<PAGE>
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
October 9, 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)
Southwestern Life Corporation
-------------------------------------------------------------
(Former name or former address, if changed since last report)
This filing contains 147 pages.
Index to Exhibits appears on page 3.
Page 1 of 147
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<PAGE>
Item 3. Bankruptcy or Receivership.
On October 10, 1995, Registrant filed a voluntary petition under Chapter
11 of Title 11 of the United States Code in the United States Bankruptcy Court
for the Northern District of Texas, Dallas, Division. The matter is captioned
as In Re: I.C.H. Corporation et al., Case No. 395-36351. Registrant continues
to operate and manage its assets and businesses as debtor in possession.
Item 5. Other Events.
Effective October 9, 1995, Registrant amended ARTICLE ONE of its
Certificate of Incorporation to read as follows:
ARTICLE ONE. The name of the corporation is I.C.H. Corporation.
On October 9, 1995, Registrant and certain of its wholly owned
subsidiaries, as sellers, executed a certain Purchase Agreement (see Exhibit 2
of this Current Report on Form 8-K) with Shinnecock Holdings Inc. and
Shinnecock Services Corp., as buyers, with respect to, among other things, the
sale by sellers of all of the capital stock of Southwestern Life Insurance
Company, Union Bankers Insurance Company, Constitution Life Insurance Company
and Southwestern Financial Services, Inc. and substantially all of the assets
of Facilities Management Installation, Inc.
On October 10, 1995, Registrant issued a public announcement with
respect to the matters referred to in Items 3 and 5 of this Current Report on
Form 8-K, which public announcement is attached as Exhibit 1 of this Current
Report on Form 8-K and incorporated herein by this reference in its entirety.
Item 7. Financial Statements, Pro Forma Financial Information, and
Exhibits.
(a) None
(b) None
(c) Exhibits.
Exhibit No. Description
----------- -----------
1 Press Release of Registrant dated October 10, 1995.
2 Purchase Agreement among I.C.H. Corporation, SWL
Holding Corporation, Care Financial Corporation,
Facilities Management Installation, Inc. and
Shinnecock Holdings Inc. and Shinnecock Services
Corp., dated October 9, 1995.
Page 2 of 147
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<PAGE>
INDEX TO EXHIBITS
Exhibit No. Document Description Sequential Page No.
- ----------- -------------------- -------------------
1 Press Release of I.C.H. Corporation dated
October 10, 1995. 5
2 Purchase Agreement among I.C.H. Corporation, SWL
Holding Corporation, Care Financial Corporation,
Facilities Management Installation, Inc. and
Shinnecock Holdings Inc. and Shinnecock Services
Corp., dated October 9, 1995. 8
Page 3 of 147
<PAGE>
<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: October 23, 1995
Page 4 of 147
<PAGE>
<PAGE>
EXHIBIT 1
DATE: October 10, 1995
FOR FURTHER INFORMATION CONTACT:
I.C.H. Corporation
Gerald J. Kohout
Vice President - Corporate Communications
(214) 954-7414
Shinnecock Holdings Inc.
Stan Levenson, CEO
Levenson Public Relations
(214) 880-0200
FOR IMMEDIATE RELEASE
Southwestern Life Insurance Company and Union Bankers Insurance Company
to be Sold to Shinnecock
Holdings Inc., an Investor Group Composed of
The Shinnecock Group LLC and Investment Partnerships Managed
by Kelso & Company and an Affiliate of Goldman, Sachs & Co.
Parent Holding Company Southwestern Life Corp. Seeks Court Protection,
Expedited Approval of Sale, to
Ensure Successful Completion of Transaction
and Other Aspects of Its Financial Reorganization
Restores Name I.C.H. Corporation to Holding Company
Insurance Subsidiaries Remain Financially Strong,
Unaffected by Holding-Company Chapter 11 Filing
Page 5 of 147<PAGE>
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DALLAS--Oct. 10, 1995 -- Southwestern Life Corporation (ASE: SLC) (the
"Company") and Shinnecock Holdings Inc., a newly-formed corporation jointly
owned by The Shinnecock Group LLC and investment partnerships managed by Kelso
& Company and an affiliate of Goldman, Sachs & Co., today announced the
signing of a definitive agreement to sell the Company's principal insurance
subsidiaries -- Southwestern Life Insurance Company, Union Bankers Insurance
Company, and Constitution Life Insurance Company -- and substantially all of
the assets of the Company's management subsidiary, Facilities Management
Installation, Inc. (FMI), to Shinnecock Holdings. Net proceeds from the sale
are estimated at $202 million in cash, subject to adjustment under certain
circumstances. The Company hopes to complete the sale, on an accelerated
basis, within approximately 30 to 45 days.
The Company also announced that, to avoid any policyholder confusion
between the holding company (Southwestern Life Corporation) and its
Southwestern Life Insurance Company subsidiary, it has restored, effective
immediately, the name of the holding company to I.C.H. Corporation (ICH), by
which the Company was known prior to June 1994.
To preserve the value of its financially strong insurance subsidiaries
for the benefit of its creditors and stockholders and to facilitate the
successful completion of the Shinnecock Holdings transaction, ICH also said
that it and FMI have filed voluntary petitions for relief under Chapter 11 of
the U.S. Bankruptcy Code and have requested expedited approval for the sale of
the insurance subsidiaries and the FMI assets. Following the sale, and prior
to any distributions to securityholders, ICH will present a plan of
reorganization to the Bankruptcy Court that will address the resolution of its
financial obligations.
The Company emphasized that none of its insurance companies are involved
in the bankruptcy filing and that its insurance businesses will continue to
operate in their ordinary course, including the payment of claims and the
issuance of new policies, and will not be subjected to any extraordinary
regulatory supervision. The Company said that all of the insurance companies
are well-capitalized, with more than sufficient liquidity to fulfill all of
their obligations to policyholders. The Company also said that it has been
working closely with state insurance regulatory authorities and that they are
supportive of the actions being taken by ICH to protect the interests of the
policyholders of its insurance subsidiaries.
At closing, Shinnecock Holdings' management subsidiary, which is
expected to employ substantially all of ICH's Dallas-based employees, will
enter into agreements to provide administrative and investment management
services to ICH and its retained insurance subsidiaries, which will continue
to operate as ICH subsidiaries.
Glenn Gettier, ICH Chairman and Chief Executive Officer, said: "We
believe our agreement with Shinnecock Holdings, which followed a broad
solicitation of investment proposals and a careful review of alternatives by
us and our financial advisor, Donaldson, Lufkin & Jenrette, permits ICH to
realize fair value for the companies being sold and provides needed liquidity
to the holding company. Additionally, the policyholders and agents doing
business with these insurance companies should be encouraged by the new
owners' financial strength, industry experience and commitment to success.
"At the same time, the decision to seek a court-supervised
reorganization for the holding company enhances our ability to preserve ICH's
value for its creditors and stockholders and to complete both the Shinnecock
Holdings transaction and the financial reorganization of which it is a part."
Page 6 of 147<PAGE>
<PAGE>
Alan C. Snyder, Chief Executive Officer of The Shinnecock Group LLC, who
will also serve as Chief Executive Officer of Shinnecock Holdings Inc., said:
"The well-established insurance companies we are acquiring have proud names, a
talented and experienced management team, and a long-standing tradition of
providing enduring value and efficient service to their policyholders. They
have strong relationships with their agents, who have served them well. We
look forward to building on those important strengths. We believe that these
companies and their dedicated employees and agents will provide a solid
platform for profitability and growth."
Mr. Snyder served as Chief Executive Officer of Aurora National Life
Assurance Company and Chief Operating Officer of Executive Life Insurance
Company, where, working with state regulators, he guided that company through
a successful rehabilitation and conservation process. Prior to that, he was
Executive Vice President and a director of Dean Witter Financial Services
Group.
Consummation of the transaction is subject to receipt of regulatory
approvals, to certain purchase price adjustments, and to customary closing
conditions, in addition to court approval.
Of the cash proceeds from the sale, up to $115 million will be subject
to certain escrow arrangements, including $67 million to satisfy a previously
disclosed tax settlement and $33 million to protect Shinnecock Holdings with
respect to various indemnifications. In addition, the Company has agreed to
withhold $50 million from distribution until the later of August 31, 1997 or
the date at which all claims against the Company have been resolved, to the
extent such claims are pending.
Donaldson, Lufkin & Jenrette has rendered an opinion to ICH that the
consideration to be received by ICH from the transaction is fair from a
financial point of view.
Kelso Investment Associates V is an investment fund with more than $700
million in committed capital managed by Kelso & Company. GS Capital Partners
II is an investment fund with $1.8 billion in capital managed by an affiliate
of Goldman, Sachs & Co. The capital of both funds is derived largely from
investments by individuals, trusts and institutional investors.
I.C.H. Corporation is an insurance holding company whose insurance
subsidiaries market life insurance, individual and group health insurance,
annuities and fee-based administrative services.
Page 7 of 147<PAGE>
EXHIBIT 2
===========================================================================
PURCHASE AGREEMENT
among
I.C.H. CORPORATION,
SWL HOLDING CORPORATION,
CARE FINANCIAL CORPORATION,
FACILITIES MANAGEMENT INSTALLATION, INC.
and
SHINNECOCK HOLDINGS INC.
SHINNECOCK SERVICES CORP.
