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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
April 2, 1996
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 (Commission (IRS Employer
jurisdiction File Number) Identification No.)
of incorporation)
500 North Akard Street, Dallas, Texas 75201
(Address of principal executive offices)
(214) 954-7111
Registrant's telephone number, including area code
Not Applicable
(Former name or former address, if changed since last report)
This filing contains 141 pages.
Index to Exhibits appears on page 4.
Page 1 of 141<PAGE>
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Item 5. Other Events.
Proposed Disposition of Certain Subsidiaries
Effective as of April 2, 1996, Bankers Multiple Line Insurance Company
("BML"), an indirect wholly-owned subsidiary of I.C.H. Corporation ("ICH"),
entered into (i) a definitive agreement to sell Modern American Life Insurance
Company ("Modern American") and Western Pioneer Life Insurance Company
("Western") to Reassure America Life Insurance Company ("Reassure"), a
wholly-owned subsidiary of Life Reassurance Corporation of America; and (ii) a
definitive agreement to sell Philadelphia American Life Insurance Company
("Philadelphia American") to New Era Enterprises, Inc. On April 4, 1996, ICH
issued a press release announcing the proposed sales of Modern American,
Western and Philadelphia American.
Modern American, Western and Philadelphia American are wholly-owned
subsidiaries of BML.
Copies of (i) the Stock Purchase Agreement regarding the proposed sale
of Modern American and Western Pioneer and (ii) the Stock Purchase Agreement
regarding the proposed sale of Philadelphia American are attached hereto as
Exhibits 2.1 and 2.2, respectively, each of which is incorporated herein by
reference. A copy of the press release issued by ICH in connection with the
proposed sales of Modern American, Western and Philadelphia American is
attached hereto as Exhibit 99.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
2.1 Stock Purchase Agreement dated as of April 2, 1996, by and between
Bankers Multiple Line Insurance Company and Reassure America Life
Insurance Company.
2.2 Stock Purchase Agreement dated as of April 2, 1996, by and between
Bankers Multiple Line Insurance Company and New Era Enterprises, Inc.
99 Press Release of I.C.H. Corporation dated April 4, 1996.
Page 2 of 141<PAGE>
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
I.C.H. CORPORATION
Date: April 17, 1996 By:/s/Susan A. Brown
Susan A. Brown,
Co-Chief Executive Officer, Chief
Financial Officer and Treasurer
(principal executive officer and
principal financial officer)
Page 3 of 141<PAGE>
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Index to Exhibits
Sequentially
Numbered
Exhibit Number Description Pages
2.1 Stock Purchase Agreement dated as of
April 2, 1996, by and between Bankers
Multiple Line Insurance Company and
Reassure America Life Insurance Company 5
2.2 Stock Purchase Agreement dated as of
April 2, 1996, by and between Bankers
Multiple Line Insurance Company and New Era
Enterprises, Inc. 72
99 Press Release of I.C.H. Corporation dated
April 4, 1996 140
Page 4 of 141<PAGE>
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STOCK PURCHASE AGREEMENT
DATED AS OF APRIL 2, 1996
By and between
BANKERS MULTIPLE LINE INSURANCE COMPANY
and
REASSURE AMERICA LIFE INSURANCE COMPANY
With Respect to all of the
Outstanding Capital Stock of
MODERN AMERICAN LIFE INSURANCE COMPANY
and
WESTERN PIONEER LIFE INSURANCE COMPANY
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Page 5 of 141<PAGE>
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE II SALE OF SHARES AND CLOSING
2.1 Purchase and Sale of Shares . . . . . . . .7
2.2 Purchase Price . . . . . . . . . . . . . .8
2.3 Closing . . . . . . . . . . . . . . . . . .9
2.4 Purchase Price Adjustment . . . . . . . . .9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER
3.1 Organization of Seller . . . . . . . . . 11
3.2 Authority . . . . . . . . . . . . . . . . 11
3.3 Organization of Modern . . . . . . . . . 11
3.4 Capital Stock; Title . . . . . . . . . . 12
3.5 Organization of WPL . . . . . . . . . . . 12
3.6 Capital Stock; Title . . . . . . . . . . 12
3.7 No Conflicts or Violations . . . . . . . 13
3.8 SAP Statements . . . . . . . . . . . . . 14
3.9 Reserves. . . . . . . . . . . . . . . . . 14
3.10 Assets . . . . . . . . . . . . . . . . . 15
3.11 Absence of Changes . . . . . . . . . . . 15
3.12 No Undisclosed Liabilities. . . . . . . . 17
3.13 Taxes . . . . . . . . . . . . . . . . . . 17
3.14 Litigation . . . . . . . . . . . . . . . 20
3.15 Compliance With Laws . . . . . . . . . . 20
3.16 Pension and Benefit Plans . . . . . . . . 21
3.17 Contracts . . . . . . . . . . . . . . . . 21
3.18 Insurance Issued . . . . . . . . . . . . 22
3.19 Licenses and Permits . . . . . . . . . . 23
3.20 Operations Insurance . . . . . . . . . . 24
3.21 Intercompany Liabilities . . . . . . . . 24
3.22 Bank Accounts . . . . . . . . . . . . . . 24
3.23 Charter Documents and Bylaws. . . . . . . 24
3.24 Minute Books. . . . . . . . . . . . . . . 24
3.25 Brokers and Finders. . . . . . . . . . . 24
3.26 Disclosure. . . . . . . . . . . . . . . . 25
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER
4.1 Organization . . . . . . . . . . . . . . 25
4.2 Authority . . . . . . . . . . . . . . . . 25
4.3 No Conflicts or Violations . . . . . . . 25
4.4 Brokers and Finders. . . . . . . . . . . 26
4.5 Purchase for Investment . . . . . . . . . 26
4.6 Litigation . . . . . . . . . . . . . . . 26
ARTICLE V COVENANTS OF SELLER
5.1 Contract and Regulatory Approvals . . . . 27
5.2 HSR Filings . . . . . . . . . . . . . . . 27
5.3 Investigation by Purchaser . . . . . . . 28
5.4 Conduct of Business . . . . . . . . . . . 28
5.5 No Charter Amendments . . . . . . . . . . 30
5.6 No Issuance of Securities . . . . . . . . 30
5.7 Dividends . . . . . . . . . . . . . . . . 30
5.8 Resignations of Directors and Officers . 31
5.9 Books and Records . . . . . . . . . . . . 31
5.10 No Negotiation, etc. . . . . . . . . . . 31
5.11 Financial Statements and Reports . . . . 32
5.12 Investments . . . . . . . . . . . . . . . 33
5.13 No Disposal of Property . . . . . . . . . 33
5.14 No Breach or Default . . . . . . . . . . 33
5.15 Indebtedness . . . . . . . . . . . . . . 33
5.16 No Acquisitions . . . . . . . . . . . . . 34
5.17 Intercompany Liabilities and Affiliate
Transactions . . . . . . . . . . . . . 34
5.18 Indemnity Liability . . . . . . . . . . . 35
5.19 Environmental Investigation . . . . . . . 36
5.20 Notice and Cure . . . . . . . . . . . . . 37
5.21 Disclosure Schedule. . . . . . . . . . . 37
ARTICLE VI COVENANTS OF PURCHASER
6.1 Contract and Regulatory Approvals . . . . 37
6.2 HSR Filings . . . . . . . . . . . . . . . 38
6.3 Notice and Cure . . . . . . . . . . . . . 38
6.4 Environmental Investigation . . . . . . . 39
6.5 Approval of Purchaser's Board . . . . . . 39
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ARTICLE VII CONDITIONS TO OBLIGATIONS OF PURCHASER
7.1 Representations and Warranties . . . . . 39
7.2 Performance . . . . . . . . . . . . . . . 39
7.3 Officer's Certificates . . . . . . . . . 39
7.4 HSR Act Approval . . . . . . . . . . . . 40
7.5 No Injunction . . . . . . . . . . . . . . 40
7.6 No Proceeding or Litigation . . . . . . . 40
7.7 Contract and Regulatory Approvals . . . . 40
7.8 No Adverse Change . . . . . . . . . . . . 40
7.9 Opinion of Counsel to Seller. . . . . . . 40
7.10 Dividends . . . . . . . . . . . . . . . . 40
7.11 Certificates of Compliance . . . . . . . 41
7.12 Approval of Purchaser's Board of
Directors . . . . . . . . . . . . . . . 41
7.13 Computer Software Availability . . . . . 41
ARTICLE VIII CONDITIONS TO OBLIGATIONS OF SELLER
8.1 Representations and Warranties . . . . . 41
8.2 Performance . . . . . . . . . . . . . . . 41
8.3 Officer's Certificates . . . . . . . . . 41
8.4 HSR Act Approval . . . . . . . . . . . . 42
8.5 No Injunction . . . . . . . . . . . . . . 42
8.6 No Proceeding or Litigation . . . . . . . 42
8.7 Contract or Regulatory Approvals . . . . 42
8.8 Opinion of Counsel to Purchaser . . . . . 42
8.9 Guaranty Agreement . . . . . . . . . . . 42
ARTICLE IX SURVIVAL OF PROVISIONS
9.1 Survival of Representations and
Warranties. . . . . . . . . . . . . . . 43
9.2 Pursuit of Claims . . . . . . . . . . . . 43
9.3 Remedies Limitation . . . . . . . . . . . 44
ARTICLE X INDEMNIFICATION
10.1 Indemnification by Seller . . . . . . . . 44
10.2 Indemnification by Purchaser . . . . . . 47
10.3 Indemnification Procedures . . . . . . . 47
10.4 Treatment of Indemnification Payments . . 48
10.5 Claims Limitation . . . . . . . . . . . . 49
10.6 Tax Indemnification . . . . . . . . . . . 50
ARTICLE XI TERMINATION
11.1 Termination . . . . . . . . . . . . . . . 52
11.2 Effect of Termination . . . . . . . . . . 53
Page 8 of 141<PAGE>
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ARTICLE XII MISCELLANEOUS
12.1 Tax Matters . . . . . . . . . . . . . . . 53
12.2 Sale of Certain Assets. . . . . . . . . . 55
12.3 Notices. . . . . . . . . . . . . . . . . 56
12.4 Entire Agreement . . . . . . . . . . . . 57
12.5 Expenses . . . . . . . . . . . . . . . . 57
12.6 Public Announcements . . . . . . . . . . 57
12.7 Confidentiality . . . . . . . . . . . . . 57
12.8 Further Assurances . . . . . . . . . . . 59
12.9 Waiver . . . . . . . . . . . . . . . . . 59
12.10 Amendment . . . . . . . . . . . . . . . . 60
12.11 Counterparts . . . . . . . . . . . . . . 60
12.12 No Third Party Beneficiary . . . . . . . 60
12.13 Governing Law . . . . . . . . . . . . . . 60
12.14 Binding Effect . . . . . . . . . . . . . 60
12.15 No Assignment . . . . . . . . . . . . . . 60
12.16 Invalid Provisions . . . . . . . . . . . 61
12.17 Table of Contents; Headings . . . . . . . 61
EXHIBITS
Exhibit A - Form of Note for Federal Income Tax Recoverable
Exhibit B - Salable Properties
Page 9 of 141<PAGE>
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made and entered
into as of the 2nd day of April, 1996 by and between Bankers Multiple Line
Insurance Company, an Illinois insurance corporation ("Seller"), and
Reassure America Life Insurance Company, an Illinois insurance corporation
("Purchaser").
WHEREAS, Seller owns 600,000 shares (the "Modern Shares") of
common stock, par value $5.00 per share ("Modern Common Stock"), of Modern
American Life Insurance Company ("Modern"); and
WHEREAS, the Modern Shares constitute all of the issued and
outstanding capital stock of Modern; and
WHEREAS, Seller owns 800,000 shares (the "WPL Shares") of common
stock, par value $1.25 per share ("WPL Common Stock"), of Western Pioneer
Life Insurance Company ("WPL"); and
WHEREAS, the WPL Shares constitute all of the issued and
outstanding capital stock of WPL; and
WHEREAS, Seller desires to sell the Modern Shares and the WPL
Shares (together, the "Shares") to Purchaser, and Purchaser desires to
purchase the Shares from Seller, on the terms and subject to the conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
The capitalized terms used herein will have the following
meanings:
"Affiliate" shall mean, with respect to a specified person or
entity, any person or entity that directly, or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control
with such specified person or entity.
"Affiliated Group" shall mean any combined, consolidated,
affiliated or unitary Tax group of which any of the Companies is or has
been a member prior to the Closing.
Page 10 of 141<PAGE>
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"Agreement" shall mean this Stock Purchase Agreement, together
with the exhibits attached hereto and the Disclosure Schedule.
"Annual Statement" shall mean the annual statutory statement of
the specified life insurance company filed with or submitted to the
insurance regulatory authority in the state of domicile of such life
insurance company.
"Assigned Value" shall have the meaning ascribed to it in Section
12.2(a) hereof.
"AVR" shall mean the asset valuation reserve required to be
established under SAP on a specified life insurer's balance sheet.
"Bankruptcy Code" shall mean Title 11 of the United States Code.
"Bankruptcy Court" shall mean the United States Bankruptcy Court
for the Northern District of Texas, Dallas Division, or any other
bankruptcy court having jurisdiction over a case commenced by or against an
Affiliate of Seller under the Bankruptcy Code.
"Chapter 11 Proceeding" shall mean jointly administered case no.
395-36351-RCM-11 as currently pending in the Bankruptcy Court.
"Closing" shall mean the closing of the transactions contemplated
by this Agreement as provided in Section 2.4 hereof.
"Closing Balance Sheet" shall mean the balance sheets of the
Companies determined in accordance with SAP as of the Closing Date.
"Closing Date" shall mean the later of (a) the last business day
of the month in which the last remaining condition set forth in ARTICLES
VII and VIII hereof has been satisfied or waived, or (b) such other date as
Purchaser and Seller may agree upon, but in no event earlier than May 31,
1996.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
"Common Stock" shall mean, collectively, the Modern Common Stock
and the WPL Common Stock.
"Company" or "Companies" shall mean Modern and WPL, taken
separately or together, as the context may require.
Page 11 of 141<PAGE>
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"Contract" shall mean any agreement, lease, sublease, license,
sublicense, promissory note, evidence of indebtedness, or other binding
contract.
"Damages" shall mean any and all monetary damages, liabilities,
fines, fees, penalties, interest obligations, deficiencies, losses, costs,
and expenses (including reasonable fees and expenses of attorneys,
accountants, actuaries, and other experts).
"Deficiency Amount" shall mean the amount, if any, by which the
Final Purchase Price exceeds the Initial Purchase Price.
"Disclosure Schedule" shall mean the disclosure schedule dated the
date hereof furnished by Seller to Purchaser and containing all lists,
descriptions, exceptions, and other information and materials as are
required to be included therein pursuant to this Agreement.
"Environmental Claim" shall mean and include any investigation,
notice of violation, demand, allegation, action, suit, injunction,
judgement, order, consent decree, penalty, fine, lien, proceeding, or claim
(whether administrative, judicial or private in nature) arising:
(A) pursuant to, or in connection with, an actual or alleged violation of
any Environmental Law; (B) in connection with any Hazardous Material or
actual or alleged activity associated with any Hazardous Material; (C) from
any abatement, removal, remedial, corrective, or other response action in
connection with any Hazardous Material, Environmental Law, or other order
or directive of any federal, state or local governmental authority; or (D)
from any actual or alleged damage, injury, threat, or harm to health,
safety, natural resources, or the environment.
"Environmental Law" shall mean any local, state or federal
statute, rule, regulation, order, directive or ordinance pertaining to: (A)
the protection of health, safety and the indoor or outdoor environment; (B)
the conservation, management, or use of natural resources and wildlife; (C)
the protection or use of surface water and ground water; (D) the
management, manufacture, possession, presence, use, generation,
transportation, treatment, storage, disposal, release, threatened release,
abatement, removal, remediation, or handling of, or exposure to, any
Hazardous Material; or (E) pollution (including any release to air, land,
surface water and ground water); and includes without limitation, the
following federal statutes (and their implementing regulations and the
analogous state statutes and regulations); the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended by the
Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. Section
9601 et seq.; the Solid
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Waste Disposal Act, as amended by the Resource Conservation and Recovery
Act of 1976, as amended by the Hazardous and Solid Waste Amendments of
1984, 42 U.S.C. Section 6901 et seq.; the Federal Water Pollution Control
Act of 1972, as amended by the Clean Water Act of 1977, as amended, 33
U.S.C. Section 1251 et seq.; the Toxic Substances Control Act of 1976, as
amended, 15 U.S.C. Section 2601 et seq.; the Emergency Planning and
Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq.; The
Clean Air Act of 1966, as amended by the Clean Air Act Amendments of 1990,
42 U.S.C. Section 7401 et seq.; the National Environmental Policy Act of
1970, as amended, 42 U.S.C. Section 4321 et seq.; the Rivers and Harbors
Act of 1899, as amended, 33 U.S.C. Section 401 et seq.; the Endangered
Species Act of 1973, as amended, 16 U.S.C. Section 1531 et seq.; the
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. Section
651 et seq.; and the Safe Drinking Water Act of 1974, as amended, 42 U.S.C.
Section 300(f) et seq.
"Environmental Release" shall mean 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, from, or upon, any land, soil, surface water,
ground water or air, or otherwise entering into the environment.
"Excess Amount" shall mean the amount, if any, by which the
Initial Purchase Price exceeds the Final Purchase Price.
"Final Purchase Price" shall have the meaning ascribed to it in
Section 2.2 hereof.
"Governmental Approval" shall mean any permit, license, variance,
certificate, consent, letter, clearance, closure, exemption, authorization,
decision or action or approval of any federal, state or local governmental
authority with jurisdiction over any Environmental Law.
"Hazardous Material" shall mean any substance, chemical, compound,
product, solid, gas, liquid, waste, by-product, pollutant, contaminant, or
material which is hazardous or toxic, and includes without limitation,
asbestos or any substance containing asbestos, polychlorinated biphenyls,
petroleum (including crude oil or any fraction thereof), and any hazardous
or toxic waste, material, or substance regulated under any Environmental
Law.
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"HSR Act" shall mean Section 7A of the Clayton Act (Title II of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976), as amended
(including any successor act), and the rules and regulations promulgated
thereunder.
"I.C.H." shall mean I.C.H. Corporation, a Delaware corporation.
"IMR" shall mean the interest maintenance reserve required to be
established under SAP on a specified life insurer's balance sheet.
"Indemnifying Party" shall mean the entity against whom claims of
indemnification are being asserted under ARTICLE X hereof.
"Indemnitee" shall mean the entity claiming indemnification under
ARTICLE X hereof.
"Initial Purchase Price" shall have the meaning ascribed to it in
Section 2.2 hereof.
"Interim Tax Return" shall have the meaning ascribed to it in
Section 12.1(a) hereof.
"IRS" shall mean the United States Internal Revenue Service.
"Material Adverse Effect" shall mean any change or effect (or
series of related changes or effects) that individually or in the aggregate
is materially adverse to (i) the business, operations, condition (financial
or otherwise) or results of operations of the Companies, (ii) the validity
or enforceability of this Agreement, or (iii) the ability of Seller to
execute and deliver this Agreement or to perform its obligations under this
Agreement.
"Modern" shall have the meaning ascribed to it in the recitals of
this Agreement.
"Modern Common Stock" shall have the meaning ascribed to it in the
recitals of this Agreement.
"Modern Shares" shall have the meaning ascribed to it in the
recitals of this Agreement.
"Permitted Lien" shall mean any (a) mechanic's, carrier's,
workmen's, repairmen's, or other similar lien arising or incurred in the
ordinary course of business, (b) lien for taxes, assessments, and other
governmental charges that are not due and payable or which are being
contested in good faith, (c) zoning, building or other similar government
restriction, or (d)
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agreement, covenant, right of way, or other similar restriction which in
the case of clauses (a), (c), and (d) above do not materially impair any
real property of Modern or WPL.
"Properties" shall mean any parcel of real property or mortgage or
similar loan on any parcel of real property currently owned, or formerly
owned, by either of the Companies; provided that "Properties" shall not
include any real property which is subject to a mortgage or similar loan
held by either Company as of the Closing and which is acquired by either
Company or an Affiliate of either Company after the Closing, through
foreclosure of such mortgage or similar loan or otherwise.
"Purchaser" shall mean Reassure America Life Insurance Company, an
Illinois insurance corporation.
"Quarterly Statement" shall mean the quarterly statutory statement
of the specified life insurance company filed with or submitted to the
insurance regulatory authority in the state of domicile of such life
insurance company.
"Salable Properties" shall have the meaning ascribed to it in
Section 12.2(a) hereof.
"SAP" shall mean the accounting practices required or permitted by
the insurance regulatory authority in the state of domicile of the
specified life insurance company, consistently applied throughout the
specified period and in the comparable period in the immediately preceding
year.
"Seller" shall mean Bankers Multiple Line Insurance Company, an
Illinois insurance corporation.
"Seller Consolidated Returns" shall mean all consolidated,
combined, affiliated or unitary Tax Returns which include the Companies
with respect to the Companies' taxable income or loss for periods through
the Closing Date.
"Seller Returns" shall have the meaning ascribed to it in Section
12.1 hereof.
"Settlement Auditor" shall mean the Dallas, Texas office of Price
Waterhouse.
"Shares" shall have the meaning ascribed to it in the recitals to
this Agreement.
"Tax Claim" shall have the meaning ascribed to it in Section
10.6(b) hereof.
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"Taxes" shall mean all taxes, charges, fees, levies, or other
similar assessments or liabilities, including without limitation (a)
income, gross receipts, ad valorem, premium, excise, real property,
personal property, sales, use, transfer, withholding, employment, payroll,
medicare, and franchise taxes imposed by the United States of America, or
by any state, local, or foreign government, or any subdivision, agency, or
other similar Person of the United States or any such government; and (b)
any interest, fines, penalties, assessments, or additions to taxes
resulting from, attributable to, or incurred in connection with any Tax or
any contest, dispute, or refund thereof.
"Tax Returns" shall mean any report, return, or statement required
to be supplied to a taxing authority in connection with Taxes.
Unless the context of this Agreement otherwise requires, (a) words
of any gender are deemed to include the other gender; (b) words using the
singular or plural number also include the plural or singular number,
respectively; (c) the terms "hereof," "herein," "hereby," "hereto," and
derivative or similar words refer to this entire Agreement; (d) the terms
"ARTICLE" or "Section" refer to the specified ARTICLE or Section of this
Agreement; (e) the phrase "in the ordinary course of business and
consistent with past practice" refers to the business, operations, affairs,
and practice of the Company consistent with past practices of such
business, operations, and affairs; (f) the term "including" and other forms
of such term, with respect to any matter or thing, means "including but not
limited to" such matter or thing; and (g) all references to "dollars" or
"$" refer to currency of the United States of America.
ARTICLE II
SALE OF SHARES AND CLOSING
2.1 Purchase and Sale of Shares. Subject to the terms and
conditions, and in reliance upon the representations and warranties, set
forth in this Agreement, Seller agrees to sell the Shares to Purchaser and
Purchaser agrees to purchase the Shares from Seller.
Page 16 of 141<PAGE>
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2.2 Purchase Price. The purchase price (the "Initial
Purchase Price") for the Shares will equal the sum of the following,
subject to adjustment after the Closing in accordance with Section 2.4
hereof (as adjusted, the "Final Purchase Price"):
(a) the capital and surplus of each of the Companies
determined in accordance with SAP as of the last day of the month
immediately preceding the Closing, but (i) in each case (A) valuing the
Salable Properties at an aggregate value of $7,350,000 and without giving
effect to the disposition by Modern or WPL, as applicable, of any sales of
any Salable Property or the receipt of any consideration therefor as
contemplated by Section 12.2 hereof, (B) valuing the Mortgage Loans at an
aggregate value of $1,686,427 and without giving effect to the disposition
by Modern of any sales of the Mortgage Loans Property or the receipt of any
consideration therefor as contemplated by Section 12.2 hereof, (C) after
giving effect to the impact of the dividend provided for in Section 5.7,
and (D) limiting the accrual for Taxes of both the Companies to no more
than an aggregate of $500,000 and (ii) with respect to Modern, including
the amount reflected on line 13 of page 2 in Modern's Annual Statement for
the year ended December 31, 1995, as a "Federal Income Tax Recoverable,"
plus interest accrued thereon calculated from the date from which the IRS
will be required to pay interest on the refund to Modern through the
Closing Date at the annual percentage rate required to be paid by the IRS
on the refund to Modern of such amount, as such rate from time to time may
vary and as applied for applicable periods consistent with such variations
(the aggregate of such amounts are herein referred to as the "Modern Tax
Recoverable"); and
(b) the AVR of each of the Companies determined in accordance
with SAP as of the last day of the month immediately preceding the Closing;
and
(c) the IMR of each of the Companies determined in accordance
with SAP as of the last day of the month immediately preceding the Closing;
and
(d) the aggregate provision for policyholder dividends and
coupons of each of the Companies payable in the following year, as
reflected in lines 7.1, 7.2, and 7.3 of the liabilities on the Companies'
balance sheets ("Policyholder Dividends"), determined in accordance with
SAP as of the last day of the month immediately preceding the Closing; and
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(e) if the accident and health insurance policies written by
the Companies have been sold or reinsured, pursuant to Section 5.4(h) of
this Agreement, prior to the Closing Date, then $278,000; and
(f) $2,116,000 (two million, one hundred sixteen thousand
dollars).
As promptly as practicable (but in no event later than 5 business days)
prior to the Closing Date, Seller shall deliver to Purchaser balance sheets
of the Companies determined in accordance with SAP as of the last day of
the month immediately preceding the Closing Date identifying the capital,
surplus, AVR, IMR, and Policyholder Dividends amounts determined pursuant
to this Section 2.2.
2.3 Closing.
(a) The Closing will take place at the offices of Winstead
Sechrest & Minick, 5400 Renaissance Tower, 1201 Elm Street, Dallas, Texas
75270, at 9:00 a.m., local time on the Closing Date.
(b) At the Closing, Purchaser (i) will pay the Initial
Purchase Price (A) by execution of a promissory note in the form attached
hereto as Exhibit A in a principal amount equal to that portion of the
Initial Purchase Price equal to the Modern Tax Recoverable, and (B) by wire
transfer of immediately available funds to such account as Seller specifies
to Purchaser for the remainder of the Initial Purchase Price, and (ii)
deliver to Seller such other documents and instruments required to be
delivered by Purchaser under the terms of this Agreement.
(c) At the Closing, Seller will deliver to Purchaser (i) a
certificate or certificates representing all the Shares, accompanied by
duly executed blank stock powers, and (ii) such other documents and
instruments required to be delivered by Seller under the terms of this
Agreement.
2.4 Purchase Price Adjustment.
(a) As promptly as practicable (but in no event more than 60
days) after the Closing Date, Purchaser will prepare and deliver to Seller
the Closing Balance Sheet prepared in accordance with SAP and using the
same assumptions and methodologies utilized in the preparation of the
December 31, 1995 Annual Statements and after the adjustments necessary to
give effect to clauses (i)(A), (i)(B), (i)(D) and (ii) of Section 2.2(a)
hereof. Purchaser will deliver to Seller the Closing Balance Sheet
together with a written notice setting forth Purchaser's determination of
the Deficiency Amount or the Excess Amount, as applicable.
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(b) Within 20 business days after Seller's receipt of the
Closing Balance Sheet, Seller will provide Purchaser with written notice
indicating whether Seller agrees or disagrees with the capital, surplus,
AVR, IMR and Policyholder Dividends amounts reflected in the Closing
Balance Sheet. If Seller disputes the capital, surplus, AVR, IMR, or
Policyholder Dividends amounts reflected in the Closing Balance Sheet, such
notice will reflect Seller's calculation of each disputed amount in
sufficient detail to permit Purchaser to verify the same. If Seller agrees
with the capital, surplus, AVR, IMR, and Policyholder Dividends amounts
reflected in the Closing Balance Sheet or if Seller fails to deliver to
Purchaser such written notice within such 20-day period, the Closing
Balance Sheet will be deemed final.
(c) Within 10 business days after Purchaser's receipt of any
notice of disagreement with the capital, surplus, AVR, IMR, or Policyholder
Dividends amounts reflected in the Closing Balance Sheet, Purchaser and
Seller will begin good faith negotiations to resolve such disagreement. If
Purchaser and Seller are unable to resolve such disagreement within 10
business days after such negotiations begin, such disagreement will be
submitted to the Settlement Auditor for resolution. Purchaser and Seller
will cooperate with the Settlement Auditor and will proceed in good faith
to cause the Settlement Auditor to resolve such disagreement within 30 days
after such disagreement is submitted to the Settlement Auditor. Purchaser
and Seller will each pay one-half of the fees and expenses of the
Settlement Auditor.
(d) The Settlement Auditor, in its sole discretion, will
determine (i) the nature and extent of the participation by Purchaser,
Seller, and their agents in connection with the resolution of any
disagreement submitted to the Settlement Auditor, (ii) the nature and
extent of information that Purchaser and Seller may submit to the
Settlement Auditor for consideration in connection with such resolution,
and (iii) the personnel of the Settlement Auditor who will review such
information and resolve such disagreement. The Settlement Auditor's
resolution of any such disagreement will be reflected in a written report
which will be delivered promptly to, and will be final and binding upon,
Purchaser and Seller. The Closing Balance Sheet will be adjusted
accordingly to reflect any such resolution and, as adjusted, will be deemed
final.
(e) Upon the earlier to occur of (i) the parties' agreement
with respect to the capital, surplus, AVR, IMR, and Policyholder Dividends
amounts reflected in the Closing Balance Sheet, or (ii) the delivery of the
report of the Settlement Auditor as provided in Section 2.4(d) hereof,
Purchaser will pay to Seller the Deficiency Amount or Seller will pay to
Purchaser the Excess Amount, as the case may be. The payment of the
Deficiency Amount
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or the Excess Amount, as the case may be, will be made by wire transfer of
immediately available funds to such account as the party entitled to
receive such payment specifies in writing to the party required to make
such payment.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as follows:
3.1 Organization of Seller. (a) Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Illinois and has full corporate power and authority to enter into
this Agreement and to perform its obligations under this Agreement.
(b) Seller has capital and surplus determined in accordance
with SAP in an amount in excess of $60.0 million after taking into account
the net proceeds from (i) the sale of the Shares and (ii) the net proceeds
(or estimated proceeds if not yet paid to Seller) from the sale of the
stock of Philadelphia American Life Insurance Company and the sale of the
business operations of Seller.
3.2 Authority. The execution and delivery of this Agreement
by Seller and the performance by Seller of its obligations under this
Agreement have been duly and validly authorized by all necessary corporate
action on the part of Seller. This Agreement has been duly executed and
delivered by Seller and constitutes a legal, valid, and binding obligation
of Seller and is enforceable against Seller in accordance with its terms,
except to the extent that (a) enforcement against Seller may be limited by
or subject to any bankruptcy, insolvency, reorganization, moratorium, or
similar laws now or hereafter in effect relating to or limiting creditors'
rights generally and (b) the remedy of specific performance and injunctive
and other forms of equitable relief are subject to certain equitable
defenses and to the discretion of the court or other similar person or
entity before which any proceeding therefor may be brought.
3.3 Organization of Modern. Modern is a stock insurance
corporation duly organized, validly existing, and in good standing under
the laws of Missouri, and has all requisite corporate power and authority
to own, lease and operate its assets and properties and to carry on its
business as presently conducted by it. Modern is duly qualified or
admitted to do business and is in good standing as a foreign corporation in
all jurisdictions in which
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the ownership, use, or leasing of its assets or properties or the conduct
or nature of its business makes such qualification or admission necessary,
except where the failure to be so qualified or admitted and in good
standing does not have or would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. Modern does
not own 10% or more of the voting capital stock of any corporation.
