of the Issuer under this Section to compensate
and indemnify the Trustee and each predecessor Trustee and to pay or
reimburse the Trustee and each predecessor Trustee for expenses,
disbursements and advances shall constitute additional indebtedness
hereunder and shall survive the satisfaction and discharge of this
Indenture. Such additional indebtedness shall be a senior claim to that of
the Securities upon all property and funds held or collected by the Trustee
as such, except funds held in trust for the benefit of the holders of
particular Securities, and the Securities are hereby subordinated to such
senior claim.
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SECTION 5.7 Right of Trustee to Rely on Officers'
Certificate, etc. Subject to Sections 5.1 and 5.2, whenever in the
administration of the trusts of this Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to
taking or suffering or omitting any action hereunder, such matter (unless
other evidence in respect thereof be herein specifically prescribed) may,
in the absence of negligence or bad faith on the part of the Trustee, be
deemed to be conclusively proved and established by an Officers'
Certificate delivered to the Trustee, and such certificate, in the absence
of negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken, suffered or omitted by it
under the provisions of this Indenture upon the faith thereof.
SECTION 5.8 Persons Eligible for Appointment as Trustee. The
Trustee hereunder shall at all times be a corporation [or a national
banking association that is part of an affiliated group of banks] having a
combined capital and surplus of at least $100,000,000, and which is
eligible in accordance with the provisions of Section 310(a) of the Trust
Indenture Act of 1939. If such corporation [or national banking
association] publishes reports of condition at least annually, pursuant to
law or to the requirements of a Federal, State or District of Columbia
supervising or examining authority, then for the purposes of this Section,
the combined capital and surplus of such corporation [or national banking
association] shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published.
SECTION 5.9 Resignation and Removal; Appointment of Successor
Trustee. (a) The Trustee may at any time resign by giving written notice
of resignation to the Issuer and by mailing notice thereof by first-class
mail to holders of Securities at their last addresses as they shall appear
on the Security register. Upon receiving such notice of resignation, the
Issuer shall promptly appoint a successor Trustee by written instrument in
duplicate, executed by authority of the Board of Directors, one copy of
which instrument shall be delivered to the resigning Trustee and one copy
to the successor Trustee. If no successor Trustee shall have been so
appointed and have accepted appointment within 30 days after the mailing of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee, or any
Securityholder who has been a bona fide holder of a Security or Securities
for at least six months may, on behalf of himself and all others similarly
situated, petition any such court for the appointment of a successor
Trustee. Such court may thereupon, after such notice, if any, as it may
deem proper, prescribe and appoint a successor Trustee.
(b) In case at any time any of the following shall occur:
(i) the Trustee shall fail to comply with the provisions
of Section 310(b) of the Trust Indenture Act of 1939, after written
request therefor by the Issuer or by any Securityholder who has been a
bona fide holder of a Security or Securities for at least six months; or
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(ii) the Trustee shall cease to be eligible in accordance
with the provisions of Section 5.8 and shall fail to resign after written
request therefor by the Issuer or by any such Securityholder; or
(iii) the Trustee shall become incapable of acting, or
shall be adjudged a bankrupt or insolvent, or a receiver or liquidator of
the Trustee or of its property shall be appointed, or any public officer
shall take charge or control of the Trustee or of its property or affairs
for the purpose of rehabilitation, conservation or liquidation;
then, in any such case, the Issuer may remove the Trustee and appoint a
successor Trustee by written instrument, in duplicate, executed by order of
the Board of Directors of the Issuer, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee,
or, subject to Section 315(e) of the Trust Indenture Act of 1939, any
Securityholder who has been a bona fide holder of a Security or Securities
for at least six months may on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee. Such court may
thereupon, after such notice, if any, as it may deem proper and prescribe,
remove the Trustee and appoint a successor Trustee.
(c) The holders of a majority in aggregate principal
amount of the Securities at the time outstanding may at any time remove the
Trustee and appoint a successor Trustee by delivering to the Trustee so
removed, to the successor Trustee so appointed and to the Issuer the
evidence provided for in Section 6.1 of the action in that regard taken by
the Securityholders.
SECTION 5.10 Acceptance of Appointment by Successor Trustee.
Any successor Trustee appointed as provided in Section 5.9 shall execute
and deliver to the Issuer and to its predecessor Trustee an instrument
accepting such appointment hereunder, and thereupon the resignation or
removal of the predecessor Trustee shall become effective and such
successor Trustee, without any further act, deed or conveyance, shall
become vested with all rights, powers, duties and obligations of its
predecessor hereunder, with like effect as if originally named as trustee
herein; but, nevertheless, on the written request of the Issuer or of the
successor Trustee, upon payment of its charges then unpaid, the Trustee
ceasing to act shall, subject to Section 9.4, pay over to the successor
Trustee all moneys at the time held by it hereunder and shall execute and
deliver an instrument transferring to such successor Trustee all such
rights, powers, duties and obligations. Upon request of any such successor
Trustee, the Issuer shall execute any and all instruments in writing for
more fully and certainly vesting in and confirming to such successor
trustee all such rights and powers. Any Trustee ceasing to act shall,
nevertheless, retain a prior claim upon all property or funds held or
collected by such Trustee to secure any amounts then due it pursuant to the
provisions of Section 5.6.
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Upon acceptance of appointment by a successor Trustee as
provided in this Section 5.10, the Issuer shall mail notice thereof by
first-class mail to the holders of Securities at their last addresses as
they shall appear in the Security register. If the acceptance of
appointment is substantially contemporaneous with the resignation, then the
notice called for by the preceding sentence may be combined with the notice
called for by Section 5.9. If the Issuer fails to mail such notice within
10 days after acceptance of appointment by the successor trustee, the
successor Trustee shall cause such notice to be mailed at the expense of
the Issuer.
SECTION 5.11 Merger, Conversion, Consolidation or Succession
to Business of Trustee. Any corporation into which the Trustee may be
merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which
the Trustee shall be a party, or any corporation succeeding to the
corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided that such corporation shall be eligible under
the provisions of Section 5.8, without the execution or filing of any paper
or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
In case at the time such successor to the Trustee shall
succeed to the trusts created by this Indenture any of the Securities shall
have been authenticated but not delivered, any such successor to the
Trustee may adopt the certificate of authentication of any predecessor
trustee and deliver such Securities so authenticated; and, in case at that
time any of the Securities shall not have been authenticated, any successor
to the Trustee may authenticate such Securities either in the name of any
predecessor hereunder or in the name of the successor Trustee; and in all
such cases such certificate shall have the full force which it is anywhere
in the Securities or in this Indenture provided that the certificate of the
Trustee shall have; provided, that the right to adopt the certificate of
authentication of any predecessor trustee or to authenticate Securities in
the name of any predecessor trustee shall apply only to its successor or
successors by merger, conversion or consolidation.
SECTION 5.12 Reports by the Trustee. Any Trustee's report
required under Section 313(a) of the Trust Indenture Act of 1939 shall be
transmitted on or before the first date for the regular payment of semi-
annual interest on the Securities next succeeding May 15 in each year, and
shall be dated as of a date convenient to the Trustee no more than 60 nor
less than 45 days prior thereto (unless such May 15 is less than 45 days
prior to such interest payment date, in which case such report shall be
(a) so transmitted on or before the second such interest payment date next
succeeding such May 15 and (b) as of a date determined as provided above).
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ARTICLE VI
CONCERNING THE SECURITYHOLDERS
SECTION 6.1 Evidence of Action Taken by Securityholders. Any
request, demand, authorization, direction, notice, consent, waiver or other
action provided by this Indenture to be given or taken by Securityholders
may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Securityholders in person or by
agent duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee. Proof of execution of any
instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and (subject to Sections 5.1 and 5.2)
conclusive in favor of the Trustee and the Issuer, if made in the manner
provided in this Article.
SECTION 6.2 Proof of Execution of Instruments and of Holding
of Securities; Record Date. Subject to Sections 5.1 and 5.2, the execution
of any instrument by a Securityholder or his agent or proxy may be proved
in accordance with such reasonable rules and regulations as may be
prescribed by the Trustee or in such manner as shall be satisfactory to the
Trustee. The holding of Securities shall be proved by the Security
register or by a certificate of the registrar thereof. The Issuer may set
a record date for purposes of determining the identity of holders of
Securities entitled to vote or consent to any action referred to in Section
6.1, which record date may be set at any time or from time to time by
notice to the Trustee, for any date or dates (in the case of any
adjournment or resolicitation) not more than 60 days nor less than 10 days
prior to the proposed date of such vote or the first solicitation of such
consent, and thereafter, notwithstanding any other provisions hereof, only
holders of Securities of record on such record date shall be entitled to so
vote or give such consent or to withdraw such vote or consent.
SECTION 6.3 Holders to be Treated as Owners. The Issuer, the
Trustee and any agent of the Issuer or the Trustee may deem and treat the
person in whose name any Security shall be registered upon the Security
register as the absolute owner of such Security (whether or not such
Security shall be overdue and notwithstanding any notation of ownership or
other writing thereon) for the purpose of receiving payment of or on
account of the principal of and, subject to the provisions of this
Indenture, interest on such Security and for all other purposes; and
neither the Issuer nor the Trustee nor any agent of the Issuer or the
Trustee shall be affected by any notice to the contrary. All such payments
so made to any such person, or upon his order, shall be valid, and, to the
extent of the sum or sums so paid, effectual to satisfy and discharge the
liability for moneys payable upon any such Security.
SECTION 6.4 Securities Owned by Issuer Deemed Not
Outstanding. In determining whether the holders of the requisite aggregate
principal amount of Securities have
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concurred in any direction, consent or waiver under this Indenture,
Securities which are owned by the Issuer or any other obligor on the
Securities or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Issuer or
any other obligor on the Securities shall be disregarded and deemed not to
be outstanding for the purpose of any such determination, except that for
the purpose of determining whether the Trustee shall be protected in
relying on any such direction, consent or waiver only Securities which the
Trustee knows are so owned shall be so disregarded. Securities so owned
which have been pledged in good faith may be regarded as outstanding if the
pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Securities and that the pledgee is not the
Issuer or any other obligor upon the Securities or any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Issuer or any other obligor on the Securities. In case of
a dispute as to such right, the advice of counsel shall be full protection
in respect of any decision made by the Trustee in accordance with such
advice. Upon request of the Trustee, the Issuer shall furnish to the
Trustee promptly an Officers' Certificate listing and identifying all
Securities, if any, known by the Issuer to be owned or held by or for the
account of any of the above-described Persons; and, subject to Sections 5.1
and 5.2, the Trustee shall be entitled to accept such Officers' Certificate
as conclusive evidence of the facts therein set forth and of the fact that
all Securities not listed therein are outstanding for the purpose of any
such determination.
SECTION 6.5 Right of Revocation of Action Taken. At any time
prior to (but not after) the evidencing to the Trustee, as provided in
Section 6.1, of the taking of any action by the Holders of the percentage
in aggregate principal amount of the Securities specified in this Indenture
in connection with such action, any holder of a Security the serial number
of which is shown by the evidence to be included among the serial numbers
of the Securities the holders of which have consented to such action may,
by filing written notice at the Corporate Trust Office and upon proof of
holding as provided in this Article, revoke such action so far as concerns
such Security. Except as aforesaid any such action taken by the holder of
any Security shall be conclusive and binding upon such holder and upon all
future holders and owners of such Security and of any Securities issued in
exchange or substitution therefor, irrespective of whether or not any
notation in regard thereto is made upon any such Security. Any action
taken by the holders of the percentage in aggregate principal amount of the
Securities specified in this Indenture in connection with such action shall
be conclusively binding upon the Issuer, the Trustee and the holders of all
the Securities.
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ARTICLE VII
SUPPLEMENTAL INDENTURES
SECTION 7.1 Supplemental Indentures Without Consent of
Securityholders. The Issuer, when authorized by a resolution of its Board
of Directors, and the Trustee may from time to time and at any time enter
into an indenture or indentures supplemental hereto for one or more of the
following purposes:
(a) to convey, transfer, assign, mortgage or pledge to
the Trustee as security for the Securities any property or assets;
(b) to evidence the succession of another corporation to
the Issuer, or successive successions, and the assumption by the
successor corporation of the covenants, agreements and obligations of the
Issuer pursuant to Article VIII;
(c) to add to the covenants of the Issuer such further
covenants, restrictions, conditions or provisions as its Board of
Directors and the Trustee shall consider to be for the protection of the
Holders of Securities, and to make the occurrence, or the occurrence and
continuance, of a default in any such additional covenants, restrictions,
conditions or provisions an Event of Default permitting the enforcement
of all or any of the several remedies provided in this Indenture as
herein set forth; provided, that in respect of any such additional
covenant, restriction, condition or provision such supplemental indenture
may provide for a particular period of grace after default (which period
may be shorter or longer than that allowed in the case of other defaults)
or may provide for an immediate enforcement upon such an Event of Default
or may limit the remedies available to the Trustee upon such an Event of
Default or may limit the right of the holders of a majority in aggregate
principal amount of the Securities to waive such an Event of Default;
(d) to cure any ambiguity or to correct or supplement any
provision contained herein or in any supplemental indenture which may be
defective or inconsistent with any other provision contained herein or in
any supplemental indenture; or to make such other provisions in regard to
matters or questions arising under this Indenture or under any
supplemental indenture as the Board of Directors may deem necessary or
desirable and which shall not adversely affect the interests of the
holders of the Securities;
(e) to provide for the issuance under this Indenture of
Securities in coupon form (including Securities registrable as to
principal only) and to provide for exchangeability of such Securities
with Securities issued hereunder in fully registered form, and to make
all appropriate changes for such purpose; and
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(f) to comply with the requirements of the SEC in order
to effect or maintain the qualification of this Indenture under the Trust
Indenture Act of 1939.
The Trustee is hereby authorized to join in the execution of
any such supplemental indenture, to make any further appropriate agreements
and stipulations which may be therein contained and to accept the
conveyance, transfer, assignment, mortgage or pledge of any property
thereunder, but the Trustee shall not be obligated to enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of
this Section may be executed without the consent of the holders of any of
the Securities at the time outstanding, notwithstanding any of the
provisions of Section 7.2.
SECTION 7.2 Supplemental Indentures With Consent of
Securityholders. With the consent (evidenced as provided in Article VI) of
the holders of not less than a majority in aggregate principal amount of
the Securities at the time outstanding, the Issuer, when authorized by a
resolution of the Board of Directors, and the Trustee may, from time to
time and at any time, enter into an indenture or indentures supplemental
hereto for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Indenture or of any
supplemental indenture or of modifying in any manner the rights of the
holders of the Securities; provided, that no such supplemental indenture
shall (a) extend the final maturity of any Security, or reduce the
principal amount thereof, or reduce the rate or change the time of payment
of interest thereon, or reduce any amount payable on redemption thereof, or
make the Securities payable in currency other than United States currency,
or impair or affect the right of any Securityholder to institute suit for
the payment thereof, in each case without the consent of each Holder of
Securities affected thereby, (b) alter in a manner adverse to the Holders
the conversion provisions of Article XIII without the consent of each
Holder of Securities affected thereby, (c) reduce the aforesaid percentage
of Securities, the consent of the holders of which is required for any such
supplemental indenture, or amend this Section 7.2, without the consent of
each Holder of Securities affected thereby or (d) alter in a manner adverse
to the Holders the provisions of Section 3.11 without the consent of each
Holder of Securities affected thereby.
Upon the request of the Issuer, accompanied by a copy of a
resolution of the Board of Directors certified by the Secretary or an
Assistant Secretary of the Issuer authorizing the execution of any such
supplemental indenture, and upon the filing with the Trustee of evidence of
the consent of Securityholders and other documents, if any, required by
Section 6.1, the Trustee shall join with the Issuer in the execution of
such supplemental indenture unless such supplemental indenture affects the
Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not
be obligated to, enter into such supplemental indenture.
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It shall not be necessary for the consent of the
Securityholders under this Section to approve the particular form of any
proposed supplemental indenture, but it shall be sufficient if such consent
shall approve the substance thereof.
Promptly after the execution by the Issuer and the Trustee of
any supplemental indenture pursuant to the provisions of this Section, the
Issuer shall mail a notice thereof by first-class mail to the holders of
Securities at their addresses as they shall appear on the registry books of
the Issuer, setting forth in general terms the substance of such
supplemental indenture. Any failure of the Issuer to mail such notice, or
any defect therein, shall not, however, in any way impair or affect the
validity of any such supplemental indenture.
SECTION 7.3 Effect of Supplemental Indenture. Upon the
execution of any supplemental indenture pursuant to the provisions hereof,
this Indenture shall be and be deemed to be modified and amended in
accordance therewith and the respective rights, limitations of rights,
obligations, duties and immunities under this Indenture of the Trustee, the
Issuer and the holders of Securities shall thereafter be determined,
exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
SECTION 7.4 Documents to Be Given to Trustee. The Trustee,
subject to the provisions of Sections 5.1 and 5.2, may receive an Officers'
Certificate and an Opinion of Counsel as conclusive evidence that any such
supplemental indenture complies with the applicable provisions of this
Indenture.
SECTION 7.5 Notation on Securities in Respect of Supplemental
Indentures. Securities authenticated and delivered after the execution of
any supplemental indenture pursuant to the provisions of this Article may
bear a notation in form approved by the Trustee as to any matter provided
for by such supplemental indenture or as to any action taken at any such
meeting. If the Issuer or the Trustee shall so determine, new Securities
so modified as to conform, in the opinion of the Trustee and the Board of
Directors, to any modification of this Indenture contained in any such
supplemental indenture may be prepared by the Issuer, authenticated by the
Trustee and delivered in exchange for the Securities then outstanding.
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ARTICLE VIII
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
SECTION 8.1 When Issuer May Merge, Etc. The Issuer may not
consolidate with, merge with or into, or transfer sell, assign, lease,
convey or otherwise dispose (collectively, "transfer") of all or
substantially all of its assets (whether as an entirety or substantially as
an entirety in one transaction or a series of related transactions) to any
Person unless:
(a) the Issuer shall be the continuing Person, or the
Person (if other than the Issuer) formed by such consolidation or into
which the Issuer is merged or to which properties and assets of the
Issuer are transferred shall be a solvent business entity organized and
existing under the laws of the United States or any State thereof or the
District of Columbia and shall expressly assume all the obligations of
the Issuer under the Securities and the Indenture in a supplemental
indenture in a form reasonably satisfactory to the Trustee; and
(b) immediately prior to and after giving effect to such
transaction no Default or Event of Default shall have occurred and be
continuing.
Notwithstanding the foregoing, this Section shall not prohibit
a transaction, the principal purpose of which is (as determined in good
faith by the Board of Directors of the Issuer and evidenced by the
resolution thereof) to change the state of incorporation of the Issuer, and
such transaction does not have as one of its purposes the evasion of the
limitations imposed by this Section.
SECTION 8.2 Successor Corporation Substituted. In case of
any such consolidation, merger, sale or conveyance, and following such an
assumption by the successor corporation, such successor corporation shall
succeed to and be substituted for the Issuer, with the same effect as if it
had been named herein.
Such successor corporation may cause to be signed, and may
issue either in its own name or in the name of the Issuer prior to such
succession any or all of the Securities issuable hereunder which
theretofore shall not have been signed by the Issuer and delivered to the
Trustee; and, upon the order of such successor corporation, instead of the
Issuer, and subject to all the terms, conditions and limitations in this
Indenture prescribed, the Trustee shall authenticate and shall deliver any
Securities which previously shall have been signed and delivered by the
officers of the Issuer to the Trustee for authentication, and any
Securities which such successor corporation thereafter shall cause to be
signed and delivered to the Trustee for that purpose. All of the
Securities so issued shall in all respects have the same legal rank and
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benefit under this Indenture as the Securities theretofore or thereafter
issued in accordance with the terms of this Indenture as though all of such
Securities had been issued at the date of the execution hereof.
In case of any such consolidation, merger, sale, lease or
conveyance such changes in phraseology and form (but not in substance) may
be made in the Securities thereafter to be issued as may be appropriate.
In the event of any such sale or conveyance the Issuer or any
successor corporation which shall theretofore have become such in the
manner described in this Article shall be discharged from all obligations
and covenants under this Indenture and the Securities and may be liquidated
and dissolved.
SECTION 8.3 Opinion of Counsel to Trustee. The Trustee,
subject to the provisions of Sections 5.1 and 5.2, may receive an Officers'
Certificate and an Opinion of Counsel as conclusive evidence that any such
consolidation, merger, sale, lease or conveyance, and any such assumption,
and any such liquidation or dissolution, complies with the applicable
provisions of this Indenture and that all conditions precedent related to
such transaction and provided for herein have been complied with.
ARTICLE IX
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS
SECTION 9.1 Satisfaction and Discharge of Indenture. (a) If
at any time (i) the Issuer shall have paid or caused to be paid the
principal of and interest on all the Securities outstanding hereunder, as
and when the same shall have become due and payable, or (ii) the Issuer
shall have delivered to the Trustee for cancellation all Securities
theretofore authenticated (other than any Securities which shall have been
destroyed, lost or stolen and which shall have been replaced or paid as
provided in Section 2.6) or (iii) (A) all such Securities not theretofore
delivered to the Trustee for cancellation shall have become due and payable
or are by their terms to become due and payable within one year or are to
be called for redemption under arrangements satisfactory to the Trustee for
the giving of notice of redemption, and (B) the Issuer shall have
irrevocably deposited or caused to be deposited with the Trustee, as trust
funds, (x) the entire amount in cash (other than moneys repaid by the
Trustee or any paying agent to the Issuer in accordance with Section 9.4),
(y) U.S. Government Obligations maturing as to principal and interest at
such times and in such amounts as will insure the availability of cash or
(z) a combination thereof sufficient to pay at maturity or upon redemption,
in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification
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thereof delivered to the Trustee, all such Securities not theretofore
delivered to the Trustee for cancellation, including principal and interest
due or to become due to such date of maturity as the case may be, and if,
in any such case, the Issuer shall also pay or cause to be paid all other
sums payable hereunder by the Issuer, then this Indenture shall cease to be
of further effect (except as to (1) rights of registration of transfer and
exchange and the Issuer's right of optional redemption, (2) rights of
Holders to convert the Securities, (3) substitution of apparently
mutilated, defaced, destroyed, lost or stolen Securities, (4) rights of
Holders to receive payments of principal thereof and interest thereon,
(5) the rights, obligations and immunities of the Trustee hereunder and
(6) rights of the Securityholders as beneficiaries hereof with respect to
the property so deposited with the Trustee payable to all or any of them),
and the Trustee, on demand of the Issuer accompanied by an Officers'
Certificate and an Opinion of Counsel and at the cost and expense of the
Issuer, shall execute proper instruments acknowledging such satisfaction of
and discharging this Indenture, if:
(A) such deposit will not result in a breach or violation
of, or constitute a default under, any agreement or instrument to which
the Issuer is a party or by which it is bound; and
(B) the Issuer has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent relating to the defeasance contemplated by this provision have
been complied with.