Dated as of October 9, 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 . . . . . . . . . . . . . . . . . . .19
2.1. Formation and Capitalization of Stock Life Holding
Company; Sale and Purchase of the Acquired Shares . . . . . 19
2.2. Sale and Purchase of Acquired Assets. . . . . . . . . . . . 19
2.3. Excluded Assets . . . . . . . . . . . . . . . . . . . . . . 21
2.4. Excluded Liabilities. . . . . . . . . . . . . . . . . . . . 22
2.5. Assumed Liabilities; Funding of Certain Assumed
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 22
2.6. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.6.1 Delivery of Acquired Shares . . . . . . . . . . . . . 23
2.6.2 Transfer of Acquired Assets . . . . . . . . . . . . . 23
2.6.3 Payment of the Initial Cash Purchase Price . . . . . 23
2.6.4 Funding of Escrow Account . . . . . . . . . . . . . . 24
2.6.5 Release of Termination Amount . . . . . . . . . . . . 25
2.7. Calculation of In-Force Purchase Price Adjustment . . . . . 25
2.8. Calculation and Payment of Post-Closing Purchase Price
Adjustment . . . . . . . . . . . . . . . . . . . . . . . . 26
2.9. Non-Assignable Assumed Contracts. . . . . . . . . . . . . . 27
2.10. Non-Assignable Intellectual Property Licenses. . . . . . . 28
ARTICLE III
Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.1. Conditions to the Obligations of all Parties. . . . . . . . 28
3.1.1 Regulatory Approvals . . . . . . . . . . . . . . . . 28
3.1.2 Bankruptcy Court Approvals . . . . . . . . . . . . . 29
3.1.3 Distributions Paid . . . . . . . . . . . . . . . . . 31
3.1.4 No Prohibition . . . . . . . . . . . . . . . . . . . 31
3.1.5 Hart-Scott-Rodino . . . . . . . . . . . . . . . . . . 32
3.1.6 Litigation . . . . . . . . . . . . . . . . . . . . . 32
3.1.7 Redomestication . . . . . . . . . . . . . . . . . . . 32
3.2. Conditions to Obligations of Buyer. . . . . . . . . . . . . 32
3.2.1 Representations and Warranties . . . . . . . . . . . 32<PAGE>
3.2.2 Performance . . . . . . . . . . . . . . . . . . . . . 32
3.2.3 Consents . . . . . . . . . . . . . . . . . . . . . . 33
3.2.4 Officer's Certificates . . . . . . . . . . . . . . . 33
3.2.5 Additional Regulatory Approvals . . . . . . . . . . . 33
3.2.6 Proceedings . . . . . . . . . . . . . . . . . . . . . 34
3.2.7 Terminated Intercompany Agreements . . . . . . . . . 34
3.2.8 Resignation of Directors and Officers . . . . . . . . 35
3.2.9 Material Adverse Effect . . . . . . . . . . . . . . . 35
3.2.10 Opinions of Counsel to Seller . . . . . . . . . . . 35
3.2.11 Rating Agencies . . . . . . . . . . . . . . . . . . 35
3.2.12 Financing . . . . . . . . . . . . . . . . . . . . . 35
3.2.13 Certificate of Non-Foreign Status . . . . . . . . . 36
3.2.14 Related Agreements . . . . . . . . . . . . . . . . . 36
3.2.15 Section 338(h)(10) Election . . . . . . . . . . . . 36
3.2.16 Name Change of SLC Financial . . . . . . . . . . . . 36
3.2.17 Texas Property Tax Certificate . . . . . . . . . . . 36
3.3. Conditions to Seller's Obligations. . . . . . . . . . . . . 36
3.3.1 Representations and Warranties . . . . . . . . . . . 37
3.3.2 Performance . . . . . . . . . . . . . . . . . . . . . 37
3.3.3 Officer's Certificate . . . . . . . . . . . . . . . . 37
3.3.4 Opinions of Counsel to Buyer . . . . . . . . . . . . 37
3.3.5 Proceedings . . . . . . . . . . . . . . . . . . . . . 37
3.3.6 Related Agreements . . . . . . . . . . . . . . . . . 37
ARTICLE IV
Representations and Warranties . . . . . . . . . . . . . . . . . . . . 38
4.1. Representations and Warranties of Seller and Selling
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 38
4.1.1 Corporate Existence . . . . . . . . . . . . . . . . . 38
4.1.2 Authorization; Enforcement . . . . . . . . . . . . . 38
4.1.3 Governmental Approvals . . . . . . . . . . . . . . . 39
4.1.4 No Conflicts; Third Party Consents . . . . . . . . . 39
4.1.5 Capital Structure . . . . . . . . . . . . . . . . . . 40
4.1.6 Company Documents . . . . . . . . . . . . . . . . . . 40
4.1.7 Financial Statements and Information . . . . . . . . 40
4.1.8 SEC Reports . . . . . . . . . . . . . . . . . . . . . 43
4.1.9 Absence of Certain Changes or Events . . . . . . . . 43
4.1.10 Assets . . . . . . . . . . . . . . . . . . . . . . . 44
4.1.11 Environmental Matters . . . . . . . . . . . . . . . 46
4.1.12 Liabilities and Reserves; No Undisclosed
Liabilities. . . . . . . . . . . . . . . . . . . . . 47
4.1.13 Contracts . . . . . . . . . . . . . . . . . . . . . 48<PAGE>
4.1.14 Litigation . . . . . . . . . . . . . . . . . . . . . 50
4.1.15 Compliance with Laws, etc. . . . . . . . . . . . . . 51
4.1.16 Operations Insurance . . . . . . . . . . . . . . . . 51
4.1.17 Taxes . . . . . . . . . . . . . . . . . . . . . . . 51
4.1.18 Affiliate Transactions . . . . . . . . . . . . . . . 54
4.1.19 Employee Benefit Plans . . . . . . . . . . . . . . . 54
4.1.20 Insurance Business . . . . . . . . . . . . . . . . . 56
4.1.21 Reinsurance . . . . . . . . . . . . . . . . . . . . 57
4.1.22 Intellectual Property . . . . . . . . . . . . . . . 58
4.1.23 Variable Products; Securities Law Matters;
Investment Companies; Investment Adviser . . . . . . 59
4.1.24 Brokers and Finders, etc. . . . . . . . . . . . . . 59
4.1.25 No Acquisition Proposal . . . . . . . . . . . . . . 59
4.1.26 Fairness Opinion . . . . . . . . . . . . . . . . . . 59
4.1.27 Disclosure . . . . . . . . . . . . . . . . . . . . . 60
4.2. Representations and Warranties of Buyer and Shinnecock
Services . . . . . . . . . . . . . . . . . . . . . . . . . 60
4.2.1 Corporate Existence . . . . . . . . . . . . . . . . . 60
4.2.2 Authorization; Enforcement . . . . . . . . . . . . . 60
4.2.3 Governmental Approvals . . . . . . . . . . . . . . . 61
4.2.4 No Conflicts . . . . . . . . . . . . . . . . . . . . 61
4.2.5 Brokers and Finders, etc. . . . . . . . . . . . . . . 61
4.2.6 Financial Capability . . . . . . . . . . . . . . . . 61
4.2.7 Purchase for Investment . . . . . . . . . . . . . . . 62
4.2.8 Litigation . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE V
Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
5.1. Operations in the Ordinary Course . . . . . . . . . . . . . 62
5.2. Restrictions . . . . . . . . . . . . . . . . . . . . . . . . 63
5.3. Related Matters . . . . . . . . . . . . . . . . . . . . . . 66
5.4. Management of Acquired Companies . . . . . . . . . . . . . . 66
5.5. Access to Information . . . . . . . . . . . . . . . . . . . 67
5.6. Exclusive Dealing . . . . . . . . . . . . . . . . . . . . . 68
5.7. Regulatory Filing and Compliance . . . . . . . . . . . . . . 70
5.8. Commercially Reasonable Efforts . . . . . . . . . . . . . . 71
5.9. Antitwisting and Antisolicitation . . . . . . . . . . . . . 72
5.10. Certificate of Aggregate In-Force, etc . . . . . . . . . . 73
5.11. Change of Names . . . . . . . . . . . . . . . . . . . . . . 73
5.12. Bankruptcy Court Approval . . . . . . . . . . . . . . . . . 73
5.13. Fairness Opinion . . . . . . . . . . . . . . . . . . . . . 75<PAGE>
5.14. Specific Enforcement of Covenants . . . . . . . . . . . . . 75
5.15. Fund America Certificates . . . . . . . . . . . . . . . . . 75
5.16. Proceeds from BL of NY . . . . . . . . . . . . . . . . . . 76
5.17. Power of Attorney . . . . . . . . . . . . . . . . . . . . . 76
5.18. Notification of Developments . . . . . . . . . . . . . . . 76
5.19. Quail Creek Communications . . . . . . . . . . . . . . . . 77
5.20. Limited Partnership Interests . . . . . . . . . . . . . . . 77
5.21. Additional Acquired Assets . . . . . . . . . . . . . . . . 77
5.22. Recapture of MAL Reinsurance . . . . . . . . . . . . . . . 77
5.23. Insurance Coverage . . . . . . . . . . . . . . . . . . . . 77
5.24. Transfer of Intellectual Property Licenses . . . . . . . . 78
5.25. REO Holding Corp . . . . . . . . . . . . . . . . . . . . . 78
5.26. September 30 Statement . . . . . . . . . . . . . . . . . . 78
5.27. Intercompany Matters . . . . . . . . . . . . . . . . . . . 78
ARTICLE VI
Certain Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . 78
6.1. Payment of Tax Liabilities . . . . . . . . . . . . . . . . . 78
6.2. Filing of Tax Returns . . . . . . . . . . . . . . . . . . . 81
6.3. Bridge Period . . . . . . . . . . . . . . . . . . . . . . . 82
6.4. Audits and Other Proceedings . . . . . . . . . . . . . . . . 82
6.5. Section 338(h)(10) Election . . . . . . . . . . . . . . . . 84
6.6. Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . 86
6.7. Cooperation . . . . . . . . . . . . . . . . . . . . . . . . 86
6.8. Allocation of Purchase Price . . . . . . . . . . . . . . . . 87
6.9. Tax Refunds and Credits . . . . . . . . . . . . . . . . . . 88
6.10. Election Relating to Section 382 of the Code . . . . . . . 89
6.11 Stub-Period Taxes . . . . . . . . . . . . . . . . . . . . . 89
ARTICLE VII
Employment Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
7.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 89
7.2. Employment of Acquired Company Employees . . . . . . . . . . 90
7.3. Service Credits . . . . . . . . . . . . . . . . . . . . . . 94
7.4. Savings Investment Plan . . . . . . . . . . . . . . . . . . 94
7.5. Welfare, Fringe and Other Benefits . . . . . . . . . . . . . 95
7.6. Retained Seller Liabilities . . . . . . . . . . . . . . . . 96
7.7. COBRA and WARN . . . . . . . . . . . . . . . . . . . . . . . 96<PAGE>
ARTICLE VIII
Indemnification and Use of Escrow Fund. . . . . . . . . . . . . . . . . 97
8.1. Indemnification . . . . . . . . . . . . . . . . . . . . . . 97
8.2. Provisions Regarding Escrow Accounts . . . . . . . . . . . .109
8.3. Funding of Escrow Accounts . . . . . . . . . . . . . . . . .111
8.4. Tax Treatment of Escrow . . . . . . . . . . . . . . . . . .111
8.5. Escrow Payments at Buyer's Direction . . . . . . . . . . . .112
8.6. Maintenance of Liquid Assets . . . . . . . . . . . . . . . .112
ARTICLE IX
Further Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . .113
9.1. Public Announcements . . . . . . . . . . . . . . . . . . . .113
9.2. Expenses Payment . . . . . . . . . . . . . . . . . . . . . .113
9.3. Termination Payment . . . . . . . . . . . . . . . . . . . .114
ARTICLE X
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .116
10.1. Termination. . . . . . . . . . . . . . . . . . . . . . . . .116
10.2. Severability . . . . . . . . . . . . . . . . . . . . . . . .117
10.3. Agreement; No Third-Party Beneficiaries. . . . . . . . . . .117
10.4. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . .117
10.5. Assignment . . . . . . . . . . . . . . . . . . . . . . . . .117
10.6. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . .118
10.7. Amendments and Waivers . . . . . . . . . . . . . . . . . . .119
10.8. Counterparts . . . . . . . . . . . . . . . . . . . . . . . .119
10.9. Successors and Assigns . . . . . . . . . . . . . . . . . . .119
10.10. Interpretation. . . . . . . . . . . . . . . . . . . . . . .120
10.11. Schedules . . . . . . . . . . . . . . . . . . . . . . . . .120
10.12. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . .120
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<PAGE>
Schedule 2.5(b) Trade Accounts
Schedule 2.8(a) In-force Adjustment
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.(d) Tillinghast Exceptions
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 4.1.10(a)(ix) Material Adverse Effect
Schedule 4.1.9(a)(x) Material Breach
Schedule 4.1.910(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
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<PAGE>
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 Ventures 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 4.1.20(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
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<PAGE>
Schedule 7.1(b) Executive Officers
Schedule 7.1(c) Executive Severance Agreements
Schedule 7.1(d) Supplemental Benefit Agreements
Schedule 8.3 Funding of Escrow Accounts<PAGE>
EXHIBITS
Exhibit A Form of SWL Investment Advisory Agreement
Exhibit B Form of Shinnecock Services Leasing Agreement
Exhibit C Form of Opinion of Counsel to Seller
Exhibit D-1 Form of Opinion of Counsel to Buyer
Exhibit D-2 Form of Opinion of Texas Counsel to Buyer
Exhibit D-3 Form of Opinion of Kentucky Counsel to Buyer
Exhibit E Form of Power of Attorney
Exhibit F Form of Escrow Agreement
Exhibit G Form of Termination and Expense Security Agreement<PAGE>
PURCHASE AGREEMENT, dated as of October 9, 1995, among I.C.H.
Corporation, a Delaware corporation ("Seller"), Facilities Management
Installation, Inc., a Delaware corporation ("FMI"), SWL Holding Cor-
poration, a Delaware corporation ("SWL Holding"), Care Financial
Corporation, a Delaware corporation ("CFC" and, together with FMI and SWL
Holding, the "Selling Subsidiaries"), Shinnecock Holdings Inc., a Delaware
corporation ("Buyer") and Shinnecock Services Corp., a Delaware corporation
and a wholly-owned direct subsidiary of Buyer ("Shinnecock Services").
W I T N E S S E T H :
WHEREAS, Seller owns all of the capital stock of SWL Holding,
CFC, FMI and SLC Financial Services, Inc., a Delaware corporation ("SLC
Financial");
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, UBIC and SLC Financial and other Subsidiaries of Seller in
connection with the conduct of the Acquired Business;
WHEREAS, (i) Buyer desires to purchase from Seller, and Seller
desires to sell to Buyer, all of the outstanding shares of the capital
stock of SLC Financial (the "SLC Financial Shares"), (ii) Buyer desires to
purchase from SWL and SWL desires to sell to Buyer, all of the outstanding
shares of the capital stock of Constitution Life (the "Constitution Life
Shares"), (iii) Buyer desires to acquire, indirectly through Constitution
Life, (a) from CFC, and CFC desires to sell to Buyer, all of the
outstanding shares of the capital stock of UBIC (the "UBIC Shares"), and
(b) from SWL Holding, and SWL Holding desires to sell to Buyer, all of the
outstanding shares of capital stock of SWL (the "SWL Shares"), and (iv)
Buyer desires to purchase and assume from FMI, and FMI desires to sell and
assign to Buyer, certain assets and liabilities, all upon the terms and
subject to the conditions set forth herein, such acquisition of assets and
assumption of liabilities to be effected by Buyer indirectly through
Shinnecock Services;<PAGE>
WHEREAS, after the Closing, Seller will retain ownership of the
Retained Companies (as hereinafter defined) and Shinnecock Services 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, after the Closing, SLC Financial (which prior to the
Closing will have been renamed SWL Financial Services, Inc. ("SWL
Financial")) will provide certain investment advisory services to certain
Retained Companies; and
WHEREAS, contemporaneously with the execution and delivery of
this Agreement, Seller and each of the Selling Subsidiaries will each file
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") 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 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: SLC Financial; 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.<PAGE>
Acquired Company Retirees: as defined in Section 7.1.
Acquired Insurance Companies: SWL, UBIC, Constitution Life and
Marquette.