3.4 Capital Stock; Title. The authorized capital stock of
Modern consists solely of the Modern Shares, all of which are issued and
outstanding. The Modern Shares are duly authorized, validly issued, fully
paid, and nonassessable and are owned beneficially and of record by Seller,
free and clear of all liens and encumbrances. Upon delivery of payment for
the Modern Shares as herein provided, Purchaser will acquire good and valid
title to the Modern Shares, free and clear of any lien or encumbrance
(other than liens or encumbrances created by Purchaser). There are no
outstanding securities, rights (preemptive or other), subscriptions, calls,
warrants, options, or other agreements (except for this Agreement) that
give any person or entity the right to (a) purchase or otherwise receive or
be issued any shares of capital stock of Modern (or any interest therein)
or any security convertible into or exchangeable for any shares of capital
stock of Modern (or any interest therein), (b) receive any dividend,
voting, or ownership rights similar to those accruing to a holder of the
Modern Shares, or (c) participate in the equity, income, or election of
directors or officers of Modern.
3.5 Organization of WPL. WPL is a stock insurance
corporation duly organized, validly existing, and in good standing under
the laws of Kentucky, and has all requisite corporate power and authority
to own, lease and operate its assets and properties and to carry on its
business as presently conducted by it. WPL is duly qualified or admitted
to do business and is in good standing as a foreign corporation in all
jurisdictions in which the ownership, use, or leasing of its assets or
properties or the conduct or nature of its business makes such
qualification or admission necessary, except where the failure to be so
qualified or admitted and in good standing does not have or would not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect. WPL does not own 10% or more of the voting
capital stock of any corporation.
3.6 Capital Stock; Title. The authorized capital stock of
WPL consists solely of the WPL Shares, all of which are issued and
outstanding. The WPL Shares are duly authorized, validly issued, fully
paid, and nonassessable and are owned beneficially and of record by Seller,
free and clear of all liens and encumbrances. Upon delivery of payment for
the WPL Shares as herein provided, Purchaser will acquire good and valid
title to the WPL Shares,
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free and clear of any lien or encumbrance (other than liens or encumbrances
created by Purchaser). There are no outstanding securities, rights
(preemptive or other), subscriptions, calls, warrants, options, or other
agreements (except for this Agreement) that give any person or entity the
right to (a) purchase or otherwise receive or be issued any shares of
capital stock of WPL (or any interest therein) or any security convertible
into or exchangeable for any shares of capital stock of WPL (or any
interest therein), (b) receive any dividend, voting, or ownership rights
similar to those accruing to a holder of the WPL Shares, or (c) participate
in the equity, income, or election of directors or officers of WPL.
3.7 No Conflicts or Violations. The execution and delivery
of this Agreement by Seller and the performance by Seller of its
obligations under this Agreement will not:
(a) subject to obtaining the approvals contemplated by
Sections 5.1, 5.2, 6.1 and 6.2 hereof, violate in any material respect any
law or any writ, judgment, decree, or injunction applicable to Seller or
either of the Companies or their respective assets or properties;
(b) conflict with or result in a violation or breach of any
of the provisions of the articles or certificate of incorporation or bylaws
of Seller or either of the Companies;
(c) conflict with or result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default
under, any Contract to which Seller or either of the Companies is a party
or by which any asset or property of Seller or either of the Companies may
be bound;
(d) require Seller or either of the Companies to obtain any
consent, approval, or action of, or make any filing with or give any notice
to, any person or entity, except (i) as set forth in Section 3.7 of the
Disclosure Schedule, (ii) as contemplated in Sections 5.1(b) and 5.2
hereof, or (iii) those which the failure to obtain, make or give,
individually of in the aggregate, would not reasonably be expected to have
a Material Adverse Effect; or
(e) result in the creation or imposition of any lien or
encumbrance upon either of the Companies or any of their respective assets
or properties.
3.8 SAP Statements. Seller has previously delivered to
Purchaser true and complete copies of the following:
(a) the Annual Statements of each of the Companies for each
of the years ended December 31, 1993, 1994, and 1995 (including
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the supporting memorandum to the actuarial opinions given in connection
with such Annual Statements); and
(b) any annual statutory statements of either of the
Companies that were filed for the year ended December 31, 1995 in any
jurisdiction which differ from the Annual Statement for the year ended
December 31, 1995 for such respective Company.
Each such statement (i) complied in all material respects with all
applicable laws when so filed, (ii) was prepared in accordance with SAP,
(iii) is true and complete in all material respects, and (iv) presents
fairly in all material respects the financial position of the respective
Company as of the respective dates thereof and the related summary of
operations and changes in capital and surplus and in cash flows of the
respective Company for and during the respective periods covered thereby.
No material deficiency has been asserted by any insurance regulatory
authority with respect to any such statement.
3.9 Reserves. The statutory reserves and other similar
amounts with respect to losses, benefits, claims, and expenses in respect
of each of the Companies' insurance business as established or reflected in
the respective December 31, 1995 Annual Statement (a) were determined in
accordance with SAP and generally accepted actuarial assumptions, (b) were
in accordance with the benefits specified in the related insurance or
reinsurance Contracts in all material respects, (c) meet the requirements
of the insurance laws of each applicable jurisdiction in all material
respects, and (d) were adequate, in all material respects, along with
future premiums, as of December 31, 1995, based upon then-current
information and assumptions concerning investment income, mortality and
morbidity experience, persistency and expenses, to cover the total amount
of all matured and reasonably anticipated unmatured benefits, claims, and
other liabilities of the respective Company under all insurance or
reinsurance Contracts which the respective Company has or will have any
liability. Each of the Companies owns assets that qualify as legal reserve
assets under applicable insurance laws in an amount at least equal to all
such statutory reserves and other similar amounts of the respective
Company.
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3.10 Assets and Properties.
(a) Section 3.10(a) of the Disclosure Schedule contains a
list of all purchases, acquisitions, sales or dispositions of all
debentures, notes, stocks, limited partnership interests, other securities,
mortgages, and other investment assets by each of the Companies from
December 31, 1995 to the date hereof. Each of the Companies has good and
marketable title to all debentures, notes, stocks, limited partnership
interests, other securities, mortgages, and other investment assets
(excluding real property) owned by it, free and clear of all liens and
encumbrances.
(b) Section 3.10(b) of the Disclosure Schedule contains a
true and complete list and description of all real property in which each
of the Companies has an ownership interest. Each of the Companies owns
good and insurable fee simple title to all such real property, free and
clear of all liens and encumbrances, except for Permitted Liens.
(c) Section 3.10(c) of the Disclosure Schedule contains a
true and complete list and description of all real property leased by each
of the Companies. Each of the Companies has a valid leasehold interest in
all such leased real property.
(d) Section 3.10(d) of the Disclosure Schedule contains a
true and complete list and description of (i) all marks, names, trademarks,
service marks, patents, patent rights, assumed names, logos, trade secrets,
copyrights, trade names, and service marks that are used in the conduct of
the business, operations, or affairs of each of the Companies, and (ii) all
computer software, programs, and similar systems (a) owned by or licensed
to either of the Companies or (b) that are used in the conduct of their
business, operations, or affairs. Neither of the Companies is in conflict
with or in violation or infringement of, nor has Seller or either of the
Companies received any notice of any alleged conflict with or violation or
infringement of, any asserted rights of any other person or entity with
respect to any such intellectual property or any such computer software,
programs, or similar systems.
3.11 Absence of Changes. Since December 31, 1995, there has
not been, occurred, or arisen any change, event (including without
limitation any damage, destruction, or loss whether or not covered by
insurance), condition, or state of facts of any character with respect to
the business or condition of either of the Companies, except as disclosed
in Section 3.11 of the Disclosure Schedule or for such changes, events,
conditions, or state of facts that, individually or in the aggregate, have
not had and reasonably would not be expected to have a Material Adverse
Effect. Except as disclosed in Section 3.11 of the Disclosure Schedule or
for
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such changes, events, conditions, or state of facts that, individually or
in the aggregate, have not had and reasonably would not be expected to have
a Material Adverse Effect, since December 31, 1995, each of the Companies
has operated only in the ordinary course of business and consistent with
past practice, and (without limiting the generality of the foregoing) there
has not been, occurred, or arisen:
(a) any declaration, setting aside, or payment of any
dividend or other distribution in respect of the capital stock of either of
the Companies or any direct or indirect redemption, purchase, or other
acquisition by either of the Companies of any such stock or of any interest
in or right to acquire any such stock;
(b) any lien or encumbrance created or assumed on any of the
assets or properties of either of the Companies;
(c) any liability involving the borrowing of money by either
of the Companies or the incurrence by either of the Companies of any
deferred purchase price obligation (other than trade credit incurred in the
ordinary course of business and consistent with past practice);
(d) any damage, destruction, or loss (whether or not covered
by insurance) affecting any of the assets or properties of either of the
Companies, which damage, destruction, or loss individually or in the
aggregate exceeds $25,000;
(e) any cancellation of any material liability owed to either
of the Companies by any other person or entity;
(f) any write-off or write-down of, or any determination to
write-off or write-down, the assets or properties (other than any statutory
write-down of investment assets) of either of the Companies or any portion
thereof;
(g) any amendment, termination, waiver, disposal, or lapse
of, or other failure to preserve, any (i) license, permit, or other form of
authorization of either of the Companies (other than a license to transact
insurance business), the result of which individually or in the aggregate
has had or would reasonably be expected to have a Material Adverse Effect,
or (ii) license of either of the Companies to transact insurance business;
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(h) any termination, amendment, or execution by the either of
Companies of any reinsurance, coinsurance, or other similar Contract, as
ceding or assuming insurer, except those Contracts which have expired in
accordance with their terms;
(i) any expenditure or commitment for additions to property,
plant, equipment, or other tangible or intangible capital assets or
properties of either of the Companies;
(j) any change in any marketing relationship between either
of the Companies and any person or entity through which the respective
Company sells insurance policies, which change has had or would reasonably
be expected to have a Material Adverse Effect; or
(k) any Contract to take any of the actions prohibited in
this Section 3.11.
3.12 No Undisclosed Liabilities.
(a) There were no liabilities against or relating to either
of the Companies as of December 31, 1995, except (i) as reflected in any of
the financial statements and the notes thereto referenced in Section 3.8
hereof, (ii) policyholder benefits payable in the ordinary course of
business and consistent with past practice, (iii) as disclosed in Section
3.12 of the Disclosure Schedule, or (iv) those which, individually or in
the aggregate, have not had and reasonably would not be expected to have a
Material Adverse Effect. Since December 31, 1995, neither of the Companies
has incurred any liabilities, except (i) policyholder benefits payable in
the ordinary course of business and consistent with past practice, (ii) as
disclosed in Section 3.12 of the Disclosure Schedule, or (iii) those which,
individually or in the aggregate, have not had and reasonably would not be
expected to have a Material Adverse Effect.
(b) Except for regular periodic assessments in the ordinary
course of business, no claim or assessment is pending nor, to the knowledge
of Seller or either of the Companies, threatened against either of the
Companies by any state insurance guaranty association in connection with
such association's fund relating to insolvent insurers.
3.13 Taxes. Except as disclosed in Section 3.13 of the
Disclosure Schedule:
(a) All Tax Returns required to be filed by or with respect
to either of the Companies have been duly and timely filed, and all such
Tax Returns are true, correct and complete in all material respects. Each
of the Companies has duly and timely paid
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(or there has been paid on its behalf) (or by the Closing Date will have
paid) all Taxes that are due, or claimed or asserted by any taxing
authority to be due, from or with respect to it and the Affiliated Group.
With respect to any period for which Taxes are not yet due, each of the
Companies has made due and sufficient current accruals for such Taxes in
its SAP financial statements. Each of the Companies and each Affiliated
Group has made (or there has been made on its behalf) (or by the Closing
Date will have paid) all required estimated Tax payments sufficient to
avoid any underpayment penalties. Each of the Companies has withheld and
paid all Taxes required by all applicable laws to be withheld or paid in
connection with any amounts paid or owing to any employee, creditor,
independent contractor or other third party.
(b) There are no outstanding agreements, waivers, or
arrangements extending the statutory period of limitation applicable to any
claim for, or the period for the collection or assessment of, Taxes due
from or with respect to either of the Companies and each Affiliated Group
for any taxable period, and no power of attorney granted by or with respect
to either of the Companies with respect to Taxes is currently in force. No
closing agreement pursuant to Section 7121 of the Code (or any predecessor
provision) or any similar provision of any state, local, or foreign law has
been entered into by or with respect to either of the Companies. No audit
or other proceeding by any court, governmental or regulatory authority, or
similar person is pending or, to the knowledge of the Seller, threatened
with respect to any Taxes due from or with respect to either of the
Companies or any Tax Return filed by or with respect to either of the
Companies, including Tax Returns of each Affiliated Group. To Seller's
knowledge, no assessment of Taxes is proposed against any Affiliated Group
or the Companies or any of their assets.
(c) No election under Sections 108, 338, 441, 1017, 1033 and
4977 of the Code has been made or filed by or with respect to either of the
Companies. No consent to the application of Section 341(f)(2) of the Code
(or any predecessor provision) has been made or filed by or with respect to
either of the Companies or any of their assets. Neither of the Companies
has agreed (and no agreement has been made on either of the Companies'
behalf) to make any adjustment pursuant to Section 481(a) or Section 807(f)
of the Code (or any predecessor provision) by reason of any change in any
accounting method or change in basis of computing reserves or otherwise,
and there is no application pending with any taxing authority requesting
permission for any changes in any accounting method of either of the
Companies. None of the assets of either of the Companies is or will be
required to be treated as being owned by any person (other than the
respective Company) pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately before
the
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enactment of the Tax Reform Act of 1986 or is "tax-exempt use property"
within the meaning of Section 168(h)(1) of the Code.
(d) Neither of the Companies is a party to, is bound by, or
has an obligation under, any Tax sharing agreement, Tax allocation
agreement or similar contract.
(e) There is no contract, agreement, plan or arrangement
covering any person that, individually or collectively, could give rise to
the payment by either of the Companies of any amount that would not be
deductible by either of the Companies by reason of Section 280G or Section
162(m) of the Code.
(f) The Seller is not a "foreign person" within the meaning
of Section 1445(b)(2) of the Code.
(g) Each of the Companies was taxable as a domestic "life
insurance company" within the meaning of Section 816 of the Code for all
taxable periods or portions thereof ending on or before the Closing Date.
(h) The balance of the policyholders surplus account (as
defined in Section 815 of the Code) of each of the Companies is zero as of
December 31, 1995, and the computation and maintenance of the policyholders
surplus account balances for the taxable years subsequent to 1958 had been
computed and maintained in accordance with Section 815 of the Code and the
Treasury Regulations thereunder.
(i) The insurance reserves with respect to each of the
Companies set forth in all federal income Tax Returns of such Company were
determined in all material respects in accordance with Section 807 of the
Code.
(j) The Tax treatment under the Code of all insurance,
annuity or investment policies, plans, or contracts, financial products,
employee benefit plans, individual retirement accounts or annuities, or any
similar or related policy, contract, plan or product, whether individual,
group or otherwise issued or sold by each of the Companies is and at all
times has been the same or not less favorable to the purchaser,
policyholder, or beneficiaries thereof than the Tax treatment under the
Code for which such contracts qualified or purported to qualify or which
the Companies represented could be obtained at the time of its issuance,
purchase, modification or exchange, except to the extent that the Tax
treatment of any product of either Company is not less favorable than the
Tax treatment of substantially similar products offered by other companies.
The provisions of the Code relating to the Tax treatment of the plans,
policies, contracts and products referred to in the preceding sentence
shall include, but
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not be limited to, Sections 72, 79, 101, 104, 105, 106, 125, 130, 264, 401,
402, 403, 404, 408, 412, 415, 419, 419A, 501, 505, 817, 818, 1035, 7702,
and 7702A of the Code.
(k) Neither of the Companies has nor will have on or before the
Closing Date any liability for Taxes resulting from an acceleration of an
"intercompany transaction" within the meaning of Treasury Regulation
Section 1.1502-13(d) (or any analogous or similar provision under state,
local of foreign law or any predecessor provision or regulation).
(l) Neither Seller nor any of its Affiliates will make any
election to retain losses from operations, net operating losses or capital
loss carryovers of each of the Companies pursuant to the procedure set
forth in Treasury Regulation Section 1.1502-20(g) or any similar or
successor provision of federal, State or local law.
3.14 Litigation. Except as disclosed in Section 3.14 of the
Disclosure Schedule:
(a) There are no actions, suits, investigations,
arbitrations, or proceedings pending, or (to the knowledge of Seller)
threatened, against Seller or its assets or properties, at law or in
equity, in, before, or by any person or entity, except such actions, suits,
investigations, arbitrations, or proceedings that individually or in the
aggregate do not have or would not reasonably be expected to have a
Material Adverse Effect.
(b) There are no actions, suits, investigations,
arbitrations, or proceedings pending, or (to the knowledge of Seller)
threatened, against either of the Companies, or any of their respective
assets or properties, at law or in equity, in, before, or by any person or
entity.
(c) There are no writs, judgments, decrees, injunctions, or
similar orders of any person or entity outstanding against either of the
Companies.
3.15 Compliance With Laws. Except as disclosed in
Section 3.15 of the Disclosure Schedule, neither of the Companies is in
violation of any law or any writ, judgment, decree, injunction, or similar
order applicable to either of the Companies, which violation, individually
or in the aggregate, has had or may reasonably be expected to have a
Material Adverse Effect.
3.16 Pension and Benefit Plans. The Company has no liability
under and has not adopted, maintained or sponsored any pension, welfare,
bonus, deferred compensation, incentive compensation,
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profit sharing, stock, retirement, or other benefit plan or arrangement.
3.17 Contracts. Section 3.17 of the Disclosure Schedule
contains a true and complete list of each of the following Contracts (true
and complete copies of which have been made available to Purchaser), to
which either of the Companies is a party or by which any of their
respective assets or properties is or may be bound:
(a) all employment, agency (other than insurance agent),
consultation, or representation Contracts or other Contracts of any type
(including without limitation loans or advances) with any present officer,
director, employee, agent (other than insurance agent), consultant, or
other similar representative of either of the Companies (or former officer,
director, employee, agent (other than insurance agent), consultant or
similar representative of either of the Companies if there exists any
present or future liability with respect to such Contract);
(b) a specimen form insurance agent Contract and any
insurance agent Contract having terms different in any material respect
than the terms contained in the specimen form insurance agent Contract;
(c) all Contracts with any person or entity containing any
provision or covenant (i) limiting the ability of either of the Companies
to (A) sell any products or services of any other person or entity, (B)
engage in any line of business, or (C) compete with or obtain products or
services from any person or entity or (ii) limiting the ability of any
person or entity to compete with or to provide products or services to
either of the Companies;
(d) all Contracts relating to the borrowing of money by
either of the Companies, relating to the deferred purchase price for
property or services, or relating to the direct or indirect guarantee by
either of the Companies of any liability;
(e) all Contracts pursuant to which either of the Companies
has agreed to indemnify or hold harmless any person or entity (other than
indemnifications or hold harmless covenants in the ordinary course of
business and consistent with past practice);
(f) all leases or subleases of real property used in the
business, operations, or affairs of either of the Companies;
(g) all Contracts or arrangements (including without
limitation those relating to allocations of expenses, personnel, services,
or facilities) between either of the Companies and Seller, any Affiliate of
Seller, Southwestern Financial
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Corporation, or any Affiliate of Southwestern Financial Corporation;
(h) all reinsurance, coinsurance, or other similar Contracts
(including pursuant to which either of the Companies receives or has
received surplus relief); and
(i) all other Contracts (other than insurance Contracts
issued, reinsured, or underwritten by either of the Companies) that involve
the payment or potential payment, pursuant to the terms of such Contracts,
by or to either of the Companies of more than $5,000 individually or in the
aggregate or that are otherwise material to the business or condition of
either of the Companies.
Each Contract disclosed or required to be disclosed in Section 3.17 of the
Disclosure Schedule is in full force and effect and constitutes a legal,
valid, and binding obligation of Seller and each Company to the extent any
of such parties is a party thereto and, to the knowledge of Seller, each
other party thereto. Neither the Seller nor either of the Companies has
received from any other party to such Contract any notice, whether written
or oral, of termination or intention to terminate such Contract. Except as
set forth in Section 3.17 of the Disclosure Schedule, neither of the
Companies nor, to the knowledge of Seller, any other party to such Contract
is in violation or breach of or default under any such Contract (or with or
without notice or lapse of time or both, would be in violation or breach of
or default under any such Contract), which violation, breach, or default
has had or would reasonably be expected to have a Material Adverse Effect.
3.18 Insurance Issued. Except as required by law or except as
disclosed in Section 3.18 of the Disclosure Schedule:
(a) All outstanding insurance Contracts issued, reinsured, or
underwritten by either of the Companies are, to the extent required under
applicable laws, on forms and at rates approved by the insurance regulatory
authority of the jurisdiction where issued or have been filed with and not
objected to by such authority within the period provided for objection.
(b) All insurance Contract benefits payable by either of the
Companies or (to the knowledge of Seller) by any other person or entity
that is a party to or bound by any reinsurance, coinsurance, or other
similar Contract with either of the Companies have in all material respects
been paid in accordance with the terms of the insurance Contracts under
which they arose, except for such benefits for which the Company believes
there is a reasonable basis to contest payment.
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(c) No outstanding insurance Contract issued, reinsured, or
underwritten by either of the Companies entitles the holder thereof or any
other person or entity to receive dividends, distributions, or other
benefits based on the revenues or earnings of either of the Companies or
any other person or entity.
(d) To Seller's knowledge, all amounts to which either of the
Companies is entitled under reinsurance, coinsurance, or other similar
Contracts (including without limitation amounts based on paid and unpaid
losses) are collectible in the ordinary course of business.
(e) To Seller's knowledge, each insurance agent, at the time
such agent wrote, sold, or produced business for either of the Companies,
was duly licensed as an insurance agent (for the type of business written,
sold, or produced by such insurance agent) in the particular jurisdiction
in which such agent wrote, sold, or produced such business.
3.19 Licenses and Permits. Except as disclosed in
Section 3.19 of the Disclosure Schedule:
(a) Each of the Companies owns or validly holds all
(i) licenses, franchises, permits, approvals, authorizations, exemptions,
classifications, certificates, registrations, and similar documents or
instruments (other than licenses to transact insurance business) that are
required for its business, operations, and affairs and that the failure to
so own or hold has had or reasonably would be expected to have a Material
Adverse Effect, and (ii) licenses set forth in Section 3.19 of the
Disclosure Schedule. Section 3.19 of the Disclosure Schedule contains a
true and complete list of all jurisdictions in which each of the Companies
is licensed to transact insurance business and the lines of business for
which each of the Companies is licensed in each jurisdiction.
(b) All such licenses, franchises, permits, approvals,
authorizations, exemptions, classifications, certificates, registrations,
and similar documents or instruments are valid and in full force and
effect. No such license to transact insurance business is the subject of a
proceeding for suspension or revocation or any similar proceeding and, to
the knowledge of Seller, there is no pending threat of such suspension or
revocation by any such licensing authority.
3.20 Operations Insurance. Section 3.20 of the Disclosure
Schedule contains a true and complete list and description of all
liability, property, workers compensation, directors and officers
liability, and other similar insurance Contracts that insure the business,
operations, or affairs of each of the Companies or
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affect or relate to the ownership, use, or operations of any of the assets
or properties of each of the Companies.
3.21 Intercompany Liabilities. Except as disclosed in Section
3.21 of the Disclosure Schedule, (a) neither Seller nor any Affiliate of
Seller (other than the Companies) provides or causes to be provided to
either of the Companies any products, services, equipment, facilities, or
similar items, and (b) there are no liabilities between Seller or any
Affiliate of Seller (other than the Companies), on the one hand, and either
of the Companies on the other hand.
3.22 Bank Accounts. Section 3.22 of the Disclosure Schedule
contains (a) a true and complete list of the names and locations of all
banks, trust companies, securities brokers, and other financial
institutions at which either of the Companies has an account or safe
deposit box or maintains a banking, custodial, trading, trust, or other
similar relationship, (b) a true and complete list and description of each
such account, box, and relationship, and (c) a list of all signatories for
each such account and box.
3.23 Charter Documents and Bylaws. Seller has heretofore made
available to Purchaser true and complete copies of the articles of
incorporation and bylaws of each of the Companies, as in effect on the date
hereof.
3.24 Minute Books. The minute books of each of the Companies
accurately reflect in all material respects all formal actions taken at all
meetings and all consents in lieu of meetings of the stockholders of the
respective Company since January 1, 1990, and all formal actions taken at
all meetings and all consents in lieu of meetings of the boards of
directors of each of the Companies and all committees thereof since January
1, 1990. All of such minute books have previously been made available for
inspection by Purchaser.
3.25 Brokers and Finders. Neither Seller nor any of its
Affiliates has employed any financial advisor or finder or incurred any
liability for any financial advisory or finders' fees in connection with
this Agreement or the transactions contemplated hereby.
3.26 Disclosure. To Seller's knowledge, no representation or
warranty made by Seller in this Agreement or in any certificate furnished
by Seller to Purchaser in connection with this Agreement contains any
untrue statement of material fact or omits to state a material fact
necessary to make the statement not misleading in light of the
circumstances in which they were made.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
4.1 Organization. Purchaser is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
Illinois and has full corporate power and authority to enter into this
Agreement and to perform its obligations under this Agreement.
4.2 Authority. The execution and delivery of this Agreement
by Purchaser and the performance by Purchaser of its obligations under this
Agreement have been duly and validly authorized by all necessary corporate
action on the part of Purchaser. This Agreement has been duly executed and
delivered by Purchaser and constitutes a legal, valid, and binding
obligation of Purchaser and is enforceable against Purchaser in accordance
with its terms, except to the extent that (a) enforcement may be limited by
or subject to any bankruptcy, insolvency, reorganization, moratorium, or
similar laws now or hereafter in effect relating to or limiting creditors'
rights generally and (b) the remedy of specific performance and injunctive
and other forms of equitable relief are subject to certain equitable
defenses and to the discretion of the court or other similar person or
entity before which any proceeding therefor may be brought.
4.3 No Conflicts or Violations. The execution and delivery
of this Agreement by Purchaser and the performance by Purchaser of its
obligations under this Agreement will not:
(a) subject to obtaining the approvals contemplated by
Sections 5.1, 5.2, 6.1 and 6.2 hereof violate any term or provision of any
law or any writ, judgment, decree, or injunction applicable to Purchaser or
any of its assets or properties;
(b) conflict with or result in a violation or breach of any
of the provisions of the certificate of incorporation or bylaws of
Purchaser;
(c) conflict with or result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default
under, any Contract to which Purchaser is a party or by which any asset or
property of Purchaser may be bound; or
(d) require Purchaser or any of its subsidiaries to obtain
any consent, approval, or action of, or make any filing with or
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give any notice to, any person or entity, except as contemplated in
Sections 6.1(a)(ii) and 6.2 hereof.
4.4 Brokers and Finders. Neither Purchaser nor any of its
Affiliates has employed any financial advisor or finder or incurred any
liability for any financial advisory or finders' fees in connection with
this Agreement or the transactions contemplated hereby.
4.5 Purchase for Investment. The Shares will be acquired by
Purchaser for its own account for the purpose of investment and not for the
purpose, or with the intent, of further distribution or other sales or
dispositions thereof. Purchaser has sufficient knowledge and experience in
financial and business matters to evaluate the merits and risks of its
investment in the Shares. Purchaser will refrain from transferring or
otherwise disposing of any of the Shares, or any interest therein, in such
manner as to violate any registration provision of the securities laws.
4.6 Litigation.
(a) There are no actions, suits, investigations,
arbitrations, or proceedings pending, or (to the knowledge of Purchaser)
threatened, against Purchaser or its assets or properties, at law or in
equity, in, before, or by any person or entity that, if adversely
determined, reasonably would be expected to have a material adverse effect
on the enforceability of this Agreement, on the ability of Purchaser to
perform its obligations under this Agreement, or on the consummation of the
transactions contemplated in this Agreement.
(b) There are no writs, judgments, decrees, injunctions, or
similar orders of any person or entity outstanding against Purchaser that
reasonably would be expected to have a material adverse effect on the
enforceability of this Agreement, on the ability of Purchaser to perform
its obligations under this Agreement, or on the consummation of the
transactions contemplated in this Agreement.
4.7 Disclosure. To Purchaser's knowledge, no representation
or warranty made by Purchaser in this Agreement or in any certificate
furnished by Purchaser to Seller in connection with this Agreement contains
any untrue statement of material fact or omits to state a material fact
necessary to make the statement not misleading in light of the
circumstances in which they were made.
ARTICLE V
COVENANTS OF SELLER
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Seller covenants and agrees with Purchaser that, at all times
before the earlier of the Closing or the termination of this Agreement in
accordance with ARTICLE XI hereof, Seller will comply with all covenants
and provisions of this ARTICLE V applicable to it, except to the extent
(i) Purchaser may otherwise consent in writing, (ii) otherwise required by
applicable law, or (iii) otherwise expressly required or permitted by this
Agreement.
5.1 Contract and Regulatory Approvals. Seller will take (and
will cause each of the Companies to take) all commercially reasonable steps
necessary or desirable, and proceed diligently and in good faith and use
commercially reasonable efforts, to obtain as promptly as practicable (a)
all approvals and consents required of any person or entity under all
Contracts to which Seller or either of the Companies is a party to
consummate the transactions contemplated hereby including without
limitation all consents set forth in Section 3.7 of the Disclosure
Schedule, and (b) all approvals, authorizations, and clearances of
governmental and regulatory authorities required of each of Seller, Modern,
and WPL to consummate the transactions contemplated hereby. Seller will,
and will cause each of the Companies to, (i) provide such other information
and communications to such governmental and regulatory authorities as
Purchaser or such authorities may reasonably request, and (ii) cooperate
with Purchaser in obtaining, as promptly as practicable, all approvals,
authorizations, and clearances of governmental or regulatory authorities
and other persons or entities required of Purchaser to consummate the
transactions contemplated hereby, including any required approvals of the
insurance regulatory authorities in the States of Missouri and Illinois and
the Commonwealth of Kentucky.
5.2 HSR Filings. Seller will (a) take all actions necessary
to make the filings required of it or its Affiliates under the HSR Act with
respect to the transactions contemplated by this Agreement, (b) comply with
any request for additional information received by Seller or its Affiliates
from the Federal Trade Commission or Antitrust Division of the Department
of Justice pursuant to the HSR Act, (c) cooperate with Purchaser in
connection with Purchaser's filings under the HSR Act, and (d) request
early termination of the applicable waiting period.
5.3 Investigation by Purchaser. Seller will provide, and
will cause each of the Companies to provide, Purchaser and its
representatives and agents with reasonable access, upon reasonable prior
notice and during normal business hours, to all facilities, officers,
employees, agents, assets or properties, and books and records of the
Companies and will furnish Purchaser and such representatives and agents
with all such information and data in their possession concerning the
business, operations, and affairs
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of the Companies as Purchaser or such representatives and agents may
reasonably request. Records and other documents that are subject to any
attorney-client or similar privilege that protects such documents and
records from a discovery or similar disclosure request from third parties
shall not be required to be disclosed if such disclosure would make such
privilege unavailable.
5.4 Conduct of Business. Except as otherwise expressly
permitted in this Agreement, Seller will cause each of the Companies to
conduct its business only in the ordinary course and consistent with past
practice. Without limiting the generality of the foregoing and except as
expressly provided herein:
(a) Seller will use, and will cause the Companies to use, all
commercially reasonable efforts to (i) preserve intact the present business
organization, reputation, and policyholder relations of each of the
Companies, (ii) keep available the services of the present officers,
directors, and agents of each of the Companies, (iii) maintain in full
force and effect all Contracts referenced in Section 3.17 hereof, except
those Contracts which expire in accordance with their terms or are
terminated by each of the Companies in the ordinary course of business,
(iv) maintain all licenses (including licenses to transact insurance
business), qualifications, and authorizations of each of the Companies to
do business in each jurisdiction in which it is so licensed, qualified, or
authorized, and (v) maintain each rating classification assigned to the
Company by all rating agencies as of the date hereof.
(b) Seller will cause each of the Companies to maintain all
assets and properties of each of the Companies in good working order and
condition (ordinary wear and tear excepted).