The Issuer agrees to reimburse the Trustee for any costs or
expenses thereafter reasonably and properly incurred (including reasonable
counsel fees) and to compensate the Trustee for any services thereafter
reasonably and properly rendered by the Trustee in connection with this
Indenture or the Securities.
(b) The Issuer shall be deemed to have paid and
discharged the entire indebtedness on all Securities outstanding on the
date of the deposit referred to in subparagraph (A) below, and the
provisions of this Indenture with respect to the Securities shall no longer
be in effect (except as to (i) rights of registration of transfer and
exchange and the Issuer's right of optional redemption, (ii) rights of
Holders to convert the Securities, (iii) substitution of apparently
mutilated, defaced, destroyed, lost or stolen Securities, (iv) rights of
Holders to receive payments of principal thereof and interest thereon,
(v) rights, obligations, duties and immunities of the Trustee hereunder and
(vi) rights of the Securityholders as beneficiaries hereof with respect to
the property so deposited with the Trustee payable to all or any of them)
and the Trustee, at the expense of the Issuer, shall at the Issuer's
request, execute proper instruments acknowledging the same, if
(A) with reference to this provision the Issuer has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee as trust funds in trust, specifically
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pledged as security for, and dedicated solely to, the benefit of the
Securityholders (x) cash in an amount, or (y) U.S. Government Obligations,
maturing as to principal and interest at such times and in such amounts as
will insure the availability of cash or (z) a combination thereof,
sufficient, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered
to the Trustee, to pay the principal and interest on all Securities
outstanding on each date that such principal or interest is due and
payable;
(B) such deposit will not result in a breach or violation
of, or constitute a default under, any agreement or instrument to which
the Issuer is a party or by which it is bound;
(C) the Issuer has delivered to the Trustee an Opinion of
Counsel or a ruling of the Internal Revenue Service to the effect that
the Securityholders will not recognize income, gain or loss for federal
income tax purposes as a result of such deposit, defeasance and discharge
and will be subject to federal income tax on the same amount and in the
same manner and at the same times as would have been the case if such
deposit, defeasance and discharge had not occurred; and
(D) the Issuer has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent relating to the defeasance contemplated by this provision have
been complied with.
SECTION 9.2 Application by Trustee of Funds Deposited for
Payment of Securities. Subject to Section 9.4, all moneys deposited with
the Trustee pursuant to Section 9.1 shall be held in trust and applied by
it to the payment, either directly or through any paying agent (including
the Issuer acting as its own paying agent), to the holders of the
particular Securities for the payment or redemption of which such moneys
have been deposited with the Trustee, of all sums due and to become due
thereon for principal and interest; but such money need not be segregated
from other funds except to the extent required by law.
SECTION 9.3 Repayment of Moneys Held by Paying Agent. In
connection with the satisfaction and discharge of this Indenture all moneys
then held by any paying agent under the provisions of this Indenture shall,
upon demand of the Issuer, be repaid to it or paid to the Trustee and
thereupon such paying agent shall be released from all further liability
with respect to such moneys.
SECTION 9.4 Return of Moneys Held by Trustee and Paying Agent
Unclaimed for Three Years. Any moneys deposited with or paid to the
Trustee or any paying agent for the payment of the principal of or interest
on any Security and not applied but remaining unclaimed for three years
after the date upon which such principal or interest shall have become due
and
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payable, shall, upon the written request of the Issuer and unless otherwise
required by mandatory provisions of applicable escheat or abandoned or
unclaimed property law, be repaid to the Issuer by the Trustee or such
paying agent, and the holder of such Security shall, unless otherwise
required by mandatory provisions of applicable escheat or abandoned or
unclaimed property laws, thereafter look only to the Issuer for any payment
which such holder may be entitled to collect, and all liability of the
Trustee or any paying agent with respect to such moneys shall thereupon
cease.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1 Incorporators, Stockholders, Officers and
Directors of Issuer Exempt from Individual Liability. No recourse under or
upon any obligation, covenant or agreement contained in this Indenture, or
in any Security, or because of any indebtedness evidenced thereby, shall be
had against any incorporator, as such or against any past, present or
future stockholder, officer or director, as such, of the Issuer or of any
successor, either directly or through the Issuer or any successor, under
any rule of law, statute or constitutional provision or by the enforcement
of any assessment or by any legal or equitable proceeding or otherwise, all
such liability being expressly waived and released by the acceptance of the
Securities by the holders thereof and as part of the consideration for the
issue of the Securities.
SECTION 10.2 Provisions of Indenture for the Sole Benefit of
Parties and Securityholders. Nothing in this Indenture or in the
Securities, expressed or implied, shall give or be construed to give to any
person, firm or corporation, other than the parties hereto and their
successors and the holders of the Securities, any legal or equitable right,
remedy or claim under this Indenture or under any covenant or provision
herein contained, all such covenants and provisions being for the sole
benefit of the parties hereto and their successors and of the holders of
the Securities.
SECTION 10.3 Successors and Assigns of Issuer Bound by
Indenture. All the covenants, stipulations, promises and agreements in
this Indenture contained by or in behalf of the Issuer shall bind its
successors and assigns, whether so expressed or not.
SECTION 10.4 Notices and Demands on Issuer, Trustee and
Securityholders. Any notice or demand which by any provision of this
Indenture is required or permitted to be given or served by the Trustee or
by the holders of Securities to or on the Issuer may be given or served by
being deposited postage prepaid, first-class mail (except as otherwise
specifically provided herein) addressed (until another address of the
Issuer is filed by the Issuer with the Trustee) to Southwestern Financial
Corporation, 745 Fifth Avenue, Fifth Floor, New York, New
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York 10151, Attention: Chief Financial Officer. Any notice, direction,
request or demand by the Issuer or any Securityholder to or upon the
Trustee shall be deemed to have been sufficiently given or made, for all
purposes, if given or made at the Corporate Trust Office.
Where this Indenture provides for notice to Holders, such
notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each
Holder entitled thereto, at his last address as it appears in the Security
register. In any case where notice to Holders is given by mail, neither
the failure to mail such notice, nor any defect in any notice so mailed, to
any particular Holder shall affect the sufficiency of such notice with
respect to other Holders. Where this Indenture provides for notice in any
manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver
shall be the equivalent of such notice. Waivers of notice by Holders shall
be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
In case, by reason of the suspension of or irregularities in
regular mail service, it shall be impracticable to mail notice to the
Issuer and Securityholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
SECTION 10.5 Officers' Certificates and Opinions of Counsel;
Statements to Be Contained Therein. Upon any application or demand by the
Issuer to the Trustee to take any action under any of the provisions of
this Indenture, the Issuer shall furnish to the Trustee an Officers'
Certificate stating that all conditions precedent provided for in this
Indenture relating to the proposed action have been complied with and an
Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent have been complied with, except that in the case of
any such application or demand as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to
such particular application or demand, no additional certificate or opinion
need be furnished.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or
covenant provided for in this Indenture shall include (a) a statement that
the person making such certificate or opinion has read such covenant or
condition, (b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based, (c) a statement that,
in the opinion of such Person, he has made such examination or
investigation as is necessary to enable him to express an informed opinion
as to whether or not such covenant or condition has been complied with and
(d) a statement as to whether or not, in the opinion of such Person, such
condition or covenant has been complied with.
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Any certificate, statement or opinion of an officer of the
Issuer may be based, insofar as it relates to legal matters, upon a
certificate or opinion of or representations by counsel, unless such
officer knows that the certificate or opinion or representations with
respect to the matters upon which his certificate, statement or opinion may
be based as aforesaid are erroneous, or in the exercise of reasonable care
should know that the same are erroneous. Any certificate, statement or
opinion of counsel may be based, insofar as it relates to factual matters
and information in the possession of the Issuer, upon the certificate,
statement or opinion of or representations by an officer or officers of the
Issuer, unless such counsel knows that the certificate, statement or
opinion or representations with respect to the matters upon which his
certificate, statement or opinion may be based as aforesaid are erroneous,
or in the exercise of reasonable care should know that the same are
erroneous.
Any certificate, statement or opinion of an officer of the
Issuer or of counsel may be based, insofar as it relates to accounting
matters, upon a certificate or opinion of or representations by an
accountant or firm of accountants in the employ of the Issuer, unless such
officer or counsel, as the case may be, knows that the certificate or
opinion or representations with respect to the accounting matters upon
which his certificate, statement or opinion may be based as aforesaid are
erroneous, or in the exercise of reasonable care should know that the same
are erroneous.
Any certificate or opinion of any independent firm of public
accountants filed with the Trustee shall contain a statement that such firm
is independent.
SECTION 10.6 Payments Due on Saturdays, Sundays and Holidays.
If the date of maturity of interest on or principal of the Securities or
the date fixed for redemption of any Security shall not be a Business Day,
then payment of interest or principal need not be made on such date, but
may be made on the next succeeding Business Day with the same force and
effect as if made on the date of maturity or the date fixed for redemption,
and no interest shall accrue for the period after such date.
SECTION 10.7 Conflict of Any Provision of Indenture with
Trust Indenture Act of 1939. If and to the extent that any provision of
this Indenture limits, qualifies or conflicts with another provision
included in this Indenture by operation of Sections 310 to 317, inclusive,
of the Trust Indenture Act of 1939 (an "incorporated provision"), such
incorporated provision shall control.
SECTION 10.8 TEXAS LAW TO GOVERN. THIS INDENTURE AND EACH
SECURITY SHALL BE DEEMED TO BE A CONTRACT UNDER THE LAWS OF THE STATE OF
TEXAS, AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF SAID STATE, EXCEPT AS MAY OTHERWISE BE REQUIRED BY MANDATORY PROVISIONS
OF LAW.
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SECTION 10.9 Counterparts. This Indenture may be executed in
any number of counterparts, each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.
SECTION 10.10 Effect of Headings. The Article and Section
headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.1 Right of Optional Redemption; Prices. The
Issuer at its option may, at any time, redeem all, or from time to time any
part of, the Securities at the redemption prices set forth in the
Securities, together with accrued and unpaid interest to the date fixed for
redemption; provided, however, that no such optional redemption may be
effected prior to December 15, 1998.
SECTION 11.2 Notice of Redemption; Partial Redemptions.
Notice of redemption to the Holders of Securities to be redeemed as a whole
or in part shall be given by mailing notice of such redemption by first
class mail, postage prepaid, at least 30 days and not more than 60 days
prior to the date fixed for redemption to such holders of Securities at
their last addresses as they shall appear upon the registry books. Any
notice which is mailed in the manner herein provided shall be conclusively
presumed to have been duly given, whether or not the holder receives the
notice. Failure to give notice by mail, or any defect in the notice to the
Holder of any Security designated for redemption as a whole or in part
shall not affect the validity of the proceedings for the redemption of any
other Security.
The notice of redemption to each such holder shall specify the
principal amount of each Security held by such Holder to be redeemed, the
date fixed for redemption, the redemption price, the place or places of
payment, that payment will be made upon presentation and surrender of such
Securities, that such redemption is pursuant to the optional redemption
provisions, that interest accrued to the date fixed for redemption will be
paid as specified in said notice, that on and after said date interest
thereon or on the portions thereof to be redeemed will cease to accrue and
that the conversion rights provided by Article XIII hereof terminate at the
close of business on the date fixed for redemption. In case any Security
is to be redeemed in part only the notice of redemption shall state the
portion of the principal amount thereof to be redeemed and shall state that
on and after the date fixed for redemption, upon surrender of such
Security, a new Security or Securities in principal amount equal to the
unredeemed portion thereof will be issued.
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The notice of redemption of Securities to be redeemed at the
option of the Issuer shall be given by the Issuer or, at the Issuer's
request, by the Trustee in the name and at the expense of the Issuer.
At least one Business Day prior to the redemption date
specified in the notice of redemption given as provided in this Section,
the Issuer will deposit with the Trustee or with one or more paying agents
(or, if the Issuer is acting as its own paying agent, set aside, segregate
and hold in trust as provided in Section 3.4) an amount of money sufficient
to redeem on the redemption date all the Securities so called for
redemption at the appropriate redemption price, together with accrued
interest to the date fixed for redemption. If less than all the
outstanding Securities are to be redeemed the Issuer will deliver to the
Trustee at least 60 days prior to the date fixed for redemption an
Officers' Certificate stating the aggregate principal amount of Securities
to be redeemed.
If less than all the Securities are to be redeemed, the
Trustee shall select, either pro rata or by such method as the Trustee
shall deem fair and appropriate, securities to be redeemed in whole or in
part. Securities may be redeemed in part in multiples of $1,000.00 only.
The Trustee shall, upon the request of the Issuer, promptly notify the
Issuer in writing of the Securities selected for redemption and, in the
case of any Securities selected for partial redemption, the principal
amount thereof to be redeemed. For all purposes of this Indenture, unless
the context otherwise requires, all provisions relating to the redemption
of Securities shall relate, in the case of any Security redeemed or to be
redeemed only in part, to the portion of the principal amount of such
Security which has been or is to be redeemed.
SECTION 11.3 Payment of Securities Called for Redemption. If
notice of redemption has been given as above provided, the Securities or
portions of Securities specified in such notice shall become due and
payable on the date and at the place stated in such notice at the
applicable redemption price, together with interest accrued to the date
fixed for redemption, and on and after said date (unless the Issuer shall
default in the payment of such Securities at the redemption price, together
with interest accrued to said date) interest on the Securities or portions
of Securities so called for redemption shall cease to accrue and, except as
provided in Sections 5.5 and 9.4, such Securities shall cease from and
after the date fixed for redemption to be entitled to any benefit or
security under this Indenture, and the holders thereof shall have no right
in respect of such Securities except the right to receive the redemption
price thereof and unpaid interest to the date fixed for redemption. On
presentation and surrender of such Securities at a place of payment
specified in said notice, said Securities or the specified portions thereof
shall be paid and redeemed by the Issuer at the applicable redemption
price, together with interest accrued thereon to the date fixed for
redemption; provided that any semi-annual payment of interest becoming due
on the date fixed for redemption shall be payable to the holders of such
Securities registered as such on the relevant record date subject to the
terms and provisions of Section 2.4 hereof.
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If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal shall, until paid or
duly provided for, bear interest from the date fixed for redemption at the
rate borne by the Security.
Upon presentation of any Security redeemed in part only, the
Issuer shall execute and the Trustee shall authenticate and deliver to or
on the order of the holder thereof, at the expense of the Issuer, a new
Security or Securities, of authorized denominations, in principal amount
equal to the unredeemed portion of the Security so presented.
SECTION 11.4 Exclusion of Certain Securities from Eligibility
for Selection for Redemption. Securities shall be excluded from
eligibility for selection for redemption if they are identified by
registration and certificate number in a written statement signed by an
authorized officer of the Issuer and delivered to the Trustee at least 40
days prior to the last date on which notice of redemption may be given as
being owned of record and beneficially by, and not pledged or hypothecated
by either (a) the Issuer or (b) an entity specifically identified in such
written statement directly or indirectly controlling or controlled by or
under direct or indirect common control with the Issuer.
ARTICLE XII
SUBORDINATION OF SECURITIES
SECTION 12.1 Securities Subordinated to Senior Indebtedness.
The Issuer covenants and agrees and the Trustee and each Holder of the
Securities, by its acceptance thereof, likewise covenants and agrees, that
all Securities shall be issued subject to the provisions of this Article
XII; and the Trustee and each Person holding any Security, whether upon
original issue or upon transfer, assignment or exchange thereof, accepts
and agrees that the payment of all Obligations on the Securities (except
for the payment of fees and expenses of the Trustee and any indemnity under
Section 5.6) by the Issuer shall, to the extent and in the manner herein
set forth, be subordinated and junior in right of payment to the prior
payment in full in cash or Cash Equivalents (or such payment shall be duly
provided for to the satisfaction of the holders of the Senior Indebtedness)
of all Obligations on the Senior Indebtedness; that the subordination is
for the benefit of, and shall be enforceable directly by, the holders of
Senior Indebtedness, and that each holder of Senior Indebtedness whether
now outstanding or hereafter created, incurred, assumed or guaranteed shall
be deemed to have acquired Senior Indebtedness in reliance upon the
covenants and provisions contained in this Indenture and the Securities.
SECTION 12.2 No Payment on Securities in Certain
Circumstances. (a) If any default occurs and is continuing in the payment
when due, whether at maturity, upon any redemption, by declaration or
otherwise, of any principal of, interest on or any other amounts owing with
respect to any Senior Indebtedness, no payment of any kind or character
(except (i) in
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Qualified Capital Stock issued by the Issuer to pay interest on the
Securities or issued in exchange for the Securities, (ii) in securities
substantially identical to the Securities issued by the Issuer in payment
of interest accrued thereon or (iii) in securities issued by the Issuer
which are subordinated to the Senior Indebtedness at least to the same
extent as the Securities and having a Weighted Average Life to Maturity at
least equal to the remaining Weighted Average Life to Maturity of the
Securities (the issuance of such subordinated securities to be consented to
by the holders of at least a majority of the outstanding amount of Senior
Indebtedness consisting of each class of Designated Senior Indebtedness
then outstanding, which subordinated securities shall be issued in exchange
for outstanding Securities or to pay interest accrued on outstanding
Securities)) shall be made by the Issuer or any other Person on behalf of
the Issuer with respect to any Obligations on the Securities or to acquire
any of the Securities for cash or property or otherwise. In addition, if
any other event of default occurs and is continuing (or if such an event of
default would occur upon any payment with respect to the Securities or
would arise upon the passage of time as a result of such payment) with
respect to any Designated Senior Indebtedness (as such event of default is
defined in the instrument creating or evidencing such Designated Senior
Indebtedness) and such event of default permits the holders of such
Designated Senior Indebtedness then outstanding to accelerate the maturity
thereof and if the Representative for the respective issue of Designated
Senior Indebtedness gives written notice of the event of default to the
Issuer and the Trustee (a "Default Notice"), then, unless and until all
events of default have been cured or waived or have ceased to exist with
respect to such issue of Designated Senior Indebtedness or the Issuer and
the Trustee receive notice from the Representative for the respective issue
of Designated Senior Indebtedness terminating the Blockage Period (as
defined below), during the 180 days after the delivery of such Default
Notice (the "Blockage Period"), neither the Issuer nor any other Person on
behalf of the Issuer shall make any payment of any kind or character
(except (i) in Qualified Capital Stock issued by the Issuer to pay interest
on the Securities or issued in exchange for the Securities, (ii) in
securities substantially identical to the Securities issued by the Issuer
in payment of interest accrued thereon or (iii) in securities issued by the
Issuer which are subordinated to the Senior Indebtedness at least to the
same extent as the Securities and having a Weighted Average Life to
Maturity at least equal to the remaining Weighted Average Life to Maturity
of the Securities (the issuance of such subordinated securities to be
consented to by the holders of at least a majority of the outstanding
amount of Senior Indebtedness consisting of each class of Designated Senior
Indebtedness then outstanding, which subordinated securities shall be
issued in exchange for outstanding Securities or to pay interest accrued on
outstanding Securities)) with respect to any Obligations on the Securities
or to acquire any of the Securities for cash or property or otherwise.
Notwithstanding anything herein to the contrary, in no event will a
Blockage Period extend beyond 180 days from the date the payment on the
Securities was due and only one such Blockage Period may be commenced
within any 360 consecutive days. For all purposes of this Section 12.2, no
event of default which existed or was continuing on the date of the
commencement of any Blockage Period with respect to the Designated Senior
Indebtedness initiating such Blockage Period shall be, or be made, the
basis for the commencement of a second Blockage Period by the
Representative of such Designated
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Senior Indebtedness, whether or not within a period of 360 consecutive
days, unless such event of default shall have been cured or waived for a
period of not less than 90 consecutive days.
(b) In the event that, notwithstanding the foregoing, any
payment shall be received by the Trustee or any Holder when such payment is
prohibited by Section 12.2(a), such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior
Indebtedness (pro rata to such holders on the basis of the respective
amount of Senior Indebtedness held by such holders) or their respective
Representatives, as their respective interests may appear. The Trustee
shall be entitled to rely on information regarding amounts then due and
owing on the Senior Indebtedness, if any, received from the holders of
Senior Indebtedness (or their Representatives) or, if such information is
not received from such holders or their Representatives, from the Issuer
and only amounts included in the information provided to the Trustee shall
be paid to the holders of Senior Indebtedness.
Nothing contained in this Article XII shall limit the right of
the Trustee or the Holders of Securities to take any action to accelerate
the maturity of the Securities pursuant to Section 4.1 or to pursue any
rights or remedies hereunder; provided that all Senior Indebtedness
thereafter due or declared to be due shall first be paid in full in cash or
Cash Equivalents before the Holders are entitled to receive any payment
with respect to Obligations on the Securities.
SECTION 12.3 Payment Over of Proceeds upon Dissolution, Etc.