Acquired Shares: as defined in Section 2.1(b)(v).
Acquisition Proposal: as defined in Section 5.6(b).
Additional Section 338 Form: as defined in Section 6.5(b)(iii).
Adjusted In-Force Statement: as defined in Section 2.7(c).
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.
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 SLC 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.
Aggregate In-Force Business: as defined in Section 2.7(a).
Agreement: this Purchase Agreement (including the Schedules
thereto), as amended from time to time.
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<PAGE>
of any Governmental Authority and (ii) orders, decisions, injunctions,
judgments, awards and decrees of or agreements with any Governmental
Authority.
Approval Orders: 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.
Assumption and Assignment Orders: as defined in Section
3.1.2(b).
Assumed Liabilities: as defined in Section 2.5.
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 bankruptcy case of Seller (which case is to be
commenced under Chapter 11 of the Bankruptcy Code contemporaneously with
the execution and delivery of this Agreement).
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, certifi-
cates 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.<PAGE>
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).
Buyer: as defined in the Preamble to this Agreement.
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).
Calculation Date: as defined in Section 2.7(a).
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 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.<PAGE>
CFC: as defined in the Preamble 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.
Closing Date Adjustment: as defined in Section 2.6.3(a).
Code: the Internal Revenue Code of 1986, as amended.
Collateral Agent: as defined in Section 9.2(b).
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).
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).
December 31 SAP Statements: as defined in Section
4.1.7(a)(iii).
Deposit: as defined in Section 4.1.20(e).<PAGE>
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 Shinnecock Services,
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 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.<PAGE>
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 and the Purchase Price Escrow Account.
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).
Exclusive Dealing Agreement: the Exclusive Dealing Agreement,
dated as of July 13, 1995, among Kelso & Company, L.P., a Delaware limited
partnership, Shinnecock Group, L.L.C., a California limited liability
company, GS Capital Partners II, L.P., a Delaware Limited partnership, and
Seller, as amended by the Amendments, dated as of August 14, 1995 and
September 15, 1995, among the parties thereto.
Exclusivity Period: the period from (and including) July 13,
1995 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.
Executive Officers: as defined in Section 7.1.
Executive Severance Arrangements: as defined in Section 7.1.
Executive Severance Benefits: as defined in Section 7.2(c)(i).
Executory Contracts: a defined in Section 3.1.2(b).
Existing Reinsurance Agreements: as defined in Section 4.1.21.<PAGE>
Expense Amount: the sum of the Pre-Execution Expense Amount and
the Pre-Closing Expense Amount.
Fairness Opinion: as defined in Section 4.1.26.
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.
Financing Commitments: as defined in Section 4.2.6.
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 a prospectus or other offering material
has stated an intention to qualify as a RIC.
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. <PAGE>
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, govern-
ment 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 byphenyls, pe-
troleum (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 sub-
stances," "hazardous materials," "hazardous waste" or "toxic substances" in
the Comprehensive Environmental Response, Compensation, and Liability Act
of 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.
HSR Act: as defined in Section 3.1.5.
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)(ii).<PAGE>
Indemnity Escrow Amount: the amount of the Initial Cash
Purchase Price to be deposited into the Indemnity Escrow Account in
accordance with Section 8.3.
Indemnity Notice: as defined in Section 8.1(d)(viii).
In-Force Adjustment: the closing adjustment to the Initial Cash
Purchase Price calculated on the basis set forth in Schedule 2.8(a).
In-Force Statement: as defined in Section 2.7(a).
In-Force Statement Resolution Period: as defined in Section
2.7(b).
Initial Cash 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.
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).
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.
Liquid Assets: as defined in Section 8.6.
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.<PAGE>
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 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).<PAGE>
Marquette: as defined in the Recitals to this Agreement.
Maintenance Period: as defined in Section 8.6.
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 (i) SWL and its Subsidiaries, taken as a whole, (ii) UBIC and
its Subsidiaries taken as a whole, or (iii) 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: as defined in Section 2.7(c).
New Shinnecock Employees: as defined in Section 7.1.
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.
Notice Period: as defined in Section 8.1(d)(ii).
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).<PAGE>
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, trust, business 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).
Post-Closing Expenses: as defined in Section 9.2(e).
Pre-Closing Expense Amount: as defined in Section 9.2(c).
Pre-Execution Expense Amount: as defined in Section 9.2(a).
Prohibited Agents: as defined in Section 5.9(a).
Purchase Price: as defined in Section 2.6.3.
Purchase Price Escrow Account: as defined in Section 8.2(a)(i).
Purchase Price Escrow Amount: the amount of the Initial Cash
Purchase Price to be deposited into the Purchase Price Escrow Account in
accordance with Section 8.3.
Quail Creek Communications: Quail Creek Communications, Inc. an
Arizona corporation.
Real Properties: as defined in Section 4.1.10(a)(i).
Reasonable Environmental Expense: as defined in Section 8.1(e).<PAGE>
Related Agreements: the Escrow Agreement, the Shinnecock
Service Leasing Agreements, the SWL Investment Advisory Agreements, the
Termination and Expense Security Agreement, the Assumption Documents and
the Transfer Documents.
Related Group: the Acquired Companies, Integrity, BL of NY and
FMI.
Related Persons: as defined in Section 4.1.19(a).
Response Notice: as defined in Section 8.1(d)(ii).
Retained Companies: SWL Holding; CFC; FMI; Western Pioneer Life
Insurance Company, a Kentucky stock life insurance corporation; MAL;
Bankers Multiple Line Insurance Company, an Illinois stock property and
casualty insurance company; BML Agency, Inc., an Illinois corporation;
Quail Creek Communications, Inc., an Arizona corporation; Philadelphia
American Life Insurance Company, a Pennsylvania stock life insurance
corporation; Philadelphia American Property Company, a Texas corporation;
REO Holding Corp., an Illinois corporation; and all other Subsidiaries of
Seller other than the Acquired Companies.
Retention Bonuses: as defined in Section 7.2(c)(i).
RIC: as defined in Section 4.1.17(c).
Sale Procedures Order: as defined in Section 5.12(a).
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.<PAGE>
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 Representatives: as defined in Section 5.6(a).
Seller's 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.<PAGE>
Separate Account: as defined in Section 4.1.17(c).
September 30 Statement: as defined in Section 5.26.
Settlement Sum: as defined in Section 8.1(d)(v).
Shinnecock Service Leasing Agreements: the Employee Leasing and
Data Processing Capacity Agreements, to be dated as of the Closing Date,
between Shinnecock Services and Seller and certain of the Retained
Companies, each to be substantially in the form of Exhibit B.
Short-Term Reinsurance Agreement: as defined in Section 9.3(b).
SLC Bonds: the 11 1/4% Subordinated Notes due 1996 issued by
Seller.
SLC Financial: as defined in the Recitals to this Agreement.
SLC Financial Shares: as defined in the Recitals to this
Agreement.
Shinnecock Services: as defined in the Preamble to this
Agreement.
Special Indemnities: the Tax Indemnity, the Litigation
Indemnity, the Excluded Liabilities, the Environmental Indemnity and the
Non-Assignable Assumed Contracts Indemnity.
Statutory Book Value: as defined in Section 2.6.3(b).
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 the Affiliated Group 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 Group 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)<PAGE>
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 Benefits: as defined in Section
7.2(c)(i).
Surplus Debentures: as defined in Section 2.1(b)(ii).
SW Holding Corp.: a Delaware corporation that, on the Closing
Date, will own all of the issued and outstanding capital stock of Buyer.
SWL: as defined in the Recitals to this Agreement.
SWL Financial: as defined in the Recitals to this Agreement.
SWL Holding: as defined in the Preamble to this
Agreement.
SWL Investment Advisory Agreements: the Investment Management
Agreements, to be dated as of the Closing Date, between SWL Financial and
certain of the Retained Companies, each to be substantially in the form of
Exhibit A.
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 re-
ceipts, 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 affiliated group filing consolidated
returns for Federal income tax purposes of which Seller or MAL<PAGE>
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
or any other court of competent jurisdiction, in each case finally
determining all Federal income tax liability of such affiliated group 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 group arising as a result of such closing
agreement or judgment, have been fully satisfied.
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.
Termination Amount: as defined in Section 9.3(a).
Termination and Expense Security Agreement: as defined in Sec-
tion 9.2(b).
Third Party: as defined in Section 5.6(a).
Third Party Claim: as defined in Section 8.1(d)(i).
Third Party Reinsurer: as defined in Section 9.3(b).
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.<PAGE>
ARTICLE II
Sale of Stock and Assets; Closing
2.1. Formation and Capitalization of Stock Life Holding
Company; Sale and Purchase of the Acquired Shares. (a) Prior to the
Closing, Constitution Life will distribute to SWL, and SWL will distribute
to SWL Holding, $21,500,000 aggregate principal amount of SLC Bonds; and
(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) Seller will cause SWL to sell to Buyer, and Buyer will
purchase from SWL, the Constitution Life Shares for $8 million in
cash;
(ii) Buyer will purchase from Constitution Life, and
Constitution Life will sell to Buyer, $155 million aggregate
principal amount (or such lesser amount as may be designated by Buyer
to reflect adjustments to the Initial Cash Purchase Price pursuant to
Section 2.6.3) of surplus debentures (the "Surplus Debentures");
(iii) Buyer will purchase from Seller, and Seller will sell to
Buyer, the SLC Financial Shares;
(iv) Seller will cause a capital contribution to be made to SWL
in the amount of $12 million in cash; and
(v) SWL Holding and CFC, respectively, will sell, and
Constitution Life will purchase, the SWL Shares and the UBIC Shares
(collectively, with the Constitution Life Shares and the SLC
Financial Shares, the "Acquired Shares").
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
Shinnecock Services to purchase 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 Shinnecock Services, (i) all rights
to causes of action, lawsuits, judgments, claims and demands of any
nature available to or being pursued by Seller or any Retained<PAGE>
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, lawsuit, 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 Shinnecock Services 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 cate-
gories 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
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;<PAGE>
(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 Shinnecock
Employees; and
(vii) all rights of FMI under the Assumed Contracts.
2.3. Excluded Assets. Anything herein to the contrary not-
withstanding, the Acquired Assets shall not include, and Shinnecock
Services shall not 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;
(e) contracts, loans, licenses and other agreements that are
not Assumed Contracts;
(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.<PAGE>
2.4. Excluded Liabilities. Except to the extent provided in
Section 2.5 hereof, notwithstanding anything to the contrary in this
Agreement, neither Buyer, Shinnecock Services nor any 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 Shinnecock Services 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
Shinnecock Services, 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, 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 Shinnecock 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 Shinnecock Services 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) as of the date of this
Agreement for (x) Executive Severance Benefits payable in respect of any<PAGE>
Eligible Executive Officer, (y) Supplemental Executive Benefits and
Retention Bonuses payable, in either case, in respect of any Executive
Officer regardless of whether suchExecutive Officer becomes a New
Shinnecock Employee and (z) Retention Bonuses payable in respect of any
Business Employee other than an Executive Officer, (ii) 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
Shinnecock Employees, and (iii) 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. Seller shall deliver to
Buyer stock certificates representing the SLC Financial Shares, SWL shall
deliver to Buyer stock certificates representing the Constitution Life
Shares, SWL Holding shall deliver to Constitution Life stock certificates
representing the SWL Shares and CFC shall deliver to Constitution Life
stock certificates representing the UBIC Shares, in each case free and
clear of any Liens and Claims (other than Liens contemplated by the
Financing Commitments and Assumed Liabilities), 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.
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 Shinnecock Services free and clear of all Liens and
Claims (other than Liens contemplated by the Financing Commitments, Assumed
Liabilities, Liens otherwise created by Shinnecock Services and Texas
Property Tax Liens on the Acquired Assets in respect of Taxes imposed in
1995), and Buyer shall cause Shinnecock Services to assume the Assumed
Liabilities.
2.6.3 Payment of the Initial Cash Purchase Price. (a) Buyer
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 to Buyer by notice at least two Business Days prior to
the Closing Date, an amount equal to $225 million (the "Initial Cash
Purchase Price") (i) plus the Pre-Execution Expense Amount (ii) plus the
amount by which Statutory Book Value as set forth in the September 30
Statement exceeds <PAGE>
$175.9 million, or minus the amount by which $175.9 million exceeds such
Statutory Book Value, as the case may be (iii) minus the sum of (A) the
excess, if any, of the sum of (1) 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 (2) any other Operating Expenses during the period from October 1, 1995
through the Closing Date, inclusive, as set forth in the 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, and
(B) the Escrow Amount and (iv) plus or minus, as the case may be, an amount
equal to what would be the adjustment to the Initial Cash Purchase Price
calculated in accordance with Section 2.8 if Aggregate In-Force Business on
the Adjusted In-Force Statement were as set forth on the certificate
delivered by Seller to Buyer under Section 5.10 (the "Closing Date
Adjustment"). The term "Purchase Price," as used herein, shall mean the
Initial Cash Purchase Price, as adjusted pursuant to Section 2.8. In the
event the Initial Cash Purchase Price is reduced by any amount pursuant to
clause (iii) above, Shinnecock Services shall at the Closing assume any
obligation of FMI to refund any portion of the amount by which the Initial
Cash Purchase Price is so reduced to any of the Acquired Companies under
the terms of the FMI Service Agreement and Shinnecock Services 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.