(c) Seller will cause each of the Companies to maintain its
books and records in the usual manner and consistent with past practice and
will not permit a material change in any underwriting, investment,
actuarial, financial reporting, Tax, or accounting practice or policy of
the Companies or in any assumption underlying such a practice or policy, or
in any method of calculating any bad debt, contingency, insurance, or other
reserve for financial reporting purposes or for other accounting purposes
(including any practice, policy, assumption, or method relating to or
affecting the determination of each of the Companies' insurance in force,
premium or investment income, reserves or other similar amounts, or
operating ratios with respect to expenses, losses or lapses).
(d) Seller will cause each of the Companies (i) to prepare
the Tax Returns required to be filed prior to Closing and (ii) to pay all
Taxes as provided under Section 12.1 hereof.
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(e) Seller shall elect under proposed Treasury Regulation
Section 1.1502-95 to apportion the full amount of any prior consolidated
limitation under Section 382 of the Code applicable to either of the
Companies to the appropriate Company.
(f) Seller will cause all statutory reserves and other
similar amounts with respect to losses, benefits, claims, and expenses in
respect of each of the Companies' insurance business to be (i) determined
in accordance with SAP and generally accepted actuarial assumptions, (ii)
determined in accordance with the benefits specified in the related
insurance or reinsurance Contracts in all material respects, (iii)
calculated, established and reflected on a basis consistent, in all
material respects, with those reserves and other similar amounts and
reserving methods followed by each of the Companies at December 31, 1995,
(iv) determined in conformity with the requirements of the insurance laws
of each applicable jurisdiction in all material respects, and (v) adequate,
in all material respects, based upon then-current information and
assumptions concerning investment income, mortality and morbidity
experience, persistency, and expenses, to cover the total amount of all
matured and reasonably anticipated unmatured benefits, dividends, losses,
claims, expenses, and other liabilities of each of the Companies under all
insurance or reinsurance Contracts which either of the Companies has or
will have any liability. Seller will cause each of the Companies to
continue to own assets and properties that qualify as legal reserve assets
under all applicable insurance laws in an amount at least equal to all of
the respective Companies' required reserves and other similar amounts.
(g) Seller will cause each of the Companies to use all
commercially reasonable efforts to maintain in full force and effect
substantially the same levels of coverage as the insurance afforded under
the insurance Contracts described in Section 3.20 hereof.
(h) Subject to Section 5.4(i), Seller will cause each of the
Companies to refrain from entering into any reinsurance, coinsurance, or
other similar Contract, whether as reinsurer or reinsured, including
without limitation any surplus relief or financial reinsurance contract.
(i) Notwithstanding any provision of Section 5.4 of this
Agreement to the contrary, Seller may arrange for the sale or reinsurance
of the accident and health insurance policies written by the Companies,
subject to Purchaser's prior written approval of the terms of such sale or
reinsurance, which approval shall not be unreasonably withheld.
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(j) Seller will cause each of the Companies to continue to
comply, in all material respects, with all laws applicable to the business,
operations, or affairs of each of the Companies.
5.5 No Charter Amendments. Seller will cause each of the
Companies to refrain from amending its articles of incorporation or bylaws
and from taking any action with respect to any such amendment.
5.6 No Issuance of Securities. Seller will cause each of the
Companies to refrain from authorizing or issuing any shares of its capital
stock (or any interest therein) or entering into any Contract or granting
any option, warrant, or right calling for the authorization or issuance of
any shares of capital stock of either of the Companies (or any interest
therein), or creating or issuing any securities directly or indirectly
convertible into or exchangeable for any such shares (or any interest
therein), or issuing any options, warrants, or rights to purchase any such
convertible securities (or any interest therein).
5.7 Dividends. (a) Seller will use commercially reasonable
efforts to cause each of the Companies to declare and pay, on or before the
Closing Date, a dividend of the property listed on Schedule 5.7 to Seller.
If the Companies are not permitted to declare such dividends prior to
Closing, Seller will purchase the properties listed on Schedule 5.7 from
the Companies prior to the Closing for a purchase price equal to the value
of such properties in the statutory financial statements of the Companies.
Seller will cause each of the Companies to refrain from (i) declaring any
dividends except as expressly provided in this Section 5.7 and
(ii) directly or indirectly redeeming or purchasing any of its capital
stock or any interest in or right to acquire any such stock.
(b) From the date hereof through the date on which Purchaser
or its successors or assigns shall no longer be entitled to indemnification
under Article X hereof, Seller shall not declare, pay or make any dividend,
distribution or other payment with respect to shares of its capital stock
or any other security or indebtedness for borrowed money of Seller or
redeem or repurchase any shares of its capital stock or any other security
or indebtedness for borrowed money of Seller which would reduce Seller's
capital and surplus below $60.0 million as determined in accordance with
Section 3.1(b), unless Seller shall have delivered to Purchaser an (a)
assumption agreement (the "Assumption Agreement"), between Seller and
I.C.H., in form and substance reasonably acceptable to Purchaser and duly
executed by I.C.H., which Assumption Agreement (i) provides for the
assignment to I.C.H. of the obligations of Seller to Purchaser under this
Agreement, including without limitation all of Seller's
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obligations under Article X hereof, and (ii) provides for the obligations
of Seller to Purchaser so assigned to constitute an administrative expense
of I.C.H.'s estate in the Chapter 11 Proceeding pursuant to section 503(b)
of the Bankruptcy Code entitled to priority under section 507(a)(1) of the
Bankruptcy Code and (b) an order of the Bankruptcy Court approving the
Assumption Agreement, in form and substance reasonably acceptable to
Purchaser, which order shall have been entered for a period of ten days
prior to the effective date of such assignment and the operation of which
shall not have been restrained, enjoined, suspended or otherwise stayed.
5.8 Resignations of Directors and Officers. Seller will
cause such directors and officers of each of the Companies as are
designated by Purchaser at least two days prior to the Closing Date to
tender their resignations effective at, and subject to, the Closing.
5.9 Books and Records. On the Closing Date, Seller will
deliver to Purchaser or will make available to Purchaser all books and
records of the Companies in the possession of Seller or Southwestern
Financial Corporation. Seller will, and will cause its Affiliates (other
than the Companies) to deliver, any books and records of the Companies if
at any time after the Closing, Seller or its Affiliates (other than the
Companies) discovers any such books or records.
5.10 No Negotiation, etc. Except for the transaction
contemplated by Section 5.4(h), Seller will refrain and will cause each
Affiliate and any other person or entity acting for or on behalf of Seller
or its Affiliates to refrain from taking, directly or indirectly, any
action (a) to seek or encourage any offer or proposal from any person or
entity to acquire all or substantially all of the assets or properties or
shares of capital stock or other securities of either of the Companies (or
any interest in any of the foregoing), (b) to merge, consolidate, or
combine either of the Companies with any other corporation, or to permit
any other corporation to merge, consolidate, or combine into either of the
Companies, (c) to liquidate, dissolve, or reorganize either of the
Companies in any manner, (d) to acquire or transfer any assets or
properties of either of the Companies (or any interest in any of the
foregoing), (e) to reach any agreement or understanding (whether or not
such agreement or understanding is absolute, revocable, contingent, or
conditional) for, or otherwise to attempt to consummate any such
acquisition, transfer, merger, consolidation, combination, or
reorganization, or (f) to furnish or cause to be furnished any information
with respect to either of the Companies to any person or entity (other than
Purchaser and its Affiliates, employees, and agents), in each case except
to the extent otherwise required by applicable law.
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If Seller or any Affiliate of Seller receives, directly or indirectly, from
any person or entity (other than Purchaser) any offer, proposal, or
informational request that is subject to this Section 5.10, Seller will
promptly advise such person or entity, by written notice, of the terms of
this Section 5.10 and will promptly deliver a copy of such notice to
Purchaser.
5.11 Financial Statements and Reports.
(a) As promptly as practicable, Seller will deliver to
Purchaser true and complete copies of the Quarterly Statements filed by
each of the Companies for each calendar quarter ending after December 31,
1995. The Quarterly Statements will (i) comply in all material respects
with all applicable laws when so filed, (ii) be prepared in accordance with
SAP, (iii) be true and complete in all material respects, and (iv) will
present fairly in all material respects the financial position of the
Companies as of the respective dates thereof and the related summary of
operations and changes in capital and surplus and in cash flows of the
Companies for and during the respective periods covered thereby.
(b) Seller will deliver to Purchaser true and complete copies
of such other material financial statements, reports, or analyses as may be
prepared or received by Seller or any Affiliate of Seller and as relate to
the business, operations, or affairs of either of the Companies.
(c) Seller will cooperate and provide Purchaser or its
representatives with access to the books and records of the Companies for
the preparation of financial statements to be prepared in accordance with
generally accepted accounting principles for the year ended December 31,
1995 as well as any calendar quarter until Closing. The cost of the
preparation of such statements shall be borne by Purchaser.
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5.12 Investments.
Seller will cause the Company to invest its future cash flow, any
cash from matured and maturing investments, any cash proceeds from the sale
of assets or properties, and any cash funds currently held by either of the
Companies exclusively in United States Treasury obligations with a maturity
of less than one (1) year except as otherwise required by law or except as
required to provide cash (in the ordinary course of business and consistent
with past practice) to meet such entity's reasonably anticipated current
obligations. Seller will use commercially reasonable efforts to ensure
that the book values determined in accordance with SAP of the assets and
properties of the Companies that are classified as nonadmitted under SAP do
not at any time exceed by more than $400,000 the book values determined in
accordance with SAP of the nonadmitted assets for the Companies as of
December 31, 1995. Notwithstanding the foregoing and except for sales
described in Section 12.2, Seller will cause each of the Companies to
refrain from any investment transactions without the approval of Purchaser.
5.13 No Disposal of Property. Seller will cause each of the
Companies to refrain from (a) disposing of any assets or properties of the
Companies and from permitting any of such assets or properties to be
subjected to any liens or encumbrances, except for Permitted Liens or to
the extent any such disposition or any such lien is made or incurred in the
ordinary course of business and consistent with past practice, (b) selling
any material part of its insurance Contracts in force, operations, or
business to any third party, (c) entering into any Contracts obligating
either of the Companies to administer the operations of any person or
entity other than the Companies, and (d) entering into any Contracts
permitting any person or entity other than the Companies to administer the
operations of either of the Companies.
5.14 No Breach or Default. Seller will cause each of the
Companies to refrain from violating, breaching, or defaulting, and from
taking or failing to take any action that (with or without notice or lapse
of time or both) would constitute a violation, breach, or default, under
any term or provision of any Contract to which either of the Companies is a
party or by which any of their assets or properties is or may be bound,
except for such violations, breaches, defaults, actions, or failures that
individually or in the aggregate do not have and would not reasonably be
expected to have a Material Adverse Effect.
5.15 Indebtedness. Seller will cause the each of the
Companies to refrain from (a) creating, incurring, assuming, guaranteeing,
or otherwise becoming liable for any liability (except in the ordinary
course of business and consistent with
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past practice), (b) canceling, paying, agreeing to cancel or pay, or
otherwise providing for a complete or partial discharge, in each case in
advance of a scheduled payment date with respect to any monetary liability,
and (c) waiving any right to receive any direct or indirect payment or
other benefit under any liability owing to it.
5.16 No Acquisitions. Seller will cause each of the Companies
to refrain from (a) merging, consolidating, or otherwise combining or
agreeing to merge, consolidate, or otherwise combine with any other entity,
(b) acquiring or agreeing to acquire blocks of business or all or
substantially all assets or capital stock or other equity securities of any
other entity, or (c) otherwise acquiring or agreeing to acquire control or
ownership of any other entity.
5.17 Intercompany Liabilities and Affiliate Transactions.
(a) Except as otherwise expressly provided for in this
Agreement, neither Company will enter into any Contract or engage in any
transaction with Seller, any Affiliate of Seller (other than the Company),
Southwestern Financial Corporation, or any Affiliate of Southwestern
Financial Corporation. On or before the Closing, Seller will deliver to
Purchaser a list and description of all intercompany accounts and balances
payable or receivable, whether or not currently due, including without
limitation any outstanding balances relating to any Tax allocation Tax
sharing, Tax indemnity or similar agreement, between each Company, on the
one hand, and Seller, any other Affiliate of the Company, Southwestern
Financial Corporation, or any Affiliate of Southwestern Financial
Corporation, on the other hand, as of the most recent practicable date
prior to the Closing ("Preliminary Intercompany Balances"). Prior to the
Closing, all such Preliminary Intercompany Balances shall be paid by the
appropriate party and fully reconciled. As soon as practicable after the
Closing, and in any event within 30 days after the Closing, Seller and
Purchaser shall cooperate in good faith to finally determine all
intercompany accounts and balances between the Companies, on the one hand,
and Seller or any other Affiliate of the Companies, on the other hand, that
were not paid on or before the Closing and, upon such determination, all
such accounts and balances shall be finally paid and reconciled. Except as
otherwise specifically provided herein or as otherwise agreed to by
Purchaser and Seller prior to the Closing, on and effective as of the
Closing Date Seller will terminate and will cause its Affiliates to
terminate each Contract between one or more of the Companies, on the one
hand, and Seller and any other Affiliate of one or more of the Companies,
on the other hand, except that all such Contracts shall be deemed to
survive the Closing to the extent necessary to preserve the parties' rights
to final reconciliation and payment
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of accounts and balances arising or accruing thereunder through the Closing
Date and, upon such reconciliation and payment shall have no further
effect; provided, however, that intercompany accounts and balances related
to Taxes shall be subject to and reconciled in accordance with Section
12.1(e) hereof. Subject to Section 12.1(e) hereof, on the Closing Date,
Seller shall execute an agreement (in a form reasonably satisfactory to
Purchaser) canceling any applicable Tax sharing, Tax allocation, Tax
indemnity or other similar agreement with respect to each of the Companies
and releasing the Companies from any further liability with respect to
Taxes of any such consolidated, combined, unitary or affiliated group.
(b) Except as disclosed in Section 5.17(b) of the Disclosure
Schedule, Seller shall execute, prior to or on the Closing Date, an
agreement cancelling any rights or obligations under a Tax sharing, Tax
allocation, Tax indemnity or other similar agreement of each Affiliate
which is or has been included as a member of a consolidated, combined,
unitary or affiliated group filing Seller Consolidated Returns.
(c) Seller shall use commercially reasonable efforts to cause
Southwestern Financial Services Corporation to grant to the Companies in
perpetuity a non-exclusive royalty free license (the "Required License") to
use modifications and improvements to computer software that were developed
by Facilities Management Installation, Inc. or any Affiliate of Facilities
Management Installation, Inc. that are used in the conduct of the
Companies' business as administered under the respective Employee Leasing
and Data Processing Capacity Agreements between each of the Companies and
Southwestern Financial Services Corporation ("Data Processing Agreements").
In addition, the Seller will use commercially reasonable efforts to make
available to the Companies the transition services under section 10.2(d) of
the Data Processing Agreements after Closing in accordance with the Data
Processing Agreements ("Transition Services").
5.18 Indemnity Liability. (a) The obligations of Seller under
this Agreement will not be transferred to I.C.H. pursuant to the provisions
of Section 12.15, unless such obligations are made to constitute
administrative expenses under the Chapter 11 Proceeding.
(b) Seller and its representatives will take all reasonable
steps to ensure that any federal income Taxes assessed pursuant to the
expedited audit process under 11 U.S.C. Section 505 for taxable years 1990-
1995 requested by I.C.H., will include federal income Taxes attributable to
the Affiliated Group, including federal income Taxes attributable to each
of the Companies, and any such assessed Taxes will be paid pursuant to the
Chapter 11 Proceeding
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in accordance with the settlement reached by I.C.H. and other members of
the Affiliated Group with the IRS with respect to federal income Taxes for
taxable years 1990-1995 as approved by the Bankruptcy court in the Chapter
11 Proceeding. Seller and its representatives will take all reasonable
steps to ensure that such settlement shall relieve each of the Companies
from any liability for federal income Taxes for taxable years 1990-1995.
5.19 Environmental Investigation.
Between the date hereof and May 31, 1996:
(a) Seller shall identify, provide and otherwise make
available to Purchaser and its representatives any and all reports,
records, data, site assessments and any other documents in the possession
of or known to exist by the Seller, regarding the environmental conditions
of the Properties. Seller shall provide access to all Properties and shall
make available to Purchaser and use commercially reasonable efforts to
ensure the cooperation of all personnel currently operating, managing
and/or occupying any of the Properties with knowledge of activities on said
Properties, including knowledge of any environmental conditions on or
affecting said Properties. Seller shall not object to and shall cooperate
as requested by Purchaser in any inquiries to federal, state or local
governmental agencies concerning such Properties.
(b) Purchaser shall have the right to conduct an
environmental due diligence investigation as to any and all of the
Properties at its own expense (which investigation may include, but not be
limited to, access to the Properties for sampling and collection of
information which Purchaser determines in its sole discretion are
necessary).
(c) Seller shall provide or otherwise make available to
Purchaser any and all existing reports, records, data, site assessments and
any other documents known to Seller regarding the environmental condition
of each Property and to which Seller has access.
(d) Purchaser shall determine the costs associated with
correcting any environmental problems on the Properties listed on
Section 5.19 of the Disclosure Schedule. If the aggregate costs to correct
the problems for the Properties exceed $600,000, Purchaser may terminate
this Agreement pursuant to Section 11.1(c).
5.20 Notice and Cure. Seller will notify Purchaser promptly
in writing of, and contemporaneously will provide Purchaser with true and
complete copies of any and all information or documents
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relating to, and will use all commercially reasonable efforts to cure
before the Closing, any event, transaction, or circumstance occurring after
the date of this Agreement that causes or will cause any covenant or
agreement of Seller under this Agreement to be breached, or that renders or
will render untrue any representation or warranty of Seller contained in
this Agreement as if the same were made on or as of the date of such event,
transaction, or circumstance. Seller also will use all commercially
reasonable efforts to cure, before the Closing, any violation or breach of
any representation, warranty, covenant, or agreement made by it in this
Agreement, whether occurring or arising before or after the date of this
Agreement. Purchaser will notify Seller promptly in writing of any event,
transaction, or circumstance of which Purchaser becomes aware and which
would require Seller to notify Purchaser and/or take such other action as
required by this Section 5.20; provided, however, that Purchaser's
obligation under this Section 5.20 shall not apply with respect to any
event, transaction or circumstance of which Purchaser has been notified by
Seller pursuant to this Section 5.20 or otherwise has actual knowledge.
5.21 Disclosure Schedule. The Seller shall deliver the final
Disclosure Schedule ("Final Disclosure Schedule") to Purchaser no later
than five business days after the date of this Agreement.
ARTICLE VI
COVENANTS OF PURCHASER
Purchaser covenants and agrees with Seller that, at all times
before the earlier of the Closing or the termination of this Agreement in
accordance with ARTICLE XI hereof, Purchaser will comply with all covenants
and provisions of this ARTICLE VI, except to the extent (i) Seller may
otherwise consent in writing, (ii) otherwise required by applicable law, or
(iii) otherwise expressly required or permitted by this Agreement.
6.1 Contract and Regulatory Approvals. Purchaser will
(a) take all commercially reasonable steps necessary or desirable, and
proceed diligently and in good faith and use commercially reasonable
efforts, to obtain as promptly as practicable (i) all approvals and
consents required of any person or entity under all Contracts to which
Purchaser is a party to consummate the transactions contemplated hereby,
including without limitation all consents set forth in Section 6.1 of the
Disclosure Schedule, and (ii) all approvals, authorizations, and clearances
of governmental and regulatory authorities required of Purchaser to
consummate the transactions contemplated hereby, including any required
approvals of the insurance regulatory authorities in the States of
Missouri,
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Kentucky and Illinois, (b) provide such information and communications to
such governmental and regulatory authorities as such authorities may
reasonably request, and (c) cooperate with Seller in obtaining, as promptly
as practicable, all approvals, authorizations, and clearances of
governmental or regulatory authorities and other persons or entities
required of Seller to consummate the transactions contemplated hereby.
6.2 HSR Filings. Purchaser will (a) take all actions
necessary to make the filings required of it or its Affiliates under the
HSR Act with respect to the transactions contemplated by this Agreement,
(b) comply with any request for additional information received by
Purchaser or its Affiliates from the Federal Trade Commission or Antitrust
Division of the Department of Justice pursuant to the HSR Act, (c)
cooperate with Seller in connection with Seller's filings under the HSR
Act, and (d) request early termination of the applicable waiting period.
6.3 Notice and Cure. Purchaser will notify Seller promptly
in writing of, and contemporaneously will provide Seller with true and
complete copies of any and all information or documents relating to, and
will use all commercially reasonable efforts to cure before the Closing,
any event, transaction, or circumstance occurring after the date of this
Agreement that causes or will cause any covenant or agreement of Purchaser
under this Agreement to be breached, or that renders or will render untrue
any representation or warranty of Purchaser contained in this Agreement as
if the same were made on or as of the date of such event, transaction, or
circumstance. Purchaser also will use all commercially reasonable efforts
to cure, before the Closing, any violation or breach of any representation,
warranty, covenant, or agreement made by it in this Agreement, whether
occurring or arising before or after the date of this Agreement. Seller
will notify Purchaser promptly in writing of any event, transaction, or
circumstance of which Seller becomes aware and which would require
Purchaser to notify Seller and/or take such other action as required by
this Section 6.3; provided, however, that Seller's obligation under this
Section 6.3 shall not apply with respect to any event, transaction or
circumstance of which Seller has been notified by Purchaser pursuant to
this Section 6.3 or otherwise has actual knowledge.
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6.4 Environmental Investigation. Purchaser will supply
Seller with the results of its investigation conducted between the date
hereof and Closing regarding environmental conditions for the Properties.
6.5 Approval of Purchaser's Board. Purchaser will seek
approval of this Agreement by its Board of Directors prior to April 15,
1996.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder are subject to the
fulfillment, at or before the Closing, of each of the following conditions
(all or any of which may be waived in whole or in part by Purchaser).
Seller shall use all commercially reasonable efforts to fulfill, at or
before the Closing, such of the following conditions (or portions thereof)
over which it has control.
7.1 Representations and Warranties. The representations and
warranties made by Seller in this Agreement, in the certificates delivered
by Seller pursuant to this Agreement, and in the Disclosure Schedule shall
be true in all material respects as of the Closing as though such
representations and warranties were made at and as of the Closing.
7.2 Performance. Seller shall have performed and complied
with, in all material respects, all agreements and covenants required by
this Agreement to be so performed or complied with by Seller at or before
the Closing.
7.3 Officer's Certificates. Seller shall have delivered to
Purchaser a certificate, dated the Closing Date and executed by an
executive officer of Seller, certifying as to the fulfillment by Seller of
the conditions set forth in Sections 7.1, 7.2, 7.5, 7.6, 7.7, and 7.8
hereof. In addition, Seller shall have delivered to Purchaser a
certificate, dated the Closing Date and executed by the secretary or any
assistant secretary of Seller, certifying (i) that Seller has duly and
validly taken all corporate or other action necessary to authorize its
execution and delivery of this Agreement and the performance of its
obligations under this Agreement and (ii) that the approval of the
Bankruptcy Court, referenced in Section 3.2 hereof, is still in full force
and effect.
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7.4 HSR Act Approval. All waiting periods applicable to this
Agreement and the transactions contemplated hereby under the HSR Act shall
have expired or been waived.
7.5 No Injunction. There shall not be in effect on the
Closing Date any writ, judgment, injunction, decree, or similar order of
any court or governmental authority restraining, enjoining, or otherwise
preventing consummation of any of the transactions contemplated by this
Agreement.
7.6 No Proceeding or Litigation. There shall not be
instituted, pending, or (to Purchaser's knowledge or Seller's knowledge)
threatened, any action, suit, investigation, or other proceeding in,
before, or by any court, governmental or regulatory authority, or other
person or entity to restrain, enjoin, or otherwise prevent consummation of
any of the transactions contemplated by this Agreement.
7.7 Contract and Regulatory Approvals. All approvals,
authorizations, and clearances contemplated by Sections 5.1 and 6.1(a)(ii)
or otherwise set forth in Section 6.1 of the Disclosure Schedule hereof and
necessary to permit Seller and Purchaser to perform their obligations under
this Agreement and to consummate the transactions contemplated hereby
(including, without limitation, any requisite action of the insurance
regulatory authorities in the States of Missouri, Kentucky and Illinois)
shall have been obtained and shall be in full force and effect.
7.8 No Adverse Change. There shall not have occurred since
December 31, 1995 any change in the business, licenses, insurance in force,
or condition (financial or otherwise) of either of the Companies, except
(i) as disclosed in Section 3.12 of the Disclosure Schedule or (ii) for
such changes that, individually or in the aggregate, do not have and would
not reasonably be expected to have a Material Adverse Effect.
7.9 Opinion of Counsel to Seller. Purchaser shall have
received an opinion from Winstead, Sechrest & Minick P.C., in form and
substance reasonably satisfactory to Purchaser.
7.10 Dividends. Prior to or upon Closing, the properties of
the Companies described on Schedule 5.7 hereto shall be dividended to
Seller or purchased by Seller in accordance with Section 5.7 hereof.
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7.11 Certificates of Compliance. Seller shall have delivered
to Purchaser certificates of compliance as of a recent date to the effect
that each of the Companies is duly licensed to transact insurance business
in, and is in compliance with the laws of, each jurisdiction in which each
of the Companies is licensed to transact insurance business.
7.12 Approval of Purchaser's Board of Directors. Purchaser's
Board of Directors must have approved this Agreement in its final form.
7.13 Computer Software Availability. Southwestern Financial
Services Corporation shall have granted to the Companies the Required
License and made available to the Companies Transition Services, in each
case as contemplated in Section 5.17(c).
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller hereunder are subject to the
fulfillment, at or before the Closing, of each of the following conditions
(all or any of which may be waived in whole or in part by Seller).
Purchaser will use all commercially reasonable efforts to fulfill, at or
before the Closing, such of the following conditions (or portions thereof)
over which it has control.
8.1 Representations and Warranties. The representations and
warranties made by Purchaser in this Agreement and in the certificates
delivered by Purchaser pursuant to this Agreement shall be true in all
material respects as of the Closing as though such representations and
warranties were made as of the Closing.
8.2 Performance. Purchaser shall have performed and complied
with, in all material respects, all agreements and covenants required by
this Agreement to be so performed or complied with by Purchaser at or
before the Closing.
8.3 Officer's Certificates. Purchaser shall have delivered
to Seller a certificate, dated the Closing Date and executed by an
executive officer of Purchaser, certifying as to the fulfillment of the
conditions set forth in Sections 8.1, 8.2, 8.5, 8.6, and 8.7 hereof. In
addition, Purchaser shall have delivered to Seller a certificate, dated the
Closing Date and executed by the secretary or any assistant secretary of
Purchaser, certifying that Purchaser has duly and validly taken all
corporate action necessary to authorize its execution and delivery of this
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Agreement and the performance of its obligations under this Agreement.
8.4 HSR Act Approval. All waiting periods applicable to this
Agreement and the transactions contemplated hereby under the HSR Act shall
have expired or been waived.
8.5 No Injunction. There shall not be in effect on the
Closing Date any writ, judgment, injunction, decree, or similar order of
any court or governmental authority restraining, enjoining, or otherwise
preventing consummation of any of the transactions contemplated by this
Agreement.
8.6 No Proceeding or Litigation. There shall not be
instituted, pending, or (to Purchaser's knowledge or Seller's knowledge)
threatened any action, suit, investigation, or other proceeding in, before,
or by any court, governmental or regulatory authority, or other person or
entity to restrain, enjoin, or otherwise prevent consummation of any of the
transactions contemplated by this Agreement.
8.7 Contract or Regulatory Approvals. All approvals,
authorizations, and clearances contemplated by Sections 5.1(b) and 6.1 or
otherwise set forth in Section 5.1 of the Disclosure Schedule hereof and
necessary to permit Seller and Purchaser to perform their obligations under
this Agreement and to consummate the transactions contemplated hereby
(including, without limitation, any requisite action of the insurance
regulatory authorities in the States of Missouri and Illinois and the
Commonwealth of Kentucky) shall have been obtained and shall be in full
force and effect.
8.8 Opinion of Counsel to Purchaser. Seller shall have
received an opinion from LeBoeuf, Lamb, Greene & MacRae, in form and
substance reasonably satisfactory to Seller.
8.9 Guaranty Agreement. Modern shall have executed and
delivered to Seller a guaranty agreement unconditionally guaranteeing the
payment of the promissory note delivered by Purchaser pursuant to Section
2.3(b)(i)(A) in accordance with the terms of such promissory note, in form
and substance reasonably satisfactory to Seller.
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ARTICLE IX
SURVIVAL OF PROVISIONS
9.1 Survival of Representations and Warranties.
(a) Subject to Section 9.2 hereof and ARTICLE X hereof, the
representations and warranties respectively made by Seller and Purchaser in
this Agreement, in the Disclosure Schedule, or in any certificate required
to be delivered pursuant to this Agreement will survive the Closing (i)
until the expiration of all applicable statutes of limitations (including
all periods of extension, whether automatic or permissive) in the case of
the representations and warranties of Seller set forth in Sections 3.4,
3.6, 3.13 and 3.16 hereof, and (ii) until June 30, 1997 in the case of all
other representations and warranties; and
(b) the covenants and agreements respectively made by Seller
or Purchaser in this Agreement, to the extent that, by their terms, they
are to be performed or complied with at or before the Closing, shall not
survive the Closing; and
(c) the covenants and agreements respectively made by Seller
or Purchaser in this Agreement, to the extent that, by their terms, they
are to be performed or complied with after the Closing, including without
limitation, the indemnification agreements set forth in Article X, shall
survive the Closing, and shall remain in full force and effect after the
Closing Date, until the expiration of all applicable statutes of
limitations (including without limitation, all periods of extension,
whether automatic or permissive) affecting any such covenant or agreement;
provided, however, that any such covenant or agreement that specifies a
term or period expiring before the expiration of all applicable statutes of
limitations will survive, and shall remain in full force and effect, for a
period of one hundred eighty (180) calendar days following the expiration
of such specified term or period.
9.2 Pursuit of Claims. Any breach of any representation,
warranty, covenant or agreement as to which a bona fide claim for
indemnification has not been asserted in accordance with ARTICLE X hereof
during the applicable survival period set forth in Section 9.1 hereof may
not be pursued beyond the expiration of such survival period and hereby is
irrevocably waived, except that if a claim for indemnification is made in
accordance with Article X hereof before the expiration of the applicable
survival period set forth in Section 9.1 hereof, then (notwithstanding such
survival period) the representation, warranty, covenant or agreement
applicable to such claim shall survive until, but only
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for purposes of, the resolution of such claim by final, nonappealable
judgment or by settlement.
9.3 Remedies Limitation. Purchaser and Seller agree that the
sole and exclusive remedy of any party hereto with respect to all claims
for Damages arising out of any actual or alleged breach of this Agreement
shall be as provided in Article X hereof, subject to limitations imposed
thereon by this Article IX.
ARTICLE X
INDEMNIFICATION
10.1 Indemnification by Seller.
(a) Subject to the provisions of Section 10.3 and ARTICLE IX
hereof, Seller will indemnify and hold harmless each of Purchaser and its
Affiliates from and against any and all Damages resulting from or relating
to:
(i) any breach by Seller of any representation, warranty,
covenant or agreement made by Seller in this Agreement, in the Disclosure
Schedule, or in any certificate required to be delivered pursuant to this
Agreement; and
(ii) (A) except to the extent covered by clause (B) of this
Section 10.1(a)(ii), any noncompliance by the Company with any
Environmental Law on or before the Closing Date; and (B) subject to
Section 10.1(b) 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 at, on, under,
or above any of the Properties; or (2) any generation, treatment, storage,
disposal, transportation, shipment offsite, or other management of a
Hazardous Material by the Company on or before the Closing (the
"Environmental Indemnity").