(a) Upon any payment or distribution of assets of the Issuer of
any kind or character, whether in cash, property or securities, to
creditors upon any liquidation, dissolution, winding-up, assignment for the
benefit of creditors or marshalling of assets of the Issuer or in a
bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to the Issuer or its property, whether voluntary or
involuntary, all amounts due or to become due upon all Senior Indebtedness
shall first be paid in full in cash or Cash Equivalents, or such payment
duly provided for to the satisfaction of the holders of the Senior
Indebtedness, before any payment or distribution of any kind or character
is made on account of any Obligations on the Securities, or for the
acquisition of any of the Securities for cash or property or otherwise.
Upon any such dissolution, winding-up, liquidation, reorganization,
receivership or similar proceeding, any payment or distribution of assets
of the Issuer of any kind or character, whether in cash, property or
securities, to which the Holders of the Securities or the Trustee under
this Indenture would be entitled (other than any payments of fees and
expenses of the Trustee and any indemnity made under Section 5.6), except
for the provisions hereof, shall be paid by the Issuer or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making
such payment or distribution, or by the Holders of the Securities or by the
Trustee under this Indenture if received by them, directly to the holders
of Senior Indebtedness (pro rata to such holders on the basis of the
respective amounts of Senior Indebtedness held by such holders) or their
respective Representatives, or to the trustee or trustees under any
indenture pursuant to which any of such Senior Indebtedness may have been
issued, as their respective interests may appear, for application to the
payment of Senior
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Indebtedness remaining unpaid until all such Senior Indebtedness has been
paid in full in cash or Cash Equivalents after giving effect to any
concurrent payment, distribution or provision therefor to or for the
holders of Senior Indebtedness.
(b) To the extent any payment of Senior Indebtedness
(whether by or on behalf of the Issuer, as proceeds of security or
enforcement of any right of setoff or otherwise) is declared to be
fraudulent or preferential, set aside or required to be paid to any
receiver, trustee in bankruptcy, liquidating trustee, agent or other
similar person under any bankruptcy, insolvency, receivership, fraudulent
conveyance or similar law, then, if such payment is recovered by, or paid
over to, such receiver, trustee in bankruptcy, liquidating trustee, agent
or other similar Person, the Senior Indebtedness or part thereof originally
intended to be satisfied shall be deemed to be reinstated and outstanding
as if such payment had not occurred.
(c) In the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Issuer of any kind or character,
whether in cash, property or securities, shall be received by any Holder
when such payment or distribution is prohibited by Section 12.3(a), such
payment or distribution shall be held in trust for the benefit of, and
shall be paid over or delivered to, the holders of Senior Indebtedness (pro
rata to such holders on the basis of the respective amount of Senior
Indebtedness held by such holders) or their respective Representatives, or
to the trustee or trustees under any indenture pursuant to which any of
such Senior Indebtedness may have been issued, as their respective
interests may appear, for application to the payment of Senior Indebtedness
remaining unpaid until all such Senior Indebtedness has been paid in full
in cash or Cash Equivalents, after giving effect to any concurrent payment,
distribution or provision therefor to or for the holders of such Senior
Indebtedness.
(d) The consolidation of the Issuer with, or the merger
of the Issuer with or into, another corporation or the liquidation or
dissolution of the Issuer following the conveyance or transfer of all or
substantially all of its assets, to another corporation upon the terms and
conditions provided in Article Five and as long as permitted under the
terms of the Senior Indebtedness shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section
if such other corporation shall, as a part of such consolidation, merger,
conveyance or transfer, assume the Issuer's obligations hereunder in
accordance with Article Five.
SECTION 12.4 Payments May Be Paid Prior to Dissolution.
Nothing contained in this Article XII or elsewhere in this Indenture shall
prevent (i) the Issuer, except under the conditions described in Sections
12.2 and 12.3, from making payments at any time for the purpose of making
payments of principal of and interest on the Securities, or from depositing
with the Trustee any moneys for such payments, or (ii) in the absence of
actual knowledge by the Trustee that a given payment would be prohibited by
Section 12.2 or 12.3, the application by the
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Trustee of any moneys deposited with it for the purpose of making such
payments of principal of, and interest on, or the redemption price or
Repurchase Payment on, the Securities to the Holders entitled thereto
unless at least one Business Day prior to the date upon which such payment
would otherwise become due and payable, the Trustee shall have received the
written notice provided for in Section 12.2(a) or in Section 12.7. The
Issuer shall give prompt written notice to the Trustee of any dissolution,
winding-up, liquidation or reorganization of the Issuer.
SECTION 12.5 Subrogation. Subject to the payment in full in
cash or Cash Equivalents of all Senior Indebtedness, the Holders of the
Securities shall be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions of cash, property or
securities of the Issuer applicable to the Senior Indebtedness until the
Securities shall be paid in full; and, for the purposes of such
subrogation, no such payments or distributions to the holders of the Senior
Indebtedness by or on behalf of the Issuer or by or on behalf of the
Holders by virtue of this Article XII which otherwise would have been made
to the Holders shall, as between the Issuer and the Holders of the
Securities, be deemed to be a payment by the Issuer to or on account of the
Senior Indebtedness, it being understood that the provisions of this
Article XII are and are intended solely for the purpose of defining the
relative rights of the Holders of the Securities, on the one hand, and the
holders of the Senior Indebtedness, on the other hand.
SECTION 12.6 Obligations of the Issuer Unconditional.
Nothing contained in this Article XII or elsewhere in this Indenture or in
the Securities is intended to or shall impair, as among the Issuer, its
creditors other than the holders of Senior Indebtedness, and the Holders of
the Securities, the obligation of the Issuer, which is absolute and
unconditional, to pay to the Holders of the Securities the principal of and
any interest on the Securities as and when the same shall become due and
payable in accordance with their terms, or is intended to or shall affect
the relative rights of the Holders of the Securities and creditors of the
Issuer other than the holders of the Senior Indebtedness, nor shall
anything herein or therein prevent the Holder of any Security or the
Trustee on its behalf from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if
any, in respect of cash, property or securities of the Issuer received upon
the exercise of any such remedy.
SECTION 12.7 Notice to Trustee.
The Issuer shall give prompt written notice to the Trustee of any fact
known to the Issuer which would prohibit the making of any payment to or by
the Trustee in respect of the Securities pursuant to the provisions of this
Article XII. Regardless of anything to the contrary contained in this
Article XII or elsewhere in this Indenture, the Trustee shall not be
charged with knowledge of the existence of any default or event of default
with respect to any Senior Indebtedness or of any other facts which would
prohibit the making of any payment to or by the Trustee unless and until a
trust officer of the Trustee shall have received notice in writing from the
Issuer, or from a holder of Senior Indebtedness or a Representative
therefor, and, prior to the receipt of any such written notice, the
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Trustee shall be entitled to assume (in the absence of actual knowledge to
the contrary) that no such facts exist.
In the event that the Trustee determines in good faith that
any evidence is required with respect to the right of any Person as a
holder of Senior Indebtedness to participate in any payment or distribution
pursuant to this Article XII, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the
amounts of Senior Indebtedness held by such Person, the extent to which
such Person is entitled to participate in such payment or distribution and
any other facts pertinent to the rights of such Person under this Article
XII, and if such evidence is not furnished the Trustee may defer any
payment to such Person pending judicial determination as to the right of
such Person to receive such payment.
SECTION 12.8 Reliance on Judicial Order or Certificate of
Liquidating Agent. Upon any payment or distribution of assets of the
Issuer referred to in this Article XII, the Trustee, subject to the
provisions of Article Seven hereof, and the Holders of the Securities shall
be entitled to rely upon any order or decree made by any court of competent
jurisdiction in which bankruptcy, dissolution, winding-up, liquidation or
reorganization proceedings are pending, or upon a certificate of the
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, delivered to the Trustee or the
Holders of the Securities, for the purpose of ascertaining the Persons
entitled to participate in such distribution, the holders of the Senior
Indebtedness and other Indebtedness of the Issuer, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article XII.
SECTION 12.9 Trustee's Relation to Senior Indebtedness. The
Trustee and any agent of the Issuer or the Trustee shall be entitled to all
the rights set forth in this Article XII with respect to any Senior
Indebtedness which may at any time be held by it in its individual or any
other capacity to the same extent as any other holder of Senior
Indebtedness and nothing in this Indenture shall deprive the Trustee or any
such agent of any of its rights as such holder.
With respect to the holders of Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its duties,
covenants, responsibilities and obligations as are specifically set forth
in this Article XII, and no implied duties, covenants, responsibilities or
obligations with respect to the holders of Senior Indebtedness shall be
read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Indebtedness.
Whenever a distribution is to be made or a notice given to
holders or owners of Senior Indebtedness, the distribution may be made and
the notice may be given to their Representative, if any.
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SECTION 12.10 Subordination Rights Not Impaired by Acts or
Omissions of the Issuer or Holders of Senior Indebtedness. No right of any
present or future holders of any Senior Indebtedness to enforce
subordination as provided herein shall at any time in any way be prejudiced
or impaired by any act or failure to act on the part of the Issuer or by
any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Issuer with the terms of this Indenture, regardless of
any knowledge thereof which any such holder may have or otherwise be
charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness may, at any time and from
time to time, without the consent of or notice to the Trustee, without
incurring responsibility to the Trustee or the Holders of the Securities
and without impairing or releasing the subordination provided in this
Article XII or the obligations hereunder of the Holders of the Securities
to the holders of the Senior Indebtedness, do any one or more of the
following: (i) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, Senior Indebtedness, or otherwise
amend or supplement in any manner Senior Indebtedness, or any instrument
evidencing the same or any agreement under which Senior Indebtedness is
outstanding; (ii) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing Senior Indebtedness;
(iii) release any Person liable in any manner for the payment or collection
of Senior Indebtedness; and (iv) exercise or refrain from exercising any
rights against the Issuer and any other Person.
SECTION 12.11 Securityholders Authorize Trustee To Effectuate
Subordination of Securities. Each Holder of Securities by its acceptance
of such Security authorizes and expressly directs the Trustee on such
Holder's behalf to take such action as may be necessary or appropriate to
effectuate, as between the holders of Senior Indebtedness and the Holders
of Securities, the subordination provided in this Article XII, and appoints
the Trustee such Holder's attorney-in-fact to act for and on behalf of each
such Holder of Securities for such purposes, including, in the event of any
dissolution, winding-up, liquidation or reorganization of the Issuer
(whether in bankruptcy, insolvency, receivership, reorganization or similar
proceedings or upon an assignment for the benefit of creditors or
otherwise) tending towards liquidation of the business and assets of the
Issuer, the filing of a claim for the unpaid balance of its Securities and
accrued interest in the form required in those proceedings.
SECTION 12.12 This Article XII Not To Prevent Events of
Default. The failure to make a payment on account of principal of or
interest on the Securities by reason of any provision of this Article XII
will not be construed as preventing the occurrence of an Event of Default.
SECTION 12.13 Trustee's Compensation Not Prejudiced. Nothing
in this Article XII will apply to amounts due to the Trustee pursuant to
other sections in this Indenture.
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ARTICLE XIII
CONVERSION OF SECURITIES
SECTION 13.1 Right of Conversion. Except upon and after the
occurrence of a Trigger Event, the Securities shall not be convertible
prior to December 15, 1997. Except as provided in the immediately
preceding sentence, on and after December 15, 1997, the Holder of any
Security or Securities shall have the right at any time prior to the close
of business on the Business Day prior to Maturity, at his option, to
convert, subject to the terms and provisions of this Article XIII, the
principal of any such Security or Securities (or any portion of the
principal thereof that is an integral multiple of $1,000.00) into fully
paid and nonassessable shares of Class A Common Stock and Class B Non-
Voting Common Stock and such other securities and property as hereinafter
provided at the conversion price of $12.50 per share of Common Stock
(representing an initial conversion rate of 80 shares of Common Stock for
each $1,000 principal amount of Securities), or, in case an adjustment
therein has taken place pursuant to the provisions of Sections 13.8 or
13.9, then at the conversion price as so adjusted (the "Conversion Price").
Any Security or Securities converted into Common Stock pursuant to the
foregoing conversion right shall be entitled to receive Class A Common
Stock and Class B Non-Voting Common Stock in the ratio of three shares of
Class A Common Stock to one share of Class B Non-Voting Common Stock (that
is to say, for each 80 shares of Common Stock initially issuable upon
conversion of each $1,000.00 principal amount of Securities, the Holder
shall receive 60 shares of Class A Common Stock and 20 shares of Class B
Non-Voting Common Stock). With respect to any Security or Securities, or
any portion thereof, which shall be called for redemption pursuant to
Article XI, the right to convert any Security or Securities shall terminate
at the close of business on the date of redemption. The number of shares
of Class A Common Stock and Class B Non-Voting Common Stock, respectively,
into which each $1,000.00 principal amount of the Securities shall be
convertible (calculated as to each conversion to the nearest 1/100th of a
share) shall be determined by dividing $1,000.00 by the Conversion Price
then in effect. Such right shall be exercised by the surrender of the
Security or Securities, the principal of which is so to be converted, to
the Issuer at any time during usual business hours at any office or agency
to be maintained by it in accordance with the provisions of Section 3.2,
with the conversion notice on the reverse of such Security or Securities
completed and manually signed indicating that the Holder elects to convert
such Security or Securities or any portion thereof and specifying the name
or names (with address or addresses) in which a certificate or certificates
evidencing Class A Common Stock and Class B Non-Voting Common Stock are to
be issued and (if so required by the Issuer or the Trustee) by an
instrument or instruments of transfer in form satisfactory to the Issuer
and the Trustee, duly executed by the Holder or his attorney, duly
authorized in writing, and with and transfer tax stamps affixed or funds
provided therefor, if required pursuant to Section 13.4. For convenience,
the conversion of all or a portion, as the case may be, of the principal of
any Security into shares of Class A Common Stock and Class B Non-Voting
Common Stock is hereinafter sometimes referred to as the conversion of such
Security. All
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Securities surrendered for conversion shall, if surrendered to the Issuer
or any conversion agent, be delivered to the Trustee for cancellation and
cancelled by it or, if surrendered to the Trustee, shall be cancelled by
it; and, subject to the next succeeding sentence, no Security shall be
issued in lieu thereof. In the case of any Security which is converted in
part only, upon such conversion the Issuer shall execute and the Trustee
shall authenticate and deliver to the Holder thereof, at the expense of the
Issuer, a new Security or Securities of authorized denominations in an
aggregate principal amount equal to the unconverted portion of the
principal amount of such Security.
SECTION 13.2 Issuance of Class A Common Stock and Class B
Non-Voting Common Stock; Time of Conversion. As promptly as practicable
after the surrender, as herein provided, of any Security or Securities for
conversion, the Issuer shall deliver or cause to be delivered at any office
or agency to be maintained by it in accordance with the provisions of
Section 3.2 to or upon the written order of the Holder of the Security or
Securities so surrendered a certificate or certificates evidencing the
number of fully paid and nonassessable shares of Class A Common Stock and
Class B Non-Voting Common Stock of the Issuer into which such Security or
Securities (or portion thereof) may be converted in accordance with the
provisions of this Article XIII. Subject to the following provisions of
this paragraph and of Section 13.8, such conversion shall be deemed to have
been made immediately prior to the close of business on the date that such
Security or Securities shall have been surrendered in satisfactory form for
conversion, so that the rights of the Holder as a Holder shall cease with
respect to such Security or Securities (or the portion thereof being
converted) at such time, and the Person or Persons entitled to receive the
shares of Class A Common Stock and Class B Non-Voting Common Stock
deliverable upon conversion of such Security or Securities shall be treated
for all purposes as having become the record holder or holders of such
shares of Common Stock at such time, and such conversion shall be at the
Conversion Price in effect at such time; provided, however, that no such
surrender on any date when the stock transfer books of the Issuer shall be
closed shall be effective to constitute the Person or Persons entitled to
receive the shares of Class A Common Stock and Class B Non-Voting Common
Stock deliverable upon such conversion as the record holder or holders of
such shares of Common Stock on such date, but such surrender shall be
effective to constitute the Person or Persons entitled to receive such
shares of Common Stock as the record holder or holders thereof for all
purposes immediately prior to the close of business on the next succeeding
day on which such stock transfer books are open, and such conversion shall
be deemed to have been made at, and shall be made at the Conversion Price
in effect at such time and on such next succeeding day.
SECTION 13.3 No Adjustments in Respect of Interest or
Dividends. Securities surrendered for conversion during the period from
the close of business on any record date to the opening of business on the
next succeeding Interest Payment Date shall be accompanied by payment in
New York Clearing House funds or other funds acceptable to the Issuer of an
amount equal to the interest payable on such Interest Payment Date on the
principal amount of Securities
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being surrendered for conversion. No such payment shall be required to
accompany Securities called for redemption and surrendered for conversion
during such period. Except as provided above and subject to the last
paragraph of Section 2.4(a), no payment or adjustment shall be made upon
any conversion on account of any interest accrued on the Securities
surrendered for conversion or on account of any dividends on the shares of
Common Stock issued upon conversion.
SECTION 13.4 Taxes and Charges. The issuance of certificates
for shares of Common Stock upon the conversion of Securities shall be made
without charge to the converting Holder of Securities for such certificates
or for any tax in respect of the issuance of such certificates or the
securities represented thereby, and such certificates shall be issued in
the respective names of, or in such names as may be directed by, the
Holders of the Securities converted; provided, however, that the Issuer
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate in a
name other than that of the Holder of the Security converted, and the
Issuer shall not be required to issue or deliver such certificates unless
and until the Person or Persons requesting the issuance thereof shall have
paid to the Issuer the amount of such tax or shall have established to the
satisfaction of the Issuer that such tax has been paid.
SECTION 13.5 Trustee and Conversion Agents Not Liable. The
Issuer is solely responsible for performing the duties and responsibilities
contained in this Article XIII. Neither the Trustee nor any conversion
agent shall at any time be under any duty or responsibility to any Holder
of Securities to determine whether any facts exist which may require any
adjustment of the Conversion Price, or with respect to the nature or extent
of any such adjustment when made, or with respect to the method employed,
or herein or in any supplemental indenture provided to be employed, in
making the same. Neither the Trustee nor any conversion agent shall be
accountable with respect to the validity or value (or the kind or amount)
of any shares of Class A Common Stock, Class B Non-Voting Common Stock or
of any securities or cash or other property which may at any time be issued
or delivered upon the conversion of any Security, or makes any
representation with respect thereto. Neither the Trustee nor any
conversion agent shall be responsible for any failure of the Issuer to make
any cash payment or to issue, transfer or deliver any shares of Class A
Common Stock, Class B Non-Voting Common Stock or stock certificates or
other securities or property upon the surrender of any Security for the
purpose of conversion, or, subject to Section 5.1, to comply with any of
the covenants of the Issuer contained in this Article XIII.
SECTION 13.6 Fractional Shares. No fractional shares of
Class A Common Stock or Class B Non-Voting Common Stock or scrip
representing fractional shares shall be issued upon conversion of
Securities. If more than one Security shall be surrendered for conversion
at one time by the same Holder, the number of full shares of Class A Common
Stock and Class B Non-Voting Common Stock issuable upon conversion thereof
shall be computed on
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the basis of the aggregate principal amount of the Securities or specified
portions thereof so surrendered. Instead of any fractional share of Class
A Common Stock or Class B Non-Voting Common Stock otherwise issuable upon
conversion of any Security or Securities (or specified portions thereof),
the Issuer shall pay a cash adjustment in respect of such fraction in an
amount equal to the same fraction of the Sales Price of the Class A Common
Stock or Class B Non-Voting Common Stock, as appropriate, at the close of
business on the day of conversion. In the absence of a Sales Price for the
appropriate class of Common Stock, the Board of Directors shall in good
faith determine the current market price of such on such basis as it
considers appropriate, taking into account whether there is a Sales Price
with respect to the other class of Common Stock, and such determined
current market price shall be used to calculate the cash adjustment.
SECTION 13.7 Shares to be Reserved. The Issuer shall reserve
out of its authorized but unissued Class A Common Stock and Class B Non-
Voting Common Stock or its Class A Common Stock and Class B Non-Voting
Common Stock held in treasury enough shares of Class A Common Stock and
Class B Non-Voting Common Stock to permit the conversion of all of the
then-outstanding Securities. For the purposes of this Section 13.7, the
full number of shares of Class A Common Stock and Class B Non-Voting Common
Stock then issuable upon the conversion of all then-outstanding Securities
shall be computed as if at the time of computation all outstanding
Securities were held by a single Holder. The Issuer shall from time to
time, in accordance with the laws of the State of Delaware and its
certificate of incorporation, increase the authorized amount of its Class A
Common Stock and Class B Non-Voting Common Stock if at any time the
authorized amount of its Class A Common Stock and Class B Non-Voting Common
Stock remaining unissued shall not be sufficient to permit the conversion
of all the Securities at the time outstanding. If any shares of Class A
Common Stock or Class B Non-Voting Common Stock required to be reserved for
issuance upon conversion of the Securities hereunder require registration
with or approval of any governmental authority under any federal or state
law before the shares may be issued upon conversion, the Issuer will in
good faith and as expeditiously as possible endeavor to cause the shares to
be so registered or approved. All shares of Class A Common Stock and Class
B Non-Voting Common Stock issued upon conversion of the Securities shall be
validly issued, fully paid and nonassessable.
SECTION 13.8 Adjustment of Conversion Price. The Conversion
Price at which the Securities shall be convertible shall be subject after
the Issue Date to adjustment, without duplication, as follows:
(a) In case the Issuer shall (A) pay a dividend on any
class of its Capital Stock in shares of its Common Stock, (B) subdivide its
outstanding shares of Common Stock into a greater number of shares or (C)
combine its outstanding shares of Common Stock into a smaller number of
shares, the Conversion Price in effect immediately prior to such action
shall be adjusted retroactively as provided below so that the Conversion
Price thereafter shall be determined by multiplying the Conversion Price at
which the Securities were theretofore
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convertible by a fraction of which the denominator shall be the number of
shares of Common Stock outstanding immediately following such action and of
which the numerator shall be the number of shares of Common Stock
outstanding immediately prior thereto. Such adjustment shall be made
whenever any event listed above shall occur and shall become effective
retroactively immediately after the record date in the case of a dividend
and immediately after the effective date in the case of a subdivision or
combination.