(b) The Term "Statutory Book Value" shall mean the total of the
reported capital and surplus, AVR and IMR (calculating any negative IMR as
zero) of all of the Acquired Insurance Companies, computed without
duplication according to SAP (applied on a basis consistent with the SAP
Annual Statements as of December 31, 1994), less,
(i) any reported capital gains without netting capital losses
(whether realized or unrealized) net of applicable reported income
Tax, whether reported as income or as an addition to IMR occurring
since December 31, 1994, such amount to be further adjusted to deduct
certain capital gains that are not to be included for this purpose
and certain capital losses that are to be added back for this
purpose, all net of applicable income tax, as described in
correspondence between the parties prior to the date hereof;
(ii) any positive after-Tax income attributable to any change
in SAP or Seller's accounting practices thereunder occurring since
December 31, 1994; and<PAGE>
(iii) any positive after-Tax income attributable to any event
not in the ordinary course of business occurring since December 31,
1994.
2.6.4 Funding of Escrow Account. Buyer shall deliver to the
Escrow Agent for deposit into the Purchase Price Escrow Account and the
Indemnity Escrow Account, respectively, the Purchase Price Escrow Amount
and the Indemnity Escrow Amount, to be held by the Escrow Agent under the
terms of the Escrow Agreement as required by Article VIII.
2.6.5 Release of Termination Amount. The Termination and
Expense Security Agreement shall terminate, and the collateral securing the
Termination Amount and the Pre-Closing Expense Amount shall be returned to
Seller.
2.7. Calculation of In-Force Purchase Price Adjustment. (a) As
soon as practicable, but in no event later than 15 days following the
Calculation Date (as defined below), Buyer shall prepare and deliver to
Seller a statement (the "In-Force Statement"), accompanied by a report
prepared by its independent accountants, setting forth the Aggregate
In-Force Business (as defined in Schedule 2.8(a)) of the Acquired Insurance
Companies as of the date (the "Calculation Date") occurring 60 days after
the Closing Date or, in the event such date is not a calendar month end, as
of the first calendar month end following such sixtieth day. The In-Force
Statement shall be prepared in accordance with Schedule 2.8(a). All fees
and expenses of Buyer's independent accountants relating to the In-Force
Statement shall be borne by Buyer.
(b) After receipt of the In-Force Statement, Seller shall have
30 days to review the In-Force Statement. Buyer shall give, and shall cause
its representatives to give, Seller and Seller's authorized representatives
full access during normal business hours to and the opportunity to review
the books, records and any work papers, schedules and other documents
prepared or utilized by Buyer and its representatives in connection with
the preparation of the In-Force Statement. Unless Seller delivers written
notice to Buyer prior to 5:00 p.m. Dallas time on the 30th day following
Seller's receipt of the In-Force Statement specifying in reasonable detail
all items of dispute and the basis therefor, Seller shall be deemed to have
accepted and agreed to the In-Force Statement. If Seller so notifies Buyer
of such an objection, Buyer and Seller shall, within 30 days following the
receipt of such notice (the "In-Force Statement Resolution Period"), use
reasonable efforts to resolve in good faith their differences and any
resolution by them as to all disputed items shall be reduced to writing and
signed by duly authorized officers of the respective parties and shall be
final, binding and conclusive.
(c) If at the conclusion of the In-Force Statement Resolution
Period the dollar amount of the Aggregate In-Force Business remains in
dispute, then such calculations shall be submitted for final resolution to
a neutral accounting firm of national standing jointly designated by the
independent accounting firms acting for Buyer and Seller, respectively (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 2.7 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 In-Force Statement still in dispute. Buyer and
Seller, and their respective representatives, shall cooperate fully with<PAGE>
the Neutral Accountants. The parties hereto shall give, and shall cause
their representatives to give, the Neutral Accountants and their repre-
sentatives such assistance and access to the books and records relating to
the Acquired Business, 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. The term "Adjusted In-Force
Statement," as used herein, shall mean the definitive In-Force Statement
agreed or deemed to have been agreed to by Buyer and Seller in accordance
with Section 2.7(b) or, if applicable, the definitive In-Force Statement
resulting from the determinations made by the Neutral Accountants in
accordance with this Section 2.7(c) (in addition to those items theretofore
agreed to by Buyer and Seller).
2.8. Calculation and Payment of Post-Closing Purchase Price
Adjustment. (a) The Initial Cash Purchase Price shall be adjusted to be
increased or decreased, as appropriate, by the amount of the In-Force
Adjustment calculated as provided in Schedule 2.8(a) on the basis of the
Adjusted In-Force Statement. The In-Force Adjustment shall be calculated in
accordance with the assumptions and methodology utilized in the preparation
of Schedule 2.8(a), consistently applied in accordance with SAP.
(b) Any adjustment to the Initial Cash Purchase Price made
pursuant to this Section 2.8 shall bear simple interest at the publicly
announced prime interest rate of The Chase Manhattan Bank, N.A. in effect
from time to time for unsecured short-term commercial loans from and
including the Closing Date to (and including) the date immediately
preceding the date of such payment. Any adjustments to the Initial Cash
Purchase Price made in favor of Buyer pursuant to this Section 2.8 that
exceed the amount of the Closing Date Adjustment shall be paid by wire
transfer in immediately available funds from the Purchase Price Escrow
Account, in accordance with Section 8.2(b), to an account specified in
writing by Buyer and, to the extent there are insufficient funds in the
Purchase Price Escrow Account, the excess will be paid directly by Seller,
by such wire transfer. Any adjustments to the Initial Cash Purchase Price
made in favor of Seller pursuant to this Section 2.8 shall be paid by Buyer
by wire transfer of immediately available funds to an account specified in
writing by Seller. All payments made pursuant to this Section 2.8 shall be
made within five Business Days after the Adjusted In-Force Statement have
been agreed or deemed to have been agreed to by Buyer and Seller or, if
applicable, the written statement of the Neutral Accountants setting forth
their determination regarding the last remaining disputed items have been
delivered to Seller and Buyer.
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 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<PAGE>
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<PAGE>
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.
(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 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<PAGE>
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.
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 following, and none
of such approvals shall be subject to conditions that are unreasonably
burdensome: (i) the distribution by SWL to SWL Holding of $21,500,000
aggregate principal amount of SLC Bonds; (ii) the redomestication of
Constitution Life from a Kentucky stock life insurance company to a Texas
stock life insurance company; (iii) the issuance and sale by Constitution
Life of the surplus debentures to Buyer; (iv) the acquisition by Buyer of
control of Constitution Life; and (v) the acquisition by Buyer and
Constitution Life of control of SWL, UBIC and Marquette.
(b) Kentucky. The Commissioner of Insurance of the Commonwealth
of Kentucky shall have approved the following, and none of such approvals
shall be subject to conditions that are unreasonably burdensome: (i) the
redomestication of Constitution Life from a Kentucky stock life insurance
company to a Texas stock life insurance company; and (ii) the acquisition
by Buyer of control of Marquette and, if required, Constitution Life.
(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 and the SWL Shares, UBIC Shares and SLC Financial Shares (the
"Estate Property") to Buyer and Shinnecock Services 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 and Seller containing the
provisions set forth below (the "Approval Orders") shall have been entered
and become Final Orders (it being understood that certain of such
provisions may be contained in the findings of fact or conclusions of law
to be made by the Bankruptcy Court as part of the Approval Orders). The
Approval Orders shall provide that: (i) the transfers of the Estate<PAGE>
Property by Seller and the Selling Subsidiaries to Buyer and Shinnecock
Services (A) are or will be legal, valid and effective transfers of the
Estate Property; (B) vest or will vest Buyer and Shinnecock Services 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 Financing Commitments, Assumed Liabilities, Liens
otherwise created by Buyer or Shinnecock Services 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 Purchase Price Escrow Account and the
Indemnity Escrow Account, each 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 Purchase Price Escrow Account or 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) the terms and provisions of
Section 8.6 of this Agreement providing for the maintenance of the Liquid
Assets are approved; (v) all amounts to be paid to (1) Buyer pursuant to
this Agreement, including without limitation the obligations of the Seller
and the Selling Subsidiaries with respect to Purchase Price adjustments
under Section 2.7(c) of this Agreement and 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; (vi) all Persons are enjoined from
in any way pursuing Buyer or its 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 or its Affiliates; (vii) the termination of the
Terminated Intercompany Agreements is approved; (viii) the execution and
delivery by Seller and each of the Selling Subsidiaries, and the per-
formance by each of them of their respective obligations under, each of the
Related Agreements to which they are party is approved; (ix) the
obligations of Seller and the Selling Subsidiaries set forth in Article VI
relating to Taxes shall be fulfilled by Seller and Seller Subsidiaries; (x)
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<PAGE>
(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; (xi) 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 Orders and Assumption and Assignment Orders 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 (1) in the event the Bankruptcy Court
abstains from exercising or declines to exercise jurisdiction with respect
to any matter provided for in this clause (xi) or is without 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) and (2) any determination of the Neutral Accountants made pursuant
to Section 2.7(c) shall be final and binding on the parties hereto and
shall not be subject to further objection or dispute before the Bankruptcy
Court or otherwise); (xii) the provisions of the Approval Orders are
nonseverable and mutually dependent; and (xiii) the transactions
contemplated by this Agreement and the Related Agreements are undertaken by
Buyer, Shinnecock Services, 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 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 Shinnecock Services and the
Bankruptcy Court shall have approved such assumption and assignment by
Seller and the Selling Subsidiaries pursuant to section 365 of the
Bankruptcy Code and orders approving such assumption and assignment in form
and substance acceptable to Buyer and Seller (the "Assumption and
Assignment Orders") shall have been entered and become Final Orders. The
Assumption and Assignment Orders 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, Shinnecock Services
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) Nothing in this Section 3.1.2, or any other Section of this
Agreement, shall preclude Seller, the Selling Subsidiaries or Buyer from
consummating the transactions contemplated herein if (i) the Approval
Orders and the Assumption and Assignment Order shall have been entered and
shall not have been stayed as of the date of the waiver referred to in
clause (ii) below and (ii) Buyer, in its sole discretion, waives the
requirement that the Approval Orders, the Assumption and Assignment Orders
or any other orders, be Final Orders. No notice of such waiver of this or
any other condition to Closing need be given except to Seller or the
Selling Subsidiaries, as explicitly required in this Agreement, it being
the intention of the parties hereto that Buyer shall be entitled to, and is<PAGE>
not waiving, the protection of section 363(m) of the Bankruptcy Code, the
mootness doctrine or any similar statute or body of law if the Closing
occurs in the absence of Final Orders.
3.1.3 Distributions Paid. SWL Holding shall have received a
distribution of $21,500,000 aggregate principal amount of SLC Bonds from
SWL following the transfer of such SLC Bonds to SWL from Constitution Life.
3.1.4 No Prohibition. Consummation of the transactions con-
templated 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 Hart-Scott-Rodino. Any waiting period, including any ex-
tensions thereof, under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 and the regulations thereunder (the "HSR Act") applicable to the
transactions contemplated hereby shall have expired or been terminated.
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, 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<PAGE>
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 Redomestication. The redomestication of Constitution Life
from a Kentucky stock life insurance company to a Texas stock life
insurance company shall have been approved by the Commissioners of
Insurance of the State of Texas and the Commonwealth of Kentucky.
3.2. Conditions to Obligations of Buyer. The obligations of
Buyer 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 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.
3.2.4 Officer's Certificates. Seller and the Selling
Subsidiaries shall have delivered to Buyer 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<PAGE>
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 Shinnecock Services or SWL Financial, on the one hand, and
the Acquired Insurance Companies, on the other hand, substantially in
the forms thereof delivered to Seller prior to the date hereof;
(ii) the entering into of a Tax sharing agreement among the
Acquired Insurance Companies substantially in the form thereof
delivered to Seller prior to the date hereof;
(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) the pledge of all of the capital stock of Constitution
Life pursuant to the terms of the Financing Commitments;
(v) the investments by Constitution Life in SWL and UBIC as
Subsidiaries;
(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.<PAGE>
(c) Each of UBIC and Constitution Life shall have notified the
Commissioner of Insurance of the State of New Hampshire of Buyer's
agreement to acquire control of UBIC and Constitution Life, respectively,
and shall have applied for relicensing in New Hampshire pursuant to Section
405.14-a of the New Hampshire Insurance Code.