(b) (i) With respect to the indemnification provided in
Section 10.1(a)(ii)(B), it is the intention of Purchaser (also referred to
herein as "Indemnitee") and Seller to bring all Properties into compliance
with all Environmental Laws which are relevant to the extent required for
the utilization of each Property in its use as of Closing. In the case of
undeveloped Property, it is the intention to bring it into compliance with
all Environmental Laws relevant and required for it to be developed for use
consistent with its current zoning designation. In order to achieve this
compliance, Purchaser will, with the cooperation of Seller and its agents
and employees, investigate each Property
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and present an Environmental Claim Notice for each noncompliance to Seller,
as contemplated by Section 10.1(c).
(ii) In determining the appropriate remediation or other
action as may be required to bring a Property into compliance with
Environmental Laws, consideration shall be given to applicable
Environmental Laws then in effect that allows the Indemnitee a range of
options with significantly differing costs as to how to comply with such
Environmental Laws or discharge any duty under such Environmental Laws
(including formally adopted risk based cleanup standards for the presence
of Hazardous Materials in the soil, groundwater and other environmental
media) and such factors as (1) the magnitude and likelihood of future
Damages, (2) the potential disruption of, or the imposition of restrictions
on, the continued use of the Property in a manner consistent with its use
as of Closing, and (3) the likelihood of the occurrence or creation of an
imminent and substantial endangerment to human health or the environment,
in each case that may result in the event any of such options were
utilized. Notwithstanding the provisions of this Section 10.1, a cost or
expense shall not be deemed an indemnifiable Damage to the extent such cost
or expense, or any duty under Environmental Law to undertake the activity
giving rise to such costs or expenses, arises from any actual or proposed
demolition, remodeling, expansion, construction, replacement or similar
activity by or at the direction of Purchaser or any Affiliate of Purchaser
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 general land use type as of the
Closing, nor (3) necessary for the development of currently undeveloped
Property in accordance with zoning provisions in effect at the time of
Closing.
(c) (i) For a claim (an "Environmental Claim") to be a
Damage eligible for indemnification under Section 10.1(a)(ii)(B), prior to
incurring costs or expenses for which indemnification is to be sought, the
Indemnitee shall provide Seller with a notice (an "Environmental Claim
Notice") which notice shall include documentation showing in reasonable
detail the basis for Indemnitee's assertion that the proposed action and
the costs and expenses are required to bring the Property into compliance
with all relevant Environmental Law as contemplated by Section 10.1(b).
The 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 Indemnitee in
connection with establishing the Environmental Claim. Unless Seller
delivers written notice to the Indemnitee prior to the 15th day following
Seller's receipt of the
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Environmental Claim Notice that either (i) Seller disputes its liability to
indemnify the Indemnitee with respect to all or part of the Environmental
Claim, which notice shall specify in reasonable detail the basis therefor,
or (ii) Seller elects to purchase the Property, pursuant to
Section 10.1(d), Seller shall be deemed to have agreed to indemnify the
Indemnitee in respect to the Environmental Claim. Notwithstanding any
other provision of this Section 10.1(b)(i), Indemnitee shall not be
required to provide notice to Seller before incurring any costs or expenses
(1) pursuant to an order by a governmental agency 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.
(ii) Upon the payment by Seller to any Indemnitee for any
Damage arising out of an Environmental Claim, Seller shall be subrogated to
all rights and causes of action which such Indemnitee may have against any
third party relating to such Damage.
(iii)In the event Seller disputes an Environmental Claim,
Seller shall escrow funds equal to Purchaser's estimate of the cost for
resolving said Environmental Claim. The escrow fund must be held in an
interest bearing account by an escrow agent acceptable to Purchaser and
Seller until the resolution of the dispute. The party that is determined
to prevail in the dispute shall be entitled to receive all escrowed funds
and interest accrued thereon. Each disputed Environmental Claim shall have
a separate escrow account.
(d) Notwithstanding the provisions of this Section 10.1,
Seller shall not be liable to indemnify Purchaser or any of its Affiliates
for any Damages to the extent such Damages are reserved against or
otherwise expressly reflected as a liability in the Closing Balance Sheet.
(e) Notwithstanding any provision of this Section 10.1, upon
delivery to Seller of any Environmental Claim Notice, Seller shall have the
right and option, but not the obligation, to purchase (directly or
indirectly through any Affiliate of Seller) all of such Company's rights
and interest in the Property to which such Environmental Claim Notice
relates in exchange for a cash amount equal to the value attributable to
such Property by Purchaser in determining the Final Purchase Price;
provided that, as a condition to Seller's (or Seller's Affiliate) purchase
of any Property pursuant to this Section 10.1(d), Seller shall agree to
cure or remedy the environmental condition that has created or given rise
to Indemnitee's right to indemnification pursuant to Section 10.1(a)(ii)(B)
to the extent required under applicable Environmental Laws in effect at
such time and shall agree that the
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indemnity provided in Section 10.1(a)(ii) shall survive with respect to
such purchased Property. If Seller fails to notify the Company within 15
days after Seller's receipt of an Environmental Claim Notice that Seller
disputes its liability to indemnify Purchaser or elects to purchase such
Property, Seller's right under this Section 10.1(d) shall be waived with
respect to that Environmental Claim Notice and Seller shall be obligated to
provide indemnification, but such waiver shall not relieve an Indemnitee's
obligation to deliver an Environmental Claim Notice with respect to any
future costs or expense related to such Property.
10.2 Indemnification by Purchaser. Subject to the provisions
of Section 10.3 and ARTICLE IX hereof, Purchaser will indemnify and hold
harmless each of Seller and its Affiliates from and against any and all
Damages resulting from or relating to any breach by Purchaser of any
representation, warranty, covenant, or agreement made by Purchaser in this
Agreement or in any certificate required to be delivered pursuant to this
Agreement.
10.3 Indemnification Procedures. Subject to Section 10.1(c):
(a) If an Indemnitee becomes aware of any matter that it
believes is indemnifiable pursuant to Section 10.1 or 10.2 hereof and such
matter involves (i) any claim made against the Indemnitee by any person or
entity other than Purchaser or Seller or (ii) the commencement of any
action, suit, investigation, arbitration, or similar proceeding against the
Indemnitee by any person or entity other than Purchaser or Seller, the
Indemnitee will give the Indemnifying Party prompt written notice of such
claim or the commencement of such action, suit, investigation, arbitration,
or similar proceeding, which notice must (A) provide (with reasonable
specificity) the basis on which indemnification is being asserted, (B) set
forth the actual or good-faith estimated amount of Damages for which
indemnification is being asserted, if known, and (C) be accompanied by
copies of all relevant pleadings, demands, and other papers served on the
Indemnitee; provided, however, that the Indemnitees' failure to provide the
Indemnifying Party with such notice shall not relieve the Indemnifying
Party of its obligation under this Article X except to the extent that such
Indemnifying Party's ability to defend against such claim has been
prejudice as a result of such failure.
(b) The Indemnifying Party will have a period of 10 days
after the delivery of each notice required by Section 10.3(a) hereof during
which to respond to such notice. If the Indemnifying Party elects to
defend the claim described in such notice or does not respond within such
10-day period, the Indemnifying Party will be obligated to compromise or
defend (and will control the defense of) such claim, at its own expense and
by
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counsel chosen by the Indemnifying Party. The Indemnitee will cooperate
fully with the Indemnifying Party and counsel for the Indemnifying Party in
the defense against any such claim, and the Indemnitee will have the right
to participate at its own expense in the defense of any such claim. If the
Indemnifying Party responds within such 10-day period and elects not to
defend such claim, the Indemnitee will be free to compromise or defend (and
control the defense of) such claim and to pursue such remedies as may be
available to the Indemnitee under applicable law.
(c) Any compromise or settlement of any claim (whether
defended by the Indemnitee or by the Indemnifying Party) will require the
prior written consent of the Indemnitee and the Indemnifying Party (which
consent will not be unreasonably withheld).
(d) If an Indemnitee becomes aware of any matter that it
believes is indemnifiable pursuant to Section 10.1 or 10.2 hereof and such
matter involves a claim made by Purchaser or Seller, the Indemnitee will
give the Indemnifying Party prompt written notice of such claim, which
notice must (i) provide (with reasonable specificity) the bases for which
indemnification is being asserted, and (ii) set forth the actual or good-
faith estimated amount of Damages for which indemnification is being
asserted. The Indemnifying Party will have a period of 10 days after the
delivery of each notice required by this Section 10.3(d) during which to
respond to such notice. If the Indemnifying Party accepts (in writing)
full responsibility for the claim described in such notice or does not
respond within such 10-day period, the Indemnifying Party will pay upon
demand to the Indemnitee the actual or estimated amount of Damages
reflected in such notice. If the Indemnifying Party disputes such claim,
the Indemnifying Party and the Indemnitee agree to proceed in good faith to
negotiate a resolution of such dispute. If all such disputes are not
resolved through negotiations within 10 days after such negotiations begin
or if such negotiations are not initiated within 10 days after notice is
given, either the Indemnifying Party or the Indemnitee may initiate
litigation to resolve such disputes.
10.4 Treatment of Indemnification Payments. Seller and
Purchaser agree that any payment made under ARTICLE X hereof will be
treated by the parties on their tax returns as an adjustment to the
aggregate consideration for the Shares. If, notwithstanding such treatment
by the parties, any indemnity payment is determined to be taxable (i) to
Purchaser or either of the Companies by any taxing authority, Seller shall
indemnify Purchaser and the Companies for any actual increases in Taxes
payable by Purchaser or the Companies by reason of the receipt or accrual
of such indemnity payment (including any payments under this
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Section 10.4), or (ii) to Seller by any taxing authority, Purchaser shall
indemnify Seller for any actual increases in Taxes payable by Seller by
reason of the receipt or accrual of such indemnity payment (including any
payments under this Section 10.4.
10.5 Claims Limitation. Notwithstanding the foregoing
provisions of this Article X:
(a) Neither Seller nor Purchaser shall be liable to the other
party for indemnification under this Article X for consequential or
punitive damages, provided, however, that if Seller, Purchaser or the
Companies must pay punitive or consequential damages to a third party and
the payment of such damages is indemnifiable under this Agreement, then
Seller or Purchaser, as the case may be, shall provide full indemnification
for the consequential of punitive damages.
(b) Seller shall have no liability for indemnification for
any Damages under Section 10.1(a) hereof, except for Damages resulting from
or relating to any misrepresentation or breach of warranty contained in
Sections 3.4, 3.6 or 3.12, until and unless the cumulative total of such
Damages exceeds in the aggregate $100,000, it being understood that if such
threshold for Damages is reached, Seller shall be liable to Purchaser for
all Damages, provided, however, that the limitations of this Section
10.5(ii) shall not apply to any Damages resulting from Seller's willful
misrepresentations or breaches of covenants or agreements made as a part of
or contained in this Agreement;
(c) An Indemnifying Party shall not be liable for
indemnification under this Article X from any Damages resulting from or
relating to a breach of any representation, warranty, covenant or
agreement, if a senior officer of the Indemnitee had actual knowledge of
such breach on or prior to the Closing and proceeded with the Closing;
(d) If an Indemnitee recovers from any third party (including
insurers) all or any part of any amount previously paid to it by an
Indemnifying Party pursuant to Section 10.1. 10.2 or 10.6 hereof, such
Indemnitee will promptly pay over to the Indemnifying Party the amount so
recovered (after deducting therefrom the full amount of the expenses
incurred by it in procuring such recovery), but not in excess of any amount
previously so paid by the Indemnifying Party;
(e) The amount constituting the claim for which indemnification
may be made pursuant to Section 10.1. 10.2 or 10.6 hereof shall first be
determined, and such amount shall be reduced by the present value (using a
10% discount rate) of the Tax savings which the Indemnitee reasonably
determines will be
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actually realized from any loss, deduction or credit which is allowable
with respect to the indemnified Damage;
(f) the aggregate amount which Seller may be required to pay for
indemnification pursuant to Section 10.1 shall not exceed the Final
Purchase Price.
10.6 Tax Indemnification.
(a) Seller will be responsible for, will pay or cause to be
paid, and will indemnify and hold harmless Purchaser and each of the
Companies from and against, any and all Damages for or in respect of each
of the following:
(i) any and all Taxes of each of the Companies (or any
predecessor) with respect to any taxable period (or portions
thereof) ending on or before the Closing Date (including without
limitation any liability for Taxes arising from (A) the dividends
described in Section 5.7 hereof and (B) sales of certain assets
described in Section 12.2 hereof);
(ii) Any and all Taxes of any member of an affiliated,
consolidated, combined or unitary group (other than the Companies)
of which either of the Companies (or any predecessor) is or was a
member on or before the Closing Date by reason of the liability of
either of the Companies pursuant to Treasury Regulation
Section 1.1502-6(a) or any analogous or similar state, local or
foreign law; and
(iii) any breach by Seller of any representation, warranty,
covenant or agreement contained in Section 3.13, Section 5.17,
Section 5.18, Section 10.6, or Section 12.1 hereof; and
(iv) Subject to Section 12.1(e), Seller shall be responsible
for, shall pay or cause to be paid, and shall indemnify and hold
harmless Purchaser and each of the Companies from and against any
liability or damages arising under any Tax sharing, Tax indemnity,
Tax allocation or other similar agreement to which either of the
Companies, any predecessor to either of the Companies or any
transferor to either of the Companies is a party or is obligated
thereunder, in either case on or before the Closing Date; and
(v) any liability of Seller as a result of transferee
liability arising from the purchase of the Shares;
provided, however, that Seller shall not be liable for or obligated to
indemnify Purchaser or the Companies for any Damages or Taxes to the
extent: (A) Purchaser is obligated to indemnify
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Seller for such taxes pursuant to Section 10.6(b), (B) such Taxes are taken
into account as a liability or otherwise specifically reserved against in
the Closing Balance Sheet and not paid by Purchaser pursuant to Section
12.1(e), or (C) such Taxes arise as a result of the business, affairs,
operations, transactions or actions or inactions of Purchaser or either of
the Companies after the Closing, whether on that portion of the Closing
Date after Closing or at any time thereafter; provided that this clause (C)
shall not apply by reason of either of the Companies performing any
obligation, or exercising or forebearing the exercise of any right, in good
faith, under this Agreement.
(b) Purchaser agrees to pay, and to indemnify Seller in
respect of, and hold Seller harmless from and against, any and all Damages
for or in respect of Taxes incurred by, imposed upon or assessed against
Seller or any Affiliate of Seller (other than either Company) as a result
of or relating to any taxable period of either Company ending after the
Closing Date.
(c) The Companies will promptly notify Seller of the
commencement of any claim, audit, examination, or other proposed change or
adjustment by any taxing authority concerning any Taxes or other Damages
covered by Section 10.6 hereof ("Tax Claim"). Except in the event that
Southwestern Financial Corporation elects to control an audit of Modern
pursuant to Section 6.4 of Purchase Agreement among I.C.H., SWL Holding
Corporation, Care Financial Corporation, Facilities Management
Installation, Inc. and Southwestern Financial Corporation, Southwestern
Financial Services Corporation, and PennCorp Financial Group, Inc. dated
December 1, 1995, Modern shall control the defense and settlement of any
Tax audit or administrative or court proceeding relating to taxable years
1990-1991, unless (i) Seller is still owned by I.C.H. or (ii) Seller
assigns its obligations under this Agreement to I.C.H. in accordance with
Section 12.15, in either case I.C.H. or Seller shall control the Tax audit
or administrative or court proceeding. For all other taxable periods of
the Companies beginning after 1991 and ending on or before the Closing
Date, I.C.H., as the common parent of an Affiliated Group, shall control
the defense and settlement of any Tax audit or administrative or court
proceeding, provided, however, that if the results of any such Tax audit or
administrative or court proceeding could reasonably be expected to be
material to Purchaser or the Companies, then Purchaser may, at its expense,
participate in any such contest or proceeding and neither party shall
compromise or settle such contest or refund suit without the consent of the
other. Seller shall promptly notify the Purchaser if neither Seller nor
I.C.H. will participate in the defense or settlement of any Tax audit or
administrative or court proceeding and Purchaser thereupon shall be
permitted to defend and settle such Tax audit or proceeding. Seller will
promptly notify the Purchaser of the
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commencement of any claim, audit, examination, or other proposed change or
adjustment by any taxing authority which may affect the liability of either
of the Companies for Taxes and Seller shall keep the Companies duly
informed of the progress thereof.
(d) Any claim for indemnity hereunder may be made at any time
prior to sixty days after the expiration of the applicable Tax statute of
limitations with respect to the relevant taxable period (including all
periods of extension, whether automatic or permissive).
ARTICLE XI
TERMINATION
11.1 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing by written agreement of
Seller and Purchaser; or
(b) at any time after June 30, 1996, by Seller or Purchaser
if the transactions contemplated by this Agreement have not been
consummated on or before such date and such failure to consummate is not
caused by a breach of this Agreement by the party electing to terminate
pursuant to this Section 11.1(b);
(c) at any time before the Closing if pursuant to
Section 5.19(e), Purchaser determines that environmental conditions at the
Properties involve damages, in the aggregate, that would cost more than
$600,000 to correct, Purchaser shall have the right to terminate this
Agreement; or
(d) by Purchaser or Seller at any time after April 15, 1996
and before Closing, if Purchaser's Board of Directors shall not have
approved this Agreement and the performance by Purchaser of its obligations
under this Agreement (provided that Purchaser shall deliver to Seller a
certificate of the Secretary of Purchaser certifying as to the adoption and
effectiveness of resolutions of Purchaser's Board of Directors to such
effect).
(e) by the Purchaser if the Final Disclosure Schedule
discloses any event, trend, condition, Contract, liability, action, suit,
proceeding, claim, circumstance or fact or other matter of any character
that was not disclosed in the Disclosure Schedule delivered to Purchaser on
the date hereof (provided that the reference to leases in Section 3.17(f)
of the Disclosure Schedule delivered to Purchaser on the date hereof shall
not be deemed to constitute disclosure of the terms of such leases for
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purposes of this Section 11.1(e)) and is not acceptable to Purchaser, in
its sole discretion, and Purchaser gives notice thereof to Seller within
five business days after receipt by the Purchaser of the Final Disclosure
Schedule, and such non-acceptable, event, trend, condition, contract,
liability, action, suit, proceeding, claim, circumstance or fact or matter
has not been cured or eliminated to Purchaser's satisfaction in its sole
discretion within 30 days after notice thereof has been given to Seller.
11.2 Effect of Termination. If this Agreement is validly
terminated pursuant to Section 11.1 hereof, this Agreement will become null
and void except that (a) the provisions of this Section 11.2 hereof will
continue to apply following any such termination, and (b) no party hereto
will be relieved of any liability for Damages that such party may have to
the other parties by reason of such party's breach of this Agreement (or
any representation, warranty, covenant, or agreement included herein).
ARTICLE XII
MISCELLANEOUS
12.1 Tax Matters.
(a) Seller Tax Returns. Seller will prepare and file, or
cause to be prepared and filed, all appropriate and necessary federal
income Tax Returns or any other Tax Returns which are required to be filed
for a period beginning on January 1, 1996 and ending on the Closing Date,
which include, on a consolidated or any other reporting basis, the results
of operations of each of the Companies for all taxable periods ending on or
before the Closing Date, including the period beginning January 1, 1996,
through the Closing Date ("Interim Tax Return") (collectively, the "Seller
Tax Returns"). Seller will timely pay or discharge, or cause to be paid or
discharged, any and all Taxes for which each of the Companies may be held
liable as a result of Seller Tax Returns, unless such Taxes are being
contested in good faith; provided, however, nothing in this Section 12.1(a)
shall be construed to limit Seller's or Purchaser's indemnification rights
set forth in Article X hereof. Seller will deliver to Purchaser a copy of
such Interim Tax Return specifying the amount of Taxes including federal
income Taxes attributable to the operations of each of the Companies,
Seller shall permit Purchaser to review and comment on, prior to filing,
any such Tax Return. From and after the date hereof, Seller shall not, and
shall not permit any of its Affiliates to, amend any Tax Return previously
filed, which includes information relating to one or more of each of the
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Companies, unless prior written notice thereof has been delivered to
Purchaser.
(b) Purchaser Tax Returns. Purchaser will prepare and after
consulting with and obtaining written consent from Seller (which consent
shall not be unreasonably withheld) file, or cause to be prepared and
filed, all appropriate and necessary returns, reports and estimates for (a)
all Taxes, other than federal income Taxes and Taxes otherwise reflected on
Seller Tax Returns, of each Company which relate to taxable periods that
include the Closing Date and (b) all federal income Taxes of each Company
which relate to taxable periods ending subsequent to the Closing Date,
including the period from and after the Closing Date through December 31,
1996 (collectively, the "Purchaser Tax Returns"). Purchaser will pay or
cause to be paid to the taxing authority any and all Taxes due as a result
of Purchaser Tax Returns required to be filed pursuant to the preceding
sentence, unless such Taxes are being contested in good faith; provided,
however, that nothing in this Section 12.1(b) shall be construed to limit
Purchaser's indemnification rights set forth in Article X hereof.
(c) Cooperation. Purchaser and Seller agree to furnish or
cause to be furnished to each other, upon request, as promptly as
practicable, such information (including, without limitation, access to
books and records) and reasonable assistance relating to each Company as is
reasonable necessary for the preparation and filing of any Tax return
contemplated in this Section 12.1, for the preparation for any audit, and
for the prosecution of any proceeding in respect of any proposed
adjustment. Purchaser and Seller shall cooperate with each other in the
conduct of any audit or other proceedings involving either Company or any
entity with which they are consolidated or combined for any Tax purposes
and each shall execute and deliver such documents as are necessary to carry
out the intent of this Section 12.l.
(d) Tax Refunds. Seller shall be entitled to any Tax refund,
net of any Taxes payable on the receipt of interest income related to such
refund, related to any taxable period of either Company, or portion
thereof, ending on or before the Closing Date that is not reflected as an
admitted asset of Modern or WPL in their respective Closing Balance Sheets,
provided that in the event that either of the Companies has a carryback
from a taxable period ending after the Closing Date which may be carried
back to a Seller Consolidated Return or a Tax Return filed on a separate
basis by either of the Companies, Seller shall promptly pay to the
respective Company any refund of Taxes which is attributable to such
carryback when and to the extent received by or credited to the benefit of
Seller. In the event that such carryback is subsequently disallowed by the
Internal Revenue Service, the Company will repay such refund, together with
all interest payable
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to the Internal Revenue Service with respect thereto, to the Seller in the
event there is a final determination that such refund is not allowable.
(e) Within ten days after completion of the Closing Balance
Sheet, Purchaser shall pay Seller the amount of the accrual for Taxes of
each of the Companies shown on such Closing Balance Sheet and relating to
Taxes payable pursuant to Seller Tax Returns (if any, but in no event more
than $500,000). The Company's accrual for current Taxes with respect to
Seller Tax Returns shall be computed in a manner consistent with the Tax
sharing or Tax allocation agreement to which the Companies currently are
subject. After the full payment by Purchaser or one or more of the
Companies of amounts required to be paid to Seller pursuant to this Section
12.1(e) hereof (if any), neither the Company nor Purchaser shall have any
further liability to Seller or its Affiliates for Taxes of either of the
Companies with respect to Seller Tax Returns.
12.2 Sale of Certain Assets.
(a) Set forth on Exhibit B is a list of certain real property
assets owned by the Companies (the "Salable Properties"). Seller and
Purchaser agree that Purchaser or its representatives may facilitate the
sale of each of the Salable Properties; however, any sales prior to the
Closing Date must be approved by the Seller. The Companies will use the
services of Conseco Mortgage Capital, Inc. to assist in the sale of the
Salable Properties
(b) (i) Modern holds two mortgage loans (more fully
described on Schedule 12.2(b)) (the "Mortgage Loans") which currently have
an aggregate value on Modern's statutory financial statements of $1,686,427
(the "Current Value of the Mortgage Loans"). Purchaser agrees to cause
Modern to sell the Mortgage Loans as soon as possible, provided, however,
that Seller must approve the terms of the sale of the Mortgage Loans.
(ii) If Modern sells the Mortgage Loans within the first year
after the Closing Date for greater than the Current Value of the Mortgage
Loans less any principal repayments on the Mortgage Loans between the date
hereof and the sale of the Mortgage Loans, then Modern will pay the amount
of such excess to Seller. For one year after the Closing Date, Seller has
the option to purchase the Mortgage Loans from Modern (if the Mortgage
Loans have not been sold previously) for an amount equal to the Current
Value of the Mortgage Loans less any principal repayments on the Mortgage
Loans between the date hereof and the sale of the Mortgage Loans.
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12.3 Notices. Any notice or other communication given
pursuant to this Agreement must be in writing and (a) delivered personally,
(b) sent by telefacsimile or other similar facsimile transmission,
(c) delivered by overnight express, or (d) sent by registered or certified
mail, postage prepaid, as follows:
(i) If to Seller:
Bankers Multiple Line Insurance Company
500 N. Akard Street
Dallas, Texas 75201
Attention: Rodney D. Moore
Facsimile Number: 214/954-7717
with a copy to:
Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75201
Attention: Rodney L. Moore
Facsimile Number: 214/745-5390
(ii) If to Purchaser:
Reassure America Life Insurance Company
969 High Ridge Road
Stamford, Connecticut 06905
Attention: W. Weldon Wilson
Facsimile Number: 203/968-0920
with a copy to:
LeBoeuf, Lamb, Greene & MacRae L.L.P.
125 West 55th Street
New York, New York 10019-5389
Attention: Cameron F. MacRae, III
Facsimile number: 212/424-8500
All notices and other communications required or permitted under this
Agreement that are addressed as provided in this Section 12.3 will (A) if
delivered personally or by overnight express, be deemed given upon
delivery; (B) if delivered by telefacsimile or similar facsimile
transmission, be deemed given when electronically confirmed; and (C) if
sent by registered or certified mail, be deemed given when received. Any
party from time to time may change its address for the purpose of notices
to that party by giving a similar notice specifying a new address, but no
such notice will be deemed to have been given until it is actually
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received by the party sought to be charged with the contents thereof.
12.4 Entire Agreement. Except for documents executed by
Seller and Purchaser pursuant hereto, this Agreement supersedes all prior
discussions and agreements between the parties with respect to the subject
matter of this Agreement, and this Agreement contains the sole and entire
agreement between the parties hereto with respect to the subject matter
hereof.
12.5 Expenses. Except as otherwise expressly provided in this
Agreement, each party hereto will pay its own costs and expenses in con-
nection with this Agreement and the transactions contemplated hereby.
12.6 Public Announcements. At all times at or before the
Closing, Seller and Purchaser will each consult with the other before
issuing or making any reports, statements, or releases to the public with
respect to this Agreement or the transactions contemplated hereby and will
use good faith efforts to agree on the text of a joint public report,
statement, or release or will use good faith efforts to obtain the other
party's approval of the text of any public report, statement, release to be
made solely on behalf of a party. If Seller and Purchaser are unable to
agree on or approve any such public report, statement, or release and such
report, statement, or release is, in the opinion of legal counsel to a
party, required by law or appropriate to discharge such party's disclosure
obligations, then such party may make or issue the legally required or
appropriate report, statement, or release. Any such report, statement, or
release approved or permitted to be made pursuant to this Section 12.6 may
be disclosed or otherwise provided by Seller or Purchaser to any person or
entity, including to any employee or customer of either party hereto and to
any governmental or regulatory authority.
12.7 Confidentiality.
(a) From the date hereof until the earlier to occur of the
second anniversary of the Closing Date or the second anniversary of the
termination of this Agreement pursuant to Section 11.1 hereof, each of
Purchaser and Seller will refrain, and will cause its respective
Affiliates, officers, directors, employees, agents, and other
representatives to refrain, from disclosing to any other person or entity
any documents or information concerning the other party hereto acquired by
it in connection with this Agreement or the transactions contemplated
hereby unless (i) such disclosure is compelled by judicial or
administrative process or by other requirements of law (including in
connection with obtaining necessary insurance regulatory approvals) and
notice of such disclosure is furnished to such other party hereto;
(ii) either
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party hereto deems it advisable (upon advice of such party's legal counsel)
to disclose any such documents or information in connection with the
requirements of any securities law; or (iii) such documents or information
can be shown to have been (A) previously known by the party hereto
receiving such documents or information, (B) in the public domain through
no fault of such receiving party, or (C) later acquired by such receiving
party from other public sources.
(b) If this Agreement is terminated pursuant to Section 11.1
hereof, for a period of two years after such termination, Purchaser will
refrain, and will cause its respective officers, directors, employees,
agents, and other representatives to refrain, from disclosing to any other
person or entity any documents or information concerning the Companies
acquired by Purchaser in connection with this Agreement or the transactions
contemplated hereby unless (i) such disclosure is compelled by judicial or
administrative process or by other requirements of law and notice of such
disclosure is furnished to Seller; (ii) Purchaser deems it advisable (upon
advice of legal counsel to Purchaser) to disclose any such documents or
information in connection with the requirements of any securities law; or
(iii) such documents or information can be shown to have been
(A) previously known by Purchaser, (B) in the public domain through no
fault of Purchaser, or (C) later acquired by Purchaser from other public
sources.
(c) For a period of two years following the Closing Date,
Seller will refrain, and will cause its Affiliates, officers, directors,
employees, agents, and other representatives to refrain, from disclosing,
to any person or entity any information regarding the Companies or the
transactions contemplated hereby unless (i) such disclosure is compelled by
judicial or administrative process or by other requirements of law and
notice of such disclosure is furnished to Purchaser; (ii) the Seller deems
it advisable (upon advice of legal counsel to Seller) to disclose any such
documents or information in connection with the requirements of any
securities law; or (iii) such documents or information can be shown to have
been (A) in the public domain through no fault of Seller, or (B) later
acquired by Seller from other public sources.
(d) The parties hereto acknowledge and agree that (i) a
breach of any of the terms or provisions of this Section 12.7 would cause
irreparable damage to the non-breaching party for which adequate remedy at
law is not available; and (ii) the non-breaching party will be entitled as
a matter of right to obtain, without posting any bond whatsoever, an
injunction, restraining order, or other equitable relief to restrain any
threatened or further breach of this Section 12.7, which right will not be
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exclusive but will be cumulative and in addition to any other rights and
remedies available at law or in equity.
(e) At the Closing, Seller will assign to Purchaser the non-
exclusive right to enforce the rights of Seller and its Affiliates under
each of the confidentiality agreements between Seller or its Affiliates and
prospective purchasers of the Companies.
12.8 Further Assurances. Seller and Purchaser agree that,
from time to time after the Closing, upon the reasonable request of the
other, they will cooperate and will cause their respective Affiliates to
cooperate with each other to effect the orderly transition of the business,
operations, and affairs of the Companies to Purchaser. Without limiting
the generality of the foregoing, (a) Seller will provide, and will cause
its Affiliates to provide, representatives of Purchaser reasonable access
to all books and records of Seller and its Affiliates reasonably requested
by Purchaser in the preparation of any post-Closing financial statements,
reports, tax returns, or tax filings of the Companies; (b) Purchaser will
provide representatives of Seller reasonable access to all pre-Closing
books and records of the Companies reasonably requested by Seller in the
preparation of any post-Closing financial statements, reports, tax returns,
or tax filings of Seller; and (c) each party hereto will execute such
documents and instruments as the other party hereto may reasonably request
containing terms and conditions mutually satisfactory to each party hereto
to further effectuate the terms hereof.
12.9 Waiver. Any term or condition of this Agreement may be
waived at any time by the party that is entitled to the benefit thereof.
Such waiver must be in writing and must be executed by an executive officer
of such party. A waiver on one occasion will not be deemed to be a waiver
of the same or any other breach or nonfulfillment on a future occasion.
All remedies, either under this Agreement, or by law or otherwise afforded,
will be cumulative and not alternative.
12.10 Amendment. This Agreement may be modified or amended
only by a writing duly executed by Seller and Purchaser.
12.11 Counterparts. This Agreement may be executed
simultaneously in any number of counterparts, each of which will be deemed
an original, but all of which will constitute one and the same instrument.
12.12 No Third Party Beneficiary. The terms and provisions of
this Agreement are intended solely for the benefit of Seller, Purchaser,
and their respective successors and permitted assigns, and it is not the
intention of the parties to
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confer third-party beneficiary rights upon any other person or entity.