(b) In case the Issuer shall issue options, rights or
warrants entitling the holder to subscribe for or purchase shares of Common
Stock at a price per share less than the current market price per share of
the Class A Common Stock (as determined in accordance with the provisions
of Section 13.8(d) below) (the "Current Market Price"), or in case the
Issuer shall issue Common Stock or other securities convertible into or
exchangeable for Common Stock for a consideration per share of Common
Stock, whether paid on issuance in respect of Common Stock or deliverable
upon exercise, conversion or exchange of any option, right or warrant, or
convertible or exchangeable security, less than the Current Market Price,
then the Conversion Price in effect immediately prior thereto shall be
adjusted as provided below so that the Conversion Price therefor shall be
equal to the price determined by multiplying (A) the Conversion Price at
which the Securities were theretofore convertible by (B) a fraction of
which the denominator shall be the sum of (1) the number of shares of
Common Stock outstanding on the date of issuance of such Common Stock,
convertible or exchangeable securities, options, rights or warrants and (2)
the number of additional shares of Common Stock issued, offered for
subscription or purchase, or issuable upon such exercise, conversion or
exchange, and of which the numerator shall be the sum of (1) the number of
shares of Common Stock outstanding on the date of issuance of such Common
Stock, convertible or exchangeable securities, options, rights or warrants
and (2) the number of additional shares of Common Stock which the aggregate
issue or offering price of the number of shares of Common Stock so offered
would purchase at the Current Market Price. Such adjustment shall be made
whenever such shares of Common Stock, convertible or exchangeable
securities, options, rights or warrants are issued, and shall become
effective immediately after such issuance, or if such securities are to be
issued to all holders of Common Stock, immediately after the record date
for the determination of stockholders entitled to receive such securities.
However, upon the expiration of any option, right or warrant to purchase
Common Stock or upon the expiration of conversion or exchange rights in
respect of any convertible or exchangeable security, the issuance of which
resulted in an adjustment in the conversion price pursuant to this Section
13.8(b), if any such option, right or warrant or conversion or exchange
right shall expire and shall not have been exercised, the Conversion Price
shall be recomputed immediately upon such expiration and effective
immediately upon such expiration shall be increased to the price it would
have been (but reflecting any other adjustments to the Conversion Price
made pursuant to the provisions of this Section 13.8(b) after the issuance
of such rights or warrants or convertible or exchangeable securities) had
the adjustment of the Conversion Price made upon the issuance of such
rights or warrants or convertible or exchangeable securities been made on
the basis of offering for subscription or purchase only that
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number of shares of Common Stock actually purchased upon the exercise of
such options, rights or warrants or convertible or exchangeable securities.
No further adjustment shall be made upon exercise of any option, right,
warrant, convertible security or exchangeable security if an adjustment
shall have been made upon issuance of such security. Notwithstanding
anything herein to the contrary, no adjustment to the Conversion Price
shall be required to be made or shall be made pursuant to this Section
13.8(b) in respect of any of the following issuances of Common Stock,
options, rights or warrants, or convertible or exchangeable securities:
(i) issuances of Common Stock or options, rights or warrants to purchase
Common Stock to employees, officers and/or directors of the Issuer and/or
any of its Subsidiaries pursuant to employee benefit or similar plans or
arrangements of the Issuer and/or its Subsidiaries approved by a majority
of the disinterested members of the Board of Directors, (ii) issuances of
Common Stock upon exercise or conversion of any option, right or warrant or
convertible or exchangeable security which, when issued, did not give rise
to an adjustment to the Conversion Price pursuant to this Section 13.8(b)
(including, without limitation, the issuance of Common Stock upon the
conversion of the Securities, upon the conversion of the Class B Non-Voting
Common Stock into Class A Common Stock and upon the exercise of the
Warrants), (iii) issuances as to which a conversion adjustment is required
under Section 13.8(a), 13.8(c) or 13.8(h), (iv) issuances of Common Stock
or options, warrants or rights or convertible or exchangeable securities
pursuant to a registered underwritten public offering, or (v) any other
issuance that the Issuer is advised, in writing, by a nationally recognized
investment banking firm, is fair, from a financial point of view, to the
holders of Common Stock.
(c) In case the Issuer shall pay a dividend to all
holders of its Common Stock (including any dividend paid in connection with
a consolidation or merger in which the Issuer is the continuing
corporation) of any shares of Capital Stock of the Issuer or its
subsidiaries (other than Common Stock) or evidences of its indebtedness or
assets (excluding cash dividends payable solely in cash that may from time
to time be fixed by the Board of Directors, or dividends or distributions
in connection with the liquidation, dissolution or winding up of the
Issuer) or rights or warrants to subscribe for or purchase any of its
securities or those of its Subsidiaries or securities (excluding Class B
Non-Voting Common Stock) convertible or exchangeable for Common Stock
(excluding those securities referred to in Section 13.8(b) above), then in
each such case the Conversion Price in effect immediately prior thereto
shall be adjusted as provided below so that the Conversion Price thereafter
shall be equal to the price determined by multiplying (A) the Conversion
Price in effect on the record date mentioned below by (B) a fraction, the
numerator of which shall be the Current Market Price per share of Class A
Common Stock on the record date mentioned below less the then fair market
value (as determined by the Board of Directors, whose good faith
determination shall be conclusive) as of such record date of the assets,
evidences of indebtedness or securities so paid with respect to one share
of Class A Common Stock, and the denominator of which shall be the Current
Market Price per share of Common Stock on such record date; provided,
however, that in the event the then fair market value (as so determined) so
paid with respect to one share of Class A Common
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Stock is equal to or greater than the Current Market Price per share of
Common Stock on the record date mentioned above, in lieu of the foregoing
adjustment, adequate provision shall be made so that each Holder of
Securities shall have the right to receive the amount and kind of assets,
evidences of indebtedness, or securities such Holder would have received
had such Holder converted all its Securities immediately prior to the
record date for such dividend. Such adjustment shall be made whenever any
such payment is made, and shall become effective retroactively immediately
after the record date for the determination of stockholders entitled to
receive the payment.
(d) For the purpose of any computation under Sections
13.8(b) and 13.8(c) above, the Current Market Price per share of Class A
Common Stock at any date shall be deemed to be the average Sales Price for
the 30 consecutive trading days commencing 45 trading days before the day
in question or, if the Sales Price is to be determined by the Board of
Directors of the Company, the fair market value per share of Class A Common
Stock as determined in good faith by the Board of Directors.
(e) No adjustment in the Conversion Price shall be
required unless the adjustment would require an increase or decrease of at
least 1% in the Conversion Price then in effect; provided, however, that
any adjustments that by reason of this Section 13.8(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 13.8 shall be made to the
nearest cent.
(f) In the event that, at any time as a result of an
adjustment made pursuant to Section 13.8(a) or 13.8(c) above, the holder of
any Security thereafter surrendered for conversion shall become entitled to
receive any shares of the Issuer other than shares of the Common Stock,
thereafter the number of such other shares so receivable upon conversion of
any Security shall be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in Sections 13.8(a) through 13.8(e)
above, and the other provisions of this Article XIII with respect to the
Common Stock shall apply on like terms to any such other shares.
(g) Whenever the Conversion Price is adjusted, as herein
provided, the Issuer shall promptly file with the Trustee a certificate of
an officer of the Issuer setting forth the Conversion Price after the
adjustment and setting forth a brief statement of the facts requiring such
adjustment and a computation thereof. The certificate shall be conclusive
evidence of the correctness of the adjustment. The Issuer shall promptly
cause a notice of the adjusted Conversion Price to be mailed to each Holder
of Securities.
(h) In case of any reclassification of the Class A Common
Stock or Class B Non-Voting Common Stock, any consolidation of the Issuer
with, or merger of the Issuer into, any other entity, any merger of another
entity into the Issuer (other than a merger that does not
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result in any reclassification, conversion, exchange or cancellation of
outstanding shares of Class A Common Stock or Class B Non-Voting Common
Stock of the Issuer), any sale or transfer of all or substantially all of
the assets of the Issuer or any compulsory share exchange pursuant to which
share exchange the Class A Common Stock or Class B Non-Voting Common Stock
is converted into other securities, cash or other property, then lawful
provision shall be made as part of the terms of such transaction whereby
each Holder of a Security or Securities then outstanding shall have the
right thereafter, during the period such Security or Securities shall be
convertible, to convert such Security or Securities only into the kind and
amount of securities, cash and other property receivable upon the
reclassification, consolidation, merger, sale, transfer or share exchange
by a holder of the number of shares of Class A Common Stock or Class B Non-
Voting Common Stock of the Issuer into which a Security or Securities would
have been convertible immediately prior to the reclassification,
consolidation, merger, sale, transfer or share exchange. The Issuer, the
person formed by the consolidation or resulting from the merger or which
acquires such assets or which acquires the Issuer's shares, as the case may
be, shall make provisions in its certificate or articles of incorporation
or other constituent document to establish such rights. The certificate or
articles of incorporation or other constituent document shall provide for
adjustments, which, for events subsequent to the effective date of the
certificate or articles of incorporation or other constituent document,
shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article XIII. The provisions of this Section 13.8(h)
shall similarly apply to successive reclassifications, consolidations,
mergers, sales, transfers or share exchanges.
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IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed all as of December 14, 1995.
SOUTHWESTERN FINANCIAL CORPORATION
By: /s/Scott D. Silverman
---------------------
Name: Scott D. Silverman
Title: Senior Vice President
U.S. TRUST COMPANY OF TEXAS, N.A., as Trustee
By: /s/John C. Stohlmann
--------------------
Name: John C. Stohlmann
Title: Vice President
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STATE OF TEXAS )
)
COUNTY OF DALLAS )
On the 14th day of December, 1995 before me personally came
Scott D. Silverman, to me known, who, being by me duly sworn, did depose
and say that he is Senior Vice President of Southwestern Financial
Corporation, a Delaware corporation; and that he signed his name thereto on
behalf of such corporation.
Notary Public in and for the
State of Texas
Name:
My Commission Expires:
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STATE OF TEXAS )
)
COUNTY OF DALLAS )
On the 14th day of December, 1995 before me personally came
John Stohlmann to me known, who, being by me duly sworn, did depose and say
that he is the Vice President of U.S. Trust Company of Texas, N.A., a
national banking association; and that he signed his name thereto on behalf
of such corporation.
Notary Public in and for the
State of Texas
Name:
My Commission Expires:
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<PAGE>
EXHIBIT A
[RESTRICTED SECURITIES LEGEND]
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND OTHER APPLICABLE SECURITIES LAWS AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN APPLICABLE EXEMPTION THEREFROM. THE HOLDER HEREOF, BY PURCHASING
THIS SECURITY, AGREES THAT (A) THIS SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1) TO THE ISSUER, (2) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER THAT IS AWARE
THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A OR (3) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH
(A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH,
ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, SUBJECT TO THE
ISSUER'S OR THE TRUSTEE'S RIGHT TO RECEIVE PRIOR TO SUCH TRANSFER THOSE
CERTIFICATES AND LEGAL OPINIONS REQUIRED BY THE INDENTURE AND SUBJECT, IN
ANY EVENT, TO THE COMPLETION AND DELIVERY TO THE TRUSTEE OF THE ASSIGNMENT
FORM APPEARING ON THE REVERSE OF THIS SECURITY.
[FORM OF FACE OF A SECURITY]
No. $
SOUTHWESTERN FINANCIAL CORPORATION
Convertible Subordinated Reset Note due 2005
Southwestern Financial Corporation, a Delaware corporation (the
"Issuer"), for value received hereby promises to pay to ________________ or
registered assigns the principal sum of ________________________ Dollars at
the Issuer's office or agency for said purpose on December 15, 2005, in
such coin or currency of the United States of America as at the time of
payment shall be legal tender for the payment of public and private debts,
and to pay interest at a rate per annum equal to the Applicable Rate at
said office or agency.
A-1<PAGE>
<PAGE>
The Issuer shall pay interest on the principal amount of this
Security at the Applicable Rate. The Issuer shall pay interest
semiannually on June 15 and December 15 of each year, commencing with June
15, 1996. Interest on the Securities will accrue from the most recent
interest payment date to which interest on the Securities has been paid or
duly provided for, unless the date hereof is a date to which interest on
the Securities has been paid or duly provided for, in which case from the
date of this Security, or unless no interest has been paid or duly provided
for on the Securities, in which case from December 14, 1995, until payment
of said principal sum has been made or duly provided for. Notwithstanding
the foregoing, if the date hereof is after June 1 or December 1, as the
case may be, and before the following June 15 or December 15, this Security
shall bear interest from such June 15 or December 15; provided, that if the
Issuer shall default in the payment of interest due on such June 15 or
December 15, then this Security shall bear interest from the next preceding
June 15 or December 15 to which interest on the Securities has been paid or
duly provided for, or, if no interest has been paid or duly provided for on
the Securities since the original issue date of this Security, from
December 14, 1995. The interest so payable on any June 15 or December 15
will, except as otherwise provided in the Indenture referred to on the
reverse hereof, be paid to the person in whose name this Security is
registered at the close of business on the June 1 or December 1 preceding
such June 15 or December 15, whether or not such day is a business day;
provided that interest may be paid, at the option of the Issuer, by mailing
a check therefor payable to the registered holder entitled thereto at his
last address as it appears on the Security register.
"Applicable Rate" means (i) from the original issuance of the
Securities through and including June 14, 1997, 7% per annum, and (ii) from
June 15, 1997, a rate per annum equal to the Reset Rate, unless the Issuer
elects to make the Repurchase Offer in accordance with the Indenture and
thereupon purchases in accordance with the terms of the Indenture all
Securities property tendered in respect of such Repurchase Offer, in which
case at 7% per annum. "Reset Rate" means an interest rate per annum equal
to a rate determined by two recognized investment banking firms retained by
the Issuer (the "Reset Advisors") to be the interest rate per annum which,
in their opinion, would result in the bid price of the Securities, as of
the business day immediately preceding June 15, 1997 (the "Reset Date"),
being 100% of their principal amount (or if the Reset Advisors are unable
to agree on a single rate, the average of the rates selected by such Reset
Advisors); provided that in no event shall the Reset Rate be less than 7%
or greater than 11% per annum. The Issuer shall give notice to the Trustee
and the Holders of the Reset Rate no later than seven days after the Reset
Date.
Interest on this Security will be calculated on the basis of a
360-day year, consisting of twelve 30-day months.
Reference is made to the further provisions set forth on the
reverse hereof. Such further provisions shall for all purposes have the
same effect as though fully set forth at this place.
A-2<PAGE>
<PAGE>
This Security shall not be valid or obligatory until the
certificate of authentication hereon shall have been duly signed by the
Trustee acting under the Indenture.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
duly executed under its corporate seal.
SOUTHWESTERN FINANCIAL CORPORATION
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the within-mentioned
Indenture.
Dated: U.S. TRUST COMPANY OF TEXAS,
N.A., as Trustee
By:
Authorized Signatory
A-3<PAGE>
[FORM OF REVERSE OF SECURITY]
SOUTHWESTERN FINANCIAL CORPORATION
Convertible Subordinated Reset Note due 2005
This Security is one of a duly authorized issue of debt
securities of the Issuer, limited to the aggregate principal amount of
$40,000,000 (except as otherwise provided in the Indenture mentioned
below), issued or to be issued pursuant to an indenture dated as of
December 14, 1995 (the "Indenture"), duly executed and delivered by the
Issuer to U.S. Trust Company of Texas, N.A., Trustee (herein called the
"Trustee"). Reference is hereby made to the Indenture and all indentures
supplemental thereto for a description of the rights, limitations of
rights, obligations, duties and immunities thereunder of the Trustee, the
Issuer and the holders (the words "holders" or "holder" meaning the
registered holders or registered holder) of the Securities.
The Securities will bear interest at the Applicable Rate.
In case an Event of Default, as defined in the Indenture, shall
have occurred and be continuing, the principal of all the Securities may be
declared due and payable, in the manner and with the effect, and subject to
the conditions, provided in the Indenture. The Indenture provides that in
certain events such declaration and its consequences may be waived by the
holders of a majority in aggregate principal amount of the Securities then
outstanding and that, prior to any such declaration, such holders may waive
any past default under the Indenture and its consequences except a default
in the payment of principal of and premium, if any, or interest on any of
the Securities. Any such consent or waiver by the holder of this Security
(unless revoked as provided in the Indenture) shall be conclusive and
binding upon such holder and upon all future holders and owners of this
Security and any Security which may be issued in exchange or substitution
herefor, whether or not any notation thereof is made upon this Security or
such other Securities.
The Indenture permits the Issuer and the Trustee, with the
consent of the holders of not less than a majority in aggregate principal
amount of the Securities at the time outstanding, evidenced as in the
Indenture provided, to execute supplemental indentures adding any
provisions to or changing in any manner or eliminating any of the
provisions of the Indenture or of any supplemental indenture or modifying
in any manner the rights of the holders of the Securities; provided that no
such supplemental indenture shall (a) extend the final maturity of any
Security, or reduce the principal amount thereof, or reduce the rate or
extend the time of payment of interest thereon, or reduce any amount
payable on the redemption hereof, or make any security payable in other
than United States currency, or impair or affect the rights of any
securityholder to institute suit for the payment thereof in each case
without the consent of each Holder of Securities affected thereby; (b)
alter in a manner adverse to the Holders the conversion provisions
A-4<PAGE>
<PAGE>
of Article XIII without the consent of each Holder of Securities affected
thereby; (c) reduce the aforesaid percentage of Securities, the consent of
the holders of which is required for any such supplemental indenture,
without the consent of each Holder of Securities affected thereby or
(d) alter in a manner adverse to the Holders the provisions of Section 3.11
without the consent of each Holder of Securities affected thereby.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Issuer, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest on this Security at the place, times, and
rate, and in the currency, herein prescribed.
The Securities are issuable only as registered Securities
without coupons in denominations of $1,000.00 and any multiple of
$1,000.00.
At the office or agency of the Issuer referred to on the face
hereof and in the manner and subject to the limitations provided in the
Indenture, Securities may be exchanged for a like aggregate principal
amount of Securities of other authorized denominations.
Upon due presentment for registration of transfer of this
Security at the above-mentioned office or agency of the Issuer, a new
Security or Securities of authorized denominations, for a like aggregate
principal amount, will be issued to the transferee as provided in the
Indenture. No service charge shall be made for any such transfer, but the
Issuer may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto.
The Securities may not be redeemed prior to December 15, 1998.
On and after December 15, 1998, the Securities may be redeemed at the
option of the Issuer as a whole, or from time to time in part, on any date
prior to maturity, upon mailing a notice of such redemption not less than
30 nor more than 60 days prior to the date fixed for redemption to the
holders of Securities to be redeemed, all as provided in the Indenture, at
the following redemption prices (expressed as percentages of the principal
amount) if redeemed during the twelve-month period commencing on December
15th of the year set forth below, together in each case with accrued and
unpaid interest to the date fixed for redemption:
Year Percentage
1998 103.50%
1999 102.33%
2000 101.17%
2001 and thereafter 100.00%
provided that if the date fixed for redemption is a June 15 or December 15,
as the case may be, then the interest payable on such redemption date shall
be paid to the holder of record on the
A-5<PAGE>
<PAGE>
immediately preceding June 1 or December 1, as the case may be,
notwithstanding any transfer or exchange of this Security after the record
date and before the date fixed for redemption.
Subject to payment by the Issuer of a sum sufficient to pay the
amount due on redemption, interest on this Security (or portion hereof if
this Security is redeemed in part) shall cease to accrue upon the date duly
fixed for redemption of this Security (or portion hereof if this Security
is redeemed in part).
Subject to the provisions of the Indenture, the Holders have
the right to convert the principal amount of the Securities into fully paid
and nonassessable shares of Class A Common Stock and Class B Non-Voting
Common Stock of the Issuer in the ratio of three shares to one share,
respectively, at the initial conversion price per share of Class A Common
Stock and Class B Non-Voting Common Stock of $12.50, or at the adjusted
conversion price then in effect, if adjustment has been made as provided in
the Indenture, upon surrender of the Security to the Issuer, together with
a fully executed notice in substantially the form attached hereto and, if
required by the Indenture, an amount equal to accrued interest payable on
such Security.
The Securities are subordinated in right of payment, in the
manner and to the extent set forth in the Indenture, to the prior payment
in full in cash or Cash Equivalents of all Senior Indebtedness, whether
outstanding on the date of the Indenture or thereafter created, incurred or
assumed or guaranteed. To the extent and in the manner provided in the
Indenture, Senior Indebtedness must be paid before any payment may be made
to any Holder of this Security. Each Holder by his acceptance hereof
agrees to be bound by such provisions and authorizes and expressly directs
the Trustee, on his behalf, to take such action as may be necessary or
appropriate to effectuate the subordination provided for in the Indenture
and appoints the Trustee his attorney-in-fact for such purposes.
The Issuer, the Trustee, and any authorized agent of the Issuer
or the Trustee may deem and treat the registered holder hereof as the
absolute owner of this Security (whether or not this Security shall be
overdue and notwithstanding any notation of ownership or other writing
hereon made by anyone other than the Issuer or the Trustee or any
authorized agent of the Issuer or the Trustee), for the purpose of
receiving payment of, or on account of, the principal hereof and premium,
if any, and, subject to the provisions on the face hereof, interest hereon
and for all other purposes, and neither the Issuer nor the Trustee nor any
authorized agent of the Issuer or the Trustee shall be affected by any
notice to the contrary.