(d) Seller shall have caused each Retained Company that is an
insurance company and which will enter into a Shinnecock Service Leasing
Agreement to submit such Shinnecock Service 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 common stock of REO Holding Corp., 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.
3.2.6 Proceedings. Subject to the provisos 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 its counsel, and its 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 Orders and the Assignment
and Assumption Orders 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.
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 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.<PAGE>
(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 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 to Seller at least five days prior to the Closing Date shall 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 a cer-
tificate, 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 June 30 GAAP Statements and the June 30 SAP Statements shall, in and
of themselves, constitute a Material Adverse Effect.
3.2.10 Opinions of Counsel to Seller. Buyer shall have received
an opinion from Winstead Sechrest & Minick, P.C., special counsel to
Seller, substantially in the form attached as Exhibit C-1.
3.2.11 Rating Agencies. There shall not have occurred any
reduction in the ratings of any of the Acquired Insurance Companies by A.M.
Best & Co., below the ratings in effect on the date of this Agreement.
3.2.12 Financing. Buyer shall have obtained, pursuant to the
Financing Commitments or otherwise, the funds necessary to consummate the
transactions contemplated by this Agreement, it being understood and agreed
that Buyer shall not be entitled to rely on this Section 3.2.12 in the
event that any failure to satisfy the conditions referenced in the
Financing Commitments is the result of SW Holding Corp. failing to
contribute at least $100,000,000 of equity funds (or such lesser amount as
may be required by the Financing Commitments) to capitalize Buyer.<PAGE>
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 shall deem reasonably necessary to transfer
to Buyer, indirectly or directly as contemplated by this Agreement, the
Acquired Shares and to Shinnecock Services the Acquired Assets, in each
case free and clear of all Liens and Claims (other than Liens and Claims
contemplated by the Financing Commitments and Assumed Liabilities and Texas
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 Name Change of SLC Financial. Seller shall have caused
SLC Financial to change its name to SWL Financial Services, Inc. and to
make all regulatory filings and obtain all regulatory approvals necessary
to effect such change. Buyer shall have received such instruments and
documents evidencing such name change as Buyer shall have reasonably
requested.
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 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.<PAGE>
3.3.2 Performance. Buyer 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 prior
to or at the Closing.
3.3.3 Officer's Certificate. Buyer shall have delivered to
Seller a certificate, dated the Closing Date, signed by the chief executive
officer and the chief financial officer of Buyer, to the effect that such
officer is authorized to execute and deliver such certificate, that such
officer is familiar with the transactions contemplated by this Agreement,
and that the conditions and covenants set forth in Section 3.3.1 and 3.3.2,
to such 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 Debevoise & Plimpton, special counsel to Buyer,
substantially in the form attached as Exhibit D-1, (ii) an opinion from
Heath, Davis & McCalla, special Texas counsel to Buyer, substantially in
the form attached hereto as Exhibit D-2 and (iii) an opinion from Stites &
Harbison, special Kentucky counsel to Buyer, substantially in the form
attached hereto as Exhibit D-3.
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 Shinnecock Services 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 Shinnecock Services of the Assumed Liabilities. Shinnecock Services
shall have executed and delivered to Seller and the Retained Companies the
respective Shinnecock Service Leasing Agreements and SWL Financial shall
have executed and delivered to the Retained Companies which are insurance
companies the respective SWL Investment Advisory Agreements.
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:<PAGE>
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 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 and the Termination and Expense Security Agreement have been duly
executed and delivered by Seller and each Selling Subsidiary, and (for
purposes of the representation and warranty being made as of the date
hereof, but not for purposes of the representation and warranty being made
as of the Closing Date, subject to Bankruptcy Court approval), this
Agreement and the Termination and Expense Security Agreement constitute
and, when executed, each of the Related Agreements to which Seller or any
Retained Company is a party 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<PAGE>
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 and Assumption and Assignment
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 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 or (b) except as set forth on 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.<PAGE>
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 the authorized, issued and outstanding amounts of its capital
stock and Seller's direct or indirect (through another specified Subsid-
iary) percentage interest therein. All the issued and outstanding shares of
the capital stock of each Acquired Company are owned of record and bene-
ficially, 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 obligated 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 provided to 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
provided to 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") and June 30, 1995 (the "June 30 GAAP Statement"), in each
case together with the notes thereto and any review reports thereon
issued by Coopers & Lybrand L.L.P.;<PAGE>
(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") and June 30, 1995 (the "June 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 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<PAGE>
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 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, 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 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) To the knowledge of Seller and the Selling Subsidiaries,
except as set forth in Schedule 4.1.7(d), the information supplied by each
of the Acquired Insurance Companies to their independent actuaries, Towers,
Perrin, Foster and Crosby, dba Tillinghast for use in connection with the
preparation of the Tillinghast Report, dated April 19, 1995, (the
"Tillinghast Report") was true and correct in all material respects and no<PAGE>
information was omitted which was necessary to make the information
provided not materially misleading.
(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 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 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 bor-
row, 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<PAGE>
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.
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 re-
strictions 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.<PAGE>
(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 Prop-
erties taken as a whole and except as set forth in Schedule 4.1.10(a)(ii).
(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.
(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.<PAGE>
(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 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 excepted) 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 Shinnecock Services good and
valid title to all of the Acquired Assets, free and clear of any Liens and
Claims (other than Liens<PAGE>
and Claims contemplated by the Financing Commitments, Texas Property Tax
Liens on the Acquired Assets in respect of Taxes imposed in 1995 and
Assumed Liabilities or Liens otherwise created by Shinnecock Services 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
(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 ap-
plicable 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 or any Acquired Company or, to the knowledge
of Seller or the Selling Subsidiaries, any other Person (including any ten-
ant 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<PAGE>
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 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 or
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 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 de-
termined in accordance with generally accepted actuarial standards
consistently applied, were based on actuarial assumptions that were in all
material respects in accordance with or more conservative than those called
for in the related insurance, annuity, guaranteed investment and other
contracts and policies, are fairly stated 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 (col-
lectively, "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<PAGE>
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 repre-
senting future liabilities in excess of $50,000 that are not
terminable without penalty upon not more than 30 days' notice;
(ii) all Contracts (including, without limitation, Contracts
relating to loans or advances other than margin loans made in the or-
dinary 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;<PAGE>
(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;
(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 Sched-
ule 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 any officer, director or
employee of Seller, any Retained Company or any Acquired Company or its
assets, prop-<PAGE>
erties 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 Agree-
ment, (iii) which reasonably would be expected to have a Material Adverse
Effect, (iv) involving any former 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 the
subject of a notice of cancellation or non-renewal by the issuing insurer.<PAGE>
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 a tax professional at Price Waterhouse LLP during the course of
negotiation of this Agreement, (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 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<PAGE>
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) each life insurance or annuity
policy issued, sold or administered by, or on behalf of, any member of an
Affiliated Group or any trust created or administered by any member thereof
(and any loan interest secured by such a life insurance policy) has at all
relevant times qualified for, and currently qualifies for, favorable Tax
treatment under section 72, 264, 7702 or 7702A of the Code and the Treasury
Regulations thereunder, as applicable, and any such member or trust has
complied in all material respects with applicable information reporting
requirements under any thereof, (ii) each segregated asset account
maintained by any member of the Related Group for its variable annuity
contracts and variable life insurance policies ("Separate Account") is
maintained in compliance in all material respects with the requirements of
Section 817 of the Code and (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.
(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<PAGE>
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.
(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
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.
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 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<PAGE>
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 to 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.
(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 affect
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<PAGE>
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 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 opera-
tion 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, (y) 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, Executive Severance Benefits, Supplemental Executive Benefits and
Retention Bonuses 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.<PAGE>
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 an 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 re-
ceived any notice of any event, inquiry, investigation 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 Gov-
ernmental 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<PAGE>
have a Material Adverse Effect, 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 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<PAGE>
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 the knowledge of Seller and the Selling Subsidiaries,
none of the Existing Reinsurance Agreements contains any provision
providing that the other party thereto may terminate such Existing Rein-
surance 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, Shinnecock
Services 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 Financing
Commitments and Assumed Liabilities or Liens created by Buyer or Shinnecock
Services). 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) 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 Li-
censes"). 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, Liens contemplated by the
Financing Commitments and 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<PAGE>
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 out-
standing 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.
(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 spon-
sorship, 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 No Acquisition Proposal. Except as permitted by this
Agreement, neither Seller nor any Seller Representative has engaged in any
solicitations, encouragements, activities, discussions and negotiations
with any parties with respect to any Acquisition Proposal between July 13,
1995 and the date hereof other than the discussions described in Schedule A
to the Exclusive Dealing Agreement.<PAGE>
4.1.26 Fairness Opinion. Donaldson, Lufkin & Jenrette
Securities Corporation, financial adviser to Seller, has delivered to the
Board of Directors of Seller a fairness opinion, dated the date hereof (the
"Fairness Opinion") regarding the fairness to Seller of the transaction
contemplated by this Agreement from a financial point of view, a copy of
which has been delivered to Buyer.
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 clauses (D) and (E) 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 and Shinnecock
Services. Each of Buyer and Shinnecock Services hereby jointly and
severally make the following representations and warranties to Seller:
4.2.1 Corporate Existence. Each of Buyer and Shinnecock
Services 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 and Shinnecock Services 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
Buyer are owned beneficially and of record by SW Holding Corp. All of the
issued and outstanding shares of capital stock of Shinnecock Services are
owned beneficially and of record by Buyer.
4.2.2 Authorization; Enforcement. Each of Buyer and Shinnecock
Services 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 and Shinnecock Services has
taken all necessary 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<PAGE>
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 and Shinnecock Services, and the Termination and
Expense Security Agreement has been duly executed and delivered by Buyer,
and this Agreement and, as to Buyer, the Termination Security Agreement,
constitute and, when executed, the other Related Agreements to which each
of Buyer and Shinnecock Services 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 or
Shinnecock Services 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 (i) under the HSR Act and (ii) as set forth in
Sections 3.1.1 and 3.2.5.
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 or Shinnecock Services 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 or Shinnecock Services'
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 or Shinnecock
Services, as the case may be, is a party or by which Buyer or Shinnecock
Services 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 or Shinnecock Services 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 transactions provided for in
this Agreement or have a material adverse effect on the ability of
Shinnecock Services to provide to Seller and the Retained Companies the
services contemplated under the Shinnecock Services Leasing Agreement.
4.2.5 Brokers and Finders, etc. Neither Buyer nor Shinnecock
Services nor any of their respective subsidiaries, officers, directors or
employees has employed any broker, agent or finder other than Merrill Lynch
& Co., or incurred any liability for any<PAGE>
brokerage fees, commissions or finders' fees in connection with the
transactions contemplated by this Agreement, other than fees to Merrill
Lynch & Co., which fees are obligations solely of Buyer and will be duly
paid by Buyer.
4.2.6 Financial Capability. (a) Buyer has delivered to Seller
complete and correct copies of a commitment letter for the benefit of the
Buyer from The Chase Manhattan Bank, N.A. for the aggregate amount of $170
million in bank financing including a term sheet accurately describing the
terms and conditions of such bank financing (the "Financing Commitments").
The Financing Commitments are in full force and effect as of the date
hereof and Buyer has no reason to believe that the Financing Commitments
will not lead to an extension of credit as contemplated by the Financing
Commitments.
(b) Buyer has delivered to Seller a complete and correct copy
of commitment letters addressed to SW Holding Corp. from Kelso & Company,
L.P. and GS Capital Partners II, L.P., committing to provide to Buyer
equity investments of $100 million (or such lesser amount as may be
required by the Financing Commitments) at the Closing. The commitments
received from investors are in full force and effect and Buyer has no
reason to believe any such commitment will not lead to such investors
providing, or causing to be provided, such amount to SW Holding Corp. for
the purpose of, and with the result of, capitalizing Buyer with such amount
of equity funds.
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 Shinnecock Services' ability to
provide to Seller and the Retained Companies the services contemplated
under the Shinnecock Services Leasing Agreement.<PAGE>
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 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 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 Cash 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 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 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 business consistent with past practice, or (ii)
create or assume any other liability or obligation (absolute or<PAGE>
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 limitation, 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 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 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<PAGE>
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 In-
corporation 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 ma-
terial to FMI, Seller or any Acquired Company.
(i) Acquisition of Assets. In the case of any Acquired Company,
other than pursuant to any Contract 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
Licenses, 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.<PAGE>
(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 SLC Bonds
by Constitution Life to SWL and from SWL 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 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 No.