12.13 Governing Law. This Agreement will be governed by and
construed and enforced in accordance with the laws of the State of Texas
(without regard to the principles of conflicts of law) applicable to a
Contract executed and performable in such state.
12.14 Binding Effect. This Agreement is binding upon and will
inure to the benefit of the parties and their respective successors and
permitted assigns.
12.15 No Assignment. Neither this Agreement nor any right or
obligation hereunder or part hereof may be assigned by any parties hereto
without the prior written consent of the other party hereto (and any
attempt to do so will be void); provided that (i) Purchaser may, without
the consent of Seller, assign any or all of its rights and obligations
under this Agreement to any Affiliate of Purchaser that directly of
indirectly owns 100% of the common stock of Purchaser prior to the Closing
and, if Purchaser elects to do so, Purchaser will simultaneously cause such
Affiliate to assume all of Purchaser's liabilities and obligations under
this Agreement and execute and deliver to Seller an agreement in form and
substance reasonably acceptable to Seller, provided that, notwithstanding
any such assignment and assumption by Purchaser to an Affiliate, Purchaser
shall remain fully liable for all, and shall not be relieved of any, of the
duties, liabilities and obligations of Purchaser under this Agreement and
(ii) Seller shall (A) be required if Purchaser shall so request, in the
event that the available capital and surplus of Seller as determined in
accordance with SAP is reduced to an amount below $60.0 million after
taking into account the net proceeds from (x) the sale of the Shares and
(y) the net proceeds (or estimated proceeds if not yet paid to Seller) from
the sale of the stock of Philadelphia American Life Insurance Company and
the sale of the business operations of Seller, and (B) otherwise have the
right, without such consent, to assign to I.C.H. all of Seller's
obligations under this Agreement, including without limitation all of
Seller's obligations under Article X hereof, which assignment in the case
of clauses (A) and (B) shall, if the Purchaser shall so request, become
effective only upon the delivery to Purchaser of (a) an assumption
agreement in form and substance reasonably acceptable to Purchaser and duly
executed by such assignee, which assumption agreement provides for the
obligations of Seller so assigned to such assignee to constitute
administrative expenses of assignee for purposes of the Chapter 11
Proceeding and (b) an order of the Bankruptcy Court in form and substance
reasonably acceptable to Purchaser, which order shall have been entered for
a period of ten days prior to the effective
Page 69 of 141<PAGE>
<PAGE>
date of such assignment and the operation of which shall not have been
restrained, enjoined, suspended or otherwise stayed, approving the
assignment and assumption of Seller's obligations hereunder to and by such
assignee as provided in the assumption agreement. Notwithstanding anything
in this Agreement to the contrary, in the event (i) Seller shall assign its
obligations hereunder to I.C.H. and (ii) Seller on or prior to such
assignment shall not have distributed to I.C.H. cash or property having a
fair market value of at least $60.0 million, Seller shall with I.C.H. be
jointly and severally liable with respect to all such assigned obligations.
12.16 Invalid Provisions. If any provision of this Agreement
is held to be illegal, invalid, or unenforceable under any present or
future law, and if the rights or obligations under this Agreement of Seller
and Purchaser will not be materially and adversely affected thereby,
(a) such provision will be fully severable; (b) this Agreement will be
construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part hereof; (c) the remaining provisions
of this Agreement will remain in full force and effect and will not be
affected by the illegal, invalid, or unenforceable provision or by its
severance from this Agreement; and (d) in lieu of such illegal, invalid or
unenforceable provision, there shall be added automatically as part of this
Agreement a provision as similar in terms to such illegal, invalid or
unenforceable provision as may then be legal, valid and enforceable under
applicable law.
12.17 Table of Contents; Headings. The table of contents and
headings of the Articles and Sections of this Agreement (including the
Disclosure Schedule) have been inserted for convenience of reference only,
are not intended to be considered a part hereof, and will not modify or
restrict any term or provision hereof.
Page 70 of 141<PAGE>
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered as of the date first written above by the duly authorized
officers of Seller and Purchaser.
REASSURE AMERICA LIFE INSURANCE
COMPANY
By: /s/W. Weldon Wilson
-------------------
Name: W. Weldon Wilson
Title: Vice President
BANKERS MULTIPLE LINE INSURANCE COMPANY
By: /s/Rodney D. Moore
-------------------
Name: Rodney D. Moore
Title: President
Page 71 of 141<PAGE>
<PAGE>
==============================================================================
STOCK PURCHASE AGREEMENT
DATED AS OF APRIL 2, 1996
By and between
BANKERS MULTIPLE LINE INSURANCE COMPANY
and
NEW ERA ENTERPRISES, INC.
With Respect to all of the
Outstanding Capital Stock of
PHILADELPHIA AMERICAN LIFE INSURANCE COMPANY
==============================================================================
Page 72 of 141<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
ARTICLE II
SALE OF SHARES AND CLOSING
2.1 Purchase and Sale of Shares . . . . . . . . . . .8
2.2 Purchase Price . . . . . . . . . . . . . . . . .8
2.3 Purchase Price Adjustment . . . . . . . . . . . .8
2.4 Closing . . . . . . . . . . . . . . . . . . . . 10
2.5 Escrow . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
3.1 Organization of Seller . . . . . . . . . . . . 11
3.2 Authority . . . . . . . . . . . . . . . . . . . 11
3.3 Organization of the Company . . . . . . . . . . 11
3.4 Capital Stock; Title . . . . . . . . . . . . . 12
3.5 No Conflicts or Violations . . . . . . . . . . 12
3.6 SAP Statements . . . . . . . . . . . . . . . . 13
3.7 Reserves. . . . . . . . . . . . . . . . . . . . 13
3.8 Assets and Properties . . . . . . . . . . . . . 14
3.9 Absence of Changes . . . . . . . . . . . . . . 14
3.10 No Undisclosed Liabilities. . . . . . . . . . . 16
3.11 Taxes . . . . . . . . . . . . . . . . . . . . . 16
3.12 Litigation . . . . . . . . . . . . . . . . . . 18
3.13 Compliance With Laws . . . . . . . . . . . . . 19
3.14 Pension and Benefit Plans . . . . . . . . . . . 19
3.15 Contracts . . . . . . . . . . . . . . . . . . . 19
3.16 Insurance Issued . . . . . . . . . . . . . . . 20
3.17 Licenses and Permits . . . . . . . . . . . . . 21
3.18 Operations Insurance . . . . . . . . . . . . . 22
3.19 Intercompany Liabilities . . . . . . . . . . . 22
3.20 Bank Accounts . . . . . . . . . . . . . . . . . 22
3.21 Charter Documents and Bylaws. . . . . . . . . . 22
3.22 Minute Books. . . . . . . . . . . . . . . . . . 22
3.23 Employees . . . . . . . . . . . . . . . . . . . 23
3.24 Disclosure . . . . . . . . . . . . . . . . . . 23
Page 73 of 141<PAGE>
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
4.1 Organization . . . . . . . . . . . . . . . . . 23
4.2 Authority . . . . . . . . . . . . . . . . . . . 23
4.3 No Conflicts or Violations . . . . . . . . . . 23
4.4 Purchase for Investment . . . . . . . . . . . . 24
4.5 Litigation . . . . . . . . . . . . . . . . . . 24
ARTICLE V
COVENANTS OF SELLER
5.1 Contract and Regulatory Approvals . . . . . . . 25
5.2 HSR Filings . . . . . . . . . . . . . . . . . . 26
5.3 Investigation by Purchaser . . . . . . . . . . 26
5.4 Conduct of Business . . . . . . . . . . . . . . 26
5.5 No Charter Amendments . . . . . . . . . . . . . 28
5.6 No Issuance of Securities . . . . . . . . . . . 28
5.7 Dividends . . . . . . . . . . . . . . . . . . . 28
5.8 Resignations of Directors and Officers . . . . 29
5.9 Books and Records . . . . . . . . . . . . . . . 29
5.10 No Negotiation, etc. . . . . . . . . . . . . . 29
5.11 Financial Statements and Reports . . . . . . . 29
5.12 Investments . . . . . . . . . . . . . . . . . . 30
5.13 Employee Matters . . . . . . . . . . . . . . . 31
5.14 No Disposal of Property . . . . . . . . . . . . 31
5.15 No Breach or Default . . . . . . . . . . . . . 31
5.16 Indebtedness . . . . . . . . . . . . . . . . . 32
5.17 No Acquisitions . . . . . . . . . . . . . . . . 32
5.18 Intercompany Liabilities and Affiliate
Transactions . . . . . . . . . . . . . . . . 32
5.19 Business . . . . . . . . . . . . . . . . . . . 33
ARTICLE VI
COVENANTS OF PURCHASER
6.1 Contract and Regulatory Approvals . . . . . . . 33
6.2 HSR Filings . . . . . . . . . . . . . . . . . . 34
6.3 Continuation of Services . . . . . . . . . . . 34
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF PURCHASER
7.1 Representations and Warranties . . . . . . . . 35
7.2 Performance . . . . . . . . . . . . . . . . . . 35
7.3 Officer's Certificates . . . . . . . . . . . . 35
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7.4 HSR Act Approval . . . . . . . . . . . . . . . 35
7.5 No Injunction . . . . . . . . . . . . . . . . . 35
7.6 No Proceeding or Litigation . . . . . . . . . . 35
7.7 Contract and Regulatory Approvals . . . . . . . 36
7.8 Resolution of Reinsurance Disputes. . . . . . . 36
7.9 No Adverse Change . . . . . . . . . . . . . . . 36
7.10 Opinion of Counsel to Seller. . . . . . . . . . 36
7.11 Investments. . . . . . . . . . . . . . . . . . 36
7.12 Financing. . . . . . . . . . . . . . . . . . . 36
7.13 Certificates of Compliance . . . . . . . . . . 37
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLER
8.1 Representations and Warranties . . . . . . . . 37
8.2 Performance . . . . . . . . . . . . . . . . . . 37
8.3 Officer's Certificates . . . . . . . . . . . . 37
8.4 HSR Act Approval . . . . . . . . . . . . . . . 37
8.5 No Injunction . . . . . . . . . . . . . . . . . 38
8.6 No Proceeding or Litigation . . . . . . . . . . 38
8.7 Contract or Regulatory Approvals . . . . . . . 38
8.8 Opinion of Counsel to Purchaser . . . . . . . . 38
ARTICLE IX
SURVIVAL OF PROVISIONS
9.1 Survival of Representations and Warranties . . 38
9.2 Pursuit of Claims . . . . . . . . . . . . . . . 39
9.3 Remedies Limitation . . . . . . . . . . . . . . 39
ARTICLE X
INDEMNIFICATION
10.1 Indemnification by Seller . . . . . . . . . . . 39
10.2 Indemnification by Purchaser . . . . . . . . . 40
10.3 Indemnification Procedures . . . . . . . . . . 40
10.4 Treatment of Indemnification Payments . . . . . 42
10.5 Claims Limitations . . . . . . . . . . . . . . 42
10.6 Tax Indemnification . . . . . . . . . . . . . . 43
ARTICLE XI
TERMINATION
11.1 Termination . . . . . . . . . . . . . . . . . . 45
11.2 Effect of Termination . . . . . . . . . . . . . 46
Page 75 of 141<PAGE>
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ARTICLE XII
MISCELLANEOUS
12.1 Employment Matters . . . . . . . . . . . . . . 46
12.2 Tax Matters . . . . . . . . . . . . . . . . . . 49
12.3 Notices. . . . . . . . . . . . . . . . . . . . 52
12.4 Entire Agreement . . . . . . . . . . . . . . . 53
12.5 Expenses . . . . . . . . . . . . . . . . . . . 53
12.6 Public Announcements . . . . . . . . . . . . . 53
12.7 Confidentiality . . . . . . . . . . . . . . . . 54
12.8 Brokers . . . . . . . . . . . . . . . . . . . . 55
12.9 Home Office . . . . . . . . . . . . . . . . . . 56
12.10 PMSC Services . . . . . . . . . . . . . . . . . 56
12.11 Further Assurances . . . . . . . . . . . . . . 56
12.12 Waiver . . . . . . . . . . . . . . . . . . . . 57
12.13 Amendment . . . . . . . . . . . . . . . . . . . 57
12.14 Counterparts . . . . . . . . . . . . . . . . . 57
12.15 No Third Party Beneficiary . . . . . . . . . . 57
12.16 Governing Law . . . . . . . . . . . . . . . . . 57
12.17 Binding Effect . . . . . . . . . . . . . . . . 57
12.18 No Assignment . . . . . . . . . . . . . . . . . 57
12.19 Invalid Provisions . . . . . . . . . . . . . . 58
12.20 Table of Contents; Headings . . . . . . . . . . 58
Page 76 of 141<PAGE>
<PAGE>
EXHIBITS
Exhibit A - Permitted Investments
Exhibit B - Form of Opinion of Seller's Counsel
Exhibit C - Form of Opinion of Purchaser's Counsel
Exhibit D - Litigation
Page 77 of 141<PAGE>
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made and entered into
this 2nd day of April, 1996, by and between Bankers Multiple Line Insurance
Company, an Illinois insurance corporation ("Seller"), and New Era
Enterprises, Inc., a Nevada corporation ("Purchaser").
WHEREAS, Seller owns 1,500,000 shares (the "Shares") of common stock,
par value $2.00 per share ("Common Stock"), of Philadelphia American Life
Insurance Company (the "Company"); and
WHEREAS, the Shares constitute all of the issued and outstanding
capital stock of the Company; and
WHEREAS, Seller desires to sell the Shares to Purchaser, and
Purchaser desires to purchase the Shares from Seller, on the terms and subject
to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
The capitalized terms used herein will have the following meanings:
"Administrative Services Agreements" shall mean all material
administrative services agreements pursuant to which the Company performs
services in connection with any self-funded employee benefit plans established
by third parties.
"Affiliate" shall mean, with respect to a specified person or entity,
any person or entity that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with
such specified person or entity.
"Agreement" shall mean this Stock Purchase Agreement, together with
the exhibits attached hereto and the Disclosure Schedule.
Page 78 of 141<PAGE>
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"Annual Statement" shall mean the annual statutory statement of the
Company filed with or submitted to the insurance regulatory authority in the
Commonwealth of Pennsylvania.
"AVR" shall mean the asset valuation reserve required to be
established under SAP on a specified life insurer's balance sheet.
"Bankruptcy Code" shall mean Title 11 of the United States Code.
"Bankruptcy Court" shall mean the United States Bankruptcy Court for
the Northern District of Texas, Dallas Division, or any other bankruptcy court
having jurisdiction over a case commenced by or against an Affiliate of Seller
under the Bankruptcy Code.
"Chapter 11 Proceeding" shall mean jointly administered case no. 395-
36351-RCM-11, as currently pending in the Bankruptcy Court.
"Closing" shall mean the closing of the transactions contemplated by
this Agreement as provided in Section 2.4 hereof.
"Closing Balance Sheet" shall mean the balance sheet of the Company
determined in accordance with SAP as of the Closing Date using the same
assumptions and methodologies utilized in the preparation of the December 31,
1995 Annual Statement.
"Closing Date" shall mean the later of (a) the last business day of
the month in which the last remaining condition set forth in ARTICLES VII and
VIII hereof has been satisfied or waived by the party hereto entitled to the
benefit thereof, or (b) such other date as Purchaser and Seller may agree
upon.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Common Stock" shall have the meaning ascribed to it in the recitals
to this Agreement.
"Company" shall have the meaning ascribed to it in the recitals to
this Agreement.
"Company Employees" shall mean (i) all current employees of the
Company, and (ii) all current employees of FMI who perform services
substantially exclusively for the Company.
Page 79 of 141<PAGE>
<PAGE>
"Contract" shall mean any agreement, lease, sublease, license,
sublicense, promissory note, evidence of indebtedness, or other binding
contract.
"Damages" shall mean any and all monetary damages, liabilities,
fines, fees, penalties, interest obligations, deficiencies, losses, costs, and
expenses (including reasonable fees and expenses of attorneys, accountants,
actuaries, and other experts).
"Deficiency Amount" shall mean the amount, if any, by which the Final
Purchase Price exceeds the Initial Purchase Price.
"Determination Date" shall mean the last day of the month immediately
preceding the Closing Date.
"Disclosure Schedule" shall mean the disclosure schedule dated the
date hereof furnished by Seller to Purchaser and containing all lists,
descriptions, exceptions, and other information and materials as are required
to be included therein pursuant to this Agreement. Any information contained
in one or more Sections of the Disclosure Schedule shall be deemed disclosed
in, and a part of, any other Section of the Disclosure Schedule to the extent
such information is required to be disclosed in such other Section(s), and the
failure to expressly include any such information in such other Section(s)
shall not form the basis for a claim for Damages, or otherwise for
indemnification, provided that the information as expressly disclosed in one
or more Sections of the Disclosure Schedule is sufficient to provide the
disclosure required by this Agreement in such other Section(s) in which such
information is not expressly set forth.
"Election" shall have the meaning ascribed to it in Section 12.2(f)
hereof.
"Election Forms" shall have the meaning ascribed to it in Section
12.2(g) hereof.
"Eligible Dependents" shall have the meaning ascribed to it in
Section 12.1(e) hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
Page 80 of 141<PAGE>
<PAGE>
"Escrow Agent" shall have the meaning ascribed to it in Section 2.5
hereof.
"Escrow Agreement" shall have the meaning ascribed to it in Section
2.5 hereof.
"Escrow Amount" shall have the meaning ascribed to it in Section 2.5
hereof.
"Estimated Intercompany Balances" shall have the meaning ascribed to
it in Section 5.18 hereof.
"Excess Amount" shall mean the amount, if any, by which the Initial
Purchase Price exceeds the Final Purchase Price.
"Final Intercompany Balances" shall have the meaning ascribed to it
in Section 5.18 hereof.
"Final Purchase Price" shall have the meaning ascribed to it in
Section 2.2 hereof.
"FMI" shall mean Facilities Management Installation, Inc., a Delaware
corporation.
"FMI Administrative Agreement" shall mean that certain Administrative
Services Agreement entered into between FMI and the Company effective as of
January 1, 1988, as amended by Amendment Number I effective as of January 1,
1993, as amended by Amendment Number II effective as of January 1, 1994, as
amended by Amendment Number III effective as of June 15, 1994, as amended by
Amendment Number IV effective January 1, 1995, and as amended by Amendment
Number V effective January 1, 1995.
"FMI Savings Plan" shall have the meaning ascribed to it in Section
12.1(g) hereof.
"FMI's Welfare Plan" shall have the meaning ascribed to it in Section
12.1(e) hereof.
"Hired Employees" shall have the meaning ascribed to it in Section
12.1(e) hereof.
"Home Office" shall mean the offices of the Company located at 3121
Buffalo Speedway, Houston, Texas.
"HSR Act" shall mean Section 7A of the Clayton Act (Title II of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976), as amended
Page 81 of 141<PAGE>
<PAGE>
(including any successor act), and the rules and regulations promulgated
thereunder.
"ICH" shall mean I.C.H. Corporation, a Delaware corporation.
"Indemnifying Party" shall mean the entity against whom claims of
indemnification are being asserted under ARTICLE X hereof.
"Indemnitee" shall mean the entity claiming indemnification under
ARTICLE X hereof.
"Initial Purchase Price" shall have the meaning ascribed to it in
Section 2.2 hereof.
"Insurance Contracts" shall mean all individual and group insurance
policies and annuity contracts issued by the Company.
"IRS" shall mean the United States Internal Revenue Service.
"Material Adverse Effect" shall mean any change or effect (or series
of related changes or effects) that individually or in the aggregate is
materially adverse to (i) the business, operations, condition (financial or
otherwise) or results of operations of the Company, (ii) the validity or
enforceability of this Agreement, or (iii) the ability of Seller to perform
its obligations under this Agreement.
"Modified Aggregate Deemed Sales Price" shall have the meaning
ascribed to it in Section 12.2(g) hereof.
"Parent" shall have the meaning ascribed to it in Section 12.2(f)
hereof.
"Permitted Lien" shall mean any (a) mechanic's, carrier's, workmen's,
repairmen's, or other similar lien arising or incurred in the ordinary course
of business, (b) lien for taxes, assessments, and other governmental charges
that are not due and payable or which are being contested in good faith, (c)
zoning, building or other similar government restriction, or (d) agreement,
covenant, right of way, or other similar restriction which in the case of
clauses (a), (c), and (d) above do not materially impair any real property of
the Company.
"PMSC" shall mean Policy Management Systems Corporation, a South
Carolina corporation.
Page 82 of 141<PAGE>
<PAGE>
"Preliminary Intercompany Balances" shall have the meaning ascribed
to it in Section 5.18 hereof.
"Purchaser" shall mean New Era Enterprises, Inc., a Nevada
corporation.
"Purchaser Indemnitees" shall have the meaning ascribed to it in
Section 10.1 hereof.
"Purchaser's Plan" shall have the meaning ascribed to it in Section
12.1(g) hereof.
"Purchaser's Welfare Plan" shall have the meaning ascribed to it in
Section 12.1(e) hereof.
"Purchaser Tax Returns" shall have the meaning ascribed to it in
Section 12.2(b) hereof.
"Quarterly Statement" shall mean any quarterly statutory statement of
the Company filed with or submitted to the insurance regulatory authority in
the Commonwealth of Pennsylvania.
"Retained Employee" shall have the meaning ascribed to it in Section
12.1(a) hereof.
"Sales Price Allocation" shall have the meaning ascribed to it in
Section 12.2(g) hereof.
"SAP" shall mean the accounting practices required or permitted by
the insurance regulatory authority in the applicable state, consistently
applied throughout the specified period and in the comparable period in the
immediately preceding year.
"Seller" shall mean Bankers Multiple Line Insurance Company, an
Illinois insurance corporation.
"Seller Consolidated Returns" shall mean all consolidated, combined,
affiliated or unitary Tax Returns which include the Company with respect to
the Company's taxable income or loss for periods through the Closing Date.
"Seller Indemnitees" shall have the meaning ascribed to it in Section
10.2 hereof.
"Settlement Auditor" shall mean the Dallas office of Price
Waterhouse.
Page 83 of 141<PAGE>
<PAGE>
"Severance Plan" shall mean the Southwestern Life Corporation
Companies Salaried Employees Severance Pay Plan, as restated effective October
1, 1994.
"Shares" shall have the meaning ascribed to it in the recitals to
this Agreement.
"Tax Claim" shall have the meaning ascribed to it in Section 10.6(c)
hereof.
"Taxes" shall mean all taxes, charges, fees, levies, or other similar
assessments or liabilities, including without limitation (a) income, gross
receipts, ad valorem, premium, excise, real property, personal property,
sales, use, transfer, withholding, employment, payroll, medicare, and
franchise taxes imposed by the United States of America, or by any state,
local, or foreign government, or any subdivision, agency, or other similar
Person of the United States or any such government; and (b) any interest,
fines, penalties, assessments, or additions to taxes resulting from,
attributable to, or incurred in connection with any Tax or any contest,
dispute, or refund thereof.
"Tax Returns" shall mean any report, return, or statement required to
be supplied to a taxing authority in connection with Taxes.
"Temporary Employee" shall mean any Company Employee (other than a
Retained Employee) who is employed by Purchaser or an Affiliate of Purchaser
(including the Company) after the Closing Date; provided, however, that such
persons will be deemed to be Temporary Employees only to the extent that such
persons are not employed by the Purchaser or an Affiliate of Purchaser
(including the Company) after 60 days following the Closing Date.
"WARN Act" shall mean the Worker Adjustment Restraining and
Notification Act.
Unless the context of this Agreement otherwise requires, (a) words of
any gender are deemed to include the other gender; (b) words using the
singular or plural number also include the plural or singular number,
respectively; (c) the terms "hereof," "herein," "hereby," "hereto," and
derivative or similar words refer to this entire Agreement; (d) the terms
"ARTICLE" or "Section" refer to the specified ARTICLE or Section of this
Agreement; (e) the phrase "in the ordinary course of business and consistent
with past practice" refers to the business, operations, affairs, and practice
of the Company consistent with
Page 84 of 141<PAGE>
<PAGE>
past practices of such business, operations, and affairs; (f) the term
"including" and other forms of such term, with respect to any matter or thing,
means "including but not limited to" such matter or thing; and (g) all
references to "dollars" or "$" refer to currency of the United States of
America.
ARTICLE II
SALE OF SHARES AND CLOSING
2.1 Purchase and Sale of Shares. Subject to the terms and
conditions, and in reliance upon the representations and warranties, set forth
in this Agreement, Seller agrees to sell the Shares to Purchaser and Purchaser
agrees to purchase the Shares from Seller.
2.2 Purchase Price. The purchase price (the "Initial Purchase
Price") for the Shares will equal the sum of the following, subject to
adjustment after the Closing in accordance with Section 2.3 hereof (as
adjusted, the "Final Purchase Price"):
(a) the capital and surplus of the Company as of the
Determination Date determined in accordance with SAP;
(b) the AVR of the Company as of the Determination Date
determined in accordance with SAP; and
(c) $2,000,000.
As promptly as practicable (but in no event less than 4 business days) prior
to the Closing Date, Seller shall deliver to Purchaser Seller's calculation of
the Initial Purchase Price, after giving effect to the settlement of the
Preliminary Intercompany Balances pursuant to Section 5.18 hereof and any
assignment of reinsurance recoverables as contemplated in Section 7.8 hereof
(certified by Seller's Chief Financial Officer).
2.3 Purchase Price Adjustment.
(a) As promptly as practicable (but in no event more than 60
days) after the Closing Date, Purchaser will prepare the Closing Balance
Sheet. At its sole and exclusive option, Purchaser may elect to cause Coopers
& Lybrand L.L.P. to complete an audit of the Closing Balance Sheet. As
promptly as practicable after the preparation of the Closing Balance Sheet
Page 85 of 141<PAGE>
<PAGE>
(and the audit of Coopers & Lybrand L.L.P. if Purchaser chooses to have such
audit conducted), Purchaser will deliver to Seller (i) the Closing Balance
Sheet, (ii) the opinion thereon of Coopers & Lybrand L.L.P. stating that the
Closing Balance Sheet presents fairly in all material respects the financial
condition of the Company at the Closing Date in conformity with SAP (if
audited), and (iii) the calculation of the Final Purchase Price. If Purchaser
chooses to have the Closing Balance Sheet audited, Purchaser will pay the fees
and expenses of Coopers & Lybrand L.L.P. in connection with the performance of
such audit.
(b) If an audit is conducted pursuant to Section 2.3(a) hereof,
Purchaser will cause Coopers & Lybrand L.L.P. to (i) provide to Seller copies
of the Closing Balance Sheet and such work papers and other documents of
Coopers & Lybrand L.L.P. relating to such audit as Seller may reasonably
request, and (ii) cooperate with, and be reasonably available to, Seller and
to provide such other information reasonably requested by Seller concerning
the status of such audit and the accounting and auditing issues that arise
from or relate to such audit; provided, however, that Seller will conduct its
activities relating to such audit in such a manner as will not unreasonably
interfere with the conduct of such audit by Coopers & Lybrand L.L.P.
(c) Within 20 business days after Seller's receipt of the
Closing Balance Sheet, Seller will provide Purchaser with written notice
indicating whether Seller agrees or disagrees with the capital, surplus, and
AVR amounts reflected in the Closing Balance Sheet. If Seller disputes the
capital, surplus, or AVR amount reflected in the Closing Balance Sheet, such
notice will reflect Seller's calculation of each disputed amount in sufficient
detail to permit Purchaser to verify the same. If Seller agrees with the
capital, surplus, and AVR amounts reflected in the Closing Balance Sheet or if
Seller fails to deliver to Purchaser such written notice within such 20-day
period, the Closing Balance Sheet will be deemed final.
(d) Within 10 business days after Purchaser's receipt of any
notice of disagreement with the capital, surplus, or AVR amount reflected in
the Closing Balance Sheet, Purchaser and Seller will begin good faith
negotiations to resolve such disagreement. If Purchaser and Seller are unable
to resolve such disagreement within 10 business days after such negotiations
begin, such disagreement will be submitted to the Settlement Auditor for
resolution. Purchaser and Seller will cooperate with the Settlement Auditor
and will proceed in good faith to cause
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the Settlement Auditor to resolve such disagreement within 30 days after such
disagreement is submitted to the Settlement Auditor. Purchaser and Seller
will each pay one-half of the fees and expenses of the Settlement Auditor.
(e) The Settlement Auditor, in its sole discretion, will
determine (i) the nature and extent of the participation by Purchaser, Seller,
and their agents in connection with the resolution of any disagreement
submitted to the Settlement Auditor, (ii) the nature and extent of information
that Purchaser and Seller may submit to the Settlement Auditor for
consideration in connection with such resolution, and (iii) the personnel of
the Settlement Auditor who will review such information and resolve such
disagreement. The Settlement Auditor's resolution of any such disagreement
will be reflected in a written report which will be delivered promptly to, and
will be final and binding upon, Purchaser and Seller. The Closing Balance
Sheet will be adjusted accordingly to reflect any such resolution and, as
adjusted, will be deemed final.
(f) Upon the earlier to occur of (i) the parties' agreement with
respect to the capital, surplus and AVR amounts reflected in the Closing
Balance Sheet, or (ii) the delivery of the report of the Settlement Auditor as
provided in Section 2.3(e) hereof, Purchaser will pay to Seller the Deficiency
Amount or Seller will pay to Purchaser the Excess Amount, as the case may be.
Such payment will be made by wire transfer of immediately available funds in
Dallas, Texas to such account as the party entitled to receive such payment
specifies in writing to the party required to make such payment.
2.4 Closing.
(a) The Closing will take place at the offices of Weil,
Gotshal & Manges, 100 Crescent Court, Suite 1300, Dallas, Texas, at 9:00 a.m.,
local time on the Closing Date.
(b) At the Closing, Purchaser will (i) pay the Initial Purchase
Price by wire transfer of immediately available funds in Dallas, Texas to such
account as Seller specifies to Purchaser, and (ii) execute and deliver to
Seller such other documents and instruments required to be executed and
delivered by Purchaser under the terms of this Agreement.
(c) At the Closing, Seller will (i) deliver to Purchaser a
certificate or certificates representing all the Shares, accompanied by duly
executed blank stock powers, and (ii) execute
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and deliver such other documents and instruments required to be delivered by
Seller under the terms of this Agreement.
2.5 Escrow. Concurrently with the execution and delivery of
this Agreement, (a) Seller, Purchaser and Bank One, Texas, N.A., as escrow
agent ("Escrow Agent"), have executed and delivered that certain Escrow
Agreement dated as of the date hereof (the "Escrow Agreement"), and (b)
Purchaser has deposited $250,000.00 (the "Escrow Amount") with the Escrow
Agent. The Escrow Amount will be disbursed as provided in Section 11.2
hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as follows:
3.1 Organization of Seller. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Illinois and has full corporate power and authority to enter into this
Agreement and to perform its obligations under this Agreement.
3.2 Authority. The execution and delivery of this Agreement by
Seller and the performance by Seller of its obligations under this Agreement
have been duly and validly authorized by all necessary corporate action on the
part of Seller. This Agreement has been duly executed and delivered by Seller
and constitutes a legal, valid, and binding obligation of Seller and is
enforceable against Seller in accordance with its terms, except to the extent
that (a) enforcement against Seller may be limited by or subject to any
bankruptcy, insolvency, reorganization, moratorium, or similar laws now or
hereafter in effect relating to or limiting creditors' rights generally, and
(b) the remedy of specific performance and injunctive and other forms of
equitable relief are subject to certain equitable defenses and to the
discretion of the court or other similar person or entity before which any
proceeding therefor may be brought. The performance of any obligations or
undertakings by Seller's Affiliates under this Agreement have been duly and
validly authorized by all necessary corporate action on the part of such
Affiliates
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3.3 Organization of the Company. The Company is a stock
insurance corporation duly organized, validly existing, and in good standing
under the laws of Pennsylvania, and has all requisite corporate power and
authority to own, lease and operate its assets and properties and to carry on
its business as presently conducted by it. The Company is duly qualified or
admitted to do business and is in good standing as a foreign corporation in
all jurisdictions in which the ownership, use, or leasing of its assets or
properties or the conduct or nature of its business makes such qualification
or admission necessary, except where the failure to be so qualified or
admitted and in good standing does not have or would not reasonably be
expected to have a Material Adverse Effect. The Company does not own 10% or
more of the voting capital stock of any corporation.