The Securities are subject to defeasance as described in the
Indenture.
No recourse shall be had for the payment of the principal of
and premium, if any, or the interest on this Security, for any claim based
hereon, or otherwise in respect hereof, or based on or in respect of the
Indenture or any indenture supplemental thereto, against any incorporator,
shareholder, officer or director, as such, past, present or future, of the
Issuer or of any successor corporation, either directly or through the
Issuer or any successor corporation,
A-6<PAGE>
<PAGE>
whether by virtue of any constitution, statute or rule of law or by the
enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the
issue hereof, expressly waived and released.
The Securities and the Indenture shall be deemed to be a
contract under laws of the State of Texas, and for all purposes shall be
construed in accordance with the laws of said state, except as may
otherwise be required by mandatory provisions of law.
A-7<PAGE>
[FORM OF ASSIGNMENT FORM]
For value received hereby sells,
assigns and transfers unto
______________________________
______________________________
Please insert social security or
other identifying number of assignee
Please print or typewrite name
and address including zip code
of assignee:
the within Security and do hereby irrevocably constitute and appoint
________________________ Attorney to transfer the Security on the books of
the Issuer with full power of substitution in the premises.
Date:_________________ Your Signature:
(Sign exactly as your name
appears on the other side
of this Security)
Signature
Guarantee:
(Signature must be guaranteed)
A-8<PAGE>
[FORM OF CONVERSION NOTICE]
To: Southwestern Financial Corporation
The undersigned owner of this Security hereby: (i) irrevocably exercises
the option to convert this Security, or the portion hereof below designated, for
shares of Class A Common Stock and Class B Non-Voting Common Stock of
Southwestern Financial Corporation in accordance with the terms of the Indenture
referred to in this Security and (ii) directs that such shares of Class A Common
Stock and Class B Non-Voting Common Stock deliverable upon the conversion,
together with any check in payment for fractional shares and any Security(ies)
representing any unconverted principal amount hereof, be issued and delivered to
the registered holder hereof unless a different name has been indicated below.
If shares or Securities in respect of the unconverted portions hereof are to be
delivered registered in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto. Any amount
required to be paid by the undersigned on account of interest accompanies this
Security.
Dated:
________________________________
Signature
Fill in for registration of shares if to be delivered, and of Securities if
to be issued, otherwise than to and in the name of the registered holder.
__________________________________
Social Security or other
Taxpayer Identifying Number
(Name)
(Street Address)
(City, State and Zip Code)
(Please print name and address)
Principal amount to be converted:
(if less than all)
$____________
A-9<PAGE>
EXHIBIT B
[FORM OF LEGAL OPINION ON TRANSFER]
_________________, 199__
[Trustee]
[Address]
Re: Southwestern Financial Corporation
Convertible Subordinated Notes due 2005
Ladies and Gentlemen:
This opinion is being furnished to you in connection with the sale by
______________________ (the "Transferor") to ______________________ (the
"Purchaser") of $____________ aggregate principal amount of Convertible
Subordinated Notes due 2005 of Southwestern Financial Corporation (the
"Securities").
We have examined such documents and records as we have deemed appropriate.
In our examination of the foregoing, we haver assumed the authenticity of all
documents, the genuineness of all signatures and the due authorization,
execution and delivery of the aforementioned by each of the parties thereto. We
have further assumed the accuracy of the representations contained in the
documents set forth above made by the parties executing such documents. We have
also assumed that the sale of the Securities to the Transferor was exempt from
the registration and prospectus delivery requirements of the Securities Act of
1933, as amended (the "Securities Act").
Based on the foregoing, we are of the opinion that the sale to the
Purchaser of the Securities does not require registration of such Securities
under the Securities Act.
Very truly yours,
B-1<PAGE>
REGISTRATION RIGHTS AGREEMENT
(Southwestern Financial Corporation)
This Registration Rights Agreement (the "Agreement") is made
and entered into as of December 14, 1995, by and among Southwestern
Financial Corporation, a Delaware corporation (the "Company"), and I.C.H.
Corporation ("ICH"), a Delaware corporation, SWL Holding Corporation ("SWL
Holding"), a Delaware corporation, and Care Financial Corporation ("CFC"),
a Delaware corporation (CFC, SWL Holding and ICH, together with Facilities
Management Installation, Inc., a Delaware corporation ("FMI"), referred to
herein collectively as the "Debtors").
This Agreement is made pursuant to the Purchase Agreement (the
"Purchase Agreement"), dated as of December 1, 1995, by and among the
Debtors, the Company, Southwestern Financial Services Corporation, a
Delaware corporation, and PennCorp Financial Group, Inc., a Delaware
corporation. In order to induce the Debtors to perform their obligations
under the Purchase Agreement and to consummate the transactions
contemplated thereby, the Company has agreed to provide the registration
and other rights set forth in this Agreement. The execution and delivery
of this Agreement is a condition to the consummation of the Purchase
Agreement.
The parties agree as follows:
1. Securities Subject to this Agreement
(a) Certain Definitions. The terms set forth below are used
herein as so defined:
"Bankruptcy Court" means the United States Bankruptcy Court for
the Northern District of Texas, Dallas Division.
"Class A Common Stock" means the Class A Common Stock, par
value $.01 per share, of the Company, and any class or series of capital
stock into which such Class A Common Stock thereafter may be changed.<PAGE>
<PAGE>
"Class B Common Stock" means the Class B Non-Voting Common
Stock, par value $.01 per share, of the Company, and any class or series of
capital stock into which such Class B Common Stock thereafter may be
changed.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means, collectively, the Class A Common Stock
and the Class B Common Stock.
"Convertible Notes" means the Company's Convertible
Subordinated Reset Notes due 2005.
"Date of Distribution" means the first date on which
Convertible Notes or shares of Common Stock are delivered to Distributees
pursuant to the Plan of Reorganization.
"Demand Registration" has the meaning given such term in
Section 2(a).
"Demand Request" has the meaning given such term in Section
2(a).
"Distributees" means the holders of claims against and/or
interests in one or more of the Debtor's estates who receive, in accordance
with the Plan of Reorganization, Convertible Notes or, if the Convertible
Notes have been converted, Common Stock in exchange for such claims or
interests.
"Eligible Distributees" means Distributees who, within 180 days
after the later to occur of (i) December 15, 1996, (ii) the Date of
Distribution and (iii) the date on which the Convertible Notes first become
convertible into Common Stock, deliver to the Company written notice of
election to exercise registration rights hereunder; provided, however, that
the only Distributees entitled to such registration rights shall be
Distributees who are (i) holders of at least $10 million principal amount
of Convertible Notes which, at the date of notice of exercise or within 60
days of the date of notice of exercise, are convertible into Common Stock,
(ii) holders of 5% or more of the outstanding Common Stock who acquired
such Common Stock pursuant to, or upon conversion of Convertible Notes
acquired pursuant to, the Plan of Reorganization or (iii) holders who
otherwise provide to the Company a written opinion of counsel (in form and
substance reasonably satisfactory to the Company, <PAGE>
<PAGE>
which may set forth the analysis relied upon in reaching the relevant legal
conclusion) to the effect that the offer and sale by such holder of the
Convertible Notes or Common Stock, as applicable, in the manner proposed to
be offered and sold by such holder, is required to be made pursuant to a
registration statement under the Securities Act; provided, however, that
the 180-day period referred to above shall be extended by the period, if
any, which any Demand Registration is deferred pursuant to Section 2(e) or
4(f) of this Agreement. Notwithstanding anything herein to the contrary,
no Person shall be an Eligible Distributee unless such Person agrees in
writing to be bound by the terms and provisions of this Agreement to the
same extent as the Debtors.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect from time to
time.
"Holder" has the meaning set forth in the definition of
Registrable Securities.
"Person" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization, or other entity.
"Plan of Reorganization" means a plan of reorganization with
respect to the Debtors' jointly administered cases under Chapter 11 of the
Bankruptcy Code that has been confirmed by the Bankruptcy Court, has not
been stayed pending appeal and becomes effective in accordance with its
terms or an order of the Bankruptcy Court.
"Pro Rata Basis" means a pro rata allocation, among a specified
group of Persons, based on the number of shares of Common Stock requested
to be included in a registered offering by such group of Persons.
"Registrable Securities" means (i) for so long as the
Convertible Notes are not convertible into Common Stock, the Convertible
Notes and (ii) the Common Stock issued or issuable upon the conversion of
the Convertible Notes to the extent such Convertible Notes were acquired by
CFC pursuant to the Purchase Agreement, or to the extent such Convertible
Notes or Common Stock were acquired by any other Debtor from CFC or by
Eligible Distributees pursuant to the Plan of Reorganization (each, a
"Holder"), until such time as such securities shall cease to be
Registerable Securities as provided in Section 1(b) hereof.<PAGE>
<PAGE>
"Registration Expenses" has the meaning set forth in Section 8.
"Registration Statement" has the meaning set forth in Section
7(a).
"Securities Act" means the Securities Act of 1933, as amended,
or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to
time.
"Selling Holder" means a Holder who is selling Registrable
Securities pursuant to a registration statement under this Agreement.
(b) Registrable Securities. Any Registrable Security will
cease to be a Registrable Security when (i) a registration statement
covering such Registrable Security has been declared effective by the
Commission and such security has been disposed of pursuant to such
effective registration statement, or (ii) such security is distributed
pursuant to the Plan of Reorganization to a Person other than an Eligible
Distributee, or (iii) such security is sold pursuant to a registered public
offering or pursuant to Section 4(1) of the Securities Act or Rule 144,
Rule 144A or Regulation S under the Securities Act (or any similar
provision then in force), or (iv) such security is eligible for sale
pursuant to Rule 144(k) under the Securities Act.
2. Demand Registration by Debtors
(a) Request for Registration. (i) Commencing on and after December
15, 1996, the Debtors that are Holders may request (collectively, the
"Requesting Debtors"), in writing (a "Demand Request"), that the Company
effect one registration under the Securities Act of all but not less than
all of the Convertible Notes or, if the Convertible Notes are convertible,
the Common Stock held by all the Debtors that are Holders (a "Demand
Registration").
(ii) Subject to Section 2(e), the Company shall file the
Demand Registration, as expeditiously as possible, and in any event within
60 days, after receiving the Demand Request (the "Required Filing Date")
and shall use its commercially reasonable efforts to cause the same to be
declared effective by the Commission as soon as possible after such filing;
provided that, if any Registrable Securities requested to be registered
pursuant to a Demand Request under this Section 2 are excluded from the
registration pursuant to Section 2(d) below, the Debtors shall <PAGE>
<PAGE>
have the right, with respect to each such exclusion, to one additional
Demand Registration under this Section 2 with respect to such excluded
Registrable Securities.
(b) Effective Registration and Expenses. A registration will not
count as a Demand Registration until it has become effective (unless the
Requesting Debtors withdraw all their Registrable Securities and the
Company has performed its obligations hereunder in all material respects,
in which case such demand will count as a Demand Registration unless the
Requesting Debtors pay all Registration Expenses in connection with such
withdrawn registration); provided that, if, after it has become effective,
an offering of Registrable Securities pursuant to a registration is
interfered with by any stop order, injunction, or other order or
requirement of the Commission or other governmental agency or court, such
registration will be deemed not to have been effected and will not count as
a Demand Registration. Except as set forth above, the Company will pay all
Registration Expenses in connection with any Demand Registration, whether
or not it becomes effective.
(c) Selection of Underwriters. The offering of Registrable
Securities pursuant to a Demand Registration shall be in the form of a
"firm commitment" underwritten offering. The Company shall select a
nationally recognized investment banking firm or firms to manage the
underwritten offering.
(d) Priority on Demand Registrations. No securities to be sold for
the account of any Person (including the Company) other than a Requesting
Debtor shall be included in a Demand Registration unless the managing
underwriter or underwriters shall advise the Company in writing that the
inclusion of such securities would not materially and adversely affect the
price or success of the offering (a "Material Adverse Effect").
Furthermore, in the event that the managing underwriter or underwriters
shall advise the Company that even after exclusion of all securities of the
other Persons pursuant to the immediately preceding sentence, the amount of
Registrable Securities proposed to be included in such Demand Registration
by the Requesting Debtors is sufficiently large to cause a Material Adverse
Effect, the Registrable Securities of the Requesting Debtors to be included
in such Demand Registration shall be reduced to that amount of Registrable
Securities which the Company is so advised can be sold in such offering
without a Material Adverse Effect and such shares shall be allocated among
the Requesting Debtors as they shall advise the Company in writing.<PAGE>
<PAGE>
(e) Deferral of Filing. The Company may defer the filing (but not
the preparation) of a registration statement required by Section 2 until a
date not later than 180 days after December 15, 1996 (with respect to
clause (i) below) or 180 days after the commencement of a Material Activity
(as defined in clause (ii) below), if (i) at December 15, 1996, the Company
is preparing to file or within 60 days after December 15, 1996, the Company
commences to prepare a registration statement for a public offering, which
in fact is filed and becomes effective within 180 days of December 15,
1996, or (ii) at the time of any Demand Request the Company is engaged in
any activity (a "Material Activity") that, in the good faith judgment of
the Company's board of directors, would be materially and adversely
affected to the detriment of the Company by the requested registration
(provided that no more than one deferral with respect to the same Material
Activity may be effected pursuant to this clause (ii) during any 360-day
period). A deferral of the filing of a registration statement pursuant to
this Section 2(e) shall be lifted, and, unless the Demand Request has been
withdrawn as contemplated below the requested registration statement shall
be filed forthwith, if, in the case of a deferral pursuant to clause (i)
of the preceding sentence, the proposed registration for the Company's
account is abandoned, or in the case of a deferral pursuant to clause (ii)
of the preceding sentence, the Company ceases to be engaged in a Material
Activity. In order to defer the filing of a registration statement
pursuant to this Section 2(e), the Company shall promptly (but in any event
within 10 days), upon determining to effect such deferral, deliver to each
Debtor a certificate signed by an executive officer of the Company stating
that the Company is deferring such filing pursuant to this Section 2(e) and
an approximation of the anticipated delay. Within 20 days after receiving
such certificate, the holders of a majority of the Registrable Securities
beneficially owned by the Debtors and for which registration was previously
requested may withdraw such Demand Request by giving notice to the Company;
if withdrawn, the Demand Request shall be deemed not to have been made for
all purposes of this Agreement. If any deferral is lifted as provided
above, prompt notice thereof shall be given in writing to the Requesting
Debtors who thereafter shall be entitled to deliver a new Demand Request.
This Section 2(e) shall not prohibit the Debtors from exercising any
"piggyback" registration rights to which they would otherwise be entitled
pursuant to Section 3.
3. Piggyback Registrations by Debtors.
(a) Request for Registration. At any time after the date hereof,
if the Company proposes to file a registration statement under the
Securities Act (other than a registration statement on Form S-4 or S-8 (or
any successor form that may be <PAGE>
<PAGE>
adopted by the Commission) or a registration statement filed in connection
with an exchange offer or offering of securities solely to the Company's
existing securityholders) with respect to an underwritten offering for cash
of Common Stock for the Company's own account or for the account of any of
its securityholders (other than in connection with the initial underwritten
public offering of Common Stock of the Company), then the Company shall
give written notice to each Debtor that is a Holder not less than 20 days
before the anticipated effective date of such registration statement. Such
notice shall offer each such Debtor the opportunity to have all or any of
the Registrable Securities held by it included in such registration
statement (the "Piggy-back Registration"). Within ten days after receiving
such notice, each such Debtor may make a written request to the Company
that any or all of its Registrable Securities be included in the Piggy-back
Registration, which notice shall specify the amount of Registrable
Securities to be so included. Subject to Section 3(b) hereof, the Company
shall include in the Piggy-back Registration all Registrable Securities
with respect to which the Company has received written requests for
inclusion therein within ten days after the receipt by each such Debtor of
the Company's notice. The Company may in its discretion withdraw any
registration statement filed pursuant to this Section 3(a). Any Holder, as
applicable, shall be permitted to withdraw all or part of the Registrable
Securities from a Piggy-back Registration at any time prior to the
effective date of such Piggy-back Registration.
(b) Priority on Piggy-back Registration. The Company shall use its
reasonable best efforts to cause the managing underwriter or underwriters
to permit the shares of Registrable Securities requested by the holders of
Registrable Securities ("Selling Piggy-back Holders") to be included in the
Piggy-back Registration (on the same terms and conditions, as nearly as
practicable, as the securities included therein for the account of the
Company or any other securityholders). Notwithstanding the foregoing, if
the managing underwriter or underwriters of such offering advise the
Company in writing that inclusion of the Registrable Securities requested
to be included in the offering would cause a Material Adverse Effect, then
(i) if such Piggy-back Registration is incident to a primary registration
on behalf of the Company, the Company shall include in the registration
statement (A) first, all the securities to be sold by it and (B) second,
the maximum amount of securities requested to be included in the Piggy-back
Registration by the Selling Piggy-back Holders and all other
securityholders of the Company entitled to piggy-back registration rights
the inclusion of which would not cause a Material Adverse Effect (provided
that the amount to be included by the Selling Piggy-back Holders shall be
allocated, subject to any written agreement among the Selling Piggy-back
Holders, on <PAGE>
<PAGE>
a Pro Rata Basis among such Selling Piggy-back Holders and other
securityholders if the inclusion of all the requested Registrable
Securities would cause a Material Adverse Effect) and (ii) if such Piggy-
back Registration is incident to a secondary registration on behalf of
holders of Common Stock (other than Holders) pursuant to demand
registration rights, the Company shall include in such registration
statement (A) first, the number of shares of Common Stock of the Person(s)
on whose behalf the registration is being made (allocated among such
Persons as they may determine, if applicable) and (B) second, the number of
Registrable Securities requested to be included in such registration
pursuant to this Section 3 in excess of the securities of such Person(s) on
whose behalf the registration is being made that, in the opinion of the
managing underwriters, would not have a Material Adverse Effect, subject to
any written agreement among the Selling Piggy-back Holders, on a Pro Rata
Basis among such Selling Piggy-back Holders, any other securityholder
entitled to exercise piggy-back registration rights with respect to such
registration statement and the Company, to the extent it desires to include
securities in such registration.
4. Demand Registration of Eligible Distributees
(a) Request for Registration. (i) Commencing on and after December
15, 1996, any Eligible Distributee (the "Requesting Eligible Distributee,"
which term shall include parties deemed "Requesting Eligible Distributees"
pursuant to Section 4(e) hereof) may request the Company, in writing (a
"Demand Request"), to effect one registration under the Securities Act of
all but not less than all of the Convertible Notes or, if the Convertible
Notes are convertible into Common Stock, the Common Stock held by the
Requesting Eligible Distributees (a "Demand Registration").
Notwithstanding anything herein to the contrary, if at the time of any
Demand Request, the Company is not eligible to use Form S-3 (or any
substitute or successor form thereto), demand registration rights pursuant
to this Section 4(a) may be exercised only by Eligible Distributees who
collectively own beneficially, and then only with respect to, at least $10
million principal amount of Convertible Notes or at least 5% of the
outstanding Common Stock; provided, however, that all Eligible Distributees
shall be provided notice of, and the opportunity to participate in, such
Demand Registration in accordance with Section 4(e).
(ii) Subject to Section 4(f), the Company shall file the
Demand Registration as expeditiously as possible and in any event within 60
days after receiving a Demand Request (the "Required Filing Date") and
shall use its commercially reasonable efforts to cause the same to be
declared effective by the <PAGE>
<PAGE>
Commission as soon as possible after such filing; provided that, if any
Registrable Securities requested to be registered pursuant to a Demand
Request under this Section 4 are excluded from a registration pursuant to
Section 4(d) below, the Eligible Distributees shall have the right, with
respect to each exclusion, to one Demand Registration under this Section 4
with respect to such excluded securities.
(b) Effective Registration and Expenses. A registration will not
count as a Demand Registration until it has become effective (unless the
Requesting Eligible Distributees withdraw all their Registrable Securities
and the Company has performed its obligations hereunder in all material
respects, in which case such demand will count as a Demand Registration
unless the Requesting Eligible Distributees pay all Registration Expenses
in connection with such withdrawn registration); provided that, if, after
it has become effective, an offering of Registrable Securities pursuant to
a registration is interfered with by any stop order, injunction, or other
order or requirement of the Commission or other governmental agency or
court, such registration will be deemed not to have been effected and will
not count as a Demand Registration. Except as set forth above, the Company
will pay all Registration Expenses in connection with any Demand
Registration, whether or not it becomes effective.
(c) Selection of Underwriters. The offering of Registrable
Securities pursuant to a Demand Registration shall be in the form of a
"firm commitment" underwritten offering. The Company shall select a
nationally recognized investment banking firm or firms to manage the
underwritten offering.
(d) Priority on Demand Registrations. No securities to be sold for
the account of any Person (including the Company) other than a Requesting
Eligible Distributee shall be included in a Demand Registration unless the
managing underwriter or underwriters shall advise the Company in writing
that the inclusion of such securities would not have a Material Adverse
Effect. Furthermore, in the event that the managing underwriter or
underwriters shall advise the Company that even after exclusion of all
securities of the other Persons pursuant to the immediately preceding
sentence, the amount of Registrable Securities proposed to be included in
such Demand Registration by Requesting Eligible Distributees is
sufficiently large to cause a Material Adverse Effect, the Registrable
Securities of the Requesting Eligible Distributees to be included in such
Demand Registration shall be reduced to that amount of Registrable
Securities which the Company is so advised can be sold in such offering
without a Material Adverse Effect and such Registrable Securities shall be <PAGE>
<PAGE>
allocated on a Pro Rata Basis among the Requesting Eligible Distributees on
the basis of the number of Registrable Securities requested to be included
by each such Requesting Eligible Distributees.