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.<PAGE>
(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
(iv) significant matters relating to the agency force, product distribu-
tion, 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 Buyer'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 (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)<PAGE>
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, prop-
erties and personnel as Buyer may reasonably request. Seller and each of
the Selling Subsidiaries will promptly deliver to Buyer such copies of all
pleadings, motions, notices, statements, schedules, applications, reports
and other papers filed in their Chapter 11 cases as Buyer may reasonably
request. Subject to any applicable confidentiality agreements, Seller and
each of the Selling Subsidiaries will promptly provide Buyer 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, to the extent reasonably necessary in
connection with Buyer's preparation for or participation in any part of the
bankruptcy proceedings of Seller or any of the Retained Companies in which
Buyer's participation is necessary or required. Seller will and will cause
each Retained Company to promptly deliver to Buyer all pleadings, motions,
notices, statements, schedules, applications, reports and other papers
filed in any judicial or administrative proceeding as Buyer may reasonably
request. Each financial statement provided to Buyer 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
Shinnecock Services and each of the Acquired Companies to, use commercially
reasonable efforts to furnish on a timely basis to Seller and the Retained
Companies such data and other<PAGE>
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 Shinnecock Services 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, Shinnecock Services
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, Shinnecock
Services, 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 shall provide a
copy of any written materials provided to Seller in connection with any
such Acquisition Proposal; provided, that, notwithstanding anything to the
contrary in this Agreement, Seller may engage in discussions or
negotiations with, and may furnish information concerning Seller and its
business, properties and assets to, a Third Party or its financial, legal
or other advisors in accordance with any order of the Bankruptcy Court or
pursuant to the bidding or notice procedures provided for in the Sale
Procedures Order; and provided, further, that the specific discussions
which occurred between August 14, 1995 and August 23, 1995 described on
Schedule A to the Amendment, dated as of August 14,<PAGE>
1995 to the Exclusive Dealing Agreement, dated as of July 13, 1995, by and
between Kelso Company, L.P., Shinnecock Group, L.L.C., GS Capital Partners
II, L.P. and Seller, shall not constitute a violation of this Section 5.6.
For purposes of this Agreement, (x) no person shall be deemed to have
engaged in "discussions" if such person advises another person that he and
Seller are precluded from taking any action that would constitute a
violation of this Section 5.6, and (y) no person shall be deemed to have
"furnished information" to any other person if such information is public
information.
(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 with such information as Buyer may reasonably request in con-
nection with any application, notification or filing Buyer 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, to the extent Buyer may reasonably request, to enable
it to make such applications, notifications or filings as promptly as prac-
ticable.
(b) Buyer 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 Insurance Laws. Buyer 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.<PAGE>
(c) Buyer and Seller, FMI and the Acquired Companies,
respectively, 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, 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 by the HSR Act, (ii) notifications and filings required to be made
under any Applicable Insurance Laws (Buyer specifically agreeing to
promptly, and in no event more than 5 days after the Execution Date, file a
Form A with the State of Texas and the Commonwealth of Kentucky, and Seller
specifically agreeing to execute and deliver (or caused to be executed and
delivered) to the Commissioners of Insurance of each of the State of Texas
and, if required, the Commonwealth of Kentucky applications for approval
for (x) Constitution to distribute to SWL, and SWL to distribute to SWL
Holding, $21,500,000 aggregate principal amount of SLC Bonds, and (y) the
redomestication of Constitution Life from a Kentucky stock life insurance
company to Texas stock life insurance company), (iii) any necessary
applications, reports or other documents to be filed with the SEC, 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 (iv) 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 or Shinnecock Services 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 or Buyer's right to make any
such application, pleading, motion or other filing with the Bankruptcy
Court as Seller or Buyer, as the case may be, deems appropriate in its sole
discretion. Each of Seller and Buyer 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<PAGE>
hand, or Buyer or Shinnecock Services 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 or any Buyer
Subsidiary, 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 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<PAGE>
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, Shinnecock Services or any of the Acquired
Companies to leave the employ of Buyer, Shinnecock Services 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 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 Aggregate In-Force, etc. 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) Seller's good faith estimate of the Aggregate In-Force
Business of the Acquired Insurance Companies as of the date of such
certificate, prepared in accordance with SAP (applied on a basis consistent
with the SAP Annual Statements as of December 31, 1994), (B) the amount
paid to FMI by the Acquired Insurance Companies pursuant to the terms of
the FMI Services Agreement from October<PAGE>
1, 1995 through the Closing Date, (C) any other Operating Expenses from
October 1, 1995 through the Closing Date, (D) all capital gains and losses
on investments, whether realized or unrealized, of the Acquired Insurance
Companies from October 1, 1995 through the Closing Date and (E thereof) 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 (B), (C), (D) and (E) 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 (B) and (C) 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, expect 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.
5.12. Bankruptcy Court Approval. (a) As promptly as practicable
after the date hereof but in no event later than one Business Day after the
filing of their Chapter 11 petitions, Seller and the Selling Subsidiaries
shall jointly (i) file a motion with the Bankruptcy Court seeking entry of
the Approval Orders and the Assumption and Assignment Orders approving,
inter alia, the sale of the Estate Property to Buyer 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 and (ii)
file a motion for, and use their best efforts to cause the Bankruptcy Court
to enter, an order (the "Sale Procedures Order"), in form and substance
reasonably satisfactory to Buyer, (A) approving the performance by Seller
and the Selling Subsidiaries of their obligations under Sections 9.2 and
9.3 of this Agreement, (B) establishing such bidding procedures as may be
reasonably acceptable to Buyer, including, without limitation, that a
competing offer will not be considered to be a higher or better offer
unless, at a minimum, such offer (1) provides for aggregate consideration
of at least $10,000,000 in excess of the value of the aggregate
consideration paid by Buyer and is not on terms which are materially more
burdensome or conditional than the terms of this Agreement, and (2) is not
conditioned on the outcome of due diligence not completed by the offeror
with respect to the Acquired Assets and Acquired Shares on or prior to the
date of the hearing to approve the Approval Orders and the Assumption and
Assignment Orders and (C) scheduling a hearing to<PAGE>
approve the Approval Orders and the Assumption and Assignment Orders and
providing that notice of such hearing be given to all creditors and
interest holders of Seller and each of the Selling Subsidiaries. Seller and
each of the Selling Subsidiaries agree 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 Orders and Assumption and
Assignment Orders, each of Seller, Selling Subsidiaries, Buyer and
Shinnecock Services 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 and Buyer will jointly endeavor to have
the Bankruptcy Court make the findings of fact and conclusions of law that
Buyer and, if appropriate, any Affiliates of Buyer, 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 Orders, Assumption and Assignment Orders,
Sale Procedures 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 agrees 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 contemplated herein if,
(i) the Approval Orders and the Assumption and Assignment Orders shall have
been entered and shall not have been stayed as of the date of the waiver
referred to in clause (ii) below and (ii) Buyer, in its sole discretion,
waives the requirement that the Approval Orders, the Assumption and
Assignment Orders or other orders be Final Orders.
5.13. Fairness Opinion. Seller shall request Donaldson, Lufkin
& Jenrette Securities Corporation to present the Fairness Opinion to the
Bankruptcy Court. Seller shall also request Donaldson, Lufkin & Jenrette
Securities Corporation to use its commercially reasonable efforts to assist
and cooperate with Seller and Buyer in obtaining the Approval Orders and
the Assignment and Assumption Orders, including without limitation,
appearing or delivering such statements as may be required to the
Bankruptcy Court.<PAGE>
5.14. Specific Enforcement of Covenants. Seller, FMI and the
Acquired Subsidiaries 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 per-
formed 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 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<PAGE>
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 hereto as Exhibit E.
5.18. Notification of Developments. Each of Seller and Buyer
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 or Buyer, as the case may be, or any officer, director,
employee, or agent of Seller, any Selling Subsidiary or Buyer 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 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<PAGE>
warranties of the parties or the conditions to the obligations of the
parties under this Agreement.
5.19. Quail Creek Communications. Prior to the Closing Date,
Seller shall have transferred all of the capital stock of Quail Creek
Communications to Seller or a Retained Company.
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 Companies to convey,
transfer, assign and deliver to Shinnecock Services 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
Shinnecock Services 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 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 Brittmore 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.<PAGE>
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.
5.25. REO Holding Corp. Prior to the Closing Date, Seller shall
cause all common stock of REO Holding Corp. owned by SWL to be sold for
cash in the amount of $4,300,000 to Seller or one or more of the Retained
Companies.
5.26. September 30 Statement. Seller shall deliver to Buyer on
the earlier of (a) November 15, 1995 and (b) the date 10 days before the
Closing Date a statement (the "September 30 Statement") setting forth the
Statutory Book Value as of the close of business on September 30, 1995. The
September 30 Statement shall be prepared in accordance with SAP, applied on
a basis consistent with the SAP Annual Statements as of December 31, 1994,
and shall fairly present Statutory Book Value as of such date in all
material respects.
5.27. Intercompany Matters. 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.
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,
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,<PAGE>
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:
(w) such Taxes 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,
during the period beginning October 1, 1995 and ending on the day
before the Closing Date (the "Stub Period");
(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 on the Closing Date after the Closing or at any time after
the Closing Date; provided, that this clause (y) shall not 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, Shinnecock Services or SW Holding Corp., or, on the Closing
Date after the Closing or at any time after the Closing Date, 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<PAGE>
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 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 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<PAGE>
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 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,<PAGE>
taking into account all interest, penalties and additions to Tax (unless
Seller, at the time of filing 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.
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 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 any Bridge Period and for
purposes of this 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
or 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)<PAGE>
Buyer, in its sole discretion, may assume joint control of any such audit
or 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; and (iii) Buyer shall control any audit or
proceeding to the extent such audit or proceeding relates to Taxes for
which Buyer would be obligated to indemnify Seller Indemnitees pursuant to
Section 6.1. 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 or 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 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, or cause Buyer to be
permitted, to review and comment upon any material written submission to
the IRS or other taxing authority 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 statute of limitations for any taxable period
beginning after December 31, 1992 or enter into any settlement or 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 that (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<PAGE>
settlement or agreement would not have the result of materially increasing
the Taxes of any Buyer Indemnitee 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 resolution 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.
(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.
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, the "Section 338(h)(10) Elections").<PAGE>
(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 20 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 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 modification 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
for final resolution using the same procedures for Neutral
Accountants specified in Section 2.7(c) except to the extent such
procedures are inconsistent with the<PAGE>
timing requirements of this Section 6.5; 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 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.
Notwithstanding any other provision of this Agreement, 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 making of the
Section 338(h)(10) Elections.
(f) Additional Section 338(h)(10) Elections. The making of any
election under section 338(h)(10) of the Code with respect to UBIC,
Constitution 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
transactions contemplated by this Agreement. Seller shall at its expense
timely file all necessary Tax Returns and other documentation in respect of
any such Taxes.<PAGE>
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 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. 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. 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 or 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 2.7(c), except
to the extent such procedures are inconsistent with the timing requirements
of this Section 6.7(a). 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.
(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<PAGE>
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 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 Cash Purchase
Price and the Assumed Liabilities shall be allocated between and among the
shares of each Acquired Company, the SLC Financial Shares and the Acquired
Assets as set forth on Schedule 6.8. On or before the beginning of the
sixth month beginning after the month in which the Closing occurs, Buyer
shall provide Seller with a revised Schedule 6.8 which reflects proposed
modifications to such allocation. Such proposed modifications shall take
into account adjustments to the Purchase Price pursuant to Article II and
any other appropriate adjustment reflect information available at such
time. Buyer and Seller shall endeavor to agree on the final Schedule 6.8;
provided, that Seller shall be entitled to object to any proposed
modification only on the basis that such proposed modification would leave
Seller and the Retained Companies in a position less favorable than their
position under the original Schedule 6.8, and then only if such objection
would not leave Buyer and its Affiliates in a position less favorable than
their position under the original Schedule 6.8. If there is any dispute
between the parties as to the application of the provisions of this Section
6.8, such dispute shall be submitted, no later than the beginning of the
seventh month beginning after the month in which the Closing occurs, for
final resolution using the same procedures for Neutral Accountants
specified in Section 2.7(c) except to the extent such procedures are
inconsistent with the timing requirements of this Section 6.8; provided,
that the agreement pursuant to which the Neutral Accountants are retained
shall provide that the determination of the Neutral Accountants shall occur
no later than the beginning of the ninth month beginning after the month in
which the Closing occurs. The Buyer shall prepare the final Schedule 6.8,
as determined according to such procedures, which shall supersede the
original Schedule 6.8 for all purposes of this Agreement and shall be
treated as the only 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<PAGE>
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, 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 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 (y) 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.
6.10. Election 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<PAGE>
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 2.7(c).
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: those current employees of FMI who
perform services (i) 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: 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 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: 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.<PAGE>
Executive Officers: those current senior executive employees of
FMI or Seller listed on Schedule 7.1(b) hereto.
Executive Severance Arrangements: 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 Shinnecock Employees: 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: the Southwestern Life
Corporation Employee Benefit Plan, as in effect on the Closing Date.