3.4 Capital Stock; Title. The authorized capital stock of the
Company consists solely of the Shares, all of which are issued and
outstanding. The Shares are duly authorized, validly issued, fully paid, and
nonassessable and are owned beneficially and of record by Seller, free and
clear of all liens and encumbrances. Upon delivery of payment for the Shares
as herein provided, Purchaser will acquire good and valid title to the Shares,
free and clear of any lien or encumbrance (other than liens or encumbrances
created by Purchaser). There are no outstanding securities, rights (pre-
emptive or other), subscriptions, calls, warrants, options, or other
agreements (except for this Agreement) that give any person or entity the
right to (a) purchase or otherwise receive or be issued any shares of capital
stock of the Company (or any interest therein) or any security convertible
into or exchangeable for any shares of capital stock of the Company (or any
interest therein), (b) receive any dividend, voting, or ownership rights
similar to those accruing to a holder of Shares, or (c) participate in the
equity, income, or election of directors or officers of the Company.
3.5 No Conflicts or Violations. The execution and delivery of
this Agreement by Seller and the performance by Seller of its obligations
under this Agreement will not:
(a) subject to obtaining the approvals contemplated by Sections
5.1, 5.2, 6.1, and 6.2 hereof, violate in any material respect any law or any
writ, judgment, decree, or injunction applicable to Seller or the Company or
their respective assets or properties;
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(b) conflict with or result in a violation or breach of any of
the provisions of the articles or certificate of incorporation or bylaws of
Seller or the Company;
(c) conflict with or result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default under,
any Contract to which Seller or the Company is a party or by which any asset
or property of Seller or the Company may be bound, except for such violations
that, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect;
(d) require Seller or the Company to obtain any consent,
approval, or action of, or make any filing with or give any notice to, any
person or entity, except (i) as set forth in Section 3.5 of the Disclosure
Schedule, (ii) as contemplated in Sections 5.1(b) and 5.2 hereof, or (iii)
those which the failure to obtain, make or give, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect;
or
(e) result in the creation or imposition of any lien or
encumbrance upon the Company or any of its assets or properties.
3.6 SAP Statements. Seller has previously delivered to
Purchaser true and complete copies of the following:
(a) the Annual Statements for each of the years ended
December 31, 1993, 1994, and 1995 filed with the Pennsylvania Insurance
Department (including the supporting memorandum to the actuarial opinions
given in connection with such Annual Statements); and
(b) any annual statutory statements of the Company that were
filed for the year ended December 31, 1995 in any jurisdiction (other than
Pennsylvania) and which differ from the Annual Statement for the year ended
December 31, 1995.
Each such statement (i) complied in all material respects with all applicable
laws when so filed, (ii) was prepared in accordance with SAP, (iii) is true
and complete in all material respects, and (iv) presents fairly in all
material respects the financial position of the Company as of the respective
dates thereof and the related summary of operations and changes in capital and
surplus and in cash flows of the Company for and during the respective periods
covered thereby. No material deficiency has been asserted by any insurance
regulatory authority with respect to any such statement.
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3.7 Reserves. The statutory reserves and other similar amounts
with respect to losses, benefits, claims, and expenses in respect of the
Company's insurance business as established or reflected in the December 31,
1995 Annual Statement (a) were determined in accordance with SAP and generally
accepted actuarial assumptions, (b) were in accordance with the benefits
specified in the related insurance or reinsurance Contracts in all material
respects, (c) meet the requirements of the insurance laws of each applicable
jurisdiction in all material respects, and (d) were adequate, in all material
respects, as of December 31, 1995, based upon then-current information and
assumptions concerning investment income, mortality and morbidity experience,
persistency and expenses, to cover the total amount of all matured and
reasonably anticipated unmatured benefits, claims, and other liabilities of
the Company under all insurance or reinsurance Contracts which the Company has
or will have any liability. The Company owns assets that qualify as legal
reserve assets under applicable insurance laws in an amount at least equal to
all such statutory reserves and other similar amounts of the Company.
3.8 Assets and Properties.
(a) Section 3.8(a) of the Disclosure Schedule contains a list of
all purchases, acquisitions, sales or dispositions of all debentures, notes,
stocks, limited partnership interests, other securities, mortgages, and other
investment assets by the Company from December 31, 1995, to the date hereof.
The Company has good and marketable title to all debentures, notes, stocks,
limited partnership interests, other securities, mortgages, and other
investment assets (excluding real property) owned by it, free and clear of all
liens and encumbrances.
(b) Section 3.8(b) of the Disclosure Schedule contains a true
and complete list and description of all real property leased by the Company.
The Company has a valid leasehold interest in all such leased real property.
(c) The Company owns good and indefeasible title to, or has a
valid leasehold interest in or a valid right under Contract to use, all
tangible personal property that is used in the conduct of its business,
operations, or affairs, free and clear of all liens and encumbrances, except
for Permitted Liens. All such tangible personal property is in good operating
condition and repair (normal wear and tear excepted) and is suitable for its
current uses.
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(d) Section 3.8(d) of the Disclosure Schedule contains a true
and complete list and description of (i) all marks, names, trademarks, service
marks, patents, patent rights, assumed names, logos, trade secrets,
copyrights, trade names, and service marks that are used in the conduct of the
business, operations, or affairs of the Company, and (ii) all computer
software, programs, and similar systems owned by or licensed to the Company
that are used in the conduct of its business, operations, or affairs. The
Company is not in conflict with or in violation or infringement of, nor has
Seller or the Company received any notice of any alleged conflict with or
violation or infringement of any asserted rights of any other person or entity
with respect to any such intellectual property or any such computer software,
programs, or similar systems.
3.9 Absence of Changes. Since December 31, 1995, there has not
been, occurred, or arisen any change, event (including without limitation any
damage, destruction, or loss whether or not covered by insurance), condition,
or state of facts of any character with respect to the business or condition
of the Company, except as disclosed in Section 3.9 of the Disclosure Schedule
and except for such changes, events, conditions, or state of facts that,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect. Except as disclosed in Section 3.9 of the Disclosure
Schedule and except for such changes, events, conditions, or state of facts
that, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect, since December 31, 1995, the Company has
operated only in the ordinary course of business and consistent with past
practice, and (without limiting the generality of the foregoing) there has not
been, occurred, or arisen:
(a) any declaration, setting aside, or payment of any dividend
or other distribution in respect of the capital stock of the Company or any
direct or indirect redemption, purchase, or other acquisition by the Company
of any such stock or of any interest in or right to acquire any such stock;
(b) any lien or encumbrance created or assumed on any of the
assets or properties of the Company;
(c) any liability involving the borrowing of money by the
Company or the incurrence by the Company of any deferred purchase price
obligation (other than trade credit incurred in the ordinary course of
business and consistent with past practice);
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(d) any damage, destruction, or loss (whether or not covered by
insurance) affecting any of the assets or properties of the Company, which
damage, destruction, or loss individually or in the aggregate exceeds $10,000;
(e) any cancellation of any material liability owed to the
Company by any other person or entity;
(f) any write-off or write-down of, or any determination to
write-off or write-down, the assets or properties (other than any statutory
write-down of investment assets) of the Company or any portion thereof;
(g) any amendment, termination, waiver, disposal, or lapse of,
or other failure to preserve, any (i) license, permit, or other form of
authorization of the Company (other than a license to transact insurance
business), the result of which individually or in the aggregate has had or
would reasonably be expected to have a Material Adverse Effect, or (ii)
license of the Company to transact insurance business;
(h) any termination, amendment, or execution by the Company of
any reinsurance, coinsurance, or other similar Contract, as ceding or assuming
insurer, except those Contracts which expired in accordance with their terms
or which were terminated by the Company in the ordinary course of business;
(i) any expenditure or commitment for additions to property,
plant, equipment, or other tangible or intangible capital assets or properties
of the Company which exceeds $10,000 individually or in the aggregate;
(j) any change in any marketing relationship between the Company
and any person or entity through which the Company sells Insurance Contracts
or Administrative Service Agreements, which change has had or would reasonably
be expected to have a Material Adverse Effect; or
(k) any Contract to take any of the actions prohibited in this
Section 3.9.
3.10 No Undisclosed Liabilities.
(a) There were no liabilities against or relating to the Company
as of December 31, 1995, except (i) as reflected in any of the financial
statements and the notes thereto referenced in Section 3.6 hereof, (ii)
policyholder benefits payable in the
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ordinary course of business and consistent with past practice, (iii) as
disclosed in Section 3.10 of the Disclosure Schedule, or (iv) those which,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect. Since December 31, 1995, the Company has not
incurred any liabilities, except (A) policyholder benefits payable in the
ordinary course of business and consistent with past practice, (B) as
disclosed in Section 3.10 of the Disclosure Schedule, or (C) those which,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
(b) Except for regular periodic assessments in the ordinary
course of business, no claim or assessment is pending or, to the knowledge of
Seller or the Company, threatened against the Company by any state insurance
guaranty association in connection with such association's fund relating to
insolvent insurers.
3.11 Taxes. Except as disclosed in Section 3.11 of the
Disclosure Schedule:
(a) All Tax Returns required to be filed by or with respect to
the Company have been duly and timely filed, and all such Tax Returns are
true, correct and complete in all material respects. The Company has duly and
timely paid (or there has been paid on its behalf) all Taxes that are due, or
claimed or asserted by any taxing authority to be due, from or with respect to
it. With respect to any period for which Taxes are not yet due, the Company
has made due and sufficient current accruals in its financial statements. The
Company has made (or there has been made on its behalf) all required estimated
Tax payments sufficient to avoid any underpayment penalties. The Company has
withheld and paid all Taxes required by all applicable laws to be withheld or
paid in connection with any amounts paid or owing to any employee, creditor,
independent contractor or other third party.
(b) There are no outstanding agreements, waivers, or
arrangements extending the statutory period of limitation applicable to any
claim for, or the period for the collection or assessment of, Taxes due from
or with respect to the Company for any taxable period, and no power of
attorney granted by or with respect to the Company with respect to Taxes is
currently in force. No closing agreement pursuant to Section 7121 of the Code
(or any predecessor provision) or any similar provision of any state, local,
or foreign law has been entered into by or with respect to the Company. No
audit or other proceeding by any court, governmental or regulatory authority,
or similar person is
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pending or, to the Knowledge of the Seller, threatened with respect to any
Taxes due from or with respect to the Company or any Tax Return filed by or
with respect to the Company. No assessment of Taxes is proposed against the
Company or any of its assets.
(c) No election under Section 338 of the Code has been made or
filed by or with respect to the Company. No consent to the application of
Section 341(f)(2) of the Code (or any predecessor provision) has been made or
filed by or with respect to the Company or any of its assets. The Company has
not agreed (and no agreement has been made on the Company's behalf) to make
any adjustment pursuant to Section 481(a) of the Code (or any predecessor
provision) by reason of any change in any accounting method, and there is no
application pending with any taxing authority requesting permission for any
changes in any accounting method of the Company. None of the assets of the
Company is or will be required to be treated as being owned by any person
(other than the Company) pursuant to the provisions of Section 168(f)(8) of
the Internal Revenue Code of 1954, as amended and in effect immediately before
the enactment of the Tax Reform Act of 1986.
(d) The Company is not a party to, is not bound by, and has no
obligation under, any Tax sharing agreement, Tax allocation agreement or
similar contract.
(e) There is no contract, agreement, plan or arrangement
covering any person that, individually or collectively, could give rise to the
payment of any amount that would not be deductible by the Company by reason of
Section 280G of the Code.
(f) The Seller is not a "foreign person" within the meaning of
Section 1445(b)(2) of the Code.
(g) The Company was taxable as an "insurance company other than
a life insurance company" within the meaning of section 831 of the Code for
the calendar year 1995. The "unearned premiums" with respect to the Company
set forth in all federal income Tax Returns of the Company were determined in
all material respects in accordance with Section 807 of the Code. The "unpaid
losses" with respect to the Company set forth in all federal income Tax
Returns of the Company were determined in all material respects in accordance
with Section 846 of the Code. All life insurance contracts issued by the
Company qualify as "life insurance contracts" within the meaning of Section
7702(a) of the Code, and all life insurance contracts issued by the Company
which are
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"modified endowment contracts" within the meaning of Section 7702A of the Code
were represented to purchasers to be "modified endowment contracts" at the
time of sale.
3.12 Litigation. Except as disclosed in Section 3.12 of the
Disclosure Schedule:
(a) There are no actions, suits, investigations, arbitrations,
or proceedings pending, or (to the knowledge of Seller) threatened, against
Seller or its assets or properties, at law or in equity, in, before, or by any
person or entity, except such actions, suits, investigations, arbitrations, or
proceedings that individually or in the aggregate do not have or would not
reasonably be expected to have a Material Adverse Effect.
(b) There are no actions, suits, investigations, arbitrations,
or proceedings pending, or (to the knowledge of Seller) threatened, against
the Company, or any of its assets or properties, at law or in equity, in,
before, or by any person or entity.
(c) There are no writs, judgments, decrees, injunctions, or
similar orders of any person or entity outstanding against the Company.
3.13 Compliance With Laws. Except as disclosed in Section 3.13
of the Disclosure Schedule, the Company is not in violation of any law or any
writ, judgment, decree, injunction, or similar order applicable to the
Company, which violation, individually or in the aggregate, has had or may
reasonably be expected to have a Material Adverse Effect.
3.14 Pension and Benefit Plans. The Company has no liability
under and has not adopted, maintained or sponsored any pension, welfare,
bonus, deferred compensation, incentive compensation, profit sharing, stock,
retirement, or other benefit plan or arrangement.
3.15 Contracts. Section 3.15 of the Disclosure Schedule contains
a true and complete list of each of the following Contracts (true and complete
copies of which have been made available to Purchaser) to which the Company is
a party or by which any of its assets or properties is or may be bound:
(a) all employment, agency (other than insurance agency),
consultation, or representation Contracts or other Contracts of
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any type (including without limitation loans or advances) with any present
officer, director, employee, agent (other than an insurance agent),
consultant, or other similar representative of the Company (or former officer,
director, employee, agent (other than an insurance agent), consultant or
similar representative of the Company if there exists any present or future
liability with respect to such Contract);
(b) a specimen form insurance agent Contract and any insurance
agent Contract having terms different in any material respect than the terms
contained in the specimen form agent Contract;
(c) all Administrative Service Agreements;
(d) all Contracts with any person or entity containing any
provision or covenant (i) limiting the ability of the Company to (A) sell any
products or services of any other person or entity, (B) engage in any line of
business, or (C) compete with or obtain products or services from any person
or entity or (ii) limiting the ability of any person or entity to compete with
or to provide products or services to the Company;
(e) all Contracts relating to the borrowing of money by the
Company, relating to the deferred purchase price for property or services, or
relating to the direct or indirect guarantee by the Company of any liability;
(f) all Contracts pursuant to which the Company has agreed to
indemnify or hold harmless any person or entity (other than indemnifications
or hold harmless covenants in the ordinary course of business and consistent
with past practice);
(g) all leases or subleases of real property used in the
business, operations, or affairs of the Company;
(h) all Contracts or arrangements (including without limitation
those relating to allocations of expenses, personnel, services, or facilities)
between the Company and Seller or any Affiliate of Seller (other than the
Company);
(i) all reinsurance, coinsurance, or other similar Contracts
(including pursuant to which the Company receives or has received surplus
relief); and
(j) all other Contracts (other than Insurance Contracts issued,
reinsured, or underwritten by the Company) that involve
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the payment or potential payment, pursuant to the terms of such Contracts, by
or to the Company of more than $10,000 individually or in the aggregate or
that are otherwise material to the business or condition of the Company.
Each Contract disclosed or required to be disclosed in Section 3.15 of the
Disclosure Schedule is in full force and effect and constitutes a legal,
valid, and binding obligation of Seller, the Company and each Affiliate of
Seller to the extent any such entity is a party thereto and, to the knowledge
of Seller, each other party thereto. Neither the Seller nor the Company has
received from any other party to such Contract any notice, whether written or
oral, of termination or intention to terminate such Contract. Except as set
forth in Section 3.15 of the Disclosure Schedule, neither the Company nor, to
the knowledge of Seller, any other party to such Contract is in violation or
breach of or default under any such Contract (or with or without notice or
lapse of time or both, would be in violation or breach of or default under any
such Contract), which violation, breach, or default has had or reasonably
would be expected to have a Material Adverse Effect.
3.16 Insurance Issued. Except as required by law or except as
disclosed in Section 3.16 of the Disclosure Schedule:
(a) All outstanding Insurance Contracts issued, reinsured, or
underwritten by the Company are, to the extent required under applicable laws,
on forms and at rates approved by the insurance regulatory authority of the
jurisdiction where such Insurance Contracts were issued or delivered or have
been filed with and not objected to by such authority within the period
provided for objection.
(b) All Insurance Contract benefits payable by the Company or
(to the knowledge of Seller) by any other person or entity that is a party to
or bound by any reinsurance, coinsurance, or other similar Contract with the
Company have in all material respects been paid in accordance with the terms
of the Insurance Contracts under which they arose, except for such benefits
for which the Company believes there is a reasonable basis to contest payment.
(c) No outstanding Insurance Contract issued, reinsured, or
underwritten by the Company entitles the holder thereof or any other person or
entity to receive dividends, distributions, or other benefits based on the
revenues or earnings of the Company or any other person or entity.
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(d) To Seller's knowledge, all amounts to which the Company is
entitled under reinsurance, coinsurance, or other similar Contracts (including
without limitation amounts based on paid and unpaid losses) are collectible in
the ordinary course of business.
(e) To Seller's knowledge, each insurance agent, at the time
such agent wrote, sold, or produced business for the Company, was duly
licensed as an insurance agent (for the type of business written, sold, or
produced by such insurance agent) in the particular jurisdiction in which such
agent wrote, sold, or produced such business.
3.17 Licenses and Permits. Except as disclosed in Section 3.17
of the Disclosure Schedule:
(a) Section 3.17 of the Disclosure Schedule contains a true and
complete list of all jurisdictions in which the Company is licensed to
transact insurance business and the lines of business for which the Company is
licensed in each jurisdiction. The Company owns or validly holds such
insurance licenses, which are valid and in full force and effect. No such
license to transact insurance business is the subject of a proceeding for
suspension or revocation or any similar proceeding and, to the knowledge of
Seller, there is no pending threat of such suspension or revocation by any
such licensing authority.
(b) The Company owns or validly holds all licenses, franchises,
permits, approvals, authorizations, exemptions, classifications, certificates,
registrations, and similar documents or instruments (other than licenses to
transact insurance business) that are required for its business, operations,
and affairs, except where the failure to so own or hold such licenses,
franchises, permits, approvals, authorizations, exemptions, classifications,
certificates, registrations, or similar documents or instruments would not
reasonably be expected to have a Material Adverse Effect. All such other
licenses, franchises, permits, approvals, authorizations, exemptions,
classifications, certificates, registrations, and similar documents or
instruments are valid and in full force and effect.
3.18 Operations Insurance. Section 3.18 of the Disclosure
Schedule contains a true and complete list and description of all liability,
property, workers compensation, directors and officers liability, and other
similar insurance policies or agreements that insure the business, operations,
or affairs of the Company
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or affect or relate to the ownership, use, or operations of any of the assets
or properties of the Company.
3.19 Intercompany Liabilities. Except as disclosed in Section
3.19 of the Disclosure Schedule, (a) neither Seller nor any Affiliate of
Seller (other than the Company) provides or causes to be provided to the
Company any products, services, equipment, facilities, or similar items, and
(b) there are no liabilities between Seller or any Affiliate of Seller (other
than the Company), on the one hand, and the Company on the other hand.
3.20 Bank Accounts. Section 3.20 of the Disclosure Schedule
contains (a) a true and complete list of the names and locations of all banks,
trust companies, securities brokers, and other financial institutions at which
the Company has an account or safe deposit box or maintains a banking,
custodial, trading, trust, or other similar relationship, (b) a true and
complete list and description of each such account, box, and relationship, and
(c) a list of all signatories for each such account and box.
3.21 Charter Documents and Bylaws. Seller has heretofore made
available to Purchaser true and complete copies of the articles of
incorporation and bylaws of the Company, as in effect on the date hereof.
3.22 Minute Books. The minute books of the Company accurately
reflect in all material respects all formal actions taken at all meetings and
all consents in lieu of meetings of the stockholders of the Company since
January 1, 1990, and all formal actions taken at all meetings and all consents
in lieu of meetings of the boards of directors of the Company and all
committees thereof since January 1, 1990. All of such minute books have
previously been made available for inspection by Purchaser.
3.23 Employees. Section 3.23 of the Disclosure Schedule contains
a true and complete list of each employee of the Company.
3.24 Disclosure. To the knowledge of Seller, no representation
or warranty made by Seller in this Agreement or in any certificate furnished
by Seller to Purchaser in connection with this Agreement contains any untrue
statement of material fact or omits to state a material fact necessary to make
the statement not misleading in light of the circumstances in which they were
made.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
4.1 Organization. Purchaser is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Nevada
and has full corporate power and authority to enter into this Agreement and to
perform its obligations under this Agreement.
4.2 Authority. The execution and delivery of this Agreement by
Purchaser and the performance by Purchaser of its obligations under this
Agreement have been duly and validly authorized by all necessary corporate
action on the part of Purchaser. This Agreement has been duly executed and
delivered by Purchaser and constitutes a legal, valid, and binding obligation
of Purchaser and is enforceable against Purchaser in accordance with its
terms, except to the extent that (a) enforcement may be limited by or subject
to any bankruptcy, insolvency, reorganization, moratorium, or similar laws now
or hereafter in effect relating to or limiting creditors' rights generally and
(b) the remedy of specific performance and injunctive and other forms of
equitable relief are subject to certain equitable defenses and to the
discretion of the court or other similar person or entity before which any
proceeding therefor may be brought.
4.3 No Conflicts or Violations. The execution and delivery of
this Agreement by Purchaser and the performance by Purchaser of its
obligations under this Agreement will not:
(a) subject to obtaining the approvals contemplated by Sections
5.1, 5.2, 6.1, and 6.2 hereof violate any term or provision of any law or any
writ, judgment, decree, or injunction applicable to Purchaser or any of its
assets or properties;
(b) conflict with or result in a violation or breach of any of
the provisions of the certificate of incorporation or bylaws of Purchaser;
(c) conflict with or result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default under,
any Contract to which Purchaser is a party or by which any asset or property
of Purchaser may be bound; or
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(d) require Purchaser or any of its subsidiaries to obtain any
consent, approval, or action of, or make any filing with or give any notice
to, any person or entity, except as contemplated in Sections 6.1(a)(ii) and
6.2 hereof.
4.4 Purchase for Investment. The Shares will be acquired by
Purchaser for its own account for the purpose of investment and not for the
purpose or with the intent of further distribution or other sales or
dispositions thereof. Purchaser has sufficient knowledge and experience in
financial and business matters to evaluate the merits and risks of its
investment in the Shares. Purchaser will refrain from transferring or
otherwise disposing of any of the Shares, or any interest therein, in such
manner as to violate any registration provision of the securities laws.
4.5 Litigation.
(a) There are no actions, suits, investigations, arbitrations or
proceedings pending, or (to the knowledge of Purchaser) threatened, against
Purchaser or its assets or properties, at law or in equity, in, before, or by
any person or entity that, if adversely determined, would reasonably be
expected to have a material adverse effect on the validity or enforceability
of this Agreement, on the ability of Purchaser to perform its obligations
under this Agreement or on the consummation of the transactions contemplated
by this Agreement.
(b) There are no writs, judgments, decrees, injunctions, or
similar orders of any person or entity outstanding against Purchaser that
reasonably would be expected to have a material adverse effect on the validity
or enforceability of this Agreement, on the ability of Purchaser to perform
its obligations under this Agreement or on the consummation of the
transactions contemplated by this Agreement.
ARTICLE V
COVENANTS OF SELLER
Seller covenants and agrees with Purchaser that, at all times before
the earlier of the Closing or the termination of this Agreement in accordance
with ARTICLE XI hereof, Seller will comply with all covenants and provisions
of this ARTICLE V applicable to it, except to the extent (i) Purchaser may
otherwise consent in writing, (ii) otherwise required by
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applicable law, or (iii) otherwise expressly required or permitted by this
Agreement.
5.1 Contract and Regulatory Approvals. Seller will take (and
will cause the Company to take) all commercially reasonable steps necessary or
desirable, and proceed diligently and in good faith and use commercially
reasonable efforts, to obtain as promptly as practicable (a) all approvals and
consents required of any person or entity under all Contracts to which Seller
or the Company is a party to consummate the transactions contemplated hereby,
including, without limitation, all consents set forth in Section 3.5 of the
Disclosure Schedule, and (b) all approvals, authorizations, and clearances of
governmental and regulatory authorities required of each of Seller and the
Company to consummate the transactions contemplated hereby. Seller will, and
will cause the Company to, (i) provide such other information and
communications to such governmental and regulatory authorities as Purchaser or
such authorities may reasonably request, and (ii) cooperate with Purchaser in
obtaining, as promptly as practicable, all approvals, authorizations, and
clearances of governmental or regulatory authorities and other persons or
entities required of Purchaser to consummate the transactions contemplated
hereby, including any required approvals of the insurance regulatory
authorities in the Commonwealth of Pennsylvania and the State of Texas.
Additionally, as soon as practicable after the filing thereof, Seller will
provide Purchaser with copies of all motions filed with the Bankruptcy Court
relating to obtaining an order of the Bankruptcy Court in connection with the
transactions contemplated by this Agreement, and at least 10 days prior to
Closing, Seller will obtain an order of the Bankruptcy Court, the operation of
which shall not have been restrained, enjoined, suspended, or otherwise
stayed, authorizing and approving (A) the performance of the obligations or
undertakings under Section 5.18 of this Agreement by any of such of Seller's
Affiliate who is a debtor in a case under the Bankruptcy Court, and (B) the
performance of any other obligation or undertaking under this Agreement by any
of such of Seller's Affiliates who is a debtor in a case under the Bankruptcy
Code which requires the approval of the Bankruptcy Court.
5.2 HSR Filings. Seller will (a) take all actions necessary to
make the filings required of it or its Affiliates under the HSR Act with
respect to the transactions contemplated by this Agreement, (b) comply with
any request for additional information received by Seller or its Affiliates
from the Federal Trade Commission or Antitrust Division of the Department of
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Justice pursuant to the HSR Act, (c) cooperate with Purchaser in connection
with Purchaser's filings under the HSR Act, and (d) request early termination
of the applicable waiting period.
5.3 Investigation by Purchaser. Seller will provide, and will
cause the Company to provide, Purchaser and its representatives and agents
with reasonable access, upon reasonable prior notice and during normal
business hours, to all facilities, officers, employees, agents, assets or
properties, and books and records of the Company and will furnish Purchaser
and such representatives and agents with all such information and data in
their possession concerning the business, operations, and affairs of the
Company as Purchaser or such representatives and agents may reasonably
request. Records and other documents that are subject to any attorney-client
privilege that protects such documents and records from a discovery request
from third parties shall not be required to be disclosed if such disclosure
would make such privilege unavailable.
5.4 Conduct of Business. Except as otherwise expressly
permitted in this Agreement, Seller will cause the Company to conduct its
business only in the ordinary course and consistent with past practice.
Without limiting the generality of the foregoing and except as expressly
provided herein:
(a) Seller will use, and will cause the Company to use, all
commercially reasonable efforts to (i) preserve intact the present business
organization, reputation, and policyholder relations of the Company, (ii) keep
available the services of the present officers, directors, employees, agents,
consultants, and other similar representatives of the Company, (iii) maintain
in full force and effect all Contracts referenced in Section 3.15 hereof,
except those Contracts which expire in accordance with their terms or are
terminated by the Company in the ordinary course of business, (iv) maintain
all licenses (including licenses to transact insurance business),
qualifications, and authorizations of the Company to do business in each
jurisdiction in which it is so licensed, qualified, or authorized, and (v)
maintain each rating classification assigned to the Company by all rating
agencies as of the date hereof.
(b) Seller will cause the Company to (i) maintain all assets and
properties of the Company in good working order and condition (ordinary wear
and tear excepted), and (ii) continue all current marketing and selling
activities relating to the business, operations, and affairs of the Company.
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(c) Seller will cause the Company to maintain its books and
records in the usual manner and consistent with past practice and will not
permit a material change in any underwriting, investment, actuarial, financial
reporting, tax, or accounting practice or policy of the Company or in any
assumption underlying such a practice or policy, or in any method of
calculating any bad debt, contingency, insurance, or other reserve for
financial reporting purposes or for other accounting purposes (including any
practice, policy, assumption, or method relating to or affecting the
determination of the Company's insurance in force, premium or investment
income, reserves or other similar amounts, or operating ratios with respect to
expenses, losses or lapses).
(d) Seller will cause the Company (i) to prepare properly and to
file duly and validly all reports and all Tax Returns required to be filed
prior to the Closing Date with any governmental or regulatory authorities with
respect to the business, operations, or affairs of the Company, and (ii) to
pay duly and fully all Taxes which are due with respect to the periods covered
by such Tax Returns or otherwise levied or assessed upon such entity or any of
its assets or properties, and to withhold or collect and pay to the proper
taxing authorities all Taxes that such entity is required to so withhold or
collect and pay, unless such taxes are being contested in good faith and, if
appropriate, reasonable reserves therefor have been established and reflected
in the books and records of such entity and in accordance with SAP and (iii)
to provide Purchaser with copies of all tax returns prepared by the Company as
soon as practicable after the preparation, but prior to the filing, thereof.
(e) Seller will cause all statutory reserves and other similar
amounts with respect to losses, benefits, claims, and expenses in respect of
the Company's insurance business to be (i) determined in accordance with SAP
and generally accepted actuarial assumptions, (ii) determined in accordance
with the benefits specified in the related insurance or reinsurance Contracts
in all material respects, (iii) calculated, established and reflected on a
basis consistent in all material respects with those reserves and other
similar amounts and reserving methods followed by the Company at December 31,
1995, (iv) determined in conformity with the requirements of the insurance
laws of each applicable jurisdiction in all material respects, and
(v) adequate, in all material respects, based upon then-current information
and assumptions concerning investment income, mortality and morbidity
experience, persistency, and expenses, to cover the total amount of all
matured and reasonably anticipated
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unmatured benefits, dividends, losses, claims, expenses, and other liabilities
of the Company under all insurance or reinsurance Contracts which the Company
has or will have any liability. Seller will cause the Company to continue to
own assets and properties that qualify as legal reserve assets under all
applicable insurance laws in an amount at least equal to all of the Company's
required reserves and other similar amounts.
(f) Seller will cause the Company to use all commercially
reasonable efforts to maintain in full force and effect substantially the same
levels of coverage as the insurance afforded under the insurance coverage
described in Section 3.18 hereof.
(g) Seller will cause the Company to refrain from entering into
any reinsurance, coinsurance, or other similar Contract, whether as reinsurer
or reinsured, including without limitation any surplus relief or financial
reinsurance contract.
(h) Seller will cause the Company to continue to comply, in all
material respects, with all laws applicable to the business, operations, or
affairs of the Company.
5.5 No Charter Amendments. Seller will cause the Company to
refrain from amending its articles of incorporation or bylaws and from taking
any action with respect to any such amendment.
5.6 No Issuance of Securities. Seller will cause the Company to
refrain from authorizing or issuing any shares of its capital stock (or any
interest therein) or entering into any Contract or granting any option,
warrant, or right calling for the authorization or issuance of any shares of
capital stock of the Company (or any interest therein), or creating or issuing
any securities directly or indirectly convertible into or exchangeable for any
such shares (or any interest therein), or issuing any options, warrants, or
rights to purchase any such convertible securities (or any interest therein).