(e) Rights of Nonrequesting Eligible Distributees. Upon receipt of
any Demand Request, the Company shall promptly, but in any event within 10
days of such Demand Request, give notice of such proposed Demand
Registration to all other Eligible Distributees, who shall have the right,
exercisable by written notice to the Company within 20 days of their
receipt of the Company's notice, to elect to include in such Demand
Registration all of their Registrable Securities. All Eligible
Distributees requesting to have their Registrable Securities included in a
Demand Registration Statement in accordance with the preceding sentence
shall be deemed to be "Requesting Eligible Distributees" for purposes of
this Section 4. The failure of any Eligible Distributee to elect to
include all of its or his Registrable Securities pursuant to this Section
4(e) shall terminate any further rights of such Eligible Distributee
pursuant to this Section 4. Notwithstanding anything in Section 4(a)(i) to
the contrary, if the Company is not otherwise required to effect a Demand
Registration because of the last sentence of Section 4(a)(i), but a number
of Eligible Distributees accept the Company's notice described in this
clause (e) sufficient to satisfy the requirements of the last sentence of
Section 4(a)(ii), the Demand Request shall be deemed to have been received,
for purposes of Section 4(b), on the twentieth day after the date of the
Company's notice pursuant to this clause (e).
(f) Deferral of Filing. The Company may defer the filing (but not
the preparation) of a registration statement required by Section 4 until a
date not later than 180 days after December 15, 1996 (with respect to
clause (i) below) or 180 days after the commencement of a Material Activity
(as defined in clause (ii) below), if (i) at December 15, 1996, the Company
is preparing to file or within 60 days after December 15, 1996, the Company
commences to prepare a registration statement for a public offering, which
in fact is filed and becomes effective within 180 days of December 15,
1996, or (ii) at the time of any Demand Request the Company is engaged in
any Material Activity (provided that no more than one deferral with respect
to the same Material Activity may be effected pursuant to this clause (ii)
during any 360-day period). A deferral of the filing of a registration
statement pursuant to this Section 4(f) shall be lifted, and, unless the
Demand Request has been withdrawn as contemplated below, the requested
registration statement shall be filed forthwith, if, in the case of a
deferral pursuant to clause (i) of the preceding sentence, the proposed
registration for the Company's account is abandoned, or in the <PAGE>
<PAGE>
case of a deferral pursuant to clause (ii) of the preceding sentence, the
Company ceases to be engaged in a Material Activity. In order to defer the
filing of a registration statement pursuant to this Section 4(f), the
Company shall promptly (but in any event within 10 days), upon determining
to seek such deferral, deliver to each Eligible Distributee a certificate
signed by an executive officer of the Company stating that the Company is
deferring such filing pursuant to this Section 4(f) and an approximation of
the anticipated delay. Within 20 days after receiving such certificate,
the holders of a majority of the Registrable Securities held by the
Eligible Distributees and for which registration was previously requested
may withdraw such Demand Request by giving notice to the Company; if
withdrawn, the Demand Request shall be deemed not to have been made for all
purposes of this Agreement. If any deferral is lifted as provided above,
prompt notice thereof shall be given in writing to the Eligible
Distributees who thereafter shall be entitled to deliver a new Demand
Request. This Section 4(f) shall not prohibit the Eligible Distributees
from exercising any "piggyback" registration rights to which they would
otherwise be entitled pursuant to Section 5.
5. Piggyback Registrations of Eligible Distributees.
(a) Request for Registration. At any time after the date hereof,
if the Company proposes to file a registration statement under the
Securities Act (other than a registration statement on Form S-4 or S-8 (or
any successor form that may be adopted by the Commission) or a registration
statement filed in connection with an exchange offer or offering of
securities solely to the Company's existing securityholders) with respect
to an underwritten offering for cash of Common Stock for the Company's own
account or for the account of any of its securityholders (other than in
connection with the initial underwritten public offering of Common Stock of
the Company), then the Company shall give written notice to each Eligible
Distributee not less than 20 days before the anticipated effective date of
such registration statement. Such notice shall offer each Eligible
Distributee the opportunity to have all or any of the Registrable
Securities held by it included in such registration statement (the
"Distributee Piggy-back Registration"). Within ten days after receiving
such notice, each Eligible Distributee may make a written request to the
Company that any or all of its Registrable Securities be included in the
Piggy-back Registration, which notice shall specify the number of shares of
Common Stock to be so included. Subject to Section 5(b) hereof, the
Company shall include in the Distributee Piggy-back Registration all
Registrable Securities with respect to which the Company has received
written requests for inclusion therein within ten days after the receipt by
each <PAGE>
<PAGE>
Eligible Distributee of the Company's notice. The Company may in its
discretion withdraw any registration statement filed pursuant to this
Section 5(a). Any Eligible Distributee shall be permitted to withdraw all
or part of the Registrable Securities from a Distributee Piggy-back
Registration at any time prior to the effective date of such Distributee
Piggy-back Registration.
(b) Priority on Piggy-back Registration. The Company shall use its
reasonable best efforts to cause the managing underwriter or underwriters
to permit the Registrable Securities requested by the holders of
Registrable Securities ("Selling Distributee Piggy-back Holders") to be
included in the Distributee Piggy-back Registration (on the same terms and
conditions, as nearly as practicable, as the securities included therein
for the account of the Company or any other securityholders of the
Company). Notwithstanding the foregoing, if the managing underwriter
advises the Company in writing that inclusion of the Registrable Securities
requested to be included in the offering would have a Material Adverse
Effect, then (i) if such Piggy-back Registration is incident to a primary
registration on behalf of the Company, the Company shall include in the
registration statement (A) first, all the securities to be sold by it and
(B) second, the maximum amount of securities requested to be included in
the Piggy-back Registration by the Selling Piggy-back Holders and all other
securityholders of the Company entitled to piggy-back registration rights
that would not cause a Material Adverse Effect (provided that the amount to
be included by the Selling Piggy-back Holders shall be allocated, subject
to any written agreement among the Selling Piggy-back Holders, on a Pro
Rata Basis among such Selling Piggy-back Holders and other securityholders
if the inclusion of all the requested Registrable Securities would cause a
Material Adverse Effect) and (ii) if such Piggy-back Registration is
incident to a secondary registration on behalf of holders of Common Stock
(other than Holders) pursuant to demand registration rights, the Company
shall include in such registration statement (A) first, the number of
securities of such Person(s) on whose behalf the registration is being made
(allocated among such Persons as they may determine, if applicable) and (B)
second, the number of Registrable Securities requested to be included in
such registration pursuant to this Section 3 in excess of the securities of
such Person(s) on whose behalf the registration is being made that, in the
opinion of the managing underwriters, would not have a Material Adverse
Effect, subject to any written agreement among the Selling Piggy-back
Holders, on a Pro Rata Basis among such Selling Piggy-back Holders, any
other securityholder entitled to exercise piggy-back registration rights
with respect to such registration rights and the Company, to the extent it
desires to include securities in such registration.<PAGE>
<PAGE>
6. Holdback Agreements
(a) Restrictions on Public Sale by Holder of Registrable
Securities. To the extent not inconsistent with applicable law, each
Debtor or Eligible Distributee whose Registrable Securities are included in
a registration statement pursuant to this Agreement agrees not to effect
any public sale or distribution of such Registrable Securities or similar
securities of the Company, including a sale pursuant to Rule 144 under the
Securities Act, during the 14 days prior to, and during the period (not to
exceed 180 days) beginning on the commencement of an underwritten public
distribution under such registration statement pursuant to this Agreement
(except as part of such underwritten public distribution), if and to the
extent requested by the Company or by the managing underwriter or
underwriters.
(b) Restrictions on Public Sale by the Company. The Company agrees
not to effect any public sale or distribution of any securities similar to
those being registered hereunder, or any securities convertible into or
exchangeable or exercisable for such securities (other than any such sale
or distribution of such securities in connection with any merger or
consolidation by the Company or a subsidiary thereof, the acquisition by
the Company or a subsidiary thereof of the capital stock or substantially
all of the assets of any other person), during the 14 days prior to, and
during the period (not to exceed 180 days) beginning on, the commencement
of an underwritten public distribution of Registrable Securities, if and to
the extent requested by the managing underwriter.
7. Registration Procedures
In connection with any registration pursuant to this Agreement,
the Company will use its commercially reasonable efforts to effect the
registration and pursuant thereto the Company will as expeditiously as
possible:
(a) prepare and file with the Commission a registration
statement on any form for which the Company then qualifies or which
counsel for the Company shall deem appropriate and which form shall
be available for the sale of the Registrable Securities to be
registered thereunder in accordance with the intended method of
distribution thereof, and use its reasonable best efforts to cause
such filed registration statement to become effective under the
Securities Act; provided, however, that, (i) at least five days
before filing a registration statement or prospectus or as promptly
as practicable prior to filing any <PAGE>
<PAGE>
amendments or supplements thereto, the Company will furnish to each
Debtor that is a Selling Holder or, if after the Date of
Distribution, to ICH and to one counsel selected by it to represent
the Eligible Distributees who are Selling Holders copies of all such
documents proposed to be filed, which documents will be subject to
the review of such Selling Holders (and their counsel) or such
counsel, as applicable; and (ii) after the filing of a registration
statement, the Company will promptly notify each such Selling Holder
or such counsel, as applicable, of comments received from, or any
stop order issued or threatened by, the Commission and take all
reasonable actions required to respond to such comments or, as the
case may be, to prevent the entry of such stop order or to remove it
if it has been entered;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of not less than 180 days (or such
lesser period as is necessary for the underwriters in an underwritten
offering to sell unsold allotments) or, in the case of Piggy-back
Registrations pursuant to Section 3, for such time period as the
Company shall determine in its sole discretion (but in any event not
before the expiration of the 90-day period referred to in subsection
4(3) of the Securities Act and Rule 174 thereunder, if applicable)
and comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods
of disposition as set forth in such registration statement;
(c) furnish to each Debtor that is a Selling Holder, prior to
filing a registration statement, copies of any document to be filed
as an exhibit to such registration statement or to be incorporated by
reference therein, and thereafter furnish to each Selling Holder such
number of copies of such registration statement, each amendment
thereto (including copies of any document to be filed as an exhibit
to such registration statement or to be incorporated by reference
therein), the prospectus included in such registration statement
(including each preliminary prospectus), and, promptly after the
effectiveness of a registration statement, to each Selling Holder the
definitive final prospectus filed with the Commission, all
supplements thereto and such other documents as such Selling Holder
may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Selling Holder;<PAGE>
<PAGE>
(d) register or qualify such Registrable Securities under
such other securities or blue sky laws of such jurisdictions within
the United States as any Selling Holder reasonably (in light of such
Selling Holder's intended plan of distribution) requests and do any
and all other acts and things which may be reasonably necessary or
advisable to enable such Selling Holder to consummate the disposition
in such jurisdictions of the Registrable Securities owned by such
Selling Holder and keep each such registration or qualification (or
exemption therefrom) effective during the period such registration
statement is effective; provided that the Company will not be
required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this
Section 7(d), (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any
such jurisdiction;
(e) cause such Registrable Securities to be registered with
or approved by such other governmental agencies or authorities as may
be necessary by virtue of the business and operations of the Company
and its Subsidiaries to enable the Selling Holder or Selling Holders
thereof to consummate the disposition of such Registrable Securities;
(f) notify each Selling Holder of such Registrable
Securities, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the occurrence
of an event requiring the preparation of a supplement or amendment to
such prospectus, and prepare and file such supplement, amendment or
any other required documents so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading and promptly make available to each
Selling Holder any such supplement or amendment;
(g) in connection with an underwritten public distribution,
enter into customary agreements (including, if requested, an
underwriting agreement in customary form) and take such other actions
as are reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities;
(h) make available for inspection during business hours on
reasonable advance notice by any Selling Holder of such Registrable <PAGE>
<PAGE>
Securities, any underwriter participating in any disposition pursuant
to such registration statement, and any attorney, accountant or other
professional retained by any such Selling Holder or underwriter
(collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of the Company
(collectively, the "Records") as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause
the Company's officers, directors and employees to supply all
information reasonably requested by any such Inspector in connection
with such registration statement. Records which the Company
determines, in good faith, to be confidential and which it notifies
the Inspectors are confidential shall not be disclosed by the
Inspectors unless (i) the disclosure of such Records is necessary to
avoid or correct a material misstatement or omission in the
registration statement or (ii) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction. Each Selling Holder of Registrable Securities agrees
that it will, upon learning that disclosure of such Records is sought
in a court of competent jurisdiction, give notice to the Company and
allow the Company, at the Company's expense, to undertake appropriate
action to prevent disclosure of the Records deemed confidential.
Each Selling Holder of Registrable Securities further agrees that
information obtained by it as a result of such inspections which is
deemed confidential by the Company shall not be used by it, and it
shall use its best efforts to cause any Inspector not to use such
confidential information, as the basis for any market transactions in
securities of the Company or for any purpose other than any due
diligence review with respect to decisions regarding such Selling
Holder's investment in the Registrable Securities, unless and until
such information is made generally available to the public;
(i) in the event such sale is pursuant to an underwritten
offering, use its commercially reasonable efforts to obtain for the
underwriters a comfort letter or comfort letters from the Company's
independent public accountants in customary form and covering such
matters of the type customarily covered by comfort letters as the
managing underwriter reasonably request;
(j) notify the Selling Holders and the managing underwriter
or underwriters, if any, promptly, and (if requested by any such
person) confirm such advice in writing, (1) when the prospectus or
any prospectus supplement <PAGE>
<PAGE>
or post-effective amendment (or document incorporated by reference
therein) has been filed, and, with respect to the registration
statement or any post-effective amendment, when the same has become
effective, (2) of any request by the Commission for amendments or
supplements to the registration statement or the prospectus or for
additional information, (3) of the receipt by the Company of any
notification with respect to the suspension of the qualification of
the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, and (4)
of the happening of any event which makes any statement made in the
registration statement, the prospectus or any document incorporated
therein by reference untrue or which requires the making of any
changes in the registration statement, the prospectus or any document
incorporated therein by reference in order to make the statements
therein not misleading;
(k) if requested by the managing underwriter or underwriters
or a Selling Holder participating in an underwritten offering,
promptly incorporate in a prospectus supplement or post-effective
amendment, as applicable, such information as the managing
underwriter or underwriters and the Selling Holders of a majority of
the Registrable Securities being sold agree should be included
therein which is not objectionable to the Company or its counsel
relating to the sale of the Registrable Securities, including,
without limitation, information with respect to the number of
Registrable Securities being sold to such underwriters, the purchase
price being paid therefor by such underwriters and with respect to
any other terms of the underwritten (or best efforts underwritten)
offering of the Registrable Securities to be sold in such offering;
and make all required filings of such prospectus supplement or post-
effective amendment as soon as notified of the matters to be
incorporated in such prospectus supplement or post-effective
amendment;
(l) otherwise comply with all applicable rules and
regulations of the Commission, and make available to its
securityholders, as soon as reasonably practicable, an earnings
statement covering a period of twelve months, beginning within three
months after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of
the Securities Act;<PAGE>
<PAGE>
(m) in the case of an underwritten offering, obtain an
opinion or opinions from counsel for the Company in customary form
and content to opinions given in similar transactions;
(n) make available to the registrar a supply of definitive
securities certificates promptly after a registration of the
Registrable Securities, and cooperate with each Selling Holder to
enable such certificates representing Registrable Securities to be in
such denominations and registered in such names as the managing
underwriters, if any, or Selling Holders may request; and
(o) use its reasonable best efforts to cause all Registrable
Securities covered by such registration statement (i) to be listed on
the principal securities exchange, if any, on which the same type or
class of securities issued by the Company are then so listed,
(ii) quoted on the NASDAQ (or the National Market System of NASDAQ)
if the same type or class of securities issued by the Company are
then so quoted or (iii) if such securities are not then listed on a
securities exchange or quoted on the NASDAQ (or the National Market
System of NASDAQ), to be listed on such securities exchange or
authorized to be quoted on the NASDAQ (or the National Market System
of NASDAQ) or such other national or regional securities exchange or
quotation system as the Selling Holders shall request, provided that
the applicable listing requirements are met; and
(p) take all other action reasonably requested by the Selling
Holders of a majority of the Registrable Securities and necessary to
effect the registration of the Registrable Securities contemplated
hereby.
The Company may require each Selling Holder of Registrable
Securities as to which any registration is being effected to furnish to the
Company such information regarding the distribution of such Registrable
Securities as the Company may from time to time reasonably request in
writing and such other information as may be legally required in connection
with such registration. Notwithstanding anything herein to the contrary,
no Person may participate in any registration statement hereunder unless
such Person (x) agrees to sell such person's Registrable Securities on the
basis provided in any underwriting arrangements, if any, approved by the
Company (which approval shall not be unreasonably withheld) and (y)
completes and executes all questionnaires, powers of attorney, indemnities,<PAGE>
<PAGE>
underwriting agreements, and other documents reasonably required under the
terms of such underwriting arrangements; provided, however, that no such
Person shall be required to make any representations or warranties in
connection with any such registration other than representations and
warranties as to (i) such Person's ownership of his or its Registrable
Securities to be sold or transferred free and clear of all liens, claims,
and encumbrances, (ii) such Person's power and authority to effect such
transfer, and (iii) such matters pertaining to compliance with securities
laws as may be reasonably requested; provided further, however, that the
obligation of such Person to indemnify pursuant to any such underwriting
arrangements shall be several, not joint and several, among such Persons
selling Registrable Securities, and the liability of each such Person will
be in proportion to, and provided further that such liability will be
limited to, the net amount received by such Person from the sale of its
Registrable Securities pursuant to such registration.
Each Selling Holder agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in
Section 7(f) hereof, such Selling Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such Selling Holder's
receipt of the copies of the supplemented or amended prospectus
contemplated by Section 7(f) hereof, or until it is advised in writing by
the Company that the use of the prospectus may be resumed, and, if so
directed by the Company, such Selling Holder will deliver to the Company
(at the Company's expense) all copies, other than permanent file copies
then in such Selling Holder's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice. In
the event the Company shall give any such notice, the Company shall extend
the period during which such registration statement shall be maintained
effective by the number of days during the period from and including the
date of the giving of such notice pursuant to Section 7(f) hereof to and
including the date when each Selling Holder of Registrable Securities
covered by such registration statement shall have received the copies of
the supplemented or amended prospectus contemplated by Section 7(f) hereof.
8. Registration Expenses
All expenses incident to the Company's performance of or
compliance with this Agreement, including, without limitation, all
Securities Act registration and filing fees, fees and expenses associated
with filings required to be made with the National Association of
Securities Dealers, Inc., fees and expenses of compliance with <PAGE>
<PAGE>
securities or "blue sky" laws (including reasonable fees and disbursements
of counsel in connection with "blue sky" qualifications of the Registrable
Securities), printing expenses, messenger and delivery expenses, fees and
expenses of counsel for the Company and its independent certified public
accountants (including the expenses of any special audit or "cold comfort"
letters required by or incident to such performance), securities acts
liability insurance (if the Company elects to obtain such insurance), the
fees and expenses of any special experts retained by the Company in
connection with such registration, and fees and expenses of other persons
retained by the Company (all such expenses being herein called
"Registration Expenses") will be borne by the Company whether or not any
registration statement becomes effective; provided that in no event shall
Registration Expenses include any (i) underwriting discounts, commissions,
or fees attributable by the Debtors to the sale of the Registrable
Securities, and (ii) any fees and expenses of any counsel, accountants, or
other persons retained or employed by the Selling Holders and/or any
Eligible Distributees.
9. Indemnification; Contribution
(a) Indemnification by Company. The Company agrees to
indemnify and hold harmless each Selling Holder of Registrable Securities,
its officers, directors and agents and each Person, if any, who controls
such Selling Holder within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act (each such person being sometimes
hereinafter referred to as an "Indemnified Holder") from and against any
and all losses, claims, damages, liabilities and judgments (including,
without limiting the foregoing, the reasonable legal and other expenses
incurred in connection with any action, suit or proceeding) arising out of
or based upon any untrue statement or alleged untrue statement of a
material fact contained in any registration statement or prospectus or in
any amendment or supplement thereto or in any preliminary prospectus
relating to any registration statement to which this Agreement relates (a
"Registration Statement") or arising out of or based upon any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein in light of the
circumstances under which they were made, not misleading, except insofar as
such losses, claims, damages, liabilities or judgments arise out of, or are
based upon, any such untrue statement or omission or allegation thereof
based upon information furnished in writing to the Company by such Selling
Holder or on such Selling Holder's behalf expressly for use therein;
provided, however, that the Company shall not be liable in any such case to
the extent that any such loss, claim, <PAGE>
<PAGE>
damage, liability or judgment arises out of or is based on an untrue
statement or alleged untrue statement or omission or alleged omission made
in any preliminary prospectus, if such Selling Holder failed to send or
deliver a copy of the final prospectus (as appropriately supplemented) with
or prior to the delivery of written confirmation of the sale of such
Registrable Securities by such Selling Holder to the person asserting such
loss, claim, damage, liability or judgment who purchased Registrable
Securities that are the subject thereof from such Selling Holder if it is
determined that it was the responsibility of such Selling Holder to provide
such Person with a copy of the final prospectus (as appropriately
supplemented) and the delivery of such final prospectus (as appropriately
supplemented) would have cured the defect giving rise to such loss, claim,
damage, liability or judgment. The Company also agrees to indemnify and
provide contribution arrangements to any underwriters of the Registrable
Securities, their officers and directors and each person who controls such
underwriters (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) (collectively, "Securities Professionals")
on substantially the same basis as that of the indemnification of the
Selling Holders provided in this Section 9 if requested.