Senior Executive Retention Arrangement: 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: 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 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.<PAGE>
(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, 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 Shinnecock Employees for accrued vacation and
sick pay and 1995 bonuses and incentive compensation and accrued but unpaid
compensation, (y) the Acquired Company Employees employed at the Dallas
offices of FMI or Seller for 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 Acquired Company Employee's accrued deferred compensation, in each
such case under clauses (x) and (y) including all employment tax
liabilities in respect thereof (such amounts in clauses (x) and (y)
referred to as "Compensation Items") and (z) the New Shinnecock Employees
for short-term disability compensation or benefits that become payable as a
result of a short-term disability of any such New Shinnecock 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 (A) to or in respect of each
Executive Officer who is a party to an Executive Severance Arrangement, for
compensation or benefits (including all employment tax liabilities in
respect thereof) required to be provided under the terms of the Executive
Severance Arrangements (the "Executive Severance Benefits"), (B) to or in
respect of all Executive Officers who become entitled thereto, other key
employees or staff selected by FMI, for any retention bonuses (including
all employment tax liabilities in respect thereof) that become payable
pursuant to the terms of Seller's Senior Executive Retention Arrangement or
any other retention arrangement disclosed in writing to Buyer prior to the
date hereof, respectively (the "Retention Bonuses"), and (C) to or in
respect of any Executive Officer who is a party to a Supplemental Executive
Arrangement, for compensation or benefits (including all employment tax
liabilities in respect thereof) required to be provided under the terms of
the Supplemental Executive Arrangements and that remain unpaid as of the
Closing Date (the "Supplemental Executive Benefits"). Notwithstanding the
foregoing provisions of this Section 7.2(c)(i), (v) 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), (w) such<PAGE>
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 Shinnecock 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, (x) such
assumption of liabilities for Executive Severance Benefits payable in
respect of any Eligible Executive Officer is expressly limited to the
amount accrued for such Executive Severance Benefits in respect of such
Eligible Executive Officer on Schedule 4.1.19(d) as of the date of this
Agreement, (y) such assumption of liabilities for Supplemental Executive
Benefits and Retention Bonuses is expressly limited to the amount accrued
therefor on Schedule 4.1.19(d) as of the date of this Agreement 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 Acquired Company Employee employed at
the Dallas offices of FMI or Seller. 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.
(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 Shinnecock 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 Shinnecock Employees, other than for
deferred compensation benefits of Acquired Company Employees employed at
the Dallas location of FMI or Seller, (C) for Retention Bonuses payable to
any Executive Officer and for Executive Severance Benefits payable to any
Eligible Executive Officer, in any such case, to the extent such liability
exceeds the amount reflected therefor on Schedule 4.1.19(d) as of the date
of this Agreement, and (D) 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<PAGE>
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 Shinnecock
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 Shinnecock 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 (D)(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.
(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 Shinnecock Employee or Acquired
Company Retiree from or after the Closing Date.
(e) At the earliest practicable date after the Closing (and in
any event within 10 days after the Closing Date) but subject to the proviso
below, Buyer shall, or shall cause a Buyer Subsidiary to, pay all Executive
Severance Benefits and Supplemental Executive Benefits payable to Eligible
Executive Officers and Retention Bonuses payable to all Executive Officers
to the extent such obligations are assumed by Buyer or a Buyer Subsidiary
pursuant to Section 7.2(c)(i) hereof, provided that no Person shall be
entitled to receive any amount referenced above from Buyer or a Buyer
Subsidiary unless (x) such Person has first executed and delivered a
release to Buyer in a form reasonably acceptable to Buyer and (y) all
periods required for such release to be effective under the Older Workers
Benefit Protection Act ("OWBPA") shall have expired and such release shall
not have been withdrawn.
(f) To the extent any funds delivered to Shinnecock Services
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<PAGE>
earlier to occur of (i) the determination by Buyer or any Buyer Subsidiary
that the New Shinnecock 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 Shinnecock 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 Shinnecock Employees to
recognize the service of each New Shinnecock 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
Shinnecock Employee was a participant immediately prior to the Closing
Date.
7.4. Savings Investment Plan. Effective as of the Closing Date,
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 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 ag-
gregate account balances under Seller's Savings Plan of those New
Shinnecock Employees who were participants in Seller's Savings Plan immedi-
ately 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 re-
spect to any New Shinnecock Employee). On or before the Closing Date,
Seller shall contribute to the accounts of the applicable New Shinnecock
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 Shinnecock Employees on account of any period
prior to the Closing.<PAGE>
7.5. Welfare, Fringe and Other Benefits. (a) Subject to
compliance with Applicable Law, the participation of the New Shinnecock
Employees under those Plans that are "employee welfare benefit plans"
(within the meaning of section 3(l) 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 Shinnecock 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 of a New Shinnecock 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 Shinnecock Employees, specifically identifying those New
Shinnecock 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 (other than those Acquired Company Retirees who
participate in the Bankers Life & Casualty Group Insurance Plan No. 778) 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<PAGE>
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 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
Shinnecock 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.<PAGE>
7.7. COBRA and WARN. 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 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 Shinnecock
Employees and their covered dependents, and (ii) to the extent related to a
qualifying event occurring on or before the Closing Date, the New
Shinnecock 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 Shinnecock 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, the Acquired Companies and any
of their officers, directors and employees (collectively, the "Buyer Indem-
nitees") 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 Alan C. Snyder, Michael A. Pruzan, Michael B.
Goldberg, Rodney J. Letts or Chong P. Chan (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 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<PAGE>
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, 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-
95CV-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. 3-95CV-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<PAGE>
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 the parties prior to 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 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<PAGE>
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 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. 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 [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 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 subrogation of
Seller to the rights of the Buyer Indemnitees under the [Fail<PAGE>
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 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 Losses resulting from
or arising out of:
(i) any failure of Buyer to perform any covenant or agreement
hereunder or under the Related Agreements or fulfill any other obli-
gation 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) and 6.3 hereof; and
(iv) any and all 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 Shinnecock Services pursuant to the
powers of attorney delivered to Shinnecock Services as contemplated
by Section 5.17 hereof.
(c) Punitive, Consequential Damages. The amount of Losses
deemed to have been suffered by Buyer Indemnitees or Seller Indemnitees
shall not include punitive or consequential damages (except to the extent
such Losses 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<PAGE>
party to this Agreement (an "Indemnifying Party") would be liable for
Losses 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 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) 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<PAGE>
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 (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 Indemnifying 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 and the amount of funds then held in Liquid Assets pursuant to
Section 8.6 hereof) 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<PAGE>
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 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 and the amount of funds then held
in Liquid Assets pursuant to Section 8.6) 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 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 Indem-
nifying Party.<PAGE>
(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 and the funds held
as Liquid Assets pursuant to Section 8.6 hereof 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 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<PAGE>
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 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 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 from 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<PAGE>
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 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<PAGE>
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 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 the parties prior to 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 (ii) 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
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<PAGE>
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. 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 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 2.7, 2.8 or 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;
(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 Accounts. (a) Creation of
Escrow Accounts. At the Closing, Buyer, Seller, the Selling Subsidiaries
and Texas Commerce Bank, National Association, as escrow agent (the "Escrow
Agent") shall enter into an<PAGE>
escrow agreement, substantially in the form of Exhibit F (the "Escrow
Agreement"), pursuant to which the following escrow accounts will be
established:
(i) an escrow account (the "Purchase Price Escrow Account") to
be used to secure payments to be made by Seller to Buyer in respect
of purchase price adjustment payments required to be made under
Section 2.9 to the extent that such payments exceed the amount of the
Closing Date Adjustment; and
(ii) an escrow account (the "Indemnity Escrow Account") to be
used to secure the indemnification obligations of Seller and the
Selling Subsidiaries under Section 8.1.
(b) Payments from Purchase Price Escrow Account. Buyer shall be
entitled to receive payments from the Purchase Price Escrow Account by wire
transfer in immediately available funds promptly upon delivery to the
Escrow Agent of a certificate signed by Buyer and Seller attaching a copy
of the Adjusted In Force Statement or, if the Neutral Accountants have been
retained, a certificate of Buyer attaching a copy of the Adjusted In Force
Statement and the final report of the Neutral Accountants produced pursuant
to Section 2.7(c), in each case, (i) setting forth the amount of the
purchase price adjustment required to be paid to Buyer pursuant to
Section 2.8 in excess of the amount of the Closing Date Adjustment, and
(ii) showing the amount of interest required to be added to the purchase
price adjustment in accordance with Section 2.8. Notwithstanding the
preceding sentence, if Seller makes no objection to the Adjusted In Force
Statement within the time periods allowed for such objection under Sections
2.7 and 2.8, the signature of Buyer alone on the copy of such statements
delivered to the Escrow Agent shall be sufficient provided that a copy
thereof is provided to Seller at least five days before delivery to the
Escrow Agent. Upon delivery by Buyer to the Escrow Agent of a certificate
confirming that all obligations of Seller in respect of any purchase price
adjustments to be made under Section 2.8 have been fully satisfied, all
remaining funds from the Purchase Price Escrow Account promptly shall be
paid to Seller.
(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 and
(y) the first day after the Tax Expiration Date all amounts remaining in
the Indemnity Escrow Account (subject to application of Section 8.2(d))
shall be paid to Seller, provided that, in the event that a<PAGE>
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 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 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, on behalf of the applicable taxpayer, funds
directly from the Indemnity Escrow Account to the IRS or any other taxing
authority in respect of Taxes to the following extent: (a) up to $67
million less any reduction in funding under Section 8.3(b)(ii), in respect
of 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<PAGE>
of any Affiliated Group. An amount equal to (1) $88 million less any
reduction in funding under Section 8.3(b)(ii) minus (2) any amounts
previously paid to the Buyer Indemnitees pursuant to the Tax Indemnity or
to the IRS or other taxing authority pursuant to the preceding sentence
shall be paid to Seller from the Indemnity Escrow Account on the first day
after the Tax Expiration Date; provided that in the event that Buyer
notifies the Escrow Agent in writing prior to such day that it or another
Buyer Indemnitee has a pending claim or claims against Seller or any
Selling Subsidiary for indemnification under this Agreement in amounts in
excess of the funds remaining in the Indemnity Escrow Account, funds in the
amount of such claims shall be retained by the Escrow Agent until it has
received (i) a written instruction directing payment of such remaining
amount jointly executed by Seller and Buyer or (ii) a written instruction
or order issued by the Bankruptcy Court or any other court of competent
jurisdiction directing payment of such remaining amount. If any amounts are
disbursed from the Indemnity Escrow Account under clause (b) of this
Section 8.2(d) prior to the date amounts are released under the preceding
sentence, 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),
together with any interest received thereon.
8.3. Funding of Escrow Accounts. On the Closing Date, Buyer
shall fund (a) the Purchase Price Escrow Account with an amount of the
Initial Cash Purchase Price determined pursuant to the table set forth in
Schedule 8.3 and (b) the Indemnity Escrow Account with the lesser of (i)
$100 million and (ii) $100 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 Purchase
Price Escrow Account and 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 to the extent that such
distributions and payments relate to Acquired Companies for which no
Section 338(h)(10) Election has been made under this Agreement.<PAGE>
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, five Business Days after notice to
Seller, 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 give such direction for so long as 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.
8.6. Maintenance of Liquid Assets. From the Closing Date until
the later of (a) the disposal or settlement of all Claims by the Bankruptcy
Court, and (b) August 31, 1997 (the "Maintenance Period"), the Seller and
Selling Subsidiaries shall at all times retain and segregate cash and Cash
Equivalents not subject to any Lien initially aggregating at least $50
million (the "Liquid Assets"). During the Maintenance Period, Seller and
Selling Subsidiaries may not distribute the Liquid Assets to creditors or
shareholders or otherwise dispose of the Liquid Assets, except (a) to or
for the benefit of the Buyer or a Buyer Indemnitee in satisfaction of the
obligations of Seller and the Selling Subsidiaries in respect of any claim
under Section 8.1 or (b) otherwise with the written consent of the Buyer.
At the expiration of the Maintenance Period, Seller and the Selling
Subsidiaries need no longer retain and segregate the Liquid Assets;
provided that in the event that Buyer notifies Seller in writing prior to
such day that Buyer has pending a claim or claims against Seller for
indemnification under this Agreement, Seller and Selling Subsidiaries shall
continue to retain and segregate the Liquid Assets pursuant to this Section
8.5 in amount equal to the sum of such pending claims until Seller has
received (i) a written instruction executed by Buyer consenting to the
release of such amount of Liquid Assets or (ii) a written instruction or
order of the Bankruptcy Court or any other court of competent jurisdiction
directing such a release.
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<PAGE>
satisfied with the text of such release or statement, except as may other-
wise be required by applicable law.