5.7 Dividends. Seller will cause the Company to declare and
pay, on or before the Closing Date, a dividend of cash and/or property to
Seller to the fullest extent permitted by the appropriate regulatory
authorities. Seller will cause the Company to refrain from directly or
indirectly redeeming or purchasing any of its capital stock or any interest in
or right to acquire any such stock.
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5.8 Resignations of Directors and Officers. Seller will cause
such directors and officers of the Company as are designated by Purchaser at
least two days prior to the Closing Date to tender their resignations
effective at, and subject to, the Closing.
5.9 Books and Records. On the Closing Date, Seller will deliver
to Purchaser or will make available to Purchaser all books and records of the
Company that are in the possession of Seller and its Affiliates (other than
the Company). Seller will, and will cause its Affiliates (other than the
Company) to deliver, any books and records of the Company if at any time after
the Closing, Seller or its Affiliates (other than the Company) discovers any
such books or records.
5.10 No Negotiation, etc. Seller will refrain and will cause
each Affiliate and any other person or entity acting for or on behalf of
Seller or its Affiliates to refrain from taking, directly or indirectly, any
action (a) to seek or encourage any offer or proposal from any person or
entity to acquire all or substantially all assets or properties or shares of
capital stock or other securities of the Company (or any interest in any of
the foregoing), (b) to merge, consolidate, or combine the Company with any
other corporation, or to permit any other corporation to merge, consolidate,
or combine into the Company, (c) to liquidate, dissolve, or reorganize the
Company in any manner, (d) to acquire or transfer any assets or properties of
the Company (or any interest in any of the foregoing), (e) to reach any
agreement or understanding (whether or not such agreement or understanding is
absolute, revocable, contingent, or conditional) for, or otherwise to attempt
to consummate any such acquisition, transfer, merger, consolidation,
combination, or reorganization, or (f) to furnish or cause to be furnished any
information with respect to the Company to any person or entity (other than
Purchaser and its Affiliates, employees, and agents), in each case except to
the extent otherwise required by applicable law. If Seller or any Affiliate
of Seller receives, directly or indirectly, from any person or entity (other
than Purchaser) any offer, proposal, or informational request that is subject
to this Section 5.10, Seller will promptly advise such person or entity, by
written notice, of the terms of this Section 5.10 and will promptly deliver a
copy of such notice to Purchaser.
5.11 Financial Statements and Reports.
(a) As promptly as practicable, Seller will deliver to Purchaser
true and complete copies of the Quarterly Statement
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filed by the Company for each calendar quarter ending after December 31, 1995.
Such Quarterly Statements will (i) comply in all material respects with all
applicable laws when so filed, (ii) be prepared in accordance with SAP, (iii)
be true and complete in all material respects, and (iv) will present fairly in
all material respects the financial position of the Company as of the
respective dates thereof and the related summary of operations and changes in
capital and surplus and in cash flows of the Company for and during the
respective periods covered thereby.
(b) Seller will deliver to Purchaser true and complete copies of
such other material financial statements, reports, or analyses as may be
prepared or received by Seller or any Affiliate of Seller and as relate to the
business, operations, or affairs of the Company.
5.12 Investments.
(a) Seller will cause the Company to invest its future cash
flow, any cash from matured and maturing investments, any cash proceeds from
the sale of assets or properties, and any cash funds currently held by the
Company exclusively in the type of assets described on Exhibit A hereto,
except as otherwise required by law or except as required to provide cash (in
the ordinary course of business and consistent with past practice) to meet
such entity's reasonably anticipated current obligations. Seller will cause
the Company to refrain from acquiring assets or properties that are classified
as non-admitted under SAP and which, individually or in the aggregate, have
book values in excess of $10,000.00. Seller will cause the Company to re-
classify as non-admitted all assets or properties (or portions thereof) of the
Company that are currently classified as admitted assets and that (i) are
listed in Section 5.12 of the Disclosure Schedule, or (ii) the insurance
regulatory authorities in either the Commonwealth of Pennsylvania or the State
of Texas direct should properly be classified as non-admitted under SAP.
Seller will cause the Company to refrain from selling or otherwise disposing
of any bonds or other securities of the type required to be reflected in line
1 of page 2 of the December 31, 1995 Annual Statement of the Company which
will result in the realization, from January 1, 1996, through the Closing
Date, individually or in the aggregate, of capital gains (without giving
effect to reduction thereof by realized capital losses) in excess of
$50,000.00.
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(b) On or before the Closing Date, Seller will cause the Company
to sell for cash all of its real property, partnership interests, common
stock, mortgage loans, and bonds having a rating assigned by the Securities
Valuation Office of the National Association of Insurance Commissioners of
other than 1, 2, 3, or 4. Each such asset and property will be sold at a
purchase price equal to the book value, determined in accordance with SAP as
of the date of such sale, of such asset or property.
(c) Seller will, or will cause Southwestern Financial
Corporation to, calculate for the Company, within 30 days after the end of
each calendar quarter after the date hereof, the book value of the Company's
investment in the bonds of Fund America Investors Corporation Series 93-C so
long as the Company owns such bonds.
5.13 Employee Matters. Except as may be required by law, Seller
will refrain, and will cause the Company to refrain, from directly or
indirectly:
(a) hiring any officer, director, employee, agent, consultant,
or other similar representative of the Company (or FMI to the extent such
person would be deemed to be a Company Employee), except to the extent
necessary to conduct its business in the ordinary course consistent with past
practice;
(b) entering into any Contract with any officer, director,
employee, agent, consultant, or other similar representative of the Company;
or
(c) adopting or entering into any pension, welfare, bonus,
deferred compensation, incentive compensation, profit sharing, stock,
retirement, or other benefit plan or arrangement.
5.14 No Disposal of Property. Except as otherwise expressly
permitted or required by this Agreement, Seller will cause the Company to
refrain from (a) disposing of any assets or properties of the Company and from
permitting any of such assets or properties of the Company to be subjected to
any liens or encumbrances, except for Permitted Liens, (b) selling any
material part of its Insurance Contracts in force, operations, or business to
any third party, (c) entering into any Contracts obligating the Company to
administer the operations of any person or entity other than the Company,
other than Administrative Services Agreements entered into in the ordinary
course of business and consistent with past practice, and (d) entering into
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any Contracts permitting any person or entity other than the Company to
administer the operations of the Company.
5.15 No Breach or Default. Seller will cause the Company to
refrain from violating, breaching, or defaulting, and from taking or failing
to take any action that (with or without notice or lapse of time or both)
would constitute a violation, breach, or default, under any term or provision
of any Contract to which the Company is a party or by which any of its assets
or properties is or may be bound, except for such violations, breaches,
defaults, actions, or failures that individually or in the aggregate do not
have and would not reasonably be expected to have a Material Adverse Effect.
5.16 Indebtedness. Seller will cause the Company to refrain from
(a) creating, incurring, assuming, guaranteeing, or otherwise becoming liable
for any liability (except in the ordinary course of business and consistent
with past practice), (b) cancelling, paying, agreeing to cancel or pay, or
otherwise providing for a complete or partial discharge, in each case in
advance of a scheduled payment date with respect to any monetary liability,
and (c) waiving any right to receive any direct or indirect payment or other
benefit under any liability owing to it.
5.17 No Acquisitions. Seller will cause the Company to refrain
from (a) merging, consolidating, or otherwise combining or agreeing to merge,
consolidate, or otherwise combine with any other entity, (b) acquiring or
agreeing to acquire blocks of business or all or substantially all assets or
capital stock or other equity securities of any other entity, or (c) otherwise
acquiring or agreeing to acquire control or ownership of any other entity.
5.18 Intercompany Liabilities and Affiliate Transactions. Except
as otherwise expressly provided for in this Agreement, the Company will not
enter into any Contract or engage in any transaction with Seller or any
Affiliate of Seller (other than the Company). On or before the fifth business
day prior to the Closing Date, Seller will deliver to Purchaser a list and
description of all intercompany accounts and balances payable or receivable,
whether or not currently due, between the Company, on the one hand, and Seller
or any other Affiliate of the Company, on the other hand, as of the
Determination Date ("Preliminary Intercompany Balances"). At or prior to
Closing, all Preliminary Intercompany Balances shall be paid by the
appropriate party and fully reconciled. As soon as practicable after the
Closing, and
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in any event within 45 days after the Closing, Seller and Purchaser shall
cooperate in good faith to finally determine all intercompany accounts and
balances between the Company, on the one hand, and Seller or its Affiliates
(other than the Company), on the other hand, that were payable or receivable
at or prior to the Closing, and, upon such determination, all such accounts
and balances shall be finally paid and reconciled. Except as otherwise
specifically provided in this Section 5.18 or Sections 12.2, 12.9, and 12.10
hereof or as otherwise agreed to by Purchaser and Seller prior to Closing, on
and effective as of the Closing Date, Seller will terminate and will cause its
Affiliates to terminate each Contract between the Company, on the one hand,
and Seller and any other Affiliate of the Company, on the other hand,
including without limitation each Contract or arrangement disclosed in Section
3.15(h) of the Disclosure Schedule, except that all such Contracts or
arrangements shall be deemed to survive the Closing to the extent necessary to
preserve the parties' rights to final reconciliation and payment of accounts
and balances arising or accruing thereunder through the Closing Date and, upon
such reconciliation and payment shall have no further effect; provided,
however, that intercompany accounts and balances related to Taxes shall be
subject to and reconciled in accordance with Section 12.2(e) hereof. Subject
to Section 12.2(e) hereof, on the Closing Date, Seller shall execute and shall
cause each Affiliate which is or has been included as a member of a
consolidated, combined, unitary or affiliated group filing Seller Consolidated
Returns to execute an agreement (in a form satisfactory to Purchaser)
cancelling any applicable tax sharing, tax allocation, tax indemnity or other
similar agreement with respect to the Company and releasing the Company from
any further liability with respect to Taxes of any such consolidated,
combined, unitary or affiliated group.
5.19 Business. Seller will cause the Company to use its
commercially reasonable efforts before the Closing Date to (a) remove any
oversight regulatory restrictions imposed on the Company's ability to issue
Insurance Contracts, (b) file with the appropriate regulatory authorities such
policy forms as Purchaser may reasonably request, and (c) license such
insurance agents and brokers as Purchaser may reasonably request.
ARTICLE VI
COVENANTS OF PURCHASER
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Purchaser covenants and agrees with Seller that, at all times before
the earlier of the Closing or the termination of this Agreement in accordance
with ARTICLE XI hereof, Purchaser will comply with all covenants and
provisions of this ARTICLE VI, except to the extent (i) Seller may otherwise
consent in writing, (ii) otherwise required by applicable law, or
(iii) otherwise expressly required or permitted by this Agreement.
6.1 Contract and Regulatory Approvals. Purchaser will (a) take
all commercially reasonable steps necessary or desirable, and proceed
diligently and in good faith and use commercially reasonable efforts, to
obtain as promptly as practicable (i) all approvals and consents required of
any person or entity under all Contracts to which Purchaser is a party to
consummate the transactions contemplated hereby, and (ii) all approvals,
authorizations, and clearances of governmental and regulatory authorities
required of Purchaser to consummate the transactions contemplated hereby,
including any required approvals of the insurance regulatory authorities in
the Commonwealth of Pennsylvania and the State of Texas, (b) provide such
information and communications to such governmental and regulatory authorities
as such authorities may reasonably request, and (c) cooperate with Seller in
obtaining, as promptly as practicable, all approvals, authorizations, and
clearances of governmental or regulatory authorities and other persons or
entities required of Seller to consummate the transactions contemplated
hereby.
6.2 HSR Filings. Purchaser will (a) take all actions necessary
to make the filings required of it or its Affiliates under the HSR Act with
respect to the transactions contemplated by this Agreement, (b) comply with
any request for additional information received by Purchaser or its Affiliates
from the Federal Trade Commission or Antitrust Division of the Department of
Justice pursuant to the HSR Act, (c) cooperate with Seller in connection with
Seller's filings under the HSR Act, and (d) request early termination of the
applicable waiting period.
6.3 Continuation of Services. Unless otherwise requested in
writing by Seller prior to the Closing, Purchaser shall cause the Company to
continue until no later than December 31, 1997, or such earlier date as may be
agreed upon between Seller and Purchaser, to provide administrative services
as currently being performed by the Company with respect to the group health,
life and disability plans and the retiree health plans established by Seller
for the current and former employees of Seller and its Affiliates, other than
employees employed by the Company after
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the Closing, upon the terms and conditions, and for the administrative fees as
currently in effect under the FMI Administrative Agreement. Nothing contained
in this Section 6.3 shall limit Seller's or its Affiliates' right to terminate
any services provided by the Company as contemplated in this Section 6.3 if
comparable services are available from other non-Affiliates of Seller on
substantially more favorable terms or the Company fails to provide such
services in accordance with standards consistent with past practice or as
otherwise required by Contracts in effect at the time of Closing or applicable
laws.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder are subject to the
fulfillment, at or before the Closing, of each of the following conditions
(all or any of which may be waived in whole or in part by Purchaser). Seller
shall use all commercially reasonable efforts to fulfill, at or before the
Closing, such of the following conditions (or portions thereof) over which it
has control.
7.1 Representations and Warranties. The representations and
warranties made by Seller in this Agreement, in the certificates delivered by
Seller pursuant to this Agreement, and in the Disclosure Schedule shall be
true in all material respects as of the Closing as though such representations
and warranties were made at and as of the Closing.
7.2 Performance. Seller shall have performed and complied with,
in all material respects, all agreements and covenants required by this
Agreement to be so performed or complied with by Seller at or before the
Closing.
7.3 Officer's Certificates. Seller shall have delivered to
Purchaser a certificate, dated the Closing Date and executed by an executive
officer of Seller, certifying as to the fulfillment by Seller of the
conditions set forth in Sections 7.1, 7.2, 7.5, 7.6, 7.7, and 7.9 hereof. In
addition, Seller shall have delivered to Purchaser a certificate, dated the
Closing Date and executed by the secretary or any assistant secretary of
Seller, certifying that Seller has duly and validly taken all corporate or
other action necessary to authorize its execution and delivery of this
Agreement and the performance of its obligations under this Agreement.
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7.4 HSR Act Approval. All waiting periods applicable to this
Agreement and the transactions contemplated hereby under the HSR Act shall
have expired or been waived.
7.5 No Injunction. There shall not be in effect on the Closing
Date any writ, judgment, injunction, decree, or similar order of any court or
governmental authority restraining, enjoining, or otherwise preventing
consummation of any of the transactions contemplated by this Agreement.
7.6 No Proceeding or Litigation. There shall not be
instituted, pending, or (to Purchaser's knowledge or Seller's knowledge)
threatened, any action, suit, investigation, or other proceeding in, before,
or by any court, governmental or regulatory authority, or other person or
entity to restrain, enjoin, or otherwise prevent consummation of any of the
transactions contemplated by this Agreement.
7.7 Contract and Regulatory Approvals. All approvals,
authorizations, and clearances contemplated by Sections 5.1 and 6.1(a)(ii)
hereof and necessary to permit Seller and Purchaser to perform their
obligations under this Agreement and to consummate the transactions
contemplated hereby (including, without limitation, any requisite action of
the insurance regulatory authorities in the Commonwealth of Pennsylvania and
the State of Texas) shall have been obtained and shall be in full force and
effect.
7.8 Resolution of Reinsurance Disputes. The Company shall have
either (a) resolved all disputes regarding its reinsurance recoverables on
terms and conditions acceptable to Purchaser, or (b) transferred to Seller or
an Affiliate of Seller (other than the Company) all of the Company's rights,
title, and interest in and to such reinsurance recoverables with respect to
such disputes for an amount in cash equal to the book value of such
reinsurance recoverables as reflected in the Company's balance sheet as of the
Determination Date.
7.9 No Adverse Change. There shall not have occurred since
December 31, 1995, any change in the business, licenses, insurance in force,
or condition (financial or otherwise) of the Company, except (i) as disclosed
in Section 3.9 of the Disclosure Schedule, (ii) changes in the amounts of in-
force insurance related to the Company's "AD-24" product, or (iii) for such
changes that, individually or in the aggregate, do not have and would not
reasonably be expected to have a Material Adverse Effect.
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7.10 Opinion of Counsel to Seller. Purchaser shall have received
the opinion substantially in the form of Exhibit B hereto from Winstead
Sechrest & Minick P.C. or other outside counsel of Seller reasonably
satisfactory to Purchaser.
7.11 Investments. Prior to or upon Closing, the assets and
properties of the Company described on Exhibit B hereto shall be sold in
accordance with Section 5.12(b) hereof.
7.12 Financing. Purchaser shall have received the proceeds of
financing for the transactions contemplated hereby in such amount and on such
terms and conditions as are satisfactory to Purchaser.
7.13 Certificates of Compliance. Seller shall have delivered to
Purchaser certificates of compliance as of a recent date to the effect that
the Company is duly licensed to transact insurance business in, and is in
compliance with the laws of, each jurisdiction in which the Company is
licensed to transact insurance business.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller hereunder are subject to the fulfillment,
at or before the Closing, of each of the following conditions (all or any of
which may be waived in whole or in part by Seller). Purchaser will use all
commercially reasonable efforts to fulfill, at or before the Closing, such of
the following conditions (or portions thereof) over which it has control.
8.1 Representations and Warranties. The representations and
warranties made by Purchaser in this Agreement and in the certificates
delivered by Purchaser pursuant to this Agreement shall be true in all
material respects as of the Closing as though such representations and
warranties were made as of the Closing.
8.2 Performance. Purchaser shall have performed and complied
with, in all material respects, all agreements and covenants required by this
Agreement to be so performed or complied with by Purchaser at or before the
Closing.
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8.3 Officer's Certificates. Purchaser shall have delivered to
Seller a certificate, dated the Closing Date and executed by an executive
officer of Purchaser, certifying as to the fulfillment of the conditions set
forth in Sections 8.1, 8.2, 8.5, 8.6, and 8.7 hereof. In addition, Purchaser
shall have delivered to Seller a certificate, dated the Closing Date and
executed by the secretary or any assistant secretary of Purchaser, certifying
that Purchaser has duly and validly taken all corporate action necessary to
authorize its execution and delivery of this Agreement and the performance of
its obligations under this Agreement.
8.4 HSR Act Approval. All waiting periods applicable to this
Agreement and the transactions contemplated hereby under the HSR Act shall
have expired or been waived.
8.5 No Injunction. There shall not be in effect on the Closing
Date any writ, judgment, injunction, decree, or similar order of any court or
governmental authority restraining, enjoining, or otherwise preventing
consummation of any of the transactions contemplated by this Agreement.
8.6 No Proceeding or Litigation. There shall not be
instituted, pending, or (to Purchaser's knowledge or Seller's knowledge)
threatened any action, suit, investigation, or other proceeding in, before, or
by any court, governmental or regulatory authority, or other person or entity
to restrain, enjoin, or otherwise prevent consummation of any of the
transactions contemplated by this Agreement.
8.7 Contract or Regulatory Approvals. All approvals,
authorizations, and clearances contemplated by Sections 5.1(b) and 6.1 hereof
or otherwise set forth in Section 3.5 of the Disclosure Schedule and necessary
to permit Seller and Purchaser to perform their obligations under this
Agreement and to consummate the transactions contemplated hereby (including,
without limitation, any requisite action of the insurance regulatory
authorities in the Commonwealth of Pennsylvania and the State of Texas) shall
have been obtained and shall be in full force and effect.
8.8 Opinion of Counsel to Purchaser. Seller shall have received
the opinion substantially in the form of Exhibit C hereto from Weil, Gotshal &
Manges LLP.
ARTICLE IX
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SURVIVAL OF PROVISIONS
9.1 Survival of Representations and Warranties.
(a) Subject to Section 9.2 hereof and ARTICLE X hereof, the
representations and warranties respectively made by Seller and Purchaser in
this Agreement, in the Disclosure Schedule, or in any certificate required to
be delivered pursuant to this Agreement will survive the Closing (i) until the
expiration of all applicable statutes of limitations (including all periods of
extension, whether automatic or permissive) in the case of the representations
and warranties of Seller set forth in Sections 3.4, 3.11, and 3.14 hereof, and
(ii) until the first anniversary of the Closing Date, in the case of all other
representations and warranties.
(b) The covenants and agreements of Seller and Purchaser
contained in ARTICLE V and ARTICLE VI hereof, respectively, will terminate as
of the first anniversary of the Closing Date.
(c) The covenants and agreements of Seller and Purchaser
contained in this Agreement, to the extent that, by their terms, they are to
be performed or complied with after the Closing, including, without
limitation, the indemnification agreements set forth in ARTICLE X hereof, will
survive the Closing until the later of (i) the first anniversary of the
Closing Date, or (ii) the expiration of all applicable statutes of limitations
(including all periods of extension, whether automatic or permissive)
affecting any such covenant or agreement; provided, however, that any such
covenant or agreement that specifies a term or period expiring before the
expiration of all applicable statutes of limitations will survive for a period
of 180 days following the expiration of such specified term or period.
9.2 Pursuit of Claims. Any breach of any representation,
warranty, covenant, or agreement as to which a bona-fide claim for
indemnification has not been asserted in accordance with ARTICLE X hereof
during the applicable survival period set forth in Section 9.1 hereof may not
be pursued, and hereby is irrevocably waived, except that if a claim for
indemnification is made in accordance with ARTICLE X hereof before the
expiration of the applicable survival period set forth in Section 9.1 hereof,
then (notwithstanding such survival period) the representation, warranty,
covenant, or agreement applicable to such claim will survive until, but only
for the purpose of, the resolution of such claim by final, nonappealable
judgment or settlement.
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9.3 Remedies Limitation. Without limiting the rights that any
party may have for fraud under common law, Purchaser and Seller agree that the
sole and exclusive remedy of any party hereto with respect to all claims for
Damages arising out of any actual or alleged breach of this Agreement will be
as provided in ARTICLE X hereof, subject to the limitations imposed thereon by
this ARTICLE IX.
ARTICLE X
INDEMNIFICATION
10.1 Indemnification by Seller. Subject to the provisions of
Sections 10.3 and 10.5 and ARTICLE IX hereof, Seller will indemnify and hold
harmless each of Purchaser, its Affiliates and each of their officers,
directors and employees (collectively, the "Purchaser Indemnitees") from and
against any and all Damages resulting from or relating to:
(a) any breach by Seller of any representation, warranty,
covenant or agreement made by Seller in this Agreement, in the Disclosure
Schedule, or in any certificate required to be delivered pursuant to this
Agreement;
(b) any of the lawsuits set forth on Exhibit D hereto;
(c) claims based on misrepresentations made by the Company or
its agents in connection with the marketing, sales, and policy issuance
activities, and claims of bad-faith claims paying practices of the Company,
that occurred on or before the Closing Date and which relate to the Company's
"AD-24" product; and
(d) the employment, the failure to employ, or the termination of
employment of any individual by FMI or by the Company at or prior to Closing,
but excluding all Damages asserted by or on behalf of any Company Employee
related to amounts for which Purchaser is liable pursuant to Section 12.1
hereof.
10.2 Indemnification by Purchaser. Subject to the provisions of
Sections 10.3 and 10.5 and ARTICLE IX hereof, Purchaser will indemnify and
hold harmless each of Seller, its Affiliates and each of their officers,
directors and employees (collectively, the "Seller Indemnitees") from and
against any and all Damages resulting from or relating to any breach by
Purchaser of any representation, warranty, covenant, or agreement made by
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Purchaser in this Agreement or in any certificate required to be delivered
pursuant to this Agreement.
10.3 Indemnification Procedures.
(a) If an Indemnitee becomes aware of any matter that it
believes is indemnifiable pursuant to Section 10.1 or 10.2 hereof and such
matter involves (i) any claim made against the Indemnitee by any person or
entity other than Purchaser or Seller or (ii) the commencement of any action,
suit, investigation, arbitration, or similar proceeding against the Indemnitee
by any person or entity other than Purchaser or Seller, the Indemnitee will
give the Indemnifying Party prompt written notice of such claim or the
commencement of such action, suit, investigation, arbitration, or similar
proceeding, which notice must (A) provide (with reasonable specificity) the
basis on which indemnification is being asserted, (B) set forth the actual or
good-faith estimated amount of Damages for which indemnification is being
asserted, if known, and (C) be accompanied by copies of all relevant
pleadings, demands, and other papers served on the Indemnitee; provided,
however, that the Indemnitee's failure to provide the Indemnifying Party with
such notice shall not relieve the Indemnifying Party of its obligations under
this Article X, except to the extent that such Indemnifying Party's ability to
defend against such claim has been prejudiced as a result of such failure.
(b) The Indemnifying Party will have a period of 10 days after
the delivery of each notice required by Section 10.3(a) hereof during which to
respond to such notice. If the Indemnifying Party elects to defend the claim
described in such notice or does not respond within such 10-day period, the
Indemnifying Party will be obligated to compromise or defend (and will control
the defense of) such claim, at its own expense and by counsel chosen by the
Indemnifying Party. The Indemnitee will cooperate fully with the Indemnifying
Party and counsel for the Indemnifying Party in the defense against any such
claim, and the Indemnitee will have the right to participate at its own
expense in the defense of any such claim. If the Indemnifying Party responds
within such 10-day period and elects not to defend such claim, the Indemnitee
will be free to compromise or defend (and control the defense of) such claim
and to pursue such remedies as may be available to the Indemnitee under
applicable law.
(c) Any compromise or settlement of any claim (whether defended
by the Indemnitee or by the Indemnifying Party) will require the prior written
consent of the Indemnitee and the
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Indemnifying Party (which consent will not be unreasonably withheld).
(d) If an Indemnitee becomes aware of any matter that it
believes is indemnifiable pursuant to Section 10.1 or 10.2 hereof and such
matter involves a claim made by Purchaser or Seller, the Indemnitee will give
the Indemnifying Party prompt written notice of such claim, which notice must
(i) provide (with reasonable specificity) the bases for which indemnification
is being asserted, and (ii) set forth the actual or good-faith estimated
amount of Damages for which indemnification is being asserted. The
Indemnifying Party will have a period of 10 days after the delivery of each
notice required by this Section 10.3(d) during which to respond to such
notice. If the Indemnifying Party accepts (in writing) full responsibility
for the claim described in such notice or does not respond within such 10-day
period, the Indemnifying Party will pay upon demand to the Indemnitee the
actual or estimated amount of Damages reflected in such notice. If the
Indemnifying Party disputes such claim, the Indemnifying Party and the
Indemnitee agree to proceed in good faith to negotiate a resolution of such
dispute. If all such disputes are not resolved through negotiations within 10
days after such negotiations begin or if such negotiations are not initiated
within 10 days after notice is given, either the Indemnifying Party or the
Indemnitee may initiate litigation to resolve such disputes.
10.4 Treatment of Indemnification Payments. Seller and Purchaser
agree that any payment made under ARTICLE X hereof will be treated by the
parties on their tax returns as an adjustment to the aggregate consideration
for the Shares.
10.5 Claims Limitations. Notwithstanding the foregoing
provisions of this Article X,
(a) Neither Seller nor Purchaser shall be liable for
indemnification under this Article X for (i) consequential damages of the
other party; or (ii) any breach of any representation or warranty by such
party if such party can demonstrate that the other party had actual knowledge
of such breach prior to Closing and did not notify such breaching party of
such breach prior to Closing;
(b) Seller shall have no liability for indemnification for any
Damages under Section 10.2 hereof until and unless the cumulative total of
such Damages exceeds in the aggregate $100,000, at which time all amounts of
Damages in excess of
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$50,000 may be claimed and recovered as provided in this Agreement; provided,
however, that the limitations of this Section 10.5(b) shall not apply to any
Damages resulting from or relating to (i) any misrepresentation or breach of
warranty contained in Sections 3.4, 3.11, 3.13, or 3.14 hereof, or (ii)
Seller's knowing or willful misrepresentations or breaches of covenants or
agreements made as a part of or contained in this Agreement;
(c) If an Indemnitee recovers from any third party (including
insurers) all or any part of any amount previously paid to it by an
Indemnifying Party pursuant to Section 10.1, 10.2, or 10.6 hereof, such
Indemnitee will promptly pay over to the Indemnifying Party the amount so
recovered (after deducting therefrom the full amount of the expenses incurred
by it in procuring such recovery), but not in excess of any amount previously
so paid by the Indemnifying Party;
(d) The amount constituting the claim for which indemnification
may be made pursuant to Section 10.1, 10.2, or 10.6 hereof shall first be
determined, and such amount shall be (i) reduced by all amounts that have been
recovered or are known to be recoverable by an Indemnitee from a third party
(including insurers) at the time such indemnification is due from an
Indemnitee; and (ii) reduced by the Tax savings which is actually realized by
the Indemnitee from any loss, deduction or credit which is allowable with
respect to the indemnified Damage;
(e) The aggregate amount which Seller may be required to pay for
indemnification pursuant to Section 10.1 hereof, except for Damages resulting
from or relating to any misrepresentation or breach of warranty contained in
Sections 3.11 or 3.14 hereof, shall not exceed the sum of the Final Purchase
Price plus all out-of-pocket costs incurred by Purchaser (including reasonable
attorneys' fees) of attorneys, accountants, actuaries and other experts) in
connection with the transactions contemplated by this Agreement or any
disputes relating hereto.
10.6 Tax Indemnification.
(a) Seller will be responsible for, will pay or cause to be
paid, and will indemnify and hold harmless Purchaser and the Company from and
against, any and all Damages for or in respect of each of the following:
(i) any and all Taxes with respect to any taxable period (or
portions thereof) of the Company (or any
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predecessor) ending on or before the Closing Date (including, without
limitation, any liability for Taxes resulting from (A) an
acceleration of an "intercompany transaction," within the meaning of
Treasury Regulation Section 1.1502-13(d) (or any analogous or similar
provision under state, local or foreign law or any predecessor
provision or regulation), that occurred on or before the Closing
Date, (B) any dividend or other distribution pursuant to this
Agreement, and (C) the Election);
(ii) any and all Taxes of any member of an affiliated,
consolidated, combined, or unitary group (other than the Company) of
which the Company (or any predecessor) is or was a member on or prior
to the Closing Date by reason of the liability of the Company
pursuant to Treasury Regulation Section 1.1502-6(a) or any analogous
or similar state, local or foreign Law; and
(iii) any breach by Seller of any representation, warranty,
covenant, or agreement contained in Section 3.11, Section 10.6, or
Section 12.2 hereof.
; provided, however, that Seller shall not be liable for or obligated
to indemnify Purchaser or the Company for any Damages or Taxes to the
extent; (A) Purchaser is obligated to indemnify Seller for such Taxes
pursuant to Section 10.6(b), (B) such Taxes are taken into account as
a liability or otherwise specifically reserved against in the Closing
Balance Sheet and are not paid to Seller pursuant to Section 12.2(e),
or (C) such Taxes arise as a result of the business, affairs,
operations, transactions or actions or inactions of Purchaser or the
Company after the Closing, whether on the Closing Date or any time
thereafter; provided that this clause (C) shall not apply by reason
of Purchaser or the Company performing any obligation, or exercising
or forebearing the exercise of any right, in good faith, under this
Agreement.
(b) Purchaser agrees to pay, and to indemnify Seller in respect
of, and hold Seller harmless from and against, any and all Damages for or in
respect of Taxes incurred by, imposed upon, or assessed against Seller or any
Affiliate of Seller (other than the Company) relating to the business and
operations of the Company after the Closing Date.
(c) The Company will promptly notify Seller of the commencement
of any claim, audit, examination, or other proposed
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change or adjustment by any taxing authority concerning any Taxes or other
Damages covered by Section 10.6(a) hereof ("Tax Claim"). Seller shall control
the defense and settlement of any Tax audit or administrative or court
proceeding relating to taxable periods of the Company ending on or prior to
the Closing Date, provided, however, that if the results of any such Tax audit
or administrative or court proceeding could reasonably be expected to be
material to Purchaser or the Company, then Purchaser may, at its expense,
participate in any such contest or proceeding and neither party shall
compromise or settle such contest or refund suit without the consent of the
other. Seller shall promptly notify the Company if it decides not to
participate in the defense or settlement of any such Tax audit or
administrative or court proceeding and the Company thereupon shall be
permitted to defend and settle such Tax audit or proceeding. Seller will
promptly notify the Company of the commencement of any claim, audit,
examination, or other proposed change or adjustment by any taxing authority
which may affect the liability of the Company for Taxes (including any audit
or proceeding relating to Seller Consolidated Returns) and Seller shall keep
the Company duly informed on a regular and periodic basis of the progress
thereof.