(b) Conduct of Indemnification Proceedings. If any action or
proceeding (including any governmental investigation) shall be brought or
asserted against any Indemnified Holder in respect of which indemnity may
be sought from the Company, such Indemnified Holder shall promptly notify
the Company in writing, and the Company shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such
Indemnified Holder and the payment of all reasonable expenses. Such
Indemnified Holder shall have the right to employ separate counsel in any
such action and to participate in the defense thereof, but the reasonable
fees and expenses of such counsel shall be at the expense of such
Indemnified Holder unless (i) the Company has agreed to pay such fees and
expenses or (ii) the Company shall have failed to promptly assume the
defense of such action or proceeding and to employ counsel reasonably
satisfactory to the Indemnified Holder or (iii) the named parties to any
such action or proceeding (including any impleaded parties) include both
such Indemnified Holder and the Company, and such Indemnified Holder shall
have been advised in writing by counsel that there is a conflict of
interest on the part of counsel employed by the Company to represent such
Indemnified Holder (in which case, if such Indemnified Holder notifies the
Company in writing that it elects to employ separate counsel at the expense
of the Company, the Company shall not have the right to assume the defense
of such action or proceeding on behalf of such Indemnified Holder, it being
understood, however, that the <PAGE>
<PAGE>
Company shall not, in connection with any one such action or proceeding or
separate but substantially similar or related actions or proceedings in the
same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys (in addition to appropriate local counsel)
at any time for such Indemnified Holder and any other Indemnified Holders,
which firm shall be designated in writing by a majority of such Indemnified
Holders). The Company shall not be liable for any settlement of any such
action or proceeding effected without the Company's written consent (which
consent shall not be unreasonably withheld), but if settled with its
written consent, or if there is a final, unappealable judgment for the
plaintiff in any such action or proceeding, the Company agrees to indemnify
and hold harmless such Indemnified Holders from and against any loss or
liability (to the extent stated above) by reason of such settlement or
judgment. The Company will not consent to entry of any judgment or enter
into any settlement which has not been consented to in writing by such
Indemnified Holder, which consent shall not be unreasonably withheld.
(c) Indemnification by Holders of Registrable Securities.
Each Selling Holder, severally and not jointly with other Selling Holders,
agrees to indemnify and hold harmless the Company, its directors and
officers employees and agents and each person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Company to such Selling Holder, but only with respect to
losses, claims, damages, liabilities and judgments arising out of, or based
upon, any such untrue statement or omission or allegations thereof based
upon information furnished in writing by such Selling Holder or on such
Selling Holder's behalf expressly for use in any registration statement or
prospectus or any amendment or supplement thereto, or any preliminary
prospectus relating to the Registration Statement; provided, however, that
with respect to any untrue statement or omission or alleged untrue
statement or omission made in any preliminary or final prospectus, the
indemnity agreement contained in this subsection shall not apply to the
extent that any such losses, claims, damages, liabilities and judgments
result from the fact that a final prospectus (as appropriately
supplemented) was not sent or given o the person asserting any such losses,
claims, damages, liabilities and judgments at or prior to the written
confirmation of the sale of the Registrable Securities concerned to such
person if it is determined that it was the responsibility of the Company or
any other person or entity (other than the Selling Holder) to provide such
person with a final prospectus (as appropriately supplemented) and such
final prospectus (as appropriately supplemented) would have cured the
defect giving rise to such loss, claims, damages, <PAGE>
<PAGE>
liabilities and judgments. In case any action or proceeding shall be
brought against the Company or its directors, officers, employees or agents
or any such controlling person, in respect of which indemnity may be sought
against such Selling Holder, such Selling Holder shall have the rights and
duties given to the Company, and the Company or its directors, officers,
employees or agents or such controlling person shall have the rights and
duties given to such Selling Holder by the preceding Section 9(b).
Notwithstanding the foregoing, in no event shall the liability of any
Selling Holder pursuant to this Section 9(c) exceed the net proceeds
received by such Selling Holder from the sale of Registrable Securities.
Each Selling Holder also agrees to indemnify and hold harmless Securities
Professionals with respect to the matters referred to in this Section 9(c)
on substantially the same basis as that of the indemnification provided to
the Company. The Company shall be entitled to receive indemnities from
Securities Professionals participating in the distribution, to the same
extent as provided above with respect to information so furnished in
writing by such persons specifically for inclusion in any prospectus or
registration statement or any amendment or supplement thereto or any
preliminary prospectus.
(d) Contribution. If the indemnification provided for in
this Section 9 is unavailable to the Company, the Indemnified Holders or
the Securities Professionals in respect of any losses, claims, damages,
liabilities or judgments referred to herein (other than by reason of
exceptions provided in subsection 9(a) or (c)), then each such indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to
the amount paid or payable by such indemnified party as a result of such
losses, claims, damages, liabilities and judgments as between the Company,
on the one hand, and each Indemnified Holder on the other, in such
proportion as is appropriate to reflect the relative fault of the Company
and of each Indemnified Holder in connection with such statements or
omissions, as well as any other relevant equitable considerations. The
relative fault of the Company on the one hand and of each Indemnified
Holder on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by such party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Indemnified Holders agree that it would not
be just and equitable if contribution pursuant to this Section 9(d) were
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in
the immediately preceding paragraph. <PAGE>
<PAGE>
Notwithstanding the provisions of this Section 9(d), no Selling Holder
shall be required to contribute any amount in excess of the amount by which
the total price at which the Registrable Securities of such Selling Holder
were offered to the public exceeds the amount of any damages which such
Selling Holder has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of subsection
11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(e) Survival. The indemnity and contribution agreements
contained in this Section 9 shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement or any
underwriting agreement, (ii) any investigation made by or on behalf of any
Indemnified Holder or by or on behalf of the Company, and (iii) the
consummation of the sale or successive resale of the Registrable
Securities.
10. Miscellaneous
(a) Remedies. In addition to being entitled to exercise all
rights provided herein and granted by law, including recovery of damages,
each Holder and Eligible Distributee will be entitled to specific
performance of his rights under Sections 2 and 4 of this Agreement. The
Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) Compliance with Certain Rules. Each of the parties
hereto undertakes, with respect to any of the securities of the Company, to
comply with the provisions of Rules 10b-6 and 10b-7 of the Exchange Act.
(c) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given unless the Company
has obtained the written consent of Selling Holders of at least a majority
of the Registrable Securities.<PAGE>
<PAGE>
(d) No Conflicting Agreements. The Company will not on or
after the date of this Agreement enter into, any the Company has not prior
to the date hereof entered into, any agreement with respect to any of its
securities which otherwise conflicts with the provisions hereof.
(e) Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail, telex, telecopier, or air courier guaranteeing overnight
delivery:
If to the Debtors:
c/o I.C.H. Corporation
500 North Akard, 12th Floor
Dallas, Texas 75201
Attention: Daniel B. Gail, Esq.
With a copy to:
Winstead Sechrest & Minick
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75201
Attention: Edward A. Petersen, Esq.
If to the Company:
Southwestern Financial Corporation
745 Fifth Avenue, 5th Floor
New York, New York 10151
Attention: David J. Stone
With a copy to:
Weil, Gotshal & Manges
100 Crescent Court, Suite 1300
Dallas, Texas 75201-6950
Attention: Jeremy W. Dickens, Esq.<PAGE>
<PAGE>
If to any Eligible Distributee:
At the address specified by it upon its
execution of a counterpart to this Agreement.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered;
five business days after being deposited in the mail, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on
the day delivered if sent by an air courier guaranteeing overnight
delivery.
(f) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and assigns of each of
the parties, including without limitation and without the need for an
express assignment, subsequent holders of Registrable Securities.
(g) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Texas.
(j) Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, under present or future laws effective
during the term of this Agreement, such provision shall be fully severable;
this Agreement shall be construed and enforced as if such illegal, invalid,
or unenforceable provision had never comprised a part of this Agreement;
and the remaining provisions of this Agreement shall remain in full force
and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement.
Furthermore, in lieu of each such <PAGE>
<PAGE>
illegal, invalid, or unenforceable provision, there shall be added
automatically as a part of this Agreement a provision as similar in terms
to such illegal, invalid, or unenforceable provision as may be possible and
be legal, valid and enforceable.
(k) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and is intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein with respect to the registration rights granted
by the Company with respect to the Registrable Securities. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
SOUTHWESTERN FINANCIAL CORPORATION
By: /s/Scott D. Silverman
---------------------
Scott D. Silverman,
Senior Vice President
I.C.H. CORPORATION
By: /s/Daniel B. Gail
-----------------
Daniel B. Gail
Executive Vice President
SWL HOLDING CORPORATION
By: /s/Daniel B. Gail
-----------------
Daniel B. Gail
Executive Vice President
CARE FINANCIAL CORPORATION
By: /s/Daniel B. Gail
-----------------
Daniel B. Gail
Executive Vice President<PAGE>
REGISTRATION RIGHTS AGREEMENT
(PennCorp)
This Registration Rights Agreement (the "Agreement") is made
and entered into as of December 14, 1995, by and among PennCorp Financial
Group, Inc., a Delaware corporation (the "Company"), I.C.H. Corporation
("ICH"), a Delaware corporation, SWL Holding Corporation ("SWL Holding"), a
Delaware corporation, and Care Financial Corporation ("CFC"), a Delaware
corporation (CFC, SWL Holding and ICH, together with Facilities Management
Installation, Inc., a Delaware corporation ("FMI"), collectively being
referred to herein as the "Debtors").
This Agreement is made pursuant to the Purchase Agreement (the
"Purchase Agreement"), dated as of December 1, 1995, by and among the
Debtors, Southwestern Financial Corporation, a Delaware corporation,
Southwestern Financial Services Corporation, a Delaware corporation, and
the Company. In order to induce the Debtors to perform their obligations
under the Purchase Agreement and to consummate the transactions
contemplated thereby, the Company has agreed to provide the registration
and other rights set forth in this Agreement. The execution and delivery
of this Agreement is a condition to the consummation of the Purchase
Agreement.
The parties agree as follows:
1. Securities Subject to this Agreement
(a) Certain Definitions. The terms set forth below are used
herein as so defined:
"Bankruptcy Court" means the United States Bankruptcy Court for
the Northern District of Texas, Dallas Division.
"Closing" means the closing of the transactions contemplated by
the Purchase Agreement.
"Commission" means the Securities and Exchange Commission.<PAGE>
<PAGE>
"Common Stock" means the common stock, par value $.01 per
share, of the Company, and any class or series of capital stock into which
such common stock thereafter may be changed.
"Date of Distribution" means the first date on which shares of
Common Stock are delivered to Distributees pursuant to the Plan of
Reorganization.
"Distributees" means the holders of claims against and/or
interests in one or more of the Debtors' estates who receive Common Stock
pursuant to the Plan of Reorganization in exchange for such claims or
interests.
"Eligible Distributee" means, if the Commission shall have
objected to the delivery of the final prospectus contained in the Shelf
Registration to prospective Distributees in connection with the
solicitation of acceptances of the proposed Plan of Reorganization, those
Distributees who, within 180 days after the Date of Distribution, deliver
to the Company a written opinion of counsel (in form and substance
reasonably satisfactory to the Company, which may set forth the analysis
relied upon in reaching the relevant legal conclusion) to the effect that
the offer and sale by such Distributee of the Common Stock, in the manner
proposed to be offered and sold by such Distributee, is required to be made
pursuant to a registration statement under the Securities Act.
Notwithstanding the foregoing, no Person shall be an Eligible Distributee
unless such Person agrees in writing to be bound by the terms and
provisions of this Agreement to the same extent as the Debtors.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect from time to
time.
"Holder" has the meaning set forth in the definition of
Registrable Securities.
"Person" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization, or other entity.
"Plan of Reorganization" means a plan of reorganization with
respect to the Debtors' jointly administered cases under Chapter 11 of the
United States Bankruptcy Code that has been confirmed by the Bankruptcy
Court, has not been stayed pending appeal and becomes effective in
accordance with its terms or an order of the Bankruptcy Court.<PAGE>
<PAGE>
"Plan of Reorganization Effective Date" means the date on which
the Plan of Reorganization becomes effective, it being understood that the
Debtors shall be obligated to provide written notice of such date to the
Company.
"Pro Rata Basis" means a pro rata allocation, among a specified
group of Persons, based on the number of shares of Common Stock requested
to be included in a registered offering by such group of Persons.
"Registrable Securities" means the shares of Common Stock
acquired by CFC pursuant to the Purchase Agreement, or by any other Debtor
from CFC, or by Eligible Distributees pursuant to the Plan of
Reorganization (each, a "Holder"), until such time as such securities shall
cease to be Registerable Securities as provided in Section 1(b) hereof.
"Securities Act" means the Securities Act of 1933, as amended,
or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to
time.
"Selling Holder" means a Holder who is selling Registrable
Securities pursuant to a registration statement under this Agreement.
(b) Registrable Securities. Any Registrable Security will
cease to be a Registrable Security when (i) a registration statement
covering such Registrable Security has been declared effective by the
Commission and such security has been disposed of pursuant to such
effective registration statement or (ii) such security is sold pursuant to
a registered public offering or pursuant to Section 4(1) of the Securities
Act or pursuant to Rule 144, Rule 144A or Regulation S under the Securities
Act (or any similar provision then in force) or (iii) such security is
eligible for sale pursuant to Rule 144(k) under the Securities Act.
2. Shelf Registration
(a) The Company agrees to file with the Commission as soon as
practicable after the Closing a "shelf" registration statement on any
appropriate form pursuant to Rule 415 under the Securities Act and/or any
similar rule that may be adopted by the Commission with respect to all of,
and only, the then Registrable Securities (the "Shelf Registration"). The
Company agrees (i) to use its commercially reasonable efforts to have such
Shelf Registration declared effective as soon as possible after such filing
and (ii) to keep such Shelf Registration continuously effective (and to
take any and all other actions necessary in order to permit public sale <PAGE>
<PAGE>
of the Registrable Securities covered by such Shelf Registration) until the
earlier of: (a) three years following the date on which such Shelf
Registration is declared effective, (b) one year after the Plan of
Reorganization Effective Date, and (c) the date on which all the
Registrable Securities cease to be such as provided in Section 1(b) hereof
(the earlier of such dates being the "Expiration Date"). In the event the
Shelf Registration Statement is not declared effective on or before
January 31, 1996, interest on a notional amount of $10,000,000 shall accrue
at the rate of 5% per annum (based on a 365-day year) from February 1,
1996, through and including the day prior to the date on which the Shelf
Registration Statement is declared effective by the Commission (the "Shelf
Registration Effective Date"); provided that in the event the value of
PennCorp Shares required to be delivered to the Holders pursuant to the
Purchase Agreement shall be reduced as contemplated by Section 3(c) hereof,
the $10,000,000 notional amount on which interest shall accrue shall be
reduced by an amount equal to the reduction in such value, effective as of
the date the proceeds to which the Holders are entitled pursuant to clause
(c) are paid to the Holders via wire transfer of immediately available
funds. Such interest shall be paid, in cash, on the Shelf Registration
Effective Date to ICH (for the benefit of the Debtors as they may agree
among themselves) via wire transfer of immediately available funds.
(b) The Company agrees, if necessary, to supplement or make
amendments to the Shelf Registration, if required by the registration form
utilized by the Company for such Shelf Registration or by the instructions
applicable to such registration form or by the Securities Act or the rules
and regulations thereunder. The Company will pay all Registration Expenses
(as hereinafter defined) in connection with such Shelf Registration,
whether or not it becomes effective. In connection with any underwritten
offering of Registrable Securities under the Shelf Registration, the
Company shall have the right to designate one or more nationally recognized
investment banking firms as the managing underwriter or underwriters with
respect to such offering.
(c) In connection with the filing of the Shelf Registration,
there shall be included a "Plan of Distribution" section in the prospectus
contained therein, which shall provide that such prospectus may be
delivered (subject to any applicable order of the Bankruptcy Court) by one
or more of the Debtors to prospective Distributees in connection with the
solicitation of acceptances of a proposed plan of reorganization related to
the Debtors. In the event the Commission objects to the delivery of the
final prospectus contained in the Shelf Registration to prospective
Distributees, the Company agrees to file such amendments or prospectus
supplements as may be necessary to identify as Selling Holders all Eligible
Distributees; provided, <PAGE>
<PAGE>
however, that the Company shall not be obligated to file more than one such
prospectus supplement during any calendar quarter to reflect any changed in
the relevant facts related to the Eligible Distributees.
3. Piggy-Back Registration.
(a) Request for Registration. At any time after the date
hereof and prior to the Expiration Date, if the Company proposes to file a
registration statement under the Securities Act (other than a registration
statement on Form S-4 or S-8 (or any successor form that may be adopted by
the Commission) or a registration statement filed in connection with an
exchange offer or offering of securities solely to the Company's existing
securityholders) with respect to an underwritten offering for cash of
Common Stock for the Company's own account or for the account of any of its
securityholders, then the Company shall give written notice to each Holder
or, if after the Date of Distribution, to ICH and to each Eligible
Distributee not less than 20 days before the anticipated effective date of
such registration statement. Such notice shall offer each Holder the
opportunity to have all or any of the Registrable Securities held by such
Person included in the registration statement proposed to be filed (the
"Piggy-back Registration"). Within ten days after receiving such notice,
each Holder may make a written request to the Company that any or all of
such Person's Registrable Securities be included in the Piggy-back
Registration, which notice shall specify the number of shares to be so
included. Subject to Section 3(b) hereof, the Company shall include in the
Piggy-back Registration all Registrable Securities with respect to which
the Company has received written requests for inclusion therein within ten
days after the receipt by each Holder of the Company's notice. The Company
may in its discretion withdraw any registration statement filed pursuant to
this Section 3(a). Any Holder shall be permitted to withdraw all or part
of the Registrable Securities from a Piggy-back Registration at any time
prior to the effective date of such Piggy-back Registration.
(b) Priority on Piggy-back Registration. The Company shall
use its reasonable best efforts to cause the managing underwriter or
underwriters to permit the shares of Registrable Securities requested by
the Holders of Registrable Securities ("Selling Piggy-back Holders") to be
included in the Piggy-back Registration (on the same terms and conditions
as the Common Stock included therein for the account of the Company or any
other holders of Common Stock). Notwithstanding the foregoing, if the
managing underwriter or underwriters of such offering advise the Company in
writing that inclusion of the Registrable Securities requested to be
included in the offering would materially and adversely affect the price or
success of the offering (a "Material Adverse Effect"), then (i) if such
Piggy-back Registration is <PAGE>
<PAGE>
incident to a primary registration on behalf of the Company, the Company
shall include in the registration statement (A) first, all the shares to be
sold by it and (B) second, the maximum amount of securities requested to be
included in the Piggy-back Registration by the Selling Piggy-back Holders
that would not cause a Material Adverse Effect (provided that the amount to
be included by the Selling Piggy-back Holders shall be allocated, subject
to any written agreement among the Selling Piggy-back Holders, on a Pro
Rata Basis among such Selling Piggy-back Holders if the inclusion of all
the requested Registrable Securities in such registration statement would
cause a Material Adverse Effect) and (C) third, the shares requested to be
included by any other securityholder (in such amounts as they may agree
among themselves) and (ii) if such Piggy-back Registration is incident to a
secondary registration on behalf of holders of Common Stock (other than
Holders) pursuant to demand registration rights, the Company shall include
in such registration statement (A) first, the number of shares of such
Person(s) on whose behalf the registration is being made (allocated among
such Persons as they may determine, if applicable) and (B) second, the
maximum number of Registrable Securities requested to be included in such
registration pursuant to this Section 3 in excess of the securities of such
Person(s) on whose behalf the registration is being made that, in the
opinion of such managing underwriters, would not have a Material Adverse
Effect, allocated, subject to any written agreement among the Selling
Piggy-back Holders, on a Pro Rata Basis among such Selling Piggy-back
Holders and the Company, to the extent it desires to include shares for its
own account in such registration.
(c) Additional Rights Incident to Certain Piggy-back
Registrations. Notwithstanding anything herein to the contrary, if the
Shelf Registration has not yet been declared effective (and, accordingly,
pursuant to the Purchase Agreement the number of PennCorp Shares has not
been determined and the PennCorp Shares have not been issued) and the
Company files a registration statement that, but for the failure of the
PennCorp Shares to have been delivered, otherwise would have enabled the
Holders to participate in a Piggy-back Registration, the Company shall
nevertheless treat the filing of such registration as though it were
subject to Section 3(a) hereof. In that regard, to the extent the Holders
request the right to participate therein (which shall specify, rather than
a number of shares of stock requested to be included therein, the amount of
proceeds the Holders desire to receive from such offering) the Company
shall use its reasonable best efforts to cause the managing underwriter or
underwriters to permit to be included such registration that number of
shares which is sufficient to produce the amount of gross proceeds sought
by the Requesting Holders, which shall be specified in the final prospectus
for such offering as a use of proceeds from such registration.
Notwithstanding the foregoing, if the managing underwriter or underwriters
of such offering advise the Company in writing <PAGE>
<PAGE>
that the amount of proceeds proposed to be obtained by the Company
(including to make the payment to the Holders contemplated by this Section
3(c)) would have a Material Adverse Effect, then the Company and the
Selling Piggy-back Holders shall reduce on a Pro Rata Basis (based, for
purposes of this clause (c), on the amount of gross proceeds sought by the
Company and the Holders) the size of the offering such that, as reduced,
the proposed amount of proceeds sought in the offering would not have a
Material Adverse Effect. If the size of the offering is reduced as
aforesaid but any over-allotment option granted to the underwriters in
connection therewith shall be exercised in whole or in part, the Company
and the Holders shall share in the gross proceeds therefrom on a Pro Rata
Basis (calculated as stated in the immediately preceding sentence).
Notwithstanding anything herein to the contrary, the Holders shall not be
entitled to participate in any such registration unless they shall execute
an agreement in form and substance reasonably satisfactory to the Company,
to the effect that any payments made to them pursuant to this Section 3(c)
shall constitute a reduction, on a dollar-for-dollar basis, in the value of
the remaining amount of PennCorp Shares, if any, required to be delivered
to the Holders after such offering pursuant to the Purchase Agreement.