9.2. Expenses Payment. (a) Pursuant to Section 8(a) of the
Exclusive Dealing Agreement, on the Execution Date, Seller paid to Buyer by
wire transfer of immediately available funds to an account of Buyer $3
million (the "Pre-Execution Expense Amount") in respect of (i) the
out-of-pocket expenses incurred by Buyer and its advisors and financing
sources in connection with Buyer's due diligence investigation and the
preparation and negotiation of this Agreement and (ii) the amount of fees
incurred by Buyer in obtaining the Financing Commitments.
(b) Concurrent with the execution of this Agreement, Seller has
delivered to Texas Commerce Bank, National Association (the "Collateral
Agent") cash or other assets in an amount equal to $4 million to be held as
security for Seller's obligations under 9.2(c) pursuant to a security
agreement, dated the date hereof among Seller, Buyer and the Collateral
Agent substantially in the form of Exhibit G (the "Termination and Expense
Security Agreement").
(c) If this Agreement shall terminate for any reason (other
than a material breach by Buyer of its obligations hereunder) Seller and
the Selling Subsidiaries shall be jointly and severally obligated to
reimburse Buyer for all amounts (the "Pre-Closing Expense Amount") in
respect of (i) the out-of-pocket expenses, including legal, financial,
accounting and actuarial expenses, incurred by Buyer and its advisors and
financing sources prior to Closing and (ii) the aggregate amount of fees
incurred by Buyer in obtaining Financing Commitments. The Pre-Closing
Expense Amount paid by Seller shall not exceed $7,000,000, less the Pre-
Execution Expense Amount paid to Buyer as contemplated by Section 9.2(a).
Buyer shall be entitled to receive any unpaid Pre-Closing Expense Amount
payable under this Section 9.2(c) from the Collateral Agent immediately
upon the termination of this Agreement. At the Closing, or in the event
that this Agreement terminates because of a material breach by Buyer of its
obligations hereunder, the collateral held by the Collateral Agent under
the Termination and Expense Security Agreement as security for Seller's
obligations under this Section 9.2(c) shall be returned to Seller.
(d) At the Closing, Buyer shall reimburse Seller for the Pre-
Execution Expense Amount as contemplated by Section 2.6. If the Closing
does not occur, or this Agreement otherwise is terminated, as a result of a
material breach by Buyer of its obligations under this Agreement, Buyer
shall reimburse Seller for the Pre-Execution Expense Amount. In the event
that the Closing does not occur for any reason other than material breach
by Buyer of its obligations under this Agreement, Buyer shall have no
obligation to reimburse Seller for the Pre-Execution Expense Amount.
(e) After the Closing Date, Seller shall from time to time as
requests for payments are submitted (accompanied by written invoices)
reimburse Buyer as set forth in this paragraph (e) for the fees and
expenses, including reasonable legal, financial, accounting and actuarial
expenses, incurred by Buyer and its advisors in connection with (i) any
litigation arising out of the bankruptcy proceedings of Seller or of any of
the Retained Companies relating to the transactions contemplated by this
Agreement or the Related Agreements (other than litigation covered by the
Litigation Indemnity) and (ii) Buyer's participation in such proceedings
(the "Post-Closing Expenses"). Buyer shall be reimbursed for 50% of all
such Post-Closing Expenses up to a total of $2,000,000, and for all of such
Post-Closing Expenses in excess of $2,000,000, provided that in no event
shall Buyer be entitled to receive in the aggregate more than $3,000,000 in
reimbursement payments pursuant to this Section 9.2(e). All reimbursements
made pursuant to this Section 9.2(e) shall be paid by wire transfer in
immediately available funds to an account specified in writing by Buyer,<PAGE>
and shall be paid prior to the 15th day of the month in which Buyer
provided to Seller notice of such Post-Closing Expenses.
9.3. Termination Payment. (a) Concurrent with the execution of
this Agreement, Seller has delivered to the Collateral Agent cash or other
assets in the amount of $10 million (the "Termination Amount") to be held
as security for Seller's obligations under this Section 9.3 pursuant to the
Termination and Expense Security Agreement.
(b) In the event that within nine months after the end of the
Exclusivity Period, Seller enters into an agreement (other than a Short-
Term Reinsurance Agreement) of a type included within the definition of
"Acquisition Proposal" with any Person (other than Buyer or an Affiliate of
Buyer) with whom Seller engaged in discussions or negotiations, or to whom
Seller furnished information concerning Seller or its assets, or from whom
Seller has solicited, initiated, sought, or encouraged an Acquisition
Proposal, during the Exclusivity Period, whether or not such discussions or
negotiations or the provision of such information was in violation of this
Agreement or the Exclusive Dealing Agreement, Seller shall be obligated to
pay Buyer an amount in cash equal to the Termination Amount, provided that
if (i) the Closing does not occur because the conditions set forth in
Sections 3.1 or 3.2 have not been satisfied or waived by Buyer, and Buyer
elects not to close hereunder, and (ii) Seller does not enter into any
agreements pursuant to the competitive offer procedure provided for <PAGE>
in the Sale Procedures Order, Seller shall not be obligated to pay Buyer
the Termination Amount unless the gross proceeds provided for in any such
agreement or series of agreements exceeds $100 million. Buyer shall be
entitled to receive the Termination Amount from the Collateral Agent
immediately upon the execution by Seller of any such agreement. In the
event that the period of Seller's potential liability under this Section
9.3(b) expires without Seller having become liable to pay the Termination
Amount, Seller shall be entitled to receive from the Collateral Agent the
funds or securities then held by the Collateral Agent to secure Seller's
obligations under this Section 9.3(b). For purposes hereof, "Short-Term
Reinsurance Agreement" means an agreement between one or more of the
Acquired Insurance Companies and the third party reinsurer referred to in
Section 8(b) of the Exclusive Dealing Agreement (the "Third Party
Reinsurer") (i) for a term of no more than two years; (ii) providing for
compensation to the Third Party Reinsurer measured not by profits on the
business ceded but rather on the return on capital parameters of the Third
Party Reinsurer, such compensation not to exceed $10 million per annum;
(iii) not involving any transfer of assets except to a trust of which the
ceding company is the trustor; (iv) providing for recapture of such
reinsurance at the option of the ceding companies and at no cost to such
companies; and (v) entered into for the purpose of providing short-term
credit support for the insurance policy obligations of the ceding
companies, and not as a means of selling the business of such insurers,
provided that such agreement shall not be deemed to be a Short-Term
Reinsurance Agreement if the Third Party Reinsurer or any of its
affiliates, prior to December 31, 1996, bids for or seeks to acquire the
business of such ceding companies.
(c) If (i) all other conditions to closing are satisfied,
(ii) upon the expiration of the 10-day time period to file notices of
appeal from the Approval Orders and the Assignment and Assumption Order,
any such notice of appeal has been filed and (iii) Buyer fails, within 21
days after the filing of the last such notice of appeal, to give notice to
Seller either electing to close within one Business Day of such notice or
terminating this Agreement by reason of the failure of the Approval Orders,
the Assignment and Assumption Orders or any other orders of the Bankruptcy
Court to have become Final Orders, then the collateral <PAGE>
held by the Collateral Agent under the Termination and Expense Security
Agreement as security for Seller's obligations to pay the Termination
Amount under Section 9.3(b) shall be returned to Seller; provided that such
collateral shall not be returned pursuant to this Section 9.3(c), and shall
continue to be held by the Collateral Agent pursuant to the terms of this
Section 9.3, if any such order has not become a Final Order by reason of it
having been stayed by the Bankruptcy Court or any other court of competent
jurisdiction. Notwithstanding the foregoing, (i) Buyer's failure to give
such notice shall not represent a breach of this Agreement and (ii) any
such return of collateral shall in no way diminish Seller's obligation to
pay Buyer the Termination Amount pursuant to Section 9.3(b).
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.
(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 within one Business Day of the execution and delivery of
this Agreement, Seller and each of the Selling Subsidiaries do not
file a petition in bankruptcy pursuant to Chapter 11 of the United
States Bankruptcy Code in the Bankruptcy Court; or
(ii) if the Sale Procedures Order shall not have been entered
by the Bankruptcy Court within ten days of the filing of bankruptcy
petitions by Seller and the Selling Subsidiaries; or
(iii) if the Approval Orders and Assumption and Assignment
Orders have not been entered by the Bankruptcy Court within 40 days
of the filing of the bankruptcy petitions by Seller and the Selling
Subsidiaries; or<PAGE>
(iv) 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; or
(v) if the Closing Date shall not have occurred prior to
December 28, 1995.
(c) Seller and the Selling Subsidiaries shall have the right to
terminate this Agreement (i) if the Closing Date shall not have occurred
prior to the end of the 21-day period referred to in Section 9.3(c), (ii)
on December 31, 1995, if such 21-day period shall not have commenced prior
to December 31, 1995 or (iii) on the expiration of such 21-day period if
such 21-day period shall have commenced prior to, but not expired by,
December 31, 1995, in each case if Buyer shall not by such time have
delivered either of the notices referred to in clause (iii) therein.
(d) In the event of the termination of this Agreement pursuant
to this Section 10.1, except for the provisions of Sections 9.2 and 9.3
hereof, 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
nothing herein shall relieve any party from liability for any breach
hereof. Notwithstanding the foregoing, in the event that a party elects not
to close hereunder by reason of the non-satisfaction of a closing condition
or conditions including the failure of a representation or warranty to be
true and correct in all material respects or the non-performance of a
covenant, the party making such representation and warranty or covenant
shall have no liability for such failure or non-performance unless such
failure or non-performance was the result of the willful breach of such
representation or covenant by such party.
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.<PAGE>
10.3. Agreement; No Third-Party Beneficiaries. This Agreement
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, including without limitation the Exclusive
Dealing Agreement and the rights and obligations under Section 8 thereof,
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.
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 deliv-
ered 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:<PAGE>
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
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:
Shinnecock Holdings Inc.
c/o Shinnecock Group, L.L.C.
1999 Avenue of the Stars, 9th Floor
Los Angeles, California 90067
Attention: Alan C. Snyder
Telecopy: (310) 788-3379
with a copy to:
GS Capital Partners II, L.P.
85 Broad Street
New York, New York 10004
Attention: Sanjay H. Patel
Telecopy:<PAGE>
Kelso & Company
350 Park Avenue, 21st Floor
New York, New York 10022
Attention: James J. Connors, II
Telecopy: (212) 223-2379
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Stephen J. Friedman, Esq.
Telecopy: (212) 909-6836
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 amend-
ed, 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.<PAGE>
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 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 NEW
YORK 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(A)(XI). SUBJECT TO THE PRECEDING SENTENCE, BUYER, SELLER, AND THE
SELLING SUBSIDIARIES HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK AND THE FEDERAL COURTS OF THE UNITED STATES
OF AMERICA LOCATED IN THE STATE, CITY AND COUNTY OF NEW YORK SOLELY IN
RESPECT OF THE INTERPRETATION AND ENFORCEMENT OF THE PROVISIONS OF THIS
AGREEMENT AND OF THE DOCUMENTS REFERRED TO IN THIS AGREEMENT, AND IN
RESPECT OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, AND HEREBY
WAIVE, AND AGREE NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR
PROCEEDING FOR THE INTERPRETATION OR ENFORCEMENT HEREOF OR OF ANY SUCH
DOCUMENT, THAT IT IS NOT <PAGE>
SUBJECT THERETO OR THAT SUCH ACTION, SUIT OR PROCEEDING MAY NOT BE BROUGHT
OR IS NOT MAINTAINABLE IN SAID COURTS OR THAT THE VENUE THEREOF MAY NOT BE
APPROPRIATE OR THAT THIS AGREEMENT OR ANY SUCH DOCUMENT MAY NOT BE ENFORCED
IN OR BY SUCH COURTS, AND THE PARTIES HERETO IRREVOCABLY AGREE THAT ALL
CLAIMS WITH RESPECT TO SUCH ACTION OR PROCEEDING SHALL BE HEARD AND
DETERMINED IN SUCH A NEW YORK STATE OR FEDERAL COURT. BUYER AND SELLER
HEREBY CONSENT TO AND GRANT ANY SUCH COURT JURISDICTION OVER THE PERSON OF
SUCH PARTIES AND OVER THE SUBJECT MATTER OF ANY SUCH DISPUTE AND AGREE THAT
MAILING OF PROCESS OR OTHER PAPERS IN CONNECTION WITH ANY SUCH ACTION OR
PROCEEDING IN THE MANNER PROVIDED IN SECTION 10.6 OR IN SUCH OTHER MANNER
AS MAY BE PERMITTED BY LAW, SHALL BE VALID AND SUFFICIENT SERVICE THEREOF.
(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 OF
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.<PAGE>
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
CARE FINANCIAL 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<PAGE>
SHINNECOCK HOLDINGS INC.
By: /s/Alan C. Snyder
-----------------
Name: Alan C. Snyder
Title: Chairman, President and
Chief Executive Officer
SHINNECOCK SERVICES CORP.
By: /s/Alan C. Snyder
-----------------
Name: Alan C. Snyder
Title: Chairman, President and
Chief Executive Officer