(d) Subject to Section 12.2 hereof, Seller shall be responsible
for, shall pay or cause to be paid, and shall indemnify and hold harmless
Purchaser and the Company from and against any liability arising under any Tax
sharing, Tax indemnity, Tax allocation or other similar contract to which the
Company, any predecessor to the Company or any transferor to the Company is a
party or is obligated thereunder, in each case on or prior to the Closing
Date.
(e) Any claim for indemnity hereunder may be made at any time
prior to sixty days after the expiration of the applicable Tax statute of
limitations with respect to the relevant taxable period (including all periods
of extension, whether automatic or permissive).
ARTICLE XI
TERMINATION
11.1 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing by written agreement of
Seller and Purchaser;
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(b) at any time before the Closing by Seller if any of the
covenants set forth in Section 6.1 or 6.2 shall have been breached, in any
material respect, and such breach has not been cured or eliminated within 30
days after notice thereof has been given to Purchaser; provided that at the
time of such termination Seller has neither breached any of the
representations and warranties set forth in Article III nor failed to satisfy,
perform, or comply with any of the covenants set forth in Article V hereof
required to be complied with as of such date, in any material respect;
(c) at any time before the Closing by Purchaser if any of the
covenants set forth in Section 5.1, 5.2, or 5.3 shall have been breached, in
any material respect, and such breach has not been cured or eliminated within
30 days after notice thereof has been given to Seller, provided that at the
time of such termination Purchaser has neither breached any of the
representations and warranties set forth in Article IV nor failed to satisfy,
perform, or comply with any of the covenants set forth in Article VI hereof
required to be complied with as of such date, in any material respect; or
(d) at any time after June 30, 1996, by Seller or Purchaser if
the transactions contemplated by this Agreement have not been consummated on
or before such date and such failure to consummate is not caused by a breach
of this Agreement by the party electing to terminate pursuant to this Section
11.1(d).
11.2 Effect of Termination. If this Agreement is validly
terminated pursuant to Section 11.1 hereof, this Agreement will become null
and void except that (a) the provisions of this Section 11.2 and ARTICLE XII
hereof will continue to apply following any such termination, and (b) no party
hereto will be relieved of any liability for Damages that such party may have
to the other parties by reason of such party's breach of this Agreement (or
any representation, warranty, covenant, or agreement included herein).
Notwithstanding anything to the contrary contained herein, if the transactions
contemplated by this Agreement are not consummated on or before June 30, 1996
solely as a result of the failure of the condition set forth in Section 7.12
hereof (or the failure of Purchaser to have obtained all necessary regulatory
approvals as contemplated by Section 6.1(a)(ii) hereof solely as a result of
the failure of the condition set forth in Section 7.12), then (i) Seller will
be entitled to retain the Escrow Amount, (ii) Seller and Purchaser will
jointly instruct the Escrow Agent to deliver the Escrow Amount to Seller and
to deliver all income thereon to Purchaser,
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all in accordance with the Escrow Agreement, and (iii) Purchaser will have no
further liability to Seller hereunder. If the transactions contemplated by
this Agreement are not consummated for any reason other than as a result of
the failure of the condition set forth in Section 7.12 hereof or if the
transactions contemplated hereby are consummated, then (A) Purchaser will be
entitled to retain the Escrow Amount and all income thereon, and (B) Seller
and Purchaser will jointly instruct the Escrow Agent to deliver the Escrow
Amount and all income thereon to Purchaser, all in accordance with the Escrow
Agreement.
ARTICLE XII
MISCELLANEOUS
12.1 Employment Matters.
(a) Effective as of the Closing Date, Purchaser will offer, or
will cause an Affiliate of Purchaser to offer, employment to those persons
listed in Section 12.1 of the Disclosure Schedule (the "Retained Employees"),
on terms and conditions as Purchaser, in its sole discretion, deems
appropriate.
(b) As a condition to employing any Retained Employee, Purchaser
agrees that it (or such Affiliate of Purchaser, including the Company, seeking
to employ such Retained Employee) will cause such Retained Employee to execute
an agreement releasing FMI from liability for any severance benefits to which
such Retained Employee would have been entitled to receive from FMI as a
result of the termination of such person's employment by FMI at Closing.
(c) During the period from the date hereof to the Closing Date,
Seller will refrain, and will cause its Affiliates (other than FMI or the
Company) to refrain from soliciting, offering, or seeking to employ or
employing any Retained Employees.
(d) If Purchaser fails to offer to any Retained Employee on or
prior to the Closing Date a position of comparable employment (as such phrase
is used in the Severance Plan) with Purchaser or an Affiliate of Purchaser
(including the Company), Purchaser will be liable for the payment of (i) all
severance benefits (in accordance with the Severance Plan) to which such
Retained Employee would have been entitled to receive from FMI or an Affiliate
of FMI (including the Company) as a result of the termination of such person's
employment by FMI or the Company at
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Closing, and (ii) all claims and liabilities relating to or arising in
connection with or under the WARN Act as a result of the failure to comply
with the notice requirements thereunder with respect to such Retained
Employee. If Purchaser hires any Company Employee (other than a Retained
Employee or a Temporary Employee) within 12 months after the Closing Date,
Purchaser will reimburse FMI for any severance benefits paid by FMI or an
Affiliate of FMI(in accordance with the Severance Plan) to such employees. At
the Closing Purchaser will pay FMI $71,867.00 (representing severance benefits
payable by FMI or its Affiliates to certain Company Employees other than
Retained Employees). Notwithstanding the foregoing, with respect to any
person hired pursuant to Section 5.13(a) hereof, neither Purchaser nor its
Affiliates (including the Company) will be liable for severance benefits to
such person.
(e) With respect to Retained Employees and Company Employees who
are hired by Purchaser or an Affiliate of Purchaser effective as of the
Closing Date or within 12 months thereafter ("Hired Employees"), Purchaser
agrees to establish, or cause an Affiliate of Purchaser to establish, a
welfare benefit plan or plans ("Purchaser's Welfare Plan") that provide
benefits that are substantially similar to the benefits to which such Hired
Employees were entitled immediately prior to the Closing Date under any plan,
fund, or arrangement maintained by FMI or any Affiliate thereof to which the
requirements of Section 4980B of the Code or Sections 601 through 608 of ERISA
apply ("FMI's Welfare Plan"). Further, Purchaser agrees that Purchaser's
Welfare Plan will cover spouses and dependents of Hired Employees who were
participating in FMI's Welfare Plan immediately prior to the Closing Date
("Eligible Dependents") on substantially similar terms as such individuals
were covered under FMI's Welfare Plan. Purchaser's Welfare Plan shall waive
any pre-existing condition provisions and eligibility requirements with
respect to Hired Employees and Eligible Dependents. Except as previously
provided in this Section 12.1(e) and Section 12.1(g) hereof, Purchaser and
Seller agree that, as of the Closing, Purchaser and its Affiliates (including
the Company) will be under no obligation to provide, maintain or sponsor, any
pension, welfare, bonus, deferred compensation, incentive compensation, profit
sharing, stock, retirement, severance, or other benefit plan or arrangement
for employees, former employees or retirees, directors, or officers of the
Company or FMI (or their dependents).
(f) From and after the Closing Date, except as provided in
Section 12.1 (e) hereof, Seller shall remain solely responsible
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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 employee benefit plan
sponsored by the Company in respect of any Company Employee terminated at or
prior to Closing. From and after the Closing Date, except as provided for in
Section 12.1(d)(ii) hereof, Seller shall 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 WARN Act.
(g) As soon as reasonably practicable following the Closing
Date, Purchaser or an Affiliate of Purchaser and FMI or an Affiliate of FMI
shall effect a trust to trust transfer of assets from the trust related to the
Southwestern Life Corporation Savings Investment Plan (the "FMI Savings Plan")
to either (i) the trust related to an existing qualified defined contribution
plan maintained by the Purchaser or an Affiliate of Purchaser or (ii) a trust
related to a newly established qualified defined contribution plan maintained
by Purchaser or an Affiliate of Purchaser (any plan and trust described in (i)
or (ii) shall be referred to herein as "Purchaser's Plan"); provided, however,
prior to any such transfer, Purchaser or an Affiliate of Purchaser shall have
provided to FMI or an Affiliate of FMI a favorable determination letter from
the IRS regarding the qualification of the Purchaser's Plan under Section
401(a) of the Code. The amount of the trust to trust transfer shall be an
amount equal to the fair market value as of the date of transfer of the
aggregate account balances under the FMI Savings Plan of those Hired Employees
who are employed by Purchaser or an Affiliate of Purchaser as of the date of
transfer. Such trust to trust transfer shall be made in accordance with all
applicable requirements of the Code and ERISA, including, but not limited to,
Section 414(l) and 411(d)(6) of the Code. All amounts transferred from the
FMI Savings Plan to Purchaser's Plan pursuant to this Section 12.1(g) shall be
fully vested in respect of applicable Hired Employees under Purchaser's Plan
effective as of the date of transfer. Following such transfer, Purchaser
shall have no obligations with respect to contributions that were required to
be made to the accounts of applicable Hired Employees under the FMI Savings
Plan, but which were not contributed to the FMI Savings Plan and transferred
to Purchaser's Plan pursuant to this Section 12.1(g). With respect to any
plan, fund or arrangement maintained by Purchaser or an Affiliate of Purchaser
which is both an "employee pension benefit plan" (within the meaning of
Section 3(2)(A) of ERISA) and a qualified plan (within the meaning of Section
401(a) of the Code), Hired Employees shall
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receive service credit for purposes of eligibility to participate and vesting
of benefits to the extent such service was recognized for such purpose for
such employees as of the Closing Date under the FMI Savings Plan.
12.2 Tax Matters.
(a) Seller will properly prepare and file, or cause to be
properly prepared and filed, all Seller Consolidated Returns. Unless
otherwise required by applicable law or an Internal Revenue Service
determination, Seller Consolidated Returns shall be prepared consistently with
past practices. Seller will timely pay or discharge, or cause to be paid or
discharged, any and all Taxes for which the Company may be held liable as a
result of Seller Consolidated Returns, unless such Taxes are being contested
in good faith; provided, however, nothing in this Section 12.2(a) shall be
construed to limit Seller's or Purchaser's indemnification rights set forth in
Article X hereof. Seller and its affiliates will not amend any Seller
Consolidated Return with respect to the Company in a manner which may
adversely affect the tax liability of the Company in a taxable period ending
after the Closing Date without consulting with Purchaser and obtaining the
consent of Purchaser to such amended Tax Return. Without the prior written
consent of Purchaser, Seller will not file any election to reattribute losses
of the Company pursuant to Treasury Regulation section 1.1502-20(g).
Purchaser may, at its option, elect to waive loss carryovers in whole or in
part pursuant to Treasury Regulation section 1.1502-32(b)(4).
(b) The Company will prepare or cause to be prepared and, after
providing Seller with an opportunity to review and comment on such Tax
Returns, timely file, or cause to be filed (a) all Tax Returns, other than
Seller Consolidated Returns, of the Company which relate to taxable periods
ending on or before the Closing Date and which are required to be filed after
the Closing Date, including the period from January 1, 1996, through the
Closing Date, and (b) all Tax Returns of the Company which relate to taxable
periods ending subsequent to the Closing Date, including the period from and
after the Closing Date through December 31, 1996 (collectively, the "Purchaser
Tax Returns"). The Company will pay or cause to be paid to the taxing
authority any and all Taxes due as a result of Purchaser Tax Returns required
to be filed pursuant to the preceding sentence, unless such Taxes are being
contested in good faith; provided, however, that nothing in this Section
12.2(b) shall be construed to limit Purchaser's indemnification rights set
forth in Article X hereof.
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(c) Purchaser and Seller agree to furnish or cause to be
furnished to each other, upon request, as promptly as practicable, such
information (including, without limitation, access to books and records) and
reasonable assistance relating to the Company (or any Affiliate) as is
reasonably necessary for the preparation and filing of any Tax Return
contemplated in this Section 12.2 or for the prosecution or defense of any
audit or proceedings relating to Taxes for which the Company may be liable.
Purchaser and Seller shall cooperate with each other in the conduct of any
audit or other proceedings involving the Company or any entity with which they
are consolidated or combined for any Tax purposes and each shall execute and
deliver, subject to such party's approval (which shall not be unreasonably
withheld) such documents as are necessary to carry out the intent of this
Section 12.2.
(d) Seller shall be entitled to any Tax refund with respect to
Seller Consolidated Returns that is not reflected as an asset of the Company
in the Closing Balance Sheet, provided that in the event that the Company has
a carryback from a taxable period ending after the Closing Date which may be
carried back to a Seller Consolidated Return, Seller shall promptly pay to the
Company any refund of Taxes which is attributable to such carryback when and
to the extent received by or credited for the benefit of Seller. In the event
that such carryback is subsequently disallowed by the Internal Revenue
Service, the Company will promptly repay such refund to Seller, together with
all interest payable to the IRS, in the event there is a final determination
that such refund is not allowable.
(e) Within ten days after completion of the Closing Balance
Sheet, (i) Purchaser shall pay Seller the amount of the accrual for current
Taxes of the Company shown on such Closing Balance Sheet and relating to
Seller Consolidated Returns (if any), or (ii) Seller shall pay Purchaser the
amount of any overpayment of Taxes by the Company or the reimbursement due to
the Company for uses of losses of the Company relating to Seller Consolidated
Returns (if any), to the extent shown as an admitted asset on the Closing
Balance Sheet. The Company's accrual for current Taxes (or the amount due to
the Company) with respect to Seller Consolidated Returns shall be computed in
a manner consistent with the tax sharing or tax allocation agreement to which
the Company is currently subject. After the full payment by Purchaser or the
Company of amounts required to be paid to Seller pursuant to this Section
12.2(e) hereof (if any), neither the Company nor Purchaser shall have any
further liability to Parent,
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Seller, or their Affiliates for Taxes of the Company with respect to Seller
Consolidated Returns.
(f) At the option of Purchaser, Seller (and the common parent of
the affiliated group filing consolidated federal income Tax Returns which
includes Seller and the Company ("Parent")) shall join with Purchaser in
electing under Section 338(h)(10) of the Code with respect to the purchase of
the Shares and under any comparable or related provisions of state, local, or
foreign law (as designated by Purchaser, where such state, local or foreign
election is optional, or as required by applicable law where such election
results from the making of an election under Section 338(h)(10) of the Code)
(collectively, all such elections are referred to herein as the "Election").
In the event that the Election is made, Parent, Seller, and Purchaser shall
(i) report, in connection with the determination of Taxes, the transactions
contemplated by this Agreement in a manner consistent with the Election, (ii)
comply with all of the requirements of Section 338(h)(10) of the Code and the
Treasury Regulations thereunder, and (iii) take no action which is
inconsistent with the Election or its validity under the Code and the
applicable Treasury Regulations.
(g) As soon as practicable after the Closing Date (and in all
events no later than 30 days prior to the due date for filing the Election),
Purchaser shall deliver to Seller (i) a written notice setting forth
Purchaser's intention to require Seller to join in the Election, (ii)
Purchaser's good faith calculation of the Modified Aggregate Deemed Sales
Price (as defined below), (iii) Purchaser's good faith allocation of the
Modified Aggregate Deemed Sales Price among the assets of the Company in
accordance with the principles of Treasury Regulation Section 1.338(h)(10)-
1(f)(1)(ii) (the "Sales Price Allocation"), and (iv) Internal Revenue Service
Form 8023-A and any similar forms under applicable state, local, or foreign
law (the "Election Forms"). The term "Modified Aggregate Deemed Sales Price"
shall mean an amount resulting from the Election, determined pursuant to
Treasury Regulation Section 1.338(h)(10)-1(f) without regard to items
described in Treasury Regulation Section 1.338(h)(10)-1(f)(4) (provided that
Parent and Seller may take such items into account in filing Tax Returns).
Purchaser, the Company, Seller and Parent shall file all Tax Returns in a
manner consistent with the Sales Price Allocation.
(h) Purchaser shall be responsible for the preparation and
filing of the Election Forms and all other forms and documents required in
connection with the Election. Purchaser shall
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provide Seller with copies of any necessary corrections, amendments, or
supplements to the Election Forms. Seller or Parent, as the case may be,
shall execute and deliver to Purchaser within five days of receipt the
Election Forms and such other documents or forms as are required to properly
complete the Election. Seller, Parent, the Company and Purchaser shall
cooperate fully with each other and make available to each other such Tax data
and other information as may be reasonably required by Seller or Purchaser in
order to complete the Election Forms and to timely file the Election. Seller
or Parent, as the case may be, shall promptly execute and deliver to Purchaser
any amendments made to the Election Forms subsequent to the filing of the
Election and any attachments which are required to be filed under applicable
Law. Notwithstanding the foregoing, all Election Forms and other forms and
documents required to be executed or delivered by Parent or Seller shall be in
form and substance reasonably acceptable to Parent and/or Seller, as
appropriate.
12.3 Notices. Any notice or other communication given pursuant
to this Agreement must be in writing and (a) delivered personally, (b) sent by
telefacsimile or other similar facsimile transmission, (c) delivered by
overnight express, or (d) sent by registered or certified mail, postage
prepaid, as follows:
(i) If to Seller:
Bankers Multiple Line Insurance Company
500 N. Akard Street
Dallas, Texas 75201
Attention: Rodney D. Moore
Facsimile Number: 214/954-7717
with a copy to:
Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75201
Attention: Rodney L. Moore
Facsimile Number: 214/745-5390
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(ii) If to Purchaser:
New Era Enterprises, Inc.
200 Westlake Park Blvd.
Houston, Texas 77079
Attention: Bill S. Chen
Facsimile Number: 713/368-7286
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201-6950
Attention: David A. Spuria
Facsimile number: 214/746-7777
All notices and other communications required or permitted under this
Agreement that are addressed as provided in this Section 12.3 will (A) if
delivered personally or by overnight express, be deemed given upon delivery;
(B) if delivered by telefacsimile or similar facsimile transmission, be deemed
given when electronically confirmed; and (C) if sent by registered or
certified mail, be deemed given when received. Any party from time to time
may change its address for the purpose of notices to that party by giving a
similar notice specifying a new address, but no such notice will be deemed to
have been given until it is actually received by the party sought to be
charged with the contents thereof.
12.4 Entire Agreement. Except for documents executed by Seller
and Purchaser pursuant hereto, this Agreement supersedes all prior discussions
and agreements between the parties with respect to the subject matter of this
Agreement, and this Agreement contains the sole and entire agreement between
the parties hereto with respect to the subject matter hereof.
12.5 Expenses. Except as otherwise expressly provided in this
Agreement, each party hereto will pay its own costs and expenses in connection
with this Agreement and the transactions contemplated hereby.
12.6 Public Announcements. At all times at or before the
Closing, Seller and Purchaser will each consult with the other before issuing
or making any reports, statements, or releases to the public with respect to
this Agreement or the transactions contemplated hereby and will use good faith
efforts to agree on the text of a joint public report, statement, or release
or will
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use good faith efforts to obtain the other party's approval of the text of any
public report, statement, release to be made solely on behalf of a party. If
Seller and Purchaser are unable to agree on or approve any such public report,
statement, or release and such report, statement, or release is, in the
opinion of legal counsel to a party, required by law or appropriate to
discharge such party's disclosure obligations, then such party may make or
issue the legally required or appropriate report, statement, or release. Any
such report, statement, or release approved or permitted to be made pursuant
to this Section 12.6 may be disclosed or otherwise provided by Seller or
Purchaser to any person or entity, including to any employee or customer of
either party hereto and to any governmental or regulatory authority.
12.7 Confidentiality.
(a) From the date hereof until the earlier to occur of the
second anniversary of the Closing Date or the second anniversary of the
termination of this Agreement pursuant to Section 11.1 hereof, each of
Purchaser and Seller will refrain, and will cause its respective Affiliates,
officers, directors, employees, agents, and other representatives to refrain,
from disclosing to any other person or entity any documents or information
concerning the other party hereto acquired by it in connection with this
Agreement or the transactions contemplated hereby unless (i) such disclosure
is compelled by
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judicial or administrative process or by other requirements of law (including
in connection with obtaining necessary insurance regulatory approvals) and
notice of such disclosure is furnished to such other party hereto; (ii) either
party hereto deems it advisable (upon advice of such party's legal counsel) to
disclose any such documents or information in connection with the requirements
of any securities law; or (iii) such documents or information can be shown to
have been (A) previously known by the party hereto receiving such documents or
information, (B) in the public domain through no fault of such receiving
party, or (C) later acquired by such receiving party from other public
sources.
(b) If this Agreement is terminated pursuant to Section 11.1
hereof, for a period of two years after such termination, Purchaser will
refrain, and will cause its respective officers, directors, employees, agents,
and other representatives to refrain, from disclosing to any other person or
entity any documents or information concerning the Company acquired by
Purchaser in connection with this Agreement or the transactions contemplated
hereby unless (i) such disclosure is compelled by judicial or administrative
process or by other requirements of law and notice of such disclosure is
furnished to Seller; (ii) Purchaser deems it advisable (upon advice of legal
counsel to Purchaser) to disclose any such documents or information in
connection with the requirements of any securities law; or (iii) such
documents or information can be shown to have been (A) previously known by
Purchaser, (B) in the public domain through no fault of Purchaser, or
(C) later acquired by Purchaser from other public sources.
(c) For a period of two years following the Closing Date, Seller
will refrain, and will cause its Affiliates, officers, directors, employees,
agents, and other representatives to refrain, from disclosing, to any person
or entity any information regarding the Company or the transactions
contemplated hereby unless (i) such disclosure is compelled by judicial or
administrative process or by other requirements of law and notice of such
disclosure is furnished to Purchaser; (ii) the Seller deems it advisable (upon
advice of legal counsel to Seller) to disclose any such documents or
information in connection with the requirements of any securities law; or
(iii) such documents or information can be shown to have been (A) in the
public domain through no fault of Seller, or (B) later acquired by Seller from
other public sources.
(d) The parties hereto acknowledge and agree that (i) a breach
of any of the terms or provisions of this Section 12.7 would cause irreparable
damage to the non-breaching party for which adequate remedy at law is not
available; and (ii) the non-breaching party will be entitled as a matter of
right to obtain, without posting any bond whatsoever, an injunction,
restraining order, or other equitable relief to restrain any threatened or
further breach of this Section 12.7, which right will not be exclusive but
will be cumulative and in addition to any other rights and remedies available
at law or in equity.
(e) At the Closing, Seller will assign to Purchaser the non-
exclusive right to enforce the rights of Seller and its Affiliates under each
of the confidentiality agreements between Seller or its Affiliates and
prospective acquirors of the Company.
12.8 Brokers. Seller will indemnify and hold harmless Purchaser
in respect of any and all claims or demands for commission, compensation, or
other Damages by any broker, finder, or other agent (whether or not a present
or former employee or agent of Seller or the Company) claiming to have been
engaged by
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Seller or any Affiliate of Seller in connection with the transactions
contemplated by this Agreement (including without limitation any claim by
Gerald Noelle), and Seller will bear the cost of the reasonable out-of-pocket
expenses incurred by Purchaser in investigating, defending against, or
appealing any such claim or demand. Purchaser will indemnify and hold
harmless Seller in respect of any and all claims or demands for commission,
compensation, or other Damages by any broker, finder, or other agent
(including without limitation any claim by Merlino & Schofield, Inc.) claiming
to have been engaged by Purchaser or any Affiliate of Purchaser in connection
with the transactions contemplated by this Agreement, and Purchaser will bear
the cost of the reasonable out-of-pocket expenses incurred by Seller in
investigating, defending against, or appealing any such claim or demand.
12.9 Home Office. Seller agrees to cause Modern American Life
Insurance Company to enter into a lease agreement with the Company in form and
substance satisfactory to the parties thereto pursuant to which the Company
will lease 40,000 sq. ft. of the Home Office for a transition period of 90
days following the Closing Date. Purchaser agrees to cause the Company to pay
to Modern American Life Insurance Company an amount equal to $10.50 per sq.
ft. per month during such lease period. Following such initial 90-day period,
the lease will be renewable on a month-to-month basis at the option of
Purchaser so long as Modern American Life Insurance Company owns the Home
Office.
12.10 PMSC Services. Notwithstanding Section 5.18 hereof, Seller
shall cause FMI or Southwestern Financial Corporation to enter into an
agreement with the Company pursuant to which the Company will receive the
services currently provided to the Company that are being performed by or on
behalf of PMSC. Such agreement will provide that such services will be
provided to the Company for a period of 150 days after the Closing at the
rates currently charged to the Company, but based on actual usage.
12.11 Further Assurances. Seller and Purchaser agree that, from time
to time after the Closing, upon the reasonable request of the other, they will
cooperate and will cause their respective Affiliates to cooperate with each
other to effect the orderly transition of the business, operations, and
affairs of the Company to Purchaser. Without limiting the generality of the
foregoing, (a) Seller will provide, and will cause its Affiliates to provide,
representatives of Purchaser reasonable access to all books and records of
Seller and its Affiliates reasonably requested by Purchaser in the preparation
of any post-Closing
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financial statements, reports, tax returns, or tax filings of the Company;
(b) Purchaser will provide representatives of Seller reasonable access to all
pre-Closing books and records of the Company reasonably requested by Seller in
the preparation of any post-Closing financial statements, reports, tax
returns, or tax filings of Seller; and (c) each party hereto will execute such
documents and instruments as the other party hereto may reasonably request
containing terms and conditions mutually satisfactory to each party hereto to
further effectuate the terms hereof.
12.12 Waiver. Any term or condition of this Agreement may be waived
at any time by the party that is entitled to the benefit thereof. Such waiver
must be in writing and must be executed by an executive officer of such party.
A waiver on one occasion will not be deemed to be a waiver of the same or any
other breach or nonfulfillment on a future occasion. All remedies, either
under this Agreement, or by law or otherwise afforded, will be cumulative and
not alternative.
12.13 Amendment. This Agreement may be modified or amended only by a
writing duly executed by Seller and Purchaser.
12.14 Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which will be deemed an original, but all
of which will constitute one and the same instrument.
12.15 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of Seller, Purchaser, and their
respective successors and permitted assigns, and it is not the intention of
the parties to confer third-party beneficiary rights upon any other person or
entity.
12.16 Governing Law. This Agreement will be governed by and construed
and enforced in accordance with the laws of the State of Texas (without regard
to the principles of conflicts of law) applicable to a Contract executed and
performable in such state.
12.17 Binding Effect. This Agreement is binding upon and will inure
to the benefit of the parties and their respective successors and permitted
assigns.
12.18 No Assignment. Neither this Agreement nor any right or
obligation hereunder or part hereof may be assigned by any parties hereto
without the prior written consent of the other party hereto (and any attempt
to do so will be void); except that
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(i) Purchaser shall have the right, without such consent, to assign to a
wholly-owned subsidiary of Purchaser all or any portion of its interest in
this Agreement; provided, however, that, in the event of such assignment,
Purchaser shall remain liable to perform all obligations hereunder; and (ii)
Seller shall have the right to assign to ICH all of Seller's obligations under
this Agreement, including without limitation all of Seller's obligations under
Article X hereof, upon (A) the delivery to Purchaser of an assumption
agreement in form and substance reasonably acceptable to Purchaser and duly
executed by such assignee, which assumption agreement provides for the
obligations of Seller so assigned to such assignee to constitute
administrative expenses of assignee for purposes of the Chapter 11 Proceeding,
and (B) the entry of an order of the Bankruptcy Court, in form and substance
reasonably acceptable to Purchaser, as to which order (or any revision,
modification or amendment thereto) the operation or effectiveness has not been
stayed and the time to appeal or seek review or rehearing has expired and no
appeal or petition for review or rehearing has been taken or is pending,
authorizing and approving the assignment and assumption agreement described in
clause (A) above (including the treatment of the obligations assigned therein
as administrative expenses); provided, however, that in the event that Seller
assigns all of its obligations under this Agreement to ICH, then,
notwithstanding such assignment, if (i) the IRS has not concluded its audit of
Seller Consolidated Returns for taxable years through December 31, 1995, or
(ii) if all Taxes asserted by the IRS to be due with respect to Seller
Consolidated Returns have not been paid in full or subject to a final
determination that no such Taxes are due, Seller shall remain liable to
perform all obligations hereunder, including, without limitation all of
Seller's obligation under Sections 10.6 and 12.2 hereof, until such audit has
been concluded and such Taxes have been paid.
12.19 Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid, or unenforceable under any present or future law, and
if the rights or obligations under this Agreement of Seller and Purchaser will
not be materially and adversely affected thereby, (a) such provision will be
fully severable; (b) this Agreement will be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a part
hereof; (c) the remaining provisions of this Agreement will remain in full
force and effect and will not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement; and (c) in
lieu of such illegal, invalid or unenforceable provision, there shall be added
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automatically as part of this Agreement a provision as similar in terms to
such illegal, invalid or unenforceable provision as may then be legal, valid
and enforceable under applicable law.
12.20 Table of Contents; Headings. The table of contents and headings
of the Articles and Sections of this Agreement (including the Disclosure
Schedule) have been inserted for convenience of reference only, are not
intended to be considered a part hereof, and will not modify or restrict any
term or provision hereof.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
as of the date first written above by the duly authorized officers of Seller
and Purchaser.
NEW ERA ENTERPRISES, INC.
By: /s/Bill S. Chen
--------------------
Name: Bill S. Chen
Title: President
BANKERS MULTIPLE LINE INSURANCE COMPANY
By: /s/Rodney D. Moore
--------------------
Name: Rodney D. Moore
Title: President
Page 139 of 141<PAGE>
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ICH Corporation
500 North Akard
Dallas, Texas 75201
214. 954. 7111
NEWS RELEASE
==============================================================================
FOR IMMEDIATE RELEASE
DEFINITIVE AGREEMENTS TO SELL THREE OF
I.C.H.'S REMAINING INSURANCE SUBSIDIARIES
DALLAS, TX--April 4, 1996--Bankers Multiple Line Insurance Company
("BML"), an indirect insurance subsidiary of I.C.H., entered into a definitive
agreement to sell Modern American Life Insurance Company ("Modern American")
and Western Pioneer Life Insurance Company ("Western") to Reassure America
Life Insurance Company ("Reassure America"), a wholly-owned subsidiary of Life
Reassurance Corporation of America. Modern American and Western will
distribute certain real estate and mineral interests to BML prior to the
closing and ICH estimates the net proceeds from the sale of the companies and
the distributed real estate and mineral interests will be approximately $30
million.
In addition, BML entered into a definitive agreement with New Era
Enterprises, Inc. ("NEE") to sell Philadelphia American Life Insurance Company
("Philadelphia American"). BML expects to utilize approximately $7 million of
the proceeds from the sale to purchase certain real estate, limited
partnership interests and reinsurable receivables from Philadelphia American
at the closing. ICH estimates the net proceeds from the sale of Philadelphia
American, the liquidation of the real estate, limited partnership interests
and the settlement of reinsurance receivables will total approximately $10
million.
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BML has also executed a letter of intent to sell effective as of March
31, 1996 all of its remaining health insurance business and related agent
debit balance for $5.75 million cash and expects to execute a definite
agreement for the transaction prior to the end of April.
The foregoing transactions, which are subject to certain conditions
including insurance regulatory approval, are scheduled to close during the
second quarter.
I.C.H. has been operating as a debtor-in-possession since its voluntary
Chapter 11 bankruptcy filing on October 10, 1995 and has until May 31, 1996,
the exclusive right to file a plan of reorganization. I.C.H. intends to
develop and present a reorganization plan which will include provisions for
the orderly liquidation of assets and distribution of proceeds thereof to
creditors and possibly equity holders of I.C.H.
FOR FURTHER INFORMATION CONTACT:
Susan A. Brown (214) 954-7660
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