4. Holdback Agreements.
To the extent not inconsistent with applicable law, each
Selling Holder agrees not to effect any public sale or distribution of such
Registrable Securities or similar securities of the Company, including a
sale pursuant to Rule 144 or Rule 144A under the Securities Act, during the
14 days prior to, and during the 180-day period (or such lesser period, if
any, agreed to by the Company in connection with such registration
statement) beginning on the commencement of an underwritten public
distribution under any registration statement pursuant to this Agreement
(except as part of such underwritten public distribution), if and to the
extent requested by the Company or by the managing underwriter or
underwriters.
5. Registration Procedures
In connection with any registration statement hereunder, the
Company will as expeditiously as possible:
(a) at least five days before filing a registration statement
or prospectus or as promptly as practicable prior to filing any
amendments or supplements thereto, the Company will furnish to each
Debtor that is a Selling Holder or, if after the Date of
Distribution, to ICH and to one counsel selected by it to represent
Eligible Distributees who are Selling Holders copies of all <PAGE>
<PAGE>
such documents proposed to be filed, which documents will be subject
to the review of such Selling Holders (and their counsel) or such
counsel, as applicable; and after the filing of a registration
statement, the Company will promptly notify each such Selling Holder
or such counsel, as applicable, of comments received from, or any
stop order issued or threatened by, the Commission and take all
reasonable actions required to respond to such comments or, as the
case may be, to prevent the entry of such stop order or to remove it
if it has been entered;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for the applicable period required by the terms
hereof or, in the case of Piggy-Back Registrations pursuant to
Section 3, for such time period as the Company shall determine in its
sole discretion (but not before the expiration of the 90-day period
referred to in subsection 4(3) of the Securities Act and Rule 174
thereunder, if applicable) and comply with the provisions of the
Securities Act with respect to the disposition of all securities
covered by such registration statement during such period in
accordance with the intended methods of disposition as set forth in
such registration statement;
(c) furnish to each Debtor that is a Selling Holder, prior to
filing a registration statement, copies of any document to be filed
as an exhibit to such registration statement or incorporated by
reference therein, and thereafter furnish to each Selling Holder such
number of copies of such registration statement, each amendment
thereto (including copies of any document to be filed as an exhibit
to such registration statement or incorporated by reference therein),
the prospectus included in such registration statement (including
each preliminary prospectus), and, promptly after the effectiveness
of a registration statement, to each Selling Holder the definitive
final prospectus filed with the Commission, all supplements thereto
and such other documents as such Selling Holder may reasonably
request in order to facilitate the disposition of the Registrable
Securities owned by such Selling Holder;
(d) register or qualify such Registrable Securities under
such other securities or blue sky laws of such jurisdictions within
the United States as any Selling Holder reasonably (in light of such
Selling Holder's intended plan of distribution) requests and do any
and all other acts and things which may be reasonably necessary or
advisable to enable such Selling Holder to consummate the disposition
in such jurisdictions of the Registrable Securities <PAGE>
<PAGE>
owned by such Selling Holder and keep each such registration or
qualification (or exemption therefrom) effective during the period
such registration statement is effective; provided that the Company
will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but
for this Section 5(d), (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any
such jurisdiction;
(e) cause such Registrable Securities to be registered with
or approved by such other governmental agencies or authorities as may
be necessary by virtue of the business and operations of the Company
and its Subsidiaries to enable the Selling Holder or Selling Holders
thereof to consummate the disposition of such Registrable Securities;
(f) notify each Selling Holder of such Registrable
Securities, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the occurrence
of an event requiring the preparation of a supplement or amendment to
such prospectus, and prepare and file such supplement, amendment or
any other required documents, so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading and promptly make available to each
Selling Holder any such supplement or amendment;
(g) in connection with an underwritten public distribution,
enter into customary agreements (including, if requested, an
underwriting agreement in customary form) and take such other actions
as are reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities;
(h) make available for inspection during business hours on
reasonable advance notice by any Selling Holder of such Registrable
Securities, any underwriter participating in any disposition pursuant
to such registration statement, and any attorney, accountant or other
professional retained by any such Selling Holder or underwriter
(collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of the Company
(collectively, the "Records") as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause
the Company's officers, directors and employees to supply all
information reasonably requested by any such Inspector in <PAGE>
<PAGE>
connection with such registration statement. Records which the
Company determines, in good faith, to be confidential and which it
notifies the Inspectors are confidential shall not be disclosed by
the Inspectors unless (i) the disclosure of such Records is necessary
to avoid or correct a material misstatement or omission in the
registration statement or (ii) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction. Each Selling Holder of Registrable Securities agrees
that it will, upon learning that disclosure of such Records is sought
in a court of competent jurisdiction, give notice to the Company and
allow the Company, at the Company's expense, to undertake appropriate
action to prevent disclosure of the Records deemed confidential.
Each Selling Holder of Registrable Securities further agrees that
information obtained by it as a result of such inspections which is
deemed confidential by the Company shall not be used by it, and it
shall use its best efforts to cause any Inspector not to use such
confidential information, as the basis for any market transactions in
securities of the Company or for any purpose other than any due
diligence review with respect to decisions regarding such Selling
Holder's investment in the Registrable Securities, unless and until
such information is made generally available to the public;
(i) in the event such sale is pursuant to an underwritten
offering, use its commercially reasonable efforts to obtain for the
underwriters a comfort letter or comfort letters from the Company's
independent public accountants in customary form and covering such
matters of the type customarily covered by comfort letters as the
managing underwriter reasonably request;
(j) notify the Selling Holders and the managing underwriter
or underwriters, if any, promptly, and (if requested by any such
person) confirm such advice in writing, (1) when the prospectus or
any prospectus supplement or post-effective amendment (or document
incorporated by reference therein) has been filed, and, with respect
to the registration statement or any post-effective amendment, when
the same has become effective, (2) of any request by the Commission
for amendments or supplements to the registration statement or the
prospectus or for additional information, (3) of the receipt by the
Company of any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose, and (4) of the happening of any event which makes any
statement made in the registration statement, the prospectus or any
document incorporated therein by reference <PAGE>
<PAGE>
untrue or which requires the making of any changes in the
registration statement, the prospectus or any document incorporated
therein by reference in order to make the statements therein not
misleading;
(k) if requested by the managing underwriter or underwriters
or a Selling Holder participating in an underwritten offering,
promptly incorporate in a prospectus supplement or post-effective
amendment, as applicable, such information as the managing
underwriter or underwriters and the Selling Holders of a majority of
the Registrable Securities being sold agree should be included
therein which is not objectionable to the Company or its counsel
relating to the sale of the Registrable Securities, including,
without limitation, information with respect to the number of
Registrable Securities being sold to such underwriters, the purchase
price being paid therefor by such underwriters and with respect to
any other terms of the underwritten (or best efforts underwritten)
offering of the Registrable Securities to be sold in such offering;
and make all required filings of such prospectus supplement or post-
effective amendment as soon as notified of the matters to be
incorporated in such prospectus supplement or post-effective
amendment;
(l) otherwise comply with all applicable rules and
regulations of the Commission, and make available to its
securityholders, as soon as reasonably practicable, an earnings
statement covering a period of twelve months, beginning within three
months after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of
the Securities Act;
(m) in the case of an underwritten offering, obtain an
opinion or opinions from counsel for the Company in customary form
and content to opinions given in similar transactions;
(n) make available to the registrar a supply of definitive
securities certificates promptly after a registration of the
Registrable Securities and cooperate with each Selling Holder to
enable such certificates representing Registrable Securities to be in
such denominations and registered in such names as the managing
underwriters, if any, or Selling Holders may request;
(o) use its commercially reasonable efforts to cause all
Registrable Securities covered by such registration statement to be
(i) approved for listing on the principal securities exchange, if
any, on which the same type or class of securities issued by the
Company are then listed or (ii) if such securities are <PAGE>
<PAGE>
not then listed on a securities exchange, authorized to be quoted on
the NASDAQ (or the National Market System of NASDAQ) or such other
national quotation system as the Company deems appropriate, provided
that the applicable listing requirements are met; and
(p) take all other action reasonably requested by the Selling
Holders of a majority of the Registrable Securities and necessary to
effect the registration of the Registrable Securities contemplated
hereby.
The Company may require each Selling Holder of Registrable
Securities as to which any registration is being effected to furnish to the
Company such information regarding the distribution of such Registrable
Securities as the Company may from time to time reasonably request in
writing and such other information as may be legally required in connection
with such registration. Notwithstanding anything herein to the contrary,
no Person may participate in any registration statement hereunder unless
such Person (x) agrees to sell such person's Registrable Securities on the
basis provided in any underwriting arrangements, if any, approved by the
Company (which approval shall not be unreasonably withheld) and (y)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements, and other documents reasonably required under the
terms of such underwriting arrangements; provided, however, that no such
Person shall be required to make any representations or warranties in
connection with any such registration other than representations and
warranties as to (i) such Person's ownership of his or its Registrable
Securities to be sold or transferred free and clear of all liens, claims,
and encumbrances, (ii) such Person's power and authority to effect such
transfer, and (iii) such matters pertaining to compliance with securities
laws as may be reasonably requested; provided further, however, that the
obligation of such Person to indemnify pursuant to any such underwriting
arrangements shall be several, not joint and several, among such Persons
selling Registrable Securities, and the liability of each such Person will
be in proportion to, and provided further that such liability will be
limited to, the net amount received by such Person from the sale of its
Registrable Securities pursuant to such registration.
Each Selling Holder agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in
Section 5(f) hereof, such Selling Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such Selling Holder's
receipt of the copies of the supplemented or amended prospectus
contemplated by Section 5(f) hereof, or until it is advised in writing by
the Company that the use of the prospectus may be resumed, and, if so
directed by the Company, <PAGE>
<PAGE>
such Selling Holder will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies then in such Selling Holder's
possession, of the prospectus covering such Registrable Securities current
at the time of receipt of such notice. In the event the Company shall give
any such notice, the Company shall extend the period during which such
registration statement shall be maintained effective by the number of days
during the period from and including the date of the giving of such notice
pursuant to Section 5(f) hereof to and including the date when each Selling
Holder of Registrable Securities covered by such registration statement
shall have received the copies of the supplemented or amended prospectus
contemplated by Section 5(f) hereof.
6. Registration Expenses
All expenses incident to the Company's performance of or
compliance with this Agreement, including, without limitation, all
Securities Act registration and filing fees, fees and expenses associated
with filings required to be made with the National Association of
Securities Dealers, Inc., fees and expenses of compliance with securities
or "blue sky" laws (including reasonable fees and disbursements of counsel
in connection with "blue sky" qualifications of the Registrable
Securities), printing expenses, underwriting discounts, commissions and
fees attributable to the sale by the Selling Holders of the Registrable
Securities, messenger and delivery expenses, fees and expenses of counsel
for the Company and its independent certified public accountants (including
the expenses of any special audit or "cold comfort" letters required by or
incident to such performance), securities acts liability insurance (if the
Company elects to obtain such insurance), the fees and expenses of any
special experts retained by the Company in connection with such
registration, and fees and expenses of other persons retained by the
Company (all such expenses being herein called "Registration Expenses")
will be borne by the Company whether or not any registration statement
becomes effective; provided that in no event shall Registration Expenses
include any fees and expenses of any counsel, accountants, or other persons
retained or employed by the Holders and/or any Eligible Distributee.
7. Indemnification; Contribution
(a) Indemnification by Company. The Company agrees to
indemnify and hold harmless each Selling Holder of Registrable Securities,
its officers, directors and agents and each Person, if any, who controls
such Selling Holder within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act (each such person being sometimes
hereinafter referred to as an "Indemnified Holder") from and against any
and all losses, claims, damages, <PAGE>
<PAGE>
liabilities and judgments (including, without limiting the foregoing, the
reasonable legal and other expenses incurred in connection with any action,
suit or proceeding) arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement or prospectus or in any amendment or supplement thereto or in any
preliminary prospectus relating to the Shelf Registration or arising out of
or based upon any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein in light of the circumstances under which they were made, not
misleading, except insofar as such losses, claims, damages, liabilities or
judgments arise out of, or are based upon, any such untrue statement or
omission or allegation thereof based upon information furnished in writing
to the Company by such Selling Holder or on such Selling Holder's behalf
expressly for use therein; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or judgment arises out of or is based on an untrue statement or
alleged untrue statement or omission or alleged omission made in any
preliminary prospectus, if such Selling Holder failed to send or deliver a
copy of the final prospectus (as supplemented, if applicable) with or prior
to the delivery of written confirmation of the sale of such Registrable
Securities by such Selling Holder to the person asserting such loss, claim,
damage, liability or judgment who purchased Registrable Securities that are
the subject thereof from such Selling Holder if it is determined that it
was the responsibility of such Selling Holder to provide such Person with
of the final prospectus (as supplemented, if applicable) and the delivery
of such final prospectus (as supplemented, if applicable) would have cured
the defect giving rise to such loss, claim, damage, liability or judgment.
The Company also agrees to indemnify and provide contribution arrangements
to any underwriters of the Registrable Securities, their officers and
directors and each person who controls such underwriters (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) (collectively, "Securities Professionals") on substantially the same
basis as that of the indemnification of the Selling Holders provided in
this Section 7 if requested.
(b) Conduct of Indemnification Proceedings. If any action or
proceeding (including any governmental investigation) shall be brought or
asserted against any Indemnified Holder in respect of which indemnity may
be sought from the Company, such Indemnified Holder shall promptly notify
the Company in writing, and the Company shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such
Indemnified Holder and the payment of all reasonable expenses. Such
Indemnified Holder shall have the right to employ separate counsel in any
such action and to participate in the defense thereof, but the reasonable
fees and expenses of such counsel shall be at the expense of such <PAGE>
<PAGE>
Indemnified Holder unless (i) the Company has agreed to pay such fees and
expenses or (ii) the Company shall have failed to promptly assume the
defense of such action or proceeding and to employ counsel reasonably
satisfactory to the Indemnified Holder, or (iii) the named parties to any
such action or proceeding (including any impleaded parties) include both
such Indemnified Holder and the Company, and such Indemnified Holder shall
have been advised in writing by counsel that there is a conflict of
interest on the part of counsel employed by the Company to represent such
Indemnified Holder (in which case, if such Indemnified Holder notifies the
Company in writing that it elects to employ separate counsel at the expense
of the Company, the Company shall not have the right to assume the defense
of such action or proceeding on behalf of such Indemnified Holder, it being
understood, however, that the Company shall not, in connection with any one
such action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (in addition to
appropriate local counsel) at any time for such Indemnified Holder and any
other Indemnified Holders, which firm shall be designated in writing by a
majority of such Indemnified Holders). The Company shall not be liable for
any settlement of any such action or proceeding effected without the
Company's written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent, or if there is a final,
unappealable judgment for the plaintiff in any such action or proceeding,
the Company agrees to indemnify and hold harmless such Indemnified Holders
from and against any loss or liability (to the extent stated above) by
reason of such settlement or judgment. The Company will not consent to
entry of any judgment or enter into any settlement which has not been
consented to in writing by such Indemnified Holder, which consent shall not
be unreasonably withheld.
(c) Indemnification by Holders of Registrable Securities.
Each Selling Holder, severally and not jointly with any other Selling
Holder, agrees to indemnify and hold harmless the Company, its directors
and officers employees and agents and each person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Company to such Selling Holder, but only with respect to
losses, claims, damages, liabilities and judgments arising out of, or based
upon, any such untrue statement or omission or allegations thereof based
upon information furnished in writing by such Selling Holder or on such
Selling Holder's behalf expressly for use in any registration statement or
prospectus or any amendment or supplement thereto, or any preliminary
prospectus relating to the Shelf Registration; provided, however, that with
respect to any untrue statement or omission or alleged untrue statement or
omission made in any preliminary or final <PAGE>
<PAGE>
prospectus, the indemnity agreement contained in this subsection shall not
apply to the extent that any such losses, claims, damages, liabilities or
judgments result from the fact that a final prospectus (as supplemented, if
applicable) was not sent or given to the person asserting any such loss,
claim, damage, liability or judgment at or prior to the written
confirmation of the sale of the Common Stock concerned to such person if it
is determined that it was the responsibility of the Company or any other
person or entity (other than the Selling Holder) to provide such person
with a final prospectus (as supplemented, if applicable) and such final
prospectus (as supplemented, if applicable) would have cured the defect
giving rise to such loss, claim, damage, liability or judgment. In case
any action or proceeding shall be brought against the Company or its
directors, officers, employees or agents or any such controlling person, in
respect of which indemnity may be sought against such Selling Holder, such
Selling Holder shall have the rights and duties given to the Company, and
the Company or its directors, officers, employees or agents or such
controlling person shall have the rights and duties given to such Selling
Holder by the preceding Section 7(b). Notwithstanding the foregoing, in no
event shall the liability of any Selling Holder pursuant to this
Section 7(c) exceed the net proceeds received by such Selling Holder from
the sale of Registrable Securities. Each Selling Holder also agrees to
indemnify and hold harmless Securities Professionals with respect to the
matters referred to in this Section 7(c) on substantially the same basis as
that of the indemnification provided to the Company. The Company shall be
entitled to receive indemnities from Securities Professionals participating
in the distribution, to the same extent as provided above with respect to
information so furnished in writing by such persons specifically for
inclusion in any prospectus or registration statement or any amendment or
supplement thereto or any preliminary prospectus.
(d) Contribution. If the indemnification provided for in
this Section 7 is unavailable to the Company, the Indemnified Holders or
the Securities Professionals in respect of any losses, claims, damages,
liabilities or judgments referred to herein (other than by reason of
exceptions provided in subsection 7(a) or 7(c)), then each such
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities and judgments as
between the Company, on the one hand, and each Indemnified Holder on the
other, in such proportion as is appropriate to reflect the relative fault
of the Company and of each Indemnified Holder in connection with such
statements or omissions, as well as any other relevant equitable
considerations. The relative fault of the Company and the Indemnified
Holders on the one hand and of the Securities Professionals on the other
shall be determined by reference to, among other things, whether the untrue
or alleged untrue statements of a material fact relates to information
supplied by the <PAGE>
<PAGE>
Company and the Indemnified Holders or by the Securities Professionals.
The relative fault of the Company on the one hand and of each Indemnified
Holder on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by such party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Indemnified Holders agree that it would not
be just and equitable if contribution pursuant to this Section 7(d) were
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in
the immediately preceding paragraph. Notwithstanding the provisions of
this Section 7(d), no Selling Holder shall be required to contribute any
amount in excess of the amount by which the total price at which the
Registrable Securities of such Selling Holder were offered to the public
exceeds the amount of any damages which such Selling Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement
or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation.
(e) Survival. The indemnity and contribution agreements
contained in this Section 7 shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement or any
underwriting agreement, (ii) any investigation made by or on behalf of any
Indemnified Party or by or on behalf of the Company, and (iii) the
consummation of the sale or successive resale of the Registrable
Securities.
8. Miscellaneous
(a) Remedies. In addition to being entitled to exercise all
rights provided herein and granted by law, including recovery of damages,
each Holder will be entitled to specific performance of its rights under
Sections 2 and 3(c) of this Agreement. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason
of a breach by it of the provisions of this Agreement and hereby agrees to
waive the defense in any action for specific performance that a remedy at
law would be adequate.<PAGE>
<PAGE>
(b) Compliance with Certain Rules. Each of the parties
hereto undertakes, with respect to any of the securities of the Company, to
comply with the provisions of Rules 10b-6 and 10b-7 of the Exchange Act.
(c) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given unless the Company
has obtained the written consent of Selling Holders of at least a majority
of the Registrable Securities.
(d) No Conflicting Agreements. The Company will not on or
after the date of this Agreement enter into, and the Company has not prior
to the date hereof entered into, any agreement with respect to any of its
securities which otherwise conflicts with the provisions hereof.
(e) Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail, telex, telecopier, or air courier guaranteeing overnight
delivery:
If to the Debtors:
c/o I.C.H. Corporation
500 North Akard, 12th Floor
Dallas, Texas 75201
Attention: Daniel B. Gail, Esq.
With a copy to:
Winstead Sechrest & Minick
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75201
Attention: Edward A. Petersen, Esq.
If to the Company:
PennCorp Financial Group, Inc.
745 Fifth Avenue, 5th Floor
New York, New York 10151
Attention: David J. Stone<PAGE>
<PAGE>
With a copy to:
Weil, Gotshal & Manges
100 Crescent Court, Suite 1300
Dallas, Texas 75201-6950
Attention: Jeremy W. Dickens, Esq.
If to any Eligible Distributee:
At the address specified by it upon its execution of a
counterpart to this Agreement.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered;
five business days after being deposited in the mail, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on
the day delivered if sent by an air courier guaranteeing overnight
delivery.
(f) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and assigns of each of
the parties, including without limitation and without the need for an
express assignment, subsequent holders of Registrable Securities.
(g) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Texas.
(j) Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable under present or future laws effective
during the term of this Agreement, such provision shall be fully severable;
this Agreement shall be construed and enforced as if such illegal, invalid,
or unenforceable provision had never comprised a part of this Agreement;
and the remaining provisions of this Agreement <PAGE>
<PAGE>
shall remain in full force and effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by its severance from this
Agreement. furthermore, in lieu of each such illegal, invalid, or
unenforceable provision, there shall be added automatically as a part of
this Agreement a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and
enforceable.
(k) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and is intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein with respect to the registration rights granted
by the Company with respect to the Registrable Securities. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
PENNCORP FINANCIAL GROUP, INC.
By: /s/Scott D. Silverman
---------------------
Scott D. Silverman,
Senior Vice President
I.C.H. CORPORATION
By: /s/Daniel B. Gail
-----------------
Daniel B. Gail
Executive Vice President
SWL HOLDING CORPORATION
By: /s/Daniel B. Gail
-----------------
Daniel B. Gail
Executive Vice President
CARE FINANCIAL CORPORATION
By: /s/Daniel B. Gail
-----------------
Daniel B. Gail
Executive Vice President<PAGE>
